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Abstract Thoughts
COMPETITIVENESS CORNER
Excerpts from “The Global Competitiveness Report 2009-2010”
Published by the World Economic Forum, September 2009
Analysis by Louis M. Wasser
A variety of factors play into determining the relative strength of a country’s economy. Quantifying overall competitiveness is a tough business, but the World Economic Forum (WEF) does it every year. “The Global Competitiveness Report 2009-2010” looks at 133 economies, evaluating them in individual categories to determine an overall ranking.
The authors of the component of the publication titled “The Global Competitiveness Index 2009-2010: Contributing to Long-Term Prosperity amid the Global Economic Crisis” say the report has a special significance given rocky global economic conditions.
“For the past three decades, the World Economic Forum’s annual competitiveness reports have examined the many factors enabling national economies to achieve sustained economic growth and long-term prosperity. Our goal over the years has been to provide benchmarking tools for business leaders and policymakers to identify obstacles to improved competitiveness, thus stimulating discussion on strategies to overcome them. In the current challenging economic environment, our work serves as a critical reminder of the importance of taking into account the consequences of our present actions on future prosperity.”
The report utilizes the Global Competiveness Index (GCI), which takes into account both microeconomic and macroeconomic factors bearing on competitiveness – a concept defined “as the set of institutions, policies, and factors that determine the level of productivity of a country.” The GCI has “12 pillars of competitiveness,” which range from institutions and infrastructure to macroeconomic stability and labor market efficiency. In addition to hard data, the index incorporates information from a survey of business executives.
The GCI is weighted according to where along the path of development an economy falls. There are three main stages of development: factor-, efficiency- and innovation-driven.
“The concept of stages of development is integrated into the Index by attributing higher relative weights to those pillars that are relatively more relevant for a country given its particular stage of development... Countries falling in between two of the three stages are considered to be ‘in transition.’ For these countries, the weights change smoothly as a country develops, reflecting the smooth transition from one stage of development to another. By introducing this type of transition between stages into the model – that is, by placing increasingly more weight on those areas that are becoming more important for the country’s competitiveness as it develops – the Index can gradually ‘penalize’ those countries that are not preparing for the next stage.”
The overall competitiveness of a country bears on its ability to successfully navigate unfavorable economic conditions – a particularly relevant issue amid current global circumstances.
“Today’s difficult economic environment underscores the importance of not losing sight of long-term competitiveness fundamentals amid short-term urgencies. Competitive economies are those that have in place factors driving the productivity enhancements on which their present and future prosperity is built. A competitiveness supporting economic environment can help national economies to weather business cycle downturns and ensure that the mechanisms enabling solid economic performance going into the future are in place.”
The report examines individual countries, placing them in both a regional and global context. Egypt, located in the Middle East and North Africa (MENA) region, is neither the best nor worst in its peer group according to the GCI, and was ranked at 70 out of 133 countries for overall competitiveness.
“The Middle East and North Africa region appears to be on average somewhat less affected by the global economic crisis than other emerging regions... With respect to national competitiveness, significant differences between countries persist. In many energy exporting countries, abundant oil windfall profits have triggered a wave of reforms aimed at improving competitiveness. As a result, some of the more successful reformers, such as Qatar (22nd), the United Arab Emirates (23rd), and Saudi Arabia (28th), place in the top tier of the emerging markets. Although non-oil exporting countries from the region also benefited from the boom through foreign investment and remittances, the progress in improving competitiveness has been less pronounced or nonexistent. Consequently, the poorest regional performers – such as Libya (88th) and Syria (94th) – continue to lag behind most of the world’s economies with respect to national competitiveness.”
At 70th place in the GCI, Egypt rose from its position in the previous report: 84th out of 134. The country’s economy is labeled as in transition from the first phase of development (factor-driven) to the second (efficiency-driven). The authors point to advances, and identify a number of strengths.
“The improvement in the overall ranking stems mainly from the upgrading of infrastructure across all categories and from positive developments related to labor market efficiency and, to an even greater extent, financial markets sophistication.
“Egypt’s main competitive strengths are the sheer size of its market (26th), which allows businesses to exploit economies of scale; the fairly solid private institutions (53rd); and the satisfactory quality of the transport and energy networks (55th overall).”
Despite these positive attributes, Egypt remains in the bottom 50 percent of the 133 countries in the overall GCI rankings. And there are still a number of stubborn obstacles facing the economy.
“The challenges, on the other hand, are numerous. The labor market continues to be over-regulated, which diminishes its efficiency. Although some progress has been achieved, the persisting labor market rigidities are particularly worrisome... Also, the participation of women in the labor force continues to be low (127th), despite some progress achieved in the context of a government program. Egypt continues to struggle with serious challenges related to macroeconomic stability (120th)... Furthermore, Egypt’s banking system continues to lack trustworthiness and solidity, as reflected in the 107th position in the rankings.”
According to weighted results from the business executive survey, topping the list of “the most problematic factors for doing business” in Egypt are “inefficient government bureaucracy,” “tax regulations,” “inadequately educated workforce,” “inflation” and “corruption,” respectively.
This report is available online at www.weforum.org
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