Global Competitiveness Report

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World map of the 2006-2007 Global Competitiveness Index. Each color represent one quartile of the ranked nations. Green nations score higher, red nations lower. Grey nations are not ranked.

The Global Competitiveness Report is a yearly report published by the World Economic Forum. [1] The first report was released in 1979. The 2006-2007 report covers 125 major and emerging economies. The report "assesses the ability of countries to provide high levels of prosperity to their citizens. This in turn depends on how productively a country uses available resources. Therefore, the Global Competitiveness Index measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity." [2] It has been widely cited and used by many scholarly and peer-reviewed articles. [3]

Somewhat similar annual reports are the Ease of Doing Business Index and the Indices of Economic Freedom. They also look at at factors that affect economic growth, but not as many as the Global Competitiveness Report.

One part of the report is the Executive Opinion Survey which is a survey of a representative sample of business leaders in their respective countries. Respondent numbers have increased every year and is currently just over 11,000 in 125 countries. [4]

The report ranks the world's nations according to the Global Competitiveness Index. The report states that it is based on the latest theoretical and empirical research. [5] It is made up of over 90 variables, of which two thirds come from the Executive Opinion Survey, and one third comes from publicly available sources such as the United Nations. The variables are organized into nine pillars, with each pillar representing an area considered as an important determinant of competitiveness.

The report notes that as a nation develops, wages tend to increase, and that in order to sustain this higher income, labor productivity must improve in order for the nation to be competitive. In addition, what creates productivity in Sweden is necessarily different from what drives it in Ghana. Thus, the GCI separates countries into three specific stages: factor-driven, efficiency-driven, and innovation-driven, each implying a growing degree of complexity in the operation of the economy.

In the factor-driven stage countries compete based on their factor endowments, primarily unskilled labor and natural resources. Companies compete on the basis of prices and sell basic products or commodities, with their low productivity reflected in low wages. To maintain competitiveness at this stage of development, competitiveness hinges mainly on well-functioning public and private institutions (pillar 1), appropriate infrastructure (pillar 2), a stable macroeconomic framework (pillar 3), and good health and primary education (pillar 4).

As wages rise with advancing development, countries move into the efficiency-driven stage of development, when they must begin to develop more efficient production processes and increase product quality. At this point, competitiveness becomes increasingly driven by higher education and training (pillar 5), efficient markets (pillar 6), and the ability to harness the benefits of existing technologies (pillar 7).

Finally, as countries move into the innovation-driven stage, they are only able to sustain higher wages and the associated standard of living if their businesses are able to compete with new and unique products. At this stage, companies must compete by producing new and different goods using the most sophisticated production processes (pillar 8) and through innovation (pillar 9).

Thus, the impact of each pillar on competitiveness varies across countries, in function of their stages of economic development. Therefore, in the calculation of the GCI, pillars are given different weights depending on the per capita income of the nation. [6] The weights used are the values that best explain growth in recent years [7] For example, the sophistication and innovation factors contribute 10% to the final score in factor and efficiency-driven economies, but 30% in innovation-driven economies. Intermediate values are used for economies in transition between stages.

[edit] Variables

1. Institutions

A. Public institutions

1. Property rights

1.01 Property rights

2. Ethics and corruption

1.02 Diversion of publics funds

1.03 Public trust of politicians

3. Undue influence

1.04 Judicial independence

1.05 Favoritism in decisions of government officials

4. Government inefficiency (red tape, bureaucracy and waste)

1.06 Wastefulness of government spending

1.07 Burden of government regulation

5. Security

1.08 Business costs of terrorism

1.09 Reliability of police services

1.10 Business costs of crime and violence

1.11 Organized crime

B. Private institutions

1. Corporate ethics

1.12 Ethical behavior of firms

2. Accountability

1.13 Efficacy of corporate boards

1.14 Protection of minority shareholders’ interests

1.15 Strength of auditing and accounting standards

2. Infrastructure

2.01 Overall infrastructure quality

2.02 Railroad infrastructure development

2.03 Quality of port infrastructure

2.04 Quality of air transport infrastructure

2.05 Quality of electricity supply

2.06 Telephone lines (hard data)

3. Macroeconomy

3.01 Government surplus/deficit (hard data)

3.02 National savings rate (hard data)

3.03 Inflation (hard data)

3.04 Interest rate spread (hard data)

3.05 Government debt (hard data)

3.06 Real effective exchange rate (hard data)

4. Health and primary education

A. Health

4.01 Medium-term business impact of malaria

4.02 Medium-term business impact of tuberculosis

4.03 Medium-term business impact of HIV/AIDS

4.04 Infant mortality (hard data)

4.05 Life expectancy (hard data)

4.06 Tuberculosis prevalence (hard data)

4.07 Malaria prevalence (hard data)

4.08 HIV prevalence (hard data)

B. Primary education

4.09 Primary enrolment (hard data)

5. Higher education and training

A. Quantity of education

5.01 Secondary enrolment ratio (hard data)

5.02 Tertiary enrolment ratio (hard data)

B. Quality of education

5.03 Quality of the educational system

5.04 Quality of math and science education

5.05 Quality of management schools

C. On-the-job training

5.06 Local availability of specialized research and training services

5.07 Extent of staff training

6. Market efficiency

A. Good markets: Distortions, competition, and size

1. Distortions

6.01 Agricultural policy costs

6.02 Efficiency of legal framework

6.03 Extent and effect of taxation

6.04 Number of procedures required to start a business (hard data)

6.05 Time required to start a business (hard data)

2. Competition

6.06 Intensity of local competition

6.07 Effectiveness of antitrust policy

6.08 Imports (hard data)

6.09 Prevalence of trade barriers

6.10 Foreign ownership restrictions

3. Size

0.00 GDP – exports + imports (hard data)

6.11 Exports (hard data)

B. Labor markets: Flexibility and efficiency

1. Flexibility

6.12 Hiring and firing practices

6.13 Flexibility of wage determination

6.14 Cooperation in labor-employer relations

2. Efficiency

6.15 Reliance on professional management

6.16 Pay and productivity

6.17 Brain drain

6.18 Private sector employment of women

C. Financial markets: Sophistication and openness

6.19 Financial market sophistication

6.20 Ease of access to loans

6.21 Venture capital availability

6.22 Soundness of banks

6.23 Local equity market access

7. Technological readiness

7.01 Technological readiness

7.02 Firm-level technology absorption

7.03 Laws relating to ICT

7.04 FDI and technology transfer

7.05 Cellular telephones (hard data)

7.06 Internet users (hard data)

7.07 Personal computers (hard data)

8. Business sophistication

A. Networks and supporting industries

8.01 Local supplier quantity

8.02 Local supplier quality

B. Sophistication of firms’ operations and strategy

8.03 Production process sophistication

8.04 Extent of marketing

8.05 Control of international distribution

8.06 Willingness to delegate authority

8.07 Nature of competitive advantage

8.08 Value-chain presence

9. Innovation

9.01 Quality of scientific research institutions

9.02 Company spending on research and development

9.03 University/industry research collaboration

9.04 Government procurement of advanced technology products

9.05 Availability of scientists and engineers

9.06 Utility patents (hard data)

9.07 Intellectual property protection

9.08 Capacity for innovation [8]

[edit] Ranking 2006-2007

[edit] External links

• Global Competitiveness Report