 Jennifer Blanke Senior Economist and Director, Global Competitiveness Network World Economic Forum  November 26, 2008 Assessing the Competitiveness of Nations Lessons from the Global Competitiveness Report

2 Assessing the Competitiveness of Nations  Presentation of the Global Competitiveness Network.  The Global Competitiveness Report.  The Global Competitiveness Index (GCI) and our data sources.  The GCI rankings with a focus on Europe and the BRIC economies. Outline

3 Assessing the Competitiveness of Nations The Global Competitiveness Network The most authoritative source for competitiveness  Launched in 1979 covering 16 countries; The Report has since expanded its coverage to 134 countries  Co-editors: Michael Porter and Klaus Schwab, with intellectual support from Xavier Sala-i-Martin  Our goal: to provide a benchmarking tool for policymakers and business leaders

4 Assessing the Competitiveness of Nations Global Competitiveness Network Regional, topical and industry reports:  Travel and Tourism Competitiveness Report 2008  Global Information Technology Report  Global Enabling Trade Report 2008  Financial Development Report 2008  Lisbon Review 2008  Global Gender Gap Report 2008

5 Assessing the Competitiveness of Nations The Global Competitiveness Report What are we trying to measure?  GDP per capita (PPP in international dollars)

6 Assessing the Competitiveness of Nations The Global Competitiveness Report Country coverage

7 Assessing the Competitiveness of Nations The Global Competitiveness Report  The most comprehensive data set on competitiveness  Assesses the comparative strengths and weakness of a large number of economies  Produced in collaboration with leading academics worldwide and a global network of partner (research) institutes

8 Assessing the Competitiveness of Nations  Use of “hard data” (publicly available information) and survey data (from the Executive Opinion Survey)  The Survey records the perspectives of business leaders around the world; Survey data is indispensable, particularly for variables where no reliable hard data sources exist The Global Competitiveness Report Data sources

9 Assessing the Competitiveness of Nations  How we do not define competitiveness: “a country’s share of the world market for its products”  This view implies a zero-sum game - one country’s gain comes at the expense of others  How we do define competitiveness: “the set of institutions, policies, and factors that determine the level of productivity of a country.”  The level of productivity, in turn, sets the sustainable level of prosperity that can be earned by an economy. The Global Competitiveness Index Definition

10 Assessing the Competitiveness of Nations Three stages of development: The process of economic development evolves in three stages captured by the model: 1."Factor-driven stage" Firms compete in prices, taking advantage of cheap factors. 2."Efficiency-driven stage" Efficient production practices to increase productivity. 3."Innovation-driven stage" Economies need to produce innovative products using sophisticated production methods (incorporating and taking full advantage of ICT, among other things.) The Global Competitiveness Index Stages of development

11 Assessing the Competitiveness of Nations The Global Competitiveness Index The 12 pillars of competitiveness Key for efficiency-driven economies Key for factor-driven economies 1. Institutions 2. Infrastructure 3. Macroeconomic stability 4. Health and primary education 5. Higher education and training 6. Goods market efficiency 7. Labor market efficiency 8. Financial market sophistication 9. Technological Readiness 10. Market size 11. Business sophistication 12. Innovation Key for innovation-driven economies BASIC REQUIREMENTS EFFICIENCY ENHANCERS INNOVATION & SOPHISTICATION FACTORS

12 Assessing the Competitiveness of Nations The Global Competitiveness Index Basic requirements  Examples of variables  Property rights  Diversion of public funds  Wastefulness of government spending  Organized crime  Strength of auditing and accounting standards  Transport infrastructure quality (roads, railroads, air transport, etc.)  Telephone lines  Government surplus/deficit  Inflation  Life expectancy  Primary enrolment rates 1. Institutions A. Basic requirements 2. Infrastructure 3. Macroeconomy 4. Health & primary education

13 Assessing the Competitiveness of Nations The Global Competitiveness Index Efficiency enhancers  Examples of variables  Secondary and tertiary enrolment rates  Quality of the educational system  Extent of staff training  Extent and effect of taxation  Prevalence of trade barriers  Exports  Hiring and firing practices  Pay and productivity  Financial market sophistication  Soundness of banks  FDI and technology transfer  Internet users 1. Higher education & training B. Efficiency Enhancers 2. Goods market efficiency 3. Labour market efficiency 4. Financial market sophistication 5. Technological readiness 6. Market size

14 Assessing the Competitiveness of Nations The Global Competitiveness Index Innovation & sophistication factors  Examples of variables  Local supplier quality and quantity  Extent of marketing  Nature of competitive advantage  Quality of scientific research institutions  Company spending on R&D  Availability of scientist and engineers  Utility patents 1. Business sophistication C. Innovation & Sophistication Factors 2. Innovation

15 Assessing the Competitiveness of Nations The Global Competitiveness Index Weights  Weights of the three main groups of pillars at each stage of development

16 Assessing the Competitiveness of Nations Global Competitiveness Index Countries by stage of development * Based on GDP per capita and resource intensity Transition from 1 to 2Stage 2Transition from 2 to 3Stage 3 GDP per capita of US$2,000-US$3,000 GDP per capita of US$3,000-US$9,000 GDP per capita of US$9,000-US$17,000 GDP per capita more than US$17,000 BangladeshMaliArmeniaAlbaniaBahrainAustralia BeninMauritaniaAzerbaijanAlgeriaBarbadosAustria BoliviaMoldovaBotswanaArgentinaChileBelgium Burkina FasoMongoliaBruneiBosnia and HerzegovinaCroatiaCanada BurundiMozambiqueChinaBrazilEstonia Cyprus CambodiaNepalEl SalvadorBulgariaHungaryCzech Republic CameroonNicaraguaGeorgiaColombiaLatviaDenmark ChadNigeriaGuatemalaCosta RicaLithuaniaFinland Côte d'IvoirePakistanDominican RepublicPolandFrance EgyptParaguayJordanEcuadorQatarGermany EthiopiaPhilippinesKazakhstanJamaicaRussian FederationGreece Gambia, TheSenegalKuwaitMacedonia, FYRSlovak RepublicHong Kong SAR GhanaSri LankaLibyaMalaysiaTaiwan, ChinaIceland GuyanaSyriaMoroccoMauritiusTrinidad and TobagoIreland HondurasTajikistanOmanMexicoTurkeyIsrael IndiaTanzaniaSaudi ArabiaMontenegroItaly IndonesiaTimor-LesteVenezuelaNamibiaJapan KenyaUgandaPanamaKorea, Rep. Kyrgyz RepublicVietnamPeruLuxembourg LesothoZambiaRomaniaMalta MadagascarZimbabweSerbiaNetherlands MalawiSouth AfricaNew Zealand SurinameNorway ThailandPortugal TunisiaPuerto Rico UkraineSingapore UruguaySlovenia Spain Sweden Switzerland United Arab Emirates United Kingdom United States Stage 1 GDP per capita of less than US$2,000

17 Assessing the Competitiveness of Nations The Global Competitiveness Ranking Top 20 and selected economies (Ranks out of 134 economies, 1-7 scale score)

18 Assessing the Competitiveness of Nations Global Competitiveness Index EU 15’s performance vs. Accession 12

19 Assessing the Competitiveness of Nations Global Competitiveness Index EU 15’s performance vs. BRIC

20 Assessing the Competitiveness of Nations Global Competitiveness Index United States’ performance vs. EU 15

21 Assessing the Competitiveness of Nations The Global Competitiveness Ranking China: Overall assessment and focus areas

22 Assessing the Competitiveness of Nations The Global Competitiveness Ranking China: Relative competitive advantages (Ranks out of 134 economies)

23 Assessing the Competitiveness of Nations The Global Competitiveness Ranking China: Relative competitive disadvantages (Ranks out of 134 economies)

24 Assessing the Competitiveness of Nations The Global Competitiveness Ranking India: Overall assessment and focus areas

25 Assessing the Competitiveness of Nations The Global Competitiveness Ranking India: Relative competitive advantages (Ranks out of 134 economies)

26 Assessing the Competitiveness of Nations The Global Competitiveness Ranking India: Relative competitive disadvantages (Ranks out of 134 economies)

27 Assessing the Competitiveness of Nations Global Competitiveness Index China’s performance vs. India

28 Assessing the Competitiveness of Nations The Global Competitiveness Ranking Brazil: Overall assessment and focus areas

29 Assessing the Competitiveness of Nations The Global Competitiveness Ranking Brazil: Relative competitive advantages (Ranks out of 134 economies)

30 Assessing the Competitiveness of Nations The Global Competitiveness Ranking Brazil: Relative competitive disadvantages (Ranks out of 134 economies)

31 Assessing the Competitiveness of Nations Global Competitiveness Index China, India and Brazil’s performance

32 Assessing the Competitiveness of Nations The Global Competitiveness Ranking Russia: Overall assessment and focus areas

33 Assessing the Competitiveness of Nations The Global Competitiveness Ranking Russia: Relative competitive advantages (Ranks out of 134 economies)

34 Assessing the Competitiveness of Nations The Global Competitiveness Ranking Russia: Relative competitive disadvantages (Ranks out of 134 economies)

35 Assessing the Competitiveness of Nations The Report is downloadable on our website at: You can also visit the GCR interactive website: