1. The Global Competitiveness Report: A Tool for Fostering Better Policies 8 th November, 2005 Augusto Lopez-Claros Chief Economist & Director Global Competitiveness Programme World Economic Forum Geneva, Switzerland

2. 2 Contents Part I. Global Competitiveness Programme What do we mean by “competitiveness” ? Part II. The Growth Competitiveness Index Results and Analysis Part III. Global Competitiveness Index Macroeconomy and Public Institutions Results and Analysis

3. 3  Competitiveness is defined as the set of factors, policies and institutions that determine the level of productivity of a country  A more competitive economy is one that is likely to grow faster over the medium to long run  We try to shed light on “the factors, policies and institutions” that determine the sharply different growth experiences of 117 economies worldwide Part I. Global Competitiveness Programme: What do we mean by “competitiveness” ?

4. 4 Global Competitiveness Programme: What are we trying to achieve?

5. 5 The Global Competitiveness Programme  Key insights gained from competitiveness programme 1.The factors that determine the level of productivity of a country are many and spread over a large number of areas 2.These factors matter differently for different countries depending on their stage of development 3.Their relative importance changes over time

6. 6 Growth Competitiveness Index Technology Transfer Sub-Index Information & Communications Technology Subindex Technology Index Macroeconomic Environment Index Public Institutions Index Contracts and law Sub-Index Corruption Sub- Index Macroeconomic stability Sub-Index Innovation Sub-Index Country Credit Rating Government Waste Part II. The Growth Competitiveness Index

7. 7 Growth Competitiveness Index Components (out of 117)

8. 8 Public Institutions Rankings (out of 117)

9. 9 Public Institutions Ranking: Key Variables (out of 117)

10. 10 Macroeconomic Environment Rankings (out of 117)

11. 11 Macroeconomic Environment Rankings: Key Variables (out of 117)

12. 12 Technology Index Rankings (out of 117)

13. 13 Part III. The Global Competitiveness Index  The Growth Competitiveness Index is a simple structure which captures some of the key drivers of growth.  It does not incorporate concepts which the theory or empirical observation suggests are important determinants of competitiveness. For instance, the functioning of labour markets, the quality of a country’s infrastructure, the state of public health and the size of the market.  The Global Competitive Index tries to assess both the macroeconomic and microeconomic determinants of competitiveness in one index

14. 14 The Global Competitiveness Index Three stages of development: 1.“Factor-driven stage” Firms compete in prices, taking advantage of cheap factors e.g., India, China, Ukraine 2.“Efficiency-driven stage” Efficient production practices to increase productivity e.g., Poland, Brazil, Mexico 3.“Innovation-driven stage” Economies need to produce innovative products using sophisticated production methods e.g., Finland, Germany, Japan

15. 15 The Global Competitiveness Index The Nine Pillars of Competitiveness 1.Institutions 2.Infrastructure 3.Macroeconomy 4.Health and Primary Education 5.Higher Education and Training 6.Market Efficiency (goods, labour, financial) 7.Technological Readiness 8.Business Sophistication 9.Innovation Basic requirements Key for factor- driven economies Efficiency enhancers Key for efficiency- driven economies Innovation and sophistication factors Key for innovation- driven economies

16. 16 Weights given to the groups of pillars (subindexes) The Global Competitiveness Index

17. 17 The Global Competitiveness Index List of countries in each stage

18. 18 Top performers in the nine pillars The Global Competitiveness Index

19. 19 The Global Competitiveness Index Public Institutions  Property rights  Diversion of public funds  Public trust of politicians  Judicial independence  Favoritism in decision of government officials  Wastefulness of government spending  Burden of government regulation  Business costs of terrorism  Reliability of police services  Business costs of crime and violence  Organized crime Macroeconomy  Government surplus/deficit  National savings rate  Inflation  Interest rate spread  Government debt / GDP ratio  Real effective exchange rate Technology & Innovation  Country technological readiness  Capacity for innovation  Technology absorption by firms  FDI and technology transfer  Spending on R&D  Technology penetration (cell phones, Internet users, PCs)  Quality of scientific research institutions  Academic/Private sector research collaboration  Availability of scientists and engineers  Appropriate legal framework and intellectual property protection