World Economic Forum: Most SEE Countries Slip in Competitiveness

B&H Business Daily/Provider: Poenta d.o.o.
December 10, 2007

Lingering institutional and market weaknesses, problems with infrastructure and a poor climate for innovation are among the problems cited in a new report. On a global scale, all Southeast European (SEE) economies, except for Croatia and particularly Turkey, have become less competitive than they were a year ago, according to the Global Competitiveness Report 2007-2008 , issued by the World Economic Forum (WEF). The study's Global Competitiveness Index (GCI) assesses 131 countries in the world on the basis of a broad range of factors affecting the business climate, grouped into 12 pillars -- institutions, infrastructure, macroeconomic stability, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market sophistication, technological readiness, market size, business sophistication and innovation. To measure each of the surveyed economies' competitiveness, the report's authors used both publicly available data and a poll of over 11,000 business leaders in the 131 nations. They have thus been able to highlight countries' main strengths and weaknesses, as well as shed light on the key priorities for policy reform. Market efficiency and strong investment in research and development (R&D) are among the factors that have allowed the United States to rebound from its sixth place in last year's survey of 122 countries to the top position in this year's GCI, with an overall score of 5.67 out of 7. Switzerland is ranked second, ahead of Denmark, Sweden, Germany, Finland and Singapore, respectively. Japan and EU members Britain and the Netherlands are also among the top ten most competitive economies, while Mozambique, Zimbabwe, Burundi and Chad are at the bottom of the list. The rankings of most of the SEE countries place them among those occupying the lower half of the GCI table. Moreover, the vast majority of the 11 nations in the region -- Albania, Bosnia and Herzegovina (BiH), Bulgaria, Croatia, Cyprus, Greece, Macedonia, Montenegro, Romania, Serbia and Turkey -- have dropped in their positions since last year. To allow readers to compare the surveyed countries' progress, the report's authors have revised the rankings and scores of the GCI for 2006-2007 to reflect the introduction of three new pillars into the model used this year. A comparison between the SEE countries' revised rankings for last year and those of the GCI for 2007-2008 shows that BiH has dropped 24 places and now stands 106th among the 131 nations. The report points to a long list of disadvantages the country needs to address to improve its competitiveness. Overregulation, unethical behaviour among firms and wasteful government spending are cited as BiH's worst problems within the scope of the institutions pillar. The country is also one of the worst performers in terms of the quality of its roads, ports and air transport infrastructure. The SEE's lowest-ranking country in this year's GCI is again Albania, which ranks 109th, 11 places down from last year. While the country has notable competitive disadvantages in all areas covered by the survey, it has been given the lowest possible ranking for individual components, such as government procurement of advanced technology products, capacity for innovation and university-industry research collaboration. Organized crime, inefficacy of corporate boards and inadequate intellectual property protection top the list of problems under the institutions pillar that Macedonia needs to address to improve its rankings. The country, which has dropped 10 places to take the 94th position in this year's GCI, also has some serious competitive disadvantages in the areas of labour market efficiency, technological readiness and business sophistication. Serbia and Montenegro, which were analysed as a single country until last year, are treated for the first time now as separate economies and have been ranked 91st and 82nd, respectively. Bulgaria and Romania, which joined the EU in January, have both slipped in the rankings, the first by five places to 79th and the latter by one to 74th. More than 17 years after the end of communism in the two countries, institutions remain a weak spot for both. Greece, the oldest EU member in the region, appears to have become less competitive than last year, dropping nine places to stand 65th in the GCI for 2007-2008. Among the most serious problems, the report cites inflexibility of wages and hiring and firing practices -- accounting for Greece's 124th and 117th place, respectively, in these two specific components. Although it has dropped one place to 57th in this year's GCI, Croatia, which hopes to join the EU by the end of the decade, has improved its overall score for competitiveness from 4.16 to 4.20. It is Turkey, however, which has made the greatest progress among the SEE countries, enabling it to outrank them all and emerge as the most competitive country in the region. It took 53rd place in the GCI for 2007-2008, up from 59th last year. "Turkey benefits from a large market, which is characterized by relatively sophisticated business operations (41st), and a comparatively efficient allocation of goods in the economy (43rd)," the WEF experts said in their report. "These characteristics point to the economy's preparedness to evolve to a more advanced stage of development." At the same time, they urged the country to deal with the burgeoning inefficiencies in its labour market. Turkey should also tackle some more basic issues, such as upgrading the quality of its port and electricity supply infrastructure and improving the human resources base through better primary education and better healthcare, according to the report. The study also includes a Business Competitiveness Index, which ranks Cyprus (45th) highest among the countries in the region, ahead of Turkey (46th), Greece (53rd), Croatia (60th), Romania (73rd), Bulgaria (83rd), Montenegro (85th), Serbia (91st), BiH (107th) and Albania (122nd). Business leaders were given a list of 14 factors and were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The majority of respondents in nine of the SEE countries pointed to inefficient government bureaucracy as the most problematic factor for doing business there. By Svetla Dimitrova from Sofia