1 the global competitiveness report and evaluation of mongolia’s position kerry jaggi and emma...

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The Global Competitiveness Reportand

Evaluation of Mongolia’s Position

Kerry Jaggi and Emma Loades World Economic Forum

13 October 2005

Copyright 2004. All rights reserved

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1. Overview of the Global Competitiveness Programme

2. The Global Competitiveness Report

3. Definition of Competitiveness

4. Growth Competitiveness Index

5. Business Competitiveness Index

6. Global Competitiveness Index

7. Conclusions

Outline

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Flagship product: Global Competitiveness Report

Launched in 1979 covering 16 countries

The Report has since expanded its coverage from 104 economies in 2004 to 117 in 2005

2005 marks our 26th anniversary of measuring competitiveness

1. Global Competitiveness Programme

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Regional and special topic reports in the past year

This year:Gender Gap StudyGlobal Information Technology Report 2005-2006South-East Europe Competitiveness Report 2005-2006

1. Global Competitiveness Programme

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Evaluates the potential for sustained economic growth of 117

economies worldwide and ranks them accordingly

Assesses the comparative strengths and weaknesses of the

major economies of the world

Is the world’s leading global monitor of the competitive condition

of economies

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Launched by Professor Klaus Schwab in 1979,

covering 16 economies

In collaboration with Professor Michael E. Porter and the

Harvard Institute for Strategy and Competitiveness

122 national academic/research institutes and business

organizations worldwide

Geographic coverage of 117 economies in 2005

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In the Global Competitiveness Report:

Competitiveness is defined as

An economy’s propensity to attain sustained economic

growth in the medium to long term (over the coming 5 to 8

years)

Competitiveness is not

A country’s share of the world market for its products

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Why is it important?

Competitiveness leads to growth

Few things matter more for the welfare of a country’s citizens

than the aggregate growth rate of the economy

The challenge is to create the conditions for rapid and

sustained economic growth


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The three determinants of competitiveness are:

1. Technology

2. Quality of Public Institutions

3. Macroeconomic Environment

The Growth Competitiveness Index measures the current

condition of these three determinants


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The two sources:

Annual Executive Opinion Survey data

Publicly available data


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Executive Opinion Survey

Captures perceptions of the current operating environment

from a representative sample of business leaders in each

country

Respondents compare their own operating environments with

global standards on a wide range of dimensions


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Growth

Competitiveness

Index

Technology

Index

Public

Institutions

Index

Macroeconomic

Environment

Index


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Non-core technology innovators

Growth

Competitiveness

Index

Technology Index

1/8 Innovation Subindex

Technology Transfer Subindex

3/8

ICT Subindex4/8


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Growth

Competitiveness

Index

Public Institutions

Index

Corruption Subindex

Contracts and Law Subindex1/2

1/2

Core and non-core technology innovators


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Growth

Competitiveness

Index

Macroeconomic

Environment Index

2/4 Macroeconomic Stability Subindex

Country Credit Rating1/4

Government Waste1/4

Core and non-core technology innovators


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Growth

Competitiveness

Index

Technology

Index1/3

Public

Institutions

Index

1/3

Macroeconomic

Environment

Index

1/3

Technology

Index2/4

Public

Institutions

Index

1/4

Macroeconomic

Environment

Index

1/4

Core Innovators Non-Core Innovators


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The goal is not to predict economic growth in

117 miscellaneous economies

The goal is to identify and analyze the strengths and

weaknesses of the economies included in our sample


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3. Growth Competitiveness Index: Mongolia

Finland 1United States 2Sweden 3Denmark 4Taiwan 5Singapore 6Iceland 7Switzerland 8Norway 9Australia 10

Mongolia 96

Top 10 rankings (out of 117)

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Growth Competitiveness Index 96 Macroeconomic Environment 105 Macroeconomic stability subindex 94 Government waste subindex 109 Country credit rating subindex 97 Public Institutions 93 Contracts and law subindex 81 Corruption subindex 96 Technology 81 Innovation subindex 53 ICT subindex 81 Technology transfer subindex 55 (out of 92 non-core innovators)


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Real effective exchange rate, 2004 31Access to credit 35

Advantages


Wastefulness of government spending 109Government deficit, 2004 100Government debt, 2004 98Country credit rating, 2004 97Interest rate spread, 2004 71Recession expectations 67

Disadvantages

Macroeconomic Environment 105

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Favoritism in decisions of government officials 107Irregular payments in exports and imports 107Judicial independence 99Irregular payments in tax collection 90Irregular payments in public utilities 84Property rights 83

Public Institutions 93

Disadvantages

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Internet hosts, 2003 110Laws relating to ICT 107Quality of competition in the ISP sector 103Technological readiness 98Telephone lines, 2003 88Firm-level technology absorption 87Internet access in schools 87


Government prioritization of ICT 22Tertiary enrollment, 2003 47

Technology 81

Advantages

Disadvantages

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Flexibility of wage determination 14Business costs of terrorism 15Hiring and firing practices 22

Advantages


Disadvantages

Effects of compliance on business 117Protection of ecosystems by business 116Extent of government mandated environmental reporting 115

Other indicators

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East Asia: Overall Growth Competitiveness Index (GCI)

Cou

ntry

(ra

nk)

Score on a scale of 1 to 7

Comparative Assessment

2.82

2.93

3.16

3.37

3.47

3.53

4.07

4.50

4.90

5.07

0 1 2 3 4 5 6 7

Cambodia (112)

East Timor (108)

Mongolia (96)

Vietnam (81)

Philippines (77)

Indonesia (74)

China (49)

Thailand (36)

Malaysia (24)

Korea, Rep. (17)

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The productivity of a country is ultimately set by the

productivity of its companies

The microeconomic foundations of productivity rest on two interrelated areas:

1. Sophistication of company operations and strategy

2. Quality of the microeconomic business environment


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Quality of the National

Business Environment

Business

Competitiveness

Index

Company Operations

and Strategy34%

66%

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Context for Firm Strategy and

Rivalry

Factor (Input) Conditions

Related and Supporting Industries

Demand Conditions

The Microeconomic Business Environment


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United States 1Finland 2Germany 3Denmark 4Singapore 5United Kingdom 6Switzerland 7Japan 8Netherlands 9Austria 10

Mongolia 100

Top 10 rankings (out of 110)

5. Business Competitiveness Index: Mongolia

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Business Competitiveness Index 100

Sophistication of Company Operations and Strategy 96

Quality of the National Business Environment 98


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Advantages

Capacity for innovation 66Nature of competitive advantage 78

Disadvantages

Value chain presence 109Breadth of international markets 107Degree of customer orientation 106

Sophistication of Company Operations and Strategy 96


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Local supplier quality 110Air transport infrastructure 108

Centralization of economic policymaking 48Railroad infrastructure development 56Quality of math and science education 62

Advantages

Disadvantages

Quality of National Business Environment 98


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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

6. The Global Competitiveness Index

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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


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All pillars matter to a certain extent for all countries

However, the importance of each pillar depends on a

country’s particular stage of development

The pillars are organized into 3 subindexes, each critical to

one particular stage:

1. Basic requirements factor-driven stage

2. Efficiency enhancers efficiency-driven stage

3. Innovation and sophistication factors innovation-

driven stage


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Different weights given for the pillars depending on which

stage a country is in

The index places more weight on those pillars that are

more important given a country’s stage of development.


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Weights given to the groups of pillars (subindexes):

Stage Basic Requirements

Efficiency enhancers

Innovation and sophistication

factors

Factor-driven 50% 40% 10%

Efficiency-driven 40% 50% 10%

Innovation-driven 30% 40% 30%


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Mongolia ranks 90 out of 117 countries in the Global

Competitiveness Index:

Mongolia is in the factor-driven stage

This means that basic requirements as well as efficiency

enhancers are critical to driving the country’s competitiveness


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Mongolia is ranked 98 overall in basic requirements:

Particular strength is in health and primary education

(ranked 76).

The country’s greatest weaknesses in this area are

infrastructure (ranked 107), the macroeconomy (ranked

102), and the quality of institutions (ranked 96).


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Mongolia is ranked 80 overall in efficiency enhancers:

Mongolia does particularly well in higher education and

training (ranked 65).

However, there is room for improvement in terms of

technological readiness (ranked 90) and market

efficiency (ranked 88).


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Mongolia is ranked 105 in innovation factors:

The country shows a particular strength in terms of innovation

(ranked 89).

Whereas, business sophistication (ranked 112) is an area

in which Mongolia could improve.


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7. Summary

Depicts the strengths and weaknesses of the national business

environment in each country

Serves as a tool for policy-makers in identifying and addressing

the obstacles to economic growth

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7. Summary

Stimulates public debate on economic development and global

stewardship; and helps investors to develop business strategies

by monitoring and benchmarking national economies

Seeks to establish a process whereby governments, business

leaders and other stakeholders can evaluate progress on a

continual basis

1 the global competitiveness report and evaluation of mongolia’s position kerry jaggi and emma...

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