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Irene Mia Senior Economist Global Competitiveness Network “Measuring Law ”- Workshop

Assessing Law and Order The Lesson from the Global Competitiveness Index and the Growth Competitiveness Index. Irene Mia Senior Economist Global Competitiveness Network “Measuring Law ”- Workshop Paris, December 15 th - 16 th , 2006. Outline.

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Irene Mia Senior Economist Global Competitiveness Network “Measuring Law ”- Workshop

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  1. Assessing Law and Order The Lesson from the Global Competitiveness Index and the Growth Competitiveness Index • Irene Mia • Senior Economist • Global Competitiveness Network • “Measuring Law”- Workshop • Paris, December 15th- 16th, 2006

  2. Outline • Presentation of the Global Competitiveness Network. • The Global Competitiveness Report and our data sources. • The Global Competitiveness Index (GCI). • The Institution pillar of the GCI and analysis. • A brief analysis of the Growth Competitiveness Index (Growth CI), and its Public Institution Index.

  3. Global Competitiveness Network • Flagship product: Global Competitiveness Report • Launched in 1979 covering 16 countries • The Report has since expanded its coverage to 125 countries. • 2006 marks our 27th anniversary of measuring competitiveness

  4. Global Competitiveness Network Regional and special topic reports in the coming months: • Gender Gap Study 2006 • Lisbon Review 2006 • Travel and Tourism Competitiveness Report 2007 • Global Information Technology Report 2007 • Arab World Competitiveness Report 2007

  5. Global Competitiveness NetworkGeographical coverage

  6. Global Competitiveness Report • The mostcomprehensive 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

  7. Global Competitiveness Report Which data do we use? • Executive Opinion Survey : • It records the perspectives of business leaders around the world; Survey data is indispensable, particularly for variables where no reliable hard data sources exist • Respondents compare their own operating environments with global standards on a wide range of dimensions • B) Hard data generally available from international sources

  8. Global Competitiveness ReportThe Executive Opinion Survey • The sample of respondents is carefully selected in each country by the Partner Institute to reflect the structure of a country’s business environment. • It is structured around eleven major issue areas, each of significant relevance to the current state of an economy’s business environment, the Survey asks participants to respond to a total of 150 questions based on their own experiences of operating a business in the country in which they are based • The Survey is translated into over 20 languages. • The Survey is also available online. • Record response rate this year of over 11,000 responses.

  9. Global Competitiveness ReportWhat are we trying to achieve?

  10. Global Competitiveness ReportWhat do we mean by competitiveness? • Competitiveness is defined as the set of factors, policies and institutions that determine the level of productivity of a country • Because productivity is the main driver of investment in an economy and investment, in turn, unambiguously determines the rate of growth of the economy, we say that: • 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

  11. Global Competitiveness Index Three stages of development:The process of economic development evolves in three stages captured by the model: • “Factor-driven stage”Firms compete in prices, taking advantage of cheap factors • “Efficiency-driven stage”Efficient production practices to increase productivity • “Innovation-driven stage”Economies need to produce innovative products using sophisticated production methods

  12. Global Competitiveness Index BASIC REQUIREMENTS • Institutions • Infrastructure • Macroeconomy • Health and Primary Education Key forfactor-driven economies • Higher Education and Training • Market Efficiency (goods, labour, financial) • Technological Readiness EFFICIENCY ENHANCERS Key forefficiency-driven economies INNOVATION & SOPHISTICATIONS FACTORS Key forinnovation-driven economies • Business Sophistication • Innovation

  13. Global Competitiveness Index • 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: • Basic requirements factor-driven stage • Efficiency enhancers efficiency-driven stage • Innovation and sophistication factors innovation-driven stage

  14. Global Competitiveness Index Weights of the three main groups of pillars at each stage of development

  15. Global Competitiveness Rankings 2006-2007Top 20 and selected economies

  16. Global Competitiveness Index 2006-2007 Top performers in the nine pillars

  17. Global Competitiveness Index 2006-2007Focus on the Institution pillar • Transparent and well-functioning institutions are one of the basic requirements for competitiveness, together with well-developed and efficient infrastructure, a sound macroeconomic environment and good levels of health and primary education. • Basic requirements are key for countries placed in stage 1, competing on cheap factors. • Although France has progressed already to a higher stage of development, institutions remain very important for the country’s overall sustained competitiveness.

  18. Institution Index 2/3 1/3 PublicInstitutions Private Institutions Global Competitiveness Index 2006-2007Institution pillar: Composition Both the Public Institution and Private Institution sub-indexes are composed only by Survey data.

  19. Global Competitiveness Index 2006-2007PublicInstitution component: Composition • Government inefficiencies • Property rights Public Institutions • Ethics and corruption • Security • Undue Influence All sub-components are given the same weight in the component’s computation

  20. Global Competitiveness Index 2006-2007PrivateInstitution component: Composition Private Institutions • Corporate Ethics • Accountability Both sub-components are given the same weight in the component’s computation

  21. Institution Pillar Rankings 2006-2007Top 20 and selected economies

  22. Global Competitiveness Index 2006-2007Institution pillar: Variables used & rankings

  23. Global Competitiveness IndexInstitutions pillar: International comparisons

  24. The Global Competitiveness IndexCompetitiveness is associated to better governance Sources: GCR 2005-2006, Kaufmann et al., 2005

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

  26. 1/4 1/4 1/2 Macroeconomic Environment Index PublicInstitutions Index Technology Index The Growth Competitiveness IndexComposition : Core Innovators Growth Competitiveness Index

  27. 1/3 1/3 1/3 Macroeconomic Environment Index Public Institutions Index Technology Index The Growth Competitiveness IndexComposition : Non-Core Innovators Growth Competitiveness Index

  28. Public Institution Index 1/2 1/2 Contract and Law Sub-index Corruption Sub-Index The Growth Competitiveness IndexThe Public Institution index: Composition

  29. Judicial independence Irregular payments in exports/imports Irregular payments in public utilities Property rights Irregular payments in tax collection Favoritism in decisions of govt officials Organised crime The Growth Competitiveness IndexThe Public Institution index: Variables used Both the Public Institution and Private Institution sub-indexes are composed only by Survey data. Corruption Sub-Index Contracts and Law Sub-Index

  30. FranceThe most problematic factor for doing business Source: EOS 2006. The question asked to the firm was: “Select among the above 14 constraints the five most problematic factors for doing business in your country.”

  31. THANK YOU FOR YOUR ATTENTION Visit our website: http://www.weforum.org

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