Ethiopia ranks 121st in global competitiveness


The Global Competitiveness Report (GCR) ranks Ethiopia 121 out of 144 countries included in the global competitiveness index (GCI).  Switzerland, for the fourth consecutive year, tops the overall rankings in the GCR 2012-2013, released last Thursday by the World Economic Forum. Singapore remains in second position while Finland takes third position overtaking Sweden. 
GCR assesses the ability of countries to provide high levels of prosperity to their citizens. This in turn depends on how productively a country uses its available resources. The GCI measures the set of institutions, policies, and factors that set the sustainable levels of economic prosperity. The report confirms that Africa’s competitiveness has been improving in recent years. South Africa (52nd) and Mauritius (54th) continue to lead the rankings followed by Rwanda (63rd), Seychelles (76th) and Botswana (79th). 
However, 14 of the 20 overall lowest-ranked economies are from Africa. Though the region has been improving in recent years in specific areas such as educational attainment and goods market efficiency, persistent infrastructure deficit and health concerns continue to be significant bottlenecks, argues the report.
Northern and Western European countries dominate the top 10 lists. The Netherlands stands fifth followed by Germany. United Kingdom takes eighth position surpassed by the United States.  Hong Kong and Japan lead Asia taking the ninth and tenth positions respectively.
The report suggests that Switzerland and countries in Northern Europe have been consolidating their strong competitiveness positions since the financial and economic downturn in 2008. On the other hand, countries in Southern Europe including Portugal (49th), Spain (36th), Italy (42nd) and Greece (96th) continue to suffer from competitiveness weaknesses in terms of macroeconomic imbalances, poor access to financing, rigid labor markets and an innovation deficit.
The United States continues to decline for the fourth year in a row falling two more positions. In addition to the burgeoning macroeconomic vulnerabilities, some aspects of the country’s institutional environment continue to raise concern among business leaders, particularly the low public trust in politicians and a perceived lack of government efficiency. However, the report appreciates the fact that the country still remains a global innovation powerhouse and its markets work efficiently.   
This year’s GCR introduces five additional sub-Saharan African economies; Gabon, Guinea, Liberia, Seychelles and Sierra Leone which stands 99th, 141th, 111th, 76th and 143rd in the index, respectively.
Emerging market economies display different performances. Though China moves down to 29th from 27th, the country continues to lead the BRICS. Only Brazil moves up this year to 48th position while South Africa (52nd), India (59th) and Russia (67th) experienced small declines in the ranking.
Since 2004, the report ranks the world’s nations according to the GCI. The report states that it is based on the latest theoretical and empirical research. It is made up of over 110 variables, of which two thirds come from the Executive Opinion Survey, and one third comes from publicly available sources such as the United Nations.
One part of the report is the Executive Opinion Survey which is a survey of a representative sample of business leaders in their respective countries. Respondent numbers have increased every year and are currently just over 13,500 in 142 countries.
The report notes that as a nation develops, wages tend to increase, and that in order to sustain this higher income, labor productivity must improve for the nation to be competitive. In addition, what creates productivity in Sweden is necessarily different from what drives it in Ethiopia. Thus, the GCI separates countries into three specific stages: factor-driven, efficiency-driven, and innovation-driven, each implying a growing degree of complexity in the operation of the economy.
In the factor-driven stage countries compete based on their factor endowments, primarily unskilled labor and natural resources. Companies compete on the basis of prices and sell basic products or commodities, with their low productivity reflected in low wages. To maintain competitiveness at this stage of development, competitiveness hinges mainly on well-functioning public and private institutions, appropriate infrastructure, a stable macroeconomic framework, and good health and primary education.
As wages rise with advancing development, countries move into the efficiency-driven stage of development, when they must begin to develop more efficient production processes and increase product quality. At this point, competitiveness becomes increasingly driven by higher education and training, efficient goods markets, efficient labor markets, developed financial markets, the ability to harness the benefits of existing technologies, and its market size, both domestic and international.
Finally, as countries move into the innovation-driven stage, they are only able to sustain higher wages and a higher standard of living if their businesses are able to compete by providing new or unique products. At this stage, companies must compete by producing new and different goods using the most sophisticated production processes and through innovation.
The GCR is a yearly report published by the World Economic Forum. The first report was released in 1979.