What is the Global Competitiveness Report?
THE GLOBAL Competitiveness Report helps to explain why some countries are more prosperous than others by assessing the important factors that contribute to economic growth and a country's ability to increase its population's income.
The report is a guide for policymakers and business leaders in their attempts to formulate the appropriate structural reforms to move their countries forward. The report assesses each country's competitiveness in this globalised world, highlighting that policymakers must avoid complacency and should industriously continue to implement proper reforms and investments necessary to guarantee that their countries can provide thriving economies and employment for its citizens.
What are the important elements?
The report outlines that economic growth and development can only be fuelled by an economy's ability to create value-added products, value-added processes and innovative business models. With this in mind, for future reference, the usual categorising of countries as developed or developing will be less relevant; instead, countries are differentiated by their abilities to be innovative. Now, they are categorised as those that are "innovatively rich" and those that are "innovatively poor".
The report made it clear that businessmen, government, intellects and civil society (especially in emerging economies) should work together to create environments that encourage innovation complemented by suitable education and training.
Additionally, the report has incorporated social and environmental factors as a part of a country's competiveness. These are important elements of sustainable development. Fundamentally, the success of an economy depends on the 12 pillars of competitiveness.
What are the 12 pillars of competitiveness?
The report defines competitiveness as the set of institutions, policies and factors that determine the level of productivity of a country. In essence, the more productive a country, the more competitive it is in a globalised context. The 12 pillars are follows:
1. Institutions: It is important that the institutional environment upon which individuals, firms and businesses interact is sound and fair. Excessive bureaucracy, corruption, overregulation and dishonesty by government officials are deterrents to a country's competitiveness globally.
2. Infrastructure: A productive economy requires extensive and efficient infrastructure. This will determine the location of economic activity and the type of activities that are suitable to specific areas in the economy.
3. Macroeconomic environment: If a country is characterised by high macroeconomic instability (rapidly depreciating exchange rate, high interest rates and inflation, etc), it makes it difficult for government to concentrate on providing the appropriate economic services.
4. Good healthcare system and proper primary education.
5. Higher education and training.
6. Efficiency in the goods market: Countries that position themselves to produce the right mix of goods and services based on their supply and demand conditions.
7. Efficiency in the labour market: Workers must be given jobs that are most suitable to their education and skills. Workers must be able to switch from one job to the next at low costs, and with relative ease depending on shifts in consumer demand.
8. A developed financial market.
9. Technological readiness.
10. Market size: The size of a county's market will determine how much the country produces. Small economies such as Jamaica must take advantage of globalisation and increase production for export.
11. Business sophistication.
These 12 pillars are divided into three broad stages: stage one is factor-driven, where a country is performing at pillars one to four above. Stage two is efficiency-driven, where a country has passed stage one and is working on improving pillars five to 10. Stage three is driven by innovation, where the country has mastered the first 10 pillars and is now focusing on business sophistication and innovation.
How did Jamaica perform on the report?
According to the report, Jamaica has passed the factor-driven phase, and is now among the group of countries that are working on their efficiency issues, but are not yet in the innovation phase. Overall, Jamaica is 94th on the rankings, three places better than the 97th it ranked last year. Trinidad and Tobago is ranked 92nd, and Barbados 47th.
Despite improving marginally on the rankings, Jamaica remains "innovatively poor" relative to the rest of the world. Our vast creativity and innovativeness are presumably substandard due to our inability to manifest these productively.
To reduce unemployment and increase income, we should try, as best as possible, to support the innovation among us, increase value-added processes, and the production of value-added goods and services, taking the energy constraint into consideration.
Dr André Haughton is a lecturer in the Department of Economics on the Mona campus of the University of the West Indies. Follow him on twitter @DrAndreHaughton; or email email@example.com.