Jennifer Blanke

Director, Senior Economist

World Economic ForumMontenegro | 20 May, 2008

Assessing Southeast Assessing Southeast Europe’s Competitiveness in Europe’s Competitiveness in an International Contextan International ContextBased on the results of The Global Based on the results of The Global Competitiveness Report 2007-2008Competitiveness Report 2007-2008

Presented at the 3rd Regional Competitiveness

Conference in Southeast Europe

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The Global Competitiveness Report.

The Global Competitiveness Index (GCI)

Southeast Europe’s comparative performance in the

GCI rankings

Outline

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Global Competitiveness Report

Flagship product: Global Competitiveness Report: launched

in 1979 covering 16 countries; The Report has since

expanded its coverage to 131 countries.

Co-editors: Professors Michael Porter, Xavier Sala-i-Martin

and Klaus Schwab

Our goal: to provide a benchmarking tool for policymakers

and business leaders

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The Global Competitiveness Network

Regional and special topic reports recently released:

Gender Gap Study 2007

Arab World Competitiveness Report 2007

Africa Competitiveness Report 2007

Travel and Tourism Competitiveness Report 2008

Global Information Technology Report 2007-2008

The Mexico Competitiveness Report 2008

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The Global Competitiveness Report 2007-2008 What are we trying to measure?

GDP per capita 1980-2008 (PPP in international dollars)

Source: International Monetary Fund, World Economic Outlook, October 2007

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Slovenia BulgariaGermany KoreaAlbania

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The Global Competitiveness Report 2007-2008

The most comprehensive 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

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Use of “hard data” (publicly available information) and

survey data (from the Executive Opinion Survey)

The Survey records the perspectives of business leaders

around the world; Survey data is indispensable, particularly

for variables where no reliable hard data sources exist

The Global Competitiveness Report 2007-2008 Data

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The Global Competitiveness Report 2007-2008Country coverage

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How we do not define competitiveness: “a country’s share of

the world market for its products” This view implies a zero-sum game - one country’s gain

comes at the expense of others

How we do define competitiveness: “the set of institutions,

policies, and factors that determine the level of productivity of

a country.” The level of productivity, in turn, sets the sustainable

level of prosperity that can be earned by an economy.

The Global Competitiveness IndexDefinition

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The process of economic development evolves in stages as

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

The Global Competitiveness IndexStages of Development

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Global Competitiveness Index 2007-2008The Framework

Key for

efficiency-driven economies

Key for

factor-driven economies

1. Institutions

2. Infrastructure

3. Macroeconomic stability

4. Health and primary education

5. Higher education and training

6. Goods market efficiency

7. Labor market efficiency

8. Financial market sophistication

9. Technological Readiness

10. Market size

11. Business sophistication

12. Innovation

Key for

innovation-driven economies

BASIC REQUIREMENTS

EFFICIENCY ENHANCERS

INNOVATION & SOPHISTICATIONS FACTORS

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Global Competitiveness Index 2007-2008

Weights of the three main groups of pillars at each stage of development

Factor-driven stage

Efficiency-driven stage

Innovation-driven stage

Basic requirements 60% 40% 20%

Efficiency enhancers 35% 50% 50%

Innovation and sophistication factors 5% 10% 30%

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Global Competitiveness Index 2007-2008Countries by stage of development

Transition from 1 to 2 Stage 2 Transition from 2 to 3 Stage 3GDP per capita of US$2,000-US$3,000

GDP per capita of US$3,000-US$9,000

GDP per capita of US$9,000-US$17,000

GDP per capita more than US$17,000

Armenia Mauritania Albania Algeria Bahrain Australia

Bangladesh Moldova Azerbaijan Argentina Barbados Austria

Benin Mongolia Bosnia and Herzegovina Brazil Croatia Belgium

Bolivia Morocco Botswana Bulgaria Czech Republic Canada

Burkina Faso Mozambique China Chile Estonia Cyprus

Burundi Nepal Colombia Costa Rica Hungary Denmark

Cambodia Nicaragua Ecuador Dominican Republic Malta Finland

Cameroon Nigeria El Salvador Jamaica Qatar France

Chad Pakistan Guatemala Latvia Slovak Republic Germany

Egypt Paraguay Jordan Lithuania Taiwan, China Greece

Ethiopia Philippines Kazakhstan Macedonia, FYR Trinidad and Tobago Hong Kong SAR

Gambia, The Senegal Kuwait Malaysia Iceland

Georgia Sri Lanka Libya Mauritius Ireland

Guyana Syria Oman Mexico Israel

Honduras Tajikistan Saudi Arabia Montenegro Italy

India Tanzania Tunisia Namibia Japan

Indonesia Timor-Leste Ukraine Panama Korea

Kenya Uganda Venezuela Peru Luxembourg

Kyrgyz Republic Uzbekistan Poland Netherlands

Lesotho Vietnam Romania New Zealand

Madagascar Zambia Russia Norway

Mali Zimbabwe Serbia Portugal

South Africa Puerto Rico

Suriname Singapore

Thailand Slovenia

Turkey Spain

Uruguay Sweden

Switzerland

United Arab Emirates

United Kingdom

United States

GDP per capita of less than US$2,000

Stage 1

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Global Competitiveness Index 2007-2008Top 20 and selected economies

Rank Economy Score Rank Economy Score

1 United States 5.67 26 Chile 4.77

2 Switzerland 5.62 28 Thailand 4.70

3 Denmark 5.55 29 Spain 4.66

4 Sweden 5.54 34 China 4.575 Germany 5.51 39 Slovenia 4.48

6 Finland 5.49 46 Italy 4.36

7 Singapore 5.45 47 Hungary 4.35

8 Japan 5.43 48 India 4.339 United Kingdom 5.41 53 Turkey 4.25

10 Netherlands 5.40 57 Croatia 4.20

11 Korea 5.40 58 Russia 4.19

12 Hong Kong SAR 5.37 65 Greece 4.08

13 Canada 5.34 66 Azerbaijan 4.07

14 Taiwan, China 5.25 68 Vietnam 4.04

15 Austria 5.23 72 Brazil 3.99

16 Norway 5.20 73 Ukraine 3.98

17 Israel 5.20 77 Egypt 3.96

18 France 5.18 90 Georgia 3.83

19 Australia 5.17 93 Armenia 3.76

20 Belgium 5.10 129 Zimbabwe 2.88

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Global Competitiveness Index 2007-2008Southeast Europe’s (SEE) overall ranking

Global Competitiveness Index

2007-2008

Rank Economy Score

39 Slovenia 4.4857 Croatia 4.2074 Romania 3.9779 Bulgaria 3.9382 Montenegro 3.9191 Serbia 3.7894 Macedonia, FYR 3.7397 Moldova 3.64

106 Bosnia and Herzegovina 3.55109 Albania 3.48

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Global Competitiveness Index 2007-2008Southeast Europe’s (SEE) performance per pillar

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The Global Competitiveness Rankings 2007-2008 Regional comparisons: SEE average vs. EU Accession 12

1

3

5

7Institutions

Infrastructure

Macroeconomic stability

Health and primaryeducation

Higher education andtraining

Goods market efficiency

Labor market efficiency

Financial marketsophistication

Technological readiness

Market size

Business sophistication

Innovation

SEE average EU Accession 12

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The Global Competitiveness Rankings 2007-2008 Regional comparisons: SEE average vs. EU 25

1

3

5

7Institutions

Infrastructure

Macroeconomic stability

Health and primaryeducation

Higher education andtraining

Goods market efficiency

Labor market efficiency

Financial marketsophistication

Technological readiness

Market size

Business sophistication

Innovation

SEE average Average EU 25

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The Global Competitiveness Rankings 2007-2008 Regional comparisons: SEE average vs. EU 15

1

3

5

7Institutions

Infrastructure

Macroeconomic stability

Health and primaryeducation

Higher education andtraining

Goods market efficiency

Labor market efficiency

Financial marketsophistication

Technological readiness

Market size

Business sophistication

Innovation

SEE average EU 15

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The Global Competitiveness Rankings 2007-2008 Regional comparisons: SEE average vs. Latin America and the Caribbean

1

3

5

7Institutions

Infrastructure

Macroeconomic stability

Health and primaryeducation

Higher education andtraining

Goods market efficiency

Labor market efficiency

Financial marketsophistication

Technological readiness

Market size

Business sophistication

Innovation

SEE average Latin America and the Caribbean

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The Global Competitiveness Rankings 2007-2008 Regional comparisons: SEE average vs. East Asian NICs average (Hong Kong, South Korea,

Singapore, and Taiwan)

1

3

5

7Institutions

Infrastructure

Macroeconomic stability

Health and primaryeducation

Higher education andtraining

Goods market efficiency

Labor market efficiency

Financial marketsophistication

Technological readiness

Market size

Business sophistication

Innovation

SEE averageEast Asian NICs average

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The Global Competitiveness Rankings 2007-2008 SEE and selected comparators (scores on a scale of 1 to 7)

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The Global Competitiveness Rankings 2007-2008 Case study: Montenegro’s overall performance

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The Global Competitiveness Rankings 2007-2008 Case study: Montenegro’s comparative advantages

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The Global Competitiveness Rankings 2007-2008 Case study: Montenegro’s comparative disadvantages

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The Global Competitiveness Rankings 2007-2008 Montenegro vs. EU 27

1

3

5

7Institutions

Infrastructure

Macroeconomic stability

Health and primary education

Higher education and training

Goods market efficiency

Labor market efficiency

Financial market sophistication

Technological readiness

Market size

Business sophistication

Innovation

Montenegro EU 27

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The Global Competitiveness Rankings 2007-2008 Montenegro vs. EU Accession 12

1

3

5

7Institutions

Infrastructure

Macroeconomic stability

Health and primary education

Higher education and training

Goods market efficiency

Labor market efficiency

Financial market sophistication

Technological readiness

Market size

Business sophistication

Innovation

Montenegro EU Accession 12

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Conclusions

Competitiveness is a complex process, requiring countries to address issues on many fronts

Several countries in the Southeast Europe region have a number of competitive strengths, especially regarding the quality of basic human capital and macroeconomic stability

But to provide an environment in which its businesses can thrive, and thus improve its competitive position, improvements must be made in a number of critical areas (e.g. institutions, infrastructure, market efficiency)

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The Global Competitiveness ReportHow to obtain more information

Please visit our website for further information and to download most sections of the Report:

www.weforum.org