Embed Size (px)
Citation preview
The Rule of Law as a Factor for
Competitiveness
Lessons from the Global Competitiveness Index
2008-2009
Irene Mia Director, Senior Economist Global Competitiveness Network, World Economic Forum
OECD Workshop on Indicators of Regulatory
Management Systems
BEER Conference Centre - London
April 2nd and 3rd, 2009
2
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
Outline
The Global Competitiveness Network and the Global
Competitiveness Report (GCR) series.
The Global Competitiveness Index (GCI) and sources.
Focus on the institutions and rule of law as basic
requirements for competitiveness.
The impact of the Forum’s competitiveness work on
national agendas.
3
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
Global Competitiveness Network
Flagship product: Global Competitiveness Report:
launched in 1979 covering 16 countries; The Report has
since expanded its coverage to 134 countries.
Co-editors: Professors Klaus Schwab and Michael
Porter.
Our goal: to provide a benchmarking tool for
policymakers and business leaders.
4
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
The Global Competitiveness Report 2008-2009 Geographical coverage
5
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
The Global Competitiveness Index The 12 pillars of competitiveness
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 & SOPHISTICATION FACTORS
6
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
The Global Competitiveness Index Weights
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%
7
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
Use of hard data (publicly available information from
sources such as the International Monetary Fund, the
World Bank, UNESCO, United Nations, etc.).
And survey data (from the Executive Opinion Survey),
which records the perspectives of business leaders
around the world; survey data is indispensable,
particularly for variables where no reliable hard data
sources exist.
In 2008, over 11,000 business leaders from 134
countries responded to the Survey.
The Global Competitiveness Index Data sources
8
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
The sample of respondents is carefully selected in each
country by the Partner Institute to reflect the structure
of a country’s GDP.
It is structured around eleven major issue areas, each
of significant relevance to the current state of an
economy’s business environment, asking participants to
respond to a total of 144 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 and is
available online.
The Global Competitiveness Index
Data sources: The Executive Opinion Survey
9
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
The Global Competitiveness Index Institutions as a key driver for competitiveness
There are strong indications that differences in
institutions explain much of the growth differential
between countries, and therefore have an influence upon
countries’ growth performance well beyond simply getting
inflation right or addressing other macroeconomic
weaknesses.
Our concept of competitiveness explicitly incorporates
notions of public sector accountability, efficiency,
transparency and, more generally, the various ways in
which the government interacts with economic agents in
the domestic economy, particularly the business sector.
Also elements of private institutions’ efficiency are taken
into consideration.
10
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
Institution Index
Public Institutions
2/3
Private Institutions
1/3
The Global Competitiveness Index Institution pillar: Composition
Both the Public Institution and Private Institution sub-pillars are
composed only by Survey data.
11
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
Public
Institutions
Property rights
Ethics and corruption
Undue Influence
Government inefficiencies
Security
The Global Competitiveness Index
Public Institution sub-pillar: Composition
All criteria are given the same weight in the sub-pillar’s computation
12
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
The Global Competitiveness Index
Public Institution sub-pillar: Variables used
A. Public institutions
1. Property rights
Property rights
Intellectual property protection
2. Ethics and corruption
Diversion of public funds
Public trust of politicians
3. Undue influence
Judicial independence
Favoritism in decisions of government officials
4. Government inefficiency
Wastefulness of government spending
Burden of government regulation
Efficiency of legal framework
Transparency of government policymaking
5. Security
Business costs of terrorism
Business costs of crime and violence
Organized crime
Reliability of police services
13
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
The Global Competitiveness Index Private Institutions
Good governance is not a concept that applies to the public sector only. Quality and transparency of private institutions are also crucial for economic efficiency. An economy is well served by businesses that are run honestly, where managers abide by strong ethical practices in their dealings with the government, other firms, and the public. Private sector transparency is indispensable to business, notably the financial sector, using standards, auditing, and accounting practices that ensure access to information in a timely manner.
14
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
Private
Institutions Corporate Ethics Accountability
The Global Competitiveness Index
Private Institution sub-pillar: Composition
Both criteria are given the same weight in the component’s computation
15
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
Global Competitiveness Index 2006-2007 Private Institution pillar: Variables used
B. Private institutions
1. Corporate ethics
Ethical behavior of firms
2. Accountability
Strength of auditing and reporting standards
Efficacy of corporate boards
Protection of minority shareholders’ interests
16
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Lon
do
n |
Ap
ril 2
nd a
nd
3rd
, 2
00
9
The Global Competitiveness Index Institution related variables used in other pillars of the
index
Other institution-related variables are used in other pillars of the GCI. A few examples: Effectiveness of anti-monopoly policy
Extent and effect of taxation
Foreign ownership restrictions
Business impact of rules on FDI
Restrictions on capital flows
Regulation on securities exchanges
Laws relating to ICT
17
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Institution Pillar Rankings 2008-2009 Top 20 and selected economies
Economy Rank 2008 Score
Singapore 1 6.20
Denmark 2 6.18
Finland 3 6.17
Switzerland 4 5.97
Sweden 5 5.95
Iceland 6 5.91
Norway 7 5.87
Hong Kong SAR 8 5.77
New Zealand 9 5.70
Netherlands 10 5.68
Luxembourg 11 5.66
Austria 12 5.65
Australia 13 5.63
Germany 14 5.59
Qatar 15 5.52
United Arab Emirates 16 5.40
Canada 17 5.36
Ireland 18 5.29
Oman 19 5.26
Tunisia 20 5.18
Korea, Rep. 27 4.86
United States 35 4.73
Botswana 37 4.67
Chile 42 4.50
South Africa 49 4.33
China 54 4.16
India 56 4.07
Italy 81 3.56
Turkey 82 3.56
Mexico 102 3.23
Russian Federation 112 3.13
Venezuela 134 2.05
Economy Rank 2008 Score
Sweden 1 6.34
Finland 2 6.22
Denmark 3 6.18
New Zealand 4 6.16
Singapore 5 6.13
Norway 6 6.09
Netherlands 7 6.02
Australia 8 6.00
Iceland 9 5.99
Switzerland 10 5.96
Austria 11 5.96
Canada 12 5.92
Germany 13 5.85
Hong Kong SAR 14 5.81
Luxembourg 15 5.74
Ireland 16 5.68
United Kingdom 17 5.61
United States 18 5.54
Belgium 19 5.51
Chile 20 5.41
Qatar 22 5.33
South Africa 25 5.21
Korea, Rep. 26 5.21
Botswana 39 4.92
India 48 4.71
Brazil 61 4.39
China 77 4.24
Mexico 78 4.24
Turkey 86 4.19
Italy 93 4.03
Russian Federation 108 3.76
Chad 134 2.96
Pu
blic
Institu
tion
s
Priv
ate
Institu
tion
s
18
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Institution Pillar 2008-2009 OECD and selected comparators (score out of 7)
0
1
2
3
4
5
6
7
Singapore EU 15 EU27 MENA Latin
America &
the
Caribbean
GCR
sample
average
OECD
Institutions
Public institutions
Private institutions
19
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Public Institution Pillar 2008-2009 OECD vs. top performer Singapore (score out of 7)
0
1
2
3
4
5
6
7
Competitive advantages
Intellectual property protection
Diversion of public funds
Public trust of politicians
Judicial independence
Favoritism in decisions of government
officials
Wastefulness of government spending
Burden of government regulation
Efficiency of legal framework
Transparency of government policymaking
Business costs of terrorism
Business costs of crime and violence
Organized crime
Reliability of police services
Singapore OECD
20
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Private Institution Pillar 2008-2009 OECD vs. top performer Sweden (score out of 7)
1
2
3
4
5
6
7
Ethical behavior of firms
Strength of auditing and reporting
standards
Efficacy of corporate boards
Protection of minority shareholders’
interests
OECD Sweden
21
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Institution Pillar 2008-2009 Property rights (score out of 7)
6.66 6.646.51 6.51 6.50 6.43
4.80 4.70
4.20 4.09 3.96
1
2
3
4
5
6
7
Switz
erla
nd
Den
mar
k
Finla
nd
Ger
man
y
Swed
en
Can
ada
Italy
Cze
ch R
epub
lic
Turke
y
Mex
ico
Pol
and
Source: EOS 2007, 2008. The question asked to the firm was: “Property rights in your country, including
over financial assets, are: (1 = Poorly defined and not protected by law ; 7 = Clearly defined and well
protected by law)”
22
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Institution Pillar 2008-2009
Wastefulness of government spending (score out of 7)
Source: EOS 2007, 2008. The question asked to the firm was: “The composition of public spending in
your country: (1 = Is wasteful ; 7 = Efficiently provides necessary goods and services not provided by the
market)”
6.06
5.13 5.044.85 4.79 4.69
2.82 2.80 2.70
2.26 2.21
1
2
3
4
5
6
7
Singa
pore
Finla
nd
Den
mar
k
Switz
erla
nd
Net
herla
nds
Aus
tralia
Cze
ch R
epub
lic
Japa
n
Polan
d
Hun
gary
Italy
23
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Institution Pillar 2008-2009
Burden of government regulations (score out of 7)
Source: EOS 2007, 2008. The question asked to the firm was: “Complying with administrative
requirements for businesses (permits, regulations, reporting) issued by the government in your country is:
(1 = Burdensome ; 7 = Not burdensome)”
5.66
4.47 4.45 4.39
3.83 3.83
2.412.27 2.26 2.23 2.14
1
2
3
4
5
6
7
Singapore
Japan
Switzer
land
Finla
nd
Korea, R
ep.
Den
mark
Mexi
co
France
Poland
Hun
garyIta
ly
24
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Institution Pillar 2008-2009 Efficiency of legal framework (score out of 7)
Source: EOS 2007, 2008. The question asked to the firm was: “The legal framework in your country for
private businesses to settle disputes and challenge the legality of government actions and/or regulations is:
(1 = Inefficient and subject to manipulation ; 7 = Efficient and follows a clear, neutral process)”
6.306.04 6.01 6.01 6.00 5.95
3.222.96 2.89 2.88 2.80
1
2
3
4
5
6
7
Den
mar
k
Switzer
land
Ger
man
y
Finla
nd
Nor
way
Sweden
Cze
ch R
epub
lic
Slova
k Rep
ublic
Polan
d
Mex
ico
Italy
25
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Institution Pillar 2008-2009 Transparency of government decision-making (score out of 7)
Source: EOS 2007, 2008. The question asked to the firm was: “Are firms in your country usually
informed clearly by the government on changes in policies and regulations affecting your industry? (1 =
Never informed ; 7 = Always informed)”
6.275.85 5.82 5.74
5.56 5.47
3.64 3.563.39 3.25
2.98
1
2
3
4
5
6
7
Singa
pore
Swed
en
Den
mar
k
Finla
nd
Switz
erla
nd
Nor
way
Gre
ece
Cze
ch R
epub
licIta
ly
Hun
gary
Polan
d
26
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Institution Pillar 2008-2009 Judicial Independence (score out of 7)
Source: EOS 2007, 2008. The question asked to the firm was: “Is the judiciary in your country
independent from influences of members of government, citizens or firms? (1 = No – heavily influenced ;
7 = yes – entirely independent)”
6.63 6.63 6.60 6.54 6.52 6.51
4.003.72 3.65 3.60
3.41
1
2
3
4
5
6
7
New
Zea
land
Finla
nd
Swed
en
Ger
man
y
Den
mar
k
Net
herla
nds
Turke
y
Polan
d
Slova
k Rep
ublic
Italy
Mex
ico
27
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Institution Pillar 2008-2009 Burden of customs procedures (score out of 7)
Source: EOS 2007, 2008. The question asked to the firm was: “Customs procedures (formalities
regulating the entry and exit of merchandise) in your country are: ( 1 = Extremely slow and cumbersome
; 7 = Rapid and efficient)”
6.45
5.97 5.90 5.79
5.30 5.18
3.98 3.88 3.773.60 3.47
1
2
3
4
5
6
7
Singa
pore
Swed
en
Den
mar
k
Finland
Nor
way
Net
herla
nds
Gre
ece
Italy
Polan
d
Mex
ico
Turke
y
28
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Institution Pillar 2008-2009 Extent and effect of taxation (score out of 7)
Source: EOS 2007, 2008. The question asked to the firm was: “The level of taxes in your country: (1 =
Significantly limits incentives to work or invest ; 7 = Has little impact on incentives to work or invest)”
6.22
5.06 4.98 4.93
4.15
3.69
2.47 2.34 2.29 2.141.93
1
2
3
4
5
6
7
Uni
ted
Arab
Emira
tes
Switz
erland
Slova
k Rep
ublic
Ireland
Korea
, Rep
.
Nor
way
Swed
en
Polan
dIta
ly
Belgi
um
Hun
gary
29
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Policymakers around the world increasingly pay close
attention to the Report’s results. The Global
Competitiveness Network is increasingly asked by
governments to help identify priority areas for reform.
Provides a highly useful platform for business to enter
into dialogue with governments on policy issues that
affect the country’s and their industries’
competitiveness.
Global Competitiveness Network The impact: a platform for private-public dialogue
30
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
Global Competitiveness Network The impact: Latam Roadshows
The findings of our Reports have been used over the years as a neutral platform to trigger private-public dialogue on countries’ competitiveness weaknesses.
A notable example has been the Latin America Roadshow, sponsored by Microsoft, and carried over annually in up to 10 countries to raise national awareness and generate a high level debate with and within the government and business sector about the structural weaknesses of the countries visited and identification of the remedial steps needed.
31
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
The Global Competitiveness Network played the key catalytic role in launching in 2004 the Egyptian Competitiveness Council. This council has spearheaded the efforts in other Arab countries to setup similar bodies (e.g. UAE, Bahrain, Kuwait, Morocco), following the Forum’s guidelines.
Also in many countries, the Global Competitiveness Index is used as a tool to assess national advancements and to set policy targets. The Forum is working closely with the government led competitiveness institutions in charge of the above in a number of countries, including Mexico, Peru, Colombia, Dominican Republic and Ecuador.
Global Competitiveness Network The impact: the National Competitiveness Councils
32
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
A number of National Competitiveness Councils or public and or private organizations have published or are writing National Competitiveness Reports based primarily on the findings and methodology of the Global Competitiveness Reports. Countries include: Egypt, Kuwait, Bahrain, Pakistan, Armenia and Croatia.
The Forum has also been asked to produce national specific reports to address competitiveness challenges in different countries.
Pilot project: the Ukraine Competitiveness Report 2008 Also: Mexico Competitiveness Report and Brazil
Competitiveness Report upcoming
Global Competitiveness Network The impact: The National Competitiveness Reports
33
The
ru
le o
f la
w a
s a
fa
cto
r fo
r c
om
pe
titive
ne
ss
Be
rlin
| N
ov
em
be
r 1
6-1
8, 2
00
8
THANK YOU FOR YOUR KIND ATTENTION
Visit our interactive website:
http://gcr.weforum.org/gcr/
The Global Competitiveness Report 2008-2009 is freely downloadable from our website at http://www.weforum.org/pdf/GCR08/GCR08.pdf
