Wong Check Ying 04003446Cheung Siu Wun 04004485Lee Po Hung 04005856Leung Yee Ka 04014057

Introduction

• Global Competitiveness Report is published by the World Economic Forum

• Assessed 117 economies

• understanding the key ingredients of economic growth and prosperity

Introduction

• Based on two indexes - Growth Competitiveness Index - Business Competitiveness Index

• Amendment in 2004 - Global Competitiveness Index - 9 pillars---institutions, infrastructure, market efficiency, business sophistication, higher education and training, etc

Growth Competitiveness Index (GCI)• measure the capacity of the national economy to achieve

sustained economic growth

• a number of complementary concepts

• providing a quantified framework for measuring competitiveness

• Limitations - from small and homogenous economies to big and diverse societies

• hard data - university enrollment rates, inflation performance, the state of the public finances, the level of penetration of new technologies, etc

• survey data drawn from the World Economic Forum’s Executive Opinion Survey - captures the expert opinions of business leaders and entrepreneurs on macroeconomic environment, corruption, technology, innovation and diffusion, domestic competition, etc

Growth Competitiveness Index (GCI)

• Core innovators are countries with more than 15 US utility patents registered per million population

• non-core innovators are all other countries

Growth Competitiveness Index (GCI)

Growth Competitiveness Index (GCI)

• explaining the evolution of growth in a country---“three pillars”

- the quality of the macroeconomic environment - the state of the country’s public institutions - the level of its technological readiness

• 3 indexes - the technology index - the public institution index - the macroeconomic environment index

Growth Competitiveness Index (GCI)

• measures the capacity for innovation and diffusion of technology

• 3 sub-indexes - innovation sub-index measures the levels of technological sophistication - technology transfer sub-index - information and communication technology sub- index measures of telephone lines, personal computers, Internet usage, etc

Technology Index

• Technology index for core economies / innovators =

1/2 innovation sub-index + 1/2 ICT sub-index

• Technology index for non-core economies / innovators =

1/8 innovation sub-index + 3/8 technology transfer

sub-index + 1/2 ICT sub-index

Growth Competitiveness Index (GCI)

Technology Index

• Innovation sub-index = 1/4 Survey data + 3/4 hard data

• Technology Transfer sub-index = un-weighted average of two technology transfer survey

questions

• Information and Communication technology sub-index = 1/3 survey data + 2/3 hard data

Growth Competitiveness Index (GCI)

Technology Index

Technology Index

Growth Competitiveness Index (GCI)

Growth Competitiveness Index (GCI)

• measures the role of politics and the bureaucracy in supporting market-based economic activity and the division of labor

• 2 sub-indexes - the contracts and law sub-index concerns neutrality in government procurement, clear delineation and respect for property rights, etc - the corruption sub-index measures the pervasiveness of bribery in three key public service areas

Public Institutions Index

• Public institutions index =

1/2 contracts and law sub-index

+ 1/2 corruption sub-index

Growth Competitiveness Index (GCI)

Public Institutions Index

Growth Competitiveness Index (GCI)Public Institutions Index

Growth Competitiveness Index (GCI)

• Measures variables related to capital accumulation and the efficiency of the division of labor

• 1 sub-index - the macroeconomic stability sub-index include the real exchange rate relative to the US, the general government budget balance, consumer price inflation, etc

Macroeconomic Environment Index

• Macroeconomic environment index =

1/2 macroeconomic stability sub-index

+ 1/4 country credit rating

+ 1/4 government waste

• Macroeconomic stability sub-index =

5/7 hard data + 2/7 survey data

Growth Competitiveness Index (GCI)

Macroeconomic Environment Index

Growth Competitiveness Index (GCI)Macroeconomic Environment Index

• GCI for core economies / innovators =

1/2 technology index

+ 1/4 public institution index

+ 1/4 macroeconomic environment index

• GCI for non-core economies / innovators =

1/3 technology index

+ 1/3 public institutions index

+ 1/3 macroeconomic environment index

Growth Competitiveness Index (GCI)

Growth Competitiveness Index (GCI)

• underlying microeconomic factors

• determine economies’ current sustainable levels of productivity and competitiveness

• complementary approach to the forward-looking macroeconomic approach of the GCI

• highly skilled people, efficiency of government processes, quality of infrastructure, the competitive pressures faced by companies, etc

The Business Competitiveness Index (BCI)

• measures two areas that are critical to the microeconomic business environment in an economy

- the sophistication of company operations and

strategy

- the quality of the overarching national business

environment in which they are operating

The Business Competitiveness Index (BCI)

• 2 sub-indexes

- companies’ operations and strategies

- quality of the national business

environment

The Business Competitiveness Index (BCI)

The Business Competitiveness Index (BCI)

Relationship between GCI and BCI

Partial regression results of GCIvs.

GDP per capita growth

GDP 2005 Data source: 2005 CIA World Factbook

1 World $55,500,000,000,000

2 United States $11,750,000,000,000

3 European Union $11,650,000,000,000

4 China $7,262,000,000,000

5 Japan $3,745,000,000,000

6 India $3,319,000,000,000

7 Germany $2,362,000,000,000

8 United Kingdom $1,782,000,000,000

9 France $1,737,000,000,000

10

Italy $1,609,000,000,000

36 Sweden $255,400,000,000

37 Switzerland $251,900,000,000

38 Hong Kong $234,500,000,000

39 Malaysia $229,300,000,000

40 Vietnam $227,200,000,000

41 Greece $226,400,000,000

42 Algeria $212,300,000,000

43 Portugal $188,700,000,000

44 Norway $183,000,000,000

45 Denmark $174,400,000,000

46 Czech Republic $172,200,000,000

139 Iceland $9,373,000,000

Competitiveness VS. GDP

About GCI

Countries with high GDP - United States (rank2)-----GCI ranking 2 - Japan (rank 5)-----GCI ranking 12

Countries with relative high GDP - Denmark (rank 45)---- GCI ranking 4

Countries with low GDP - Iceland (rank 139)---- GCI ranking 7

Competitiveness VS. GDP

About BCI

Countries with high GDP - United States (rank2)-----BCI ranking 1 - Japan (rank 5)-----BCI ranking 8

Countries with relative high GDP - Denmark (rank 45)---- BCI ranking 4

Countries with low GDP - Iceland (rank 139)---- BCI ranking 17

GDP - per capita 2005 Data source: 2005 CIA World Factbook

1 Luxembourg $58,900

2 United States $40,100

3 Guernsey $40,000

3 Jersey $40,000

3 Norway $40,000

4 British Virgin Islands $38,500

5 Bermuda $36,000

6 San Marino $34,600

7 Hong Kong $34,200

8 Switzerland $33,800

9 Cayman Islands $32,300

10 Denmark $32,200

11 Iceland $31,900

11 Ireland $31,900

12 Canada $31,500

13 Austria $31,300

14 Australia $30,700

15 Belgium $30,600

16 United Kingdom $29,600

17 Netherlands $29,500

18 Japan $29,400

19 Finland $29,000

20 France $28,700

20 Germany $28,700

21 Man, Isle of $28,500

22 Sweden $28,400

23 Aruba $28,000

24 Gibraltar $27,900

25 Singapore $27,800

98 Peru $5,600

Competitiveness VS. GDP per capita

About GCI

Countries with high per capita GDP - United States (rank 2)-----GCI ranking 2 - Hong Kong (rank 7)-----GCI ranking 12

Countries with relative high per capita GDP - Japan (rank 18)---- GCI ranking 4

Countries with low per capita GDP - Peru (rank 98)---- GCI ranking 68

About BCI

Countries with high per capita GDP - United States (rank 2)-----BCI ranking 1 - Hong Kong (rank 7)-----BCI ranking 20

Countries with relative high per capita GDP - Japan (rank 18)---- BCI ranking 8

Countries with low per capita GDP - Peru (rank 98)---- BCI ranking 81

Competitiveness VS. GDP per capita

GDP - real growth rate(%) 2005 Data source: 2005 CIA World Factbook

1 Iraq 52.30

2 Chad 38.00

3 Liberia 21.80

4 Equatorial Guinea 20.00

5 Venezuela 16.80

6 Macau 15.60

7 Ukraine 12.00

8 Angola 11.70

9 Ethiopia 11.60

10 Liechtenstein 11.00

11 Mongolia 10.60

12 Tajikistan 10.50

13 Uruguay 10.20

14 Faroe Islands 10.00

15 Azerbaijan 9.80

16 Georgia 9.50

17 Kazakhstan 9.10

17 China 9.10

18 Armenia 9.00

19 Qatar 8.70

20 Argentina 8.30

21 Turkey 8.20

21 Mozambique 8.20

22 Romania 8.10

22 Singapore 8.10

23 Hong Kong 7.90

24 Vietnam 7.70

25 Latvia 7.60

26 Afghanistan 7.50

26 Congo, Democratic Republic of the

7.50

26 San Marino 7.50

27 Malaysia 7.10

27 Cook Islands 7.10

28 Moldova 6.80

28 Kuwait 6.80

29 Russia 6.70

30 Lithuania 6.60

69 Luxembourg 2.30

69 Barbados 2.30

69 Syria 2.30

70 Kenya 2.20

71 France 2.10

71 Denmark 2.10

72 Virgin Islands 2.00

72 Andorra 2.00

72 Bermuda 2.00

72 Comoros 2.00

73 Yemen 1.90

73 Gabon 1.90

73 Guyana 1.90

73 Jamaica 1.90

73 Austria 1.90

74 Greenland 1.80

74 El Salvador 1.80

74 Iceland 1.80

74 Switzerland 1.80

75 Germany 1.70

Competitiveness VS. GDP real growth rate (%)

About GCI

Countries with high GDP real growth rate - Chad (rank 2)-----GCI ranking 117 - Mongolia (rank 11)-----GCI ranking 96 Countries with relative high GDP real growth rate - Hong Kong (rank 23)---- GCI ranking 12

Countries with low GDP real growth rate - Iceland (rank 74)---- GCI ranking 7 - Germany (rank 75)---- GCI ranking 15

Competitiveness VS. GDP real growth rate (%)

About BCI

Countries with high GDP real growth rate - Chad (rank 2)-----BCI ranking 116 - Mongolia (rank 11)-----BCI ranking 104 Countries with relative high GDP real growth rate - Hong Kong (rank 23)---- BCI ranking 20

Countries with low GDP real growth rate - Iceland (rank 74)---- BCI ranking 17 - Germany (rank 75)---- BCI ranking 3

What is WCI?

• WCI stands for World Competitiveness Index

• indicated in the World Competitiveness Yearbook

• most renowned and comprehensive annual report

on the competitiveness of nations, ranking and

analyzing how a nation environment creates and

sustains the competitiveness of enterprises

GCR WCI

Aim assess the capacity of the world’s economies to achieve sustained economic growth

evaluate the overall competitiveness of countries

Cover more than 100 economies

60 national and regional economies

Global network

122 Partner Institutes 55 Partner Institutes

GCR WCI

Aggregation of data

Aggregates data over the year

Aggregates data over a 5-year period

Collection of data

Combines publicly available data with survey data that captures the perceptions and observations of business leaders in a given country

Survey data are drawn from the Executive Opinion Survey (4,166 respondents)

Hard data are taken from international and regional organizations and private institutes

Conclusion• GDP and competitiveness are normally positively related , but there still some exception like Iceland which has low GDP but high competitiveness

• GDP per capita are normally in positive relation

• Real GDP growth rate are in negative relation to competitiveness

• They are only one of the sub-indexes

• should not focus on one pillar only