The GlobalCompetitiveness Report2012–2013Insight ReportKlaus Schwab, World Economic Forum
Insight ReportThe GlobalCompetitiveness Report2012–2013Full Data EditionProfessor Klaus SchwabWorld Economic ForumEditorProfessor Xavier Sala-i-MartínColumbia UniversityChief Advisor of The Global Benchmarking Network
The Global Competitiveness Report 2012–2013 | iiiPartner Institutes vPreface xiiiby Klaus SchwabPart 1: Measuring Competitiveness 11.1 The Global Competitiveness Index 32012–2013: Strengthening Recovery byRaising Productivityby Xavier Sala-i-Martín, Beñat Bilbao-Osorio, JenniferBlanke, Roberto Crotti, Margareta Drzeniek Hanouz,Thierry Geiger, and Caroline Ko1.2 Assessing the Sustainable Competitiveness 49of Nationsby Beñat Bilbao-Osorio, Jennifer Blanke, Roberto Crotti,Margareta Drzeniek Hanouz, Brindusa Fidanza, ThierryGeiger, Caroline Ko, and Cecilia Serin1.3 The Executive Opinion Survey: The Voice 69of the Business Communityby Ciara Browne, Thierry Geiger, and Tania GutknechtPart 2: Data Presentation 792.1 Country/Economy Profiles 81How to Read the Country/Economy Profiles ..................................83Index of Countries/Economies........................................................85Country/Economy Profiles ..............................................................862.2 Data Tables 375How to Read the Data Tables.......................................................377Index of Data Tables.....................................................................379Data Tables ..................................................................................381Technical Notes and Sources 519About the Authors 523Acknowledgments 527Contents
The Global Competitiveness Report 2012–2013 | vThe World Economic Forum’s Global BenchmarkingNetwork is pleased to acknowledge and thankthe following organizations as its valued PartnerInstitutes, without which the realization of The GlobalCompetitiveness Report 2012–2013 would not havebeen feasible:AlbaniaInstitute for Contemporary Studies (ISB)Artan Hoxha, PresidentElira Jorgoni, Senior ExpertEndrit Kapaj, ExpertAlgeriaCentre de Recherche en Economie Appliquée pourle Développement (CREAD)Youcef Benabdallah, Assistant ProfessorYassine Ferfera, DirectorArgentinaIAE—Universidad AustralEduardo Luis Fracchia, ProfessorSantiago Novoa, Project ManagerArmeniaEconomy and Values Research CenterManuk Hergnyan, ChairmanSevak Hovhannisyan, Board Member and Senior AssociateGohar Malumyan, Research AssociateAustraliaAustralian Industry GroupColleen Dowling, Senior Research CoordinatorInnes Willox, Chief ExecutiveAustriaAustrian Institute of Economic Research (WIFO)Karl Aiginger, DirectorGerhard Schwarz, Coordinator, Survey DepartmentAzerbaijanAzerbaijan Marketing SocietyFuad Aliyev, Deputy ChairmanAshraf Hajiyev, ConsultantBahrainBahrain Economic Development BoardKamal Bin Ahmed, Minister of Transportation and Acting ChiefExecutive of the Economic Development BoardNada Azmi, Manager, Economic Planning and DevelopmentMaryam Matter, Coordinator, Economic Planning andDevelopmentBangladeshCentre for Policy Dialogue (CPD)Khondaker Golam Moazzem, Senior Research FellowKishore Kumer Basak, Research AssociateMustafizur Rahman, Executive DirectorBarbadosSir Arthur Lewis Institute of Social and Economic Studies,University of West Indies (UWI)Judy Whitehead, DirectorBelgiumVlerick Business SchoolPriscilla Boiardi, Associate, Competence CentreEntrepreneurship, Governance and StrategyWim Moesen, ProfessorLeo Sleuwaegen, Professor, Competence CentreEntrepreneurship, Governance and StrategyBeninCAPOD—Conception et Analyse de Politiques deDéveloppementEpiphane Adjovi, DirectorMaria-Odile Attanasso, Deputy CoordinatorFructueux Deguenonvo, ResearcherBosnia and HerzegovinaMIT Center, School of Economics and Business in Sarajevo,University of SarajevoZlatko Lagumdzija, ProfessorZeljko Sain, Executive DirectorJasmina Selimovic, Assistant DirectorBotswanaBotswana National Productivity CentreLetsogile Batsetswe, Research Consultant and StatisticianBaeti Molake, Executive DirectorPhumzile Thobokwe, Manager, Information and ResearchServices DepartmentBrazilFundação Dom Cabral, Bradesco Innovation CenterCarlos Arruda, International Relations Director, Innovationand Competitiveness ProfessorDaniel Berger, Bachelor Student in EconomicsFabiana Madsen, Economist and Associate ResearcherMovimento Brasil Competitivo (MBC)Carolina Aichinger, Project CoordinatorErik Camarano, Chief Executive OfficerBrunei DarussalamMinistry of Industry and Primary ResourcesPehin Dato Yahya Bakar, MinisterNormah Suria Hayati Jamil Al-Sufri, Permanent SecretaryBulgariaCenter for Economic DevelopmentAdriana Daganova, Expert, International Programmes andProjectsAnelia Damianova, Senior ExpertBurkina Fasolnstitut Supérieure des Sciences de la Population (ISSP),University of OuagadougouBaya Banza, DirectorPartner Institutes
vi | The Global Competitiveness Report 2012–2013Partner InstitutesBurundiUniversity Research Centre for Economic and SocialDevelopment (CURDES), National University of BurundiBanderembako Deo, DirectorGilbert Niyongabo, Dean, Faculty of Economics &ManagementCambodiaEconomic Institute of CambodiaSok Hach, PresidentSokheng Sam, ResearcherCameroonComité de Compétitivité (Competitiveness Committee)Lucien Sanzouango, Permanent SecretaryCanadaThe Conference Board of CanadaMichael R. Bloom, Vice-President, OrganizationalEffectiveness & LearningDouglas Watt, Associate DirectorCape VerdeINOVE RESEARCH—Investigação e Desenvolvimento, LdaJúlio Delgado, Partner and Senior ResearcherJosé Mendes, Chief Executive OfficerSara França Silva, Project ManagerChadGroupe de Recherches Alternatives et de Monitoring du ProjetPétrole-Tchad-Cameroun (GRAMP-TC)Antoine Doudjidingao, ResearcherGilbert Maoundonodji, DirectorCeline Nénodji Mbaipeur, Programme OfficerChileUniversidad Adolfo IbáñezFernando Larrain Aninat, Director MBALeonidas Montes, Dean, School of GovernmentChinaInstitute of Economic System and Management, NationalDevelopment and Reform CommissionChen Wei, Research FellowDong Ying, ProfessorZhou Haichun, Deputy Director and ProfessorChina Center for Economic Statistics Research, TianjinUniversity of Finance and EconomicsBojuan Zhao, ProfessorFan Yang, Professor Jian Wang, Associate ProfessorHongye Xiao, ProfessorLu Dong, ProfessorColombiaNational Planning DepartmentSara Patricia Rivera, AdvisorJohn Rodríguez, Coordinator, Competitiveness ObservatoryJavier Villarreal, Enterprise Development DirectorColombian Private Council on CompetitivenessRosario Córdoba, PresidentMarco Llinás, VicepresidentCôte d’IvoireChambre de Commerce et d’Industrie de Côte d’IvoireJean-Louis Billon, PresidentMamadou Sarr, Director GeneralCroatiaNational Competitiveness CouncilJadranka Gable, AdvisorKresimir Jurlin, Research FellowCyprusThe European UniversityBambos Papageorgiou, Head of Socioeconomic andAcademic Researchcdbbank—The Cyprus Development BankMaria Markidou-Georgiadou, Manager, Business Developmentand Special ProjectsCzech RepublicCMC Graduate School of BusinessTomas Janca, Executive DirectorDenmarkDanish Technological Institute, Center for Policy and BusinessDevelopmentHanne Shapiro, Center ManagerEcuadorESPAE Graduate School of Management, Escuela SuperiorPolitécnica del Litoral (ESPOL)Elizabeth Arteaga, Project AssistantVirginia Lasio, DirectorSara Wong, ProfessorEgyptThe Egyptian Center for Economic Studies (ECES)Iman Al-Ayouty, Senior EconomistOmneia Helmy, Acting Executive Director and Directorof ResearchEstoniaEstonian Institute of Economic ResearchEvelin Ahermaa, Head of Economic Research SectorMarje Josing, DirectorEstonian Development FundKitty Kubo, Head of ForesightOtt Pärna, Chief Executive OfficerEthiopiaAfrican Institute of Management, Development andGovernanceZebenay Kifle, General ManagerTegenge Teka, Senior ExpertFinlandETLA—The Research Institute of the Finnish EconomyMarkku Kotilainen, Research DirectorPetri Rouvinen, Research DirectorPekka Ylä-Anttila, Managing DirectorFranceHEC School of Management, ParisBertrand Moingeon, Professor and Deputy DeanBernard Ramanantsoa, Professor and DeanGabonConfédération Patronale GabonaiseRegis Loussou Kiki, General SecretaryGina Eyama Ondo, Assistant General SecretaryHenri Claude Oyima, PresidentGambia, TheGambia Economic and Social Development Research Institute(GESDRI)Makaireh A. Njie, DirectorGeorgiaBusiness Initiative for Reforms in GeorgiaTamara Janashia, Executive DirectorGiga Makharadze, Founding Member of the Board of DirectorsMamuka Tsereteli, Founding Member of the Board of Directors
The Global Competitiveness Report 2012–2013 | viiPartner InstitutesGermanyWHU—Otto Beisheim School of ManagementRalf Fendel, Professor of Monetary EconomicsMichael Frenkel, Professor, Chair of Macroeconomics andInternational EconomicsGhanaAssociation of Ghana Industries (AGI)Patricia Addy, Projects OfficerNana Owusu-Afari, PresidentSeth Twum-Akwaboah, Executive DirectorGreeceSEV Hellenic Federation of EnterprisesMichael Mitsopoulos, Senior Advisor, EntrepreneurshipThanasis Printsipas, Economist, EntrepreneurshipGuatemalaFUNDESAFelipe Bosch G., President of the Board of DirectorsPablo Schneider, Economic DirectorJuan Carlos Zapata, General ManagerGuineaConfédération Patronale des Entreprises de GuinéeMohamed Bénogo Conde, Secretary-GeneralGuyanaInstitute of Development Studies, University of GuyanaKaren Pratt, Research AssociateClive Thomas, DirectorHaitiGroup Croissance SAPierre Lenz Dominique, Coordinator, Survey DepartmentKesner Pharel, Chief Executive Officer and ChairmanHong Kong SARHong Kong General Chamber of CommerceDavid O’Rear, Chief EconomistFederation of Hong Kong IndustriesAlexandra Poon, DirectorThe Chinese General Chamber of CommerceHungaryKOPINT-TÁRKI Economic Research Ltd.Éva Palócz, Chief Executive OfficerPeter Vakhal, Project ManagerIcelandInnovation Center IcelandArdis Armannsdottir, Marketing ManagerKarl Fridriksson, Managing Director of Human Resourcesand MarketingThorsteinn I. Sigfusson, DirectorIndiaConfederation of Indian Industry (CII)Chandrajit Banerjee, Director GeneralMarut Sengupta, Deputy Director GeneralGantakolla Srivastava, Head, Financial ServicesIndonesiaCenter for Industry, SME & Business Competition Studies,University of TrisaktiTulus Tambunan, Professor and DirectorIran, Islamic Republic ofThe Center for Economic Studies and Surveys (CESS), IranChamber of Commerce, Industries, Mines and AgricultureMohammad Janati Fard, Research AssociateHamed Nikraftar, Project ManagerFarnaz Safdari, Research AssociateIrelandInstitute for Business Development and CompetitivenessSchool of Economics, University College CorkJustin Doran, Principal AssociateEleanor Doyle, DirectorCatherine Kavanagh, Principal AssociateForfás, Economic Analysis and Competitiveness DepartmentAdrian Devitt, ManagerConor Hand, EconomistIsraelManufacturers’ Association of Israel (MAI)Dan Catarivas, DirectorAmir Hayek, Managing DirectorZvi Oren, PresidentItalySDA Bocconi School of ManagementSecchi Carlo, Full Professor of Economic Policy, BocconiUniversityPaola Dubini, Associate Professor, Bocconi UniversityFrancesco A. Saviozzi, SDA Professor, Strategic andEntrepreneurial Management DepartmentJamaicaMona School of Business (MSB), The University of the WestIndiesPatricia Douce, Project AdministratorEvan Duggan, Executive Director and ProfessorWilliam Lawrence, Director, Professional Services UnitJapanKeio UniversityYoko Ishikura, Professor, Graduate School of Media DesignHeizo Takenaka, Director, Global Security Research InstituteJiro Tamura, Professor of Law, Keio UniversityKeizai Doyukai (Japan Association of Corporate Executives)Kiyohiko Ito, Managing Director, Keizai DoyukaiJordanMinistry of Planning & International CooperationJordan National Competitiveness TeamKawther Al-Zou’bi, Head of Competitiveness DivisionBasma Arabiyat, ResearcherMukhallad Omari, Director of Policies and Studies DepartmentKazakhstanNational Analytical CentreDiana Tamabayeva, Project ManagerVladislav Yezhov, ChairmanKenyaInstitute for Development Studies, University of NairobiMohamud Jama, Director and Associate Research ProfessorPaul Kamau, Senior Research FellowDorothy McCormick, Research ProfessorKorea, Republic ofCollege of Business School, Korea Advanced Institute ofScience and Technology KAISTByungtae Lee, Acting DeanSoung-Hie Kim, Associate Dean and ProfessorJinyung Cha, Assistant Director, Exchange ProgrammeKorea Development InstituteJoohee Cho, Senior Research AssociateYongsoo Lee, Head, Policy Survey UnitKuwaitKuwait National Competitiveness CommitteeAdel Al-Husainan, Committee MemberFahed Al-Rashed, Committee ChairmanSayer Al-Sayer, Committee Member
viii | The Global Competitiveness Report 2012–2013Partner InstitutesKyrgyz RepublicEconomic Policy Institute “Bishkek Consensus”Lola Abduhametova, Program CoordinatorMarat Tazabekov, ChairmanLatviaStockholm School of Economics in RigaKarlis Kreslins, EMBA Programme DirectorAnders Paalzow, RectorLebanonBader Young Entrepreneurs ProgramAntoine Abou-Samra, Managing DirectorFarah Shamas, Program CoordinatorLesothoPrivate Sector Foundation of LesothoO.S.M. Moosa, PresidentThabo Qhesi, Chief Executive OfficerNteboheleng Thaele, ResearcherLibyaLibya Development Policy CenterYusser Al-Gayed, Project DirectorAhmed Jehani, ChairmanMohamed Wefati, DirectorLithuaniaStatistics LithuaniaOna Grigiene, Deputy Head, Knowledge Economyand Special Surveys Statistics DivisionVilija Lapeniene, Director GeneralGediminas Samuolis, Head, Knowledge Economyand Special Surveys Statistics DivisionLuxembourgLuxembourg Chamber of CommerceChristel Chatelain, Research AnalystStephanie Musialski, Research AnalystCarlo Thelen, Chief Economist, Member of theManaging BoardMacedonia, FYRNational Entrepreneurship and CompetitivenessCouncil (NECC)Mirjana Apostolova, President of the AssemblyDejan Janevski, Project CoordinatorMadagascarCentre of Economic Studies, University of AntananarivoRavelomanana Mamy Raoul, DirectorRazato Rarijaona Simon, Executive SecretaryMalawiMalawi Confederation of Chambers of Commerce andIndustryHope Chavula, Public Private Dialogue ManagerChancellor L. Kaferapanjira, Chief Executive OfficerMalaysiaInstitute of Strategic and International Studies (ISIS)Jorah Ramlan, Senior Analyst, EconomicsSteven C.M. Wong, Senior Director, EconomicsMahani Zainal Abidin, Chief ExecutiveMalaysia Productivity Corporation (MPC)Mohd Razali Hussain, Director GeneralLee Saw Hoon, Senior DirectorMaliGroupe de Recherche en Economie Appliquée etThéorique (GREAT)Massa Coulibaly, Executive DirectorMaltaCompetitive Malta—Foundation for National CompetitivenessMargrith Lutschg-Emmenegger, Vice PresidentAdrian Said, Chief CoordinatorCaroline Sciortino, Research CoordinatorMauritaniaCentre d’Information Mauritanien pour le DéveloppementEconomique et Technique (CIMDET/CCIAM)Lô Abdoul, Consultant and AnalystMehla Mint Ahmed, DirectorHabib Sy, Administrative Agent and AnalystMauritiusBoard of Investment of MauritiusNirmala Jeetah, Director, Planning and PolicyKen Poonoosamy, Managing DirectorJoint Economic CouncilRaj Makoond, DirectorMexicoCenter for Intellectual Capital and CompetitivenessErika Ruiz Manzur, Executive DirectorRené Villarreal Arrambide, President and Chief ExecutiveOfficerRodrigo David Villarreal Ramos, DirectorInstituto Mexicano para la Competitividad (IMCO)Priscila Garcia, ResearcherManuel Molano, Deputy General DirectorJuan E. Pardinas, General DirectorMinistry of the EconomyJose Antonio Torre, Undersecretary for Competitivenessand StandardizationEnrique Perret Erhard, Technical Secretary forCompetitivenessNarciso Suarez, Research Director, Technical Secretaryfor CompetitivenessMoldovaAcademy of Economic Studies of Moldova (AESM)Grigore Belostecinic, RectorCentre for Economic Research (CER)Corneliu Gutu, DirectorMongoliaOpen Society Forum (OSF)Munkhsoyol Baatarjav, Manager of Economic PolicyErdenejargal Perenlei, Executive DirectorMontenegroInstitute for Strategic Studies and Prognoses (ISSP)Maja Drakic, Project ManagerPetar Ivanovic, Chief Executive OfficerVeselin Vukotic, PresidentMoroccoComité National de l’Environnement des AffairesSeloua Benmbarek, Head of MissionMozambiqueEconPolicy Research Group, Lda.Peter Coughlin, DirectorDonaldo Miguel Soares, ResearcherEma Marta Soares, AssistantNamibiaInstitute for Public Policy Research (IPPR)Graham Hopwood, Executive Director
The Global Competitiveness Report 2012–2013 | ixPartner InstitutesNepalCentre for Economic Development and Administration (CEDA)Ramesh Chandra Chitrakar, Professor, Country Coordinatorand Project DirectorMahendra Raj Joshi, MemberHari Dhoj Pant, Officiating Executive Director, Advisor, SurveyprojectNetherlandsINSCOPE: Research for Innovation, Erasmus UniversityRotterdamFrans A. J. Van den Bosch, ProfessorHenk W. Volberda, Director and ProfessorNew ZealandThe New Zealand InitiativeCatherine Harland, Research FellowOliver Hartwich, Executive DirectorNigeriaNigerian Economic Summit Group (NESG)Frank Nweke Jr., Director GeneralChris Okpoko, Associate Director, ResearchFoluso Phillips, ChairmanNorwayBI Norwegian Business SchoolEskil Goldeng, ResearcherTorger Reve, ProfessorOmanThe International Research FoundationSalem Ben Nasser Al-Ismaily, ChairmanPublic Authority for Investment Promotion and ExportDevelopment (PAIPED)Mehdi Ali Juma, Expert for Economic ResearchPakistanMishal PakistanPuruesh Chaudhary, Director ContentAmir Jahangir, Chief Executive OfficerParaguayCentro de Análisis y Difusión de Economia Paraguaya(CADEP)Dionisio Borda, Research MemberFernando Masi, DirectorMaría Belén Servín, Research MemberPeruCentro de Desarrollo Industrial (CDI), Sociedad Nacionalde IndustriasNéstor Asto, Project DirectorLuis Tenorio, Executive DirectorPhilippinesMakati Business Club (MBC)Michael B. Mundo, Chief EconomistMarc P. Opulencia, Deputy DirectorPeter Angelo V. Perfecto, Executive DirectorManagement Association of the Philippines (MAP)Arnold P. Salvador, Executive DirectorPolandEconomic Institute, National Bank of PolandPiotr Boguszewski, AdvisorJarosław T. Jakubik, Deputy DirectorPortugalPROFORUM, Associação para o Desenvolvimento daEngenhariaIlídio António de Ayala Serôdio, Vice President of the Boardof DirectorsFórum de Administradores de Empresas (FAE)Paulo Bandeira, General DirectorPedro do Carmo Costa, Member of the Board of DirectorsEsmeralda Dourado, President of the Board of DirectorsPuerto RicoPuerto Rico 2000, Inc.Ivan Puig, PresidentInstituto de Competitividad Internacional, UniversidadInteramericana de Puerto RicoFrancisco Montalvo, Project CoordinatorQatarQatari Businessmen Association (QBA)Sarah Abdallah, Deputy General ManagerIssa Abdul Salam Abu Issa, Secretary-GeneralSocial and Economic Survey Research Institute (SESRI)Hanan Abdul Ibrahim, Associate DirectorDarwish Al Emadi, DirectorRomaniaSC VBD Alliance Consulting SrlIrina Ion, Program CoordinatorRolan Orzan, General DirectorRussian FederationBauman Innovation & Eurasia Competitiveness InstituteKaterina Marandi, Programme ManagerAlexey Prazdnichnykh, Principal and Managing DirectorStockholm School of Economics, RussiaIgor Dukeov, Area PrincipalCarl F. Fey, Associate Dean of ResearchRwandaPrivate Sector Federation (PSF)Hannington Namara, Chief Executive OfficerAndrew O. Rwigyema, Head of Research and PolicySaudi ArabiaNational Competitiveness Center (NCC)Awwad Al-Awwad, PresidentKhaldon Mahasen, Vice PresidentSenegalCentre de Recherches Economiques Appliquées (CREA),University of DakarDiop Ibrahima Thione, DirectorSerbiaFoundation for the Advancement of Economics (FREN)Mihail Arandarenko, DirectorAleksandar Radivojevic, Project CoordinatorBojan Ristic, ResearcherSeychellesPlutus Auditing & Accounting ServicesNicolas Boulle, PartnerMarco L. Francis, PartnerSingaporeEconomic Development BoardAnna Chan, Assistant Managing Director, Planning & PolicyCheng Wai San, Head, Research & Statistics UnitTeo Xinyu, Executive, Research & Statistics UnitSlovak RepublicBusiness Alliance of Slovakia (PAS)Robert Kicina, Executive Director
x | The Global Competitiveness Report 2012–2013Partner InstitutesSloveniaInstitute for Economic ResearchPeter Stanovnik, ProfessorSonja Uršic, Senior Research AssistantUniversity of Ljubljana, Faculty of EconomicsMateja Drnovšek, ProfessorAleš Vahcic, ProfessorSouth AfricaBusiness Leadership South AfricaFriede Dowie, DirectorThero Setiloane, Chief Executive OfficerBusiness Unity South AfricaNomaxabiso Majokweni, Chief Executive OfficerJoan Stott, Executive Director, Economic PolicySpainIESE Business School, International Center forCompetitivenessMaría Luisa Blázquez, Research AssociateAntoni Subirà, ProfessorSri LankaInstitute of Policy Studies of Sri Lanka (IPS)Ayodya Galappattige, Research OfficerDilani Hirimuthugodage, Research OfficerSaman Kelegama, Executive DirectorSurinameSuriname Trade & Industry Association (VSB)Helen Doelwijt, Executive SecretaryRene van Essen, DirectorDayenne Wielingen Verwey, Economic Policy OfficerSwazilandFederation of Swaziland Employers and Chamber ofCommerceMduduzi Lokotfwako, Research AnalystZodwa Mabuza, Chief Executive OfficerNyakwesi Motsa, Administration & Finance ManagerSwedenInternational University of Entrepreneurship and TechnologyNiclas Adler, PresidentSwitzerlandUniversity of St. Gallen, Executive School of Management,Technology and Law (ES-HSG)Rubén Rodriguez Startz, Head of ProjectTobias Trütsch, Communications ManagerTaiwan, ChinaCouncil for Economic Planning and Development, ExecutiveYuanHung, J. B., Director, Economic Research DepartmentShieh, Chung Chung, Researcher, Economic ResearchDepartmentWu, Ming-Ji, Deputy MinisterTajikistanThe Center for Sociological Research “Zerkalo”Rahima Ashrapova, Assistant ResearcherQahramon Baqoev, DirectorGulnora Beknazarova, ResearcherTanzaniaResearch on Poverty Alleviation (REPOA)Cornel Jahari, Assistant ResearcherJohansein Rutaihwa, Commissioned ResearcherSamuel Wangwe, Professor and Executive DirectorThailandSasin Graduate Institute of Business Administration,Chulalongkorn UniversityPongsak Hoontrakul, Senior Research FellowNarudee Kiengsiri, President of Sasin Alumni AssociationToemsakdi Krishnamra, Director of SasinThailand Development Research Institute (TDRI)Somchai Jitsuchon, Research DirectorChalongphob Sussangkarn, Distinguished FellowYos Vajragupta, Senior ResearcherTimor-LesteEast Timor Development Agency (ETDA)Jose Barreto, Survey ManagerPalmira Pires, DirectorChambers of Commerce and Industry of Timor-LesteKathleen Fon Ha Tchong Goncalves, Vice-PresidentTrinidad and TobagoArthur Lok Jack Graduate School of BusinessMiguel Carillo, Executive Director and Professor of StrategyNirmala Harrylal, Director, Internationalisation and InstitutionalRelations CentreThe Competitiveness CompanyRolph Balgobin, ChairmanTunisiaInstitut Arabe des Chefs d’EntreprisesAhmed Bouzguenda, PresidentMajdi Hassen, Executive CounsellorTurkeyTUSIAD Sabanci University Competitiveness ForumIzak Atiyas, DirectorSelcuk Karaata, Vice DirectorSezen Ugurlu, Project SpecialistUgandaKabano Research and Development CentreRobert Apunyo, Program ManagerDelius Asiimwe, Executive DirectorFrancis Mukuya, Research AssociateUkraineCASE Ukraine, Center for Social and Economic ResearchDmytro Boyarchuk, Executive DirectorVladimir Dubrovskiy, Leading EconomistUnited Arab EmiratesAbu Dhabi Department of Economic DevelopmentH.E. Mohammed Omar Abdulla, UndersecretaryDubai Economic CouncilH.E. Hani Al Hamly, Secretary GeneralInstitute for Social and Economic Research (ISER), ZayedUniversityMouawiya Alawad, DirectorEmirates Competitiveness CouncilH.E. Abdulla Nasser Lootah, Secretary GeneralUnited KingdomLSE Enterprise Ltd, London School of Economics andPolitical ScienceAdam Austerfield, Director of ProjectsNiccolo Durazzi, Project ManagerRobyn Klingler Vidra, ResearcherUruguayUniversidad ORT UruguayIsidoro Hodara, Professor
The Global Competitiveness Report 2012–2013 | xiPartner InstitutesVenezuelaCONAPRI—The Venezuelan Council for Investment PromotionLitsay Guerrero, Economic Affairs and Investor ServicesManagerEduardo Porcarelli, Executive DirectorVietnamHo Chi Minh City Institute for Development Studies (HIDS)Nguyen Trong Hoa, Professor and PresidentDu Phuoc Tan, Head of DepartmentTrieu Thanh Son, ResearcherYemenYemeni Businessmen Club (YBC)Mohammed Esmail Hamanah, Executive ManagerFathi Abdulwasa Hayel Saeed, ChairmanMoneera Abdo Othman, Project CoordinatorMARcon Marketing ConsultingMargret Arning, Managing DirectorZambiaInstitute of Economic and Social Research (INESOR),University of ZambiaPatricia Funjika, Research FellowJolly Kamwanga, Senior Research Fellow and ProjectCoordinatorMubiana Macwan’gi, Director and ProfessorZimbabweGraduate School of Management, University of ZimbabweA. M. Hawkins, ProfessorBolivia, Costa Rica, Dominican Republic, Ecuador,El Salvador, Honduras, Nicaragua, PanamaINCAE Business School, Latin American Center forCompetitiveness and Sustainable Development (CLACDS)Ronald Arce, ResearcherArturo Condo, RectorMarlene de Estrella, Director of External RelationsLawrence Pratt, DirectorLiberia and Sierra LeoneFJP Development and Management ConsultantsOmodele R. N. Jones, Chief Executive Officer
The Global Competitiveness Report 2012–2013 | xiiiThe Global Competitiveness Report 2012–2013 is beingreleased amid a long period of economic uncertainty.The tentative recovery that seemed to be gaining groundduring 2010 and the first half of 2011 has given wayto renewed concerns. The global economy faces anumber of significant and interrelated challenges thatcould hamper a genuine upturn after an economic crisishalf a decade long in much of the world, especiallyin the most advanced economies. The persistingfinancial difficulties in the periphery of the euro zonehave led to a long-lasting and unresolved sovereigndebt crisis that has now reached the boiling point. Thepossibility of Greece and perhaps other countries leavingthe euro is now a distinct prospect, with potentiallydevastating consequences for the region and beyond.This development is coupled with the risk of a weakrecovery in several other advanced economies outsideof Europe—notably in the United States, where politicalgridlock on fiscal tightening could dampen the growthoutlook. Furthermore, given the expected slowdown ineconomic growth in China, India, and other emergingmarkets, reinforced by a potential decline in global tradeand volatile capital flows, it is not clear which regionscan drive growth and employment creation in the shortto medium term.Policymakers are struggling to find ways tocooperate and manage the current economic challengeswhile preparing their economies to perform well in anincreasingly difficult and unpredictable global landscape.Amid the short-term crisis management, it remainscritical for countries to establish the fundamentalsthat underpin economic growth and development forthe longer term. The World Economic Forum has, formore than three decades, played a facilitating role inthis process by providing detailed assessments of theproductive potential of nations worldwide. The Reportcontributes to an understanding of the key factors thatdetermine economic growth, helps to explain why somecountries are more successful than others in raisingincome levels and opportunities for their respectivepopulations, and offers policymakers and businessleaders an important tool in the formulation of improvedeconomic policies and institutional reforms.The complexity of today’s global economicenvironment has made it more important than everto recognize and encourage the qualitative as well asthe quantitative aspects of growth, integrating suchconcepts as social and environmental sustainabilityto provide a fuller picture of what is needed and whatworks. In this context, the Forum’s Global BenchmarkingNetwork has continued to push forward with its researchon how sustainability relates to competitiveness andeconomic performance. To this end, Chapter 1.2 of thisReport presents our evolving analysis of how countrycompetitiveness can be assessed once issues ofsocial and environmental sustainability are taken intoaccount. This represents an important area for the WorldEconomic Forum’s research going forward.This year’s Report features a record number of144 economies, and thus continues to be the mostcomprehensive assessment of its kind. It contains adetailed profile for each of the economies included inthe study as well as an extensive section of data tableswith global rankings covering over 100 indicators.This Report remains the flagship publication within theForum’s Global Benchmarking Network, which producesa number of research studies that mirror the increasedintegration and complexity of the world economy.The Global Competitiveness Report 2012–2013could not have been put together without the thoughtleadership of Professor Xavier Sala-i-Martín at ColumbiaUniversity, who has provided ongoing intellectualsupport for our competitiveness research. Further,this Report would have not been possible without thecommitment and enthusiasm of our network of over 150Partner Institutes worldwide. The Partner Institutes areinstrumental in carrying out the Executive Opinion Surveythat provides the foundation data of this Report as wellas imparting the results of the Report at the nationallevel. We would also like to convey our sincere gratitudeto all the business executives around the world who tookthe time to participate in our Executive Opinion Survey.We are also grateful to the members of our AdvisoryBoard on Competitiveness and Sustainability, whohave provided their valuable time and knowledge tohelp us develop the framework on sustainability andcompetitiveness presented in this Report: JamesCameron, Chairman, Climate Change Capital; Dan Esty,Commissioner, Connecticut Department of Energy andEnvironmental Protection; Edwin J. Feulner Jr, President,PrefaceKLAUS SCHWABExecutive Chairman, World Economic Forum
xiv |The Global Competitiveness Report 2012–2013PrefaceThe Heritage Foundation; Clément Gignac, Ministerof Natural Resources and Wildlife of Quebec; JeniKlugman, Director for Gender, The World Bank; Marc A.Levy, Deputy Director, CIESIN, Columbia University; JohnMcArthur, Senior Fellow, United Nations Foundation;Kevin X. Murphy, President and Chief Executive Officer,J.E. Austin Associates Inc.; Mari Elka Pangestu, Ministerof Tourism and Creative Economy of Indonesia; MarkSpelman, Global Head of Strategy, Accenture; andSimon Zadek, Senior Visiting Fellow, Global GreenGrowth Institute.Appreciation also goes to Børge Brende, ManagingDirector at the Forum, and Jennifer Blanke, Head ofThe Global Benchmarking Network, as well as teammembers Beñat Bilbao-Osorio, Ciara Browne, RobertoCrotti, Margareta Drzeniek Hanouz, Thierry Geiger, TaniaGutknecht, Caroline Ko, and Cecilia Serin. Finally, wewould like to thank the Africa Commission and FedEx,our partners in this Report, for their support in thisimportant publication.
The Global Competitiveness Report 2012–2013 | 3CHAPTER 1.1The GlobalCompetitiveness Index2012–2013: StrengtheningRecovery by RaisingProductivityXAVIER SALA-I-MARTÍNBEÑAT BILBAO-OSORIOJENNIFER BLANKEROBERTO CROTTIMARGARETA DRZENIEK HANOUZTHIERRY GEIGERCAROLINE KOWorld Economic ForumAt the time of releasing The Global CompetitivenessReport 2012–2013, the outlook for the world economyis once again fragile. Global growth remains historicallylow for the second year running with major centers ofeconomic activity—particularly large emerging economiesand key advanced economies—expected to slow in2012–13, confirming the belief that the global economyis troubled by a slow and weak recovery. As in previousyears, growth remains unequally distributed. Emergingand developing countries are growing faster thanadvanced economies, steadily closing the income gap.The International Monetary Fund (IMF) estimatesthat, in 2012, the euro zone will have contracted by0.3 percent, while the United States is experiencing aweak recovery with an uncertain future. Large emergingeconomies such as Brazil, the Russian Federation, India,China, and South Africa are growing somewhat lessthan they did in 2011. At the same time, other emergingmarkets—such as developing Asia—will continue toshow robust growth rates, while the Middle East andNorth Africa as well as sub-Saharan African countriesare gaining momentum.Recent developments—such as the danger of aproperty bubble in China, a decline in world trade, andvolatile capital flows in emerging markets—could derailthe recovery and have a lasting impact on the globaleconomy. Arguably, this year’s deceleration to a largeextent reflects the inability of leaders to address themany challenges that were already present last year.Policymakers around the world remain concernedabout high unemployment and the social conditions intheir countries. The political brinkmanship in the UnitedStates continues to affect the outlook for the world’slargest economy, while the sovereign debt crises andthe danger of a banking system meltdown in peripheraleuro zone countries remain unresolved. The high levelsof public debt coupled with low growth, insufficientcompetitiveness, and political gridlock in some Europeancountries stirred financial markets’ concerns aboutsovereign default and the very viability of the euro.Given the complexity and the urgency of the situation,European countries are facing particularly difficulteconomic management decisions with challengingpolitical and social ramifications. Although Europeanleaders do not agree on how to address the immediatechallenges, there is recognition that, in the longer term,stabilizing the euro and putting Europe on a higherand more sustainable growth path will necessitateimprovements to the competitiveness of the weakermember states.All these developments are highly interrelatedand demand timely, decisive, and coordinated actionby policymakers. In light of these uncertain globalramifications, sustained structural reforms aimedat enhancing competitiveness will be necessary for
1.1: The Global Competitiveness Index 2012–20134 | The Global Competitiveness Report 2012–2013countries to stabilize economic growth and ensure therising prosperity of their populations going into the future.Competitive economies drive productivityenhancements that support high incomes by ensuringthat the mechanisms enabling solid economicperformance are in place.For more than three decades, the World EconomicForum’s annual Global Competitiveness Reportshave studied and benchmarked the many factorsunderpinning national competitiveness. From the onset,the goal has been to provide insight and stimulate thediscussion among all stakeholders on the best strategiesand policies to help countries to overcome the obstaclesto improving competitiveness. In the current challengingeconomic environment, our work is a critical reminder ofthe importance of structural economic fundamentals forsustained growth.Since 2005, the World Economic Forum hasbased its competitiveness analysis on the GlobalCompetitiveness Index (GCI), a comprehensive tool thatmeasures the microeconomic and macroeconomicfoundations of national competitiveness.1We define competitiveness as the set of institutions,policies, and factors that determine the level ofproductivity of a country. The level of productivity, inturn, sets the level of prosperity that can be earned byan economy. The productivity level also determines therates of return obtained by investments in an economy,which in turn are the fundamental drivers of its growthrates. In other words, a more competitive economy isone that is likely to sustain growth.The concept of competitiveness thus involves staticand dynamic components. Although the productivity ofa country determines its ability to sustain a high level ofincome, it is also one of the central determinants of itsreturns to investment, which is one of the key factorsexplaining an economy’s growth potential.THE 12 PILLARS OF COMPETITIVENESSMany determinants drive productivity andcompetitiveness. Understanding the factors behindthis process has occupied the minds of economistsfor hundreds of years, engendering theories rangingfrom Adam Smith’s focus on specialization and thedivision of labor to neoclassical economists’ emphasison investment in physical capital and infrastructure,2and, more recently, to interest in other mechanismssuch as education and training, technological progress,macroeconomic stability, good governance, firmsophistication, and market efficiency, among others.While all of these factors are likely to be important forcompetitiveness and growth, they are not mutuallyexclusive—two or more of them can be significant at thesame time, and in fact that is what has been shown inthe economic literature.3This open-endedness is captured within the GCIby including a weighted average of many differentcomponents, each measuring a different aspect ofcompetitiveness. These components are grouped into 12pillars of competitiveness (see Figure 1):First pillar: InstitutionsThe institutional environment is determined by the legaland administrative framework within which individuals,firms, and governments interact to generate wealth. Theimportance of a sound and fair institutional environmentbecame even more apparent during the recent economicand financial crisis and is especially crucial for furthersolidifying the fragile recovery given the increasing roleplayed by the state at the international level and for theeconomies of many countries.The quality of institutions has a strong bearing oncompetitiveness and growth.4It influences investmentdecisions and the organization of production and playsa key role in the ways in which societies distribute thebenefits and bear the costs of development strategiesand policies. For example, owners of land, corporateshares, or intellectual property are unwilling to invest inthe improvement and upkeep of their property if theirrights as owners are not protected.5The role of institutions goes beyond the legalframework. Government attitudes toward marketsand freedoms and the efficiency of its operationsare also very important: excessive bureaucracy andred tape,6overregulation, corruption, dishonesty indealing with public contracts, lack of transparency andtrustworthiness, inability to provide appropriate servicesfor the business sector, and political dependence ofthe judicial system impose significant economic coststo businesses and slow the process of economicdevelopment.In addition, the proper management of publicfinances is also critical to ensuring trust in the nationalbusiness environment. Indicators capturing the qualityof government management of public finances aretherefore included here to complement the measures ofmacroeconomic stability captured in pillar 3 below.Although the economic literature has focused mainlyon public institutions, private institutions are also animportant element in the process of creating wealth.The recent global financial crisis, along with numerouscorporate scandals, have highlighted the relevance ofaccounting and reporting standards and transparencyfor preventing fraud and mismanagement, ensuring goodgovernance, and maintaining investor and consumerconfidence. An economy is well served by businessesthat are run honestly, where managers abide by strongethical practices in their dealings with the government,other firms, and the public at large.7Private-sectortransparency is indispensable to business, and can bebrought about through the use of standards as well as
The Global Competitiveness Report 2012–2013 | 51.1: The Global Competitiveness Index 2012–2013auditing and accounting practices that ensure access toinformation in a timely manner.8Second pillar: InfrastructureExtensive and efficient infrastructure is critical forensuring the effective functioning of the economy, asit is an important factor in determining the location ofeconomic activity and the kinds of activities or sectorsthat can develop in a particular instance. Well-developedinfrastructure reduces the effect of distance betweenregions, integrating the national market and connecting itat low cost to markets in other countries and regions. Inaddition, the quality and extensiveness of infrastructurenetworks significantly impact economic growth andreduce income inequalities and poverty in a variety ofways.9A well-developed transport and communicationsinfrastructure network is a prerequisite for the access ofless-developed communities to core economic activitiesand services.Effective modes of transport—including qualityroads, railroads, ports, and air transport—enableentrepreneurs to get their goods and services tomarket in a secure and timely manner and facilitatethe movement of workers to the most suitable jobs.Economies also depend on electricity supplies that arefree of interruptions and shortages so that businessesand factories can work unimpeded. Finally, a solidand extensive telecommunications network allows fora rapid and free flow of information, which increasesoverall economic efficiency by helping to ensure thatbusinesses can communicate and decisions are madeby economic actors taking into account all availablerelevant information.Third pillar: Macroeconomic environmentThe stability of the macroeconomic environment isimportant for business and, therefore, is important forthe overall competitiveness of a country.10Althoughit is certainly true that macroeconomic stability alonecannot increase the productivity of a nation, it is alsorecognized that macroeconomic instability harms theeconomy, as we have seen over the past years, notablyin the European context. The government cannotprovide services efficiently if it has to make high-interestpayments on its past debts. Running fiscal deficits limitsthe government’s future ability to react to businesscycles and to invest in competitiveness-enhancingmeasures. Firms cannot operate efficiently when inflationrates are out of hand. In sum, the economy cannot growin a sustainable manner unless the macro environmentis stable. Macroeconomic stability has captured theattention of the public most recently when someEuropean countries needed the support of the IMF andother euro zone economies to prevent sovereign default,as their public debt reached unsustainable levels.It is important to note that this pillar evaluatesthe stability of the macroeconomic environment, so itdoes not directly take into account the way in whichpublic accounts are managed by the government. Thisqualitative dimension is captured in the institutions pillardescribed above.Fourth pillar: Health and primary educationA healthy workforce is vital to a country’scompetitiveness and productivity. Workers who areill cannot function to their potential and will be lessproductive. Poor health leads to significant costs tobusiness, as sick workers are often absent or operate atlower levels of efficiency. Investment in the provision ofhealth services is thus critical for clear economic, as wellas moral, considerations.11In addition to health, this pillar takes into account thequantity and quality of the basic education received bythe population. Basic education increases the efficiencyof each individual worker. Moreover, workers who havereceived little formal education can carry out only simplemanual tasks and find it much more difficult to adapt tomore advanced production processes and techniques,and therefore contribute less to come up with or executeinnovations. In other words, lack of basic educationcan become a constraint on business development,with firms finding it difficult to move up the value chainby producing more sophisticated or value-intensiveproducts with existing human resources.For the longer term, it will be essential to avoidsignificant reductions in resource allocation to thesecritical areas, in spite of the fact that governmentbudgets will need to be cut to reduce the deficits anddebt burden.Fifth pillar: Higher education and trainingQuality higher education and training is particularlycrucial for economies that want to move up the valuechain beyond simple production processes andproducts.12In particular, today’s globalizing economyrequires countries to nurture pools of well-educatedworkers who are able to perform complex tasks andadapt rapidly to their changing environment and theevolving needs of the economy. This pillar measuressecondary and tertiary enrollment rates as well asthe quality of education as evaluated by the businesscommunity. The extent of staff training is also taken intoconsideration because of the importance of vocationaland continuous on-the-job training—which is neglectedin many economies—for ensuring a constant upgradingof workers’ skills.Sixth pillar: Goods market efficiencyCountries with efficient goods markets are wellpositioned to produce the right mix of products andservices given their particular supply-and-demand
1.1: The Global Competitiveness Index 2012–20136 | The Global Competitiveness Report 2012–2013conditions, as well as to ensure that these goods canbe most effectively traded in the economy. Healthymarket competition, both domestic and foreign, isimportant in driving market efficiency and thus businessproductivity by ensuring that the most efficient firms,producing goods demanded by the market, are thosethat thrive. The best possible environment for theexchange of goods requires a minimum of impedimentsto business activity through government intervention. Forexample, competitiveness is hindered by distortionary orburdensome taxes and by restrictive and discriminatoryrules on foreign direct investment (FDI)—limiting foreignownership—as well as on international trade. Therecent economic crisis has highlighted the degree ofinterdependence of economies worldwide and thedegree to which growth depends on open markets.Protectionist measures are counterproductive as theyreduce aggregate economic activity.Market efficiency also depends on demandconditions such as customer orientation and buyersophistication. For cultural or historical reasons,customers may be more demanding in some countriesthan in others. This can create an important competitiveadvantage, as it forces companies to be more innovativeand customer-oriented and thus imposes the disciplinenecessary for efficiency to be achieved in the market.Seventh pillar: Labor market efficiencyThe efficiency and flexibility of the labor market arecritical for ensuring that workers are allocated to theirmost effective use in the economy and provided withincentives to give their best effort in their jobs. Labormarkets must therefore have the flexibility to shiftworkers from one economic activity to another rapidlyand at low cost, and to allow for wage fluctuationswithout much social disruption.13The importance ofwell-functioning labor markets has been dramaticallyhighlighted by last year’s events in Arab countries, whererigid labor markets were an important cause of highyouth unemployment, sparking social unrest in Tunisiathat then spread across the region. Youth unemploymentis also high in a number of European countries, whereimportant barriers to entry into the labor market remainin place.Efficient labor markets must also ensure a clearrelationship between worker incentives and theirefforts to promote meritocracy at the workplace, andthey must provide equity in the business environmentbetween women and men. Taken together these factorshave a positive effect on worker performance and theattractiveness of the country for talent, two aspects thatare growing more important as talent shortages loom onthe horizon.Eighth pillar: Financial market developmentThe recent economic crisis has highlighted the centralrole of a sound and well-functioning financial sectorfor economic activities. An efficient financial sectorallocates the resources saved by a nation’s citizens, aswell as those entering the economy from abroad, to theirmost productive uses. It channels resources to thoseentrepreneurial or investment projects with the highestexpected rates of return rather than to the politicallyconnected. A thorough and proper assessment of risk istherefore a key ingredient of a sound financial market.Business investment is also critical to productivity.Therefore economies require sophisticated financialmarkets that can make capital available for private-sectorinvestment from such sources as loans from a soundbanking sector, well-regulated securities exchanges,venture capital, and other financial products. In order tofulfill all those functions, the banking sector needs to betrustworthy and transparent, and—as has been madeso clear recently—financial markets need appropriateregulation to protect investors and other actors in theeconomy at large.Ninth pillar: Technological readinessIn today’s globalized world, technology is increasinglyessential for firms to compete and prosper. Thetechnological readiness pillar measures the agility withwhich an economy adopts existing technologies toenhance the productivity of its industries, with specificemphasis on its capacity to fully leverage informationand communication technologies (ICT) in daily activitiesand production processes for increased efficiencyand enabling innovation for competitiveness.14ICT hasevolved into the “general purpose technology” of ourtime,15given the critical spillovers to the other economicsectors and their role as industry-wide enablinginfrastructure. Therefore ICT access and usage are keyenablers of countries’ overall technological readiness.Whether the technology used has or has notbeen developed within national borders is irrelevantfor its ability to enhance productivity. The centralpoint is that the firms operating in the country needto have access to advanced products and blueprintsand the ability to absorb and use them. Among themain sources of foreign technology, FDI often playsa key role, especially for countries at a lower stage oftechnological development. It is important to note that, inthis context, the level of technology available to firms ina country needs to be distinguished from the country’sability to conduct blue-sky research and develop newtechnologies for innovation that expand the frontiersof knowledge. That is why we separate technologicalreadiness from innovation, captured in the 12th pillar,described below.
The Global Competitiveness Report 2012–2013 | 71.1: The Global Competitiveness Index 2012–2013Tenth pillar: Market sizeThe size of the market affects productivity since largemarkets allow firms to exploit economies of scale.Traditionally, the markets available to firms havebeen constrained by national borders. In the era ofglobalization, international markets can to a certainextent substitute for domestic markets, especially forsmall countries. Vast empirical evidence shows thattrade openness is positively associated with growth.Even if some recent research casts doubts on therobustness of this relationship, there is a general sensethat trade has a positive effect on growth, especiallyfor countries with small domestic markets.16The caseof the European Union illustrates the importance of themarket size for competitiveness, as important efficiencygains were realized through closer integration. Althoughthe reduction of trade barriers and the harmonization ofstandards within the European Union have contributedto raising exports within the region, many barriers to atrue single market, in particular in services, remain inplace and lead to important border effects. Thereforewe continue to use the size of the national domestic andforeign market in the Index.Thus exports can be thought of as a substitute fordomestic demand in determining the size of the marketfor the firms of a country.17By including both domesticand foreign markets in our measure of market size, wegive credit to export-driven economies and geographicareas (such as the European Union) that are divided intomany countries but have a single common market.Eleventh pillar: Business sophisticationThere is no doubt that sophisticated business practicesare conducive to higher efficiency in the production ofgoods and services. Business sophistication concernstwo elements that are intricately linked: the quality of acountry’s overall business networks and the quality ofindividual firms’ operations and strategies. These factorsare particularly important for countries at an advancedstage of development when, to a large extent, themore basic sources of productivity improvements havebeen exhausted. The quality of a country’s businessnetworks and supporting industries, as measured bythe quantity and quality of local suppliers and the extentof their interaction, is important for a variety of reasons.When companies and suppliers from a particularsector are interconnected in geographically proximategroups, called clusters, efficiency is heightened, greateropportunities for innovation in processes and productsare created, and barriers to entry for new firms arereduced. Individual firms’ advanced operations andstrategies (branding, marketing, distribution, advancedproduction processes, and the production of unique andsophisticated products) spill over into the economy andlead to sophisticated and modern business processesacross the country’s business sectors.Twelfth pillar: InnovationInnovation can emerge from new technological and non-technological knowledge. Non-technological innovationsare closely related to the know-how, skills, and workingconditions that are embedded in organizations andare therefore largely covered by the eleventh pillar ofthe GCI. The final pillar of competitiveness focuses ontechnological innovation. Although substantial gainscan be obtained by improving institutions, buildinginfrastructure, reducing macroeconomic instability, orimproving human capital, all these factors eventuallyseem to run into diminishing returns. The same is true forthe efficiency of the labor, financial, and goods markets.In the long run, standards of living can be largelyenhanced by technological innovation. Technologicalbreakthroughs have been at the basis of many of theproductivity gains that our economies have historicallyexperienced. These range from the industrial revolutionin the 18th century and the invention of the steam engineand the generation of electricity to the more recent digitalrevolution. The latter is transforming not only the waythings are being done, but also opening a wider rangeof new possibilities in terms of products and services.Innovation is particularly important for economies as theyapproach the frontiers of knowledge and the possibilityof generating more value by only integrating andadapting exogenous technologies tends to disappear.18Although less-advanced countries can still improvetheir productivity by adopting existing technologiesor making incremental improvements in other areas,for those that have reached the innovation stage ofdevelopment this is no longer sufficient for increasingproductivity. Firms in these countries must designand develop cutting-edge products and processes tomaintain a competitive edge and move toward higher-value-added activities. This progression requires anenvironment that is conducive to innovative activity andsupported by both the public and the private sectors. Inparticular, it means sufficient investment in research anddevelopment (R&D), especially by the private sector; thepresence of high-quality scientific research institutionsthat can generate the basic knowledge needed to buildthe new technologies; extensive collaboration in researchand technological developments between universitiesand industry; and the protection of intellectual property,in addition to high levels of competition and accessto venture capital and financing that are analyzed inother pillars of the Index. In light of the recent sluggishrecovery and rising fiscal pressures faced by advancedeconomies, it is important that public and private sectorsresist pressures to cut back on the R&D spending thatwill be so critical for sustainable growth going into thefuture.
1.1: The Global Competitiveness Index 2012–20138 | The Global Competitiveness Report 2012–2013The interrelation of the 12 pillarsWhile we report the results of the 12 pillars ofcompetitiveness separately, it is important to keepin mind that they are not independent: they tend toreinforce each other, and a weakness in one area oftenhas a negative impact in others. For example, a stronginnovation capacity (pillar 12) will be very difficult toachieve without a healthy, well-educated and trainedworkforce (pillars 4 and 5) that is adept at absorbing newtechnologies (pillar 9), and without sufficient financing(pillar 8) for R&D or an efficient goods market that makesit possible to take new innovations to market (pillar 6).Although the pillars are aggregated into a single index,measures are reported for the 12 pillars separatelybecause such details provide a sense of the specificareas in which a particular country needs to improve.The appendix describes the exact composition ofthe GCI and technical details of its construction.STAGES OF DEVELOPMENT AND THE WEIGHTEDINDEXWhile all of the pillars described above will matter to acertain extent for all economies, it is clear that they willaffect them in different ways: the best way for Cambodiato improve its competitiveness is not the same as thebest way for France to do so. This is because Cambodiaand France are in different stages of development: ascountries move along the development path, wages tendto increase and, in order to sustain this higher income,labor productivity must improve.In line with the economic theory of stages ofdevelopment, the GCI assumes that economies in thefirst stage are mainly factor-driven and compete basedon their factor endowments—primarily low-skilled laborand natural resources.19Companies compete on thebasis of price and sell basic products or commodities,with their low productivity reflected in low wages.Maintaining competitiveness at this stage of developmenthinges primarily on well-functioning public and privateinstitutions (pillar 1), a well-developed infrastructure(pillar 2), a stable macroeconomic environment (pillar 3),and a healthy workforce that has received at least abasic education (pillar 4).As a country becomes more competitive,productivity will increase and wages will rise withadvancing development. Countries will then moveinto the efficiency-driven stage of development, whenthey must begin to develop more efficient productionprocesses and increase product quality becausewages have risen and they cannot increase prices. AtFigure 1: The Global Competitiveness Index frameworkKey forfactor-driveneconomiesKey forefficiency-driveneconomiesKey forinnovation-driveneconomies Pillar 1. Institutions Pillar 2. Infrastructure Pillar 3. Macroeconomic environment Pillar 4. Health and primary education Pillar 11. Business sophistication Pillar 12. Innovation Pillar 5. Higher education andtraining Pillar 6. Goods market efficiency Pillar 7. Labor market efficiency Pillar 8. Financial marketdevelopment Pillar 9. Technological readiness Pillar 10. Market sizeBasic requirementssubindexEfficiency enhancerssubindexInnovation and sophisticationfactors subindexNote: See the appendix for the detailed structure of the GCI.GLOBAL COMPETITIVENESS INDEX
The Global Competitiveness Report 2012–2013 | 91.1: The Global Competitiveness Index 2012–2013Table 1: Subindex weights and income thresholds for stages of development STAGES OF DEVELOPMENT Stage 1: Transition from Stage 2: Transition from Stage 3: Factor-driven stage 1 to stage 2 Efficiency-driven stage 2 to stage 3 Innovation-drivenGDP per capita (US$) thresholds* <2,000 2,000–2,999 3,000–8,999 9,000–17,000 >17,000Weight for basic requirements subindex 60% 40–60% 40% 20–40% 20%Weight for efficiency enhancers subindex 35% 35–50% 50% 50% 50%Weight for innovation and sophistication factors 5% 5–10% 10% 10–30% 30%Note: See individual country/economy profiles for the exact applied weights.* For economies with a high dependency on mineral resources, GDP per capita is not the sole criterion for the determination of the stage of development. See text for details.this point, competitiveness is increasingly driven byhigher education and training (pillar 5), efficient goodsmarkets (pillar 6), well-functioning labor markets (pillar 7),developed financial markets (pillar 8), the ability toharness the benefits of existing technologies (pillar 9),and a large domestic or foreign market (pillar 10).Finally, as countries move into the innovation-drivenstage, wages will have risen by so much that they areable to sustain those higher wages and the associatedstandard of living only if their businesses are able tocompete with new and/or unique products, services,models, and processes. At this stage, companiesmust compete by producing new and different goodsthrough new technologies (pillar 12) and/or the mostsophisticated production processes or business models(pillar 11).The GCI takes the stages of development intoaccount by attributing higher relative weights to thosepillars that are more relevant for an economy given itsparticular stage of development. That is, although all12 pillars matter to a certain extent for all countries, therelative importance of each one depends on a country’sparticular stage of development. To implement thisconcept, the pillars are organized into three subindexes,each critical to a particular stage of development.The basic requirements subindex groups thosepillars most critical for countries in the factor-drivenstage. The efficiency enhancers subindex includesthose pillars critical for countries in the efficiency-drivenstage. And the innovation and sophistication factorssubindex includes the pillars critical to countries in theinnovation-driven stage. The three subindexes are shownin Figure 1.The weights attributed to each subindex in everystage of development are shown in Table 1. To obtainthe weights shown in the table, a maximum likelihoodregression of GDP per capita was run against eachsubindex for past years, allowing for different coefficientsfor each stage of development.20The rounding of theseeconometric estimates led to the choice of weightsdisplayed in Table 1.Implementation of stages of developmentTwo criteria are used to allocate countries into stages ofdevelopment. The first is the level of GDP per capita atmarket exchange rates. This widely available measureis used as a proxy for wages, because internationallycomparable data on wages are not available for allcountries covered. The thresholds used are also shownin Table 1. A second criterion is used to adjust forcountries that are wealthy, but where prosperity is basedon the extraction of resources. This is measured by theshare of exports of mineral goods in total exports (goodsand services), and assumes that countries that exportmore than 70 percent of mineral products (measuredusing a five-year average) are to a large extent factordriven.21Any countries falling in between two of the threestages are considered to be “in transition.” For thesecountries, the weights change smoothly as a countrydevelops, reflecting the smooth transition from onestage of development to another. This allows usto place increasingly more weight on those areasthat are becoming more important for the country’scompetitiveness as the country develops, ensuring thatthe GCI can gradually “penalize” those countries thatare not preparing for the next stage. The classificationof countries into stages of development is shown inTable 2.DATA SOURCESTo measure these concepts, the GCI uses statisticaldata such as enrollment rates, government debt, budgetdeficit, and life expectancy, which are obtained frominternationally recognized agencies, notably the UnitedNations Educational, Scientific and Cultural Organization(UNESCO), the IMF, and the World Health Organization(WHO). The descriptions and data sources of all thesestatistical variables are presented in the Technical Notesand Sources at the end of this Report. Furthermore,the GCI uses data from the World Economic Forum’sannual Executive Opinion Survey (Survey) to captureconcepts that require a more qualitative assessmentor for which internationally comparable statistical data
1.1: The Global Competitiveness Index 2012–201310 | The Global Competitiveness Report 2012–2013are not available for the entire set of economies. TheSurvey process and the statistical treatment of data aredescribed in detail in Chapter 1.3 of this Report.ADJUSTMENTS TO THE GCIA few minor adjustments have been made to theGCI structure this year. Within the macroeconomicenvironment pillar (3rd), the interest rate spread hasbeen removed from the Index because of limitationsin the international comparability of these data.Furthermore, mobile broadband was added to thetechnological readiness (9th) pillar in order to take intoaccount the rapidly expanding access to the Internetvia mobile devices. And a variable capturing the extentto which governments provide services to the businesscommunity, which has been collected through theExecutive Opinion Survey, was added to the institutionspillar (1st). For the patent indicator in the innovation pillar(12th), the source has been changed to include databased on the Patents Co-operations Treaty instead ofthe US Patent and Trademark Office (USPTO), whichhad been used until now. These data are collectedand published jointly by the World Intellectual PropertyOrganization and the Organisation for Economic Co-operation and Development (OECD). They record patentapplications globally, not just in the United States,therefore eliminating a possible geographical bias.22Finally, the Rigidity of Employment Index was droppedfrom the labor market efficiency pillar (7th), as the WorldBank ceased to provide this indicator.23COUNTRY COVERAGEThe coverage of this year has increased from 142 to 144economies. The newly covered countries are Gabon,Guinea, Liberia, Seychelles, and Sierra Leone. Libyawas re-included after a year of absence as we wereTable 2: Countries/economies at each stage of developmentStage 1:Factor-driven(38 economies)Transition fromstage 1 to stage 2(17 economies)Stage 2:Efficiency-driven(33 economies)Transition fromstage 2 to stage 3(21 economies)Stage 3:Innovation-driven(35 economies)Bangladesh Algeria Albania Argentina AustraliaBenin Azerbaijan Armenia Bahrain AustriaBurkina Faso Bolivia Bosnia and Herzegovina Barbados BelgiumBurundi Botswana Bulgaria Brazil CanadaCambodia Brunei Darussalam Cape Verde Chile CyprusCameroon Egypt China Croatia Czech RepublicChad Gabon Colombia Estonia DenmarkCôte d’Ivoire Honduras Costa Rica Hungary FinlandEthiopia Iran, Islamic rep. Dominican Republic Kazakhstan FranceGambia, The Kuwait Ecuador Latvia GermanyGhana Libya El Salvador Lebanon GreeceGuinea Mongolia Georgia Lithuania Hong Kong SARHaiti Philippines Guatemala Malaysia IcelandIndia Qatar Guyana Mexico IrelandKenya Saudi Arabia Indonesia Oman IsraelKyrgyz Republic Sri Lanka Jamaica Poland ItalyLesotho Venezuela Jordan Russian Federation JapanLiberia Macedonia, FYR Seychelles Korea, Rep.Madagascar Mauritius Trinidad and Tobago LuxembourgMalawi Montenegro Turkey MaltaMali Morocco Uruguay NetherlandsMauritania Namibia New ZealandMoldova Panama NorwayMozambique Paraguay PortugalNepal Peru Puerto RicoNicaragua Romania SingaporeNigeria Serbia Slovak RepublicPakistan South Africa SloveniaRwanda Suriname SpainSenegal Swaziland SwedenSierra Leone Thailand SwitzerlandTajikistan Timor-Leste Taiwan, ChinaTanzania Ukraine United Arab EmiratesUganda United KingdomVietnam United StatesYemenZambiaZimbabwe
The Global Competitiveness Report 2012–2013 | 111.1: The Global Competitiveness Index 2012–2013not able to conduct the Survey because of civil unrestin 2011. Three previously covered countries had to beexcluded from this year’s Report. Survey data could notbe collected in Belize and Angola; in Syria, the securitysituation did not allow the Survey to be carried out. In thecase of Tunisia we decided not to report the results thisyear because an important structural break in the datamakes comparisons with past years difficult. We hope tore-include these countries in the future.THE GLOBAL COMPETITIVENESS INDEX 2012–2013RANKINGSTables 3 through 7 provide the detailed rankings ofthis year’s GCI. The following sections discuss thefindings of the GCI 2012–2013 for the top performersglobally, as well as for a number of selected economiesin each of the five following regions: Europe and NorthAmerica, Asia and the Pacific, Latin America and theCaribbean, the Middle East and North Africa, and sub-Saharan Africa. Box 1 presents a comparative study ofthe GCI results, highlighting the profound and persistingcompetitiveness divide across and within the differentworld regions.Top 10As in previous years, this year’s top 10 remain dominatedby a number of European countries, with Switzerland,Finland, Sweden, the Netherlands, Germany, and theUnited Kingdom confirming their place among themost competitive economies. Along with the UnitedStates, three Asian economies also figure in top 10,with Singapore remaining the second-most competitiveeconomy in the world, and Hong Kong SAR and Japanplacing 9th and 10th.Switzerland retains its 1st place position again thisyear as a result of its continuing strong performanceacross the board. The country’s most notablestrengths are related to innovation and labor marketefficiency, where it tops the GCI rankings, as well as thesophistication of its business sector, which is ranked2nd. Switzerland’s scientific research institutions areamong the world’s best, and the strong collaborationbetween its academic and business sectors, combinedwith high company spending on R&D, ensures thatmuch of this research is translated into marketableproducts and processes reinforced by strong intellectualproperty protection. This robust innovative capacity iscaptured by its high rate of patenting per capita, forwhich Switzerland ranks a remarkable 2nd worldwide.Productivity is further enhanced by a business sectorthat offers excellent on-the-job-training opportunities,both citizens and private companies that are proactiveat adapting the latest technologies, and labor marketsthat balance employee protection with the interests ofemployers. Moreover, public institutions in Switzerlandare among the most effective and transparent in theworld (5th). Governance structures ensure a level playingfield, enhancing business confidence; these includean independent judiciary, a strong rule of law, and ahighly accountable public sector. Competitivenessis also buttressed by excellent infrastructure (5th),well-functioning goods markets (7th), and highlydeveloped financial markets (9th). Finally, Switzerland’smacroeconomic environment is among the most stablein the world (8th) at a time when many neighboringeconomies continue to struggle in this area.While Switzerland demonstrates many competitivestrengths, maintaining its innovative capacity will requireboosting university enrollment, which continues to lagbehind that of many other high-innovation countries,although this has been increasing in recent years.Singapore retains its place at 2nd position asa result of an outstanding performance across theentire Index. The country features in the top 3 inseven of the 12 categories of the Index and appearsin the top 10 of three others. Its public and privateinstitutions are rated as the best in the world for thefifth year in a row. It also ranks 1st for the efficiencyof its goods and labor markets, and places 2nd interms of financial market development. Singapore alsohas world-class infrastructure (2nd), with excellentroads, ports, and air transport facilities. In addition,the country’s competitiveness is reinforced by a strongfocus on education, which has translated into a steadyimprovement in the higher education and training pillar(2nd) in recent years, thus providing individuals with theskills needed for a rapidly changing global economy.Finland moves up one place since last year toreach 3rd position on the back of small improvementsin a number of areas. Similar to other countries inthe region, the country boasts well-functioning andhighly transparent public institutions (2nd), toppingseveral indicators included in this category. Its privateinstitutions, ranked 3rd overall, are also seen to beamong the best run and most ethical in the world.Finland occupies the top position both in the healthand primary education pillar as well as the highereducation and training pillar, the result of a strong focuson education over recent decades. This has providedthe workforce with the skills needed to adapt rapidly toa changing environment and has laid the groundworkfor high levels of technological adoption and innovation.Finland is one of the most innovative countries inEurope, ranking 2nd, behind only Switzerland, on therelated pillar. Improving the country’s capacity to adoptthe latest technologies (ranked 25th) could lead toimportant synergies that in turn could corroborate thecountry’s position as one of the world’s most innovativeeconomies. Finland’s macroeconomic environmentweakens slightly on the back of rising inflation (above 3percent), but fares comparatively well when contrastedwith other euro-area economies.
1.1: The Global Competitiveness Index 2012–201312 | The Global Competitiveness Report 2012–2013Box 1: Competitiveness from above: The GCI heat mapFigure 1: The GCI heat map* The interval [x,y[ is inclusive of x but exclusive of y. † Highest value; †† lowest value.Figure 1 identifies the competitiveness “hotspots” and theregions or countries with weak performance according to theGlobal Competitiveness Index (GCI). The 10 best-performingcountries are shaded dark red. The remaining countriesare colored in intermediate tones moving from orange, thesecond-best performing group, through yellow, light blue,medium blue, and dark blue; this last color identifies the least-competitive nations according to the GCI.The map reveals that the hotspots remain concentratedin Europe, North America, and a handful of advancedeconomies in Asia and the Pacific. Despite decades of briskeconomic growth in some developing regions (such as LatinAmerica and Africa), the map reveals that the profoundcompetitiveness gap of these regions with more advancedeconomies persists. This competitiveness deficit in vastswaths of the developing world raises questions about thesustainability of growth patterns.Sub-Saharan Africa, for example, continues to face thebiggest competitiveness challenges of all regions (see Box5). As shown on the map, a vast majority of the continent’scountries covered in this Report fall into the group of least-competitive economies (dark blue). Out of the region’s32 countries included in the GCI, only Botswana, Gabon,Namibia, the Seychelles (medium blue), Mauritius, Rwanda,and South Africa (light blue) are in the next higher categories.With six of the ten best-performing countries, Northernand Western Europe is a competitiveness hotspot. Theassessment is considerably bleaker when looking atSouthern and Eastern Europe. On the map, the patchwork ofcolors—ranging from dark red to medium blue—reveals the“competitiveness divide” within Europe. Indeed, the lack ofcompetitiveness of several of its members is among the rootcauses of the current difficulties in the euro zone (see Box2). The map also shows that within the European Union thetraditional distinction made between the 15 original membersand the 12 countries that joined after 2004 does not holdfrom a competitiveness point of view.The map draws a mixed picture of Asia, too. Scatteredacross the region, the Asian Tigers and Japan can beconsidered competitiveness hotspots. Within this group offive advanced economies, Singapore, Hong Kong SAR, andJapan enter the top 10, and Taiwan (China), and the Republicof Korea rank only a few notches behind. The developingnations of Southeast Asia are not yet competitivenesschampions, but their group performance is quite remarkable.Led by Malaysia, all these economies achieve a GCI scoreabove 4.0, the theoretical average of the GCI, and none ofthem falls into the lowest, dark-blue category. This contrastsstarkly with the situation in South Asia, where best-performing India ranks a middling 59th and several countriesappear in dark blue, including Pakistan and Bangladesh.In the Middle East and North Africa, Israel and the sixmembers of the Gulf Cooperation Council perform strongly.But elsewhere in the region, the lack of competitiveness of theLevantine and North African countries is worrisome. Finally,the map also reveals that the BRICS do not form a uniformgroup in terms of competitiveness, as seen on the map whereChina is the only member appearing in a relatively strongyellow.GCI score*n [5.39,5.72†]n [5.00,5.39[n [4.60,5.00[n [4.20,4.60[n [3.80,4.20[n [2.78††,3.80[n Not covered