Bangladesh has cheapest labor and tries inviting investors to come with the capital but investors are reluctant to come here. Dhaka is the costliest city to live among cities of Bangladesh and city planners trying to push industrial establishment to other part of the country. Interestingly, in contrast, the business conglomerates from Chittagong, Jessore, Kushtia are shifting their production plants and offices to Dhaka. Historically, some multinationals started business in Chittagong from British period and recently shifted their office and factory to Dhaka. This contradiction lies in fact that Dhaka is cheapest city in Bangladesh for doing business. The cost of living and cost of doing business is two different dimensions of a city.

1.  Sunday, October 8, 2017
http://dailyasianage.com/news/89463/meaning-of-competitiveness
Meaning of competitiveness Meaning of
competitiveness
M S Siddiqui
Bangladesh has cheapest labor and tries inviting investors to come with the capital but investors are
reluctant to come here. Dhaka is the costliest city to live among cities of Bangladesh and city
planners trying to push industrial establishment to other part of the country. Interestingly, in contrast,
the business conglomerates from Chittagong, Jessore, Kushtia are shifting their production plants
and offices to Dhaka. Historically, some multinationals started business in Chittagong from British
period and recently shifted their office and factory to Dhaka. This contradiction lies in fact that Dhaka
is cheapest city in Bangladesh for doing business. The cost of living and cost of doing business is
two different dimensions of a city.
The term competitiveness is a broad concept. So for, there is no universal agreement on the
definition of competitiveness. Competitiveness depends on various parameters. The European
Commission defines competitiveness as the ability of an economy to provide its people with high and
rising standards of living and high rates of employment on a sustainable basis. The Organization for
Economic Co-operation and Development (OECD) countries defined, the degree free trade and free

2. market conditions, produce goods and services which meet the test of international markets, while
simultaneously maintaining and expanding the real incomes of its people over the long term.
The determinants of competitiveness are many and complex. For hundreds of years, economists
have tried to understand what determines the wealth of nations. This attempt has ranged from Adam
Smith's focus on specialization and the division of labor to neoclassical economists' emphasis on
investment in physical capital and infrastructure, and, more recently, to interest in other mechanisms
such as education and training, technological progress, macroeconomic stability, good governance,
the rule of law, transparent and well-functioning institutions, firm sophistication, demand conditions,
market size, and many others.
The World Economic Forum (GEF) calculated the Global Competitiveness Index (GCI) for
measuring national competitiveness, which captures the microeconomic and macroeconomic
foundations of national competitiveness. GEF defines competitiveness as the set of institutions,
policies, and factors that determine the level of productivity of a country. The level of productivity, in
turn, sets the sustainable level of prosperity that can be earned by an economy. The GEF group all
these components into 12 pillars of economic competitiveness. These are as Institutions,
Infrastructure, Macroeconomic stability, Health and primary education, Higher education and
training, Goods market efficiency, Labor market efficiency, Financial market sophistication,
Technological readiness, Market size, Business sophistication, and Innovation.
Competitiveness shifted its focus toward competitive advantage, which emphasizes efficiencies in
the means of production, particularly in so-called value factors that have to do with performance and
quality. Business need economic planning to achieve comparative advantage by keeping production
costs like labor, materials, energy, taxes, and infrastructure at low relative to those of
competitors. The value factors pertain to resource, capital, and labor efficiencies and the use of
advanced technologies to increase productivity. Recent thinking views quality of life, human capital,
and social capital as also important to workforce productivity, innovation, and competencies.
In many respects, such as technology and human capital, competitive advantage relates to
endogenous growth theory and others Developing economies began opening up their national
economies to foreign direct investment (FDI) in the 1980s to stimulate national development. Some
grew in the 1990s by using competitive advantage as a policy for economic development. Foreign
manufacturers, seeing their margins fall in comparison, turned to quality assurance to become more
productive. Many private companies in the region also began to make improvements in the
workplace and in skills, in the process shaping local economies and transforming urban areas.
There are three advantageous approaches to competitiveness are comparative, competitive, and
collaborative advantage give rise to an investment and economic development. Comparative
advantage: Land costs, Infrastructure, Taxation, Labor costs, Proximity to raw materials, Transport,
Cost of capital, Location of markets, Economies of scale. The principle of comparative advantage,
developed out of trade theory, assumes that individuals and regions will produce those goods or
services for which they have a relative advantage, usually because of infrastructure, natural
resources, labor, or capital. Comparative advantage tends to induce specialization.
Economic planning sought to achieve comparative advantage by keeping production costs (labor,
materials, energy, taxes, and infrastructure) low relative to those of competitors. The full costs of
production were often not accounted for, but tariffs, incentives, and infrastructure subsidies were
lowered to increase comparative advantage.
In the 1980s, competitiveness shifted its focus toward competitive advantage, which emphasizes
efficiencies in the means of production, particularly in so-called value factors that have to do with
performance and quality, value factors pertain to resource, capital, and labor efficiencies and the use

3. of advanced technologies to increase productivity. Recent thinking views quality of life, human
capital, and social capital as also important to workforce productivity, innovation, and competencies.
In many respects, such as technology and human capital, competitive advantage relates to
endogenous growth theory as developed by.
For companies that crave success in business or governments that hope to entice investors,
especially from abroad, to invest in local economies, comparative or competitive advantage is no
longer enough. Their profit margins squeezed by global competition, companies are forced to
change the way they do business. Former rivals are seeking to collaborate through alliances,
partnerships, and other forms of cooperation to win and expand their business. The new theory of
collaborative advantage has thus emerged.
Collaboration in the context of competitiveness is centered on strategy and on the factor costs of
production, such as the improvements to be gained in resource efficiency and organizational
effectiveness. Competitiveness has two broader dimensions: surface-level and deep-level
competitiveness. Surface-level competitiveness reflects the competitive performance of a firm or
industry that is directly observable to consumers. Deep-level competitiveness reflects the capability
of a firm or industry that is not directly observable to consumers.
An improvement in the deep-level performance enhances the performance at the surface level. The
long-term sustainability of the industry demands enhancement of deep-level competitiveness.
Therefore, the future development of the industry will depend on how much importance will be given
to which factors, and how the individual firms will respond and how government policies will
influence the industry.
(To be continued)
The writer is a Legal Economist. E-mail: mssiddiqui2035@gmail.com