How Competitiveness is Assessed

Competitiveness is assessed across countries by various international ranking agencies using a uniform set of criteria. The NCC uses three primary indices to measure Saudi Arabia’s competitiveness against other countries. These indices measure, at a more detailed level, the drivers of competitiveness across the four aspects of the Diamond. Of these, the indices developed by the World Economic Forum (WEF) and the Institute for Management Development (IMD) are used to benchmark the Kingdom’s competitiveness on both the macroeconomic and microeconomic level. The NCC also uses the International Finance Corporation’s (IFC) “Ease of Doing Business” report to benchmark the legal and regulatory environment in which businesses operate.

The WEF, IMD, and IFC rankings help policy makers to develop, prioritize, and implement appropriate competitiveness initiatives. They strongly influence investors’ and business executives’ decisions regarding investment in a country. Most importantly, the rankings can serve as a guideline or benchmark for a nation aiming to enhance its competitiveness and to track its progress.

Countries that have high rankings and/or have shown significant gains have done so by showing consistently superior performance in key macro and microeconomic areas:

• Macroeconomic environment: high budget surpluses, low government waste, strong country credit rating, low inflation
• Strong public and private institutions: absence of corruption, business and governmental transparency, judicial independence, enforcement of property rights
• Technology and innovation: high spend on research and development (R&D), aggressive adoption of new technologies, university and industry research collaborations, active use of technology
• Education and training: high educational enrollment rates, excellent educational establishments, skilled labor force

The Kingdom uses these reports to monitor the success of its 10x10 program, which reflects its ambition to be in the top 10 in at least one of these rankings by 2010. The assessments of these ranking agencies are essentially guidelines, useful tools for measuring progress and highlighting areas for action. Ultimately, the Kingdom’s roadmap to greater prosperity will be its own.

The World Economic Forum Global Competitiveness Index (GCI)

The WEF’s Global Competitiveness Index (GCI) is the most widely recognized assessment of competitiveness, covering 125 countries. Saudi Arabia will be ranked for the first time th. The GCI evaluates 103 parameters, a mixture of hard data (facts and statistics) and management perceptions (collected through executive opinion surveys), to assess the quality of the macroeconomic and microeconomic environment. These parameters are organized into nine “pillars” of competitiveness: institutions, infrastructure, macroeconomic framework, health and primary education, higher education and training, efficient markets, ability to harness benefits of existing technologies, sophistication of production processes, and innovation. The GCI groups countries into the three stages of development, factor-driven, investment-driven, and innovation-driven stages (see Stages of Economic Development) and weights the pillars according to a country’s economic stage (defined by GDP levels). For example, the GCI weighs infrastructure and health and education more heavily for countries in the first stage of economic development and gives greater weight to pillars such as sophistication of production processes and innovation for countries in the innovation-driven stage. The Kingdom is currently classified as transitioning from an investment-driven to an innovation-driven economy. For ranking history click here

The Institute for Management Development World Competitiveness Index

The IMD’s World Competitiveness Index also assesses microeconomic and macroeconomic conditions. Evaluating 199 parameters, it is focused much more on hard data and relies less on executive opinions. Given the challenges of collecting much of this data, the IMD covers only 55 countries. However, the IMD’s methodology also allows it to assess regions within a country, so it could be used to assess the Economic Cities in the future. The Kingdom is not yet rated by the IMD, but hopes to participate in coming years. For ranking history click here

International Finance Corporation Ease of Doing Business Index

The IFC’s Ease of Doing Business Index provides the most comprehensive assessment of one of the most important factors determining competitiveness – the business environment. The IFC assesses 175 countries on 10 aspects of doing business: 1)  Starting a business 2)  Dealing with licenses 3)  Employing workers 4)  Registering property 5)  Getting credit 6)  Protecting investors 7)  Paying taxes 8)  Trading across borders 9)  Enforcing contracts 10) Closing a business. The IFC’s assessments are mostly based on the number of procedures required, the time taken, and the cost of various bureaucratic steps. In 2006, Saudi Arabia ranked 38 out of 175 countries in the IFC Ease of Doing Business Index. For ranking history click here

 

 

 

About National Competitiveness

What is National Competitiveness

Diamond Framework

Stages of Economic Development