The Global Competitiveness Report (GCR), in combination with the Global Competitiveness Index as its ranking component, is the hallmark product of the World Economic Forum. Executive talked about the position of Arab economies in the GCR perspective with Margareta Drzeniek Hanouz, a director of the WEF and the Forum’s lead economist of competitiveness research.
We have heard that you can give Executive a sneak preview on findings related to the 2013 GCR.
Yes, on the Arab World Competitiveness Report [AWCR], which we will release on May 23 in Amman as it looks right now.
What can you tell us in terms of highlights?
The report is based on the GCR but we go into a deeper analysis for the Arab world’s economy. In this one we actually collaborate with the European Bank for Reconstruction and Development; it is a joint report.
Is there any one single issue that you identified in the upcoming AWCR as most important in terms of the competitiveness of Arab economies?
The main thread is to solve the job creation issue in the region. [For that] we need an improvement in competitiveness and thus we need to look at the very basic reforms that are needed to strengthen competitiveness. For much of the region this means actually going back to the institutional frameworks and education. This is in particular the case in North Africa. In Lebanon and Jordan, the issue is related to institutions and infrastructure. In the Gulf region it is really more on education, skills and fostering innovation and business education.
Job creation was already an urgent topic at the WEF for the Middle East in Amman in November 2011. Has anything improved since that meeting?
We haven’t seen any major improvement in the situation. Part of the challenge is that in order to keep up with the growth of the population and the entry into the labor force you need to create growth that is really very high. Growth has actually been rather low in the region in the past few years. It is difficult to create jobs in a medium-growth context — the context we are currently facing.
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The Syria crisis must have made it difficult to assess the country’s competitiveness. Have you looked at the impact of the crisis on other countries in the region?
We had to take out Syria as some of the data is based on a survey we ran of businesses and doing that obviously is not possible in the current context. We have not directly analyzed the impact of the Syria crisis as the Global Competitiveness Index does not really lend itself to this — it takes into account some of the factors that may be important such as physical security but we don’t really look at geopolitical difficulties because we like to focus on the measures that are in the realm that the government can directly influence. We do take [crises] into account in the context of security. We have seen actually in much of the region a deterioration of the security situation that [has affected] competitiveness.
Does that mean that most of the region would score lower in competitiveness?
No, we can’t really see a trend in the region like this. It is definitely true that the North African countries have slipped but we would have to look at individual countries. Egypt has slipped a few places but on the other hand Morocco has improved. Lebanon and Jordan [have] remained rather stable for the past two years.
How are you looking at Bahrain today? Has there been any downgrading of Bahraini competitiveness based on the anti-government protests that seem to be persisting?
Bahrain has improved by two rankings between 2011 and 2012 but we see that it is significantly deteriorating in institutions and in security, especially in the business cost of crime and violence. But it has counterbalanced this by improvements in the macroeconomic environment.
Does this mean that the multiplicity of pillars and index components in the GCR can sometimes camouflage negative impacts that might translate into a much worse deterioration of competitiveness than reflected in the composite index number?
The pillars are extremely interrelated and we do not claim that we give a perfect picture of the reality in this case. We just claim that we represent it according to a model that seems to be accepted by economists.
Have you had to take any country other than Syria out of coverage?
We did not cover Tunisia in the last report, because we had a huge structural break in the data.
In terms of data security and the partners that you are working with in Arab countries, are they all of the exact same quality and of the same quality as your partners in Switzerland?
In general, we don’t see a lower quality of the partner institutes. We try to have very respected institutions in each of these countries and often have more than one institution. In Lebanon for example we work with the Bader Young Entrepreneurship Program.
During a discussion of these issues with one of your colleagues at the 2011 WEF in Amman, he made reference to a “halo effect” of positive bias. Do you have a formula for compensating for positive bias in the survey components, and what is that formula?
From a statistical point of view and from a survey expert point of view, there is no solution to compensate for this type of effect, especially for a survey of this size.
Is it correct that you have about 60 plus participants in the survey for each country?
No, on average we have about 90 to 100.
Is that for Arab countries or globally?
Globally. I haven’t calculated it but it could be that it is lower for Arab countries because there are a few countries that have been difficult to get to and there are a number of smaller countries as well, which lowers the number.
Given that the Global Competitiveness Report is not the only such report and that other institutions have issued similar reports, how competitive must a competitiveness report be?
We don’t really think about it in terms of competing with others. The focus from our perspective is rather not that we compete for the attention of policy makers but how are we able to be top-notch in terms of methodology [and] in terms of the detail we use. We see the main value of the report in being able to take out the details and use it for dialogue at our regional events.
Would you describe the competitiveness reports as easy reads?
We do our best to make it an easy read. It is always a trade-off. We want to appeal to the research audience as well as to the policy makers, the media and to a certain extent to the broader public, although to a more restricted degree, so it is a balancing act. We don’t want to be too colloquial. After all, it is easy to lose content when you go for too easy a read.
You are based in Switzerland, which happens to score at the top of the rankings very consistently. What distinguishes top countries?
What is interesting in the top five countries is that they all have a consistent long-term strategy for economic and social development. In a way, they have a vision of a country. I think it is very important to be persistent over a longer period of time and in a sense be free from political cycles. The ability to learn and be constantly on your toes is really important.
