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The World Economic Forum's Global Competitiveness Index 2011-12 finds the gas-rich state the region's most competitive and emerging as the 14th most business-friendly country in the world.

"Its strong performance in terms of competitiveness rests on solid foundations made up of a high-quality institutional framework where it ranks 14th overall, a stable macroeconomic environment (5th), and an efficient goods market (17th)," notes WEF in glowing assessment of the country.

However, the country's financial services sector received a black mark, ranking at 80th position, and legal rights of borrowers and lenders were seen as under-protected (105th) by the business community.

"The survey noted that, "given its high wage level, diversification into other sectors will require the country to raise productivity by continuing to promote a greater use of the latest technologies (33rd) and by fostering more openness to foreign competition, currently ranked at 53rd- reflecting barriers to international trade and investment."

Saudi Arabia also fared extremely well, rising four places to finish as the 17th most competitive economy in the world.

The Kingdom saw numerous improvements at an institutional level, and stronger private institutions helped the country's ranking.

"Additionally, the country's largest stimulus package among the G-20 contributed to improving infrastructure in the country," says the WEF, which is odd, given that most of the Kingdom's $130-billion stimulus hasn't worked its way into the economy and the United States and EU's fiscal stimuli are far greater.

Still, health and education is not up to global standards, says WEF, the latter especially impacting on labour skills and training issues which has exacerbated by the country's chronic and politically explosive job creation issue.

 

UAE FALLS
Worryingly, the UAE is now only the fourth most competitive economy (or third, excluding Israel), and has actually fallen two places to become the 27th most competitive economy in the world. It fell two places in last's year's survey as well.

While the country shines in high quality infrastructure (ranked 8th), efficient markets (10th) and government efficiency (a superb fifth) and macroeconomic stability (11th), many areas of concerns remain.

The WEF explains:
"Over recent years, we have observed a lower assessment of institutions overall - an assessment that was probably affected by the particular severity of the country's economic crisis. The resulting reorientation of the country's development model will demand solid foundations in competitiveness and a continuation of competitiveness-enhancing structural reforms to reduce the risk of asset bubbles and put economic development on a more stable footing.

"Priorities in this context should include further investment to boost health and educational outcomes. Raising the bar with respect to education will require not only measures to improve the quality of teaching and the relevance of curricula, but also incentivizing the population to attend schools at the primary and secondary levels."

Despite these setbacks, the UAE was the only Mideast country in WEF's top-tier of 37 countries that are seen as Innovation-Driven. All other Middle East states are several categories below and fall under the Transition Phase, with the exception of Jordan which is seen as one of the 28 Efficiency Driven economies.

Kuwait improved its ranking from 35 to 34, Oman also rose two places to 32 and Bahrain retained its position as the 37th most competitive economy in the world. These are surprising results, given that economic conditions in Bahrain and Oman deteriorated earlier this year and Kuwait suffered from its unique political paralysis.

 

ARAB SPRINGS SETBACK
However, the Great Arab Revolt, widely known as the Arab Spring, has not translated into competitive economies. Tunisia and Egypt lost their competitive edge, as they would, given that a paradigm shift in their political structures has also greatly upset their economic models.

These countries are now works in progress, and hopefully the re-engineered economies of Tunisia and Egypt in the future will emerge even more competitive and upstage the likes of Qatar and Saudi Arabia.

But for now, Tunisia - for all its troubles of igniting the Arab Spring - has seen its ranking fall eight places and stands as the 40th most competitive economy in the world. Egypt has fared even worse, falling 13 places to finish at 94 this year.

"The drop likely reflects increased uncertainty regarding the drop likely reflects increased uncertainty regarding the future direction of economic policy as well as higher the future direction of economic policy as well as higher public awareness of the countries' structural weak public awareness of the countries' structural weaknesses, resulting mainly in poorer assessments of different aspects of public and private institutions and, to a lesser degree, also deteriorating goods and labour markets efficiency. Similar developments can be observed in some other countries from North Africa and the Levant, notably Jordan, Lebanon, and Algeria."

Jordan, seen as one of the more innovative and entrepreneurial economies in the Middle East, fell six places to 71, but Lebanon - another entrepreneurial economy, climbed three places to finish as the 89th most competitive economy in the world.

While the WEF says that it could not capture much data from Libya, given the intensity of the civil war at the time of compiling the report, it has ranked Yemen as the least competitive economy in the region, at 138 out of 142 nations.

Source: Zawya

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