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The importance of enhancing national competitiveness has moved up on the agenda of many countries over the past decade. During this same period, traditional cornerstones of globalization have shifted and changed the framework within which national policies operate. The global financial crisis of 2008-2009, the lack of clear progress on the Doha Development Round and the rise in preferential trading agreements are among the developments that have shaped the global context of national economic growth. The jobless recovery and the Arab Spring movements moved employment and social cohesion to the core of many national economic policies in industrial, emerging and developing economies alike. In addition, progressing climate change and environmental damage highlight the interrelation between economic progress and the environment. Against this background, the Global Agenda Council on Competitiveness re-states the need to foster competitiveness by raising productivity, and has identified the following as the key issues for national competitiveness:

  • Increasing sustainable competitiveness
  • Institutionalizing multistakeholder discussions on competitiveness
  • Analysing competitiveness
  • Focusing on competitiveness at the sub-national level
  • Developing new models of governance

Increasing Sustainable Competitiveness

Competitive economies have traditionally been viewed as those that are most productive and provide high and rising living standards for their citizens. However, past models are not always relevant to all aspects of future societies. Augmented competitiveness models are necessary for continued growth, ensuring inclusive and sustainable development. Annual growth rates and conventional measures of competitiveness (e.g. governance, education, market efficiency and innovation), while important, do not account for some of the elements gaining recognition in the evolving competitive landscape of the 21st century, where economic performance is viewed as only one aspect of a long-term ecosystem in which such issues as social inclusion and environmental responsibility play a larger role than in the past.

The Council supports the work of the World Economic Forum on sustainable competitiveness (accessed at: http://www.weforum.org/content/pages/sustainable-competitiveness). This new analytical framework will complement existing measures of core competitiveness, such as the Global Competitiveness Index, and is being developed to shed light on the interaction between economic, social and environmental sustainability and their importance for long-term economic performance. Council Members are contributing to ongoing work related to the development of this framework.

The Council also provided input into the Forum’s work on assessing the progress of countries towards Europe 2020, the European Commission’s competitiveness framework, which includes an environmental component as well as social cohesion.

Institutionalizing Multistakeholder Discussions on Competitiveness

Competitiveness affects not only the private and/or public sectors, and stagnant opinions from one side or the other provide little depth into the issues at hand. Sustainable growth, economic prosperity and social change are re-imagined from all levels of society, so engaging every party in the dialogue is imperative to a well-rounded discussion on national competitiveness. One of the proven ways to institutionalize multistakeholder competitiveness discussions at the national level is through the creation of National or Regional Competitiveness Councils (NCCs).

With members representing all sectors of society (private, public, business, labour, academia, etc.), NCCs provide a combined voice that speaks to present challenges and necessary solutions to bring about a reformed and renewed interest in the promotion of competitiveness policy. Involving the key players in technology, education, business, trade sectors and many other facets of development is critical to revising and reinvigorating the discussion on national competitiveness, but this dialogue cannot remain solely at the national level.

Innovation, sustainability and resilience – which are becoming increasingly recognized as the foundations of national competitiveness along with more basic factors such as education, the macroeconomic environment or infrastructure – are now also global platforms for prosperity. The fundamental drivers of national competitiveness are being knitted together in networks that currently underpin global economic growth; acting globally is now a prerequisite to national economic competitiveness. Therefore, all NCCs should strive to fully immerse themselves on the international stage. The primary course of action should be to join the Global Federation of Competitiveness Councils (GFCC), a network of competitiveness councils from around the world, predicated on the belief that sharing best practices among NCCs and nations would prove beneficial to all interested parties (www.thegfcc.org).

The Council entered into an informal cooperative relationship with the GFCC to stimulate the creation of new private-sector led National Competitiveness Councils in countries where no such organizations exist, and to work on issues to enhance national and sub-national competitiveness in the global marketplace.

The Council on Competitiveness also updated the Forum’s guidelines on the creation of National Competitiveness Councils. These updated guidelines provide input on the basic characteristics of the councils, such as membership, funding, transparency, legitimacy and convening power, while acknowledging the effectiveness of other models.

Analysing Competitiveness

Globalization, fuelled by rapid technological change, shrinking economic distance and sweeping liberalization, has led to an increasingly complex competitiveness landscape. Policy-makers are struggling to find ways to manage present economic challenges: developed economies worry about maintaining their technological lead and staying ahead of lower wage entrants, while less developed economies worry about reviving their economies and diversifying their activities so they can challenge mature industrial countries. Competitiveness reports are an important tool to identify and overcome these challenges. As a non-partisan public service, they create an informed dialogue for policy-makers attuned to enhancing the economic performance of nations and regions.

Traditionally, the purpose of a National Competitiveness Report (NCR) is to inform by analysing a region’s or a nation’s current economic standing and assessing how it performs relative to other countries in selected criteria and measures of competitive prowess. NCRs also raise public awareness of the critical link between a nation’s competitiveness and its public well-being. Over time the scope of NCRs has evolved significantly, from a simple global benchmarking tool to an agile tool kit for NCCs to influence policy and steer their initiatives.

Competitiveness Reports are valuable reference documents often cited in developing policy, and as such serve as a platform for NCCs to make both specific policy recommendations and clearly articulated broad goals to improve a nation’s well-being, such as social inclusion and sustainability. Additionally, NCRs play an important role in guiding the types of activities in which NCCs might want to participate by giving perspectives and advice to existing councils’ initiatives and incubating new projects focused on a nation’s productivity drivers. NCRs also serve as a tool for measuring the impact of a council’s work to help build credibility and formulate a convincing case for its recommendations.

The Council has established some practical guidelines for producing NCRs, including section by section explanations of how and why specific routes may benefit a report, while leaving room for non-traditional approaches. These reports can be seen as deeper-dives into the competitiveness landscapes of countries, and provide a useful counterpart to the Forum’s annual Global Competitiveness Report.

Focusing on Competitiveness at the Sub-National Level

While the discussion on competitiveness is often focused on the national stage, regional and even city-based competitiveness analysis can provide a more comprehensive lens from which to observe the issues facing a country. Obstacles can vary from region to region as widely as they can from country to country. Resource requirements, talent pools, technology advancements and comparative advantages do not conform to geographical boundaries and these divides are not apparent in nation-wide analysis.

Regional competitiveness can be instrumental in highlighting the challenges a country is facing on a micro level. Just as productivity is not equal across all sectors, it is not necessarily comparable from region to region. To this end, it is extremely important for NCCs to take an in-depth look at regional competitiveness, whether through individual studies or in the process of forming the very agenda that will drive the council. For NCCs to have a country-wide impact through policy recommendation, implementation may prove easier at the regional level, as governors, mayors and local organizations often have greater success in execution at scale.

The Council recognizes the usefulness of taking this analysis to the sub-national and sometimes sub-regional levels for many countries to encourage effective pro-competitive actions. This could be presented as part of an NCC’s competitiveness report or as an entirely separate study of specific regions as issues and attributes become more apparent

Developing New Models of Governance

Better implementation of existing approaches and new models of governance for accountability, transparency and organization are needed across both business and government. In particular, it is necessary to address the misalignment between short-term incentives and the longer-term goals of government and business. This is a prerequisite for supporting the long-term competitiveness vision articulated above. Countries and industries must stop thinking in terms of the next election or the next fiscal quarter and begin thinking in ranges that will map the future decades of progress

For governments, models must be more aligned with the needs of society and markets, producers and consumers. For business, models that create financial and social incentives for longer-term planning and thinking by business leaders are required. Along the same lines, new models for innovation are important to support sustainable competitiveness. It is critical to bring together the ecosystems of business, government and academia, as these innovative strategies will vary from one country to another and must be defined by the key stakeholders in competitiveness.

What Have the Key Obstacles to Main Progress on the Issues Been?

In addition to the obstacles mentioned above, progress to increase competitiveness is currently hindered by a number of obstacles that endanger future growth and prosperity, resulting from the recent global financial crisis. These include:

  • overstretched public finances in much of the West due to debt build-up before the global financial crisis, and the subsequent policies to combat the crisis and ensuing recession (bank bailouts, fiscal and monetary stimulus). This compromises both macroeconomic stability and the economic climate for growth.
  • creeping regulatory interventions that have accelerated in the wake of the crisis in the West and the rest of the world, which threaten to spill over into non-tariff protectionism and provide room for corruption, which reduces competitiveness in many countries.
  • the continued propping up of banks deemed “to big to fail”, which exacerbates moral hazard and stokes the next financial crisis. The problem is often addressed by heavy regulation rather than by structural reform to limit taxpayer and depositor liability and promote genuine competition in the financial sector. In addition, permanent “fire-fighting” in developed economies deflects attention from necessary supply-side reforms to boost competitiveness and growth.

Moreover, as developed countries necessitate political capital to implement the reforms needed to boost national competitiveness and growth, upcoming elections in many countries will likely change the political landscape considerably and the outcome will have major impact on national policies. Also, in some economies, a renewed danger of protectionist policies to protect local industries exists, often justified by the depreciation of the euro and the dollar. Such measures will reduce the competitiveness of countries in the medium term.

What Has the Council Done and What Is It Planning to Do about these Issues in the Future?

  • Council Members have provided input in the World Economic Forum’s ongoing work on sustainable competitiveness. Council Members participated in the ongoing consultations and a private session during the World Economic Forum Annual Meeting in Davos-Klosters in January 2012.
  • The Council provided input in a number of regional and topical competitiveness projects, for example in the Europe 2020 review, an analysis that benchmarks the progress of Europe towards the competitiveness goals.
  • The Council has agreed to work with the Global Federation of Competitiveness Councils to stimulate the creation and growth of private-sector led National Competitiveness Councils around the world, particularly in Europe, Africa, the Indian sub-continent, and South and Central Asia.
  • The Council and the World Economic Forum will formalize its relationship with the Global Federation of Competitiveness Councils and sign Memoranda of Understanding to work on issues of mutual interest.
  • The Guidelines for National Competitiveness Councils and reports will be disseminated via the World Economic Forum’s website and the Global Federation of Competitiveness Councils. They are expected to provide a first point of entry to institutions interested in setting up a competitiveness council or publishing a competitiveness report.
  • The World Economic Forum will encourage all existing and new National Competitiveness Councils to become members of the Global Federation of Competitiveness Councils. Global Agenda Council Members will champion the creation of private-sector led national Competitiveness Councils in their home countries where no such organizations exist.
  • The Council will provide concrete input in the Global Competitiveness Principles released annually by the Global Federation of Competitiveness Councils. The Global Agenda Council will also contribute to the Annual Best Practices report issued by the Global Federation of Competitiveness Councils and distribute the two documents at the Summit on the Global Agenda and at the World Economic Forum Annual Meeting in Davos-Klosters in January 2013.
  • The Council will aim at featuring a discussion on enhancing global competitiveness at the Summit on the Global Agenda and at the World Economic Forum Annual Meeting in Davos-Klosters in January 2013.
  • Council Members will be encouraged to attend the Global Federation of Competitiveness Councils’ Annual Meeting in Dubai in November 2012 and the Global Innovation Forum in Riyadh in January 2013 to participate in discussions on innovation and competitiveness in the global marketplace.

Disclaimer

The opinions expressed here are those of the individual members of the Council and not of the World Economic Forum or any institutions to which they are affiliated.