How best to increase competitiveness

It is, of course, encouraging to learn that in the 26th Global Competitiveness Report of for 2005-06 of the Switzerland-based World Economic Forum (WEF), Pakistan jumped up to the 83rd position in global rankings in 2005-06.
However, pointing to a dampening feature of the overall improved situation for the country, the report cited weakness of public institutions was still blocking relative boost in the mood of the business community. The reasons for this should not be too far to seek. Scores to nations are assigned by WEF in the light of several factors, such as government's economic policies, strength of local institutions, and the degree to which technology has been used to bolster growth.
In the final analysis, it will be noted, Pakistan secured the 80th position in the use of technology and 69th in macroeconomic environment, while depicting a rather discouraging performance in strengthening of public institutions, thereby scoring 113th position among 117 economies of the world.
The lapse in respect of public institutions should serve as a timely reminder of what needs actually to be done to enhance the country's competitiveness, for catching up with the countries far ahead of us in the race triggered by the ongoing rapid process of globalisation of the world economies.
Some idea of our deficiency may be had from a look at the better performing countries. For one, reference may be made to Finland, which topped the annual Global Competitiveness Index (GCI), for the third consecutive year, despite concerns about the Nordic nation's high taxation system.
With the United States taking the second place in the WEF report, Finland figures prominently among the five Nordic countries in the top 10. Led by Finland (1), the other Nordic countries in the top 10 were Sweden (3), Denmark (4), Iceland (7) and Norway (9). The tenth place was claimed by Australia, signifying it as the biggest 'climbed' economy, up four places. It was not casually that the Nordic countries continued to hold prominent positions in the top 10 most competitive economies. For, according to WEF report, the Nordic countries depict a number of common characteristics that distinguish them as highly competitive.
These have been identified as very healthy macroeconomic environments, and highly transparent and efficient public institutions, along with general agreement within the society on the spending priorities to be met in the government budget.
Moreover, it has been noted that, like elsewhere in the world, the business communities in the Nordic countries do point to high tax rates as a problem area, yet no evidence has been found of such apprehensions adversely affecting the capability of these countries, to compete effectively in the world markets, or to provide their respective populations with some of the highest standards of living in the world. As such, it will be noted that their strengths far outweigh their inherent weaknesses.
Nearer home in Asia, the same can be said about Taiwan and Singapore, ranked 5th and 6th, respectively, several places ahead of Japan, ranking 12th. The distance between these top-ranked economies and Japan has increased since last year, thereby pointing to Japan's relatively poor macroeconomic performance, particularly with regard to management of its public finances.
In contrast, Taiwan and Singapore, through sustained good policies over the last few decades, have been seen as lifting their citizens from poverty, and joining the ranks of the most prosperous and competitive economies in the world. As for the rest of Asia, India and China performed well, securing 49th and 50th positions respectively. However, China dropped three places, while India moved up five places.
Nevertheless, as pointed out by WEF, both of them suffer from institutional weaknesses, which could slow their "ascension to the top tier" of the world's most competitive economies. China's slightly depressing score has been attributed to its macroeconomic environment, while India's improved position is owed to a higher rank in technology. Other notable placings for Asia include South Korea, up 12 places to 17th.
All in all, this year's Global Competitiveness Report will be seen as providing an opportunity to countries like Pakistan to identify some of the key economic issues hampering their competitiveness, and to focus increasing attention on addressing their shortcomings without any loss of time.