Wednesday, September 5, 2012

Competitiveness of Nepali economy unchanged

The latest Global Competitiveness Report 2012-2013 shows that Nepal’s ranking in competitiveness has remained unchanged at 125 out of 144 countries. Last year, Nepal’s ranking was also 125 out of 142 countries. Nepal’s ranking is the lowest in South Asia, where the most competitive economy is India (last year it was Sri Lanka).

  GCI 2012-2013 GCI 2011-2012 GCI 2010-2011
Country Rank (out of 144 countries) Score Rank (out of 142 countries) Rank (out of 139 countries)
India 59 4.32 56 51
Sri Lanka 68 4.19 52 62
Bangladesh 118 3.65 108 107
Pakistan 124 3.52 118 123
Nepal 125 3.49 125 130

Competitiveness is defined as “the set of institutions, policies, and factors that determine the level of productivity of a country”.The ranking is based on global competitiveness index, which comprises of 12 categories – the pillars of competitiveness – which together gives a picture of a country’s competitiveness landscape. The pillars are: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication and innovation.

Switzerland tops the overall ranking for four consecutive year. It is followed by Singapore, Finland, Sweden and Netherland in the top five competitive nations. The least competitive nations are Burundi, Sierra Leone, Haiti, Guinea and Yemen. The report notes that troubled economies in the Euro zone areas—Portugal (49th), Spain (36th), Italy (42nd) and Greece (96th)— “continue to suffer from competitiveness weaknesses in terms of macroeconomic imbalances, poor access to financing, rigid labour markets and an innovation deficit”.

In the emerging markets (BRICS), China is ranked at 29th position, Brazil 48th, South Africa 52nd, India 59th, and Russia 67th.


Nepal’s case:

Given the political stalemate and lack of introduction of new reform to boost competitiveness along with implementation of existing ones, it is no surprise that there is no improvement in ranking. In 2011-2012, ranking jumped by five positions to 125 compared to 2010-2011 rankings. In 2009-10, Nepal’s ranking was 125 out of 133 countries and in 2010-11, the ranking was 130 out of 139 countries.

Nepal is still a factor-driven economy but its macroeconomic environment is better than that of other factor-driven economies. Its labor market efficiency is below the standard of other factor-driven economies. Nepal still has a long way to go to become an efficiency-driven and then innovation-driven economy.

In basic requirements (institutions, infrastructure, macroeconomic environment, and health and primary education), Nepal’s ranking is 121 (same as last year) out of 144 economies. In efficiency enhancers (higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, and market size), Nepal’s ranking is 126 (an improvement by one position). In innovation and sophistication factors (business sophistication and innovation), Nepal’s ranking is 133 (down by one position). In overall competitiveness index, basic requirements, efficiency enhancers, and innovation and sophistication factors have 60 percent, 35 percent and 5 percent weight respectively.

The best ranking is in macroeconomic environment at 56 out of 144 counties (last year it was 50, which means a bit deterioration this year). Ranking in gross national savings (% of GDP) is 18 and government budget balance (% of GDP) 48. Ranking in women in labor force (ratio to men) is 13.The worst ranking is in infrastructure at 143 out of 144 countries (in quality supply of electricity as well it is 143).

The rankings in the 12 pillars of competitiveness are (last year’s in bracket) : institutions 123 (124), infrastructure 143 (141), macroeconomic environment 56 (50), health and primary education 109 (115); higher education and training 128 (129), goods market efficiency 121 (125), labor market efficiency 125 (128), financial market development 91 (100), technological readiness 129 (130), market size 95 (98); business sophistication 127 (125) and innovation 133 (134).

The report also includes results from perception survey (of business community) on the most problematic factors for doing business. The chart below shows the results. Government instability, corruption, inefficient government bureaucracy, policy instability and restrictive labor regulations are perceived as the top five problematic factors for doing business in Nepal.