Georgia Improves Global Competitiveness Index by 11 Notches
31 January, 2013
Georgia Improves Global Competitiveness Index by 11 Notches
Georgia climbed 11 notches up in the World Economic Forum’s (WEF) 2012-2013 Global Competitiveness Report (GCR). Some economic analysts believe it is a significant achievement for Georgia, while others appear skeptical toward the rating.
With an overall score of 4.1 out of possible 7, Georgia moved to the 77th position out of 144 economies and was transferred to Stage 2, falling into the group of efficiency-driven countries.
Since 1979, the WEF GCR has benchmarked the business environment and competitiveness landscape
of most of the world’s major economies. Georgia has been included in the GCR since 2004.
Data for the GCR originates from the Executive Opinion Survey of small, medium and large businesses across various sectors in each economy (2/3 of the indicators) as well as from International Organizations (1/3 of indicators). The report contains three main stages of country development: factor-driven, efficiency-driven and innovation-driven. There are also intermediary transition stages.
In the latest report, there are 38 stage-1 or factor-driven economies, which mainly compete with their factor endowments—primarily low-skilled labor and natural resources. At this stage, competitiveness hinges primarily on well-functioning public and private institutions, a well-developed infrastructure, a stable macroeconomic environment, and a healthy workforce that has received at least basic education. Georgia left this stage by the latest report and moved on to the efficiency-driven group of economies incorporating 33 economies now.
Stage 2 means that economies begin to develop more efficient production processes and increase product quality. At this point, competitiveness is increasingly driven by higher education and training, efficient goods markets, well-functioning labor markets, developed financial markets, the ability to harness the benefits of existing technologies, and a large domestic or foreign market.
The GCR is based on the Global Competitiveness Index (GCI) - a weighted average of 111 indicators, which are assigned across 12 pillars, and weighted based on a country’s development status. These pillars comprise: government 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.
In the 2012-2013 report of GCR, Georgia registered improvements in 6 of the 12 pillars. Georgia gained most in the “macroeconomic environment” pillar, where it jumped 49 places to the 88th spot from last year’s the137th.
In the “infrastructure” pillar, the country improved its ranking by 15 places to the 53rd, based on a significant improvement in the number of mobile telephone subscribers and fixed telephone lines. “Health and primary education” moved up 6 places to 61st position and “financial market development”, up 6 places to the 93rd position. Georgia showed good performance on “technological readiness” moving up 24 places to 76th position and for “market size,” up 7 places to the 99th position.
The three categories where Georgia slid back were in “goods market efficiency,” where it fell 10 places to the 82nd, though the country has shown some positive indicators in relation to trade barriers and the burden of customs procedures. In “innovation” the rank declined by 8 places to the 126th, and in “higher education and training” 5 places to the 93rd.
Though Georgia showed a minimal decline in the rank of “labor market efficiency”, “business sophistication”, and “institutions”, the report indicates that country has failed to come up with effective regulations on property rights and intellectual property protection, where the country lost its position of the 105th to the 126th.
According to the report, the greatest challenges facing Georgia in improving its competitiveness are strengthening government institutions, enhancing quality of higher education, and advancing efficiency and equality on the labor market. Property rights [physical as well as intellectual], limited access to financial service and monopolized market still remains the problem to Georgia making vital obstacles to business development. For now government plans to establish new competition agency (EU recommendation) and situation is supposed to improve in this direction. Gross national savings are minimal in the country. Local suppliers are very few and quality is very low either.
As for Georgia’s neighboring countries, Turkey with a rank of 43rd and Azerbaijan of 46th made important strides this year in improving competitiveness, as did Armenia with the rank of 82nd, while the Russian Federation fell one point to take 67th position. Turkey was identified as having the most competitive economy in Southeast Europe.
Demur Giorkhelidze, an economic analyst, is skeptical toward any kind of ranking like GCI that rather misleads investors than gives trustful clues.
“How could Georgia with its stagnated economy get promoted in the ranking by 11 notches?” Giorkhelidze wonders. “This is a humbug.”
Irakli Lekvinadze, an economic analyst, argues that the GCI is one of the most trustful indices and depicts the real economic picture of rated countries and investors do have much belief in it.
“This improved rating in GCI is a real achievement as this index makes a comprehensive picture of the country. Of course investors do their own research to make final decision but this here rating gives a very trustful information on the overall political, economic, legislative, and technological development of the country,” he said.
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