Competitiveness Dilemma



Arthur Bayhan is an expert on economic growth policies and national competitiveness initiatives, including investment and trade, with over 20 years experience in the transitional economies of Europe, South-and Southeast Asia and Latin America. He has worked as chief of party for USAID, head of private sector development at OECD and as an advisor at the EU Commission. He can be reached at arthur.bayhan@telefonica.net


Ethiopia has been ranked at 118 out of the 144 economies around the world in the World Economic Forum’s (WEF) Global Competitiveness Report (GCR) 2014-2015, released on Wednesday, September 3, 2014, in Geneva.

The report findings show that Switzerland tops the overall rankings in the Global Competitiveness Report for the fifth consecutive year. Singapore remains in second position, the United States in third and Finland in fourth. Germany, Japan, Hong Kong, the Netherlands, the United Kingdom and Sweden come next in this order.

The Report assesses the competitiveness landscape of 144 economies, providing insight into the drivers of their productivity, innovation and prosperity.

The report evaluates that among low-income economies, Kenya makes the biggest improvement, rising by six places to 90th position (it was ranked at 96 last year). Nigeria (127th) continues to be ranked low, highlighting the need for it to diversify its economy.

Rwanda is ranked at 62 and the Seychelles at 92; Ethiopia improved this year by nine rankings and ranked at 118 (it was ranked at 127 last year). Burundi ranked at 139, Uganda at 122. Comoros, Djibouti, Somalia, Sudan are not included in the Report or have not participated in the Report’s surveys.

This year’s report consists of three main indexes and 12 pillars. Ethiopia ranked in basic requirements at 117, in efficiency enhancers at 120 and in innovation and sophistication factors at 119. All the 12 pillars included in the report rank Ethiopia as follows: Institutions are ranked at 96, infrastructure at 125, macroeconomic environment at 95, health and primary education at 110, higher education and training at 131, goods market efficiency at 124, labour market efficiency at 78, financial market development at 120, technological readiness at 133, market size at 66, business sophistication at 127 and innovation at 109.

Ethiopia made some improvements in health and primary education, moving from 113 to 110 in the ranking; in financial market development, it moved from 126 to 120, improving by 6 ranks; and in technological readiness, it moved from 139 to 133.

The most problematic areas in doing business in Ethiopia stipulated in the Report include access to financing, inefficient government bureaucracy, inflation, policy instability and tax regulations, inadequately supply of infrastructure, inadequately educated workforce, tax rates and insufficient capacity to innovate.

The Global Competitiveness Report is the most influential ranking of a country’s economic competitiveness and it affects Ethiopia’s image in the world among businesses, governments and financial leaders. The Report series remains the most comprehensive assessment of national competitiveness worldwide.

In the last 10 years, the Ethiopian government has undertaken several efforts to reform its economy, which has resulted in an average economic growth of around 11pc per annum. The government’s current five-year (2011-2015) Growth & Transformation Plan (GTP) shows some progress in moving the country from a low- to a middle- income country by 2023.

Within this framework, the Ethiopian government set priorities, such as the policy and investment framework (PIF), to promote investments in the agriculture sector and has revised several laws over the past few years to encourage agricultural growth and overall economic development.

Yet, reforms are still needed to improve the intensity of local competition, effectiveness of anti-monopoly policy, customs reform, food safety, foreign trade laws and impediments, which constrain domestic and foreign investments.

Furthermore, Ethiopia’s key trading partners, in the region and outside of the region, are World Trade Organisation (WTO) members and are progressively updating laws and regulations based on WTO requirements. These can create more barriers for Ethiopia to enter those markets in the future, if it does not follow suit and revive its accession negotiations with the WTO.

The Ethiopian government’s economic reform agenda and the other donors support – specifically the EU sponsored Transformation & Triggering Facility (TTF), which anchored to and aligned with the government’s GTP and its proposed component “Regional Competitiveness Hub” facility – once activated could play an important role in improving the regional and international competitiveness rankings of the Ethiopian economy in the coming years.

The Regional Competitiveness Hub (RCH) is designed to respond to the priorities of the Government of Ethiopia by increasing Ethiopia’s global competitiveness rankings, improving economic policy coordination, mobilising higher investment, fostering productive private-public dialogue and generating popular understanding and support for Ethiopia’s policy agenda. The RCH will benchmark over 100 competitiveness-related indictors in an annual Ethiopian National Competitiveness Report and will stimulate leaders at the regional and local level to monitor indicators related to the business environment and to undertake competitiveness related initiatives at the regional level.

This can further create networks, build partnerships and obtain support of the multilateral, regional and bilateral institutions dealing with competitiveness.

 



By Arthur Bayhan
Arthur Bayhan is an expert on economic growth policies and national competitiveness initiatives. He can be reached at arthur.bayhan@telefonica.net

Published on September 7, 2014 [ Vol 15 ,No 749]


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