Assessing the Foundations of Mexico's Competitiveness: Findings from the Global Competitiveness Index 2007-2008.
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Assessing the Foundations of Mexico's Competitiveness:
Findings from the Global Competitiveness Index 2007-2008
Irene Mia, World Economic ForumEmilio Lozoya Austin, World Economic Forum
This paper is published by the World Economic Forum within the framework of the GlobalCompetitiveness Network.
Professor Klaus SchwabExecutive Chairman
The Global Competitiveness Network:
Fiona Paua, Senior Director, Head of Strategic Insight Teams
Jennifer Blanke, Director, Senior EconomistCiara Browne, Senior Community ManagerAgustina Ciocia, CoordinatorMargareta Drzeniek Hanouz, Associate Director, Senior EconomistThierry Geiger, EconomistIrene Mia, Associate Director, Senior EconomistPearl Samandari, Research AssistantEva Trujillo Herrera, Research Assistant
The Regional Agenda Team, Latin America:
Julio Estrada, Associate Director, Global Leadership Fellow, Latin AmericaAntonio Human, Community Relations Manager, Latin AmericaEmilio Lozoya Austin, Head of Latin America, Global Leadership FellowPaula Verholen, Senior Community Relations Manager, Latin America
Contents
Part I: Assessing the Foundations of Mexico’s Competitiveness: Findings from the Global
Competitiveness Index 2007-2008 3
by Irene Mia and Emilio Lozoya Austin (World Economic Forum)
Assessing the Foundationsof Mexico’s Competitiveness:Findings from the GlobalCompetitiveness Index IRENE MIA, World Economic Forum
EMILIO LOZOYA AUSTIN, World Economic Forum
Mexico has come a long way since the “lost decade”of the 1980s and the ensuing instability associated withrecurring financial crises.The country has emerged asthe second largest economy in Latin America,1 afterBrazil, and as the region’s top destination for foreigndirect investment (FDI) in 2006.2
Since the 1995 “Tequila” crisis that rocked thecountry’s financial and exchange markets, Mexico hasmade significant progress toward establishing a solidmacroeconomic foundation for sustained growth. Itadopted an effective stabilization program that includedthe restructuring of its external debt, a prudent monetarypolicy, and a flexible exchange rate.These were coupledwith the privatization of important companies. Oneresult has been single-digit inflation (3.6% in 2006).Public debt and the current account deficit both standat manageable levels -20% and 0.2% of gross domesticproduct (GDP).The government even enjoys a modestbudget surplus (0.11% of GDP in 2006).
Also, Mexico has started to leverage its uniquegeographic position between two oceans and betweenNorth and South America.With an already large internalmarket of over 100 million people,3 it has entered intoan extensive network of trade agreements that providepreferential access to markets that include North America,Japan and Europe.The North American Free TradeAgreement (NAFTA), which established a free tradearea between Mexico, the United States and Canada,helped triple intra-regional trade during the first decadeafter it took effect in 1994.4 NAFTA has significantlycontributed to the diversification of Mexico’s productiveand export structure, especially thanks to the maquiladorasystem of assembly factories and increased FDI.TheUnited States accounted for 84.7% and 50% of Mexicanexports and imports, respectively, and Mexico’s exportsconsisted mainly of manufactured products (81% oftotal) in 2006 according to the Economist IntelligenceUnit (EIU).
Notwithstanding these achievements and positivedevelopments, Mexico does not display the same dynamismin terms of growth rates as other leading emergingmarkets such as India and China.Annual GDP growthrates in Mexico averaged 2.8% from 2002 to 2006,unimpressive compared to 10.1% and 7.8% for Chinaand India, respectively, for the same period.5 Mexico’seconomy continues to appear particularly vulnerable toexternal downturns, given its close association with theUS business cycle and the heavy dependence on oilrevenues to fund the public sector.The slowdown of theUS economy sparked by the recent sub-prime mortgagecrisis will likely stunt Mexico’s growth, now forecast at1.9% for 2008 and 3% for 2009.
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The authors would like to thank Eva Trujillo Herrera for her excellent research assistancefor this paper.
The Mexico Competitiveness Report 2008 will try tocast some light on the impediments to Mexico’s growthand sustained competitiveness. It aims to provide a neutralplatform for dialogue among policymakers, businesspeople and other relevant stakeholders and help themidentify effective policies and strategies that will improvethe country’s competitiveness and lead to lasting prosperityfor all Mexicans. In that spirit, this paper will assess thecurrent state of Mexico’s competitiveness and its potentialfor sustained growth using the broad methodologicalframework offered by the Global Competitiveness Index(GCI), developed for the World Economic Forum byProfessor Xavier Sala-i-Martin of Columbia University.Besides identifying the drivers of competitiveness, theGCI offers a unique tool that can help prioritize policiesand actions according to a country’s specific stage ofdevelopment.Through the lens of the GCI, this paper willtake a comprehensive snapshot of Mexico’s competitivelandscape and suggest areas that should be given priorityin the design of a national competitiveness strategy.
The paper will start by briefly outlining the method-ological framework of the GCI. It will then assess Mexico’sperformance in the different pillars of competitiveness,with a special focus on those factors considered crucialfor the country given its stage of development.
Introducing the Global Competitiveness IndexThe World Economic Forum has been studying nationalcompetitiveness for almost three decades. During thatperiod it worked with leading academics, always takinginto account relevant new ideas, literature and evidence.Developed in cooperation with Professor Xavier Sala-i-Martin, an eminent growth economist from ColumbiaUniversity, the GCI was introduced in 2004.The indexprovides a state-of-the-art methodological framework toassess “the set of institutions, policies, and factors that determinethe level of productivity of a country” and identifies a largenumber of macro and microeconomic drivers of growth.6
The GCI builds on the awareness that competitivenessis an extremely complex phenomenon that cannot beexplained by one or two causes; rather, competitiveness andsustained growth are determined by the interrelationshipsamong several and diverse factors. Figure 1 shows the12 pillars of competitiveness identified by the GCI andlisted below:• Institutions: fairness of public institutions, government
efficiency, security and its costs to businesses, andcorporate governance;
• Infrastructure: quality and development of generaland specific infrastructure;
• Macroeconomic stability: quality of the macro-economic environment;
• Health and primary education: health of the popu-lation and the quality of and access to basic education;
• Higher education and training: quality of and accessto secondary and higher education and the effectivenessof job training;
• Goods market efficiency: the extent of domesticand foreign competition in a given market and thequality of demand conditions;
• Labor market efficiency: flexibility of the labormarket and whether it ensures the efficient use of talent;
• Financial market sophistication: sophistication,efficiency, soundness and trustworthiness of financialmarkets;
• Technological readiness: penetration of informationand communication technologies (ICT) and the extentto which countries leverage technology and knowledgefrom abroad (notably through FDI), by adopting andadapting it in their production systems;
• Market size: the size of the domestic and foreign markets;• Business sophistication: at the firm level, the
degree of sophistication of operations and companystrategies and the presence and development of clusters;
• Innovation: potential to generate endogenous innovation.
The 12 pillars (analyzed in more detail in the followingsection) play a crucial role for all countries as drivers ofcompetitiveness, but their importance differs according toeach country’s stage of development. Different pillars affectdifferent countries in different ways.The elements drivingproductivity, and therefore competitiveness, change as countriesmove along the development path.Accordingly, the GCIclassifies countries into three specific stages of development:factor-driven, efficiency-driven and innovation-driven.7
In the factor-driven stage, countries compete on thebasis of their factor endowments, primarily unskilledlabor and natural resources, and their economies arecentered on commodities and/or basic manufacturedproducts.At this stage of development, competitivenessrests mainly on efficient and transparent public and privateinstitutions (pillar 1), well-developed infrastructure (pillar 2),good macroeconomic fundamentals (pillar 3), and ahealthy and literate labor force (pillar 4).
As countries move up the development path to theefficiency-driven stage, productivity can be improved notonly by fostering the efficiency of the factor markets butalso by improving the efficiency of production processesand practices at the firm level. Key factors include: highereducation and training (pillar 5), efficient markets for goodsand services (pillar 6), flexible and well-functioning labormarkets (pillar 7), sophisticated financial markets (pillar 8),a large domestic and/or foreign market that allows foreconomies of scale (pillar 9) and the ability to leverageexisting technologies, notably ICT, in the productionsystem (pillar 10).
In the third and most advanced -innovation-driven-stage of development, countries cannot continue to growif they simply rely on efficient markets and productionprocesses; they must start to compete by producing new,unique value-added goods.At this point, the capacity togenerate endogenous technology (pillar 11) and to usesophisticated production processes (pillar 12) becomescritical.
Innovation and sophistication factors• Business sophistication• Innovation
Key forfactor-driven
economies
Key forefficiency-driven
economies
Key forinnovation-driven
economies
Table 1 lists the 131 economies covered by the latestGCI included in the Global Competitiveness Index 2007-2008 by stage of development.8 The countries fallingin between two of the three stages are defined as “intransition”. Mexico is currently placed in the efficiency-driven stage, together with regional neighbors Argentina,Brazil, Costa Rica and Peru and other relevant countriessuch as Russia,Thailand and Turkey.
The GCI integrates the concept of developmentstages in two ways:a) by organizing the 12 pillars into three subindexes,
according to their importance for each of the stagesof development referenced above: pillars one to fourare considered basic requirements of competitiveness,key for countries in the factor-driven stage but alsofundamental preconditions for any competitive economy;pillars five to 10 represent efficiency enhancers, crucialfor economies in an efficiency-driven stage; pillars 11and 12 are defined as innovation and sophisticationfactors and are considered particularly relevant forcountries in the innovation-driven stage (see Figure 1).
b) by assigning a different relative weight to each subindexin the overall GCI computation according to thespecific development stage of a country.Table 2 providesfull details of the weighting of the subindexes basedon stages of development.9 In the case of Mexico, forinstance, the overall GCI score is the result of aweighted average of the three subindexes, as follows:40% for basic requirements, 50% for efficiencyenhancers, and 10% for innovation and sophisticationfactors.
The GCI builds on a combination of hard and surveydata in order to capture, in the most comprehensive waypossible, all determinants of competitiveness. Hard data
means quantitative factors, such as inflation rates, personalcomputer penetration and life expectancy that arecollected by international organizations, including theInternational Monetary Fund (IMF), the World Bank andvarious United Nations agencies. Survey data capturefundamentals that tend to be qualitative in nature andfor which hard data are often not available for a largenumber of countries.They include crucial factors suchas the protection of property rights, independence ofthe judiciary and the quality of the educational system.These data come from the Executive Opinion Survey,conducted by the Forum annually in more than 130economies that accounted for 98% of global GDP in2007.10 For a detailed description of the more than 110variables included in the GCI, see Annex 1: Structure ofthe Global Competitiveness Index 2007-2008 at the end ofthis paper.
An appraisal of Mexico’s competitivenesslandscape through the lens of the GlobalCompetitiveness Index This section draws on the findings of the most recentGCI, featured in the Global Competitiveness Report 2007-2008.To provide benchmarks relevant to Mexico’sprogress and challenges, comparisons will be made withselected neighboring and/or relevant countries andregions;11 the GCI figures for Mexico for the last threeyears will also be included.This analysis will provide auseful starting point from which to identify areas offocus and corrective policies and actions.
Figure 2 provides a snapshot of Mexico’s competi-tiveness by pillar in the GCI for 2007-2008. Figure 3highlights the evolution of the country’s performancefor 2005-07 in comparison only to economies includedin the 2005-06 sample.12
Table 1Table 1 List of economies by stage of development
Stage 1 Transition from 1 to 2 Stage 2 Transition from 2 to 3 Stage 3Armenia Albania Algeria Bahrain AustraliaBangladesh Azerbaijan Argentina Barbados AustriaBenin Bosnia and Herzegovina Brazil Croatia BelgiumBolivia Botswana Bulgaria Czech Republic CanadaBurkina Faso China Chile Estonia CyprusBurundi Colombia Costa Rica Hungary DenmarkCambodia Ecuador Dominican Republic Malta FinlandCameroon El Salvador Jamaica Qatar FranceChad Guatemala Latvia Slovak Republic GermanyEgypt Jordan Lithuania Taiwan, China GreeceEthiopia Kazakhstan Macedonia, FYR Trinidad and Tobago Hong Kong SARGambia, The Kuwait Malaysia IcelandGeorgia Libya Mauritius IrelandGuyana Oman Mexico IsraelHonduras Saudi Arabia Montenegro ItalyIndia Tunisia Namibia JapanIndonesia Ukraine Panama Korea, Rep.Kenya Venezuela Peru LuxembourgKyrgyz Republic Poland NetherlandsLesotho Romania New ZealandMadagascar Russian Federation NorwayMali Serbia PortugalMauritania South Africa Puerto RicoMoldova Suriname SingaporeMongolia Thailand SloveniaMorocco Turkey SpainMozambique Uruguay SwedenNepal SwitzerlandNicaragua United Arab EmiratesNigeria United KingdomPakistan United StatesParaguay Philippines Senegal Sri Lanka Syria Tajikistan Tanzania Timor-Leste Uganda Uzbekistan Vietnam Zambia Zimbabwe
Table 2Table 2 Weights of the three subindexes per stage of development
Tables 3 to 6 show rankings and scores for Mexicoand selected countries/regions in the overall GCI 2007-2008 as well as for each subindex and pillar.
Mexico ranked 52nd among 131 countries in themost recent GCI computation (48th in the constant2005-06 sample, as shown in Figure 3). It placed amongthe most competitive economies in Latin America13 andbetter than four of the 10 countries in the comparativesample, namely Brazil (72nd), Russia (58th), Indonesia(54th) and Turkey (53rd). In addition, Figure 3 showshow Mexico’s competitiveness has been following anencouraging upward trend over the last three years, withan improvement of five positions.
Nevertheless, Mexico’s performance in each of the12 pillars (Figure 2) reveals a series of important flaws.These problems must be tackled if the country is to fulfillits competitive potential. Rankings in labor marketefficiency (92nd), institutions (85th) and higher educationand training (72nd) would seem particularly alarming
given Mexico’s stage of development. Indeed, as explainedabove, countries in the efficiency-driven stage derivetheir competitiveness from efficiency enhancers and, toa slightly lesser extent, basic requirements.Accordingly,Mexico’s relatively poor 71st place in innovation is notas worrisome as its 72nd place in higher education andtraining; the country can continue to grow withoutgenerating much endogenous knowledge but it must beable to count on a pool of qualified and skilled labor torespond to its current challenges.
The rest of this section will focus on Mexico’sperformance in the three subindexes of the GCI andwill assess its main shortcomings in each area.
Basic requirements As described above, transparent institutions, a soundmacroeconomic environment, well-developed infrastructureand a healthy and literate workforce are basic requirementsfor national competitiveness.They play a crucial role for
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Figure 2Figure 2
Source: World Economic Forum 2007
Mexico competitiveness performance at glance
Labour market efficiency
Institutions
Higher education and training
Innovation
Financial market sophistication
Infrastructure
Goods market efficiency
Technological readiness
Health and primary education
Business sophistication
Macroeconomic stability
Market size
GCI 2007-2008 ranks (out of 131 economies)
0 10 20 30 40 50 60 70 80 90 100
92
85
72
71
67
61
61
60
55
54
35
13
Figure 3Figure 3 Mexico’s evolution in the GCI ranking, 2005-07
2005-06
53
2006-07
51
2007-08note: ranks are in a constant 2005-06 sample
factor-driven economies but are also very important forefficiency-driven economies, accounting for 40% oftheir overall GCI score.
Placing 56th, Mexico clusters with countries likeHungary (55th), South Africa (61st) Turkey (63rd) forbasic requirements. It largely outdoes Brazil (101st),Indonesia (82nd), India (74th) and Russia (68th) and theLatin American average (4.53 for Mexico vs. 4.18 forthe region), yet the gap between the country, the bestperformers in the sample (Korea and Chile, ranked 14thand 33rd respectively) and the average for the Organizationfor Economic Cooperation and Development (OECD)(5.38) highlights the magnitude of the challenge Mexicofaces in its attempt to achieve first class institutions,infrastructure, literacy and public health standards and -to a lesser extent - stable macroeconomic fundamentals.
InstitutionsThe institutional environment provides the frameworkwithin which individuals, firms, and the government
interact to generate income and wealth in an economy.Its efficiency and transparency bear strongly on produc-tivity and growth.“Competitiveness-friendly” institutionsare ones that guarantee property rights and contractenforcement and operate in a fair and efficient manner;they also stimulate entrepreneurship, maintain macro-economic stability, manage risk-taking by financial inter-mediaries, provide social insurance and safety nets, andenhance participation and accountability.The institutionalframework is also a key determinant of how a societydistributes the benefits and costs of development strategiesand policies. It also influences investment decisions andthe way production is organized.
In addition, fair and competent private institutionshave been long recognized by competitiveness experts andpractitioners as a relevant complement to public institutionsin generating an environment that is conducive to growth.This includes, for example, the role of corporate ethicsand transparent accounting and reporting practices inmaintaining investor and consumer confidence.
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Table 3Table 3 GCI 2007-2008 and its sub-indexes: Mexico and selected countries/regions
The institutions pillar assesses both the quality of thepublic and private institutions, devoting separate subpillarsto each, accounting for three-fourths and one-fourth ofthe final pillar score respectively.The public institutionssubpillar looks at a country’s general legal framework(including the extent to which property rights areprotected and enforced), public ethics standards, theefficiency of public administration, and the overall level ofsecurity (intuitively important to creating an environmentwhere businesses can flourish). In turn, the private institutionssubpillar includes elements of corporate ethics andaccountability.
Mexico ranked 85th for institutions, making this pillarthe country’s second worst after labor market efficiency.The country fares poorly on this item when comparedto the rest of the sample, outranking only laggardsRussia (116th), Brazil (104th) and China (77th).Thedistance between Mexico and Korea (26th), Chile (29th)and South Africa (39th), as well as with the OECDaverage (5.05, as opposed to 3.62 for Mexico), is striking.
Mexico’s institutions have plenty of room for improvement –with one caveat: the pillar’s overall rank conceals importantdifferences in the quality of the public and private insti-tutions; the former came in 89th place but the latter aless worrisome 57th.
Institutional reforms have played a subordinate role toeconomic ones in Mexico’s national debate and strategyuntil very recently. Some have questioned this since therule of law and well-functioning and trustworthy institutionsare widely considered prerequisites for a vibrant marketeconomy. Similarly, many experts believe that economicreforms should have been carried out in tandem with large-scale institutional transformations in the medium term.14
Institutional weaknesses have undermined Mexico’s capacityto reap the full advantages of economic liberalization inthe past decade. Influential interest groups (monopolies,quasi-monopolies and certain labor unions) have been ableto hijack the political process and capture most of the newwealth.This has fuelled discontent about the results of theeconomic reforms among broad segments of the society.
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Table 5Table 5 Efficiency enhancers: Mexico and selected countries/regions
The areas of concern in this pillar include: propertyrights protection (77th),15 and weak ethical standards inthe public sector (87th).The latter is also reflected in avery low trust of politicians (91st) and in the perceivedfavoritism in decisions made by government officials(90th). Red tape and inefficiencies remain importanthindrances. Security is considered a problem, with thecountry ranked 118th - Mexico’s worst showing on anyumbrella item. Contributing factors included rampantorganized crime (120th), violence (119th), and a lowlevel of trust in the police (119th).These factors arebelieved to impose significant costs to businesses. Indeedviolence has been on the rise, both in traditional drug-trafficking centers and other areas. In response, one ofPresident Felipe Calderón’s first actions after beingsworn in on December 1, 2006 was to deploy 24,000soldiers to hot spots.An underlying problem is thecountry’s extremely weak criminal justice system.Studies have shown that the probability of being arrestedand brought before a judge after committing a crime is3.3%.16 Of all crimes reported, only 18.5% are fullyinvestigated and resolved.17 About 66% of convictsreceive jail sentences of less than three years, meaning thatabout two-thirds of resources are spent in investigating,prosecuting and punishing relative less serious offences;felonies such as drug trafficking and homicides receiveless attention and continue to rise.18
A reform of the criminal justice system designed toimprove accountability and transparency, restore trust andconfidence among citizens, and ensure higher convictionrates should rank high on the national agenda.A billapproved by congress in February 2008 represents animportant step; however, it is unclear whether the changescan be implemented.Additional desirable modificationswould include: procedural and legal changes to reducethe time needed to resolve lawsuits; the creation of acivil service career structure in the police force andinvestigative agencies to make law enforcement moreappealing as a profession and improve its reputation andthus help attract and retain talented and qualified people;improvements in the crime reporting process; greateremphasis on human rights; and an overhaul of the peni-tentiary system.
InfrastructureWell-functioning and extensive infrastructure plays afundamental role in increasing an economy’s potentialfor growth. Both the amount and quality of infrastructuremake important contributions to the private sector’srates of productivity and investment.19 Particularly criticalare adequate roads, railroads, ports, and air transport; anuninterrupted electricity supply; and adequate telecom-munications.Widespread, good quality infrastructure canalso help reduce inequality and poverty by connectingpoor communities to markets, allowing children inremote areas to attend schools or get access to virtualeducation, and improving health standards by providing
drinking water and sanitation services. Hulten foundthat approximately 40% of the growth differentialbetween low and high growth countries can be tracedto differences in the effective use of infrastructure.20
In the 1990s, Mexico made important progress inupgrading and extending its infrastructure, especially interms of improved access to water and sanitation, elec-tricity and communications; however, relative to compa-rable countries it lost ground except in water and accessto basic sanitation.21 Mexico follows a trend observedfor the rest of Latin America: it is estimated that theregion would need to invest up to 6% of GDP in infra-structure catch up with Korea and keep up with China.22
This mixed performance is reflected in the 61stranking (score of 3.55) registered by Mexico in theinfrastructure pillar. It places ahead of the Latin Americanaverage (3.18) and countries such as Indonesia (91st),Brazil (78th) and India (67th) but well behind the topperformers in the sample, Korea (16th) and Chile (31st),and the OECD average (5.15). In particular, the qualityof the port infrastructure (91st) and electricity supply(82nd) stand out as areas of concern.
In response to the above, the governmentannounced a National Infrastructure Program in June2007 to increase public and private investment in infra-structure through 2012.The program’s goals include themodernization or construction of around 20,000 kilo-meters of highways and rural roads, the modernizationand upgrading of existing road infrastructure, the expansionof the railway and airport systems, and investment in ICTinfrastructure.23 Financing that involves private-publicpartnerships (PPPs) will receive priority given limitedpublic resources.The program should benefit from fortuitoustrends in the capital markets, which have demonstrateda greater willingness to provide long-term financing inlocal currency.The World Economic Forum InfrastructurePrivate Investment Attractiveness Index (IPAI),24 developedin 2007 for 12 selected Latin American countries, canprovide insight on the degree of Mexico’s attractivenessfor private investment in infrastructure.
The overall IPAI rankings (Mexico came in 5th of 12)and a snapshot of Mexico’s environment for PPPs ininfrastructure can be found in Figures 4 and 5, respec-tively.Among Mexico’s strengths: a favorable macroeco-nomic environment including fairly well developed bondmarkets; low political risk; and easy access to information.On the downside, the country has a poor track recordof private investment in infrastructure over the pastdecade (0.8% of GDP compared to the regional average1.8%), and the government’s low level of readiness tofacilitate private investment in infrastructure, particularlyin terms of the PPP legislation and degree of centralizationof infrastructure strategy.
Some large-scale projects have been auctioned offand commissioned by the Federal Electricity Commissionand Toll Road Rescue Trust (FARAC).The toll roadauctions in particular seem to indicate a strong willingness
in the private sector to assume investment risks in a stablemacroeconomic environment.The government must tryharder to improve the environment for PPPs, notably byensuring that they are carried out by using resilientstructures in financial and economic terms. It is hopedthat this would encourage more private involvement ininfrastructure projects for the benefit of all social stake-holders.
Macroeconomic stabilityStrong macroeconomic fundamentals are a necessarycondition for well-functioning and prosperous economies.They provide a sound environment in which businesses
can operate and generate wealth.The GCI includes amacroeconomic stability pillar among its basic requirementsof competitiveness.This takes into consideration a handfulof hard indicators such as government budget balanceand debt, inflation, interest spreads and national savingrates.
Ranking 35th of 131 countries, up some 20 positionsfrom last year, Mexico is clearly delivering a convincingperformance on this score in recent years.This is especiallysignificant given the country’s recent history of cyclicalfinancial crises that coincided with the end of each six-year presidential term. Relative to the sample group ofcountries/regions, Mexico ranks 4th of 11 on this item,
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Figure 4Figure 4 IPAI ranking, 2007
Rank Country Score 1 Chile 5.43 2 Brazil 4.40 3 Colombia 4.33 4 Peru 4.23 5 Mexico 4.04 6 Uruguay 4.02 7 El Salvador 3.97 8 Guatemala 3.64 9 Argentina 3.41 10 Venezuela 3.37 11 Bolivia 3.34 12 Dominican Republic 3.33
just behind extremely successful countries such as China(7th), Korea (8th) and Chile (12th).With a score of 5.36,it also outperforms the Latin American average (4.63) and,notably, the OECD average (5.19), and ranks well aheadof sample countries with dismal macroeconomic recordssuch as Brazil (126th), India (108th) and Hungary (107th).
Several factors have helped Mexico achieve an“investment grade” macroeconomic environment:25
single digit inflation, controlled by a constitutionallyindependent Central Bank; prudent fiscal policy, coupledwith a flexible exchange rate regime, adopted followingthe “Tequila” crisis; the reduction of the governmentdebt to a manageable level (20% of GDP); and effortsto change the debt profile from external to internal andfrom short-term to longer-term maturities.
Notwithstanding these positive developments, severalshortcomings need to be addressed before Mexico can
walk a stable macroeconomic path into the future.Particularly worrisome is the persistent and heavydependence of public finances on oil revenues.Althoughimportant advances have been made to improve thebudget process,26 increasing transparency and introducingfiscal rules to address the volatility of revenues from thestate energy company PEMEX, the government has onlymanaged to marginally increase non-oil tax revenues.Petroleum revenues still accounted for approximately36% of the total in 2007. One problem is the low level ofcitizen trust and confidence in public spending (evidencedby Mexico’s 61st position on perceived wastefulness); thisengenders widespread tax evasion.
The low level of fiscal legitimacy in Mexico,including in comparison to the Latin American averageand most countries in the region, is demonstrated inFigure 6. On a more positive note, the levels of trust
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Figure 6Figure 6
Source: OECD Development Center 2007 (based on Latinobarometro)
Citizen Trust in Public Spending in Latin America, 2003 and 2005
2003
Peru Brazil Mexico Colombia Argentina Chile Venezuela Latin American average
2005
0
10
20
30
% w
ho tr
ust t
axes
40
9 9
18
12 11
15
20 21 21
27
1815
37 38
17
10
Figure 7Figure 7
Source: OECD Development Center 2007
* Data is for 2004, except for Bolivia (2003) and Uruguay (2002)** Direct taxes include: i) taxes on income, profits, and capital gains, ii) taxes on payroll and workforce, and iii) taxes on property*** Other taxes include: i) taxes on goods and services, and ii) other taxes
Tax revenues as a percentage of GDP: Mexico vs. selected countries/regions, 2004*
Direct Taxes**
Latin America OECD Mexico Chile Brazil Ireland Spain France
toward public spending seem to have risen from 2003to 2005.
Tax revenues as a percentage of GDP stand at 12%,far behind the OECD average (36%) and even lowerthan Latin American (17%), as demonstrated by Figure 7.
A fiscal reform bill approved by the MexicanCongress in 2007 is expected to increase tax revenuesby 2% of GDP over the current six year administration.Measures include allowing states to levy an additionalsales tax on goods and services and an “informality tax”of 2% on cash deposits exceeding 20,000 pesos.This isan encouraging step, but it will need to be complementedby efforts to improve tax collection, enlarge the extremelynarrow tax base by pulling people out of informality,and rationalize the tax system.A slew of exemptions -notably for agriculture, forestry, fishing and pharmaceu-ticals - add to the complexity of the tax system and thepotential for evasion. Moreover, some studies have shownthat these exemptions are not progressive but regressiveand do not reach their intended target, poor Mexicans.A recent study concluded that less then 10% of thesubsidies related to exemptions in the value added taxreach the poorest 20% of Mexicans.27
Any important fiscal adjustment in the medium-termwill have to be linked to an energy reform package giventhe size of PEMEX’s contribution to public finances.Mexico dearly needs energy reform not only to improvethe efficiency of its markets in goods and services but alsoto make public finances less dependent on oil revenues.This will be discussed further in the analysis of the marketefficiency pillar below.
The role of fiscal policy in reducing income inequalitymust also be taken into consideration. One interestingstudy analyzes the measure of inequality most commonlyused by economists, the Gini coefficient, after taxes andtransfers (see Figure 8).28 Goñi et al. conclude that, whileEurope succeeds in reducing its inequality on average by
15% through tax expenditures and transfers, the corre-sponding percentage for Mexico is a disappointing 2%.The authors argue this can be largely explained by twofactors: transfers in Latin America average 7.3% of GDPcompared to 14.7% in Europe; and Europe’s better targetedand more progressive tax and transfer systems.
Health and primary educationA healthy and literate workforce is key to a country’spotential to improve its productivity and competitiveness.Workers in poor health cannot function to their fullpotential and create significant costs for businesses.Likewise, basic education fosters human resource efficiencyby enabling employees to correctly perform tasks andadapt to the changing needs of the production system.Examples of the positive cause-and-effect relationshipbetween measures of health and education and per capitaincome growth abound in the economic literature.Recent studies demonstrate the importance not only offull enrollment but also of the quality of education.
With a score of 5.59, Mexico ranked 55th in thispillar, just after Korea (27th) and Hungary (41st) in thesample. It is worth noting that Mexico outperforms theregional star economy Chile, which came in 70th inhealth and primary education. Nevertheless, Mexico lagswell behind the OECD average (6.14), which suggeststhat there is still much left to do.
Mexico ranks 62nd in health quality. Althoughgood by Latin American standards, health indicatorsremain far below those of most OECD countries.Thegovernment faces important challenges in providinguniversal access to basic healthcare services, notablybecause of the large informal sector.The level of publicspending as a share of total healthcare spending has beenincreasing, but remains 45% of the total, well below the73% OECD average. Only about half of the populationis covered by health insurance, and there are large
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Figure 8Figure 8
Source: OECD Development Center 2007 (based Goñi et al. 2006)
Inequality and taxes
Inequality before taxes and transfers
Latin America Europe Mexico ChileBrazil Ireland Spain France
regional disparities between the richer north and thepoorer south in terms of insurance coverage, publichealthcare expenditure and standards of quality.At around6.5% of GDP in 2005, total spending in healthcare wasquite low in comparison to the OECD average (8.9%).29
Given the country’s demographics, health costs arebound to grow.Thus improved access to preventive carefor uninsured citizens represents a priority.30 Accordingto the OECD, the Mexican government appears ontrack to meet this goal by 2010.At the same time,schemes known as Oportunidades (Opportunities) andProgresa (Progress) have been providing cash since the1990s to some five million poor families so that theycan go to health clinics, receive health education andkeep their children in school.31
Given the desire of the government to achieve universalhealthcare coverage, new PPP mechanisms should beexplored to share these tasks with the private sector.Successful in other countries,“build, operate and transfer”(BOT) mechanisms should be favored over privatization.32
BOT schemes allow the private sector to play a greaterrole in providing services while ensuring qualitythrough pre-established agreements on standards.
Mexico ranks 56th in the primary education subpillar.The country has achieved almost universal enrollment inprimary education (98% according to the latest datafrom the United Nations Educational, Scientific andCultural Organization, UNESCO), and the it investsheavily in education (5.25% of GDP, corresponding to a33rd position out of 131 economies).Yet the quality of
the primary education system is a major issue (95th).Investment in education has increased significantly overthe past 15 years. Data from the Ministry of Financeshow that public expenditures on education rose from3.7% of GDP in 1990 to an estimated 5.9% of GDP in2005.This compares to an OECD average of 5.6%.Private spending on education has also increased in thepast decade, from about 0.2-0.3% of GDP in the firsthalf of the 1990s to 1.5% in 2004.33
The relatively high outlays for education suggest thatthe problem is not how much but rather how resourcesare invested. Mexican 15 year-olds score poorly in theOECD’s standardized tests (the Program for InternationalStudent Assessment, PISA) compared to their counterpartsin Thailand and the Slovak Republic, countries withsimilar levels of spending (see Figure 9).34 As much as90% of expenditures in 2005 were earmarked for wages(80% for teachers and 10% for support staff) even though60% of primary school teachers did not have a universitydegree and 70% of secondary school instructors had noteacher training, according to the OECD.35
The powerful teachers union, the National Union ofEducation Workers (SNTE), the largest labor union in LatinAmerica, has been in large part responsible for blockingreforms that would increase the quality of spending and helpensure equal access to education. Poor teacher performanceand learning outcomes are associated with the SNTE-dominated, centralized collective bargaining for manywork rules, according to one study.36 In 1992, the SNTEreached an agreement that would allow for additional
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FigFigurure 9e 9
Source: OECD Development Center 2007
Investment in education vs. performance in math
Annual expenditure on educational institutions per student (2001) in $ PPP, by level of education, based on full-time equivalents
negotiations and grant the union greater bargaining powerat the state level.37 While it is hampering the educationalreform process, the union is also extracting rents.Thiswill be further described in the section below on the effi-ciency of markets for goods and services.
Evidence suggests that quality, measured in terms of theknowledge that the students acquire that can be measuredby cognitive tests, is critical to economic growth.Thusurgent action is needed to de-politicize the educationalsystem and therefore allow for more flexibility in curriculumdevelopment and the hiring and training of teachers andincentive schemes linked to student performance.
Efficiency enhancersAs other countries at a similar stage of development,Mexico relies in large part on efficiency enhancers toensure sustained economic growth.These include: goodquality higher education, efficient factor markets, thecapacity to make use of existing technology (notablyICT) in one’s domestic production system, and a marketbig enough to enable economies of scale.Accordingly,these efficiency enhancers have a 50% weight in theoverall GCI score for Mexico.
Mexico, with a score of 4.17, is ranked 50th in thissubindex, outperforming Brazil (55th),Turkey (51st) and theLatin American average (3.72). But it still languishes amongthe worst on this score (see Table 5) and lags well behindthe OECD average (4.93).The country displays a verymixed performance across the pillars, with ranks stretchingfrom 13th (market size) to 92nd (labor market efficiency).
Higher education and trainingThe importance of an efficient higher education andtraining system to provide an adequate pool of skilledand trained labor cannot be overstated.This is especially
true for countries that have reached higher (efficiency-or innovation-driven) development stages; for them, lowcost production provides less of a competitive advantage.Higher education is also key to fostering the absorption oftechnology and innovation. Countries constantly featuredat the top of the Forum’s competitiveness rankings – suchas the United States, the Nordic countries and smallereconomies such as Israel and Singapore – all share acommon focus on higher education in their recentdevelopmental histories.
The quality of higher education, especially for mathand science, has long been a concern for Latin America,and Mexico is no exception. Ranked 72nd, the countrylags behind the rest of the sample, with the exception ofChina (78th). It is worth noting how fellow OECDmember Korea, often put forward as top competitor forMexico, ranked 6th on the higher education and trainingpillar.This could partly explain the different growthpaths followed by these countries in the last two decades.
Enrollment rates in Mexico for secondary and tertiaryeducation are poor: 79.71% and 23.39%, respectively,according to the most recent data available fromUNESCO, putting Mexico in the 80th and 73rd positions,respectively.This problem is compounded by an especiallygloomy assessment of the quality of the educationalsystem (92nd), notably in math and science (113th). Inthe latest PISA survey, conducted by the OECD in2006, Mexico placed below the OECD average of 500points in science (413), math (406) and reading (410) -chalking up one of the worst performances among the57 countries assessed. Only 3% of Mexican studentsreached the highest levels in the 2006 PISA sciencescale, compared to an OECD average of 9%.38 The poorresults by 15 year-olds on this standardized test have adirect affect on enrollment in higher education (see
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Figure 10Figure 10
Source: OECD 2007d
Percentage of adults 25-64 who have attended higher educational institutions, 2004
Figure 10) – a disappointing 16.4% for Mexico, placingthe country below the OECD average (25.2%) and farbelow top OECD performers, such as the United Statesand Canada, and Korea (30.5%).
Those Mexicans who do graduate from college tendto get degrees in the social sciences, law and professionalservices (43.6% according to OECD in 2002). Only13.9% receive diplomas in engineering, for instance.39
Again this is in marked contrast with Korea, whichboasts the highest percentage of graduates in engineering(27.4% in 2002) in the OECD.The lack of progress inareas such as engineering is considered an obstacle toinnovation.40
In order to make the higher educational systemmore responsive to the needs of an efficiency-driveneconomy, greater emphasis should be placed on adoptingOECD standards of learning.This should includechanges in the curriculum to focus on subjects importantfor a rapidly changing world, such as languages and ICT,as well as scientific and technical training. Efforts shouldbe made to recruit students into these majors.41
On a more positive note, Mexico deserves recognitionfor the quality of its management schools (49th) and therelative availability of specialized research and trainingservices (52nd).
The efficiency of markets for goods and servicesWell-functioning markets for goods and services ensurethat resources are allocated to their most appropriateuses.This provides an economy with the right mix ofproducts based on supply-and-demand conditions.Asmentioned above, this becomes particularly importantfor countries as they move to higher development stagessince their competitiveness increasingly rests on efficientproduction systems and markets. Key underpinnings toefficient markets for goods and services include healthystandards for competition among economic actors, bothnational and foreign, and adequate demand conditions.Market structures that undermine competition causehigher prices, diminished supply, and higher costs tosociety than competitive conditions. Lack of competitionis probably the biggest hindrance to entrepreneurship,innovation and - ultimately - socioeconomic progress.In this spirit the goods market efficiency pillar analyzesthe extent to which government regulations and inter-ventions create distortion; including agricultural policies,anti-monopoly policies, taxation, and the regulatoryframework for opening and operating a business.
With an overall rank of 61st for the efficiency of itsgoods and services markets, Mexico is placed in thesame league as countries like China (58th) andHungary (59th). It outperforms Russia (84th), Brazil(97th) and the Latin American average (4.23 forMexico vs. 3.95). Mexico has a long way to go tomatch the world-class efficiency of Korea (16th),Indonesia (23rd) and Chile (28th). It also lags behindthe OECD average (4.99).
The GCI highlights some areas of particular concernregarding the standards of competition in Mexico: theextent of market dominance and the effectiveness of theanti-monopoly policy are assessed very poorly, 87th and77th, respectively. Barriers to foreign and national privateinvestment remain high, particularly in some services andinfrastructure sectors, such as telecommunications, energy,and domestic land transportation. Other problematic aspectsinclude the extent and effect of taxation (80th), the cost ofthe current agricultural policy (105th), and trade openness(102nd for the trade weighted tariff rate). In particular,Mexico’s average most favored nation (MFN) tariff remainshigher than the average of middle-income countries; thisfact is becoming more relevant as trade increases withcountries that are not part of preferential agreements.
On a positive note, it has become easier to set up abusiness in the last year. Notably the number of daysrequired to get started dropped from 58 to 27 days.
The country opened its economy in the late 1980sand privatized several key companies in the 1990s.Thesepolicies drastically reduced the extent of state interventionin the economy and liberalized trade.42 Yet the GCIassessment reflects the need to follow through on theseinitiatives to promote greater efficiency in the marketsfor goods and services.The parameters for competitionremain far from perfect for most parts of the Mexicaneconomy. For example, as mentioned above, the powerfulteachers union SNTE extracts rents in the educationsector thanks to its de facto monopoly position; manyfirms have difficulty obtaining financing because of thecountry’s history of high concentration in banking andcapital markets; the energy sector needs greater compe-tition and a shift in strategy to ensure long term sustain-ability; and an onerous social security system encouragespeople to remain in the informal sector.This latter pointwill be examined in more detail below.
The lack of competition in important non-tradablesdampens capital investment and reduces total factor pro-ductivity. It also hoists a heavy burden on local producerswho venture into international markets, saddling them withhigher production costs and unreliable supplies. Utilities(notably natural gas and electricity) present quality problemsand high prices, which make them among the world’s mostexpensive. Unionized workers in the petroleum, telecom-munications and teaching sectors earn significantly higherwages than their peers in other industries with similar levelsof education and experience, according to household surveydata for the 2000-04.43 Petroleum workers earned 71% more,telecommunications workers 30% more and teachers48% more than would be expected.This contrasts witha small 7% premium for workers in manufacturing,where most companies face international competition.
One major problem here is the lack of independenceof regulatory agencies in Mexico.The Central Bank is anotable exception, but most regulatory bodies in Mexicodepend on the executive branch for funding and personnel.They have limited authority to impose and collect fines.44
Labor market efficiencyFlexible labor markets ensure that the workforce is allocatedas efficiently as possible.They are critical to improvingcompetitiveness in all economies.This is even more sofor countries that are competing mainly on high valueadded goods in dynamic markets that require continuousadjustments in national production systems; the labormarket must be flexible enough to allow workers togravitate to whatever the key sectors are at a given time.Well-functioning labor markets can also help reducepoverty and foster social equality.This is especially true forcountries such as Mexico that are characterized by veryunequal income distribution and widespread hardship.45
With a score of 4.09, Mexico is ranked a disappoint-ingly low 92nd for labor market efficiency, by far theworst assessment among the 12 pillars of competitiveness.This is particularly troubling since the country’s competi-tiveness rests crucially on the efficiency of factor markets.Although Mexican labor markets seem to functionsignificantly better than those in Turkey (126th, the laggardin the sample), Brazil (104th) and India (96th), theimpressive showings of regional leader Chile (14th),Korea (24th), and the OECD average (4.66) demonstratethe magnitude of the challenge for Mexico in this realm.
The GCI assessment reflects the inflexibility of theformal labor market in Mexico. Extremely burdensomelabor regulations include high firing costs (worth 74weeks of salary, according to World Bank estimates, 95thout of 131 countries)46 and high payroll taxes (includingsocial contributions).47 Coupled with an onerous andinefficient tax system, these factors hinder labor mobility,keep human resources “trapped” in low productivitysectors, discourage training and cause job shortages inthe most dynamic sectors.48 In such a context, salaries arenot allowed to play their essential role in allocating laboraccording to demand; indeed wages do not well reflectthe productivity of economic sectors. In fact, salariesrose more than productivity in 1995-2004, according tothe Instituto Mexicano para la Competitividad (MexicanCompetitiveness Institute, IMCO).
An overregulated labor market offers a powerfulincentive for informality.The informal market accountedfor over 60% of the active labor force in 2006 and isestimated to have absorbed 475,000 out of an estimatedannual 700,000 jobs generated by the Mexican economyfrom 2000 to 2006.49 This has serious implications forsocial equality and national productivity since informaljobs tend to be unstable, poorly paid and offer diminishingreturns.The informal market also reduces the tax base,compromising the stability of public finances, as mentionedin the section on macroeconomic stability.
The Calderón administration pushed through changesin the pension system for civil servants in March 2007.Among new rules is one allowing for the portability ofpensions across sectors. However, structural reforms arestill required to make the system less rigid and enablethe labor market to allocate workers according to the
needs of the production system.These reforms must beaccompanied by better education and training; labormobility can only make a difference in conjunction witha labor pool that consists of people who are skilled, eagerto learn, and constantly improving their qualifications.
Financial market sophisticationA sophisticated and efficient financial system is animportant feature of any competitive economy, especiallyin higher stages of development. Comparative countrystudies tend to find that the depth of the financial systempredicts future economic growth, physical capital accu-mulation, and improvements in economic efficiency -even after controlling for initial income levels, education,and a variety of policy indicators.50 Some studies evensuggest that developing deep and efficient financial systemsis correlated not only with a healthy economy, but alsowith poverty reduction and lowered income inequality.51
Development of the financial system contributes toeconomic growth by reducing the costs of acquiringand processing information, helping investors diversifyrisks, and reducing monitoring costs.As a consequence,it improves resource allocation. In the absence of inter-mediaries, economic agents would have to assume thelarge cost of evaluating every business, firm, manager,sector and whatnot before deciding where to put theirsavings. Intermediaries handle these tasks, cutting thecost of acquiring information and improving the assessmentof investment opportunities. Financial intermediariesalso encourage innovation by helping to identify entre-preneurs with the best and potentially most profitableideas and products, thus reinforcing the Schumpeterianprocess of “creative destruction”.52
The financial market sophistication pillar gauges thesophistication and efficiency of the financial system and itssoundness and trustworthiness. It analyses variables such asthe ease of obtaining bank loans, the soundness of banks,the ease of raising money on the local stock market, and theavailability of venture capital.With an overall mark of 4.28,Mexico ranked 67th on this pillar, just above the LatinAmerican average (4.19). Mexico lagged over 40 positionsbehind the best country in the sample, South Africa (25th),and the best Latin American performer, Chile (26th). It alsofell well behind the OECD average (5.25).
As evidenced by a remarkable 20 position improvementfrom last year in the pillar, Mexico’s financial systemhas been recovering from the endemic fragility of thepast caused by macroeconomic instability and recurringfinancial crises. Several factors have contributed to thesoundness and profitability of the banking sector sincethe “Tequila” crisis: important changes in oversight,consolidation and more openness to foreign investment.53
The inflow of foreign investment helped the consoli-dation process along and brought in knowledgeablepeople with expertise in areas such as credit analysis.54
These changes led to remarkable improvements inefficiency.
Nevertheless, important challenges remain. Small andmedium enterprises and consumers still find it difficultto obtain capital, a fact highlighted by Mexico’s lowmarks for the ease of access to loans (88th), venture capitalavailability (86th) and financing through the equitymarkets (68th).55 Behind these rankings is a vicious circleof scarce credit and the inadequate protection of legalrights. Creditors find it hard and time-consuming toobtain judicial orders that will allow them to executecollateral and guarantees.This of course makes them lessinclined to expand credit. Furthermore, the real estateand property registry databases, essential for the corrob-orating information on collateral, use outdated comput-er systems or still work with paper files.Thus creditorsmust wade through difficult and lengthy processes toverify ownership, and check existing liens and relatedinformation.
Underlying the problems of access to capital is thestill insufficient banking infrastructure.This can beobserved in Table 7:
The lack of venture capital and private equity is alsoproblematic, especially since these kinds of capital areused to finance start-ups and foster innovation. In 1999-2004, Latin America received 1% of all private equityflows worldwide; Mexico captured 18% of that.This isrelated to the negative returns in the region (-10.7%)during that turbulent period, economist and formerSecretary of Finance Aspe Armella has argued.56 He linksthe underdevelopment of the private equity industry inMexico to fiscal disincentives, limited institutional partic-ipation, and barriers to using initial private offerings(IPOs) as exit strategies for private equity investments.The limited participation of pension funds in privatesecurities crucially undermines the development of theprivate equity industry.57
Good news can be found in the development ofMexico’s capital markets, especially for fixed incomeinstruments.This has been driven by a clear public debtmanagement strategy designed to gradually open upparticipation in the primary market for securities auctionsand introduce a market-making scheme for governmentdebt.This has helped increase secondary market liquidity.Annual debt management strategies were announcedand a quarterly auction calendar was made available toinvestors.This helped boost domestic debt from 8% ofGDP in1994 to 22% in 2004.58
Changes in pension funds and their regulationwould contribute to the further development of equityand corporate debt capital markets.59 Managers ofmandatory pension funds operate under strict ratingrestrictions; they are allowed to invest only in the highestrated securities.This has led to the concentration ofinvestment in both equities and bonds in a small numberof companies.60 Furthermore, pension funds investheavily in government debt, which accounts for 70%of their assets (see Figure 11).They shy away from theproductive sector, and play little if any role in strength-ening the corporate governance of companies they doinvest in. By contrast, in Brazil over 100 companieshave adhered to São Paulo Stock Market’s Novo Mercado(New Market) which admits only firms that voluntarilyagree to certain standards of corporate governance, andpension funds work closely with companies preparingIPOs.61 Voluntary collaboration between issuers andproviders of capital has helped improve corporate gover-nance in Brazil. In turn more funds are flowing fromBrazilian fund managers and from abroad, and both thestock market index and trading volume have shot up.62
In Mexico, regulations that hamper the healthydiversification of pension assets should be re-examinedwith an eye toward achieving more diversification whilepreserving world-class standards of asset quality.
Technological readinessIn today’s globalized world, technology has increasinglybecome an essential element for firms that hope tocompete and prosper. Given its impact on productionprocesses across sectors and industries, ICT, in particular,now plays a central role in boosting national productivity.
Technology is important for low-income and developedeconomies alike, but what really matters for countrieslike Mexico is the availability of knowledge - no matterwhat the source.At its current stage of development,Mexico does not need to generate knowledge to continueto grow. It can still benefit from the integration of foreigntechnology in its production processes and everyday life.The technological readiness pillar assesses precisely thisaspect, together with ICT penetration.
With a score of 3.23, Mexico ranked 60th in thispillar, outperforming Russia (72nd), China (73rd),Indonesia (75th), and the Latin American average (3.06).However, the country continues to lag behind the
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Table 7Table 7 Banking infrastructure (per million inhabitants)
Branches ATMs Terminals with servicesUnited Kingdom 619 1,122 18,982 Mexico 109 311 2,742 Chile 135 328 n.a Brazil 136 1,101 9,374 Canada 534 1,824 20,538 United States 457 1,645 15,012
OECD average (4.81), as well as Hungary (41st), Chile(42nd) and especially bellwether Korea (7th). Koreacould serve as a source of inspiration for Mexico.Thatcountry offers a textbook example of how to quicklyand advantageously join the knowledge economy. Koreafollowed an integrated public-private strategy focusedon ICT, innovation and education. Massive investmentin education and ICT infrastructure established an envi-ronment favorable to further advances in informationtechnology, more public-private partnerships and coor-dination, and cooperation between firms and universities.Korea also managed to attract high-tech multinationalsand take advantage of their spillovers to foster a localknowledge-based intermediate goods industry.63
Mexico’s performance in individual variablesdemonstrates how far the country has to go catch upwith the world’s most networked economies in ITCpenetration,64 technology availability (73rd), and theability of its firms to absorb technology (88th). Inparticular, Mexico is among the OECD countries thathave least invested in ICT. Fixed and mobile telephonyand Internet hosting have grown dramatically in the lastfive years, by 21% and 67%,65 respectively, but Internetuse remains fairly low (16.9% in 2005, according to theInternational Telecommunication Union, ITU) byOECD standards. Korea, for instance, boasts 71%.
Mexico ranked 41st for the variable on FDI andtechnology transfer. But despite considerable incomingFDI flows (see Figure 12 below) associated with at leastsome technology transfer, the country does not appearto have fully taken advantage of an impressive set ofcompetitive advantages that include a unique geographiclocation and the young labor force to insert itself intothe global knowledge-based value chain. Poor educationstandards, the lack of a centralized innovation policyand underdeveloped ICT infrastructure all stand asobstacles.
Market sizeA sufficiently large market is central to improving produc-tivity. It allows firms to benefit from economies of scale,in turn encouraging them to invest in research anddevelopment (R&D), innovate and constantly improvetheir production processes. Since relevant marketsincreasingly stretch beyond national borders, the GCIincludes in its assessment both domestic and foreign markets.
With a score of 5.34, Mexico ranked a satisfactory13th for the size of its market, putting it in the sameleague as Russia (9th), Brazil (10th), Korea (11th) andIndonesia (15th). On this score it outperforms both theLatin American (3.31) and OECD (4.72) averages.A verylarge domestic market (ranked 12th out of 131) is furtherextended by exports (31.9% of its GDP). It ranks 17thfor the size of its foreign market.
In terms of domestic market, Mexico’s population isover 100 million, and purchasing power is growing.Recently attained macroeconomic stability, strongergrowth, expanding credit, and social programs for the poorhave contributed to a marked reduction in the percentageof Mexicans under the poverty line (from 37% in 1996to 14% in 2006) and the emergence of a more robustmiddle class.The number of families that earn betweenUS$600-1,600 a month jumped from 5.7 million in1996 to 10.7 million a decade later.66
The most recent demographic trends bode well for afurther expansion of the domestic market. For the firsttime in decades, the economically active populationoutnumbers the rest of the population (i.e. the sum ofretired population and children).67 And the trend is expectedto last another 30 years. If supported by investment inhuman and physical capital, productivity and growthprospects could benefit as the domestic market grows.
The size of Mexico’s foreign market is boosted by itsextensive network of free trade agreements. Mexico is aworld leader in signing such pacts. It has inked deals that
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Figure 11Figure 11
Source: OECD Development Center 2007
Distribution of portfolio’s investment in Mexico
Government securities
Argentina Bolivia Brazil Chile Colombia Mexico Peru
involve 43 countries on three continents – translatinginto a potential market of one billion consumers.68 Sincethe early 1990s, Mexico has concluded free trade agree-ments with countries and regions as diverse as Chile(1992), the United States and Canada (NAFTA, 1994),Venezuela and Colombia (the G3 Free Trade Agreement,1995), Israel (2000), the European Union (2000) andJapan (2005). Mexico is also an active member ofimportant regional forums, such as the Asia PacificEconomic Cooperation Association, the Latin AmericanIntegration Association and the Free Trade Area of theAmericas.
NAFTA has provided Mexico with free access to itsmain market, the United States. From NAFTA’s inceptionto 2005, regional trade in North America grew by 128%to a record US$ 772 billion. NAFTA has also served asa catalyst for attracting FDI to Mexico and helped itdiversity its exports.
Figures 12 and 13 show the evolution of Mexico’sFDI inflows and manufactured exports, respectively, forthe last few decades. FDI increased from US$ 11 billionin 1994 to US$ 19 billion in 2006,69 roughly equivalentto 3% of GDP. FDI is helping Mexico shift from low tohigher tech manufacturing.And since restrictions onforeign ownership in banking were lifted in the 1990s, ithas also bolstered the financial sector. Mexico is alsobeginning to get some traction from its geographicallocation – especially in the automotive (5% of FDI) andother sectors in which competitiveness relies on trans-portation costs and just-in-time logistics. In these sectors,the country is increasingly integrated into the productionand distribution systems of the United States.
Exports have also become more diversified. Mexico’sexports were dominated by manufactured products (81%)in 2006, of which 44.7% came from the maquiladoraassembly sector.70 This magnifies a trend observed in the
region. Commodity exports in Latin America declinedfrom over 50% to 30% from 1985-87 to 1999-2002.Foreign sales of manufactured products rose from 50%to over 70% during the same period.71
Innovation and Sophistication Factors The capacity to generate innovation and produce uniquevalue added products via sophisticated production processesis a central driver of competitiveness for countries thathave reached the last and most advanced stage of devel-opment, as explained above. Mexico has not reached theinnovation-driven stage yet; therefore, innovation andsophistication factors are not yet crucial to the country’ssustained growth.Thus these factors account for only10% of its overall GCI score.
The country came in 60th for innovation andsophistication (with a score of 3.66), putting it amongthe worst performers in the sample, just after Russia(77th). Nevertheless, Mexico outperformed the LatinAmerican average (3.42).Also the innovation andsophistication factor subindex is the worst ranked acrossthe three GCI subindexes.
Business sophisticationThe business sophistication pillar captures elementsat the microeconomic level that affect a healthy andcompetitive business environment.The operations,strategies and business networks of sophisticated firmshelp them achieve greater efficiency in the productionof goods and services.They foster productivity and,therefore, competitiveness. Important elements includethe quantity and quality of suppliers, the presence ofeffective clusters, well-developed production processes,the nature of a firm’s competitive advantage, and theextent to which a firm controls international distributionand marketing. Business sophistication is especially criticalfor firms operating at the top end of value chains, whichare mainly located in high income countries. However,it is bound to become increasingly important for efficiency-driven economies such as Mexico as they move alongthe development path.
For its development level, Mexico displays a fairlysophisticated business sector, reflected in a 54th overallrank (corresponding to a 4.22 score). Contributing tothis score are relatively developed clusters (54th), goodquality local suppliers (49th), and a broad value chain(46th), among other factors.Within the sample, Mexicoranks lower than similarly efficiency-driven economieslike Chile (32nd), South Africa (36th), Brazil (39th) andTurkey (41st), but it outperforms important competitorssuch as Russia (88th) and China (57th), and tops theLatin American average (3.91).
This rather strong performance reflects Mexico’sdiversification. Many firms operate quite high up in thevalue chain and produce sophisticated, value-addedgoods.Assembly maquiladoras represent just one aspect ofMexico’s production landscape.The country has been at
the forefront of the recent multilatinas phenomenon, bywhich Latin American companies successfully expandglobally thanks to superior technology and organization.72
One of the largest cement producers in the world, withUS$ 18 billion in annual sales in 2006,73 CEMEX is atextbook example of a multilatina.The company hasexpanded operations abroad through acquisitions, rollingout an efficient business model (built around extremelyadvanced IT systems) beyond the region, to places suchas the United States, Indonesia, the Philippines and theUnited Kingdom.
InnovationInnovation is widely seen as a strategic driver of nationalcompetitiveness in the long run. It is the only “good”that does not suffer from diminishing rates of return.This is especially true for countries that are on the tech-nological frontier. For them, the capacity to generatenew and innovative products or processes becomesessential for sustained growth.As mentioned above,Mexico can still benefit from adopting external sourcesof technology. However, with an eye toward the future,it should begin to attempt to realize its own innovativepotential.Any national development strategy shouldinclude as a goal the establishment of an environmentthat is friendly to and encourages innovation.
With a rather mediocre score of 3.11, Mexico ranked71st for its innovation potential, last in the sample - 14 placesbehind second-to-last Russia (57th) and 63 positions behindKorea (8th). One look at the OECD average (4.47) providesan idea of how much ground Mexico has to make up.
Innovation has traditionally been a weak point forLatin America, and this is confirmed by the low regionalaverage in the innovation pillar (2.93).Very much in linewith the regional performance, Mexico displays importantweaknesses in most dimensions relevant to innovation,including investment, university-business cooperation,and scientific and technological potential. Capacity forinnovation and spending on R&D are assessed as quitelow (at 58th and 69th, respectively). Research institutionsreceive a sub-par rating (65th), and university-industryresearch collaboration is judged insufficient (59th). Nordoes the government seem to be using its procurementpolicy to foster innovative and efficient high tech products(93rd) or to provide adequate protection for intellectualproperty rights (65th).The insufficient pool of scientistsand engineers (96th) is also a concern, as highlightedabove in the section on the higher education and trainingpillar.
The lack of focus on innovation is evident in thelow per capita number of registered patents per millionpopulation for Mexico, i.e. 0.61 in 2006.Though this isnot far from off the regional average,74 it compares poorlywith emerging economies such as Taiwan (226.86),Israel (179.12) and Korea (123). Indeed, Mexico fellamong the OECD countries with the lowest R&Dinvestment relative to GDP (0.5%) and industry R&D
investment relative to value added (0.3%) in 2005.75 Withrespect to business R&D investment, a note of optimismcan be introduced: the private sector has been consistentlyincreasing its participation in national R&D,76 from14.28% to 41.90% in 1992-2005, according to the Redde Indicadores de Ciencia y Tecnologia RICYT -Iberoamericanae Interamericana (Network on Science and TechnologyIndicators).77 Moreover, Mexico has increased the shareof business R&D financed by the government from2.8% in 1995 to 5.7% in 2005 and has adopted importanttax incentives to support innovation among companies.According to the OECD,78 one unit of R&D expenditureby firms resulted in 0.37 units of tax relief.
ConclusionsThis paper has underlined the significant progress madeby Mexico in the last decade or so toward creating astrong foundation for sustained competitiveness.At thesame time, it has not been shy about pointing out short-comings and challenges.
The country has broken free from endemic macro-economic instability. It has made impressive stridestoward opening, liberalizing and improving the efficiencyof its economy. It has also diversified its economy.Yet anumber of important weaknesses remain in key areas.
Among the efficiency-enhancers, overly rigid labormarkets and imperfect competition conditions in thegoods and services markets hamper economic efficiency.They need to be addressed by further liberalization andstructural reforms.The poor quality of the higher educationsystem, reflected in the unsatisfactory performance ofMexican students on international tests, is a major causeof concern.As for other countries whose competitivenessis hinged to efficient production systems and markets,Mexico needs a qualified, constantly learning and adaptableworkforce. In addition, Mexico also suffers from aninsufficient pool of graduates in math, science and engi-neering.This reduces the capacity of Mexican firms toadvance further in the value chain. National innovationand the capacity to absorb and adapt foreign technologyare also hurt.
Mexico also continues to display serious shortcomingsin some of the basic requirements of competitiveness.Thequality of its institutions is worrisome.The list of problemsis long: poor public governance, rampant corruption, lowlevels of citizen trust in politicians, widespread red-tapeand government inefficiency, an onerous tax system witha small tax base, and an inefficient legal framework.Epidemic levels of crime and violence impose considerablecosts on businesses, not to mention ordinary Mexicans.This is well understood by policymakers, but furtheraction is urgently required.
At the same time, Mexico is a country of greatpotential, with a unique geographical position, a youngpopulation and a rapidly expanding market.This potentialmust and can be fulfilled by a joint effort of all politicalparties, the business sector and civil society to address
the deficiencies highlighted above. Only then can thecountry take advantage of its diverse competitive advantagesand ensure sustained growth and enduring prosperityfor its citizens.
The current administration deserves credit for effortsto end the political deadlock that dominated the termsof its two immediate predecessors.The government hasmanaged to push important bills through congress,including pension reform for public employees, fiscalreform, electoral reform, and reform of the criminaljustice system. It also plans to present to congress anurgently needed energy reform bill.These are significantsteps in the right direction.They will increase productivityand foster growth, provided they are duly implemented.Consensus building continues to be a priority, coupledwith a focus on action and diligent execution.
1 With an estimated US$ 840 billion economy, according to the EconomistIntelligence Unit (EIU) 2007a.
2 According to the United Nations Conference on Trade and Development(UNCTAD) 2007, Mexico attracted around US$ 19.04 billion in 2006, ahead ofBrazil (US$ 18.78 billion) and Chile (US$ 7.950 billion).
3 United Nations Population Fund 2006.
4 See Consejo Ejecutivo de Empresas Globales (Executive Council of GlobalEnterprises) 2006, page 48.
5 EIU 2007a.
6 For a more detailed analysis of the GCI, see Sala-i-Martin et al. 2007.
7 The classification adopted here is a slightly modified version of MichaelPorter’s theory of stages of development (Porter, 1990). For further details,see Sala-i-Martin et al. 2007, note 19.
8 Countries are allocated to the different stages of development according totheir GDP per capita at market exchange, as a proxy for wages. This criterionis then corrected with a second one measuring the extent to which countriesare factor-driven, using as proxies the share of exports of primary goods intotal exports (goods and services). We assume that countries that exportmore than 70% of primary products are to a large extent factor-driven.
9 The weights have been derived from a growth regression using threedecades of data using as proxies the main categories included in the GCI.
10 For a more in depth analysis of the survey’s process and methodology, seeBrowne and Geiger 2007.
11 The list of countries chosen for the comparative sample includes Chile, thetop performer in Latin America, the BRICS countries (Brazil, Russia, India,China and South Africa), Korea and Indonesia in Asia, and Turkey andHungary in Europe. Also the regional average scores for Latin America andthe OECD are taken into account, given Mexico’s double “nature” as a LatinAmerican country and an OECD member.
12 Our analysis is conducted on a constant 2005-06 sample, meaning Mexico’srankings among only the economies included in the 2005-2006 GCI computa-tion, excluding the economies included for the first time in 2006-07 and2007-08. That is, taking into account only the 117 included in 2005-06.
13 Just after Chile (26th), Puerto Rico (36th) and Barbados (50th).
14 Hausmann et al. 2004.
15 According to Business Software Alliance 2006, 65% of the software boughtin Mexico comes from counterfeit or illegal sources; this points to a highdegree of non-observance of copyrights.
16 Zepeda 2004.
17 Ibid.
18 Zepeda 2006. Zepeda reports that in 2006, 213,000 individuals were in jail(of which 92,000 had not been sentenced), with a daily minimum fiscal costof US$ 3.2 million.
19 Borensztein et al. consider good quality infrastructure, in particular in trans-portation and telecommunications, as a key determinant in attracting FDI.See Borensztein et al. 1998
20 Hulten 1996.
21 Mia et al. 2007.
22 Fay and Morrison 2005.
23 EIU 2007c.
24 For further details on the IPAI’s concept and methodology, see Mia et al. 2007.
25 Currently for Standard & Poor’s at BBB+ with a stable outlook.
26 Important reforms started under Pedro Aspe Armilla’s tenure as secretaryof finance.
27 Larre et al. 2007.
28 Goñi et al. 2006.
29 EIU 2007c.
30 This effort is being carried out via the Sistema de Proteccion Social en Salud(System of Social Security in Heath, centered on a voluntary health insuranceschemes) and Seguro Popular (Popular Insurance), financed mainly by contri-butions from federal and state governments, with means-tested contributionsfrom affiliates.
31 The World Bank found that these programs significantly helped to raiseenrollment rates. Similarly, improvements in health and nutrition linked tothe program have also been striking, as measured by increases in the heightof children and reductions in the incidence of disease. See World Bank 2006.
32 In other countries, BOT mechanisms have proven an efficient way of involvingthe private sector and transferring some of the risks to it, while achieving themost important goal of providing a quality service.
33 EIU 2007c.
34 Developed jointly by OECD member countries through the OECD’s Directoratefor Education, the PISA gauges the degree to which 15 year-old students,approaching the end of compulsory education, have acquired some of theknowledge and skills essential for full participation in the knowledge economy.PISA surveys are conducted every three years and focus on science, math andreading. The last survey conducted in 2006 included 57 countries, up from 41in 2003, covering close to 90% of the world economy. Further informationcan be found at: www.pisa.oecd.org.
35 OECD 2005.
36 Guerrero et al. 2006.
37 World Bank 2006.
38 OECD 2007a.
39 This is also reflected in the survey data on the availability of scientists andengineers, included in the innovation pillar, for which Mexico ranked 96th.
40 Murphy et al. provide evidence suggesting that countries with a higher pro-portion of engineering college majors grow faster, whereas countries with ahigher proportion of law graduates are less dynamic. See Murphy et al. 1991.
41 See IMCO 2007.
42 As already mentioned, the signing of NAFTA and other trade agreementsallowed the country to diversify away from primary commodities and developan important manufacturing sector and other higher value added industries.Manufactured goods exports expanded by 11% per year in dollar terms onaverage in the 10 years to 2005, compared with 6% for the OECD on average(OECD 2007b).
43 Guerrero et al. 2006.
44 The Federal Communication Commission can impose fines, but it has littleability to enforce them. This depends on the judicial system. At the same time,the Federal Telecommunication Commission can only give recommendationsto the corresponding ministry. It lacks independent enforcement powers.
45 The most recent Gini coefficient for Mexico was 46.1, lower than Brazil(57.0), but much higher than Korea (31.6). See World Bank 2007.
46 Unlike Chile, Mexico has not significantly liberalized the labor legal frameworkin the wake of the market reforms of the 1990s. The framework remains verymuch the one established by the 1917 constitution and the federal labor lawadopted in 1970. Over flexibility and efficiency, priority is given to the protectionof workers rights. These include the provision of a minimum salary, severerestrictions on forms of employment other than permanent contracts, aprotection mechanism for workers in work-related disputes, and promotioncriteria based on seniority and “unionization” rather than competence (theso called “Escalafón ciego”).
47 Mexico is ranked 92nd in the variable for non-wage labor cost, estimated bythe World Bank at 23.9% of total salary.
48 Although McKinsey (in Farrell et al. 2007) ranks Mexico 2nd in its index of themost attractive offshore centers (given its low labor cost and attractive geo-graphical position), it warns about the difficulties encountered by companiesin finding suitable talent, especially for high-skilled jobs.
49 Instituto Mexicano del Seguro Social (Mexican Social Security Institute2006), quoted in IMCO 2007.
50 De la Torre and Schmuckler 2007; and Levine et al. 2000.
51 Levine 2005.
52 Rajan and Zingales 2003.
53 Restrictions on foreign ownership in the banking sector were lifted in 1998.
54 According to the EIU, by 2006 80% of banking sector assets was controlledby foreign investors, notably by BBVA-Bancomer, Banamex, HSBC and BancoSantander Mexicano. See EIU 2007c.
55 In the past decade a decrease, not an increase, in the numbers of issuers hasbeen observed. Market capitalization as a percentage of GDP is less than25%, four times less than in the developed world or Chile, according to theBolsa Mexicana de Valores (BMV, Mexican Stock Market, www.bmv.com.mx).
57 Rather than increasing direct buying of equities and participating on theboards of companies listed in the stock exchange, pension managers havetended to limit most of their exposure in equities to Exchange Traded Funds.Thus they are not active shareholders.
58 De la Torre et al. 2007.
59 In 1997 an important reform was passed changing the pay-as-you-go systemto a fully-funded one with individual accounts.
60 In 2004, 93% of all corporate debt on the balance sheets of pension fundswas rated AA or higher, while in the equity markets 10 firms represented 70%of the value traded. (see BMV website, available at: www.bmv.com.mx).
61 Novo Mercado is a listing segment designed for shares issued by companiesthat voluntarily agree to abide by corporate governance practices and trans-parency requirements in addition to those already required by the Brazilian lawand the Brazilian Securities and Exchange Commission. Given the voluntaryaspect, it is widely thought that the Novo Mercado is a success becauseboth investors and companies consider corporate governance obligations tobe advantageous.
62 As of February 2008, Brazil became the largest emerging market in theMorgan Stanley Capital International Global Emerging Market index,accounting for 14.95% of the index. In 2002, Brazil accounted for just 5.3%.(see: www.mscibarra.com)
63 For a full account of the different competitiveness strategies followed byMexico and Korea, see Villareal Ramos and Villareal Arrambide 2006.
64 Ranked 69th, 59th, 54th and 50th, respectively, for mobile telephone subscribers,Internet users, personal computers and broadband Internet subscribers.
65 OECD 2007c.
66 The Economist 2007c.
67 According to the Consejo Nacional de Población (National Council of Population)(quoted in Consejo Ejecutivo de Empresas Globales 2006), the number ofchildren per fertile mother has decreased from 7 to 2.1 from the 1970s to 2005.
68 See http://www.gob.mx/wb/egobierno
69 UNCTAD 2007.
70 The maquiladora or maquila system has been one of the main forms of off-shoring to Mexico from the United States. It takes advantage of the duty-freeregime between the two countries. The numerous maquiladoras, clusteredalong the US-Mexico border, assemble products from imported material andequipment, which are then re-exported to the United States.
71 ECLAC-CEPAL 2004.
72 According to Alfaro and Hammel, the average number of foreign deals forthe largest Latin American countries (home of most multilatinas) hasincreased from four per year in 1993 to 40 in the late 1990s and early 2000s.See Alfaro and Hammel 2006.
73 The Economist 2008.
74 Costa Rica and Argentina, the best performers in the region in this respect,display 1.14 and 0.97 patents per million population, respectively; Chile andBrazil follow at 0.85 and 0.64, respectively (see US Patent and TrademarkOffice 2007).
75 OECD 2007c.
76 The government and universities still accounted for 40.69% and 7.22%,respectively, in 2005.
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This annex presents the structure of the GlobalCompetitiveness Index 2007-2008.The numbering of the variables matches the numbering ofthe Data Tables in the Global Competitiveness Report 2007-2008.The number preceding the period indicates to whichpillar the variable belongs.The hard data indicators used in the GCI are normalized ona 1-to-7 scale in order to align them with the ExecutiveOpinion Survey’s results.a
Those variables that are followed by the symbol1/2 enter theGCI in two different places. In order to avoid double counting,we give them a half-weight in each place by dividing theirvalue by 2 when computing the aggregate score for the twocategories in which they appear.b
The percentage next to each category represents this category’sweight within its immediate parent category.The computationof the GCI is based on successive aggregations of scores, fromthe variable level (i.e., the lowest level) all the way up to theoverall GCI score (i.e., the highest level), using the weightsreported above. For example, the score a country achieves inthe 9th pillar accounts for 17% of this country’s score in theEfficiency enhancers subindex. Similarly, the score achievedon the Networks and supporting industries subpillar accountsfor 50% of the score of the 11th pillar. Reported percentagesare rounded to the nearest integer, but exact figures are usedin the calculation of the GCI.The weight of each of the three subindexes (Basic requirements,Efficiency enhancers, and Innovation and sophistication factors)depends on each country’s stage of development, as discussedin the text.c
Basic requirements
1st pillar: Institutions ................................................ 25%A. Public institutions ........................................................................ 75%
1. Property rights ..................................................................... 20%1.01 Property rights1.02 Intellectual property protection1/2
2. Ethics and corruption.......................................................... 20%1.03 Diversion of public funds1.04 Public trust of politicians
3. Undue influence................................................................... 20%1.05 Judicial independence1.06 Favoritism in decisions of government officials
4. Government inefficiency .................................................... 20%1.07 Wastefulness of government spending1.08 Burden of government regulation1.09 Efficiency of legal framework1.10 Transparency of government policymaking
5. Security ................................................................................. 20%1.11 Business costs of terrorism1.12 Business costs of crime and violence1.13 Organized crime1.14 Reliability of police services
B. Private institutions ....................................................................... 25%1. Corporate ethics .................................................................. 50%
1.15 Ethical behavior of firms
2. Accountability ...................................................................... 50%1.16 Strength of auditing and reporting standards1.17 Efficacy of corporate boards1.18 Protection of minority shareholders’ interests
2nd pillar: Infrastructure .......................................... 25%A. General infrastructure ................................................................. 50%
2.01 Quality of overall infrastructure
B. Specific infrastructure ................................................................ 50%2.02 Quality of roads2.03 Quality of railroad infrastructure2.04 Quality of port infrastructure2.05 Quality of air transport infrastructure2.06 Available seat kilometers (hard data)2.07 Quality of electricity supply2.08 Telephone lines (hard data)
3rd pillar: Macroeconomic stability ...................... 25%3.01 Government surplus/deficit (hard data)3.02 National savings rate (hard data)3.03 Inflation (hard data)d
3.04 Interest rate spread (hard data)3.05 Government debt (hard data)
4th pillar: Health and primary education.............. 25%A. Health.............................................................................................. 50%
4.01 Business impact of malariae
4.02 Malaria incidence (hard data)e
4.03 Business impact of tuberculosise
4.04 Tuberculosis incidence (hard data)e
4.05 Business impact of HIV/AIDSe
4.06 HIV prevalence (hard data)4.07 Infant mortality (hard data)4.08 Life expectancy (hard data)
B. Primary education ........................................................................ 50%4.09 Quality of primary education4.10 Primary enrollment (hard data)4.11 Education expenditure (hard data)1/2
Efficiency enhancers
5th pillar: Higher education and training ............. 17%A. Quantity of education................................................................... 33%
B. Quality of education..................................................................... 33%5.03 Quality of the educational system5.04 Quality of math and science education5.05 Quality of management schools5.06 Internet access in schools
C. On-the-job training ....................................................................... 33%5.07 Local availability of specialized research and training
7.01 Cooperation in labor-employer relations7.02 Flexibility of wage determination7.03 Non-wage labor costs (hard data)7.04 Rigidity of employment (hard data)7.05 Hiring and firing practices6.04 Extent and effect of taxation1/2
6.05 Total tax rate (hard data)1/2
7.06 Firing costs (hard data)
B. Efficient use of talent................................................................... 50%7.07 Pay and productivity7.08 Reliance on professional management1/2
7.09 Brain drain7.10 Female participation in labor force (hard data)
8.01 Financial market sophistication8.02 Financing through local equity market8.03 Ease of access to loans8.04 Venture capital availability8.05 Restriction on capital flows8.06 Strength of investor protection (hard data)
B. Trustworthiness and confidence............................................... 50%8.07 Soundness of banks8.08 Regulation of securities exchanges8.09 Legal rights index (hard data)
9th pillar: Technological readiness ....................... 17%9.01 Availability of latest technologies9.02 Firm-level technology absorption9.03 Laws relating to ICT9.04 FDI and technology transfer9.05 Mobile telephone subscribers (hard data)9.06 Internet users (hard data)9.07 Personal computers (hard data)9.08 Broadband Internet subscribers (hard data)
B. Foreign market size...................................................................... 25%10.02 Foreign market size index (hard data)i
Innovation and sophistication factors
11th pillar: Business sophistication ...................... 50%A. Networks and supporting industries........................................ 50%
11.01 Local supplier quantity11.02 Local supplier quality11.03 State of cluster development
B. Sophistication of firms’ operations and strategy................... 50%11.04 Nature of competitive advantage11.05 Value chain breadth11.06 Control of international distribution11.07 Production process sophistication11.08 Extent of marketing11.09 Willingness to delegate authority
7.08 Reliance on professional management1/2
12th pillar: Innovation............................................... 50%12.01 Capacity for innovation12.02 Quality of scientific research institutions12.03 Company spending on R&D12.04 University-industry research collaboration12.05 Government procurement of advanced technology
products12.06 Availability of scientists and engineers12.07 Utility patents (hard data)
1.02 Intellectual property protection1/2
Notes:a. The standard formula for converting hard data is the following:
The sample minimum and sample maximum are, respectively, the lowest andhighest country scores in the sample of countries covered by the GCI. In someinstances, adjustments were made to account for extreme outliers. For thosehard data variables for which a higher value indicates a worse outcome (e.g.,disease incidence, government debt), we rely on a normalization formula that, inaddition to converting the series to a 1-to-7 scale, reverses it, so that 1 and 7still corresponds to the worst and best possible outcomes, respectively:
b. As described in the chapter, the weights are the following:
c. For those groups of variables that contain one or several half-weight variables,country scores for those groups are computed as follows:
d. In order to capture the idea that both high inflation and deflation are detrimental,inflation enters the model in a U-shaped manner as follows: for values of inflationbetween 0.5 and 2.9%, a country receives the highest possible score of 7. Outsidethis range, scores decrease linearly as they move away from these values.
e. The impact of malaria, tuberculosis, and HIV/AIDS on competitiveness dependsnot only on their respective incidence rates, but also on how costly they are forbusiness. Therefore, in order to estimate the impact of each of the three diseases,we combine its incidence rate with the survey question on its perceived cost tobusinesses. To combine these data we first take the ratio of each country’s diseaseincidence rate relative to the highest incidence rate in the whole sample. Theinverse of this ratio is then multiplied by each country’s score on the related sur-vey question. This product is then normalized to a 1-to-7 scale. Note that coun-tries with zero reported incidence receive a 7, regardless their scores on therelated survey question.
f. The Competition subpillar is the weighted average of two components:Domestic competition and Foreign competition. In both components, the includedvariables provide an indication of the extent to which competition is distorted.The relative importance of these distortions depends on the relative size of domesticversus foreign competition. This interaction between the domestic market andthe foreign market is captured by the way we determine the weights of the twocomponents. Domestic competition is the sum of consumption (C), investment(I), government spending (G), and exports (X), while foreign competition is equalto imports (M). Thus we assign a weight of (C+I+G+X)/(C+I+G+X+M) to domesticcompetition, and a weight of M/(C+I+G+X+M) to foreign competition.
g. Variables 6.06 and 6.07 combine to form one single variable.
h. The size of the domestic market is constructed by taking the natural log of thesum of the gross domestic product valued at PPP plus the total value (PPP estimates)of imports of goods and services, minus the total value (PPP estimates) ofexports of goods and services. Data are then normalized on a 1-to-7 scale. PPPestimates of imports and exports are obtained by taking the product of exportsas a percentage of GDP and GDP valued at PPP. The underlying data are reportedin the Data Tables section of the Global Competitiveness Report 2007-2008.
i. The size of the foreign market is estimated as the natural log of the total value(PPP estimates) of exports of goods and services, normalized on a 1-to-7 scale.PPP estimates of exports are obtained by taking the product of exports as apercentage of GDP and GDP valued at PPP. The underlying data are reported inthe Data Tables section of the Global Competitiveness Report 2007-2008.
This section includes a four-page country profile forMexico and three-page country profiles for the 10 othercountries covered in this Report. Each country profiledisplays major economic, financial, social and trade datafrom published sources and the World Economic Forum’sExecutive Opinion Survey (Survey). Country profiles arelaid out as follows: the first page presents key indicatorsas a general overview of a country’s economic and socialdevelopment and the main results from the World EconomicForum’s Global Competitiveness Index (GCI); the secondpage includes charts that illustrate the evolution of percapita gross domestic product (GDP), foreign directinvestment, main exports, and trade data; the third (andfourth for Mexico) presents the rankings for the countryin question on each of the indicators of the GCI.
Page 1
Key indicatorsThe first section presents a selection of key indicators.Population figures come from the United NationsPopulation Fund (UNFPA)’s State of World Population2007. GDP data come from World Economic OutlookDatabase. Current account and unemployment datacome from the Economist Intelligence Unit (EIU).Total reserves figures come from the World Bank’s WorldDevelopment Indicators 2007 (CD version).The GINIindex is computed by the United Nations DevelopmentProgramme (UNDP) and is presented in the 2007edition of the Human Development Report.The mostrecent data available for each country is displayed.
Competitiveness RankingsThe table shows the country’s rankings in the GCI aspresented in the Global Competitiveness Report (GCR)2007-08. Ranks are measured against the 131 countriescovered by that edition of the GCR.
For Mexico, a bar chart on the right-hand side comparesits scores to the average score for Latin America and theCaribbean, and the best performer for each subindex/pillar.
For other countries, a spider chart on the right-handside shows their scores per subindex and pillar, ascompared to Mexico’ scores.
0 5 10 15 20 25
Percent of responses
Brazil Mexico
BrazilKey indicators
Total population (millions), 2007......................................................................191.3GDP (US$ billions), 2007................................................................................1,295.4GDP per capita (PPP, US$), 2007 .................................................................6,841.6Real growth in GDP (percent), 2007...................................................................4.4Current account balance (percent of GDP), 2006 .................................................1.3Total reserves in months of imports, 2005 ........................................................5.1Unemployment (percent of total labour force), 2007 ......................................9.8GINI index, 2004...................................................................................................57.0
Competitiveness rankingsRank Score
(out of 131) (1–7)
Global Competitiveness Index 2007-2008 .........72 ......4.0GCI 2006-2007 (out of 122) ......................................................66 ........4.1
Poor work ethic in national labour force..............1.2% .........1.9%
Government instability/coups .................................1.1% .........0.2%
Institutions
Infrastructure
Macroeconomicstability
Health and primary
education
Higher education and training
Goods market efficiency
Labor market efficiency
Financial market sophistication
Technological readiness
Market size
Businesssophistication
Innovation
1
2
3
4
5
6
7
Source: World Economic Forum, Executive Opinion Survey 2006, 2007
BrazilMexico
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.
33
How
to R
ead
the
Coun
try P
rofil
es
How to Read the Country ProfilesEVA TRUJILLO HERRERA, World Economic Forum
The most problematic factors for doing businessThis chart summarizes factors considered by CEOs andtop executives as the biggest barriers to doing businessin a country.The information is drawn from a Surveyquestion. From a menu of 14 factors, respondents wereasked to rank in order the five biggest barriers to doingbusiness in the countries in which they were based.
For the other countries, the scores for Mexico areshown by way of comparison.
GDP based on purchasing power parity (PPP) percapita, 1996-2007
This chart shows the evolution of GDP based on purchasingpower parity (PPP) per capita for the last 10 years.Thedata were obtained from the World Economic OutlookDatabase.
FDI Flows (US$), 1995-2006This chart tracks the evolution of foreign direct investmentinflows for a 10 year period through 2006.The data are fromthe United Nations Conference on Trade and Development(UNCTAD)’s Foreign Direct Investment Database.
Main exports (in US$), 1994-2006This chart illustrates the evolution of the make-up of acountry’s export trade. It shows the total value in US$ forall exports, as well as for the top three categories of exports,according to the Standard International ClassificationTrade Classification (SITC). Data come from UnitedNations Statistics Division’s Cometrade Database.
Share of merchandise exports by main destinationThis figure presents the breakdown of exports by destinationcountry or region with the total value of a country’sexports appearing below, for 2006 or most recent yearavailable.These figures come from the World TradeOrganization, country profiles online.
Trade diversificationThe bottom area features an indicator of a country’s exportdiversification in 2005 expressed as the number of exportingsectors.This indicator gives equal weight to each sector,using SITC at the three-digit aggregation level. It variesfrom 1 (no diversification) to 261 (highest diversification)and is expressed as the inverse of the Herfindahl Index.Data come from the International Trade Centre.
8
7
6
5
Share of merchandase exportsby main destination, 2006
Source: WTO, 2007
Trade diversificationNumber of exported product groups out of 261
National Competitiveness Balance SheetThis page provides detailed information on the relativestrengths and weaknesses of each economy.The balancesheet presents all variables used to calculate the GCIorganized under issue areas that are part of the 12 pillarsof the GCI; such as infrastructure, macroeconomy andbusiness sophistication.The figures correspond to thecountry’s rank for a particular variable among the 131countries included in the GCR 2007-08.
Variables are defined as advantages or disadvantagesaccording to the methodology employed in the GCR2007-08: for the top 10 countries in the GCI, variablesranked between 1 and 10 are considered to be advantages;for countries in the 11-50 bracket, variables ranked betterthan a country’s own rank are considered to be advantages;for countries with overall GCI ranks of lower than 50,any variables ranked equal to or higher than 50 areconsidered to be advantages.
In the Mexico section the average scores for threegroups - Latin America and the Caribbean, countriesof the Organization for Economic Cooperation andDevelopment (OECD), and the best performer for eachindicator - are included for comparative purposes.For other countries, Mexico’s scores are included.
The figures to the left of the variables refer to the numberingof the data tables presented in the GCR 2007-08.The reference is to 2007 unless otherwise specified.
9 The Global Competitiveness Index in detail + Better than Mexico (45 times) – Worse than Mexico (65 times)
INDICATOR RANK/131 VALUE
1st pillar: Institutions1.01 Property rights..........................................................70 ...+.....4.51.02 Intellectual property protection ................................73 ....–.....3.31.03 Diversion of public funds........................................124 ....–.....2.21.04 Public trust of politicians.........................................126 ....– .....1.41.05 Judicial independence ..............................................89 ....–.....3.11.06 Favoritism in decisions of government officials .......91 ....–.....2.71.07 Wastefulness of government spending..................127 ....– .....1.91.08 Burden of government regulation...........................128 ....– .....1.91.09 Efficiency of legal framework .................................105 ....–.....2.91.10 Transparency of government policymaking ............107 ....–.....3.31.11 Business costs of terrorism......................................10 ...+.....6.21.12 Business costs of crime and violence....................121 ....–.....2.81.13 Organized crime......................................................125 ....–.....3.31.14 Reliability of police services ...................................120 ....–.....2.61.15 Ethical behavior of firms...........................................98 ....–.....3.81.16 Strength of auditing and reporting standards...........63 ...+.....4.81.17 Efficacy of corporate boards.....................................65 ...+.....4.61.18 Protection of minority shareholders’ interests .........46 ...+.....4.8
2nd pillar: Infrastructure2.01 Quality of overall infrastructure ................................97 ....–.....2.72.02 Quality of roads.......................................................110 ....–.....2.32.03 Quality of railroad infrastructure ...............................91 ....– .....1.72.04 Quality of port infrastructure...................................116 ....–.....2.62.05 Quality of air transport infrastructure .......................87 ....–.....4.02.07 Quality of electricity supply ......................................61 ...+.....4.92.08 Telephone lines*.......................................................60 ...+ ...21.4
3rd pillar: Macroeconomic stability3.01 Government surplus/deficit* ....................................98 ....–....-3.03.02 National savings rate* ..............................................82 ....– ...18.33.03 Inflation*...................................................................61 ....–.....4.23.04 Interest rate spread* ..............................................127 ....–...36.93.05 Government debt* ...................................................99 ....–...65.5
4th pillar: Health and primary education4.01 Business impact of malaria .....................................n/a4.02 Malaria incidence*..................................................105 ....–.254.24.03 Business impact of tuberculosis ..............................47 ....–.....6.24.04 Tuberculosis incidence* ...........................................69 ....–...59.64.05 Business impact of HIV/AIDS...................................61 ....–.....5.34.06 HIV prevalence* .......................................................77 ....–.....0.54.07 Infant mortality* .......................................................91 ....–...32.04.08 Life expectancy* ......................................................81 ....–...70.04.09 Quality of primary education ..................................123 ....–.....2.24.10 Primary enrollment* .................................................45 ....–...95.34.11 Education expenditure*............................................64 ....–.....4.1
5th pillar: Higher education and training5.01 Secondary enrollment* ............................................21 ...+ .102.05.02 Tertiary enrollment*..................................................75 ....–...22.35.03 Quality of the educational system..........................120 ....–.....2.55.04 Quality of math and science education ..................117 ....–.....2.85.05 Quality of management schools...............................66 ....–.....4.15.06 Internet access in schools........................................70 ....–.....3.35.07 Local availability of research and training services...32 ...+.....4.75.08 Extent of staff training..............................................45 ...+.....4.2
6th pillar: Goods market efficiency6.01 Intensity of local competition ...................................45 ...+.....5.36.02 Extent of market dominance....................................45 ...+.....4.26.03 Effectiveness of anti-monopoly policy......................47 ...+.....4.36.04 Extent and effect of taxation ..................................131 ....– .....1.56.05 Total tax rate* .........................................................109 ....– ...71.76.06 No. of procedures required to start a business*....121 ....–....17.0
INDICATOR RANK/131 VALUE
6.07 Time required to start a business*.........................123 ....– .152.06.08 Agricultural policy costs............................................40 ...+.....4.16.09 Prevalence of trade barriers......................................98 ....–.....4.06.10 Trade-weighted tariff rate* .......................................80 ...+.....8.26.11 Prevalence of foreign ownership..............................95 ....–.....4.66.12 Business impact of rules on FDI ..............................96 ....–.....4.66.13 Burden of customs procedures..............................124 ....–.....2.56.14 Degree of customer orientation ...............................61 ....–.....4.76.15 Buyer sophistication .................................................65 ....–.....3.8
7th pillar: Labor market efficiency7.01 Cooperation in labor-employer relations ...................96 ....–.....4.27.02 Flexibility of wage determination............................108 ....–.....4.27.03 Non-wage labor costs* ...........................................119 ....– ...37.57.04 Rigidity of employment* ..........................................73 ....–...42.07.05 Hiring and firing practices.......................................121 ....–.....2.77.06 Firing costs* .............................................................65 ...+...36.87.07 Pay and productivity .................................................93 ....–.....3.87.08 Reliance on professional management ....................40 ...+.....5.07.09 Brain drain ................................................................40 ...+.....3.97.10 Female participation in labor force* .........................72 ...+.....0.7
8th pillar: Financial market sophistication8.01 Financial market sophistication ................................31 ...+.....5.48.02 Financing through local equity market .....................61 ...+.....4.88.03 Ease of access to loans............................................89 ....–.....2.88.04 Venture capital availability .......................................103 ....–.....2.58.05 Restriction on capital flows ....................................123 ....–.....3.18.06 Strength of investor protection* ..............................45 ....–.....5.38.07 Soundness of banks .................................................36 ...+.....6.18.08 Regulation of securities exchanges..........................41 ...+.....5.18.09 Legal rights index*..................................................118....=.....2.0
9th pillar: Technological readiness9.01 Availability of latest technologies .............................60 ...+.....4.39.02 Firm-level technology absorption..............................55 ...+.....4.99.03 Laws relating to ICT .................................................52 ...+.....4.09.04 FDI and technology transfer .....................................47 ....–.....5.19.05 Mobile telephone subscribers* ................................68 ...+...46.29.06 Internet users* .........................................................58 ...+....17.29.07 Personal computers*................................................47 ...+ ...16.19.08 Broadband Internet subscribers* .............................54 ....– .....1.8
11th pillar: Business sophistication11.01 Local supplier quantity..............................................21 ...+.....5.411.02 Local supplier quality ................................................40 ...+.....5.011.03 State of cluster development ...................................41 ...+.....3.911.04 Nature of competitive advantage .............................99 ....–.....3.011.05 Value chain breadth ..................................................67 ....–.....3.611.06 Control of international distribution ..........................49 ...+.....4.311.07 Production process sophistication............................36 ...+.....4.411.08 Extent of marketing..................................................33 ...+.....5.211.09 Willingness to delegate authority.............................39 ...+.....4.2
12th pillar: Innovation12.01 Capacity for innovation .............................................29 ...+.....4.012.02 Quality of scientific research institutions .................42 ...+.....4.312.03 Company spending on R&D.....................................35 ...+.....3.812.04 University-industry research collaboration................46 ...+.....3.412.05 Gov’t procurement of advanced tech products........67 ...+.....3.612.06 Availability of scientists and engineers.....................60 ...+.....4.412.07 Utility patents* .........................................................55 ...+.....0.6
Brazil
* Hard data
Note: For further details and explanation, please refer to the section "How to Read the Country/Economy Profiles" at the beginning of this chapter.
9
MexicoThe Global Competitiveness Index in detail � competitive advantages � /� improve/worsen between 2006-2007 and 2007-2008
� competitive disadvantages � /� improve/worsen between 2005-2006 and 2006-2007
INDICATOR RANK SCORE LA&C OECD BEST PERFORMER EVOLUTION
1st pillar: Institutions1.01 Property rights ..........................................................................77....................� ..................4.3 ................4.2 ................5.8 ....................6.7 Germany .......................�..........�1.02 Intellectual property protection .............................................65....................� ..................3.5 ................3.2 ................5.3 ....................6.5 Germany .......................�..........�1.03 Diversion of public funds ........................................................80....................� ..................3.3 ................3.2 ................5.2 ....................6.6 Denmark .......................�..........�1.04 Public trust of politicians ........................................................91....................� ..................2.1 ................2.1 ................3.9 ....................6.4 Singapore .....................�..........�1.05 Judicial independence ............................................................75....................� ..................3.6 ................3.3 ................5.4 ....................6.5 Germany .......................�..........�1.06 Favoritism in decisions of government officials..................90....................� ..................2.7 ................2.7 ................4.2 ....................5.7 Finland...........................�..........�1.07 Wastefulness of government spending................................61....................� ..................3.4 ................2.9 ................3.9 ....................5.9 Singapore .....................�..........�1.08 Burden of government regulation .......................................112....................� ..................2.6 ................2.8 ................3.3 ....................5.3 Singapore .....................�..........�1.09 Efficiency of legal framework ................................................96....................� ..................3.1 ................3.2 ................5.0 ....................6.5 Denmark .......................�..........�1.10 Transparency of government policymaking.........................76....................� ..................3.9 ................3.7 ................4.8 ....................6.1 Singapore .....................�..........�1.11 Business costs of terrorism....................................................53....................� ..................5.6 ................5.3 ................5.5 ....................6.6 Finland...........................�..........�1.12 Business costs of crime and violence................................119....................� ..................2.9 ................3.3 ................5.5 ....................6.7 Syria ..............................�..........�1.13 Organized crime......................................................................120....................� ..................3.4 ................4.2 ................5.7 ....................6.7 Iceland ..........................�..........�1.14 Reliability of police services.................................................119....................� ..................2.6 ................3.3 ................5.5 ....................6.7 Finland...........................�..........�1.15 Ethical behavior of firms .........................................................51....................� ..................4.4 ................4.1 ................5.4 ....................6.6 Finland...........................�..........�1.16 Strength of auditing and reporting standards .....................69....................� ..................4.6 ................4.4 ................5.7 ....................6.3 Germany .......................�..........�1.17 Efficacy of corporate boards..................................................67....................� ..................4.6 ................4.6 ................5.2 ....................6.1 Sweden.........................�..........�1.18 Protection of minority shareholders’ interests....................68....................� ..................4.4 ................4.1 ................5.3 ....................6.4 Sweden.........................�..........�
2nd pillar: Infrastructure2.01 Quality of overall infrastructure .............................................69....................� ..................3.4 ................3.3 ................5.3 ....................6.7 Switzerland ..................�..........�2.02 Quality of roads.........................................................................59....................� ..................3.6 ................3.3 ................5.1 ....................6.7 France ...........................�..........n/a2.03 Quality of railroad infrastructure ...........................................74....................� ..................2.2 ................1.6 ................4.6 ....................6.8 Switzerland ..................�..........�2.04 Quality of port infrastructure ..................................................91....................� ..................3.3 ................3.6 ................5.1 ....................6.8 Singapore .....................�..........�2.05 Quality of air transport infrastructure...................................60....................� ..................4.8 ................4.4 ................5.6 ....................6.9 Singapore .....................�..........�2.07 Quality of electricity supply ....................................................82....................� ..................4.1 ................4.2 ................6.1 ....................6.9 Denmark .......................�..........�2.08 Main telephone lines (per 100 pop.)*....................................65....................� ................18.2 ..............17.5 ..............47.1 ..................69.0 Switzerland ..................�..........�
3rd pillar: Macroeconomic stability3.01 Central government balance (% of GDP)* ...........................49....................� ..................0.1 ...............-0.3 ................0.0 ..................42.1 Libya ..............................�..........�3.02 National savings rate (% of GDP)* ........................................67....................� ................21.8 ..............21.4 ..............22.1 ..................65.2 Kuwait ...........................�..........�3.03 Annual percent change in consumer price index ..............54....................� ..................3.6 ................6.7 ................2.8 ....................0.2 Japan ............................�..........�3.04 Interest rate spread (%)* ........................................................46....................� ..................4.2 ................9.6 ................3.8 ....................0.6 Netherlands .................�..........�3.05 Government gross debt (% of GDP)* ....................................23....................� ................20.2 ..............49.6 ..............53.7 ....................0.0 Timor-Leste...................�..........�
4th pillar: Health and primary education4.01 Business impact of malaria ....................................................43....................� ..................6.5 ................5.9 ................6.6 ....................6.9 Iceland ..........................�..........�4.02 Malaria incidence (cases per 100,000 pop.)* ......................76....................� ..................3.2 ............325.7 ................0.6 ....................0.0 Multiple (57) .................=..........�4.03 Business impact of tuberculosis ...........................................37....................� ..................6.3 ................5.8 ................6.4 ....................6.9 Denmark .......................�..........�4.04 Tuberculosis incidence (cases per 100,000 pop.)* .............39....................� ................22.7 ..............62.3 ..............16.1 ....................2.8 Iceland ..........................�..........�4.05 Business impact of HIV/AIDS.................................................57....................� ..................5.4 ................4.7 ................5.9 ....................6.6 Iceland ..........................�..........�4.06 HIV prevalence (% of adult pop.)*.........................................64....................� ..................0.3 ................0.9 ................0.3 ....................0.1 Multiple (24) .................=..........=4.07 Infant mortality (deaths per 1,000 live births)* ....................75....................� ................23.0 ..............23.1 ................5.9 ....................2.0 Multiple (2) ...................=..........�4.08 Life expectancy at birth (years)* ...........................................46....................� ................74.0 ..............71.6 ..............78.3 ..................82.0 Multiple (2) ...................=..........=4.09 Quality of primary education ..................................................95....................� ..................2.7 ................2.9 ................4.9 ....................6.5 Finland...........................n/a ........n/a4.10 Primary education enrollment (net rate, %)*.......................23....................� ................98.0 ..............93.1 ..............96.2 ..................99.8 Japan ............................�..........�4.11 Education expenditure (% of GNI)*.......................................33....................� ..................5.3 ................3.9 ................5.1 ....................9.4 Uzbekistan....................=..........n/a
5th pillar: Higher education and training5.01 Secondary education enrollment (gross rate, %)*.............80....................� ................79.7 ..............80.5 ............104.0 ................148.6 Australia .......................=..........�5.02 Tertiary education enrollment (gross rate, %)*...................73....................� ................23.4 ..............27.4 ..............60.4 ..................89.9 Korea.............................�..........�5.03 Quality of the educational system .........................................92....................� ..................3.0 ................3.0 ................4.7 ....................6.0 Singapore .....................�..........�5.04 Quality of math and science education..............................113....................� ..................2.8 ................3.1 ................4.9 ....................6.3 Singapore .....................�..........�5.05 Quality of management schools ............................................49....................� ..................4.4 ................4.1 ................5.1 ....................6.0 France ...........................�..........�5.06 Internet access in schools .....................................................62....................� ..................3.5 ................3.0 ................5.2 ....................6.5 Iceland ..........................�..........�5.07 Local availability of specialized research and training services.........52....................� ..................4.1 ................3.7 ................5.1 ....................6.0 Switzerland ..................�..........�5.08 Extent of staff training .............................................................65....................� ..................3.8 ................3.6 ................4.9 ....................5.9 Denmark .......................�..........�
6th pillar: Goods market efficiency6.01 Intensity of local competition .................................................66....................� ..................4.9 ................4.7 ................5.6 ....................6.3 Germany .......................�..........�6.02 Extent of market dominance...................................................87....................� ..................3.3 ................3.4 ................5.0 ....................6.2 Germany .......................�..........�6.03 Effectiveness of anti-monopoly policy..................................77....................� ..................3.6 ................3.5 ................5.2 ....................6.1 Germany .......................�..........�6.04 Extent and effect of taxation ..................................................80....................� ..................3.2 ................3.2 ................3.5 ....................6.3 Bahrain .........................�..........�6.05 Total tax rate (% of profits)* ...................................................34....................� ................37.1 ..............52.4 ..............47.5 ..................14.9 Saudi Arabia ................�..........n/a6.06 Number of procedures required to start a business*........37....................� ..................8.0 ..............11.2 ................6.7 ....................2.0 Multiple (3) ...................�..........=6.07 Number of days required to start a business*....................48....................� ................27.0 ..............79.7 ..............18.4 ....................2.0 Australia .......................�..........=6.08 Agricultural policy costs .......................................................105....................� ..................3.4 ................3.8 ................3.8 ....................5.6 New Zealand................�..........�
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.
MexicoKey indicators
Total population (millions), 2007......................................................................109.6GDP (US$ billions), 2007...................................................................................886.4GDP per capita (PPP, US$), 2007 .................................................................8,426.3Real growth in GDP (percent), 2007...................................................................2.9Current account balance (percent of GDP), 2006................................................-0.2Total reserves in months of imports, 2005 ........................................................3.4Unemployment (percent of total labour force), 2007 ......................................3.7GINI index, 2004...................................................................................................46.1
The Global Competitiveness Index in detailRank Score
(out of 131) (1–7)
Global Competitiveness Index 2007-2008 .........52 ......4.3GCI 2006-2007 (out of 122) ......................................................52 ........4.2GCI 2005-2006 (out of 114) ......................................................53 ........4.1
Source: World Economic Forum, Global Competitiveness Report 2007-2008
The most problematic factors for doing business
Inefficient government bureaucracy .................15.6%Corruption ...............................................................12.5%Access to financing ..............................................12.0%Inadequate supply of infrastructure ..................10.8%Crime and theft ......................................................10.6%Tax regulations.........................................................9.3%Restrictive labour regulations...............................8.6%Policy instability.......................................................7.6%Tax rates....................................................................6.3%Inadequately educated workforce.......................3.8%Poor work ethic in national labour force ............1.9%Inflation .....................................................................0.6%Government instability/coups................................0.2%Foreign currency regulations................................0.2%
Source: World Economic Forum, Executive Opinion Survey 2006, 2007
10th pillar: Market size10.01 Domestic market size index*..................................................12....................� ..................5.3 ................3.2 ................4.6 ....................7.0 United States ...............�..........�10.02 Foreign market size index* .....................................................17....................� ..................5.4 ................3.5 ................5.0 ....................7.0 China .............................�..........�
11th pillar: Business sophistication11.01 Local supplier quantity ............................................................66....................� ..................4.7 ................4.5 ................5.4 ....................6.3 Germany .......................�..........�11.02 Local supplier quality...............................................................49....................� ..................4.7 ................4.3 ................5.5 ....................6.5 Germany .......................�..........�11.03 State of cluster development .................................................54....................� ..................3.6 ................3.3 ................4.3 ....................5.7 Taiwan, China ..............�..........�11.04 Nature of competitive advantage..........................................60....................� ..................3.5 ................3.4 ................4.9 ....................6.3 Germany .......................�..........�11.05 Value chain breadth .................................................................46....................� ..................4.0 ................3.3 ................5.1 ....................6.3 Switzerland ..................�..........�11.06 Control of international distribution ......................................71....................� ..................4.0 ................3.8 ................4.7 ....................5.5 Iceland ..........................�..........�11.07 Production process sophistication........................................56....................� ..................3.9 ................3.5 ................5.2 ....................6.3 Germany .......................�..........�11.08 Extent of marketing ..................................................................50....................� ..................4.8 ................4.5 ................5.5 ....................6.3 United States ...............�..........�11.09 Willingness to delegate authority..........................................46....................� ..................4.1 ................3.8 ................4.9 ....................6.3 Sweden.........................�..........�
12th pillar: Innovation12.01 Capacity for innovation............................................................58....................� ..................3.3 ................3.0 ................4.7 ....................6.1 Germany .......................�..........�12.02 Quality of scientific research institutions ............................65....................� ..................3.8 ................3.4 ................5.0 ....................6.2 Switzerland ..................�..........�12.03 Company spending on R&D....................................................69....................� ..................3.1 ................3.0 ................4.5 ....................6.1 Switzerland ..................�..........�12.04 University-industry research collaboration .........................59....................� ..................3.2 ................2.9 ................4.4 ....................5.6 United States ...............�..........�12.05 Government procurement of advanced technology products.......93....................� ..................3.3 ................3.3 ................4.1 ....................5.5 Singapore .....................�..........�12.06 Availability of scientists and engineers................................96....................� ..................3.8 ................3.9 ................5.2 ....................6.0 Finland...........................�..........�12.07 USPTA utility patents granted in 2006 (per mio pop.)*..........56....................� ..................0.6 ................1.1 ..............73.5 ................298.4 United States ...............�..........�
MexicoThe Global Competitiveness Index in detail (next)
* Hard data
Note: For further details and explanation, please refer to the section "How to Read the Competitiveness Profiles" on page XXX.
Total population (millions), 2007......................................................................191.3GDP (US$ billions), 2007................................................................................1,295.4GDP per capita (PPP, US$), 2007 .................................................................6,841.6Real growth in GDP (percent), 2007...................................................................4.4Current account balance (percent of GDP), 2006 .................................................1.3Total reserves in months of imports, 2005 ........................................................5.1Unemployment (percent of total labour force), 2007 ......................................9.8GINI index, 2004...................................................................................................57.0
Competitiveness rankingsRank Score
(out of 131) (1–7)
Global Competitiveness Index 2007-2008 .........72 ......4.0GCI 2006-2007 (out of 122) ......................................................66 ........4.1
Poor work ethic in national labour force..............1.2% .........1.9%
Government instability/coups .................................1.1% .........0.2%
Institutions
Infrastructure
Macroeconomicstability
Health and primary
education
Higher education and training
Goods market efficiency
Labor market efficiency
Financial market sophistication
Technological readiness
Market size
Businesssophistication
Innovation
1
2
3
4
5
6
7
Source: World Economic Forum, Executive Opinion Survey 2006, 2007
BrazilMexico
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.
The Global Competitiveness Index in detail + Better than Mexico (45 times) – Worse than Mexico (65 times)
INDICATOR RANK/131 VALUE
1st pillar: Institutions1.01 Property rights..........................................................70 ...+.....4.51.02 Intellectual property protection ................................73 ....–.....3.31.03 Diversion of public funds........................................124 ....–.....2.21.04 Public trust of politicians.........................................126 ....– .....1.41.05 Judicial independence ..............................................89 ....–.....3.11.06 Favoritism in decisions of government officials .......91 ....–.....2.71.07 Wastefulness of government spending..................127 ....– .....1.91.08 Burden of government regulation...........................128 ....– .....1.91.09 Efficiency of legal framework .................................105 ....–.....2.91.10 Transparency of government policymaking ............107 ....–.....3.31.11 Business costs of terrorism......................................10 ...+.....6.21.12 Business costs of crime and violence....................121 ....–.....2.81.13 Organized crime......................................................125 ....–.....3.31.14 Reliability of police services ...................................120 ....–.....2.61.15 Ethical behavior of firms...........................................98 ....–.....3.81.16 Strength of auditing and reporting standards...........63 ...+.....4.81.17 Efficacy of corporate boards.....................................65 ...+.....4.61.18 Protection of minority shareholders’ interests .........46 ...+.....4.8
2nd pillar: Infrastructure2.01 Quality of overall infrastructure ................................97 ....–.....2.72.02 Quality of roads.......................................................110 ....–.....2.32.03 Quality of railroad infrastructure ...............................91 ....– .....1.72.04 Quality of port infrastructure...................................116 ....–.....2.62.05 Quality of air transport infrastructure .......................87 ....–.....4.02.07 Quality of electricity supply ......................................61 ...+.....4.92.08 Telephone lines*.......................................................60 ...+ ...21.4
3rd pillar: Macroeconomic stability3.01 Government surplus/deficit* ....................................98 ....–....-3.03.02 National savings rate* ..............................................82 ....– ...18.33.03 Inflation*...................................................................61 ....–.....4.23.04 Interest rate spread* ..............................................127 ....–...36.93.05 Government debt* ...................................................99 ....–...65.5
4th pillar: Health and primary education4.01 Business impact of malaria .....................................n/a4.02 Malaria incidence*..................................................105 ....–.254.24.03 Business impact of tuberculosis ..............................47 ....–.....6.24.04 Tuberculosis incidence* ...........................................69 ....–...59.64.05 Business impact of HIV/AIDS...................................61 ....–.....5.34.06 HIV prevalence* .......................................................77 ....–.....0.54.07 Infant mortality* .......................................................91 ....–...32.04.08 Life expectancy* ......................................................81 ....–...70.04.09 Quality of primary education ..................................123 ....–.....2.24.10 Primary enrollment* .................................................45 ....–...95.34.11 Education expenditure*............................................64 ....–.....4.1
5th pillar: Higher education and training5.01 Secondary enrollment* ............................................21 ...+ .102.05.02 Tertiary enrollment*..................................................75 ....–...22.35.03 Quality of the educational system..........................120 ....–.....2.55.04 Quality of math and science education ..................117 ....–.....2.85.05 Quality of management schools...............................66 ....–.....4.15.06 Internet access in schools........................................70 ....–.....3.35.07 Local availability of research and training services...32 ...+.....4.75.08 Extent of staff training..............................................45 ...+.....4.2
6th pillar: Goods market efficiency6.01 Intensity of local competition ...................................45 ...+.....5.36.02 Extent of market dominance....................................45 ...+.....4.26.03 Effectiveness of anti-monopoly policy......................47 ...+.....4.36.04 Extent and effect of taxation ..................................131 ....– .....1.56.05 Total tax rate* .........................................................109 ....– ...71.76.06 No. of procedures required to start a business*....121 ....–....17.0
INDICATOR RANK/131 VALUE
6.07 Time required to start a business*.........................123 ....– .152.06.08 Agricultural policy costs............................................40 ...+.....4.16.09 Prevalence of trade barriers......................................98 ....–.....4.06.10 Trade-weighted tariff rate* .......................................80 ...+.....8.26.11 Prevalence of foreign ownership..............................95 ....–.....4.66.12 Business impact of rules on FDI ..............................96 ....–.....4.66.13 Burden of customs procedures..............................124 ....–.....2.56.14 Degree of customer orientation ...............................61 ....–.....4.76.15 Buyer sophistication .................................................65 ....–.....3.8
7th pillar: Labor market efficiency7.01 Cooperation in labor-employer relations ...................96 ....–.....4.27.02 Flexibility of wage determination............................108 ....–.....4.27.03 Non-wage labor costs* ...........................................119 ....– ...37.57.04 Rigidity of employment* ..........................................73 ....–...42.07.05 Hiring and firing practices.......................................121 ....–.....2.77.06 Firing costs* .............................................................65 ...+...36.87.07 Pay and productivity .................................................93 ....–.....3.87.08 Reliance on professional management ....................40 ...+.....5.07.09 Brain drain ................................................................40 ...+.....3.97.10 Female participation in labor force* .........................72 ...+.....0.7
8th pillar: Financial market sophistication8.01 Financial market sophistication ................................31 ...+.....5.48.02 Financing through local equity market .....................61 ...+.....4.88.03 Ease of access to loans............................................89 ....–.....2.88.04 Venture capital availability .......................................103 ....–.....2.58.05 Restriction on capital flows ....................................123 ....–.....3.18.06 Strength of investor protection* ..............................45 ....–.....5.38.07 Soundness of banks .................................................36 ...+.....6.18.08 Regulation of securities exchanges..........................41 ...+.....5.18.09 Legal rights index*..................................................118....=.....2.0
9th pillar: Technological readiness9.01 Availability of latest technologies .............................60 ...+.....4.39.02 Firm-level technology absorption..............................55 ...+.....4.99.03 Laws relating to ICT .................................................52 ...+.....4.09.04 FDI and technology transfer .....................................47 ....–.....5.19.05 Mobile telephone subscribers* ................................68 ...+...46.29.06 Internet users* .........................................................58 ...+....17.29.07 Personal computers*................................................47 ...+ ...16.19.08 Broadband Internet subscribers* .............................54 ....– .....1.8
11th pillar: Business sophistication11.01 Local supplier quantity..............................................21 ...+.....5.411.02 Local supplier quality ................................................40 ...+.....5.011.03 State of cluster development ...................................41 ...+.....3.911.04 Nature of competitive advantage .............................99 ....–.....3.011.05 Value chain breadth ..................................................67 ....–.....3.611.06 Control of international distribution ..........................49 ...+.....4.311.07 Production process sophistication............................36 ...+.....4.411.08 Extent of marketing..................................................33 ...+.....5.211.09 Willingness to delegate authority.............................39 ...+.....4.2
12th pillar: Innovation12.01 Capacity for innovation .............................................29 ...+.....4.012.02 Quality of scientific research institutions .................42 ...+.....4.312.03 Company spending on R&D.....................................35 ...+.....3.812.04 University-industry research collaboration................46 ...+.....3.412.05 Gov’t procurement of advanced tech products........67 ...+.....3.612.06 Availability of scientists and engineers.....................60 ...+.....4.412.07 Utility patents* .........................................................55 ...+.....0.6
Brazil
* Hard data
Note: For further details and explanation, please refer to the section "How to Read the Country/Economy Profiles" at the beginning of this chapter.
Total population (millions), 2007........................................................................16.6GDP (US$ billions), 2007...................................................................................160.8GDP per capita (PPP, US$), 2007 .................................................................9,697.7Real growth in GDP (percent), 2007...................................................................5.9Current account balance (percent of GDP), 2006 .................................................3.6Total reserves in months of imports, 2005 ........................................................4.0Unemployment (percent of total labour force), 2007 ......................................6.5GINI index, 2004...................................................................................................54.9
Competitiveness rankingsRank Score
(out of 131) (1–7)
Global Competitiveness Index 2007-2008 .........26 ......4.8GCI 2006-2007 (out of 122) ......................................................27 ........4.8
Government instability/coups .................................0.0% .........0.2%
Institutions
Infrastructure
Macroeconomicstability
Health and primary
education
Higher education and training
Goods market efficiency
Labor market efficiency
Financial market sophistication
Technological readiness
Market size
Businesssophistication
Innovation
1
2
3
4
5
6
7
Source: World Economic Forum, Executive Opinion Survey 2006, 2007
ChileMexico
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.
The Global Competitiveness Index in detail + Better than Mexico (99 times) – Worse than Mexico (10 times)
INDICATOR RANK/131 VALUE
1st pillar: Institutions1.01 Property rights..........................................................40 ...+.....5.41.02 Intellectual property protection ................................49 ...+.....4.01.03 Diversion of public funds..........................................37 ...+.....4.61.04 Public trust of politicians ..........................................28 ...+.....3.71.05 Judicial independence ..............................................54 ...+.....4.21.06 Favoritism in decisions of government officials .......31 ...+.....3.81.07 Wastefulness of government spending ...................29 ...+.....4.11.08 Burden of government regulation ............................24 ...+.....3.81.09 Efficiency of legal framework ...................................35 ...+.....4.81.10 Transparency of government policymaking ..............19 ...+.....5.11.11 Business costs of terrorism .....................................28 ...+.....6.01.12 Business costs of crime and violence......................65 ...+.....4.61.13 Organized crime .......................................................28 ...+.....6.11.14 Reliability of police services .....................................26 ...+.....5.61.15 Ethical behavior of firms...........................................18 ...+.....5.51.16 Strength of auditing and reporting standards...........30 ...+.....5.51.17 Efficacy of corporate boards.....................................15 ...+.....5.51.18 Protection of minority shareholders’ interests .........28 ...+.....5.3
2nd pillar: Infrastructure2.01 Quality of overall infrastructure ................................30 ...+.....5.02.02 Quality of roads ........................................................22 ...+.....5.42.03 Quality of railroad infrastructure ...............................66 ...+.....2.52.04 Quality of port infrastructure ....................................34 ...+.....4.82.05 Quality of air transport infrastructure .......................31 ...+.....5.72.07 Quality of electricity supply ......................................39 ...+.....5.62.08 Telephone lines*.......................................................59 ...+...22.0
3rd pillar: Macroeconomic stability3.01 Government surplus/deficit*.....................................11 ...+ .....7.73.02 National savings rate* ..............................................59 ...+...24.03.03 Inflation*...................................................................50 ...+.....3.43.04 Interest rate spread* ................................................22 ...+.....2.93.05 Government debt* .....................................................5 ...+.....5.4
4th pillar: Health and primary education4.01 Business impact of malaria ....................................n /a4.02 Malaria incidence*....................................................58 ...+.....0.04.03 Business impact of tuberculosis...............................10 ...+.....6.74.04 Tuberculosis incidence* ...........................................32 ...+ ...14.64.05 Business impact of HIV/AIDS...................................43 ...+.....5.74.06 HIV prevalence* .......................................................64....=.....0.34.07 Infant mortality* .......................................................39 ...+.....8.04.08 Life expectancy* ......................................................31 ...+ ...77.04.09 Quality of primary education ..................................102 ....–.....2.74.10 Primary enrollment* .................................................79 ....–...89.74.11 Education expenditure* ...........................................73 ....–.....3.9
5th pillar: Higher education and training5.01 Secondary enrollment* ............................................53 ...+...89.15.02 Tertiary enrollment*..................................................41 ...+...43.05.03 Quality of the educational system............................78 ...+.....3.45.04 Quality of math and science education ..................107 ...+.....3.05.05 Quality of management schools...............................19 ...+.....5.35.06 Internet access in schools........................................39 ...+.....4.55.07 Local availability of research and training services...34 ...+.....4.65.08 Extent of staff training..............................................40 ...+.....4.3
6th pillar: Goods market efficiency6.01 Intensity of local competition ...................................14 ...+.....5.76.02 Extent of market dominance....................................67 ...+.....3.86.03 Effectiveness of anti-monopoly policy......................24 ...+.....5.26.04 Extent and effect of taxation ....................................36 ...+.....4.06.05 Total tax rate* ..........................................................11 ...+...26.36.06 No. of procedures required to start a business* .....52 ....–.....9.0
INDICATOR RANK/131 VALUE
6.07 Time required to start a business* ..........................48....= ...27.06.08 Agricultural policy costs..............................................7 ...+.....4.86.09 Prevalence of trade barriers ......................................11 ...+.....5.76.10 Trade-weighted tariff rate* .......................................64 ...+.....6.06.11 Prevalence of foreign ownership ..............................12 ...+.....6.06.12 Business impact of rules on FDI ..............................16 ...+.....5.86.13 Burden of customs procedures ................................10 ...+.....5.56.14 Degree of customer orientation ...............................46 ...+.....4.96.15 Buyer sophistication .................................................29 ...+.....4.7
7th pillar: Labor market efficiency7.01 Cooperation in labor-employer relations ...................29 ...+.....5.07.02 Flexibility of wage determination ...............................4 ...+.....6.17.03 Non-wage labor costs*.............................................12 ...+.....3.47.04 Rigidity of employment* ..........................................26 ...+...24.07.05 Hiring and firing practices.........................................62 ...+.....3.97.06 Firing costs* .............................................................81 ...+...52.07.07 Pay and productivity .................................................16 ...+.....5.07.08 Reliance on professional management ....................23 ...+.....5.57.09 Brain drain ..................................................................7 ...+.....5.47.10 Female participation in labor force*........................109 ...+.....0.5
8th pillar: Financial market sophistication8.01 Financial market sophistication ................................27 ...+.....5.58.02 Financing through local equity market .......................7 ...+.....5.98.03 Ease of access to loans............................................33 ...+.....4.38.04 Venture capital availability.........................................34 ...+.....3.98.05 Restriction on capital flows ......................................40 ....–.....5.88.06 Strength of investor protection*...............................19 ...+.....6.38.07 Soundness of banks .................................................21 ...+.....6.58.08 Regulation of securities exchanges............................7 ...+.....6.08.09 Legal rights index* ...................................................69 ...+.....4.0
9th pillar: Technological readiness9.01 Availability of latest technologies .............................34 ...+.....5.19.02 Firm-level technology absorption..............................38 ...+.....5.29.03 Laws relating to ICT .................................................25 ...+.....4.99.04 FDI and technology transfer .....................................30 ...+.....5.39.05 Mobile telephone subscribers* ................................51 ...+ ...67.89.06 Internet users* .........................................................39 ...+...28.99.07 Personal computers*................................................51 ...+ ...14.89.08 Broadband Internet subscribers* .............................38 ...+.....4.5
11th pillar: Business sophistication11.01 Local supplier quantity..............................................24 ...+.....5.311.02 Local supplier quality ................................................27 ...+.....5.411.03 State of cluster development ...................................53 ...+.....3.711.04 Nature of competitive advantage .............................52 ...+.....3.611.05 Value chain breadth ..................................................48 ....–.....4.011.06 Control of international distribution ..........................30 ...+.....4.611.07 Production process sophistication............................31 ...+.....4.711.08 Extent of marketing..................................................22 ...+.....5.511.09 Willingness to delegate authority.............................36 ...+.....4.3
12th pillar: Innovation12.01 Capacity for innovation .............................................50 ...+.....3.512.02 Quality of scientific research institutions .................51 ...+.....4.012.03 Company spending on R&D.....................................60 ...+.....3.312.04 University-industry research collaboration................43 ...+.....3.512.05 Gov't procurement of advanced tech products........40 ...+.....3.912.06 Availability of scientists and engineers.....................31 ...+.....4.912.07 Utility patents* .........................................................49 ...+.....0.8
Chile
* Hard data
Note: For further details and explanation, please refer to the section "How to Read the Country/Economy Profiles" at the beginning of this chapter.
Total population (millions), 2007...................................................................1,331.4GDP (US$ billions), 2007................................................................................3,248.5GDP per capita (PPP, US$), 2007 .................................................................2,459.8Real growth in GDP (percent), 2007.................................................................11.5Current account balance (percent of GDP), 2006 .................................................9.0Total reserves in months of imports, 2005 ......................................................13.5Unemployment (percent of total labour force), 2007 ......................................9.5GINI index, 2004...................................................................................................46.9
Competitiveness rankingsRank Score
(out of 131) (1–7)
Global Competitiveness Index 2007-2008 .........34 ......4.6GCI 2006-2007 (out of 122) ......................................................35 ........4.6
Government instability/coups .................................2.3% .........0.2%
Crime and theft ..........................................................1.6% .......10.6%
Institutions
Infrastructure
Macroeconomicstability
Health and primary
education
Higher education and training
Goods market efficiency
Labor market efficiency
Financial market sophistication
Technological readiness
Market size
Businesssophistication
Innovation
1
2
3
4
5
6
7
Source: World Economic Forum, Executive Opinion Survey 2006, 2007
ChinaMexico
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.
The Global Competitiveness Index in detail + Better than Mexico (57 times) – Worse than Mexico (53 times)
INDICATOR RANK/131 VALUE
1st pillar: Institutions1.01 Property rights ..........................................................76 ...+.....4.31.02 Intellectual property protection ................................71 ....–.....3.41.03 Diversion of public funds..........................................83 ....–.....3.21.04 Public trust of politicians ..........................................45 ...+.....3.11.05 Judicial independence ..............................................82 ....–.....3.41.06 Favoritism in decisions of government officials .......71 ...+.....3.01.07 Wastefulness of government spending ...................48 ...+.....3.61.08 Burden of government regulation ............................35 ...+.....3.61.09 Efficiency of legal framework ...................................71 ...+.....3.61.10 Transparency of government policymaking ..............88 ....–.....3.81.11 Business costs of terrorism....................................109 ....–.....4.61.12 Business costs of crime and violence......................73 ...+.....4.41.13 Organized crime .......................................................99 ...+.....4.21.14 Reliability of police services .....................................59 ...+.....4.41.15 Ethical behavior of firms .........................................101 ....–.....3.71.16 Strength of auditing and reporting standards.........102 ....–.....3.81.17 Efficacy of corporate boards ...................................115 ....–.....4.01.18 Protection of minority shareholders’ interests........114 ....–.....3.6
2nd pillar: Infrastructure2.01 Quality of overall infrastructure ................................65 ...+.....3.62.02 Quality of roads ........................................................53 ...+.....3.92.03 Quality of railroad infrastructure ...............................33 ...+.....3.92.04 Quality of port infrastructure ....................................66 ...+.....4.02.05 Quality of air transport infrastructure .......................86 ....–.....4.12.07 Quality of electricity supply ......................................78 ...+.....4.22.08 Telephone lines*.......................................................48 ...+...26.6
3rd pillar: Macroeconomic stability3.01 Government surplus/deficit* ....................................69 ....– ....-1.23.02 National savings rate* ................................................7 ...+ ...51.23.03 Inflation*.....................................................................7 ...+ .....1.53.04 Interest rate spread* ................................................36 ...+.....3.63.05 Government debt* ...................................................24 ....–...22.0
4th pillar: Health and primary education4.01 Business impact of malaria ....................................n /a4.02 Malaria incidence*....................................................75 ...+.....3.14.03 Business impact of tuberculosis ..............................85 ....–.....5.54.04 Tuberculosis incidence* ...........................................87 ....– .100.34.05 Business impact of HIV/AIDS...................................56 ...+.....5.44.06 HIV prevalence* .......................................................25 ...+.....0.14.07 Infant mortality* .......................................................81 ....–...26.04.08 Life expectancy* ......................................................56 ....–...72.04.09 Quality of primary education ....................................48 ...+.....4.14.10 Primary enrollment* .................................................50 ....–...94.64.11 Education expenditure* ..........................................111 ....–.....2.0
5th pillar: Higher education and training5.01 Secondary enrollment* ............................................91 ....–...72.55.02 Tertiary enrollment*..................................................80 ....– ...19.15.03 Quality of the educational system............................73 ...+.....3.45.04 Quality of math and science education....................57 ...+.....4.45.05 Quality of management schools...............................90 ....–.....3.65.06 Internet access in schools........................................46 ...+.....4.05.07 Local availability of research and training services...39 ...+.....4.45.08 Extent of staff training..............................................61 ...+.....3.8
6th pillar: Goods market efficiency6.01 Intensity of local competition ...................................39 ...+.....5.36.02 Extent of market dominance....................................66 ...+.....3.86.03 Effectiveness of anti-monopoly policy......................73 ...+.....3.76.04 Extent and effect of taxation ....................................47 ...+.....3.76.05 Total tax rate* ........................................................114 ....– ...77.16.06 No. of procedures required to start a business*....101 ....– ...13.0
INDICATOR RANK/131 VALUE
6.07 Time required to start a business* ..........................70 ....–...35.06.08 Agricultural policy costs..............................................8 ...+.....4.86.09 Prevalence of trade barriers......................................78 ....–.....4.36.10 Trade-weighted tariff rate* .......................................49 ...+.....4.76.11 Prevalence of foreign ownership ............................103 ....–.....4.46.12 Business impact of rules on FDI ..............................60 ....–.....5.36.13 Burden of customs procedures................................48 ...+.....4.26.14 Degree of customer orientation ...............................79 ....–.....4.46.15 Buyer sophistication .................................................39 ...+.....4.3
7th pillar: Labor market efficiency7.01 Cooperation in labor-employer relations ...................89 ....–.....4.37.02 Flexibility of wage determination .............................51 ...+.....5.47.03 Non-wage labor costs*...........................................122 ....–...44.07.04 Rigidity of employment* ..........................................26 ...+...24.07.05 Hiring and firing practices.........................................41 ...+.....4.37.06 Firing costs* ...........................................................107 ....– ...91.07.07 Pay and productivity .................................................15 ...+.....5.07.08 Reliance on professional management ....................63 ....–.....4.57.09 Brain drain ................................................................38 ...+.....3.97.10 Female participation in labor force* .........................27 ...+.....0.9
8th pillar: Financial market sophistication8.01 Financial market sophistication ................................91 ....–.....3.28.02 Financing through local equity market .....................82 ....–.....4.28.03 Ease of access to loans..........................................100 ....–.....2.68.04 Venture capital availability.........................................71 ...+.....3.08.05 Restriction on capital flows.....................................114 ....–.....3.58.06 Strength of investor protection* ..............................65 ....–.....5.08.07 Soundness of banks ...............................................128 ....–.....4.28.08 Regulation of securities exchanges.........................111 ....–.....3.48.09 Legal rights index*..................................................118....=.....2.0
9th pillar: Technological readiness9.01 Availability of latest technologies .............................79 ....–.....3.99.02 Firm-level technology absorption..............................50 ...+.....5.09.03 Laws relating to ICT .................................................57 ....–.....3.99.04 FDI and technology transfer .....................................90 ....–.....4.59.05 Mobile telephone subscribers* ................................86 ....–...29.99.06 Internet users* .........................................................80 ....–.....8.69.07 Personal computers*................................................86 ....–.....4.19.08 Broadband Internet subscribers* .............................46 ...+.....2.9
11th pillar: Business sophistication11.01 Local supplier quantity..............................................35 ...+.....5.211.02 Local supplier quality ................................................73 ....–.....4.311.03 State of cluster development ...................................29 ...+.....4.311.04 Nature of competitive advantage .............................80 ....–.....3.311.05 Value chain breadth ..................................................61 ....–.....3.711.06 Control of international distribution ..........................63 ...+.....4.011.07 Production process sophistication............................81 ....–.....3.311.08 Extent of marketing..................................................80 ....–.....4.011.09 Willingness to delegate authority.............................72 ....–.....3.8
12th pillar: Innovation12.01 Capacity for innovation .............................................34 ...+.....3.812.02 Quality of scientific research institutions .................56 ...+.....4.012.03 Company spending on R&D.....................................32 ...+.....3.912.04 University-industry research collaboration................25 ...+.....4.112.05 Gov't procurement of advanced tech products........23 ...+.....4.312.06 Availability of scientists and engineers.....................78 ...+.....4.212.07 Utility patents* .........................................................59 ....–.....0.5
China
* Hard data
Note: For further details and explanation, please refer to the section "How to Read the Country/Economy Profiles" at the beginning of this chapter.
Total population (millions), 2007........................................................................10.0GDP (US$ billions), 2007...................................................................................136.4GDP per capita (PPP, US$), 2007 ...............................................................13,560.4Real growth in GDP (percent), 2007...................................................................2.1Current account balance (percent of GDP), 2006................................................-6.5Total reserves in months of imports, 2005 ........................................................2.6Unemployment (percent of total labour force), 2007 ......................................7.4GINI index, 2002...................................................................................................26.9
Competitiveness rankingsRank Score
(out of 131) (1–7)
Global Competitiveness Index 2007-2008 .........47 ......4.4GCI 2006-2007 (out of 122) ......................................................38 ........4.5
Source: World Economic Forum, Executive Opinion Survey 2006, 2007
HungaryMexico
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.
The Global Competitiveness Index in detail + Better than Mexico (73 times) – Worse than Mexico (38 times)
INDICATOR RANK/131 VALUE
1st pillar: Institutions1.01 Property rights..........................................................37 ...+.....5.41.02 Intellectual property protection ................................37 ...+.....4.41.03 Diversion of public funds..........................................56 ...+.....3.81.04 Public trust of politicians ..........................................75 ...+.....2.31.05 Judicial independence ..............................................49 ...+.....4.41.06 Favoritism in decisions of government officials .......98 ....–.....2.61.07 Wastefulness of government spending ..................117 ....–.....2.51.08 Burden of government regulation ...........................110 ...+.....2.61.09 Efficiency of legal framework ...................................57 ...+.....3.81.10 Transparency of government policymaking ..............94 ....–.....3.71.11 Business costs of terrorism......................................11 ...+.....6.21.12 Business costs of crime and violence......................31 ...+.....5.51.13 Organized crime .......................................................48 ...+.....5.51.14 Reliability of police services .....................................41 ...+.....4.81.15 Ethical behavior of firms...........................................85 ....–.....3.91.16 Strength of auditing and reporting standards...........50 ...+.....5.11.17 Efficacy of corporate boards.....................................59 ...+.....4.71.18 Protection of minority shareholders’ interests .........48 ...+.....4.7
2nd pillar: Infrastructure2.01 Quality of overall infrastructure ................................52 ...+.....4.22.02 Quality of roads ........................................................64 ....–.....3.52.03 Quality of railroad infrastructure ...............................42 ...+.....3.42.04 Quality of port infrastructure ....................................71 ...+.....3.72.05 Quality of air transport infrastructure .......................72 ....–.....4.42.07 Quality of electricity supply ......................................49 ...+.....5.32.08 Telephone lines*.......................................................35 ...+...33.2
3rd pillar: Macroeconomic stability3.01 Government surplus/deficit* ..................................126 ....–....-9.23.02 National savings rate* ..............................................92 ....– ...15.83.03 Inflation*...................................................................59 ....–.....3.93.04 Interest rate spread* ................................................10 ...+.....2.03.05 Government debt*..................................................100 ....–...66.0
4th pillar: Health and primary education4.01 Business impact of malaria ....................................n /a4.02 Malaria incidence*......................................................1 ...+.....0.04.03 Business impact of tuberculosis ..............................46 ....–.....6.24.04 Tuberculosis incidence* ...........................................38 ...+ ...21.74.05 Business impact of HIV/AIDS...................................15 ...+.....6.14.06 HIV prevalence* .......................................................25 ...+.....0.14.07 Infant mortality* .......................................................35 ...+ .....7.04.08 Life expectancy* ......................................................51 ....–...73.04.09 Quality of primary education ....................................37 ...+.....4.54.10 Primary enrollment* .................................................84 ....–...88.84.11 Education expenditure* ...........................................19 ...+.....5.8
5th pillar: Higher education and training5.01 Secondary enrollment* ............................................37 ...+...96.55.02 Tertiary enrollment*..................................................25 ...+...59.65.03 Quality of the educational system............................65 ...+.....3.65.04 Quality of math and science education....................23 ...+.....5.15.05 Quality of management schools...............................57 ....–.....4.35.06 Internet access in schools........................................27 ...+.....5.15.07 Local availability of research and training services...61 ....–.....4.05.08 Extent of staff training ..............................................74 ....–.....3.6
6th pillar: Goods market efficiency6.01 Intensity of local competition ...................................32 ...+.....5.46.02 Extent of market dominance....................................64 ...+.....3.86.03 Effectiveness of anti-monopoly policy......................39 ...+.....4.56.04 Extent and effect of taxation...................................117 ....–.....2.56.05 Total tax rate* ..........................................................99 ....–...59.36.06 No. of procedures required to start a business*......16 ...+.....6.0
INDICATOR RANK/131 VALUE
6.07 Time required to start a business* ..........................78 ....–...38.06.08 Agricultural policy costs...........................................111 ....–.....3.36.09 Prevalence of trade barriers......................................19 ...+.....5.66.10 Trade-weighted tariff rate*........................................13 ...+.....3.46.11 Prevalence of foreign ownership ..............................13 ...+.....6.06.12 Business impact of rules on FDI ..............................31 ...+.....5.66.13 Burden of customs procedures................................44 ...+.....4.36.14 Degree of customer orientation ...............................86 ....–.....4.36.15 Buyer sophistication .................................................91 ....–.....3.3
7th pillar: Labor market efficiency7.01 Cooperation in labor-employer relations ...................43 ....–.....4.87.02 Flexibility of wage determination .............................61 ...+.....5.27.03 Non-wage labor costs* ...........................................117 ....–...35.27.04 Rigidity of employment* ..........................................50 ...+...34.07.05 Hiring and firing practices.........................................71 ...+.....3.87.06 Firing costs* .............................................................58 ...+...34.57.07 Pay and productivity .................................................56 ....–.....4.47.08 Reliance on professional management ....................58 ...+.....4.77.09 Brain drain ................................................................55 ....–.....3.57.10 Female participation in labor force* .........................50 ...+.....0.8
8th pillar: Financial market sophistication8.01 Financial market sophistication ................................47 ...+.....4.68.02 Financing through local equity market......................76 ....–.....4.38.03 Ease of access to loans............................................51 ...+.....3.78.04 Venture capital availability.........................................50 ...+.....3.48.05 Restriction on capital flows ......................................29 ...+.....6.08.06 Strength of investor protection* ..............................87 ....–.....4.38.07 Soundness of banks .................................................73 ....–.....5.58.08 Regulation of securities exchanges..........................46 ....–.....5.08.09 Legal rights index* ...................................................27 ...+.....6.0
9th pillar: Technological readiness9.01 Availability of latest technologies .............................56 ...+.....4.59.02 Firm-level technology absorption..............................48 ...+.....5.09.03 Laws relating to ICT .................................................48 ...+.....4.19.04 FDI and technology transfer .....................................12 ...+.....5.69.05 Mobile telephone subscribers* ................................25 ...+...92.39.06 Internet users* .........................................................38 ...+...29.79.07 Personal computers*................................................49 ...+ ...14.99.08 Broadband Internet subscribers* .............................36 ...+.....6.5
11th pillar: Business sophistication11.01 Local supplier quantity..............................................69 ....–.....4.711.02 Local supplier quality ................................................59 ....–.....4.511.03 State of cluster development .....................................6 ...+.....4.911.04 Nature of competitive advantage .............................54 ...+.....3.511.05 Value chain breadth ..................................................32 ...+.....4.411.06 Control of international distribution.........................110 ....–.....3.511.07 Production process sophistication............................45 ...+.....4.211.08 Extent of marketing..................................................63 ....–.....4.511.09 Willingness to delegate authority.............................85 ....–.....3.5
12th pillar: Innovation12.01 Capacity for innovation .............................................38 ...+.....3.712.02 Quality of scientific research institutions .................24 ...+.....4.912.03 Company spending on R&D.....................................68 ...+.....3.212.04 University-industry research collaboration................34 ...+.....3.712.05 Gov't procurement of advanced tech products........86 ...+.....3.412.06 Availability of scientists and engineers.....................40 ...+.....4.712.07 Utility patents* .........................................................32 ...+.....4.9
Hungary
* Hard data
Note: For further details and explanation, please refer to the section "How to Read the Country/Economy Profiles" at the beginning of this chapter.
Total population (millions), 2007...................................................................1,135.6GDP (US$ billions), 2007................................................................................1,089.9GDP per capita (PPP, US$), 2007 ....................................................................964.6Real growth in GDP (percent), 2007...................................................................8.9Current account balance (percent of GDP), 2006................................................-1.1Total reserves in months of imports, 2005 .......................................................n/aUnemployment (percent of total labour force), 2007 ......................................7.2GINI index, 2004-2005 .........................................................................................36.8
Competitiveness rankingsRank Score
(out of 131) (1–7)
Global Competitiveness Index 2007-2008 .........48 ......4.3GCI 2006-2007 (out of 122) ......................................................42 ........4.5
Government instability/coups .................................1.3% .........0.2%
Crime and theft ..........................................................0.7% .......10.6%
Institutions
Infrastructure
Macroeconomicstability
Health and primary
education
Higher education and training
Goods market efficiency
Labor market efficiency
Financial market sophistication
Technological readiness
Market size
Businesssophistication
Innovation
1
2
3
4
5
6
7
Source: World Economic Forum, Executive Opinion Survey 2006, 2007
IndiaMexico
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.
The Global Competitiveness Index in detail + Better than Mexico (68 times) – Worse than Mexico (42 times)
INDICATOR RANK/131 VALUE
1st pillar: Institutions1.01 Property rights..........................................................44 ...+.....5.31.02 Intellectual property protection ................................48 ...+.....4.01.03 Diversion of public funds..........................................64 ...+.....3.61.04 Public trust of politicians ..........................................83 ...+.....2.21.05 Judicial independence ..............................................26 ...+.....5.31.06 Favoritism in decisions of government officials .......54 ...+.....3.31.07 Wastefulness of government spending ...................47 ...+.....3.61.08 Burden of government regulation ............................79 ...+.....2.91.09 Efficiency of legal framework ...................................34 ...+.....4.81.10 Transparency of government policymaking ..............45 ...+.....4.41.11 Business costs of terrorism .....................................93 ....–.....4.91.12 Business costs of crime and violence......................45 ...+.....5.21.13 Organized crime .......................................................68 ...+.....5.11.14 Reliability of police services .....................................60 ...+.....4.41.15 Ethical behavior of firms...........................................60 ....–.....4.21.16 Strength of auditing and reporting standards...........27 ...+.....5.71.17 Efficacy of corporate boards.....................................33 ...+.....5.01.18 Protection of minority shareholders’ interests .........27 ...+.....5.3
2nd pillar: Infrastructure2.01 Quality of overall infrastructure ................................79 ....–.....3.12.02 Quality of roads ........................................................82 ....–.....3.12.03 Quality of railroad infrastructure ...............................23 ...+.....4.52.04 Quality of port infrastructure ....................................80 ...+.....3.52.05 Quality of air transport infrastructure .......................61 ....–.....4.82.07 Quality of electricity supply ....................................106 ....–.....3.12.08 Telephone lines*.....................................................102 ....–.....4.5
3rd pillar: Macroeconomic stability3.01 Government surplus/deficit* ..................................125 ....– ....-7.53.02 National savings rate* ..............................................38 ...+ ...27.33.03 Inflation*...................................................................81 ....–.....6.13.04 Interest rate spread* ................................................47 ....–.....4.23.05 Government debt*..................................................109 ....–...79.5
4th pillar: Health and primary education4.01 Business impact of malaria ....................................n /a4.02 Malaria incidence* ..................................................101 ....–..167.24.03 Business impact of tuberculosis ..............................91 ....–.....5.34.04 Tuberculosis incidence* ...........................................98 ....–..167.84.05 Business impact of HIV/AIDS.................................100 ....–.....4.44.06 HIV prevalence* .......................................................94 ....–.....0.94.07 Infant mortality* .....................................................106 ....–...62.04.08 Life expectancy*.....................................................104 ....–...62.04.09 Quality of primary education ....................................88 ...+.....3.04.10 Primary enrollment* .................................................85 ....–...88.84.11 Education expenditure* ...........................................69 ....–.....4.0
5th pillar: Higher education and training5.01 Secondary enrollment*...........................................103 ....–...53.55.02 Tertiary enrollment*..................................................98 ....–....11.85.03 Quality of the educational system............................31 ...+.....4.55.04 Quality of math and science education ....................11 ...+.....5.45.05 Quality of management schools.................................8 ...+.....5.75.06 Internet access in schools........................................56 ...+.....3.75.07 Local availability of research and training services...31 ...+.....4.75.08 Extent of staff training..............................................33 ...+.....4.6
6th pillar: Goods market efficiency6.01 Intensity of local competition ...................................10 ...+.....5.96.02 Extent of market dominance ....................................19 ...+.....5.26.03 Effectiveness of anti-monopoly policy......................30 ...+.....5.06.04 Extent and effect of taxation ....................................29 ...+.....4.26.05 Total tax rate* ........................................................116 ....– ...81.16.06 No. of procedures required to start a business* .....85 ....–....11.0
INDICATOR RANK/131 VALUE
6.07 Time required to start a business* ..........................70 ....–...35.06.08 Agricultural policy costs............................................68 ...+.....3.86.09 Prevalence of trade barriers......................................46 ...+.....4.86.10 Trade-weighted tariff rate*......................................118 ....– ...14.76.11 Prevalence of foreign ownership..............................63 ....–.....5.26.12 Business impact of rules on FDI ..............................49 ....–.....5.46.13 Burden of customs procedures................................73 ...+.....3.66.14 Degree of customer orientation ...............................33 ...+.....5.16.15 Buyer sophistication .................................................31 ...+.....4.7
7th pillar: Labor market efficiency7.01 Cooperation in labor-employer relations ...................56 ....–.....4.77.02 Flexibility of wage determination .............................57 ...+.....5.37.03 Non-wage labor costs*.............................................66 ...+ ...16.87.04 Rigidity of employment* ..........................................70 ....– ...41.07.05 Hiring and firing practices .......................................102 ....–.....3.17.06 Firing costs* .............................................................84 ...+...55.97.07 Pay and productivity .................................................46 ....–.....4.67.08 Reliance on professional management ....................24 ...+.....5.47.09 Brain drain ................................................................45 ...+.....3.87.10 Female participation in labor force* ........................116 ....–.....0.4
8th pillar: Financial market sophistication8.01 Financial market sophistication ................................33 ...+.....5.28.02 Financing through local equity market......................13 ...+.....5.78.03 Ease of access to loans............................................38 ...+.....4.28.04 Venture capital availability.........................................29 ...+.....4.18.05 Restriction on capital flows ......................................84 ....–.....4.48.06 Strength of investor protection* ..............................25....=.....6.08.07 Soundness of banks .................................................46 ...+.....5.98.08 Regulation of securities exchanges..........................30 ...+.....5.58.09 Legal rights index* ...................................................47 ...+.....5.0
9th pillar: Technological readiness9.01 Availability of latest technologies .............................31 ...+.....5.29.02 Firm-level technology absorption..............................22 ...+.....5.69.03 Laws relating to ICT .................................................36 ...+.....4.69.04 FDI and technology transfer .....................................28 ...+.....5.39.05 Mobile telephone subscribers*...............................114 ....–.....8.29.06 Internet users* .........................................................95 ....–.....5.49.07 Personal computers*..............................................105 ....– .....1.59.08 Broadband Internet subscribers* .............................88 ....–.....0.1
11th pillar: Business sophistication11.01 Local supplier quantity................................................6 ...+.....5.811.02 Local supplier quality ................................................33 ...+.....5.111.03 State of cluster development ...................................24 ...+.....4.411.04 Nature of competitive advantage .............................75 ....–.....3.311.05 Value chain breadth ..................................................27 ...+.....4.611.06 Control of international distribution ..........................31 ...+.....4.611.07 Production process sophistication............................41 ...+.....4.311.08 Extent of marketing..................................................30 ...+.....5.211.09 Willingness to delegate authority.............................32 ...+.....4.5
12th pillar: Innovation12.01 Capacity for innovation .............................................31 ...+.....4.012.02 Quality of scientific research institutions .................22 ...+.....5.112.03 Company spending on R&D.....................................28 ...+.....4.212.04 University-industry research collaboration................44 ...+.....3.512.05 Gov't procurement of advanced tech products........71 ...+.....3.612.06 Availability of scientists and engineers.......................4 ...+.....5.912.07 Utility patents* .........................................................62 ....–.....0.4
India
* Hard data
Note: For further details and explanation, please refer to the section "How to Read the Country/Economy Profiles" at the beginning of this chapter.
Total population (millions), 2007......................................................................228.1GDP (US$ billions), 2007...................................................................................410.3GDP per capita (PPP, US$), 2007 .................................................................1,824.1Real growth in GDP (percent), 2007...................................................................6.2Current account balance (percent of GDP), 2006 .................................................2.7Total reserves in months of imports, 2005 ........................................................4.1Unemployment (percent of total labour force), 2007 ......................................9.6GINI index, 2002...................................................................................................34.3
Competitiveness rankingsRank Score
(out of 131) (1–7)
Global Competitiveness Index 2007-2008 .........54 ......4.2GCI 2006-2007 (out of 122) ......................................................54 ........4.2
Poor work ethic in national labour force..............1.8% .........1.9%
Crime and theft ..........................................................0.5% .......10.6%
Institutions
Infrastructure
Macroeconomicstability
Health and primary
education
Higher education and training
Goods market efficiency
Labor market efficiency
Financial market sophistication
Technological readiness
Market size
Businesssophistication
Innovation
1
2
3
4
5
6
7
Source: World Economic Forum, Executive Opinion Survey 2006, 2007
IndonesiaMexico
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.
The Global Competitiveness Index in detail + Better than Mexico (60 times) – Worse than Mexico (51 times)
INDICATOR RANK/131 VALUE
1st pillar: Institutions1.01 Property rights ........................................................115 ....–.....3.41.02 Intellectual property protection ................................87 ....–.....3.11.03 Diversion of public funds..........................................77 ...+.....3.41.04 Public trust of politicians ..........................................63 ...+.....2.61.05 Judicial independence ..............................................98 ....–.....3.01.06 Favoritism in decisions of government officials .......41 ...+.....3.61.07 Wastefulness of government spending .....................7 ...+.....5.01.08 Burden of government regulation ............................22 ...+.....3.91.09 Efficiency of legal framework ...................................75 ...+.....3.51.10 Transparency of government policymaking ............131 ....–.....2.51.11 Business costs of terrorism .....................................30 ...+.....5.91.12 Business costs of crime and violence......................24 ...+.....5.71.13 Organized crime .......................................................37 ...+.....5.71.14 Reliability of police services .....................................93 ...+.....3.61.15 Ethical behavior of firms...........................................97 ....–.....3.81.16 Strength of auditing and reporting standards...........72 ....–.....4.51.17 Efficacy of corporate boards.....................................24 ...+.....5.41.18 Protection of minority shareholders’ interests..........11 ...+.....5.7
2nd pillar: Infrastructure2.01 Quality of overall infrastructure...............................102 ....–.....2.62.02 Quality of roads.......................................................113 ....–.....2.32.03 Quality of railroad infrastructure ...............................62 ...+.....2.72.04 Quality of port infrastructure...................................113 ....–.....2.72.05 Quality of air transport infrastructure .......................85 ....–.....4.12.07 Quality of electricity supply ......................................85 ....–.....4.02.08 Telephone lines*.....................................................100 ....–.....5.7
3rd pillar: Macroeconomic stability3.01 Government surplus/deficit* ....................................69 ....– ....-1.23.02 National savings rate* ..............................................39 ...+ ...27.23.03 Inflation* .................................................................126 ....– ...13.13.04 Interest rate spread* ................................................55 ....–.....4.63.05 Government debt* ...................................................63 ....–...42.3
4th pillar: Health and primary education4.01 Business impact of malaria ....................................n /a4.02 Malaria incidence*....................................................96 ....–...98.94.03 Business impact of tuberculosis ..............................49 ....–.....6.24.04 Tuberculosis incidence* ..........................................110 ....–.239.24.05 Business impact of HIV/AIDS...................................28 ...+.....6.04.06 HIV prevalence* .......................................................25 ...+.....0.14.07 Infant mortality* .......................................................87 ....–...30.04.08 Life expectancy* ......................................................89 ....– ...67.04.09 Quality of primary education ....................................45 ...+.....4.24.10 Primary enrollment* .................................................42 ....–...95.54.11 Education expenditure* .........................................120 ....–.....0.9
5th pillar: Higher education and training5.01 Secondary enrollment* ............................................96 ....–...64.15.02 Tertiary enrollment*..................................................86 ....– ...16.75.03 Quality of the educational system............................29 ...+.....4.65.04 Quality of math and science education....................32 ...+.....4.95.05 Quality of management schools...............................32 ...+.....4.95.06 Internet access in schools........................................64 ....–.....3.45.07 Local availability of research and training services...29 ...+.....4.75.08 Extent of staff training..............................................34 ...+.....4.5
6th pillar: Goods market efficiency6.01 Intensity of local competition ...................................28 ...+.....5.56.02 Extent of market dominance ....................................16 ...+.....5.26.03 Effectiveness of anti-monopoly policy......................25 ...+.....5.16.04 Extent and effect of taxation ......................................8 ...+.....5.46.05 Total tax rate* ..........................................................36 ....– ...37.26.06 No. of procedures required to start a business* .....95 ....– ...12.0
INDICATOR RANK/131 VALUE
6.07 Time required to start a business* .........................119 ....– ...97.06.08 Agricultural policy costs..............................................4 ...+.....5.06.09 Prevalence of trade barriers......................................30 ...+.....5.26.10 Trade-weighted tariff rate* .......................................50 ...+.....4.86.11 Prevalence of foreign ownership ..............................10 ...+.....6.16.12 Business impact of rules on FDI...............................11 ...+.....5.96.13 Burden of customs procedures ..............................101 ....–.....3.06.14 Degree of customer orientation ...............................22 ...+.....5.46.15 Buyer sophistication ...................................................9 ...+.....5.4
7th pillar: Labor market efficiency7.01 Cooperation in labor-employer relations ...................16 ...+.....5.47.02 Flexibility of wage determination .............................44 ...+.....5.57.03 Non-wage labor costs*.............................................32 ...+ ...10.07.04 Rigidity of employment* ..........................................79 ....–...44.07.05 Hiring and firing practices.........................................34 ...+.....4.57.06 Firing costs*............................................................116 ....– .108.37.07 Pay and productivity ...................................................5 ...+.....5.57.08 Reliance on professional management ....................25 ...+.....5.47.09 Brain drain.................................................................19 ...+.....4.87.10 Female participation in labor force*........................101 ...+.....0.6
8th pillar: Financial market sophistication8.01 Financial market sophistication ................................83 ....–.....3.68.02 Financing through local equity market .......................2 ...+.....6.08.03 Ease of access to loans............................................42 ...+.....4.08.04 Venture capital availability.........................................35 ...+.....3.98.05 Restriction on capital flows ......................................32 ....–.....5.98.06 Strength of investor protection* ..............................45 ....–.....5.38.07 Soundness of banks ...............................................118 ....–.....4.58.08 Regulation of securities exchanges..........................27 ...+.....5.68.09 Legal rights index* ...................................................47 ...+.....5.0
9th pillar: Technological readiness9.01 Availability of latest technologies .............................51 ...+.....4.79.02 Firm-level technology absorption..............................67 ...+.....4.79.03 Laws relating to ICT .................................................82 ....–.....3.39.04 FDI and technology transfer .......................................4 ...+.....5.99.05 Mobile telephone subscribers* ................................94 ....– ...21.19.06 Internet users* .........................................................85 ....– .....7.29.07 Personal computers*..............................................107 ....– .....1.49.08 Broadband Internet subscribers* ...........................102 ....–.....0.0
11th pillar: Business sophistication11.01 Local supplier quantity..............................................31 ...+.....5.211.02 Local supplier quality ................................................52 ....–.....4.711.03 State of cluster development .....................................8 ...+.....4.811.04 Nature of competitive advantage .............................53 ...+.....3.511.05 Value chain breadth ..................................................62 ....–.....3.711.06 Control of international distribution ..........................15 ...+.....5.011.07 Production process sophistication............................73 ....–.....3.511.08 Extent of marketing..................................................37 ...+.....5.011.09 Willingness to delegate authority.............................23 ...+.....4.9
12th pillar: Innovation12.01 Capacity for innovation .............................................51 ...+.....3.412.02 Quality of scientific research institutions .................28 ...+.....4.712.03 Company spending on R&D.....................................27 ...+.....4.212.04 University-industry research collaboration................64 ....–.....3.112.05 Gov't procurement of advanced tech products........66 ...+.....3.612.06 Availability of scientists and engineers.....................27 ...+.....5.112.07 Utility patents* .........................................................87 ....–.....0.0
Indonesia
* Hard data
Note: For further details and explanation, please refer to the section "How to Read the Country/Economy Profiles" at the beginning of this chapter.
Total population (millions), 2007........................................................................48.1GDP (US$ billions), 2007...................................................................................949.7GDP per capita (PPP, US$), 2007 ...............................................................19,624.4Real growth in GDP (percent), 2007...................................................................4.8Current account balance (percent of GDP), 2006 .................................................0.7Total reserves in months of imports, 2005 ........................................................7.8Unemployment (percent of total labour force), 2007 ......................................2.9GINI index, 1998...................................................................................................31.6
Competitiveness rankingsRank Score
(out of 131) (1–7)
Global Competitiveness Index 2007-2008 .........11 ......5.4GCI 2006-2007 (out of 122) ......................................................23 ........5.1
Crime and theft ..........................................................0.3% .......10.6%
Institutions
Infrastructure
Macroeconomicstability
Health and primary
education
Higher education and training
Goods market efficiency
Labor market efficiency
Financial market sophistication
Technological readiness
Market size
Businesssophistication
Innovation
1
2
3
4
5
6
7
Source: World Economic Forum, Executive Opinion Survey 2006, 2007
Korea, Rep.Mexico
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.
The Global Competitiveness Index in detail + Better than Mexico (95 times) – Worse than Mexico (16 times)
INDICATOR RANK/131 VALUE
1st pillar: Institutions1.01 Property rights..........................................................24 ...+.....5.71.02 Intellectual property protection ................................23 ...+.....5.41.03 Diversion of public funds..........................................26 ...+.....5.01.04 Public trust of politicians ..........................................22 ...+.....4.01.05 Judicial independence ..............................................35 ...+.....5.11.06 Favoritism in decisions of government officials........15 ...+.....4.71.07 Wastefulness of government spending ...................22 ...+.....4.31.08 Burden of government regulation ..............................8 ...+.....4.31.09 Efficiency of legal framework ...................................28 ...+.....5.01.10 Transparency of government policymaking ..............34 ...+.....4.71.11 Business costs of terrorism .....................................78 ....–.....5.31.12 Business costs of crime and violence......................40 ...+.....5.31.13 Organized crime .......................................................50 ...+.....5.41.14 Reliability of police services .....................................27 ...+.....5.51.15 Ethical behavior of firms...........................................25 ...+.....5.21.16 Strength of auditing and reporting standards...........35 ...+.....5.41.17 Efficacy of corporate boards.....................................30 ...+.....5.21.18 Protection of minority shareholders’ interests .........31 ...+.....5.1
2nd pillar: Infrastructure2.01 Quality of overall infrastructure.................................19 ...+.....5.62.02 Quality of roads ........................................................20 ...+.....5.62.03 Quality of railroad infrastructure ...............................12 ...+.....5.62.04 Quality of port infrastructure ....................................20 ...+.....5.52.05 Quality of air transport infrastructure .......................26 ...+.....5.72.07 Quality of electricity supply ......................................19 ...+.....6.22.08 Telephone lines*.......................................................19 ...+...49.2
3rd pillar: Macroeconomic stability3.01 Government surplus/deficit* ....................................34 ...+ .....1.83.02 National savings rate* ..............................................29 ...+...30.53.03 Inflation*...................................................................21 ...+.....2.23.04 Interest rate spread* ..................................................4 ...+ .....1.43.05 Government debt* ...................................................33 ....–...26.5
4th pillar: Health and primary education4.01 Business impact of malaria ....................................n /a4.02 Malaria incidence* ....................................................74 ...+.....2.34.03 Business impact of tuberculosis ..............................87 ....–.....5.44.04 Tuberculosis incidence* ...........................................85 ....–...96.44.05 Business impact of HIV/AIDS...................................70 ....–.....5.24.06 HIV prevalence* .........................................................1 ...+ ..<0.14.07 Infant mortality* .......................................................22 ...+.....5.04.08 Life expectancy* ......................................................31 ...+ ...77.04.09 Quality of primary education ....................................23 ...+.....5.14.10 Primary enrollment* ...................................................4 ...+...99.44.11 Education expenditure* ...........................................76 ....–.....3.7
5th pillar: Higher education and training5.01 Secondary enrollment* ............................................48 ...+...92.95.02 Tertiary enrollment*....................................................1 ...+...89.95.03 Quality of the educational system............................19 ...+.....5.05.04 Quality of math and science education ....................10 ...+.....5.55.05 Quality of management schools...............................26 ...+.....5.15.06 Internet access in schools..........................................4 ...+.....6.35.07 Local availability of research and training services ...14 ...+.....5.35.08 Extent of staff training................................................5 ...+.....5.6
6th pillar: Goods market efficiency6.01 Intensity of local competition ...................................23 ...+.....5.66.02 Extent of market dominance....................................27 ...+.....4.76.03 Effectiveness of anti-monopoly policy ......................19 ...+.....5.36.04 Extent and effect of taxation ....................................30 ...+.....4.26.05 Total tax rate* ..........................................................18 ...+...30.96.06 No. of procedures required to start a business* .....95 ....– ...12.0
INDICATOR RANK/131 VALUE
6.07 Time required to start a business* ..........................37 ...+...22.06.08 Agricultural policy costs ............................................16 ...+.....4.56.09 Prevalence of trade barriers......................................32 ...+.....5.26.10 Trade-weighted tariff rate* .......................................78 ...+.....8.06.11 Prevalence of foreign ownership..............................61 ....–.....5.26.12 Business impact of rules on FDI ..............................53 ....–.....5.36.13 Burden of customs procedures..................................4 ...+.....5.96.14 Degree of customer orientation .................................4 ...+.....5.96.15 Buyer sophistication ...................................................2 ...+.....5.7
7th pillar: Labor market efficiency7.01 Cooperation in labor-employer relations ...................55 ....–.....4.77.02 Flexibility of wage determination .............................25 ...+.....5.77.03 Non-wage labor costs*.............................................71 ...+....17.57.04 Rigidity of employment* ..........................................50 ...+...34.07.05 Hiring and firing practices.........................................23 ...+.....4.77.06 Firing costs* ...........................................................107 ....– ...91.07.07 Pay and productivity ...................................................9 ...+.....5.27.08 Reliance on professional management ....................33 ...+.....5.27.09 Brain drain ................................................................20 ...+.....4.87.10 Female participation in labor force* .........................79 ...+.....0.7
8th pillar: Financial market sophistication8.01 Financial market sophistication ................................32 ...+.....5.28.02 Financing through local equity market .....................28 ...+.....5.58.03 Ease of access to loans............................................28 ...+.....4.48.04 Venture capital availability .........................................17 ...+.....4.58.05 Restriction on capital flows ......................................35 ....–.....5.98.06 Strength of investor protection* ..............................45 ....–.....5.38.07 Soundness of banks .................................................69 ....–.....5.58.08 Regulation of securities exchanges ..........................11 ...+.....5.98.09 Legal rights index* ...................................................27 ...+.....6.0
9th pillar: Technological readiness9.01 Availability of latest technologies .............................20 ...+.....5.79.02 Firm-level technology absorption..............................13 ...+.....6.09.03 Laws relating to ICT ...................................................7 ...+.....5.79.04 FDI and technology transfer .....................................39 ...+.....5.29.05 Mobile telephone subscribers* ................................42 ...+...79.49.06 Internet users* ...........................................................6 ...+...68.49.07 Personal computers*................................................19 ...+...53.29.08 Broadband Internet subscribers* ...............................2 ...+...25.2
11th pillar: Business sophistication11.01 Local supplier quantity................................................7 ...+.....5.811.02 Local supplier quality ................................................17 ...+.....5.711.03 State of cluster development .....................................3 ...+.....5.111.04 Nature of competitive advantage .............................13 ...+.....5.511.05 Value chain breadth...................................................11 ...+.....5.711.06 Control of international distribution ............................4 ...+.....5.411.07 Production process sophistication............................14 ...+.....5.611.08 Extent of marketing ..................................................13 ...+.....5.811.09 Willingness to delegate authority.............................21 ...+.....5.0
12th pillar: Innovation12.01 Capacity for innovation ...............................................7 ...+.....5.512.02 Quality of scientific research institutions..................11 ...+.....5.612.03 Company spending on R&D.......................................6 ...+.....5.612.04 University-industry research collaboration..................5 ...+.....5.412.05 Gov't procurement of advanced tech products..........2 ...+.....5.312.06 Availability of scientists and engineers.....................13 ...+.....5.512.07 Utility patents* ...........................................................8 ...+ .123.1
Korea, Rep.
* Hard data
Note: For further details and explanation, please refer to the section "How to Read the Country/Economy Profiles" at the beginning of this chapter.
Total population (millions), 2007......................................................................141.9GDP (US$ billions), 2007................................................................................1,223.7GDP per capita (PPP, US$), 2007 .................................................................8,611.7Real growth in GDP (percent), 2007...................................................................7.0Current account balance (percent of GDP), 2006 .................................................9.6Total reserves in months of imports, 2005 ......................................................10.8Unemployment (percent of total labour force), 2007 ......................................7.0GINI index, 2002...................................................................................................39.9
Competitiveness rankingsRank Score
(out of 131) (1–7)
Global Competitiveness Index 2007-2008 .........58 ......4.2GCI 2006-2007 (out of 122) ......................................................59 ........4.1
Source: World Economic Forum, Executive Opinion Survey 2006, 2007
Russian FederationMexico
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.
The Global Competitiveness Index in detail + Better than Mexico (42 times) – Worse than Mexico (69 times)
INDICATOR RANK/131 VALUE
1st pillar: Institutions1.01 Property rights ........................................................122 ....–.....3.21.02 Intellectual property protection ...............................115 ....–.....2.61.03 Diversion of public funds..........................................94 ....–.....2.91.04 Public trust of politicians.........................................104 ....– .....1.91.05 Judicial independence ............................................106 ....–.....2.71.06 Favoritism in decisions of government officials......107 ....–.....2.41.07 Wastefulness of government spending..................100 ....–.....2.81.08 Burden of government regulation ...........................118 ....–.....2.51.09 Efficiency of legal framework .................................106 ....–.....2.81.10 Transparency of government policymaking.............118 ....–.....3.11.11 Business costs of terrorism....................................108 ....–.....4.71.12 Business costs of crime and violence......................86 ...+.....4.01.13 Organized crime......................................................103 ...+.....4.01.14 Reliability of police services ....................................111 ...+.....3.01.15 Ethical behavior of firms.........................................120 ....–.....3.31.16 Strength of auditing and reporting standards...........95 ....–.....3.91.17 Efficacy of corporate boards.....................................38 ...+.....5.01.18 Protection of minority shareholders’ interests .......125 ....–.....3.1
2nd pillar: Infrastructure2.01 Quality of overall infrastructure ................................81 ....–.....3.02.02 Quality of roads ......................................................106 ....–.....2.42.03 Quality of railroad infrastructure ...............................29 ...+.....4.12.04 Quality of port infrastructure ....................................72 ...+.....3.72.05 Quality of air transport infrastructure .......................79 ....–.....4.22.07 Quality of electricity supply ......................................76 ...+.....4.32.08 Telephone lines*.......................................................44 ...+ ...27.9
3rd pillar: Macroeconomic stability3.01 Government surplus/deficit* ......................................9 ...+.....9.23.02 National savings rate* ..............................................30 ...+...30.13.03 Inflation* .................................................................113 ....–.....9.73.04 Interest rate spread* ................................................77 ....–.....6.43.05 Government debt*....................................................11 ...+.....9.0
4th pillar: Health and primary education4.01 Business impact of malaria ....................................n /a4.02 Malaria incidence*......................................................1 ...+.....0.04.03 Business impact of tuberculosis ..............................59 ....–.....5.94.04 Tuberculosis incidence* ...........................................90 ....– .119.04.05 Business impact of HIV/AIDS...................................39 ...+.....5.84.06 HIV prevalence*......................................................100 ....– .....1.14.07 Infant mortality* .......................................................56 ...+ ...13.04.08 Life expectancy* ......................................................96 ....–...65.04.09 Quality of primary education ....................................46 ...+.....4.24.10 Primary enrollment* .................................................68 ....–...92.24.11 Education expenditure* ...........................................79 ....–.....3.5
5th pillar: Higher education and training5.01 Secondary enrollment* ............................................47 ...+...92.95.02 Tertiary enrollment*..................................................14 ...+...68.25.03 Quality of the educational system............................46 ...+.....4.05.04 Quality of math and science education....................38 ...+.....4.75.05 Quality of management schools...............................78 ....–.....3.85.06 Internet access in schools........................................55 ...+.....3.75.07 Local availability of research and training services...79 ....–.....3.75.08 Extent of staff training..............................................96 ....–.....3.3
6th pillar: Goods market efficiency6.01 Intensity of local competition ...................................92 ....–.....4.56.02 Extent of market dominance....................................78 ...+.....3.56.03 Effectiveness of anti-monopoly policy ....................106 ....–.....3.16.04 Extent and effect of taxation ....................................97 ....–.....2.96.05 Total tax rate* ..........................................................90 ....–...54.26.06 No. of procedures required to start a business* .....27 ...+ .....7.0
INDICATOR RANK/131 VALUE
6.07 Time required to start a business* ..........................52 ....–...28.06.08 Agricultural policy costs ..........................................117 ....–.....3.16.09 Prevalence of trade barriers....................................104 ....–.....3.96.10 Trade-weighted tariff rate*......................................108 ....– ...12.96.11 Prevalence of foreign ownership ............................129 ....–.....3.36.12 Business impact of rules on FDI ............................127 ....–.....3.56.13 Burden of customs procedures ..............................110 ....–.....2.96.14 Degree of customer orientation ...............................67 ....–.....4.66.15 Buyer sophistication .................................................58 ....–.....4.0
7th pillar: Labor market efficiency7.01 Cooperation in labor-employer relations ...................67 ....–.....4.57.02 Flexibility of wage determination .............................31 ...+.....5.67.03 Non-wage labor costs*...........................................107 ....– ...31.07.04 Rigidity of employment* ..........................................79 ....–...44.07.05 Hiring and firing practices.........................................15 ...+.....5.07.06 Firing costs* .............................................................27 ...+....17.37.07 Pay and productivity .................................................14 ...+.....5.07.08 Reliance on professional management ....................70 ....–.....4.57.09 Brain drain ................................................................49 ...+.....3.77.10 Female participation in labor force*..........................18 ...+.....0.9
8th pillar: Financial market sophistication8.01 Financial market sophistication ................................88 ....–.....3.38.02 Financing through local equity market .....................81 ....–.....4.28.03 Ease of access to loans............................................86 ...+.....2.88.04 Venture capital availability.........................................60 ...+.....3.18.05 Restriction on capital flows.....................................118 ....–.....3.38.06 Strength of investor protection* ..............................45 ....–.....5.38.07 Soundness of banks ...............................................108 ....–.....4.78.08 Regulation of securities exchanges ........................103 ....–.....3.68.09 Legal rights index* ...................................................94 ...+.....3.0
9th pillar: Technological readiness9.01 Availability of latest technologies .............................99 ....–.....3.49.02 Firm-level technology absorption ............................103 ....–.....4.19.03 Laws relating to ICT .................................................85 ....–.....3.29.04 FDI and technology transfer....................................115 ....–.....4.19.05 Mobile telephone subscribers* ................................36 ...+...83.69.06 Internet users* .........................................................63 ....– ...15.29.07 Personal computers*................................................56 ....– ...12.19.08 Broadband Internet subscribers* .............................60 ....– .....1.1
11th pillar: Business sophistication11.01 Local supplier quantity..............................................73 ....–.....4.711.02 Local supplier quality ................................................86 ....–.....4.111.03 State of cluster development ...................................85 ....–.....3.311.04 Nature of competitive advantage............................115 ....–.....2.811.05 Value chain breadth.................................................120 ....–.....2.611.06 Control of international distribution ..........................92 ....–.....3.711.07 Production process sophistication............................79 ....–.....3.411.08 Extent of marketing..................................................90 ....–.....3.711.09 Willingness to delegate authority.............................82 ....–.....3.6
12th pillar: Innovation12.01 Capacity for innovation .............................................54 ...+.....3.412.02 Quality of scientific research institutions .................44 ...+.....4.212.03 Company spending on R&D.....................................50 ...+.....3.412.04 University-industry research collaboration................61 ....–.....3.212.05 Gov't procurement of advanced tech products........83 ...+.....3.412.06 Availability of scientists and engineers.....................37 ...+.....4.912.07 Utility patents* .........................................................45 ...+ .....1.2
Russian Federation
* Hard data
Note: For further details and explanation, please refer to the section "How to Read the Country/Economy Profiles" at the beginning of this chapter.
Total population (millions), 2007........................................................................47.7GDP (US$ billions), 2007...................................................................................274.5GDP per capita (PPP, US$), 2007 .................................................................5,723.9Real growth in GDP (percent), 2007...................................................................4.7Current account balance (percent of GDP), 2006................................................-6.4Total reserves in months of imports, 2005 ........................................................3.2Unemployment (percent of total labour force), 2007 ....................................24.2GINI index, 2000...................................................................................................57.8
Competitiveness rankingsRank Score
(out of 131) (1–7)
Global Competitiveness Index 2007-2008 .........44 ......4.4GCI 2006-2007 (out of 122) ......................................................36 ........4.5
Source: World Economic Forum, Executive Opinion Survey 2006, 2007
South AfricaMexico
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.
The Global Competitiveness Index in detail + Better than Mexico (69 times) – Worse than Mexico (42 times)
INDICATOR RANK/131 VALUE
1st pillar: Institutions1.01 Property rights..........................................................22 ...+.....5.81.02 Intellectual property protection ................................24 ...+.....5.21.03 Diversion of public funds..........................................49 ...+.....4.01.04 Public trust of politicians ..........................................48 ...+.....3.01.05 Judicial independence ..............................................23 ...+.....5.51.06 Favoritism in decisions of government officials .......53 ...+.....3.31.07 Wastefulness of government spending ...................27 ...+.....4.21.08 Burden of government regulation ...........................101 ...+.....2.71.09 Efficiency of legal framework ...................................17 ...+.....5.41.10 Transparency of government policymaking ..............30 ...+.....4.91.11 Business costs of terrorism .....................................43 ...+.....5.81.12 Business costs of crime and violence....................126 ....–.....2.31.13 Organized crime......................................................112 ...+.....3.91.14 Reliability of police services ...................................104 ...+.....3.21.15 Ethical behavior of firms...........................................39 ...+.....4.71.16 Strength of auditing and reporting standards.............6 ...+.....6.21.17 Efficacy of corporate boards.......................................4 ...+.....5.71.18 Protection of minority shareholders’ interests .........13 ...+.....5.6
2nd pillar: Infrastructure2.01 Quality of overall infrastructure ................................43 ...+.....4.52.02 Quality of roads ........................................................38 ...+.....4.72.03 Quality of railroad infrastructure ...............................41 ...+.....3.42.04 Quality of port infrastructure ....................................48 ...+.....4.42.05 Quality of air transport infrastructure .......................22 ...+.....5.92.07 Quality of electricity supply ......................................83 ....–.....4.02.08 Telephone lines*.......................................................87 ....– ...10.0
3rd pillar: Macroeconomic stability3.01 Government surplus/deficit* ....................................48 ...+.....0.33.02 National savings rate*.............................................103 ....– ...14.13.03 Inflation*...................................................................70 ....–.....4.73.04 Interest rate spread* ................................................43 ...+.....4.03.05 Government debt* ...................................................49 ....–...33.3
4th pillar: Health and primary education4.01 Business impact of malaria ....................................n /a4.02 Malaria incidence*....................................................86 ....–...29.94.03 Business impact of tuberculosis.............................124 ....–.....3.74.04 Tuberculosis incidence*..........................................125 ....–.599.94.05 Business impact of HIV/AIDS.................................129 ....–.....2.34.06 HIV prevalence*......................................................126 ....– ...18.84.07 Infant mortality* .......................................................99 ....–...54.04.08 Life expectancy*.....................................................120 ....–...48.04.09 Quality of primary education ....................................99 ....–.....2.74.10 Primary enrollment* .................................................93 ....– ...87.14.11 Education expenditure* ...........................................32 ...+.....5.3
5th pillar: Higher education and training5.01 Secondary enrollment* ............................................51 ...+...90.55.02 Tertiary enrollment*..................................................90 ....– ...15.35.03 Quality of the educational system..........................104 ....–.....2.85.04 Quality of math and science education ..................128 ....–.....2.45.05 Quality of management schools...............................22 ...+.....5.25.06 Internet access in schools........................................86 ....–.....3.05.07 Local availability of research and training services...33 ...+.....4.65.08 Extent of staff training..............................................21 ...+.....5.0
6th pillar: Goods market efficiency6.01 Intensity of local competition ...................................52 ...+.....5.16.02 Extent of market dominance....................................36 ...+.....4.46.03 Effectiveness of anti-monopoly policy ......................18 ...+.....5.46.04 Extent and effect of taxation ....................................26 ...+.....4.36.05 Total tax rate* ..........................................................39 ....–...38.36.06 No. of procedures required to start a business* .....52 ....–.....9.0
INDICATOR RANK/131 VALUE
6.07 Time required to start a business* ..........................70 ....–...35.06.08 Agricultural policy costs ............................................14 ...+.....4.56.09 Prevalence of trade barriers......................................38 ...+.....5.06.10 Trade-weighted tariff rate* .......................................65 ...+.....6.16.11 Prevalence of foreign ownership..............................56 ....–.....5.36.12 Business impact of rules on FDI ..............................79 ....–.....4.96.13 Burden of customs procedures................................68 ...+.....3.86.14 Degree of customer orientation ...............................64 ....–.....4.66.15 Buyer sophistication .................................................33 ...+.....4.5
7th pillar: Labor market efficiency7.01 Cooperation in labor-employer relations .................120 ....–.....3.87.02 Flexibility of wage determination............................121 ....–.....3.47.03 Non-wage labor costs* .............................................11 ...+.....2.47.04 Rigidity of employment* ..........................................70 ....– ...41.07.05 Hiring and firing practices.......................................129 ....–.....2.37.06 Firing costs* .............................................................38 ...+...24.07.07 Pay and productivity .................................................92 ....–.....3.87.08 Reliance on professional management ....................15 ...+.....5.87.09 Brain drain ................................................................69 ....–.....3.27.10 Female participation in labor force*........................102 ...+.....0.6
8th pillar: Financial market sophistication8.01 Financial market sophistication.................................15 ...+.....6.08.02 Financing through local equity market .......................4 ...+.....6.08.03 Ease of access to loans............................................44 ...+.....3.98.04 Venture capital availability.........................................41 ...+.....3.78.05 Restriction on capital flows .....................................111 ....–.....3.68.06 Strength of investor protection* ................................9 ...+.....8.08.07 Soundness of banks .................................................16 ...+.....6.68.08 Regulation of securities exchanges............................5 ...+.....6.08.09 Legal rights index* ...................................................47 ...+.....5.0
9th pillar: Technological readiness9.01 Availability of latest technologies .............................40 ...+.....4.99.02 Firm-level technology absorption..............................30 ...+.....5.49.03 Laws relating to ICT .................................................32 ...+.....4.89.04 FDI and technology transfer .....................................24 ...+.....5.39.05 Mobile telephone subscribers* ................................47 ...+ ...71.69.06 Internet users* .........................................................73 ....– ...10.89.07 Personal computers*................................................62 ....–.....8.49.08 Broadband Internet subscribers*..............................74 ....–.....0.3
11th pillar: Business sophistication11.01 Local supplier quantity..............................................26 ...+.....5.311.02 Local supplier quality ................................................29 ...+.....5.311.03 State of cluster development ...................................45 ...+.....3.911.04 Nature of competitive advantage .............................70 ....–.....3.411.05 Value chain breadth ..................................................79 ....–.....3.411.06 Control of international distribution ..........................32 ...+.....4.511.07 Production process sophistication............................47 ...+.....4.111.08 Extent of marketing ..................................................17 ...+.....5.611.09 Willingness to delegate authority.............................30 ...+.....4.6
12th pillar: Innovation12.01 Capacity for innovation .............................................43 ...+.....3.712.02 Quality of scientific research institutions .................27 ...+.....4.712.03 Company spending on R&D.....................................26 ...+.....4.212.04 University-industry research collaboration................24 ...+.....4.212.05 Gov't procurement of advanced tech products........52 ...+.....3.812.06 Availability of scientists and engineers...................104 ....–.....3.612.07 Utility patents* .........................................................39 ...+.....2.3
South Africa
* Hard data
Note: For further details and explanation, please refer to the section "How to Read the Country/Economy Profiles" at the beginning of this chapter.
Total population (millions), 2007........................................................................75.2GDP (US$ billions), 2007...................................................................................482.0GDP per capita (PPP, US$), 2007 .................................................................6,547.7Real growth in GDP (percent), 2007...................................................................5.0Current account balance (percent of GDP), 2006................................................-8.1Total reserves in months of imports, 2005 ........................................................4.8Unemployment (percent of total labour force), 2007 ......................................9.7GINI index, 2003...................................................................................................43.6
Competitiveness rankingsRank Score
(out of 131) (1–7)
Global Competitiveness Index 2007-2008 .........53 ......4.2GCI 2006-2007 (out of 122) ......................................................58 ........4.1
Poor work ethic in national labour force..............1.1% .........1.9%
Crime and theft ..........................................................0.6% .......10.6%
Institutions
Infrastructure
Macroeconomicstability
Health and primary
education
Higher education and training
Goods market efficiency
Labor market efficiency
Financial market sophistication
Technological readiness
Market size
Businesssophistication
Innovation
1
2
3
4
5
6
7
Source: World Economic Forum, Executive Opinion Survey 2006, 2007
TurkeyMexico
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.
The Global Competitiveness Index in detail + Better than Mexico (66 times) – Worse than Mexico (44 times)
INDICATOR RANK/131 VALUE
1st pillar: Institutions1.01 Property rights..........................................................58 ...+.....4.81.02 Intellectual property protection ................................69 ....–.....3.41.03 Diversion of public funds..........................................54 ...+.....3.81.04 Public trust of politicians ..........................................56 ...+.....2.81.05 Judicial independence ..............................................50 ...+.....4.41.06 Favoritism in decisions of government officials .......49 ...+.....3.41.07 Wastefulness of government spending ...................70 ....–.....3.31.08 Burden of government regulation ............................80 ...+.....2.91.09 Efficiency of legal framework ...................................63 ...+.....3.71.10 Transparency of government policymaking ..............59 ...+.....4.11.11 Business costs of terrorism ...................................100 ....–.....4.81.12 Business costs of crime and violence......................58 ...+.....4.91.13 Organized crime........................................................76 ...+.....4.91.14 Reliability of police services .....................................52 ...+.....4.61.15 Ethical behavior of firms...........................................40 ...+.....4.61.16 Strength of auditing and reporting standards...........62 ...+.....4.81.17 Efficacy of corporate boards.....................................91 ....–.....4.31.18 Protection of minority shareholders’ interests .........56 ...+.....4.6
2nd pillar: Infrastructure2.01 Quality of overall infrastructure ................................59 ...+.....3.72.02 Quality of roads ........................................................50 ...+.....4.02.03 Quality of railroad infrastructure ...............................67 ...+.....2.42.04 Quality of port infrastructure ....................................83 ...+.....3.42.05 Quality of air transport infrastructure .......................49 ...+.....5.12.07 Quality of electricity supply ......................................74 ...+.....4.32.08 Telephone lines*.......................................................51 ...+...25.9
3rd pillar: Macroeconomic stability3.01 Government surplus/deficit* ....................................41 ...+.....0.73.02 National savings rate* ..............................................53 ...+...24.53.03 Inflation*..................................................................111 ....–.....9.63.04 Interest rate spread* ................................................76 ....–.....6.43.05 Government debt* ...................................................90 ....–...59.8
4th pillar: Health and primary education4.01 Business impact of malaria ....................................n /a4.02 Malaria incidence*....................................................82 ....– ...12.94.03 Business impact of tuberculosis ..............................41 ....–.....6.34.04 Tuberculosis incidence* ...........................................48 ....–...28.84.05 Business impact of HIV/AIDS...................................16 ...+.....6.14.06 HIV prevalence* .........................................................1 ...+ ..<0.14.07 Infant mortality* .......................................................85 ....–...28.04.08 Life expectancy* ......................................................71 ....– ...71.04.09 Quality of primary education ....................................80 ...+.....3.24.10 Primary enrollment* .................................................80 ....–...89.44.11 Education expenditure* ...........................................81 ....–.....3.5
5th pillar: Higher education and training5.01 Secondary enrollment* ............................................81 ....–...79.25.02 Tertiary enrollment*..................................................62 ...+...29.05.03 Quality of the educational system............................70 ...+.....3.55.04 Quality of math and science education....................60 ...+.....4.35.05 Quality of management schools...............................54 ....–.....4.35.06 Internet access in schools........................................52 ...+.....3.75.07 Local availability of research and training services...43 ...+.....4.35.08 Extent of staff training..............................................47 ...+.....4.0
6th pillar: Goods market efficiency6.01 Intensity of local competition ...................................31 ...+.....5.56.02 Extent of market dominance....................................35 ...+.....4.46.03 Effectiveness of anti-monopoly policy......................34 ...+.....4.66.04 Extent and effect of taxation ..................................103 ....–.....2.86.05 Total tax rate* ..........................................................66 ....–...46.36.06 No. of procedures required to start a business* .....37....=.....8.0
INDICATOR RANK/131 VALUE
6.07 Time required to start a business*...........................11 ...+.....9.06.08 Agricultural policy costs ..........................................108 ....–.....3.36.09 Prevalence of trade barriers......................................42 ...+.....5.06.10 Trade-weighted tariff rate* .......................................40 ...+.....3.86.11 Prevalence of foreign ownership..............................52 ....–.....5.36.12 Business impact of rules on FDI ..............................55 ....–.....5.36.13 Burden of customs procedures................................57 ...+.....4.06.14 Degree of customer orientation ...............................37 ...+.....5.06.15 Buyer sophistication .................................................60 ....–.....3.9
7th pillar: Labor market efficiency7.01 Cooperation in labor-employer relations ...................93 ....–.....4.37.02 Flexibility of wage determination .............................88 ....–.....4.87.03 Non-wage labor costs*.............................................86 ...+ ...21.67.04 Rigidity of employment* ..........................................89 ....–...49.07.05 Hiring and firing practices.........................................88 ....–.....3.57.06 Firing costs*............................................................112 ....–...94.77.07 Pay and productivity .................................................83 ....–.....4.07.08 Reliance on professional management ....................68 ....–.....4.57.09 Brain drain ................................................................58 ....–.....3.57.10 Female participation in labor force*........................125 ....–.....0.4
8th pillar: Financial market sophistication8.01 Financial market sophistication ................................36 ...+.....4.98.02 Financing through local equity market .....................29 ...+.....5.58.03 Ease of access to loans ............................................74 ...+.....3.18.04 Venture capital availability.........................................82 ...+.....2.98.05 Restriction on capital flows ......................................14 ...+.....6.28.06 Strength of investor protection* ..............................45 ....–.....5.38.07 Soundness of banks .................................................92 ....–.....5.08.08 Regulation of securities exchanges..........................39 ...+.....5.28.09 Legal rights index* ...................................................94 ...+.....3.0
9th pillar: Technological readiness9.01 Availability of latest technologies .............................47 ...+.....4.79.02 Firm-level technology absorption..............................29 ...+.....5.49.03 Laws relating to ICT .................................................50 ...+.....4.09.04 FDI and technology transfer .....................................73 ....–.....4.89.05 Mobile telephone subscribers* ................................55 ...+...59.69.06 Internet users* .........................................................62 ....– ...15.39.07 Personal computers*................................................76 ....–.....5.19.08 Broadband Internet subscribers* .............................49 ...+.....2.2
11th pillar: Business sophistication11.01 Local supplier quantity..............................................22 ...+.....5.411.02 Local supplier quality ................................................39 ...+.....5.011.03 State of cluster development ...................................46 ...+.....3.811.04 Nature of competitive advantage .............................83 ....–.....3.211.05 Value chain breadth ..................................................36 ...+.....4.311.06 Control of international distribution ..........................27 ...+.....4.611.07 Production process sophistication............................48 ...+.....4.111.08 Extent of marketing..................................................51 ....–.....4.811.09 Willingness to delegate authority.............................70 ....–.....3.8
12th pillar: Innovation12.01 Capacity for innovation .............................................47 ...+.....3.612.02 Quality of scientific research institutions .................50 ...+.....4.012.03 Company spending on R&D.....................................62 ...+.....3.212.04 University-industry research collaboration................49 ...+.....3.312.05 Gov't procurement of advanced tech products........73 ...+.....3.612.06 Availability of scientists and engineers.....................41 ...+.....4.712.07 Utility patents* .........................................................67 ....–.....0.2
Turkey
* Hard data
Note: For further details and explanation, please refer to the section "How to Read the Country/Economy Profiles" at the beginning of this chapter.
This paper is published by the World Economic Forum within the framework of the GlobalCompetitiveness Network.
Professor Klaus SchwabExecutive Chairman
The Global Competitiveness Network:
Fiona Paua, Senior Director, Head of Strategic Insight Teams
Jennifer Blanke, Director, Senior EconomistCiara Browne, Senior Community ManagerAgustina Ciocia, CoordinatorMargareta Drzeniek Hanouz, Associate Director, Senior EconomistThierry Geiger, EconomistIrene Mia, Associate Director, Senior EconomistPearl Samandari, Research AssistantEva Trujillo Herrera, Research Assistant
The Regional Agenda Team, Latin America:
Julio Estrada, Associate Director, Global Leadership Fellow, Latin AmericaAntonio Human, Community Relations Manager, Latin AmericaEmilio Lozoya Austin, Head of Latin America, Global Leadership FellowPaula Verholen, Senior Community Relations Manager, Latin America
Contents
Part I: Assessing the Foundations of Mexico’s Competitiveness: Findings from the Global
Competitiveness Index 2007-2008 3
by Irene Mia and Emilio Lozoya Austin (World Economic Forum)
Assessing the Foundations of Mexico's Competitiveness:
Findings from the Global Competitiveness Index 2007-2008
Irene Mia, World Economic ForumEmilio Lozoya Austin, World Economic Forum
W h i t e P a p e r
The World Economic Forum is an independent international organization committed to improvingthe state of the world by engaging leaders in partnerships to shape global, regional and industry agendas.
Incorporated as a foundation in 1971, and basedin Geneva, Switzerland, the World EconomicForum is impartial and not-for-profit; it is tied to no political, partisan or national interests.(www.weforum.org)