1. 1 The Global Competitiveness Report and Evaluation of Mongolia’s Position Kerry Jaggi and Emma Loades World Economic Forum 13 October 2005 Copyright 2004. All rights reserved

2. 2 1. Overview of the Global Competitiveness Programme 2. The Global Competitiveness Report 3. Definition of Competitiveness 4. Growth Competitiveness Index 5. Business Competitiveness Index 6. Global Competitiveness Index 7. Conclusions Outline

3. 3  Flagship product: Global Competitiveness Report  Launched in 1979 covering 16 countries  The Report has since expanded its coverage from 104 economies in 2004 to 117 in 2005  2005 marks our 26th anniversary of measuring competitiveness 1. Global Competitiveness Programme

4. 4  Regional and special topic reports in the past year  This year:  Gender Gap Study  Global Information Technology Report 2005-2006  South-East Europe Competitiveness Report 2005-2006 1. Global Competitiveness Programme

5. 5 2. The Global Competitiveness Report  Evaluates the potential for sustained economic growth of 117 economies worldwide and ranks them accordingly  Assesses the comparative strengths and weaknesses of the major economies of the world  Is the world’s leading global monitor of the competitive condition of economies

6. 6 2. The Global Competitiveness Report  Launched by Professor Klaus Schwab in 1979, covering 16 economies  In collaboration with Professor Michael E. Porter and the Harvard Institute for Strategy and Competitiveness  122 national academic/research institutes and business organizations worldwide  Geographic coverage of 117 economies in 2005

7. 7 2. The Global Competitiveness Report

8. 8 3. Definition of Competitiveness In the Global Competitiveness Report: Competitiveness is defined as  An economy’s propensity to attain sustained economic growth in the medium to long term (over the coming 5 to 8 years) Competitiveness is not  A country’s share of the world market for its products

9. 9 Why is it important?  Competitiveness leads to growth  Few things matter more for the welfare of a country’s citizens than the aggregate growth rate of the economy  The challenge is to create the conditions for rapid and sustained economic growth 3. Definition of Competitiveness

10. 10  The three determinants of competitiveness are: 1. Technology 2. Quality of Public Institutions 3. Macroeconomic Environment  The Growth Competitiveness Index measures the current condition of these three determinants 4. Growth Competitiveness Index

11. 11 The two sources:  Annual Executive Opinion Survey data  Publicly available data 4. Growth Competitiveness Index

12. 12 Executive Opinion Survey  Captures perceptions of the current operating environment from a representative sample of business leaders in each country  Respondents compare their own operating environments with global standards on a wide range of dimensions 4. Growth Competitiveness Index

13. 13 Growth Competitiveness Index Technology Index Public Institutions Index Macroeconomic Environment Index 4. Growth Competitiveness Index

14. 14 Non-core technology innovators Growth Competitiveness Index Technology Index 1/8 Innovation Subindex Technology Transfer Subindex 3/8 ICT Subindex 4/8 4. Growth Competitiveness Index

15. 15 Growth Competitiveness Index Public Institutions Index Corruption Subindex Contracts and Law Subindex 1/2 Core and non-core technology innovators 4. Growth Competitiveness Index

16. 16 Growth Competitiveness Index Macroeconomic Environment Index 2/4 Macroeconomic Stability Subindex Country Credit Rating 1/4 Government Waste 1/4 Core and non-core technology innovators 4. Growth Competitiveness Index

17. 17 Growth Competitiveness Index Technology Index 1/3 Public Institutions Index 1/3 Macroeconomic Environment Index 1/3 Technology Index 2/4 Public Institutions Index 1/4 Macroeconomic Environment Index 1/4 Core InnovatorsNon-Core Innovators 4. Growth Competitiveness Index

18. 18  The goal is not to predict economic growth in 117 miscellaneous economies  The goal is to identify and analyze the strengths and weaknesses of the economies included in our sample 4. Growth Competitiveness Index

19. 19 3. Growth Competitiveness Index: Mongolia  Top 10 rankings (out of 117)

20. 20 4. Growth Competitiveness Index: Mongolia

21. 21  Advantages 4. Growth Competitiveness Index: Mongolia  Disadvantages

22. 22 4. Growth Competitiveness Index: Mongolia  Disadvantages

23. 23 4. Growth Competitiveness Index: Mongolia  Advantages  Disadvantages

24. 24  Advantages 4. Growth Competitiveness Index: Mongolia  Disadvantages

25. 25 East Asia: Overall Growth Competitiveness Index (GCI) Country (rank) Score on a scale of 1 to 7 Comparative Assessment

26. 26  The productivity of a country is ultimately set by the productivity of its companies  The microeconomic foundations of productivity rest on two interrelated areas: 1. Sophistication of company operations and strategy 2. Quality of the microeconomic business environment 4. Business Competitiveness Index

27. 27 4. Business Competitiveness Index Quality of the National Business Environment Business Competitiveness Index Company Operations and Strategy 34% 66%

28. 28 Context for Firm Strategy and Rivalry Factor (Input) Conditions Related and Supporting Industries Demand Conditions The Microeconomic Business Environment 4. Business Competitiveness Index

29. 29  Top 10 rankings (out of 110) 5. Business Competitiveness Index: Mongolia

30. 30 4. Business Competitiveness Index: Mongolia

31. 31  Advantages  Disadvantages 5. Business Competitiveness Index: Mongolia

32. 32  Advantages  Disadvantages 5. Business Competitiveness Index: Mongolia

33. 33

34. 34 The nine pillars of competitiveness: 1.Institutions 2.Infrastructure 3.Macroeconomy 4.Health and Primary Education 5.Higher Education and Training 6.Market Efficiency (goods, labour, financial) 7.Technological Readiness 8.Business Sophistication 9.Innovation 6. The Global Competitiveness Index

35. 35 Three stages of development: The process of economic development evolves in three stages captured by the model: 1.“Factor-driven stage” Firms compete in prices, taking advantage of cheap factors 2.“Efficiency-driven stage” Efficient production practices to increase productivity 3.“Innovation-driven stage” Economies need to produce innovative products using sophisticated production methods 6. The Global Competitiveness Index

36. 36  All pillars matter to a certain extent for all countries  However, the importance of each pillar depends on a country’s particular stage of development  The pillars are organized into 3 subindexes, each critical to one particular stage: 1.Basic requirements  factor-driven stage 2.Efficiency enhancers  efficiency-driven stage 3.Innovation and sophistication factors  innovation- driven stage 6. The Global Competitiveness Index

37. 37  Different weights given for the pillars depending on which stage a country is in  The index places more weight on those pillars that are more important given a country’s stage of development. 6. The Global Competitiveness Index

38. 38 Weights given to the groups of pillars (subindexes): StageBasic Requirements Efficiency enhancers Innovation and sophistication factors Factor-driven 50%40%10% Efficiency-driven 40%50%10% Innovation-driven 30%40%30% 6. The Global Competitiveness Index

39. 39 Mongolia ranks 90 out of 117 countries in the Global Competitiveness Index:  Mongolia is in the factor-driven stage  This means that basic requirements as well as efficiency enhancers are critical to driving the country’s competitiveness 6. The Global Competitiveness Index

40. 40 Mongolia is ranked 98 overall in basic requirements:  Particular strength is in health and primary education (ranked 76).  The country’s greatest weaknesses in this area are infrastructure (ranked 107), the macroeconomy (ranked 102), and the quality of institutions (ranked 96). 6. The Global Competitiveness Index

41. 41 Mongolia is ranked 80 overall in efficiency enhancers:  Mongolia does particularly well in higher education and training (ranked 65).  However, there is room for improvement in terms of technological readiness (ranked 90) and market efficiency (ranked 88). 6. The Global Competitiveness Index

42. 42 Mongolia is ranked 105 in innovation factors:  The country shows a particular strength in terms of innovation (ranked 89).  Whereas, business sophistication (ranked 112) is an area in which Mongolia could improve. 6. The Global Competitiveness Index

43. 43 7. Summary  Depicts the strengths and weaknesses of the national business environment in each country  Serves as a tool for policy-makers in identifying and addressing the obstacles to economic growth

44. 44 7. Summary  Stimulates public debate on economic development and global stewardship; and helps investors to develop business strategies by monitoring and benchmarking national economies  Seeks to establish a process whereby governments, business leaders and other stakeholders can evaluate progress on a continual basis