 Jennifer Blanke Director, Senior Economist World Economic Forum  Montenegro | 20 May, 2008 Assessing Southeast Europe’s Competitiveness in an International Context Based on the results of The Global Competitiveness Report Presented at the 3rd Regional Competitiveness Conference in Southeast Europe

2 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008  The Global Competitiveness Report.  The Global Competitiveness Index (GCI)  Southeast Europe’s comparative performance in the GCI rankings Outline

3 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 Global Competitiveness Report  Flagship product: Global Competitiveness Report: launched in 1979 covering 16 countries; The Report has since expanded its coverage to 131 countries.  Co-editors: Professors Michael Porter, Xavier Sala-i-Martin and Klaus Schwab  Our goal: to provide a benchmarking tool for policymakers and business leaders

4 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Network Regional and special topic reports recently released:  Gender Gap Study 2007  Arab World Competitiveness Report 2007  Africa Competitiveness Report 2007  Travel and Tourism Competitiveness Report 2008  Global Information Technology Report  The Mexico Competitiveness Report 2008

5 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Report What are we trying to measure? GDP per capita (PPP in international dollars) Source: International Monetary Fund, World Economic Outlook, October 2007

6 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Report  The most comprehensive data set on competitiveness  Assesses the comparative strengths and weakness of a large number of economies  Produced in collaboration with leading academics worldwide and a global network of partner (research) institutes

7 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008  Use of “hard data” (publicly available information) and survey data (from the Executive Opinion Survey)  The Survey records the perspectives of business leaders around the world; Survey data is indispensable, particularly for variables where no reliable hard data sources exist The Global Competitiveness Report Data

8 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Report Country coverage

9 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008  How we do not define competitiveness: “a country’s share of the world market for its products”  This view implies a zero-sum game - one country’s gain comes at the expense of others  How we do define competitiveness: “the set of institutions, policies, and factors that determine the level of productivity of a country.”  The level of productivity, in turn, sets the sustainable level of prosperity that can be earned by an economy. The Global Competitiveness Index Definition

10 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The process of economic development evolves in stages as 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 The Global Competitiveness Index Stages of Development

11 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 Global Competitiveness Index The Framework Key for efficiency-driven economies Key for factor-driven economies 1. Institutions 2. Infrastructure 3. Macroeconomic stability 4. Health and primary education 5. Higher education and training 6. Goods market efficiency 7. Labor market efficiency 8. Financial market sophistication 9. Technological Readiness 10. Market size 11. Business sophistication 12. Innovation Key for innovation-driven economies BASIC REQUIREMENTS EFFICIENCY ENHANCERS INNOVATION & SOPHISTICATIONS FACTORS

12 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 Global Competitiveness Index  Weights of the three main groups of pillars at each stage of development

13 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 Global Competitiveness Index Countries by stage of development

14 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 Global Competitiveness Index Top 20 and selected economies

15 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 Global Competitiveness Index Southeast Europe’s (SEE) overall ranking

16 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 Global Competitiveness Index Southeast Europe’s (SEE) performance per pillar

17 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings SEE and selected comparators (scores on a scale of 1 to 7)

18 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Regional comparisons: SEE average vs. EU Accession 12

19 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Regional comparisons: SEE average vs. EU 25

20 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Regional comparisons: SEE average vs. EU 15

21 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Regional comparisons: SEE average vs. Latin America and the Caribbean

22 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Regional comparisons: SEE average vs. East Asian NICs average (Hong Kong, South Korea, Singapore, and Taiwan)

23 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Montenegro’s overall performance

24 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Montenegro’s comparative advantages

25 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Montenegro’s comparative disadvantages

26 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Montenegro vs. EU 27

27 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Montenegro vs. EU Accession 12

28 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 Conclusions  Competitiveness is a complex process, requiring countries to address issues on many fronts  Several countries in the Southeast Europe region have a number of competitive strengths, especially regarding the quality of basic human capital and macroeconomic stability  But to provide an environment in which its businesses can thrive, and thus improve its competitive position, improvements must be made in a number of critical areas (e.g. institutions, infrastructure, market efficiency)

29 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Report How to obtain more information Please visit our website for further information and to download most sections of the Report:

30 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Report How to obtain more information Appendix Detailed slides for other SEE countries

31 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Albania’s overall performance

32 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Albania’s comparative advantages

33 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Albania’s comparative disadvantages

34 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Albania vs. EU 27

35 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Albania vs. EU Accession 12

36 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Bosnia and Herzegovina’s overall performance

37 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Bosnia and Herzegovina’s comparative advantages

38 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Bosnia and Herzegovina’s comparative disadvantages

39 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Bosnia and Herzegovina vs. EU 27

40 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Bosnia and Herzegovina vs. EU Accession 12

41 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Macedonia’s overall performance

42 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Macedonia’s comparative advantages

43 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Macedonia’s comparative disadvantages

44 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Macedonia’s vs. EU 27

45 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Macedonia’s vs. EU Accession 12

46 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Croatia’s overall performance

47 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Croatia’s comparative advantages

48 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Croatia’s Comparative disadvantages

49 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Croatia vs. EU 27

50 Assessing Southeast Europe’s Competitiveness in an International Context |June, 2008 The Global Competitiveness Rankings Case study: Croatia vs. EU Accession 12