1. IMD World Competitiveness Index
Group 2
Cheng Ka Kit
Chau Sze Ming
Chui Yee Hang
Sze Ka Po

2. Content I. Introduction - about WCI - competitive definition
- theoretical basis for WCY
- golden rule for competitiveness
II. Methodology
- methodology
- Four competitiveness principles
- how to use the WCY
III. Comparison with some economic indicator
- Real GDP growth in current year
- Unemployment in current year
- Average real GDP growth across five years

3. Part I: Introduction Why we want to know competitiveness?
A trend of enhancing communications globally
Enhancing free flow of knowledge and skills
Frontiers between nations are losing importance

4. About WCI WCI – World Competitiveness Index
Computed by IMD - International Institute for Management Development, a leading provider of Executive Education located in Swiss
Published in WCY - World Competitiveness Yearbook

5. About WCI
Indices are developed for 60 countries and regional economies, all key players in world market
312 criteria under evaluation for each player
Indices are ranked descending to show decreasing competitiveness across players

6. About WCI
The ranking represent a success, economic performance, wealth of a nation
It shows the ability of nations create and maintain a competitive environment
Also investigate the global economic situation
WCI and its ranking provide a frame of reference to asses how nations mange their economic future.

7. Competitiveness Definition
Condensed definition:
Competitiveness analyses how nation and enterprises manage the totality of their competencies to achieve prosperity or profit

8. Competitiveness Definition
Academic definition:
Competitiveness analyses the facts and policies that shape the ability of a nation to create and maintain an environment that sustains more value creation for its enterprises and more prosperity for its people
Fact: natural resources, land area, risk of disasters, war……
Fully utilize or efficiently allocate resources more comparative advantage

9. Competitiveness Definition
Basic and Important Idea:
Wealth creation takes place at the enterprise level
National environment may enhance or hinder a country’s ability to compete domestically and internationally

10. Theory provided for WCY
Four fundamental forces shape the country’s competitiveness environment
a) Attractiveness vs. Aggressiveness
b) Proximity vs. Globality
c) Assets vs. processes
d) Individual Risk Taking vs. Social
Cohesiveness

11. a) Attractiveness vs. Aggressiveness
   How a nation manage his relationship with the world business community
Aggressiveness
Attractiveness
By exports and foreign direct investment (FDI) strategy
Through incentives and investment

12. a) Attractiveness vs. Aggressiveness
    
Aggressiveness
Attractiveness
Generates income in the home country, not necessarily jobs
e.g. Germany, Japan, Korea
Creates jobs in the FDI host countries, can be short of money
e.g. Ireland, Singapore
Must consider both to compete in the world business

13. b) Proximity vs. Globality
Types of economic system a nation refers to
Proximity
Globality
Comprises traditional activities
Crafts, social and personal services, administrative activities and consumer-support activities
Is composed with international operations
Global business

14. b) Proximity vs. Globality
    
Proximity
Globality
Provide value-added close to the end-user
Generally protectionist and expensive
Not necessarily close to the end-user
Benefits from the comparative advantages with operation costs
Generally competitive and price effective

15. b) Proximity vs. Globality
    
In Western Europe 2/3 of the GDP come from economy of proximity
Smaller countries are more dependent on economy of globality

16. c) Assets vs. Processes
Resources a nation relied on to create a competitive environment
Assets
Processes
Rich in assets
Land, people and natural resources
Poor in resources
Essentially on transformation processes (Economic value added activities)

17. c) Assets vs. Processes Assets Processes Not necessarily competitive
    
Assets
Processes
Not necessarily competitive
Become complacent
Brazil, India and Russia
More competitive
Added on infrastructure, industrial power, education and skills
Singapore, Japan and Switzerland

18. d) Individual Risk Taking vs. Social Cohesiveness
    
Two different types of Government policy
Individual risk taking
Social cohesiveness
Emphasis on risk
Deregulation, privatization and the responsibility of the individual
Minimize social welfare
Relies on social consensus
Extensive welfare system

19. Golden Rules of Competitiveness
    

20. Golden Rules of Competitiveness
    

21. Part II: Methodology
The methodology of the WCY divides the competitive environment into four main areas:
Economic Performance
Government Efficiency
Business Efficiency
Infrastructure

22. Methodology
Each of these four factors is broken down into five sub-factors
Features 20 such sub-factors
Each highlighting different measures of competitiveness.
Criteria under sub-factors, sum up to be 320

23. Methodology Sub-factor’ s characteristics:
not necessarily including the same number of criteria
has the same weight in overall consolidation of results (5%)
Collect objective statistic or subjective data accordingly

25. Competitiveness factor
ECONOMIC PERFORMANCE (83 criteria)
(Macro-economic evaluation of the domestic economy)
Domestic Economy
International Trade
International Investment
Employment
Prices

26. Examples Real GDP Growth
Percentage change, based on national currency in constant prices
Balance of trade
US$ billions (minus sign = deficit)
Direct investment flows abroad
US$ billions
Employment
Percentage of population
Consumer price inflation
Average annual rate

27. Competitiveness factor
GOVERNMENT EFFICIENCY (77 criteria)
(Extent to which government policies conductive to competitiveness)
Public Finance
Fiscal Policy
Institutional Framework
Business Legislation
Societal Framework

28. Examples Government budget surplus/deficit Percentage of GDP
Collected total tax revenues
Personal security and private property
Survey
Price controls

29. Competitiveness factor
BUSINESS EFFICIENCY (69 criteria)
(Extent to which enterprises are performing in an innovative, profitable and responsible manner)
Productivity
Labor Market
Finance
Management Practices
Attitudes and Values

30. Examples Overall productivity GDP per person employed, US$
Labor relations
Survey
Banking sector assets
Percentage of GDP
Social responsibility
Values of society

31. Competitiveness factor
INFRASTRUCTURE (94 criteria)
(Extent to which basic, technological, scientific and human resources meet the needs of business )
Basic Infrastructure
Technological Infrastructure
Scientific Infrastructure
Health and Environment
Education

32. Examples Urbanization Survey High-tech exports
Percentage of manufactured exports
Total expenditure on R&D
US$ millions
Total health expenditure
Percentage of GDP
Total public expenditure on education

33. I M D W O R L D C O M P E T I T I V E N E S S Y E A R B O O K 2 0 0 5
Countries
World competitiveness Index
(1) USA 1
100
(6) HONG KONG 2
93.073
(2) SINGAPORE 3
89.679
(5) ICELAND 4
85.349
(3) CANADA 5
82.648
(8) FINLAND 6
82.627
(7) DENMARK 7
82.545
(14) SWITZERLAND 8
82.534
(4) AUSTRALIA 9
81.975
(9) LUXEMBOURG 10
80.311

34. (11) SWEDEN 14
76.261
(23) JAPAN 21
68.652
(22) UNITED KINGDOM 22
68.518
(21) GERMANY 23
67.842
(35) KOREA 29
64.239
(30) FRANCE 30
64.203
(24) CHINA MAINLAND 31
63.219
(50) RUSSIA 54
43.591

35. How to use the World Competitiveness Yearbook
apply Chile’s example here
Competitiveness Trend – Overall
Show evolution of the economy’s overall performance and individual results

37. How to use the World Competitiveness Yearbook
Competitiveness Trends – Factor Breakdown
Show the economy’s performance over time for each Competitiveness Factor from 2001 to 2005

38. How to use the World Competitiveness Yearbook
Competitiveness balance Sheets
Highlight specific strengths and weaknesses of the economy in world competitiveness

39. How to use the World Competitiveness Yearbook
Twenty Strongest Criteria
Identifies the 20 strongest criteria overall.
Are broken down by the 13 hard and 7 survey criteria with the highest STD values

40. How to use the World Competitiveness Yearbook
Twenty weakest Criteria
Identifies the 20 weakest criteria

41. Part III: Comparison
We try to find the correlation between WCI and some commonly used economic indicator
To see how should we interpret WCI
We apply figures in 2004 for illustration

42. 2004 WCI Ranking Countries World competitiveness Index (04) (1) USA 1
100
(6) HONG KONG 2
93.073
(2) SINGAPORE 3
89.679
(5) ICELAND 4
85.349
(3) CANADA 5
82.648
(8) FINLAND 6
82.627
(7) DENMARK 7
82.545
(14) SWITZERLAND 8
82.534
(4) AUSTRALIA 9
81.975
(9) LUXEMBOURG 10
80.311
(12) TAIWAN 11
78.319
(10) IRELAND 12
77.846
(15) NETHERLANDS 13
77.4
(11) SWEDEN 14
76.261
(17) NORWAY 15
76.157

43. WCI and other economic indicator
Compare with real GDP growth in the current year
Compare with unemployment rate
Compare with average real GDP growth in past five years

44. W C Index & real GDP growth (04)

45. W C Index & real GDP growth (04)
The correlation coefficient is  
It seems no significant correlation between the index and real GDP growth
One should not simply conclude that high index means high GDP Growth or vice versa (Venezuela as an example)

46. W C Index & Unemployment rate(04)

47. W C Index & Unemployment rate(04)
The correlation coefficient is
It seems there is negative relationship between the index and unemployment rate

48. W C Index & real GDP growth (average 00-04)

49. W C Index & real GDP growth (average 00-04)
The correlation coefficient is
 It seems no relationship between the index and average real GDP growth in past five years

50. Conclusion Four forces shaping a region’s competitiveness environment
Four areas altogether 312 criteria to investigate
WCI does not necessary correlate with GDP growth or GDP volume
WCI does correlate with some indicators like unemployment, per capita income