Global competitiveness report: Ethiopia’s productivity growth has hardly picked up!

30 Sep

By Keffyalew Gebremedhin – The Ethiopia Observatory (TEO)

The Global Competitiveness Index is a composite or syncretic picture of an economy incisively looked through the prisms of recognized metrics.

Consequently, good showing on the World Economic Forum’s The Global Competitiveness Index offers ample evidences of an economy’s successes in productivity growth. It can be deduced that poor standing on those measures is bad, since it shows failures in a nation’s productivity growth and development.

The authors of WEF’s Competitiveness Index for 2015-2016 report define competitiveness “as the set of institutions, policies, and factors that determine the level of productivity of an economy, which in turn sets the level of prosperity that the country can earn.”

This time around, Switzerland, Singapore, United States, Germany, Netherlands, Japan, Hong Kong SAR, Finland, Sweden and the United Kingdom have clinched the first ten positions in global competitiveness, a sign of their forging forward in global competitive growth.

In Sub-Saharan Africa, the first ten top ranking nations are: Mauritius, South Africa, Rwanda, Botswana, Namibia, Cote D’Ivoire, Zambia, Seychelles, Kenya and Gabon – each scoring a value of 4.4 (2), 4.3, 4.2, 4.0, 3.9 (4) and 3.8.

Ten of the above Sub-Saharan African nations have better rankings, nine of them with rankings of under hundred, the other one Gabon ranking 103rd, according to TEO’s analysis of the report.

Further, analyst Caroline Galvan believes Africa’s level of productivity and competitiveness remain low, simply because they are held down by the basic drivers of competitiveness, such as weak institutions, poor infrastructure and insufficient health and education sectors. The only way out of this, according to the analyst is recognizing:

    “[T]he ease of entry and exit from low-wage, low-productivity jobs and an improving business environment alone will not lead to improved competitiveness. These need to be critically complemented by competitiveness-enhancing reforms in basic requirement, such as improving institutions and bridging the infrastructure and human capital gap.”

That is where Ethiopia has lost it, by fsiling to build and respect institutions – meaning mandates, accountability and the rule of law!

Ethiopia’s competitiveness may give the impression that it has improved this year – given its ranking has moved to 109, out of 140 countries, and relative to its 2014 standing of 118th. However, that is not the case, simply because it has only trabskated to an overall movement of 0.1 value, which is not a great deal.

More importantly, on basics and the bricks and mortars of development – such as infrastructural development – its global standing is 121st out of 140 nations. Also, for instance, in health and primary education it has stooped diwn to the lower end and stands at the ranking of 108th; in higher education its ranking is as bad as 129th out of 140 nations.

Efficiency of the goods market is poor, which has left Ethiopia in a bad corner at the ranking of 102nd; its technological readiness is equally poor at 132nd, i.e., out of 140 nations; its financial market development is lowly, rated as 116th out of 140 nations; and the sophistication of its business environment is rudimentary at its best at a standing of 108th.

Why do these 12 miraculous metrics mean so much? What is the source of their miraculous powers; after all, what are they?

The 12 metrics of performance ratings in productivity growth and development are measures that set each nation apart from the others. They determine the ranking of a nation, especially how speedily it improves the conditions of life and the standards of living of its people.

In that regard, Ethiopia’s standing has not really qualitatively improved from the previous time, even if in terms of ranking it has come down to 109th. Its 3.7 score or value rating is no good grade since the level of its composite value improvement is as low as 0.1 percent.

Ethiopia has become a nation governed by leaders that love to seduce themselves by political propaganda, lies and vindictiveness that is out to destroy imagined enemies, including Teddy Afro, a favorite musician of Ethiopians no force can disgorge out of them!

Furthermore, in key and very essential metrics Ethiopia’s performance has been laggard because of bad politics and ineptness, or lack of national vision and poor insight of the country’s leadership. It recently tried to buy time for itself at the Mekelle party conference, admitting that it has drowned the nation into sespool of corruption; it has dragged the country into having to contend with bad leadership and poor governance in every front.

Ethiopians did not trust the TPLF regime. The people remained skeptical after a quarter century of experiences with the regime. They, therefore, simply said the proof the pudding is in the eating; tgat’s the reform they would bring about for improvement of national life.

Not surprisingly, it soon became business as usual with the Man in the Ethiopian Prime Minister’s Office who broke tgat pledge with his decision to pass the buck to others. He was heard acting smart-alecky and claiming, according to Addis Fortune saying, “It is now visible that the rent seeking political economy has overwhelmed our cities”.

He might have succeeded in fooling careerists lurking within his party, not other Ethiopians. Rest assured, Ethiopia cannot also get anywhere with deceptiveness!

Source: World Economic Forum

Source: World Economic Forum


 

Here are the details of what each metric means:

    (i) Institutions – While Ethiopia’s standing in this is 83rd from 140 nations,

    The institutional environment, WEF says, relates to: “The legal and administrative framework within which individuals, firms, and governments interact determines the quality of the public institutions of a country and has a strong bearing on competitiveness and growth.”

    (ii) Infrastructural development, according to WEF:

    “Extensive and efficient infrastructure is critical for ensuring the effective functioning of the economy. Effective modes of transport—including high-quality roads, railroads, ports, and air transport—enable entrepreneurs to get their goods and services to market in a secure and timely manner and facilitate the movement of workers to the most suitable jobs. Economies also depend on electricity supplies that are free from interruptions and shortages so that businesses and factories can work unimpeded. Finally, a solid and extensive telecommunications network allows for a rapid and free flow of information, which increases overall economic efficiency by helping to ensure that businesses can communicate and decisions are made by economic actors taking into account all available relevant information.”

    (iii) Macroeconomic environment: “Government cannot provide services efficiently if it has to make high-interest payments on its past debts. Running fiscal deficits limits the government’s future ability to react to business cycles. Firms cannot operate efficiently when inflation rates are out of hand. In sum, the economy cannot grow in a sustainable manner unless the macro environment is stable.”

    (iv) Health and primary education: “Poor health leads to significant costs to business, as sick workers are often absent or operate at lower levels of efficiency. ”

    (v) Higher education and training:”This pillar measures secondary and tertiary enrollment rates as well as the quality of education as evaluated by business leaders. The extent of staff training is also taken into consideration because of the importance of vocational and continuous on-the-job training—which is neglected in many economies—for ensuring a constant upgrading of workers’ skills.”

    (vi) Goods market efficiency: “Countries with efficient goods markets are well positioned to produce the right mix of products and services given their particular supply-and-demand conditions, as well as to ensure that these goods can be most effectively traded in the economy. Healthy market competition, both domestic and foreign, is important in driving market efficiency, and thus business productivity, by ensuring that the most efficient firms, producing goods demanded by the market, are those that thrive. Market efficiency also depends on demand conditions such as customer orientation and buyer sophistication.”

    (vii) Labor market efficiency: “Labor markets must have the flexibility to shift workers from one economic activity to another rapidly and at low cost, and to allow for wage fluctuations without much social disruption. Efficient labor markets must also ensure clear strong incentives for employees and promote meritocracy at the workplace, and they must provide equity in the business environment between women and men.”

    (viii) Financial market development:”Economies require sophisticated financial markets that can make capital available for private-sector investment from such sources as loans from a sound banking sector, well-regulated securities exchanges, venture capital, and other financial products. In order to fulfill all those functions, the banking sector needs to be trustworthy and transparent, and—as has been made so clear recently—financial markets need appropriate regulation to protect investors and other actors in the economy at large.”

    (ix) Technological readiness: “The technological readiness pillar measures the agility with which an economy adopts existing technologies to enhance the productivity of its industries, with specific emphasis on its capacity to fully leverage information and communication technologies (ICTs) in daily activities and production processes for increased efficiency and enabling innovation for competitiveness.”

    (x) Market size: “The size of the market affects productivity since large markets allow firms to exploit economies of scale. Traditionally, the markets available to firms have been constrained by national borders. In the era of globalization, international markets have become a substitute for domestic markets, especially for small countries.”

    (xi) business sophistication: “Business sophistication concerns two elements that are intricately linked: the quality of a country’s overall business networks and the quality of individual firms’ operations and strategies. These factors are especially important for countries at an advanced stage of development when, to a large extent, the more basic sources of productivity improvements have been exhausted.”

    (xii) Innovation: “Firms must design and develop cutting-edge products and processes to maintain a competitive edge and move toward even higher value-added activities. This progression requires an environment that is conducive to innovative activity and supported by both the public and the private sectors.”

*Updated.

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