World Economic Forum has been developing and publishing since 1979 the global competitiveness index, measuring the competitiveness of countries under 12 different pillars or categories to which different indicators are associated with the objective of promoting economic, social and cultural policies that favor the country's competitiveness and with it its economic growth and prosperity.
These 12 pillars of competitiveness are:
Health and primary education
Higher education and training
Good market efficiency
Labour market efficiency
Financial market development
Below we explain the meaning of each of the 12 pillars of competitiveness accompanied by indicators that have been used to measure the degree of success and approach to that pillar.
The institutional environment includes the legal and administrative framework of public and private institutions through which people, companies and governments interact. That is, the rules and procedures necessary to carry out any economic activity as well as the set of policies framed towards economic growth and therefore competitiveness, with the institutional environment being a fundamental pillar within the scope of the competitiveness and growth of a country.
Indicators of the institutional environment:
Degree of transparency of the state budget.
Degree of companies audited externally.
The provision of efficient infrastructure is another fundamental pillar for the competitiveness of a country, transport infrastructures such as highways, airports, seaports, rail network ... will improve and reduce the time spent in transport of both goods and people improving the overall productivity of the country. On the other hand infrastructures related to energy supply (electricity, gas ...) are necessary for the proper operation of companies, likewise a good infrastructure associated with telecommunications (telephony, internet ...) will allow a fast and safe flow of the huge amount of information that companies, institutions and people handle daily.
Efficiency of transport.
Quality of the railway infrastructure.
A stable and solid macroeconomic environment will allow a better development of the competitiveness of a country. High rates of inflation or deflation, high payment interest by the requested loans, high levels of fiscal deficit ... all these are macroeconomic disadvantages that hinder the competitiveness of a country and therefore its economic growth.
Indicators of the macroeconomic environment:
Country credit ratio.
The existence of health services as well as primary education centers are vital so that future and present workers can perform their work productively, avoiding high rates of illness absenteeism as well as developing their work correctly.
Indicators of health and primary education:
Expectation of life.
Enrollment rate in primary education.
Countries that want to improve their competitiveness must have specialized and quality higher education centers, training present and future workers to generate products and / or services with a high added value.
Indicators of higher education and training:
University enrollment rate.
Degree of investment in training for workers by companies.
A transparent, efficient and stable environment is necessary for the exchange of goods and services, avoiding excessive bureaucratic procedures and taxes that slow down the market. On the other hand, the existence in the market of demanding customers and buyers forces companies to continue innovating and improving their competitiveness.
Indicators of goods market efficiency:
Number of procedures necessary to create a business.
Degree of sophistication of the buyers.
Competitive countries must have an efficient and flexible labour framework, allowing workers to change activity quickly at low cost without social disorders, on the other hand, equality between men and women and the culture of promotion on their own merits will attract and will retain the talent of workers in a country.
Indicators of labour market efficiency:
Wages and productivity.
Labor policies for hiring and firing.
Percentage of women workers.
A stable, transparent and secure financial market will allow to obtain new funds for investments that have an impact on the improvement of competitiveness, as well as ensuring the capital of the companies and people of the country at all times.
Financial market development indicators:
Degree of financing to small and medium enterprises.
Liquidity ratio of banks.
Competitive countries must be able to adopt and quickly implement technological innovations that allow an increase in productivity and competitiveness
Indicators of technology readiness:
Disposition of the latest technologies.
Technology adoption rate by companies.
The size of the market is closely linked to the productivity of companies, large markets will allow companies to manufacture in large quantities (economies of scale), reducing costs of both purchase, manufacturing and distribution, directly affecting productivity and competitiveness. The effect of globalization makes markets cross the borders of countries expanding throughout the planet, therefore countries that promote export and opening new markets favors their competitiveness.
Indicators of market size:
Size of the domestic market.
Size of the external market.
Countries that have good business networks where specialized companies (supplier - manufacturer - institutions ...) are well interconnected will lead to the creation of clusters, being a key element and catalyst of the country 's competitiveness.
Indicators of business sophistication:
Quality and quantity of suppliers
Sophistication of the productive process
Innovation is the engine for the creation of new products / services produced by a nation, increasing its value and therefore competitiveness. For this the countries must promote both public and private investment in R & D, as well as having collaboration networks between universities, qualified scientists and private companies with the aim of creating and promoting these new technologies.
Indicators of innovation:
Investment of private companies in R & D
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