The Grey Chronicles

2009.June.30

Asian Competitiveness Index 2008-2009: India



The Global Competitiveness Report 2008–2009Recalling the previous post on Legatum Institute’s 2008 Prosperity Index, the recent World Economic Forum’s The Global Competitiveness Report [GCR] 2008-2009 (2008) also requires a conscientious look at India’s competitive advantages. Thus, in the interest of those who read the series Relative Hardship, an update of which is also addressed here.

India, at 50th place, derives substantial advantages not only from its market size (4th for its domestic market size and 5th for its foreign market size) but also from its strong business sophistication (27th) and innovation (32nd). The Philippines, at 71st place, benefits from its relatively large market size (34th) and has seen an improvement in its Macroeconomic Stability (53rd) since last year, with a shrinking government budget deficit (64th) and lower public debt (96th). Both countries are categorized by WEF as factor-driven economies.

India Competitive Index Philippine Competitiveness Index

The Philippines scores better compared to India in only three pillars: Macroeconomic Stability, Health and Primary Education, and Higher Education and Training. Of the 110 Competitiveness Index factors, moreover, India boasts of 50 competitive advantages, compared to only 20 for the Philippines. India is endowed with strong business clusters and many local suppliers (4th), and ranks an impressive 3rd for the availability of scientists and engineers and 27th for the quality of its research institutions.

Comparative Competitive Index: India, PhilippinesHowever, India’s overall competitive position is weakened by its macroeconomic instability (109th) with the government running one of the highest deficits in the world (127th out of 134 countries!), unsustainable levels of government debt (113th), and fairly high inflation (77th). Health and Primary Education is another area of concern, with poor health indicators (105th for both infant mortality and life expectancy), related to the high prevalence of diseases such as tuberculosis and malaria. Educational enrollment rates also remain low at all levels, with the primary educational system in particular getting poor marks for quality (80th). Certain Labor Market Efficiency indicators are also poor, including female participation in the labor force (122nd) and the facility with which firms can hire and fire employees (104th).

On the other hand, the main obstacles to greater competitiveness of the Philippines are related to the quality of the its Public Institutions (105th) and the Labor Market Efficiency (101st). The institutional environment is characterized by the perception that government spending is highly wasteful (120th), a lack of evenhandedness in the government’s dealings with the private sector (117th), and general concerns about corruption in the public sphere. In addition, the threat of terrorism imposes significant costs on businesses in the country (125th out of 134 countries). With regard to labor market inefficiencies, wages are not flexibly determined by companies (108th), regulations impede firms from freely hiring and firing workers (101st), and firing costs are excessive (108th), all of which hinders job creation.

Using Pareto’s 80-20 Rule, the GCR cited that the top 80% problematic factors for doing business in the Philippines are corruption (23.9%), inefficient government bureaucracy (19.7%), inadequate supply of infrastructure (13.1%), policy instability (8.7%), government instability (7.0%) and tax regulations (6.4%). Meanwhile, India’s top 80% problems are inadequate supply of infrastructure (25.5%), inefficient government bureaucracy (14.6%), corruption (10.1%), restrictive labor regulations (9.9%), tax regulations (8.8%), inflation (5.6%) and policy instability (5.0%). Almost similar problems challenging the Philippines. Inflation (3.5%) and restrictive labor regulations (2.4%) are relatively smaller concerns for the Philippines, compared to its 80%. India’s government instability (1.3%) is, however, much to small compared to (7.0%) for the Philippines.

Recalling the series of posts on Relative Hardship, much of the same factors are also used in the WEF’s Competitive Index. The Relative Hardship computations were mostly based on 2005 data, while WEF relied more on 2007 data. Noteworthy, moreover, is that most of the Relative Hardship scores are still consistent with the previous computations, and thus after a lapse of two years from 2005 to 2007, it seemed that no substantial changes of the Relative Hardship matrix would be required. Click here for WEF’s Competitive Advantage applied to Relative Hardship.


Notes:

Porter, Michael E. & Klaus Schwab, (2008). The Global Competitiveness Report 2008-2009, Geneva: World Economic Forum, October 2008. pp. 27, 29, 188-189, 276-277. back to text

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 LicenseDisclaimer: The posts on this site do not necessarily represent any organization’s positions, strategies or opinions; and unless otherwise expressly stated, are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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