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Fifty is not the limit
 
Editorial
In 2013, Kazakhstan has finally found itself ranking 50th in the WEF Global Competitiveness Report. However, there is no time ahead to rest on our laurels, because the President has set a new goal for our country to get into the top 30 of the most advanced economies in the world. With this, the country can hardly count on getting quick results, because we will have to meet the highest standards in the field of human capital development, but it seems that this will require a fundamental revision by the government of its social policy.
 

In 2013, the number of countries covered by the Global Competitiveness Report of the World Economic Forum (WEF Global Competitiveness Report 2013–2014) has increased again and reached 148. Nevertheless, the top 3 countries in the rankings have remained unchanged. Switzerland has been on top of the list for the fifth consecutive year. Then it follows Singapore and Finland (Table 1). Germany ranks 4th, marking an improvement of last year's result by two positions. The U.S.A. has also managed to overcome a four-year losing streak, and now is up from 7th to 5th position. This has occurred mainly due to the restoration of confidence in the government and financial markets, while the macroeconomic stability of the world's largest economy is still of great concern (117th). In addition, Hong Kong (7th) and Japan (9th) have managed to improve their competitiveness, while Sweden (6th), Netherlands (8th) and the UK (10th), on the contrary, have lowered their positions.

In the opinion of WEF experts, the need to urgently solve the problem of sovereign debts in order to avoid the collapse of the Eurozone, has led to a situation that it seems as if in many European countries competitiveness as the fundamental issue was put on the backburner. As a result, today, the southern European countries such as Spain (35th), Italy (49th), Portugal (51st), and especially Greece (91st), should focus on overcoming weaknesses in operation and efficiency of their markets, the development of innovation, and the improvement of access to financing.

However, last year's pessimism and uncertainty with regard to the developed economies has given way to the slowdown on emerging markets. In particular, among the BRICS group of emerging economies, only Russia has shown a positive trend (+3 to 64th). China's position remained unchanged (29th), while South Africa (-1 to 53rd), Brazil (-8 to 56th), and India (-1 to 60th) have recorded a decline.

Among the countries of the Middle East and North Africa, the leaders are Qatar (13th) and the UAE (+5 to 19th). The latter has got in the top 20 countries of the rankings for the first time in its history. Saudi Arabia (-2 to 20th) is at the bottom of these top 20 countries, while Israel and Kuwait occupy 26th and 37th positions, respectively.

Among Latin American countries, Chile (24th), Panama (40th), Costa Rica (54th), Mexico (55th) and Peru (61st) have demonstrated the most competitiveness. Along with that, despite stable economic growth, the positions of these countries in the rankings list have remained unchanged for the last few years, with no sign of evident advancement. This evidences certain stagnation in their work on their competitiveness.

Against this backdrop, post-Soviet states look in a much better position. In 2013, most of the post-Soviet countries have again succeeded in improving their positions in the global rankings list. In particular, Estonia has been up from 34th to 32nd, Azerbaijan from 46th to 39th, Latvia from 55th to 52nd, Georgia from 77th to 72nd, Armenia from 82nd to 79th, and the Kyrgyz Republic from 127th to 121st. The outsiders are only Lithuania, which fell from 45th to 48th, Ukraine from 73rd to 84th, and Moldova from 87th to 89th. One more member-country of the CIS – Tajikistan – has dropped out of the WEF rankings altogether this year.

Speaking of Kazakhstan, after the last year’s dizzying leap by 21 positions up, this year Kazakhstan has risen only one position but even this achievement is very important. Today, we can rightly say that our country is among the 50 most competitive economies in the world.

By the rate of improvement of its competitiveness, now it is Ecuador that has taken a baton from Kazakhstan. The first moved 15 positions up to 71st. Among other countries in the WEF rankings that have demonstrated successful dynamics are Lesotho (+14 to 123rd), Indonesia (+12 to 38th), and Swaziland (+11 to 124th). On the contrary, a number of countries have made a big leap down in the rankings list; these are Honduras (-21 to 111th), Gambia (-18 to 116th), Liberia (-17 to 128th), Iran (-16 to 82nd) and Mongolia (-14 to 107th).

According to WEF experts, the new report evidences that the time when the global and regional policies were focused on "putting out fires" are behind. So, the leaders of the countries should again turn to the implementation of large-scale structural economic reforms. Here, the emphasis on innovation is becoming increasingly important from the viewpoint of the ability of the economy to ensure future prosperity.

The founder and Executive Chairman of the WEF, Klaus Schwab, stated that "gradually erase, and we'll talk about them as "innovation rich" and "innovation poor" countries. In this regard, it is important that the top managers of businesses, the government and the society will work together to create an appropriate system of education and a favorable environment for their development.

Adjusting the focus

So, in 2013, eight years after the President set an ambitious target before the country, Kazakhstan has become a full member of the "Club 50". At the same time on a seven-point scale, our performance has improved over the last year by 0.03 points from 4.38 to 4.41.

As can be seen from Table 2, Kazakhstan has made the crucial step forward due to its improved positions on two of the three sub-indices that form the Global Competitiveness Index (GCI), on the basis of which the WEF makes its rankings. On 9 of 12 pillars, the position of Kazakhstan has improved, and on the remaining 3 pillars the position of the country has lowered.

Thus, Kazakhstan has moved 3 positions up from 56th to 53rd in the Efficiency Enhancers subindex. Of the six variables, comprising this sub-index, a rise in position was on five of them, and only on one of them – Technological readiness – the country has dropped 2 positions down to 57th. However, after last year's moving of 32 positions up, this pullback hardly looks so critical. Kazakhstan has showed considerable progress in the Financial Market Development (+12 to 103rd) and Goods Market Efficiency services (+15 to 56th).

The year 2013 has become a breakthrough even for our weakest sub-index – Innovation and Sophistication Factors. By this sub-index, Kazakhstan has raised 17 positions up to 87th.

The only sub-index that has showed negative dynamics is Basic Requirements, where Kazakhstan has dropped one position down from 49th to 48th. This resulted from the pullback of our most strong variable Macroeconomic Environment (-7 to 23rd), as well as the continuing regression in Health and Primary Education (-5 to 97th). Efforts to mitigate the negative impact from this fall have been helpless even at the backdrop of evident progress in Institutions (+11 to 55th) and Infrastructure (+5 to 62nd).

The overall picture of Kazakhstan's competitiveness looks as follows: of the 114 variables that form the final GCI index, Kazakhstan has improved its position on 75 of them, worsened on 26, and the country’s position on 8 other variables has remained unchanged. 5 more variables have no basis for comparison, since they have been taken into account for the first time this year.

The number of those variables that Kazakhstan can consider its strengths has remained unchanged (Table 3). Today, we are among the top 50 most competitive countries by 29 variables. Despite the number of variables in the list of our strengths has remained the same (29), the content of the list itself has changed. This year, the list of our strengths includes Business Costs of Crime and Violence (+19 to 44th), Prevalence of Trade Barriers (+16 to 48th), and the new variable that assesses the Country Capacity to Attract Talent (41st). But some variables are now not in the list of our strengths; thus, Kazakhstan can hardly boast now of Efficacy of Corporate Boards (-17 to 53rd), and the Effect of Taxation on Incentives to Invest (-15 to 54th). In addition, the variable State Support of Business has been excluded from the WEF report, on which we ranked 13th last year.

Among the pillars where we have made the most progress for the last year, the Institutions pillar is on the top of that list. This is especially in view of the fact that WEF experts call the availability of strong institutions in the country as one of the main basic conditions for successful improvement of competitiveness. In particular, the situation has improved significantly in Intellectual Property Protection (+19 to 73rd), Favoritism in Decisions of Government Officials (+14 to 77th), Efficiency of Legal Framework in Settling Disputes (+14 to 53rd), Organized Crime (+ 18 to 67th), Ethical Behavior of Firms (+14 to 56th), and Protection of Minority Shareholders’ Interests (+15 to 74th). Thus, one can predict that if the current trend continues, the greater part of variables in the Institutions pillar has all the potential to become a competitive advantage for Kazakhstan in the next few years.

The financial sector of Kazakhstan is restoring the lost positions; the loss in positions was caused by the global recession. By Ease of Access to Loans, Kazakhstan has gained 49 positions up to 61st, and by Venture Capital Availability has raised 33 positions up to 72nd. Soundness of Banks has strengthened significantly, making the domestic banking system a gain of 20 positions up to 100th, and Regulation of Securities Exchange has also showed a remarkable result (+10 to 90th).

But the most pleasant surprise was the breakthrough in the pillar Innovation – herewe have raised 19 positions up to 84th place. By Capacity for Innovation, Kazakhstan has gained 18 positions up to 74th place, by Company Spending on R & D 17 positions up to 77th, by Gov’t Procurement of Advanced Tech Products 13 positions up to 58th, and by University-Industry Collaboration in R & D by 11 up to 79th.

That fact that the best performance results have been achieved on the above variables says that today the government of Kazakhstan thoroughly monitors the WEF assessment and recommendations with respect to our competitiveness progress, and in efforts to improve the situation makes a special focus on those variables which have the most showed the weaknesses of our country.

As for our competitiveness disadvantages at the given moment, 85 of the 114 variables of GCI can be referred to such. But the reassuring fact is that the list of variables where we are below the 100th position has reduced for the year from 26 to 20. The most critical areas are presented in Table 4.

The most disadvantage in 2013 has been the Quality of Port Infrastructure (-20 to 135th). Although this is odd, as in Kazakhstan there is only one seaport. The lack of progress with the Quality of Roads (117th) arouses concerns.

In our opinion, the below-listed variables as the fundamental things of our life need urgent attention from the government: Primary Education Enrollment, net (-16 to 118th), Business Impact of Tuberculosis (+1 to 111th), Life Expectancy (+1 to 103rd), and Infant Mortality (98th).

The competitiveness of Business Sophistication has turned out to be in a critical condition. The factors that have a negative effect on it are the weak Intensity of Local Competition (-7 to 120th), Local Supplier Quantity (-15 to 105th) and Local Supplier Quality (-12 to 102nd), State of Cluster Development (-16 to 126th), and Nature of Competitive Advantage (+6 to 118th), which leads to a poor Value Chain Breadth (+2 to 109th).

Talking about the indicator that has showed the largest fall, it suddenly appears HIV Prevalence among the adult population (-33 to 45th place).

Let us coordinate the positions

Today, Kazakhstan faces a new nation-wide challenge – to be among the top 30 most developed countries in the world by the year 2050. At the moment, among the post-Soviet countries, Estonia with its 32nd place in the report has the most chances to be among the top 30. Estonia, like Kazakhstan, is an economy in transition, which occupies an intermediate position between the second and third stages of economic development (when the factors of efficiency, and partly innovation are at the forefront). In this context, it is quite logical to examine the strengths of the Estonian economic competitiveness and to compare them with the performance indicators of our country.

Let's start with the fact that in terms of GDP per capita, Estonia with its GDP per capita at $16,320 is much ahead of Kazakhstan with its $11,773 (according to the 2012 data). Estonia and Kazakhstan are almost equitable in terms of macroeconomic stability (22nd place against 23rd, respectively) and labor market efficiency (12th vs. 15th). The only pillar, where Kazakhstan dominates over Estonia, is Market Size (54th vs. 99th, respectively). With this, Kazakhstan is seriously lagging behind Estonia in Health and Primary Education (97th vs. 29th, respectively), Financial Market Development (103rd versus 35th, respectively), Business Sophistication (94th vs. 51st), Innovation (84th vs. 31st), and Technological Readiness (57th vs. 29th).

The number of variables that are competitive advantages of Estonia is 50 by now, which is twice that of Kazakhstan.

So, we have to admit that our performance is far less balanced than that of Estonia, and therefore, the achieving of better indicators for Kazakhstan can be a major challenge for the government and businesses today.



Table of contents
Fifty is not the limit  Editorial 
· 2016 №1  №2  №3  №4  №5
· 2015 №1  №2  №3  №4  №5  №6
· 2014 №1  №2  №3  №4  №5  №6
· 2013 №1  №2  №3  №4  №5  №6
· 2012 №1  №2  №3  №4  №5  №6
· 2011 №1  №2  №3  №4  №5  №6
· 2010 №1  №2  №3  №4  №5/6
· 2009 №1  №2  №3  №4  №5  №6
· 2008 №1  №2  №3  №4  №5/6
· 2007 №1  №2  №3  №4
· 2006 №1  №2  №3  №4
· 2005 №1  №2  №3  №4
· 2004 №1  №2  №3  №4
· 2003 №1  №2  №3  №4
· 2002 №1  №2  №3  №4
· 2001 №1/2  №3/4  №5/6
· 2000 №1  №2  №3





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