UAE joins league of top 25 competitive nations of the world

The United Arab Emirates has made it to the top 25 most competitive countries in the world, according to a latest report.

The UAE rankings show maximum improvement within the GCC this year, said The Global Competitiveness Report 2009-2010 by the World Economic Forum.

The country is at 23rd place, up from 31st last year. The improvement in rankings is the result of a positive trend of the past few years, said the report.

"Notwithstanding the current cyclical downturn, the available data suggest that the UAE has in place the underlying fundamentals of a competitive economy. The lower score in macroeconomic stability due to rising public debt and lower budget surplus is in line with most other countries' results in this pillar and therefore does not lead to significant changes in the ranking," said the report.

However, the issues of debt do arise in the report, which can have a negative impact on the positive work done in the country in the past few years.

"Serious doubts persist about the sustainability of public finances in Dubai and the potential effect a further deterioration may have on the country as a whole. As the global downturn continues to limit the availability of finance and reduces tourism and trade, the country's main sectors of activity are likely to be adversely affected," said the report.

"In spite of the fall in real estate prices, the assessment of its financial markets so far proves more resilient than for many other countries. It has to be noted that businesses assess banks as somewhat less than sound," it adds further.

The changing global environment is also reflected in the intensifying competition in goods markets in the UAE, which may in turn have positive effects on the country's future development path.

The consistent upgrading of institutions and infrastructure and rising technological readiness and innovative capacity is also noteworthy and will help the UAE maintain its competitive edge in the longer-term.

Education is one sector that needs to be looked at to increase the competitiveness of the country. The report highlights the low secondary and tertiary enrolment rates [50th and 81st respectively], and lack of research institutions in the country.

There is a relative disconnect between universities and businesses in the country, which can be improved by developing the level of education, said the report.

Qatar is one place ahead of the UAE at 22nd place but is only four notches up from last year. "The country continues to weather the economic crisis, well thanks to its abundant resources in natural gas remaining, with an estimated 18 per cent growth rate in 2009, the fastest-growing economy in the GCC.

"This positive economic performance is reflected in a number of indicators captured by the GCI. Over the past year, the country moved up by six places from last year's already high base in the macroeconomic stability pillar, to 13th. This is a reflection of both absolute improvements – notably in the budgetary surplus and public debt levels – and the poorer macro economic performance of many other countries due to the financial crisis and concurrent countercyclical measures.

"In terms of macroeconomic management, the country's priorities are to reduce inflation, which was exacerbated by rising food and housing prices in 2008, and to expand credit."

The report lauds the nation in taking the right decisions, which has helped it move up the competitive scale. The upgrading of the institutional framework continues [ninth], and goods and labour markets are more efficient than in previous years, ranked 21st and 14th respectively. The country has also been able to harness the latest technologies and has opened up to foreign investment.

As is the case with the UAE, Qatar also needs to work on its quality of education. "The competitiveness of the country can improve if students are encouraged to pursue tertiary education," said the report.

Stronger protection of investor's rights and strength of legal rights are also areas to be worked upon, it added.

Qatar and the UAE is followed by Saudi Arabia from the GCC bloc. The kingdom is at 28th place in the top tier of the emerging markets but it is down by one place from last year. As in previous years, the country's macroeconomic stability remains its main strength.

Major reforms in the area of investment climate, education, health, the financial sec- tor, and the judiciary are under way or envisaged, and are being registered in the country's performance in the GCIs. However, serious challenges remain. The quality of education is the most critical followed by a rigid labour market, trustworthiness and confidence in the financial sector, which remain low.

Bahrain is at 38th place from 37th last year. Kuwait stands at 39, down from 35th slot last year. Oman is the last country from the GCC in the index. It is at 41st slot, down from 38th last year.

Switzerland tops the overall ranking in The Global Competitiveness Report this year.

The United States falls one place to second position, with weakening in its financial markets and macroeconomic stability.

Singapore, Sweden and Denmark round out the top five. European economies continue to prevail in the top 10 with Finland, Germany and the Netherlands following suit.

Among the three other large Bric economies, Brazil and India also improve, while Russia falls by 12 places.



The 12 pillars of competitiveness

The 2009-2010 report assesses countries on 12 pillars of competitiveness, which are as follows.

Institutions

The quality of institutions has a strong bearing on competitiveness and growth. It influences investment decisions and the organisation of production and plays a central role in the ways in which societies distribute the benefits and bear the costs of development strategies and policies.

Infrastructure

Extensive and efficient infrastructure is an essential driver of competitiveness. It is critical for ensuring the effective functioning of the economy, as it is an important factor determining the location of economic activity and the kinds of activities or sectors that can develop in a particular economy.

Macroeconomic stability

The stability of the macroeconomic environment is important for business and, therefore, is important for the overall competitiveness of a country.

Health and primary education

Investment in the provision of health services is critical for clear economic, as well as moral considerations. In addition to healthcare, this pillar takes into account the quantity and quality of basic education received by the population, which is increasingly important in today's economy.

Higher education and training

Quality higher education and training is crucial for economies that want to move up the value chain beyond simple production processes and products.

Goods market efficiency

Countries with efficient goods markets are well positioned to produce the right mix of products and services given supply-and-demand conditions, as well as to ensure that these goods can be most effectively traded.

Labour market efficiency

The efficiency and flexibility of the labour market are critical for ensuring that workers are allocated to their most efficient use in the economy and provided with incentives to give their best effort in their jobs.

Financial sophistication

An efficient financial sector allocates the resources saved by a nation's citizens as well as those entering the economy from abroad.

Technological readiness

This pillar measures the agility with which an economy adopts existing technologies to enhance the productivity of its industries. In particular, information and communication technologies (ICT) have evolved into the "general purpose technology" of our time, given the critical spillovers to the other economic sectors and their role as efficient infrastructure for commercial transactions.

Market size

The size of the market affects productivity because large markets allow firms to exploit economies of scale. There is vast empirical evidence showing that trade openness is positively associated with growth.

Business sophistication

Business sophistication is conducive to higher efficiency in the production of goods and services. This leads, in turn, to increased productivity, thus enhancing a nation's competitiveness.

Innovation

The final pillar of competitiveness is innovation. In the long run, standards of living can be expanded only with innovation. Innovation is particularly important for economies as they approach the frontiers of knowledge and the possibility of integrating and adapting exogenous technologies.

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