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Opinions of Thursday, 16 September 2010

Columnist: Ampong, Charles Horace

Statistics of Ghana's drop in Global Competitiveness rankings

According to the World Economic Forum Global Competitiveness Index (GCI) report for 2010-2011, Ghana appears to have dropped in global competiveness. Ghana was placed in the 110th position in 2009 rankings but dropped to the position of 114th out of 139 countries in the 2010-2011 rankings. GCI is a highly comprehensive index for measuring national competitiveness taking into consideration microeconomic and macroeconomic factors, policies, institutions that do affect the level of productivity of a country. The index based ranking of the countries which encompassed 12 factors code-named 12 pillars of economic competitiveness provided the following statistics for Ghana.

1st Pillar – Institutions (67th out of 139) : This include the efficiency of the legal and administrative framework within which individuals, firms and governments interact to generate income and wealth in the economy. The role, quality and management of institutions are all determinants of this pillar. Includes also accountability probity in the accounting and financial practices of government and private businesses.


2nd Pillar – Infrastructure (106th out of 139) : Focuses on extensive and efficient infrastructure critical for promoting economic growth nationally.

3rd Pillar – Macroeconomic environment (136th out of 139) : Macroeconomic environment that is stable where inflation, interest rate, fiscal debt or imbalances, spending are under control. High interest on past debts and deficit spending play a major role in this scenario.

4Th Pillar – Health & Primary Education (122nd out of 139) : Healthy workforce vital for competitiveness and productivity sustainability.

5th Pillar – Higher Education and Training (108th out of 139) : Quality education and training vital for effective value chain management of developing economies and economic growth as a whole.

6th Pillar – Goods market efficiency (75th out of 139) : Free market avoiding protectionistic tendencies by governments in the form of interventions in the market.

7th Pillar – Labor market efficiency (93rd out of 139) : Flexible labor markets, low costs allowing for wage fluctuations without much social disruption or unrest.

8th Pillar – Financial market development (60th out of 139) : Sophisticated financial markets with capital availability for private sector coupled with sound banking sector, and properly regulated securities exchanges. Loan availability is a major determinant here.


9th Pillar – Technological readiness (117th out of 139) : Information and Communications Technology (ICT) accessibility and usage necessary for attraction and growth of Direct Foreign Investment (DFI) and industries in general.

10th Pillar – Market size (83rd out of 139) : The size of the market for products. However, in the absence of that higher exports can be a good substitute to better ranking.

11th Pillar – Business sophistication (97th out of 139) : Quality of the overall business network in the economy. It includes local suppliers network and the extent of their interactions promoting business growth.

12th Pillar – Innovation (99th out of 139) : Technological innovation level including human capital availability and adaptability.

The report however contained some surprises. The United States which lost the first position to Switzerland in 2009 dropped again to the 4th position in 2010 from its 2nd position in 2009 and was also overtaken by countries like Sweden (2nd position) and Singapore (3rd position). Germany also moved up from 7th position in 2009 to 5th position in the 2010 report. The results showed the relative improvement in the EU’s global competitiveness especially with respect to United States of America. Now, Ghana whose GDP was 15.5 billion US$ in 2009 barely improved its GDP per capita (measure of the standard of living) which now stands at 671US$. Strangely, the index also had Zimbabwe (136th out of 139) better ranked ahead of Angola (138th out of 139). Furthermore, countries such as South Africa(54th), Namibia(74th), Morocco(75th), Botswana(76th), Rwanda(80th), Algeria(86th), The Gambia(90th), Benin (103rd), Kenya(106th), Cameroon(111th) and Tanzania(113th ) were all better ranked ahead of Ghana. Nevertheless, Ghana was better ranked than countries like Zambia(115th), Uganda(118th), Ethiopia(119th), Madagascar(124th), Malawi(125th), Swaziland(126th), Nigeria (127th), Lesotho(128th), Cote D’ivoire(129th), Mozambique(131st), Mali (132nd), Burkina Faso(134th), Mauritania(135th), Zimbabwe(136th), Burundi(137th), Angola(138th) and Chad(139th).

Based on the details of the index ranking it appears Ghana is lagging seriously in five pillars namely infrastructure, health & primary education, higher education and training (predominantly human capital), macroeconomic environment stability and technological readiness which are essentials for sustained economic development and competitiveness in the medium to longer term. Ultimately, the question that needs to be asked is whether the macro-policies of the ruling government are working considering the low ranking for the country’s macroeconomic environment stability (136th out of 139). Additionally, the index ranking produces a blurred picture of the country’s competency for growth in the years ahead. In fact, foreign business men and women do garner much information from such reports by WEF. WEF is a reputable organization in the area of country risk assessment and economic analysis. Again these rankings should not be considered as propaganda for it has potential intrinsic consequences on the attraction of foreign investments and can also set the trajectory of investments for investors already in Ghana.

By Charles Horace Ampong
www.charliepee.blogspot.com
www.icgcchicago.com
Source: http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2010-11.pdf