Caribbean Trade Law and Development

Category: competitiveness

  • Evaluating Barbados’ WEF GCI Competitiveness Scorecard: Is Top of the Regional Class Good Enough?

    Alicia Nicholls

    Barbados made its grand reappearance on the World Economic Forum (WEF) Global Competitiveness Index (GCI) 2016-2017 after data shortages precluded its 2014-2015 inclusion. According to the WEF’s scorecard, the region’s star pupil topped its Latin American and Caribbean peers in the following subjects: infrastructure, labour market efficiency and technological readiness.

    Barbados is a 166 sq  miles (431 sq km) island nation with a population of about 280,000, a GDP of US4.4 billion and a GDP per capita of US$15,773, which puts us in the high income non-OECD range according to the World Bank. On the surface Barbados’ scorecard is commendable, particularly for a small island developing state (SIDS) whose recovery from the 2008/2009 global economic and financial crisis has been slow and protracted. Personally for me as a Barbadian I am proud of the achievements my country has made since our independence from the UK just shy of 50 years ago.

    But before we uncork the champagne, several things should give us pause. First, Barbados’ current rank of 72nd out of 138 economies marks a precipitous drop from its ranking in the GCI 2012-2013 where it was ranked 44th place out of 144 economies. Second, contrast this slide with the performance of another small island developing state (SIDS), Mauritius, which was ranked 54th in GCI 2012-2013 and has risen slowly but surely up the ranks to reach 45th place out of 138 economies in GCI 2016-2017. Third, only three other Caribbean economies were included on the index this year. While Barbados and Trinidad & Tobago lost ground, the other two Caribbean economies, Jamaica and the Dominican Republic, improved their rankings. Fourth, Barbados’ performance on eleven of the twelve pillars has been on a downward slope since 2012-2013.

    The Good

    Barbados’ top scores were in higher education and training, and infrastructure, where it ranked 29th and 30th respectively. For example, it ranks 6th in fixed-telephone lines /100 population and 25th in overall quality of infrastructure.  These have for a long time been among the island’s competitive advantages despite its small size. However, while the gross tertiary education enrolment rate is 36%, this is likely to decline given the removal of tuition-free tertiary education in 2014.

    Barbados also ranks 31st in technological readiness which is the only one of the twelve pillars on which the island’s performance remains on an upward trajectory. It ranks a commendable 10th in internet bandwidth kb/s/user. Unlike the other three Caribbean economies included, corruption was not seen as a major problem in Barbados.

    The Bad

    The GCI is a useful tool for policy makers to benchmark their economy’s current against its historical performance across over 100 competitiveness indicators. Factors which, according to the WEF GCI, affect doing business in Barbados are: poor work ethic in the national labour force, inefficient government bureaucracy, tax rates, restrictive labour regulations and access to financing.

    Not surprisingly, market size and the macroeconomic environment are the island’s Achilles heel and are a drag on the island’s competitiveness. The Central Bank of Barbados reports economic growth of 1.3% for the first half of 2016 but the island’s fiscal deficit and public debt remain unsustainably high. The island’s economic fragility is reflected in the low rankings on indicators such as government budget balance as % of GDP (122nd), gross national savings (127th) and government debt (127th). The island is rated 72 out of 100 for country credit rating, reflecting the successive downgrades since 2009 and could decline as the downgrades continue. Under the market size pillar, the country ranked 135th out of 136 on GDP (PPP).

    The Way Forward

    The GCI is an important scorecard showing the areas in which an economy is doing well, and those in which remedial attention is needed. Barbados remains a preferred jurisdiction in the Caribbean for doing business and the report shows that the island has clear competitive advantages in some areas that policymakers and the private sector should continue to build on and leverage in our investment promotions.

    However, I believe that while Barbados remains top of the class in the Caribbean, the island’s continued slippage in the rankings, including in areas which are our competitive advantage, is a concern. I dare say that top of the class in this case is not good enough. Discerning investors consult several indices, including the GCI, when considering potential investment locations. Barbados’ previous A-class performance on these indices was one of its selling points and this would carry less weight if the island continues to decline in its rankings.

    A useful feature of the GCI is that it allows for benchmarking against other economies and is a good tool for identifying best practices. Singapore, a small island developing state, currently ranks second place overall on the index and there may be some areas in which Barbados can learn from the reforms they have made. Besides Singapore, we can examine another top 50-rated SIDS, Mauritius, to see what best practices we can consider. We may also be able to learn from the Dominican Republic and Jamaica which, while ranked below us, saw improvements in their rankings.We have strong rankings in our technological and infrastructure capacity. Let us build on these strengths by improving the incorporation of ICTs for improving the ease of doing business and reducing some of the inefficiencies.

    Perhaps the best utility of the GCI is that it provides empirical evidence for identifying policy priorities as countries craft and evaluate their national competitiveness policies. As any eager pupil would, Barbados should take these findings to heart. Several competitiveness reforms have been on-going aimed at tackling some of the weaknesses which the GCI 2016 has again brought to light. For example, the $50 million fund for SMEs announced in the August budget should assist SMEs’ access to finance. The island also received a loan from the Inter-American Development Bank for competitiveness improvement called the Barbados Competitiveness Programme. These are good strides. However, if Barbados wants an A-grade and to be truly at the top of the global class, the island needs to quicken and deepen the pace of its competitiveness reforms, strengthening those things it is good at, working on those which it is not, while also putting mechanisms for monitoring and evaluation of their performance.

    Nonetheless, the responsibility for ensuring long-term and sustainable competitiveness does not rest with government alone but requires strong collaboration, honest dialogue and feedback among all national stakeholders, including for instance, through the social partnership.

    Private sector involvement is key for ensuring Barbados’ obtains a score card each year. A few years ago, I was part of the survey team which administered the WEF Executive Opinion Survey in Barbados, the main instrument used for gathering the data utilised in a whole suite of WEF reports, including the Global Competitiveness Report. While in each instance our team was able to meet our quota, the biggest challenge we found was the unwillingness of some business executives either to participate in the survey, or to complete it satisfactorily and in a timely manner. If insufficient businesses complete the survey, the country will not be included in the index. To encourage greater private sector participation in the survey, I suggest there be closer collaboration between the country partner institute and the various private sector bodies in the country.

     Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • Ranking Caribbean Countries’ Competitiveness: WEF Global Competitiveness Index 2016-2017

    business-561388_960_720Alicia Nicholls

    A few days ago, the World Economic Forum (WEF) released its Global Competitiveness Report 2016-2017. Two things immediately struck me as I perused the list of 138 economies which made the GCI 2016. The first was that because of data shortages only 4 Caribbean countries (Barbados, Jamaica, Dominican Republic and Trinidad & Tobago in order of rank) were included in this year’s index. The second was that all four of these economies were in the bottom 50 per cent of the survey sample, with the highest ranked (Barbados) at only 72nd place.

    The WEF in its Global Competitiveness Report defines competitiveness as “the set of institutions, policies, and factors that determine the level of productivity of an economy which in turn sets the level of prosperity that the country can achieve”.The GCI’s 114 indicators are grouped into 12 pillars which are further grouped into 3 sub-indices.  Collectively they measure an economy’s performance on a variety of concepts which impact on productivity and prosperity. Some of these include basic requirements such as institutions, infrastructure and macroeconomic environment to more sophisticated indicators dealing with business sophistication and innovation.

    In the preface to this year’s report, the World Economic Forum team highlighted that “many of the competitiveness challenges we see today stem from the aftermath of the financial crisis”.  Productivity and GDP growth in advanced economies and increasingly emerging economies remain subdued. This equally applies to Caribbean countries whose small open economies enhanced their vulnerability to the effects of global financial and economic crisis of 2008, and face many competitiveness disadvantages inherent in their smallness. However, not all of the region’s competitiveness challenges are structural and many are within our power to address.

    Caribbean Countries’ WEF GCI Performance 2016-2017

    So how did the region fare on the GCI this time around?  Barbados, whose economic recovery remains fragile, topped the CARIFORUM rankings with a rank of 72. Due to data shortages, the island had not been included in the 2015-2016 index but has dropped several places since its rank of 55 out of 144 economies on the 2014-2015 index.

    Barbados commendably tops the Latin America and Caribbean region in infrastructure, labour market efficiency and technology. However, the island’s most problematic factors for doing business are as follows: poor work ethic in national labour force, inefficient government bureaucracy, tax rates, restrictive labour regulations and access to financing. Unlike the other three Caribbean economies included, corruption was not seen as a major problem in Barbados.

    Trinidad & Tobago, which is currently in recession, has also lost ground, ranking 94 out of 138 economies in 2016-2017, compared to 89 out 140 in 2015-2016. The top 5 problem areas for Trinidad & Tobago for doing business were poor work ethic in national labour force, corruption, inefficient government bureaucracy, crime and theft and foreign currency regulations. But there is a silver lining. The WEF GCI identifies three stages of development: Stage 1 (Factor-driven), Stage 2 (Efficiency-driven) and Stage 3 (Innovation-driven). Trinidad was the only Caribbean country listed as a stage 3 economy (innovation-driven). Barbados was ranked as transitioning between stages 2 and 3. Jamaica and the Dominican Republic were classified as stage 2.

    Some more good news is that Jamaica saw forward movement on the index, moving to 75 out of 138 in 2016-2017 from 86 out of 140 in 2015-2016, as well as the Dominican Republic which ranked 92 out of 138 countries in 2016-2017 compared to 98 out of 140 countries in 2015-2016. The Dominican Republic’s reforms were mentioned in the report.

    Importance of Country Competitiveness Indices

    The WEF GCI is the most comprehensive benchmark of national competitiveness of economies worldwide. This year’s index comprised 98% of the global economy. It is, therefore, quite disappointing that not only does no Caribbean country currently rank among the top 50, but that so few Caribbean countries are included in the 2016-2017 index compared to previous indices as a result of data shortages.

    These rankings are important for several reasons.The GCI is a useful tool for policy makers not only  for benchmarking the economy’s current performance  across over 100 competitiveness indicators against its historical performance, but also against other economies in the same bracket. As such, it provides good empirical evidence for setting policy priorities and interventions as national competitiveness strategies are crafted and refined.

    Secondly, and importantly for small economies which depend significantly on foreign direct investment inflows, the WEF GCI is one of several indices, along with the World Bank’s Doing Business Index, which discerning investors consult when considering potential investment locations. For this reason, it is not uncommon for investment promotion agencies to reference their country’s favourable performance on these indices when marketing to prospective investors.

    The Way Forward

    It is axiomatic for any economy that  competitiveness should not only be long-term but sustainable. What the current WEF GCI makes clear is that economies in the Caribbean region have a lot of room for improvement, particularly in these problem areas: inefficient government bureaucracy, work ethic in the national labor force and corruption. Improving our competitiveness, however, is not a government responsibility alone. It requires continued strategic and enhanced  public-private sector collaboration and partnership.

    Governments, the private sector and other stakeholders including trade unions and other civil society actors, therefore, need to closely examine the causes and solutions for these problematic areas. For example, what are the factors which contribute to the perception of “poor work ethic”? What country-level and firm-level productivity enhancing reforms are working and which need revising or implementing? What can we do improve the vexing issue of “inefficient government bureaucracy”? This year’s Global Competitiveness Report focused heavily on the Fourth Industrial Revolution. What role can ICTs play in improving our weak areas?

    We can also take lessons from those economies which consistently rank as the most competitive economies and those which saw tremendous improvement. The top five economies in this year’s GCI were in order of ranking: Switzerland, Singapore, United States, Netherlands and Germany. What best practices can we learn from these countries? How about those countries like India, which made the biggest leap of any country in this year’s index by climbing 16 places? Or Mauritius, a SIDS, ranks 45th , having climbed two places? Even our own Jamaica and the Dominican Republic which saw improved rankings may hold valuable lessons.

    Businesses also need to play their part. It is unacceptable that the region is so poorly represented on the GCI year after year. A few years ago, I was part of the survey team which administered the WEF  Executive Opinion Survey in Barbados, the main instrument used for gathering the data utilised in a whole suite of WEF reports, including the Global Competitiveness Report. While in each instance our team was able to meet our quota, one of the challenges we found was the unwillingness of some business executives either to participate in the survey, or to complete it properly and in a timely manner. This is after repeated attempts to impress upon them the importance of the data collected in the survey for judging Barbados’ competitiveness and to ensuring Barbados was ranked on this important index. If insufficient businesses answer the survey, the country will not be included in the index. To encourage greater private sector participation in the survey in each country, I suggest there be closer collaboration between the country partner institutes and the various private sector bodies in the countries.

    The full WEF GCI 2016-2017 Report may be accessed here.

     Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.