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BENCHMARKING COMPETITIVENESS
Excerpts from “The Fourth Egyptian Competitiveness Report”
Published by the Egyptian National Competition Council, May 2008
Analysis by RÉHAB EL-BAKRY
As Egypt implements economic reforms to improve its competitiveness globally, it is essential that it continuously self-assess its performance to identify its strengths and weaknesses. The “Fourth Egyptian Competitiveness Report” seeks to answer why Egypt’s competitiveness rankings on various international indices have dropped despite record-high exports, growth rate and foreign direct investment (FDI). Chapter 1 of the report outlines how Egypt performs on the various indices and their indicators, and explains the reasons behind the ranking.
“On the Global Competitiveness Index (GCI), Egypt fell from 52nd place in 2005 to 63rd place in 2006, with a score of 4.09 [...]. Egypt ranked 8th out of the 13 Arab countries included in the ranking. Likewise, Egypt’s rank on the Business Competitiveness Index (BCI) [...] dropped from 71st to 76th. Egypt is now ranked in the lower half of all countries listed on the BCI.”
The rankings of Egypt are important as they reflect the perceptions of the business community and international organizations of the business and investment environment in the country. For four years, the country has aggressively implemented reforms to improve the investment climate, boost exports and create jobs – necessities for any country wishing to grow economically and develop in today’s global business community.
“The key to being one of the winners in globalization is competitiveness. Competitiveness is the key to achieving high rates of sustainable growth, increased employment, reduction in poverty and a stronger nation. Egypt must achieve greater competitiveness to catch [up] with the rest of the world economy. [...] Egypt has 1.15 percent of the world’s population but only 0.33 percent of the world GDP and 0.21 percent of the world export market.”
Despite all its efforts, Egypt is still playing catch up with the rest of the world. Yet the country’s drop in ranking has less to do with what Egypt did right or wrong, and more to do with what other countries in the world are doing right. It is also worth mention that some of the data on which the rankings are based date back to 2005, and thus do not accurately reflect the current situation.
Furthermore, although some of the international indices are based on hard empirical data, others are based on soft data reflecting the perceptions of business executives. While the different indices, when combined, can provide various snapshots of the performance of the Egyptian economy and its various sectors, the fact is no single index can truly capture the essence or performance of a country’s entire economy.
Egypt has improved slightly on some of the indicators, such as health and primary education enrollment. However, economic indicators continue to hinder the country’s ascent up the rankings.
“Egypt performed relatively well on health and primary education and to a lesser extent on institutions. It lies at the low end as regards macroeconomy, innovation and technological readiness. As regards infrastructure, higher education and training, market efficiency and business sophistication, Egypt has traveled about 30-40 percent of the way covered by other emerging economies.”
The report emphasizes that the main reason why Egypt dropped in the rankings has to do with the drop in its macroeconomic indicators. The country still suffers from a high budget deficit, skyrocketing government debt and increasing inflation. Moreover, it has a reputation as having some of the least prudent government spending in the world. Also contributing to poor economic rankings is the large number of civil servants – estimated at around 6 million – and the cost of government food and energy subsidies.
“Labor market efficiency also received a declining score [on the various indices]. The quality of higher education and training received lower scores this year as well, as did the technological readiness of the country.”
Another reason for the decline in Egypt’s rankings on international indices is the perceived rise in the threat of terrorism to conducting business, which drives up operating costs. Moreover, in this year’s report, the country received poor rankings on the efficiency of government and public institutions, bureaucracy, red tape and wasteful government spending. By contrast, private institutions fared better on corporate ethical behavior, though there was a decline in perceived accountability by their boards and auditors.
“Overall, public and private institutions have the advantage of being technocratic rather than corruption-ridden; however, efficiency is lacking.”
The report clearly states that the purpose of reviewing Egypt’s competitiveness ranking on the various indices is only to have a compilation of the various ranks for comparison. The main idea is to identify what areas are causing the country’s ranks to drop in order for all parties involved – the government, think tanks and the private sector – to engage in more effective dialogue to address the various issues.
A full copy of this report is available on the website of the Egyptian National Competition Council at www.encc.org.eg
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