Competitiveness indices: not getting stuck among the average

The latest global trends in competitiveness are not showing anything miraculous. What do the leading countries do that we do not to rise above the average to the next level? 

The IMD World Competitiveness Centre makes its rankings on the basis of 340 criteria (of which 225 rely on statistics, 115 on business leader surveys). According to the latest competitiveness ranking of 63 countries that was published in May, in 2018 Lithuania climbed one position to place 32nd, which is still not the best achievement for the country. In 2015, Lithuania was 28th, and in 2016 was 30th on the list. 

In the 2017–2018 Global Competitiveness Index of the World Economy Forum, Lithuania dropped from the 35th place to the 40th

The good thing about the indices from the past few years is that when it comes to the latest rating, we have improved our positions in four pillars of measurement: in the area of macroeconomic environment, we went up from the 42nd place to the 36th; executive efficiency, from the 34th place to the 31st; business efficiency, from the 33rd place to the 31st; and infrastructure, from the 30th place to the 29th. Yet with one exception of infrastructure, our results have been better across all pillars in previous years. 

As a rule, rating results tend to vary even for the top-performing countries, yet what worries us most is that we are stuck amidst the average, and the reforms that cause so much ado fail to do any good for the wellbeing of the people or to impress external appraisers much. 

The press release from the Centre accentuates that every leading country has its own recipe for climbing up the ladder of the competitiveness ratings. 

With the US (placing 1st in 2018), it was the overall high level of the economy and the infrastructure, and with Honk Kong, it was the efficiency of the government sector and the business. Lithuania could follow the example of the Netherlands at number four, which is positioned as being on a ‘balanced’ road towards competitiveness. This country placed in the top 10 in 3 out of the 4 main pillars. 

It is likely that some of Lithuania’s reforms, the changes to the Labour Code included, are still not reflected in this year’s ratings, which clearly are yet to reflect the latest amendments to the taxation that have already attracted comments from international experts that were not all positive. Yet we can see that when it comes to individual measurement criteria, Lithuania is in a dire need of stability. 

We are rated high on the basis of international trade, but then go down when it comes to international investments and occupation. Neither do our results shine in terms of the labour market criterion. This implies that we are failing at handling one important issue: we have the talents but they cannot establish themselves on the labour market or are not fit for the market. If we add our lagging behind not only the Netherlands or Austria, but Estonia too, in the area of education, to all of the above, us getting stuck among the average for an extended period of time becomes something of a worry. 

The leading countries have no claim to be the cheapest: on the contrary, they are possessed of a higher standard of living and higher prices (and higher taxes, as often as not). We are ahead of the Netherlands and Austria in terms of our tax policy, yet these countries placed much higher than we did in the overall rating. The leaders do not rush to change all of their effective regulations based on some theoretical models that are supposed to promote competitiveness – on the contrary, they prioritise national stability and ease of access and efficiency of use of human resources and infrastructure, albeit at a higher price.


By Linas Sesickas, Managing Partner, Law Firm GLIMSTEDT

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