Global Competitiveness Report 2017-18 World …Global Competitiveness Report 2017-18 World Economic Forum Warsaw, September 27, 2017 Piotr Boguszewski, Economic Analysis Department

Global Competitiveness Report 2017-18

World Economic Forum

Warsaw, September 27, 2017

Piotr Boguszewski, Economic Analysis Department

Dorota Mirowska-Wierzbicka, Financial Stability Department

(Preliminary results)

Contents


1 Global Competitiveness Report – introductory remarks

2 Global processes – 2017 vs. trends

3 World in 2017

4 Poland

5 Towards GCI 4.0

6 Concluding remarks

2

Global Competitiveness Report

– introductory remarks

3

1


■ Final assessment of the country is a weighted

sum of answers to particular questions and the

so called „hard assessments” of the country

(mainly some macroeconomic data). Altogether

150 variables are taken into account

■ Procedure of means calculation has a built-in

mechanism of results weighing, which takes into

account results from the previous year. It

smoothes the assessments

■ EOS methodology is a subject of an audit (last in

2012)

■ This year’s index has been calculated both

traditionally and according to modified

methodology

■ This year’s report – prepared according to

significantly modified methodology adopted

in previous years

■ Based on Executive Opinion Survey (EOS)

– a survey addressed to boards of directors

and executive boards members of

enterprises participating in the survey

■ Interviewees are asked about situation in

the country, not in the particular company

■ In 2017 the survey was conducted in 148

countries on the sample consisting of ca.

14.000 interviewees

■ Reliability of questionnaires (Mahalanobis

distance method) and of country data is

validated. This year 11% of questionnaires

were rejected (6% in the previous year) and

datasets from some countries were not

included

4

Methodological assumptions


■ Changes in methodology concern mainly

two elements:

■ Sample composition – 1/3 micro firms

(<=10 employees), 1/3 SMEs (>=11 and

<250) and 1/3 large firms(>249)

■ No requirement of having 50% of

respondents the same as in the previous

year

■ Significant consequences of changes:

■ Visible decrease in sample sizes in many

countries including those more competitive

than Poland. Median – 83 firms, close to

recommended value (85)

■ Liquidation of one of intertemporal

smoothing elements

■ It is not known how countries adjusted to

new requirements

5

Methodological assumptions cont.

Figure 1. Size and dynamics of a sample and position in the

ranking (2017)


Source: Own calculations based on WEF data.

SAMPLE DYNAMICS

SAMPLE SIZE (RHS)

LIMIT SAMPLE SIZE

POLAND

COUNTRY RANKING (2017)

SA

MP

LE

SIZ

E (

2017)

SA

MP

LE

DY

NA

MIC

S (

IN %

-A

OR

P=

100)

■ Influence (median) of hard data on most of pillars – positive and not significant (<10%)

■ There exist two pillars ex definitioneindependent of EOS

■ Evident negative effect only in case of Technological readiness (F9) and Innovation(F12)

■ Therefore changes in EOS have significant influence on the results

6

Methodological assumptions cont.

Figure 2. Influence of hard data on GCI values (2016) –

distribution across countries. EOS – scoring based on the survey

* POLSKA

COMPARABILITY WITH PREVIOUS RANKINGS

REQUIRES FURTHER RESEARCH

GCI

EOS

HARD DATA

EOS

EOS

HARD DATA

PIL

LA

R I

NC

LU

DE

S

ON

LY

DA

TA

FR

OM

EO

S

PIL

LA

R D

OE

S N

OT

IN

CLU

DE

DA

TA

FR

OM

EO

S

PIL

LA

R D

OE

S N

OT

INC

LU

DE

DA

TA

FR

OM

EO

S

INFLUENCE OF

HARD DATA



* POLAND

7

Domestic research procedure

▪ National Bank of Poland since

2009 has participated in work on

the Report:

■ On the methodological consultation level

■ In the research process –conducting annual EOS among domestic entrepreneurs

■ In the analytical process –domestic presentation of the Report

■ In the educational area in a broad sense

▪ Crucial role of regional branches of NBP

▪ 214 questionnaires (firms) in the current year. Sample almost constant in time and one of the biggest

▪ The survey conducted between February and April 2017

▪ The sample is compatible with the general methodology of the Report:

■ Sectors (agriculture, industry, services) represented according to their role in Polish GDP

■ Equal share of micro, SMEs and large firms (33% each group)

■ Questionnaires fulfilled by Top 5 management


■ Changes in methodology affected GCI

■ Assessments made by micro firms worse than those made by the large ones (significantly) and by SMEs

■ Micro firms more often than other respondents assessed various aspects more negative (grades 1–2 in the scale of 1 to 7)

■ The biggest differences between large and micro firms assessments concerned above all:

■ Financial standards (1,2 p.)

■ Matching financial products to firm’s needs (1,1 p.)

■ Too high costs of financial services(0,9 p.)

■ Burden of customs procedures (0,9 p.)

■ Too weak protection against monopolistic practices (0,9 p.)

■ Among ten factors for which differences in EOS between micro and large firms assessments were the biggest, four concerned questions from section V (Financial environment) of the questionnaire

■ In Poland, pseudo-GCI for SMEs and large firms higher than for the whole sample by 0,06

8

Domestic research procedure cont.

DIFFERENCE OF ROW AND COLUMN AVERAGES

LARGE MICRO

MICRO -.260774

0.012

SME -.095903 .164871

0.749 0.170

Figure 3. Pseudo-GCI (for EOS questions) – variance analysis



LARGE MICRO SME

Global processes – 2017 r. vs. trends

9

2


▪ Slight increase in share of

countries changing position (but

after significant jump in 2008

these are rather non-systematic

fluctuations around the mean)

▪ Compared to 2016 – high

percentage of countries improving

their ranking

▪ Still very low (and declining)

percentage of countries with

deterioration of their position in

ranking

Dynamics – scale of reshuffling

10

Figure 4. Frequency of annual changes of rankings in years 2006-17 [in %]



SHARE OF COUNTRIES (IN %):

CHANGING POSITION

IMPROVING POSITION

WORSENING POSITION

SH

AR

ES

(IN

%)

Dynamics – structure of reshuffling

11

▪ In 2017 structure close to

multiannual average (with

exception of categories W3-5

and S3-5)

▪ Relatively small reallocations

in ranking prevail

▪ Relatively significant increase

in indicator S 11-15, it is

however still quite low

Table 1. Distribution of increases and declines in rankings in years 2007-17

Class of

changes 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

For years

2007-

2017

W 1-2 17,2 12,1 15,9 17,4 10,9 12,6 11,2 16,9 24,6 19,5 17,2 15,8

W 3-5 10,9 21,2 6,8 16,7 12,3 13,3 20,3 19,1 15,7 16,5 10,9 15,3

W 6-10 7,8 6,8 8,3 9,4 9,4 11,2 18,2 10,3 6,0 12,0 7,8 10,0

W 11-15 2,3 3,0 1,5 2,2 5,8 2,8 4,9 3,7 1,5 5,3 2,3 3,3

W >15 1,6 3,0 2,3 0,0 1,4 0,0 2,1 1,5 0,7 0,8 1,6 1,3

No

changes 10,9 13,6 9,8 9,4 13,0 9,8 11,2 15,4 14,2 12,0 11,9 10,9

S 1-2 13,3 15,9 16,7 18,8 20,3 16,1 12,6 14,7 10,4 12,8 15,2 13,3

S 3-5 18,0 10,6 15,9 10,9 13,0 10,5 7,0 8,8 11,9 9,8 11,6 18,0

S 6-10 13,3 7,6 14,4 12,3 5,8 15,4 8,4 6,6 10,4 7,5 10,2 13,3

S 11-15 3,9 3,8 6,1 2,9 6,5 5,6 3,5 1,5 2,2 3,8 4,0 3,9

S >15 0,8 2,3 2,3 0,0 1,4 2,8 0,7 1,5 2,2 0,0 1,4 0,8



Dynamics – competitors’ pressure and resistance

12

Figure 5. Barriers of ranking changes in years 2007-17

▪ In 2017, scoring that guarantees

improvement in ranking has

slightly decreased. Current level

still quite low – ca. 0,06

▪ Since 2015 increasing number of

countries for which increase of

scoring and decrease of ranking

occurred

▪ Some sign of competitive

pressure increase



INCREASE OF SCORING

AND DECREASE OF

RANKING (NUMBER – LHS)

SCORING GUARANTEEING

INCREASE (RHS)

INCREASE OF SCORING

AND DECREASE OF

RANKING (MEDIAN – RHS)

NU

MB

ER

OF

CO

UN

TR

IES

CH

AN

GE

OF

GC

I –

LO

GA

RY

TH

MIC

SC

ALE

Country

Decrease in

years 2007-17

Slovak Republic -18

Oman -20

Greece -22

Kuwait -22

Egypt -23

Pakistan -23

Venezuela -29

Nigeria -30

El Salvador -42

Tunisia -63

Winners and losers in years 2007-2017

13

Country

Increase in years

2007-17

Tajikistan 38

Albania 34

Azerbaijan 31

Bulgaria 30

Nepal 26

Georgia 23

United Arab Emirates 20

Armenia 20

Russia 20

Malta 19

▪ Devastating influence of political

instability (e.g. in Tunisia, Egypt,

Venezuela, Nigeria, Pakistan)

▪ Negative exposition of some

countries where oil industry is too

(?) significant

▪ The biggest improvement –

generally in smaller countries,

relatively less developed (of

which 7 are post-socialist

countries).Table 2. Ten countries with the highest changes in rankings in years 2007-17



World in 2017

14

3


2.85 - 3.5

3.5 - 3.76

3.76 - 4.06

4.06 - 4.28

4.28 - 4.81

4.81 - 5.4

5.4 - 5.9

15

Map 1. The World – distribution of GCI in 2017



▪ Significant improvement in last

year’s ranking within the group

of countries from places 90–110

▪ Sizeable drop of Qatar (from 18

position in 2017) and Kuwait

(from 38 position)

16

„Winners and Losers” – last year

Country

Decline in

years 2015-17

Rwanda -6

Qatar -7

Georgia -8

Honduras -8

Panama -8

Lesotho -11

Dominican Republic -12

Kuwait -14

Sri Lanka -14

RPA -14

Country

Increase in

years 2015-17

Cyprus 19

Bhutan 15

Egypt 15

Argentina 12

Brunei 12

Serbia 12

Moldova 11

Trinidad and

Tobago 11

Nicaragua 10

Nepal 10

Table 3. Ten countries with the highest changes in rankings in years 2015-17.



▪ Since 2012 no “falling out”, only

„reshufflings”. Distribution of GCI

shows that this is a higher league

▪ Switzerland as a leader since

2009

▪ Second position of the US –

considerable improvement after

crisis

▪ Noticeable promotion of Hong

Kong

▪ Finland still on the very edge

▪ Canada, Denmark, Taiwan – out

of the Top 10 group (14,12,15)

Top 10

17

Table 4. Top 10 of GCR ranking in years 2005-17

Country 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Switzerland 4 4 2 2 1 1 1 1 1 1 1 1 1

US 1 1 1 1 2 4 5 7 5 3 3 3 2

Singapore 6 8 7 5 3 3 2 2 2 2 2 2 3

Netherlands 10 8 10 8 7 5 8 8 5 4 4

Germany 8 7 5 7 7 5 6 6 4 5 4 5 5

Hong Kong 10 9 7 7 7 9 6

Sweden 9 9 4 4 4 2 3 4 6 10 9 6 7

UK 3 2 9 10 8 10 9 10 7 8

Japan 5 5 8 9 8 6 9 10 9 6 6 8 9

Finland 2 6 6 6 6 7 4 3 3 4 8 10 10

Canada 10 9 10

Denmark 7 3 3 3 5 9 8

Taiwan 10



18

Map 2. Europe – distribution of GCI in 2017

▪ Small changes comparing to 2016

▪ Europe is still a competitiveness

leader – 6 countries from this

continent in the TOP 10

▪ The most developed European

countries decide on the

competitiveness of Europe

▪ Some improvement in the group

of countries hit by financial crisis

(Italy, Spain, Portugal)

▪ Considerable diversification of

development – still relatively

worse situation of countries from

the South of the continent

3.84 - 4.22

4.22 - 4.42

4.42 - 4.53

4.53 - 5.08

5.08 - 5.41

5.41 - 5.9



Poland

19

4


20

I. Institutions

II. Infrastructure

III. Macroeconomic

environment

IV. Health and primary

educations

V. Higher education

VI. Goods market

efficiency

VII. Labor market

efficiency

VIII. Financial market

development

IX. Technological

readiness

X. Market size

XI. Business

sophistication

XII. Innovation

Poland’s position

in ranking in years

2005-17



BE

TT

ER

POSITION IN RANKING

SCORING

PO

SIT

ION

IN

RA

NK

ING

SC

OR

ING

P

P

P

PP

P

P

P

P

P

P

P

21

I. Institutions

II. Infrastructure

III. Macroeconomic

environment

IV. Health and primary

education

V. Higher education

VI. Goods market

efficiency

VII. Labor market

efficiency

VIII. Financial market

development

IX. Technological

readiness

X. Market size

XI. Business

sophistications

XII. Innovation

Poland’s position – cont. ▪ Poland on 39 position (-3) – decline

but accompanied by increase of

scoring (by 0,03)! Only 8% (out of 73)

of countries with at least the same

increase of GCI worsened their

position, all of them (with exception of

Poland) by less than 3 positions

▪ Changes of position in the third

subindex (innovation factors) – from

55 to 59. They have significant impact

on the position in the main ranking –

due to the weights system

▪ Convergence (!) of basic factors, but a

systematic (?) decline of institutions

assessment (P I). Systematic

improvement of infrastructure

▪ Still historically low assessment of

labor market

▪ Another year of increase in innovation

but still distant positions in this area

▪ Decrease in business sophistication

(P XI)

Convergence

Institutions


Effect of labor market

INNOVATION

FACTORS

PILLARS

EFFICIENCY FACTORS

BASIC FACTORS

Figure 6. Poland’s position (for 12

pillars of GCI)

in 2007-17


P I

P II

P IIIP IV

P V

P VI

P VIIP VIII

P IXP X

P XIP XII

Poland – strengths and weaknesses

22

Figure 7. Distribution of most problematic factors for

doing business in 2017 (left chart) and shares of strong

and weak positions in rankings in years 2006-17 [in%]

(right chart)



SHARE OF

CATEOGIRES

HAVING

POSITION:

ABOVE 75 (LHS)

ABOVE 100 (LHS)

UP TO 45 (RHS)

PE

RC

EN

TA

GE

OF

QU

ES

TIO

NS

PE

RC

EN

TA

GE

OF

QU

ES

TIO

NS

0 5 10 15 20

INFLATION

CRIME AND THEFT

FOREIGN CURRENCY REGULATIONS

CORRUPTION

POOR PUBLIC HEALTH

POOR WORK ETHICS

LOW INNOVATION

INADEQUATE INFRASTRUCTURE

GOVERNMENT INSTABILITY

ACCESS TO FINANCING

WORKFORCE QUALIFICATIONS

INEFFICIENT GOVERNMENT BUREAUCRACY

POLICY INSTABILITY

LABOR MARKET BARRIERS

HIGH TAX RATES

TAX REGULATIONS

BARRIERS

Persistency of barriers

23

▪ Since 2013 systematic decline of “bad”

grades share (position >75). In 2017

increase of „very bad” grades share

(>100). Considerable improvement of

“very good” grades (position <36) share

▪ Small changes in problems importance

during last 8 years

▪ In the first place – traditionally –

complexity of tax regulations. Also,

reported problem of high tax rates (2nd

position)

▪ Companies raise the problem of policy

instability

▪ Weaker problem of inadequate

infrastructure, poor work ethics and low

innovation

Table 5. Ranking of most problematic factors for doing business in

Poland in years 2010-17



PROBLEM 2010 2012 2015 2016 2017

TAX REGULATIONS 1 1 1 1 1

HIGH TAX RATES 5 4 3 4 2

LABOR MARKET BARRIERS 3 2 2 2 3

POLICY INSTABILITY 10 12 9 3 4

INEFFICIENT GOVERNMENT

BUREAUCRACY 2 3 4 5 5

WORKFORCE

QUALIFICATIONS 8 8 8 6 6

ACCESS TO FINANCING 4 5 5 7 7

GOVERNMENT INSTABILITY 12 14 13 11 8

INADEQUATE

INFRASTRUCTURE 6 6 6 8 9

LOW INNOVATION 7 7 9 10

POOR WORK ETHICS 7 9 10 10 11

POOR PUBLIC HEALTH 13 13 11 12 12

CORRUPTION 9 10 12 13 13

FOREIGN CURRENCY

REGULATIONS 11 16 16 16 14

CRIME AND THEFT 15 15 14 15 15

INFLATION 14 11 15 14 16

▪ Rather small changes in the balance. Possible

impact of sample structure changes – some

procedures are more difficult for small firms

▪ Bottlenecks as one of mechanisms which

weaken advantages:

▪ Low assessments of institutions (pillar I – 72/65),

because: i.a. too many regulations (112/119), poor

transparency of procedures (116/109), insufficient

public trust

▪ Still poor assessment of labor market efficiency

(pillar VII – position 78/79), because i.a.: suboptimal

(but better) employer-employees relations (79/93),

still negative influence of taxes on employees

motivation (128/127!), net outflow of human capital

(slight improvement: 89, 113). But accompanied by

a very high elasticity of wages formation (24/29)

▪ For pillar VI (45/47): number of procedures

to start a business – position 18/22, time

to start a business – position 123/118

(situation slightly worse than in the

previous year)

▪ Traditionally strong, although weaker,

position in:

▪ Health and primary education (38)

▪ Higher education (pillar V – 40/37)

▪ Invariably high market potential (pillar X

– 21/21)

24

Poland – SWOT


▪ Estonia as the leader (30/30) still has better

ranking than Poland. Czech Republic is

also ahead of us (31/31 – significant

improvement since 2007)

▪ Russia outran Poland

▪ Position of Lithuania dropped significantly

(41/35) and is currently worse than

Poland’s

▪ Most countries in this group improved

scoring in the horizon of analysis (the

weakest ones very strongly) – „base effect”

▪ Comparing to the group – moderate

increase of GCI for Poland

Poland in comparison to post-

socialist countries 2007-17

25

BETTER ONES IN 2007

POLAND’S SCORING IN 2016

GREEN – INCREASE

RED – DECREASE

SC

OR

ING

(G

CI)

(*)

Source: Own calculations based on WEF data. (*) – dane za 2016


Towards GCI 4.0

26

5


■ Work on the new index started 3 years

ago

■ Conducted under supervision of Klaus

Schwab and Xavier Sala-i-Martin

■ This year’s GCR presents results of

new procedure. However, they are

preliminary and work on target solution

is still in progress

■ Current GCI – almost unchanged

since 2004

■ In new approach willingness to

include:

■ 4th industrial revolution (4IR)

■ New experiences in the global

economy, including reasons and

consequences of financial crisis

■ Changes in the area of available data

– new sources, communication

channels, Big Data etc.

27

GCI 4.0 – motivationATTENTION: CHANGES IN METHODOLOGY

ARE TOO SIGNIFICANT TO COMPARE GCI

RESULTS WITH GCI 4.0 RESULTS


■ Change in weights system – current GCI

is an index with complex weighing

system. The so called level of economic

development has impact on weights

■ This level is based on GDP per capita

expressed in USD. Such approach, apart

from other drawbacks, introduces

element of „inflation” to the index –

annual changes of currency rate may

change weights of subindices. GCI for

2016 calculated in „constant prices”

would be significantly different from the

one resulting from the GCR

■ In the new methodology all the pillars

(12) have equal weights – each ca. 8%.

28

GCI 4.0 – main changes

Figure 8. Impact of currency rate changes on Poland’s

GCI and Poland’s positions in GCR rankings in years

2008-16



-2

-1

0

1

2

3

4

5

2008 2009 2010 2011 2012 2013 2014 2015 2016

NOMINAL AND REAL DYNAMICS OF GCI FOR POLAND

DGCI

DGCI_R_PAASHE

DGCI_R_LASPEYRES

30

35

40

45

50

55

2008 2009 2010 2011 2012 2013 2014 2015 2016

POLAND'S POSITION ACCORDING TO ACTUALWEIGHTS AND WEIGHTS FROM

T-1 (FOR ALL COUNTRIES)

NEW_RANKING RANKING

■ Subindices in the new approach have

only presentational function – they are

not used in the process of weighing

index (it is based on 12 equally treated

pillars)

■ GCI 4.0 uses 106 indicators (GCI 114),

but:

■ 67% of indicators entirely new

■ Only 45 are based on EOS (currently 80)

– remarkable reduction of EOS

significance

■ Decline of EOS indicators weight in GCI

4.0 to 30% – from 69% for developed

economies and from 57% for poorly

developed ones in the current

methodology

■ 12 pillars of competitiveness remain

■ Changes concern subindices and construction of pillars

■ New subindices:

■ Supporting environment

■ Human capital

■ Markets

■ Innovative ecosystem

■ The last group will reflect reality in which innovation:

■ Depends on the bundle of factors

■ Is a process leading from idea to product

■ May encompass products, services, manufacturing techniques, organizational factors etc.

29

GCI 4.0 – main changes cont.


■ System of final indicators computation

also changes. GCI 4.0 is based on

DTF approach (for indicators where

higher value corresponds to better

outcome):

30

GCI 4.0 – main changes cont.

𝑆𝐶𝑂𝑅𝐸𝑖𝑐 =𝑉𝐴𝐿𝑈𝐸𝑖𝑐 − 𝑀𝐼𝑁𝑖

𝑀𝐴𝑋𝑖 − 𝑀𝐼𝑁𝑖∗ 100

■ DTF procedure is used:

■ For computation of normalized values of partial indicators constituting particular pillar

■ For „pricing” pillar on the country level

■ For missing data imputation procedures are used Figure 9. Distribution of GCI 4.0 in 2017.

c – country

i – indicator



FAULT

10

20

30

40

50

60

70

80

90

0 20 40 60 80 100 120 140 160

GCI 4.0 – 2017

■ High assessment of Health and

Macroeconomic context

■ Poor assessment of Institutions and

Labor market functioning

■ Bad assessment of Innovation capacity

31

GCI 4.0 – main changes cont.I. Institutions

II. Infrastructure

III. Technological readiness

IV. Macroeconomic context

V. Health

VI. Education and skills

VII. Product market efficiency

VIII. Labor market functioning

IX. Financial market development

X. Market size

XI. Business dynamism

XII. Innovation capacity

ATTENTION:

NEW PILLARS

Figure 10. Poland – values of competitiveness pillars according to

GCI 4.0 (2017)



0 20 40 60 80 100

XII

VIII

I

III

IX

VII

X

XI

II

VI

IV

V

%

Pill

ars

DTF – GCI 4.0 2017

Concluding remarks

32

6


▪ Significant changes in methodology – problem

of results comparability in time, further analysis

required. Possible future corrections

▪ In 2017 relatively few changes in global

rankings

▪ Also in 2017 the group of most competitive

economies (Top 10) is constant

▪ Significant declines in rankings usually in

countries hit by wars and other shocks.

Problems also in some economies with oil

industries

▪ Position of Poland worsened but the decline

was accompanied by:

▪ Higher scoring

▪ Methodological changes

▪ Visible progress in the longer-run – from

places higher than 50 in years 2007-08, to 39

in 2017

▪ Changes in subindices concern only

innovation factors. Remarkable

improvement in basic factors (except from

decrease in institutions assessment). Still

weak assessment of innovation capacity

▪ Map of problems – quite stable in time.

Further improvement in regulations needed

(tax system, other regulations, economic

policy etc.)

▪ Increases of GCI seem to be weaker than

in many post-socialist countries

▪ Possible changes of methodology in the

nearest future – GCI 4.0

Concluding remarks

33Global Competitiveness Report 2017-18

www.nbp.pl

Documents

Global Competitiveness Report 2017-18 World …Global Competitiveness Report 2017-18 World Economic Forum Warsaw, September 27, 2017 Piotr Boguszewski, Economic Analysis Department