Lankan private sector optimistic

Global Competitiveness Report 2008/2009:

The Global Competitiveness Report 2008/09 of the World Economic Forum (WEF) was launched on Wednesday in Geneva. The report summarises the views of over 12,000 business leaders who took part in the Executive Opinion Survey carried out in 134 global economies including Sri Lanka.

Sri Lanka is ranked 77 out of 134 countries. Last year Sri Lanka was 70 out of 131 countries.

What is Competitiveness?

It is the set of institutions policies and factors that determine the productivity of a country.

Almost all countries in South Asia have been sliding down the Global Competitiveness ranking this year as indicated by the chart. Maldives and Bhutan are not ranked in the index. India leads the region in terms of competitiveness.

This year Sri Lanka slides up the ladder in terms of innovation and business sophistication

Sri Lanka’s private sector perception has particularly improved in the area of innovation and business sophistication over the years. The ranking has improved considerably from 47 in 2007/08 to 34 in 2008/09. In terms of innovation, Sri Lanka was ranked 60 last year and has gone up to 40 this year. In terms of business sophistication, the country has gone up from 72 to 51.

Efficiency of the economy is measured by looking at higher education, goods market and labour market efficiency, financial market sophistication, technological readiness and the market size.

Sri Lanka was ranked 72 in the 2007/08 report and 74 in the 2008/09 report.

Labour market efficiency is the poorest performer in this index and is ranked at 115. The goods market efficiency in Sri Lanka seems to have improved considerably during the year with the ranking going up from 53 to 42.

The goods market efficiency is measured in terms of competition, customer orientation, buyer sophistication and prevalence of foreign ownership.

In the current context of the US financial turmoil the financial market efficiency becomes an important component in terms of competitiveness of the country. Soundness of banks has dropped from 65 to 70. However, the financial market sophistication has improved from 59 to 51. Sri Lanka has been continuously recording poor progress in this index. Last year the country was ranked 85 and this year 92. The basic requirements for competitiveness include institutions, infrastructure, macroeconomic stability, health and primary education.

Sri Lanka is considered a factor driven economy and according to the report, during this stage, the most important determinants of the competitiveness are basic requirements.

Sri Lanka is ranked at 132 out of 134 countries in terms of macroeconomic stability this year. Last year we were 125 out of 131 countries.

The private sector in the country seems to feel that the infrastructure and institutions in the country has slightly improved over the year, the ranking of the former has improved from 73 to 65 and the latter from 68 to 66.

Despite the economic slowdown and financial crisis, US still tops the world in terms of competitiveness, followed by Switzerland, Denmark, Sweden and Singapore.

The US is categorised as an economy driven by innovation, thus most important factors that determine US competitiveness are innovation and business sophistication.