Transcript www.hkbu.edu.hk

Wong Yat Fu
05000041
Tsang Heng Cheong
05017475
• Many benchmarks are used to describe an economy
e.g. growth rate of GDP, GDP per capita, net export,
performance of stock markets, etc
• The overall performance of an economy is not
reflected by separate use of a few indicators
• Biased, not a full picture of the “health” of the
economy
• Published by the World Economic Forum (WEF)
• Provides an overview of factors that are critical to
driving productivity and competitiveness
• The rankings are drawn from a combination of
publicly available hard data, and the results of the
Executive Opinion Survey (EOS)
EOS: a comprehensive annual survey conducted by the WEF,
together with its network of Partner Institutes (leading
research institutes and business organizations) in the
countries covered by the Report
• The EOS captures the expert opinions of over
11,000 business leaders and entrepreneurs on:
Macroeconomic Environment
Public Institutions: Corruption
Technology, Innovation and
Diffusion
Domestic Competition
Human Resources: Education,
Health and Labour
Cluster Development
General Infrastructure
Company Operations and
Strategy
Public Institutions: Contracts and
Law
Environment
• This year (2006), over 11,000 business leaders in
125 countries were polled
• Each leader will make a score from 1 to 7 on
different areas of economies
• The higher score, the better
The 2006 GCI rankings and 2005 comparisons (first 40):
Country/Economy
GCI
GCI
GCI
2006 Rank
2006 Score
2005 Rank
Country/Economy
GCI
GCI
GCI
2006 Rank
2006 Score
2005 Rank
Switzerland
1
5.81
4
Ireland
21
5.21
21
Finland
2
5.76
2
Luxembourg
22
5.16
24
Sweden
3
5.74
7
New Zealand
23
5.15
22
Denmark
4
5.70
3
Korea, Rep.
24
5.13
19
Singapore
5
5.63
5
Estonia
25
5.12
26
United States
6
5.61
1
Malaysia
26
5.11
25
Japan
7
5.60
10
Chile
27
4.85
27
Germany
8
5.58
6
Spain
28
4.77
28
Netherlands
9
5.56
11
Czech Republic
29
4.74
29
United Kingdom
10
5.54
9
Tunisia
30
4.71
37
Hong Kong SAR
11
5.46
14
Barbados
31
4.70
—
Norway
12
5.42
17
United Arab Emirates
32
4.66
32
Taiwan, China
13
5.41
8
Slovenia
33
4.64
30
Iceland
14
5.40
16
Portugal
34
4.60
31
Israel
15
5.38
23
Thailand
35
4.58
33
Canada
16
5.37
13
Latvia
36
4.57
39
Austria
17
5.32
15
Slovak Republic
37
4.55
36
France
18
5.31
12
Qatar
38
4.55
46
Australia
19
5.29
18
Malta
39
4.54
44
Belgium
20
5.27
20
Lithuania
40
4.53
34
9 pillars
3 sub-indexes
Institutions
Basic requirement
Infrastructure
Macroeconomy
Health and Primary
Education
Higher Education
and Training
GCI
Efficiency enhancers
Market Efficiency
(goods, labor, financial)
Technological Readiness
Innovation and
sophistication factors
Business Sophistication
Innovation
We look at the 1st pillar, institutions…
Institutions
Basic requirement
Infrastructure
Macroeconomy
Health and Primary
Education
Higher Education
and Training
GCI
Efficiency enhancers
Market Efficiency
(goods, labor, financial)
Technological Readiness
Innovation and
sophistication factors
Business Sophistication
Innovation
• 1st pillar: Institutions
A. Public institutions
1. Property rights
2. Diversion of publics funds
3. Public trust of politicians
4. Judicial independence
5. Favoritism in decisions of government officials
• 1st pillar: Institutions (cont’d)
A. Public institutions
6. Wastefulness of government spending
7. Burden of government regulation
8. Business costs of terrorism
9. Reliability of police services
10. Business costs of crime and violence
11. Organized crime
The GCI and public institutions:
• 1st pillar: Institutions (Cont’d)
B. Private institutions
12. Ethical behavior of firms
13. Efficacy of corporate boards
14. Protection of minority shareholders’ interests
15. Strength of auditing and accounting standards
We look at the 2st pillar, infrastructure…
Institutions
Basic requirement
Infrastructure
Macroeconomy
Health and Primary
Education
Higher Education
and Training
GCI
Efficiency enhancers
Market Efficiency
(goods, labor, financial)
Technological Readiness
Innovation and
sophistication factors
Business Sophistication
Innovation
• 2nd pillar: Infrastructure
1. Overall infrastructure quality
2. Railroad infrastructure development
3. Quality of port infrastructure
4. Quality of air transport infrastructure
5. Quality of electricity supply
6. Telephone lines (hard data)
We look at the 3st pillar, macroeconomy…
Institutions
Basic requirement
Infrastructure
Macroeconomy
Health and Primary
Education
Higher Education
and Training
GCI
Efficiency enhancers
Market Efficiency
(goods, labor, financial)
Technological Readiness
Innovation and
sophistication factors
Business Sophistication
Innovation
• 3rd pillar: Macroeconomy
1. Government surplus/deficit (hard data)
2. National savings rate (hard data)
3. Inflation (hard data)
4. Interest rate spread (hard data)
5. Government debt (hard data)
6. Real effective exchange rate (hard data)
The GCI and macroeconomy:
We look at the 4th pillar, health and primary education…
Institutions
Basic requirement
Infrastructure
Macroeconomy
Health and Primary
Education
Higher Education
and Training
GCI
Efficiency enhancers
Market Efficiency
(goods, labor, financial)
Technological Readiness
Innovation and
sophistication factors
Business Sophistication
Innovation
• 4th pillar: Health and primary education
A. Health
1. Medium-term business impact of malaria
2. Medium-term business impact of tuberculosis
3. Medium-term business impact of HIV/AIDS
4. Infant mortality (hard data)
5. Life expectancy (hard data)
6. Tuberculosis prevalence (hard data)
7. Malaria prevalence (hard data)
8. HIV prevalence (hard data)
B. Primary education
9. Primary enrolment (hard data)
We look at the 5th pillar, higher education and training…
Institutions
Basic requirement
Infrastructure
Macroeconomy
Health and Primary
Education
Higher Education
and Training
GCI
Efficiency enhancers
Market Efficiency
(goods, labor, financial)
Technological Readiness
Innovation and
sophistication factors
Business Sophistication
Innovation
• 5th pillar: Higher education and training
A. Quantity of education
1. Secondary enrolment ratio (hard data)
2. Tertiary enrolment ratio (hard data)
B. Quality of education
3. Quality of the educational system
4. Quality of math and science education
5. Quality of management schools
C. On-the-job training
6. Local availability of specialized research and training
services
7. Extent of staff training
The GCI and higher education and training:
We look at the 6th pillar, market efficiency …
Institutions
Basic requirement
Infrastructure
Macroeconomy
Health and Primary
Education
Higher Education
and Training
GCI
Efficiency enhancers
Market Efficiency
(goods, labor, financial)
Technological Readiness
Innovation and
sophistication factors
Business Sophistication
Innovation
• 6th pillar: Market efficiency
A. Good markets: Distortions, competition, and size
1. Agricultural policy costs
2. Efficiency of legal framework
3. Extent and effect of taxation
4. Number of procedures required to start a business (hard data)
5. Time required to start a business (hard data)
6. Intensity of local competition
• 6th pillar: Market efficiency (cont’d)
A. Good markets: Distortions, competition, and size
7. Effectiveness of antitrust policy
8. Imports (hard data)
9. Prevalence of trade barriers
10. Foreign ownership restrictions
11. GDP – exports + imports (hard data)
12. Exports (hard data)
• 6th pillar: Market efficiency (Cont’d)
B. Labor markets: Flexibility and efficiency
1. Hiring and firing practices
2. Flexibility of wage determination
3. Cooperation in labor-employer relations
4. Reliance on professional management
5. Pay and productivity
6. Brain drain
7. Private sector employment of women
• 6th pillar: Market efficiency (Cont’d)
C. Financial markets: Sophistication and openness
8. Financial market sophistication
9. Ease of access to loans
10. Venture capital availability
11. Soundness of banks
12. Local equity market access
We look at the 7th pillar, technological readiness…
Institutions
Basic requirement
Infrastructure
Macroeconomy
Health and Primary
Education
Higher Education
and Training
GCI
Efficiency enhancers
Market Efficiency
(goods, labor, financial)
Technological Readiness
Innovation and
sophistication factors
Business Sophistication
Innovation
• 7th pillar: Technological readiness
1. Technological readiness
2. Firm-level technology absorption
3. Laws relating to ICT
4. FDI and technology transfer
5. Cellular telephones (hard data)
6. Internet users (hard data)
7. Personal computers (hard data)
We look at the 8th pillar, business sophistication…
Institutions
Basic requirement
Infrastructure
Macroeconomy
Health and Primary
Education
Higher Education
and Training
GCI
Efficiency enhancers
Market Efficiency
(goods, labor, financial)
Technological Readiness
Innovation and
sophistication factors
Business Sophistication
Innovation
• 8th pillar: Business sophistication
A. Networks and supporting industries
1. Local supplier quantity
2. Local supplier quality
B. Sophistication of firms’ operations and strategy
3. Production process sophistication
4. Extent of marketing
5. Control of international distribution
6. Willingness to delegate authority
7. Nature of competitive advantage
8. Value-chain presence
We look at the 9th pillar, innovation…
Institutions
Basic requirement
Infrastructure
Macroeconomy
Health and Primary
Education
Higher Education
and Training
GCI
Efficiency enhancers
Market Efficiency
(goods, labor, financial)
Technological Readiness
Innovation and
sophistication factors
Business Sophistication
Innovation
• 9th pillar: Innovation
1. Quality of scientific research institutions
2. Company spending on research and development
3. University/industry research collaboration
4. Government procurement of advanced technology
products
5. Availability of scientists and engineers
6. Utility patents (hard data)
7. Intellectual property protection
8. Capacity for innovation
• The relative importance of particular factors is different
for different economies
• Depends on what stage is the economy experiencing
• E.g. what presently drives productivity in economy A is
necessarily different from what drives it in economy B
• Each of the sub-indexes is weighed differently,
depending on the stage of a given country
• More weight is placed on those pillars that are most
important at a given stage of a country’s development
Weights
Basic
requirements
Efficiency
enhancers
Innovation and
sophistication
factors
Factor-driven
stage
50%
40%
10%
Efficiency-driven
stage
40%
50%
10%
Innovationdriven stage
30%
40%
30%
• The pillars are organized into three sub-indexes:
• Institutions
• Infrastructure
• Macroeconomy
• Health and Primary Education
• The pillars are organized into three sub-indexes:
• Higher Education and Training
• Market Efficiency (goods, labor, financial)
• Technological Readiness
• The pillars are organized into three sub-indexes:
• Business Sophistication
• Innovation
Uses of GCI:
• By government, investors, enterprises etc
• Investors: to decide whether to invest in that economy
• Government: to help make policies to attract foreign
investors
• Let take Hong Kong and
Singapore as examples
• Collect data from EOS
• Average the score under
9 pillars
Basic Requirements
Infrastructure Macroeconomy
Health and primary
education
Country
Institutions
Hong Kong
SAR
5.54
6.29
5.65
6.67
Singapore
5.9
6.16
5.67
6.81
• The score of Basic requirements will be average of the
underlying 4 pillars
– Hong Kong SAR = 6.04
– Singapore = 6.14
• Singapore has a better performance on Basic
requirements
Efficiency Enhancers
Country
Higher education and
training
Market efficiency
Technological
readiness
Hong Kong
SAR
5.08
5.69
5.44
Singapore
5.59
5.62
5.69
• The score of Efficiency enhancers will be average of the
underlying 3 pillars
– Hong Kong SAR = 5.40
– Singapore = 5.63
• Singapore also does a better job on Efficiency enhancing
Innovation Factors
Country
Business sophistication
Innovation
Hong Kong SAR
5.48
4.46
Singapore
5.17
5.04
• The score of Innovative factors will be average of the
underlying 2 pillars
– Hong Kong SAR = 4.97
– Singapore = 5.11
• Singapore also does a better job on Innovative factors
comparing to Hong Kong
• Different stages of economy has to use different
weightings
Weights
Basic
requirements
Efficiency
enhancers
Innovation and
sophistication
factors
Factor-driven
stage
50%
40%
10%
Efficiency-driven
stage
40%
50%
10%
Innovation-driven
stage
30%
40%
30%
• Hong Kong and Singapore are also Innovationdriven stage
Basic
Requirement
s
Efficiency
Enhancers
Innovation
Factors
Final
Score
Hong Kong
SAR
6.04 x 30%
5.44 x 40%
4.97 x 30%
5.46
Singapore
6.14 x 30%
5.63 x 40%
5.11 x 30%
5.63
• Singapore has a higher score on GCI, that is
why Singapore ranking 5th and Hong Kong
ranking 11th
• The relationship between GCI and other
economic indicators may not be linear
• The information of unemployment rate is
limited
• The model is using top 20 countries with
highest GCI (N = 20)
• Unemployment rate is negative economic
indicator
• Fewer people participate in production
• Unemployment rate should be negatively
related to global competitiveness
5.85
5.80
5.75
5.70
5.65
GCI
5.60
5.55
5.50
5.45
5.40
5.35
5.30
5.25
5.20
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
Unemployment rate
6.00%
7.00%
8.00%
9.00%
• Negatively related
• Unemployment rate  1%, GCI  2.3402
GCI = 5.6279+(-2.3402 x Unemployment rate)
• R square = 0.0818
• Correlation coefficient = -0.2861
6.20
6.10
GCI - Basic Requirement
6.00
5.90
5.80
5.70
5.60
5.50
5.40
5.30
5.20
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
Unemployment rate
6.00%
7.00%
8.00%
9.00%
• Negatively related
• Unemployment rate  1%, Basic
requirements score  3.8571
GCIBS = 5.9673+(-3.8571 x Unemployment rate)
• R square = 0.1007
• Correlation coefficient = -0.3173
5.70
GCI - Efficiency enhancer
5.60
5.50
5.40
5.30
5.20
5.10
5.00
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
Unemployment rate
6.00%
7.00%
8.00%
9.00%
• Negatively related
• Unemployment rate  1%, Efficiency
enhancers score  4.4050
GCIEE = 5.6459+(-4.4050 x Unemployment rate)
• R square = 0.2357
• Correlation coefficient = -0.4855
7.00
GCI - Innovation Factors
6.00
5.00
4.00
3.00
2.00
1.00
0.00
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
Unemployment rate
6.00%
7.00%
8.00%
9.00%
• Positively related
• Unemployment rate  1%, Efficiency
enhancers score  2.0053
GCIIF = 5.2602+(2.0053 x Unemployment rate)
• R square = 0.01314
• Correlation coefficient = 0.1147
5.9
5.8
5.7
GCI
5.6
5.5
5.4
5.3
5.2
0
10000
20000
30000
40000
50000
60000
GDP per capita at current price (US$)
70000
80000
90000
• Positively related
• Nominal GDP per capita  US$1000,
GCI  0.002923
GCI = 5.3877+(0.000002923 x GDP per capita)
• R square = 0.05065
• Correlation coefficient = 0.2250
5.9
5.8
5.7
GCI
5.6
5.5
5.4
5.3
5.2
0.00%
1.00%
2.00%
3.00%
4.00%
Percentage change of GDP
5.00%
6.00%
• Negatively related
• GDP Growth rate  1%, GCI  2.6681
GCI = 5.5832+(-2.668 x GDP growth rate)
• R square = 0.03167
• Correlation coefficient = -0.1780
• GCI is negatively related to unemployment
rate
• GCI is positively related to GDP per capita
• The higher GCI, the better
• GCI dose not have a well explained
relationship with a single economic
indicator
• With low R square
• GCI is not significantly affect by a single
economic indicator
• GCI is relatively a full-scale index
GDP per capita
5.90
5.90
5.80
5.80
5.70
5.70
5.60
5.60
GCI
GCI
Unemployment rate
5.50
5.50
5.40
5.40
5.30
5.30
5.20
5.20
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
0
10000
20000
Unemployment rate
50000
60000
70000
80000
90000
GDP deflator
5.90
5.90
5.80
5.80
5.70
5.70
5.60
5.60
GCI
GCI
40000
GDP per capita
GDP growth rate
5.50
5.50
5.40
5.40
5.30
5.30
5.20
0.00%
30000
5.20
1.00%
2.00%
3.00%
4.00%
GDP growth rate
5.00%
6.00%
0
20
40
60
80
100
GDP deflator
120
140
160
GCI = 6.6418 +
-1.6248 x unemployment rate +
-4.8363 x GDP growth rate +
0.000006809 x GDP per capita +
-0.01076 x GDP deflator
R square = 0.3722
• GCI has a better explained relationship
with a group of economic indicator
• Again, it proves that GCI is a better all
round indicator
• Provide a fair and accurate result