1. Insight Report
The Global
Competitiveness Report
2012–2013
Klaus Schwab, World Economic Forum

3. Insight Report
The Global
Competitiveness Report
2012–2013
Full Data Edition
Professor Klaus Schwab
World Economic Forum
Editor
Professor Xavier Sala-i-Martín
Columbia University
Chief Advisor of The Global Benchmarking Network
© 2012 World Economic Forum

4. The Global Competitiveness Report 2012–20013: World Economic Forum
Full Data Edition is published by the World Economic Geneva
Forum within the framework of The Global
Benchmarking Network. Copyright © 2012
by the World Economic Forum
Professor Klaus Schwab All rights reserved. No part of this publication may be
Executive Chairman reproduced, stored in a retrieval system, or transmitted,
in any form or by any means, electronic, mechanical,
Professor Xavier Sala-i-Martín
photocopying, or otherwise without the prior permission
Chief Advisor of The Global Benchmarking Network
of the World Economic Forum.
Børge Brende
ISBN-13: 978-92-95044-35-7
Managing Director, Government Relations and
ISBN-10: 92-95044-35-5
Constituents Engagement
This book is printed on paper suitable for recycling and
made from fully managed and sustained forest sources.
THE GLOBAL BENCHMARKING NETWORK
Printed and bound in Switzerland by SRO-Kundig.
Jennifer Blanke, Senior Director,
Lead Economist, Head of The Global The Report and an interactive data platform are available
Benchmarking Network at www.weforum.org/gcr.
Beñat Bilbao-Osorio, Associate Director,
Senior Economist
Ciara Browne, Associate Director
Roberto Crotti, Quantitative Economist
Margareta Drzeniek Hanouz, Director, Senior
Economist, Head of Competitiveness Research
Brindusa Fidanza, Associate Director,
Environmental Initiatives
Thierry Geiger, Associate Director, Economist
Tania Gutknecht, Community Manager
Caroline Ko, Junior Economist
Cecilia Serin, Team Coordinator
We thank Hope Steele for her excellent editing work and
Neil Weinberg for his superb graphic design and layout.
We are grateful to Annabel Guinault for her invaluable
research assistance.
The terms country and nation as used in this report do
not in all cases refer to a territorial entity that is a state
as understood by international law and practice. The
terms cover well-defined, geographically self-contained
economic areas that may not be states but for which
statistical data are maintained on a separate and
independent basis.
© 2012 World Economic Forum

5. Contents
Partner Institutes v Part 2: Data Presentation 79
Preface xiii 2.1 Country/Economy Profiles 81
by Klaus Schwab How to Read the Country/Economy Profiles ..................................83
Index of Countries/Economies ........................................................85
Country/Economy Profiles ..............................................................86
Part 1: Measuring Competitiveness 1
2.2 Data Tables 375
How to Read the Data Tables .......................................................377
1.1 The Global Competitiveness Index 3 Index of Data Tables .....................................................................379
2012–2013: Strengthening Recovery by Data Tables ..................................................................................381
Raising Productivity
by Xavier Sala-i-Martín, Beñat Bilbao-Osorio, Jennifer
Blanke, Roberto Crotti, Margareta Drzeniek Hanouz, Technical Notes and Sources 519
Thierry Geiger, and Caroline Ko
About the Authors 523
1.2 Assessing the Sustainable Competitiveness 49
of Nations
Acknowledgments 527
by Beñat Bilbao-Osorio, Jennifer Blanke, Roberto Crotti,
Margareta Drzeniek Hanouz, Brindusa Fidanza, Thierry
Geiger, Caroline Ko, and Cecilia Serin
1.3 The Executive Opinion Survey: The Voice 69
of the Business Community
by Ciara Browne, Thierry Geiger, and Tania Gutknecht
The Global Competitiveness Report 2012–2013 | iii
© 2012 World Economic Forum

6. © 2012 World Economic Forum

7. Partner Institutes
The World Economic Forum’s Global Benchmarking Barbados
Sir Arthur Lewis Institute of Social and Economic Studies,
Network is pleased to acknowledge and thank
University of West Indies (UWI)
the following organizations as its valued Partner Judy Whitehead, Director
Institutes, without which the realization of The Global
Belgium
Competitiveness Report 2012–2013 would not have Vlerick Business School
been feasible: Priscilla Boiardi, Associate, Competence Centre
Entrepreneurship, Governance and Strategy
Albania
Wim Moesen, Professor
Institute for Contemporary Studies (ISB)
Leo Sleuwaegen, Professor, Competence Centre
Artan Hoxha, President
Entrepreneurship, Governance and Strategy
Elira Jorgoni, Senior Expert
Endrit Kapaj, Expert Benin
CAPOD—Conception et Analyse de Politiques de
Algeria
Développement
Centre de Recherche en Economie Appliquée pour
Epiphane Adjovi, Director
le Développement (CREAD)
Maria-Odile Attanasso, Deputy Coordinator
Youcef Benabdallah, Assistant Professor
Fructueux Deguenonvo, Researcher
Yassine Ferfera, Director
Bosnia and Herzegovina
Argentina
MIT Center, School of Economics and Business in Sarajevo,
IAE—Universidad Austral
University of Sarajevo
Eduardo Luis Fracchia, Professor
Zlatko Lagumdzija, Professor
Santiago Novoa, Project Manager
Zeljko Sain, Executive Director
Armenia Jasmina Selimovic, Assistant Director
Economy and Values Research Center
Botswana
Manuk Hergnyan, Chairman
Botswana National Productivity Centre
Sevak Hovhannisyan, Board Member and Senior Associate
Letsogile Batsetswe, Research Consultant and Statistician
Gohar Malumyan, Research Associate
Baeti Molake, Executive Director
Australia Phumzile Thobokwe, Manager, Information and Research
Australian Industry Group Services Department
Colleen Dowling, Senior Research Coordinator
Brazil
Innes Willox, Chief Executive
Fundação Dom Cabral, Bradesco Innovation Center
Austria Carlos Arruda, International Relations Director, Innovation
Austrian Institute of Economic Research (WIFO) and Competitiveness Professor
Karl Aiginger, Director Daniel Berger, Bachelor Student in Economics
Gerhard Schwarz, Coordinator, Survey Department Fabiana Madsen, Economist and Associate Researcher
Movimento Brasil Competitivo (MBC)
Azerbaijan
Carolina Aichinger, Project Coordinator
Azerbaijan Marketing Society
Erik Camarano, Chief Executive Officer
Fuad Aliyev, Deputy Chairman
Ashraf Hajiyev, Consultant Brunei Darussalam
Ministry of Industry and Primary Resources
Bahrain
Pehin Dato Yahya Bakar, Minister
Bahrain Economic Development Board
Normah Suria Hayati Jamil Al-Sufri, Permanent Secretary
Kamal Bin Ahmed, Minister of Transportation and Acting Chief
Executive of the Economic Development Board Bulgaria
Nada Azmi, Manager, Economic Planning and Development Center for Economic Development
Maryam Matter, Coordinator, Economic Planning and Adriana Daganova, Expert, International Programmes and
Development Projects
Anelia Damianova, Senior Expert
Bangladesh
Centre for Policy Dialogue (CPD) Burkina Faso
Khondaker Golam Moazzem, Senior Research Fellow lnstitut Supérieure des Sciences de la Population (ISSP),
Kishore Kumer Basak, Research Associate University of Ouagadougou
Mustafizur Rahman, Executive Director Baya Banza, Director
The Global Competitiveness Report 2012–2013 | v
© 2012 World Economic Forum

8. Partner Institutes
Burundi Cyprus
University Research Centre for Economic and Social The European University
Development (CURDES), National University of Burundi Bambos Papageorgiou, Head of Socioeconomic and
Banderembako Deo, Director Academic Research
Gilbert Niyongabo, Dean, Faculty of Economics &
cdbbank—The Cyprus Development Bank
Management
Maria Markidou-Georgiadou, Manager, Business Development
Cambodia and Special Projects
Economic Institute of Cambodia
Czech Republic
Sok Hach, President
CMC Graduate School of Business
Sokheng Sam, Researcher
Tomas Janca, Executive Director
Cameroon
Denmark
Comité de Compétitivité (Competitiveness Committee)
Danish Technological Institute, Center for Policy and Business
Lucien Sanzouango, Permanent Secretary
Development
Canada Hanne Shapiro, Center Manager
The Conference Board of Canada
Ecuador
Michael R. Bloom, Vice-President, Organizational
ESPAE Graduate School of Management, Escuela Superior
Effectiveness & Learning
Politécnica del Litoral (ESPOL)
Douglas Watt, Associate Director
Elizabeth Arteaga, Project Assistant
Cape Verde Virginia Lasio, Director
INOVE RESEARCH—Investigação e Desenvolvimento, Lda Sara Wong, Professor
Júlio Delgado, Partner and Senior Researcher
Egypt
José Mendes, Chief Executive Officer
The Egyptian Center for Economic Studies (ECES)
Sara França Silva, Project Manager
Iman Al-Ayouty, Senior Economist
Chad Omneia Helmy, Acting Executive Director and Director
Groupe de Recherches Alternatives et de Monitoring du Projet of Research
Pétrole-Tchad-Cameroun (GRAMP-TC)
Estonia
Antoine Doudjidingao, Researcher
Estonian Institute of Economic Research
Gilbert Maoundonodji, Director
Evelin Ahermaa, Head of Economic Research Sector
Celine Nénodji Mbaipeur, Programme Officer
Marje Josing, Director
Chile Estonian Development Fund
Universidad Adolfo Ibáñez Kitty Kubo, Head of Foresight
Fernando Larrain Aninat, Director MBA Ott Pärna, Chief Executive Officer
Leonidas Montes, Dean, School of Government
Ethiopia
China African Institute of Management, Development and
Institute of Economic System and Management, National Governance
Development and Reform Commission Zebenay Kifle, General Manager
Chen Wei, Research Fellow Tegenge Teka, Senior Expert
Dong Ying, Professor
Zhou Haichun, Deputy Director and Professor Finland
China Center for Economic Statistics Research, Tianjin ETLA—The Research Institute of the Finnish Economy
Markku Kotilainen, Research Director
University of Finance and Economics
Petri Rouvinen, Research Director
Bojuan Zhao, Professor
Pekka Ylä-Anttila, Managing Director
Fan Yang, Professor Jian Wang, Associate Professor
Hongye Xiao, Professor France
Lu Dong, Professor HEC School of Management, Paris
Bertrand Moingeon, Professor and Deputy Dean
Colombia
Bernard Ramanantsoa, Professor and Dean
National Planning Department
Sara Patricia Rivera, Advisor Gabon
John Rodríguez, Coordinator, Competitiveness Observatory Confédération Patronale Gabonaise
Javier Villarreal, Enterprise Development Director Regis Loussou Kiki, General Secretary
Gina Eyama Ondo, Assistant General Secretary
Colombian Private Council on Competitiveness
Henri Claude Oyima, President
Rosario Córdoba, President
Marco Llinás, Vicepresident Gambia, The
Gambia Economic and Social Development Research Institute
Côte d’Ivoire
(GESDRI)
Chambre de Commerce et d’Industrie de Côte d’Ivoire
Makaireh A. Njie, Director
Jean-Louis Billon, President
Mamadou Sarr, Director General Georgia
Business Initiative for Reforms in Georgia
Croatia
Tamara Janashia, Executive Director
National Competitiveness Council
Giga Makharadze, Founding Member of the Board of Directors
Jadranka Gable, Advisor
Mamuka Tsereteli, Founding Member of the Board of Directors
Kresimir Jurlin, Research Fellow
vi | The Global Competitiveness Report 2012–2013
© 2012 World Economic Forum

9. Partner Institutes
Germany Ireland
WHU—Otto Beisheim School of Management Institute for Business Development and Competitiveness
Ralf Fendel, Professor of Monetary Economics School of Economics, University College Cork
Michael Frenkel, Professor, Chair of Macroeconomics and Justin Doran, Principal Associate
International Economics Eleanor Doyle, Director
Catherine Kavanagh, Principal Associate
Ghana
Association of Ghana Industries (AGI) Forfás, Economic Analysis and Competitiveness Department
Patricia Addy, Projects Officer Adrian Devitt, Manager
Nana Owusu-Afari, President Conor Hand, Economist
Seth Twum-Akwaboah, Executive Director
Israel
Greece Manufacturers’ Association of Israel (MAI)
SEV Hellenic Federation of Enterprises Dan Catarivas, Director
Michael Mitsopoulos, Senior Advisor, Entrepreneurship Amir Hayek, Managing Director
Thanasis Printsipas, Economist, Entrepreneurship Zvi Oren, President
Guatemala Italy
FUNDESA SDA Bocconi School of Management
Felipe Bosch G., President of the Board of Directors Secchi Carlo, Full Professor of Economic Policy, Bocconi
Pablo Schneider, Economic Director University
Juan Carlos Zapata, General Manager Paola Dubini, Associate Professor, Bocconi University
Francesco A. Saviozzi, SDA Professor, Strategic and
Guinea Entrepreneurial Management Department
Confédération Patronale des Entreprises de Guinée
Mohamed Bénogo Conde, Secretary-General Jamaica
Mona School of Business (MSB), The University of the West
Guyana Indies
Institute of Development Studies, University of Guyana Patricia Douce, Project Administrator
Karen Pratt, Research Associate Evan Duggan, Executive Director and Professor
Clive Thomas, Director William Lawrence, Director, Professional Services Unit
Haiti Japan
Group Croissance SA Keio University
Pierre Lenz Dominique, Coordinator, Survey Department Yoko Ishikura, Professor, Graduate School of Media Design
Kesner Pharel, Chief Executive Officer and Chairman Heizo Takenaka, Director, Global Security Research Institute
Jiro Tamura, Professor of Law, Keio University
Hong Kong SAR
Hong Kong General Chamber of Commerce Keizai Doyukai (Japan Association of Corporate Executives)
David O’Rear, Chief Economist Kiyohiko Ito, Managing Director, Keizai Doyukai
Federation of Hong Kong Industries Jordan
Alexandra Poon, Director Ministry of Planning & International Cooperation
The Chinese General Chamber of Commerce Jordan National Competitiveness Team
Kawther Al-Zou’bi, Head of Competitiveness Division
Hungary Basma Arabiyat, Researcher
KOPINT-TÁRKI Economic Research Ltd. Mukhallad Omari, Director of Policies and Studies Department
Éva Palócz, Chief Executive Officer
Peter Vakhal, Project Manager Kazakhstan
National Analytical Centre
Iceland Diana Tamabayeva, Project Manager
Innovation Center Iceland Vladislav Yezhov, Chairman
Ardis Armannsdottir, Marketing Manager
Karl Fridriksson, Managing Director of Human Resources Kenya
and Marketing Institute for Development Studies, University of Nairobi
Thorsteinn I. Sigfusson, Director Mohamud Jama, Director and Associate Research Professor
Paul Kamau, Senior Research Fellow
India Dorothy McCormick, Research Professor
Confederation of Indian Industry (CII)
Chandrajit Banerjee, Director General Korea, Republic of
Marut Sengupta, Deputy Director General College of Business School, Korea Advanced Institute of
Gantakolla Srivastava, Head, Financial Services Science and Technology KAIST
Byungtae Lee, Acting Dean
Indonesia Soung-Hie Kim, Associate Dean and Professor
Center for Industry, SME & Business Competition Studies, Jinyung Cha, Assistant Director, Exchange Programme
University of Trisakti
Korea Development Institute
Tulus Tambunan, Professor and Director
Joohee Cho, Senior Research Associate
Iran, Islamic Republic of Yongsoo Lee, Head, Policy Survey Unit
The Center for Economic Studies and Surveys (CESS), Iran
Kuwait
Chamber of Commerce, Industries, Mines and Agriculture
Kuwait National Competitiveness Committee
Mohammad Janati Fard, Research Associate
Adel Al-Husainan, Committee Member
Hamed Nikraftar, Project Manager
Fahed Al-Rashed, Committee Chairman
Farnaz Safdari, Research Associate
Sayer Al-Sayer, Committee Member
The Global Competitiveness Report 2012–2013 | vii
© 2012 World Economic Forum

10. Partner Institutes
Kyrgyz Republic Malta
Economic Policy Institute “Bishkek Consensus” Competitive Malta—Foundation for National Competitiveness
Lola Abduhametova, Program Coordinator Margrith Lutschg-Emmenegger, Vice President
Marat Tazabekov, Chairman Adrian Said, Chief Coordinator
Caroline Sciortino, Research Coordinator
Latvia
Stockholm School of Economics in Riga Mauritania
Karlis Kreslins, EMBA Programme Director Centre d’Information Mauritanien pour le Développement
Anders Paalzow, Rector Economique et Technique (CIMDET/CCIAM)
Lô Abdoul, Consultant and Analyst
Lebanon
Mehla Mint Ahmed, Director
Bader Young Entrepreneurs Program
Habib Sy, Administrative Agent and Analyst
Antoine Abou-Samra, Managing Director
Farah Shamas, Program Coordinator Mauritius
Board of Investment of Mauritius
Lesotho
Nirmala Jeetah, Director, Planning and Policy
Private Sector Foundation of Lesotho
Ken Poonoosamy, Managing Director
O.S.M. Moosa, President
Thabo Qhesi, Chief Executive Officer Joint Economic Council
Nteboheleng Thaele, Researcher Raj Makoond, Director
Libya Mexico
Libya Development Policy Center Center for Intellectual Capital and Competitiveness
Yusser Al-Gayed, Project Director Erika Ruiz Manzur, Executive Director
Ahmed Jehani, Chairman René Villarreal Arrambide, President and Chief Executive
Mohamed Wefati, Director Officer
Rodrigo David Villarreal Ramos, Director
Lithuania
Instituto Mexicano para la Competitividad (IMCO)
Statistics Lithuania
Priscila Garcia, Researcher
Ona Grigiene, Deputy Head, Knowledge Economy
Manuel Molano, Deputy General Director
and Special Surveys Statistics Division
Juan E. Pardinas, General Director
Vilija Lapeniene, Director General
Gediminas Samuolis, Head, Knowledge Economy Ministry of the Economy
and Special Surveys Statistics Division Jose Antonio Torre, Undersecretary for Competitiveness
and Standardization
Luxembourg
Enrique Perret Erhard, Technical Secretary for
Luxembourg Chamber of Commerce
Competitiveness
Christel Chatelain, Research Analyst
Narciso Suarez, Research Director, Technical Secretary
Stephanie Musialski, Research Analyst
for Competitiveness
Carlo Thelen, Chief Economist, Member of the
Managing Board Moldova
Academy of Economic Studies of Moldova (AESM)
Macedonia, FYR
Grigore Belostecinic, Rector
National Entrepreneurship and Competitiveness
Council (NECC) Centre for Economic Research (CER)
Mirjana Apostolova, President of the Assembly Corneliu Gutu, Director
Dejan Janevski, Project Coordinator
Mongolia
Madagascar Open Society Forum (OSF)
Centre of Economic Studies, University of Antananarivo Munkhsoyol Baatarjav, Manager of Economic Policy
Ravelomanana Mamy Raoul, Director Erdenejargal Perenlei, Executive Director
Razato Rarijaona Simon, Executive Secretary
Montenegro
Malawi Institute for Strategic Studies and Prognoses (ISSP)
Malawi Confederation of Chambers of Commerce and Maja Drakic, Project Manager
Industry Petar Ivanovic, Chief Executive Officer
Hope Chavula, Public Private Dialogue Manager Veselin Vukotic, President
Chancellor L. Kaferapanjira, Chief Executive Officer
Morocco
Malaysia Comité National de l’Environnement des Affaires
Institute of Strategic and International Studies (ISIS) Seloua Benmbarek, Head of Mission
Jorah Ramlan, Senior Analyst, Economics
Mozambique
Steven C.M. Wong, Senior Director, Economics
EconPolicy Research Group, Lda.
Mahani Zainal Abidin, Chief Executive
Peter Coughlin, Director
Malaysia Productivity Corporation (MPC) Donaldo Miguel Soares, Researcher
Mohd Razali Hussain, Director General Ema Marta Soares, Assistant
Lee Saw Hoon, Senior Director
Namibia
Mali Institute for Public Policy Research (IPPR)
Groupe de Recherche en Economie Appliquée et Graham Hopwood, Executive Director
Théorique (GREAT)
Massa Coulibaly, Executive Director
viii | The Global Competitiveness Report 2012–2013
© 2012 World Economic Forum

11. Partner Institutes
Nepal Portugal
Centre for Economic Development and Administration (CEDA) PROFORUM, Associação para o Desenvolvimento da
Ramesh Chandra Chitrakar, Professor, Country Coordinator Engenharia
and Project Director Ilídio António de Ayala Serôdio, Vice President of the Board
Mahendra Raj Joshi, Member of Directors
Hari Dhoj Pant, Officiating Executive Director, Advisor, Survey
Fórum de Administradores de Empresas (FAE)
project
Paulo Bandeira, General Director
Netherlands Pedro do Carmo Costa, Member of the Board of Directors
INSCOPE: Research for Innovation, Erasmus University Esmeralda Dourado, President of the Board of Directors
Rotterdam
Puerto Rico
Frans A. J. Van den Bosch, Professor
Puerto Rico 2000, Inc.
Henk W. Volberda, Director and Professor
Ivan Puig, President
New Zealand Instituto de Competitividad Internacional, Universidad
The New Zealand Initiative Interamericana de Puerto Rico
Catherine Harland, Research Fellow Francisco Montalvo, Project Coordinator
Oliver Hartwich, Executive Director
Qatar
Nigeria Qatari Businessmen Association (QBA)
Nigerian Economic Summit Group (NESG) Sarah Abdallah, Deputy General Manager
Frank Nweke Jr., Director General Issa Abdul Salam Abu Issa, Secretary-General
Chris Okpoko, Associate Director, Research
Social and Economic Survey Research Institute (SESRI)
Foluso Phillips, Chairman
Hanan Abdul Ibrahim, Associate Director
Norway Darwish Al Emadi, Director
BI Norwegian Business School
Romania
Eskil Goldeng, Researcher
SC VBD Alliance Consulting Srl
Torger Reve, Professor
Irina Ion, Program Coordinator
Oman Rolan Orzan, General Director
The International Research Foundation
Russian Federation
Salem Ben Nasser Al-Ismaily, Chairman
Bauman Innovation & Eurasia Competitiveness Institute
Public Authority for Investment Promotion and Export Katerina Marandi, Programme Manager
Development (PAIPED) Alexey Prazdnichnykh, Principal and Managing Director
Mehdi Ali Juma, Expert for Economic Research
Stockholm School of Economics, Russia
Pakistan Igor Dukeov, Area Principal
Mishal Pakistan Carl F. Fey, Associate Dean of Research
Puruesh Chaudhary, Director Content
Rwanda
Amir Jahangir, Chief Executive Officer
Private Sector Federation (PSF)
Paraguay Hannington Namara, Chief Executive Officer
Centro de Análisis y Difusión de Economia Paraguaya Andrew O. Rwigyema, Head of Research and Policy
(CADEP)
Saudi Arabia
Dionisio Borda, Research Member
National Competitiveness Center (NCC)
Fernando Masi, Director
Awwad Al-Awwad, President
María Belén Servín, Research Member
Khaldon Mahasen, Vice President
Peru
Senegal
Centro de Desarrollo Industrial (CDI), Sociedad Nacional
Centre de Recherches Economiques Appliquées (CREA),
de Industrias
University of Dakar
Néstor Asto, Project Director
Diop Ibrahima Thione, Director
Luis Tenorio, Executive Director
Serbia
Philippines
Foundation for the Advancement of Economics (FREN)
Makati Business Club (MBC)
Mihail Arandarenko, Director
Michael B. Mundo, Chief Economist
Aleksandar Radivojevic, Project Coordinator
Marc P. Opulencia, Deputy Director
Bojan Ristic, Researcher
Peter Angelo V. Perfecto, Executive Director
Management Association of the Philippines (MAP) Seychelles
Arnold P. Salvador, Executive Director Plutus Auditing & Accounting Services
Nicolas Boulle, Partner
Poland Marco L. Francis, Partner
Economic Institute, National Bank of Poland
Piotr Boguszewski, Advisor Singapore
Jarosław T. Jakubik, Deputy Director Economic Development Board
Anna Chan, Assistant Managing Director, Planning & Policy
Cheng Wai San, Head, Research & Statistics Unit
Teo Xinyu, Executive, Research & Statistics Unit
Slovak Republic
Business Alliance of Slovakia (PAS)
Robert Kicina, Executive Director
The Global Competitiveness Report 2012–2013 | ix
© 2012 World Economic Forum

12. Partner Institutes
Slovenia Thailand
Institute for Economic Research Sasin Graduate Institute of Business Administration,
Peter Stanovnik, Professor Chulalongkorn University
Sonja Uršic, Senior Research Assistant Pongsak Hoontrakul, Senior Research Fellow
Narudee Kiengsiri, President of Sasin Alumni Association
University of Ljubljana, Faculty of Economics
Toemsakdi Krishnamra, Director of Sasin
Mateja Drnovšek, Professor
Aleš Vahcic, Professor Thailand Development Research Institute (TDRI)
Somchai Jitsuchon, Research Director
South Africa
Chalongphob Sussangkarn, Distinguished Fellow
Business Leadership South Africa
Yos Vajragupta, Senior Researcher
Friede Dowie, Director
Thero Setiloane, Chief Executive Officer Timor-Leste
East Timor Development Agency (ETDA)
Business Unity South Africa
Jose Barreto, Survey Manager
Nomaxabiso Majokweni, Chief Executive Officer
Palmira Pires, Director
Joan Stott, Executive Director, Economic Policy
Chambers of Commerce and Industry of Timor-Leste
Spain
Kathleen Fon Ha Tchong Goncalves, Vice-President
IESE Business School, International Center for
Competitiveness Trinidad and Tobago
María Luisa Blázquez, Research Associate Arthur Lok Jack Graduate School of Business
Antoni Subirà, Professor Miguel Carillo, Executive Director and Professor of Strategy
Nirmala Harrylal, Director, Internationalisation and Institutional
Sri Lanka
Relations Centre
Institute of Policy Studies of Sri Lanka (IPS)
Ayodya Galappattige, Research Officer The Competitiveness Company
Dilani Hirimuthugodage, Research Officer Rolph Balgobin, Chairman
Saman Kelegama, Executive Director
Tunisia
Suriname Institut Arabe des Chefs d’Entreprises
Suriname Trade & Industry Association (VSB) Ahmed Bouzguenda, President
Helen Doelwijt, Executive Secretary Majdi Hassen, Executive Counsellor
Rene van Essen, Director
Turkey
Dayenne Wielingen Verwey, Economic Policy Officer
TUSIAD Sabanci University Competitiveness Forum
Swaziland Izak Atiyas, Director
Federation of Swaziland Employers and Chamber of Selcuk Karaata, Vice Director
Commerce Sezen Ugurlu, Project Specialist
Mduduzi Lokotfwako, Research Analyst
Uganda
Zodwa Mabuza, Chief Executive Officer
Kabano Research and Development Centre
Nyakwesi Motsa, Administration & Finance Manager
Robert Apunyo, Program Manager
Sweden Delius Asiimwe, Executive Director
International University of Entrepreneurship and Technology Francis Mukuya, Research Associate
Niclas Adler, President
Ukraine
Switzerland CASE Ukraine, Center for Social and Economic Research
University of St. Gallen, Executive School of Management, Dmytro Boyarchuk, Executive Director
Technology and Law (ES-HSG) Vladimir Dubrovskiy, Leading Economist
Rubén Rodriguez Startz, Head of Project
United Arab Emirates
Tobias Trütsch, Communications Manager
Abu Dhabi Department of Economic Development
Taiwan, China H.E. Mohammed Omar Abdulla, Undersecretary
Council for Economic Planning and Development, Executive Dubai Economic Council
Yuan H.E. Hani Al Hamly, Secretary General
Hung, J. B., Director, Economic Research Department
Institute for Social and Economic Research (ISER), Zayed
Shieh, Chung Chung, Researcher, Economic Research
University
Department
Mouawiya Alawad, Director
Wu, Ming-Ji, Deputy Minister
Emirates Competitiveness Council
Tajikistan
H.E. Abdulla Nasser Lootah, Secretary General
The Center for Sociological Research “Zerkalo”
Rahima Ashrapova, Assistant Researcher United Kingdom
Qahramon Baqoev, Director LSE Enterprise Ltd, London School of Economics and
Gulnora Beknazarova, Researcher Political Science
Adam Austerfield, Director of Projects
Tanzania
Niccolo Durazzi, Project Manager
Research on Poverty Alleviation (REPOA)
Robyn Klingler Vidra, Researcher
Cornel Jahari, Assistant Researcher
Johansein Rutaihwa, Commissioned Researcher Uruguay
Samuel Wangwe, Professor and Executive Director Universidad ORT Uruguay
Isidoro Hodara, Professor
x | The Global Competitiveness Report 2012–2013
© 2012 World Economic Forum

13. Partner Institutes
Venezuela
CONAPRI—The Venezuelan Council for Investment Promotion
Litsay Guerrero, Economic Affairs and Investor Services
Manager
Eduardo Porcarelli, Executive Director
Vietnam
Ho Chi Minh City Institute for Development Studies (HIDS)
Nguyen Trong Hoa, Professor and President
Du Phuoc Tan, Head of Department
Trieu Thanh Son, Researcher
Yemen
Yemeni Businessmen Club (YBC)
Mohammed Esmail Hamanah, Executive Manager
Fathi Abdulwasa Hayel Saeed, Chairman
Moneera Abdo Othman, Project Coordinator
MARcon Marketing Consulting
Margret Arning, Managing Director
Zambia
Institute of Economic and Social Research (INESOR),
University of Zambia
Patricia Funjika, Research Fellow
Jolly Kamwanga, Senior Research Fellow and Project
Coordinator
Mubiana Macwan’gi, Director and Professor
Zimbabwe
Graduate School of Management, University of Zimbabwe
A. M. Hawkins, Professor
Bolivia, Costa Rica, Dominican Republic, Ecuador,
El Salvador, Honduras, Nicaragua, Panama
INCAE Business School, Latin American Center for
Competitiveness and Sustainable Development (CLACDS)
Ronald Arce, Researcher
Arturo Condo, Rector
Marlene de Estrella, Director of External Relations
Lawrence Pratt, Director
Liberia and Sierra Leone
FJP Development and Management Consultants
Omodele R. N. Jones, Chief Executive Officer
The Global Competitiveness Report 2012–2013 | xi
© 2012 World Economic Forum

14. © 2012 World Economic Forum

15. Preface
KLAUS SCHWAB
Executive Chairman, World Economic Forum
The Global Competitiveness Report 2012–2013 is being to recognize and encourage the qualitative as well as
released amid a long period of economic uncertainty. the quantitative aspects of growth, integrating such
The tentative recovery that seemed to be gaining ground concepts as social and environmental sustainability
during 2010 and the first half of 2011 has given way to provide a fuller picture of what is needed and what
to renewed concerns. The global economy faces a works. In this context, the Forum’s Global Benchmarking
number of significant and interrelated challenges that Network has continued to push forward with its research
could hamper a genuine upturn after an economic crisis on how sustainability relates to competitiveness and
half a decade long in much of the world, especially economic performance. To this end, Chapter 1.2 of this
in the most advanced economies. The persisting Report presents our evolving analysis of how country
financial difficulties in the periphery of the euro zone competitiveness can be assessed once issues of
have led to a long-lasting and unresolved sovereign social and environmental sustainability are taken into
debt crisis that has now reached the boiling point. The account. This represents an important area for the World
possibility of Greece and perhaps other countries leaving Economic Forum’s research going forward.
the euro is now a distinct prospect, with potentially This year’s Report features a record number of
devastating consequences for the region and beyond. 144 economies, and thus continues to be the most
This development is coupled with the risk of a weak comprehensive assessment of its kind. It contains a
recovery in several other advanced economies outside detailed profile for each of the economies included in
of Europe—notably in the United States, where political the study as well as an extensive section of data tables
gridlock on fiscal tightening could dampen the growth with global rankings covering over 100 indicators.
outlook. Furthermore, given the expected slowdown in This Report remains the flagship publication within the
economic growth in China, India, and other emerging Forum’s Global Benchmarking Network, which produces
markets, reinforced by a potential decline in global trade a number of research studies that mirror the increased
and volatile capital flows, it is not clear which regions integration and complexity of the world economy.
can drive growth and employment creation in the short The Global Competitiveness Report 2012–2013
to medium term. could not have been put together without the thought
Policymakers are struggling to find ways to leadership of Professor Xavier Sala-i-Martín at Columbia
cooperate and manage the current economic challenges University, who has provided ongoing intellectual
while preparing their economies to perform well in an support for our competitiveness research. Further,
increasingly difficult and unpredictable global landscape. this Report would have not been possible without the
Amid the short-term crisis management, it remains commitment and enthusiasm of our network of over 150
critical for countries to establish the fundamentals Partner Institutes worldwide. The Partner Institutes are
that underpin economic growth and development for instrumental in carrying out the Executive Opinion Survey
the longer term. The World Economic Forum has, for that provides the foundation data of this Report as well
more than three decades, played a facilitating role in as imparting the results of the Report at the national
this process by providing detailed assessments of the level. We would also like to convey our sincere gratitude
productive potential of nations worldwide. The Report to all the business executives around the world who took
contributes to an understanding of the key factors that the time to participate in our Executive Opinion Survey.
determine economic growth, helps to explain why some We are also grateful to the members of our Advisory
countries are more successful than others in raising Board on Competitiveness and Sustainability, who
income levels and opportunities for their respective have provided their valuable time and knowledge to
populations, and offers policymakers and business help us develop the framework on sustainability and
leaders an important tool in the formulation of improved competitiveness presented in this Report: James
economic policies and institutional reforms. Cameron, Chairman, Climate Change Capital; Dan Esty,
The complexity of today’s global economic Commissioner, Connecticut Department of Energy and
environment has made it more important than ever Environmental Protection; Edwin J. Feulner Jr, President,
The Global Competitiveness Report 2012–2013 | xiii
© 2012 World Economic Forum

16. Preface
The Heritage Foundation; Clément Gignac, Minister
of Natural Resources and Wildlife of Quebec; Jeni
Klugman, Director for Gender, The World Bank; Marc A.
Levy, Deputy Director, CIESIN, Columbia University; John
McArthur, Senior Fellow, United Nations Foundation;
Kevin X. Murphy, President and Chief Executive Officer,
J.E. Austin Associates Inc.; Mari Elka Pangestu, Minister
of Tourism and Creative Economy of Indonesia; Mark
Spelman, Global Head of Strategy, Accenture; and
Simon Zadek, Senior Visiting Fellow, Global Green
Growth Institute.
Appreciation also goes to Børge Brende, Managing
Director at the Forum, and Jennifer Blanke, Head of
The Global Benchmarking Network, as well as team
members Beñat Bilbao-Osorio, Ciara Browne, Roberto
Crotti, Margareta Drzeniek Hanouz, Thierry Geiger, Tania
Gutknecht, Caroline Ko, and Cecilia Serin. Finally, we
would like to thank the Africa Commission and FedEx,
our partners in this Report, for their support in this
important publication.
xiv |The Global Competitiveness Report 2012–2013
© 2012 World Economic Forum

17. Part 1
Measuring Competitiveness
© 2012 World Economic Forum

18. © 2012 World Economic Forum

19. CHAPTER 1.1 At the time of releasing The Global Competitiveness
Report 2012–2013, the outlook for the world economy
is once again fragile. Global growth remains historically
The Global low for the second year running with major centers of
economic activity—particularly large emerging economies
Competitiveness Index and key advanced economies—expected to slow in
2012–13, confirming the belief that the global economy
2012–2013: Strengthening is troubled by a slow and weak recovery. As in previous
years, growth remains unequally distributed. Emerging
Recovery by Raising and developing countries are growing faster than
advanced economies, steadily closing the income gap.
Productivity The International Monetary Fund (IMF) estimates
that, in 2012, the euro zone will have contracted by
XAVIER SALA-I-MARTÍN 0.3 percent, while the United States is experiencing a
BEÑAT BILBAO-OSORIO weak recovery with an uncertain future. Large emerging
JENNIFER BLANKE economies such as Brazil, the Russian Federation, India,
ROBERTO CROTTI China, and South Africa are growing somewhat less
MARGARETA DRZENIEK HANOUZ than they did in 2011. At the same time, other emerging
THIERRY GEIGER markets—such as developing Asia—will continue to
CAROLINE KO show robust growth rates, while the Middle East and
World Economic Forum North Africa as well as sub-Saharan African countries
are gaining momentum.
Recent developments—such as the danger of a
property bubble in China, a decline in world trade, and
volatile capital flows in emerging markets—could derail
the recovery and have a lasting impact on the global
economy. Arguably, this year’s deceleration to a large
extent reflects the inability of leaders to address the
many challenges that were already present last year.
Policymakers around the world remain concerned
about high unemployment and the social conditions in
their countries. The political brinkmanship in the United
States continues to affect the outlook for the world’s
largest economy, while the sovereign debt crises and
the danger of a banking system meltdown in peripheral
euro zone countries remain unresolved. The high levels
of public debt coupled with low growth, insufficient
competitiveness, and political gridlock in some European
countries stirred financial markets’ concerns about
sovereign default and the very viability of the euro.
Given the complexity and the urgency of the situation,
European countries are facing particularly difficult
economic management decisions with challenging
political and social ramifications. Although European
leaders do not agree on how to address the immediate
challenges, there is recognition that, in the longer term,
stabilizing the euro and putting Europe on a higher
and more sustainable growth path will necessitate
improvements to the competitiveness of the weaker
member states.
All these developments are highly interrelated
and demand timely, decisive, and coordinated action
by policymakers. In light of these uncertain global
ramifications, sustained structural reforms aimed
at enhancing competitiveness will be necessary for
The Global Competitiveness Report 2012–2013 | 3
© 2012 World Economic Forum

20. 1.1: The Global Competitiveness Index 2012–2013
countries to stabilize economic growth and ensure the This open-endedness is captured within the GCI
rising prosperity of their populations going into the future. by including a weighted average of many different
Competitive economies drive productivity components, each measuring a different aspect of
enhancements that support high incomes by ensuring competitiveness. These components are grouped into 12
that the mechanisms enabling solid economic pillars of competitiveness (see Figure 1):
performance are in place.
For more than three decades, the World Economic First pillar: Institutions
Forum’s annual Global Competitiveness Reports The institutional environment is determined by the legal
have studied and benchmarked the many factors and administrative framework within which individuals,
underpinning national competitiveness. From the onset, firms, and governments interact to generate wealth. The
the goal has been to provide insight and stimulate the importance of a sound and fair institutional environment
discussion among all stakeholders on the best strategies became even more apparent during the recent economic
and policies to help countries to overcome the obstacles and financial crisis and is especially crucial for further
to improving competitiveness. In the current challenging solidifying the fragile recovery given the increasing role
economic environment, our work is a critical reminder of played by the state at the international level and for the
the importance of structural economic fundamentals for economies of many countries.
sustained growth. The quality of institutions has a strong bearing on
Since 2005, the World Economic Forum has competitiveness and growth.4 It influences investment
based its competitiveness analysis on the Global decisions and the organization of production and plays
Competitiveness Index (GCI), a comprehensive tool that a key role in the ways in which societies distribute the
measures the microeconomic and macroeconomic benefits and bear the costs of development strategies
foundations of national competitiveness.1 and policies. For example, owners of land, corporate
We define competitiveness as the set of institutions, shares, or intellectual property are unwilling to invest in
policies, and factors that determine the level of the improvement and upkeep of their property if their
productivity of a country. The level of productivity, in rights as owners are not protected.5
turn, sets the level of prosperity that can be earned by The role of institutions goes beyond the legal
an economy. The productivity level also determines the framework. Government attitudes toward markets
rates of return obtained by investments in an economy, and freedoms and the efficiency of its operations
which in turn are the fundamental drivers of its growth are also very important: excessive bureaucracy and
rates. In other words, a more competitive economy is red tape,6 overregulation, corruption, dishonesty in
one that is likely to sustain growth. dealing with public contracts, lack of transparency and
The concept of competitiveness thus involves static trustworthiness, inability to provide appropriate services
and dynamic components. Although the productivity of for the business sector, and political dependence of
a country determines its ability to sustain a high level of the judicial system impose significant economic costs
income, it is also one of the central determinants of its to businesses and slow the process of economic
returns to investment, which is one of the key factors development.
explaining an economy’s growth potential. In addition, the proper management of public
finances is also critical to ensuring trust in the national
THE 12 PILLARS OF COMPETITIVENESS business environment. Indicators capturing the quality
Many determinants drive productivity and of government management of public finances are
competitiveness. Understanding the factors behind therefore included here to complement the measures of
this process has occupied the minds of economists macroeconomic stability captured in pillar 3 below.
for hundreds of years, engendering theories ranging Although the economic literature has focused mainly
from Adam Smith’s focus on specialization and the on public institutions, private institutions are also an
division of labor to neoclassical economists’ emphasis important element in the process of creating wealth.
on investment in physical capital and infrastructure,2 The recent global financial crisis, along with numerous
and, more recently, to interest in other mechanisms corporate scandals, have highlighted the relevance of
such as education and training, technological progress, accounting and reporting standards and transparency
macroeconomic stability, good governance, firm for preventing fraud and mismanagement, ensuring good
sophistication, and market efficiency, among others. governance, and maintaining investor and consumer
While all of these factors are likely to be important for confidence. An economy is well served by businesses
competitiveness and growth, they are not mutually that are run honestly, where managers abide by strong
exclusive—two or more of them can be significant at the ethical practices in their dealings with the government,
same time, and in fact that is what has been shown in other firms, and the public at large.7 Private-sector
the economic literature.3 transparency is indispensable to business, and can be
brought about through the use of standards as well as
4 | The Global Competitiveness Report 2012–2013
© 2012 World Economic Forum

21. 1.1: The Global Competitiveness Index 2012–2013
auditing and accounting practices that ensure access to It is important to note that this pillar evaluates
information in a timely manner.8 the stability of the macroeconomic environment, so it
does not directly take into account the way in which
Second pillar: Infrastructure public accounts are managed by the government. This
Extensive and efficient infrastructure is critical for qualitative dimension is captured in the institutions pillar
ensuring the effective functioning of the economy, as described above.
it is an important factor in determining the location of
economic activity and the kinds of activities or sectors Fourth pillar: Health and primary education
that can develop in a particular instance. Well-developed A healthy workforce is vital to a country’s
infrastructure reduces the effect of distance between competitiveness and productivity. Workers who are
regions, integrating the national market and connecting it ill cannot function to their potential and will be less
at low cost to markets in other countries and regions. In productive. Poor health leads to significant costs to
addition, the quality and extensiveness of infrastructure business, as sick workers are often absent or operate at
networks significantly impact economic growth and lower levels of efficiency. Investment in the provision of
reduce income inequalities and poverty in a variety of health services is thus critical for clear economic, as well
ways.9 A well-developed transport and communications as moral, considerations.11
infrastructure network is a prerequisite for the access of In addition to health, this pillar takes into account the
less-developed communities to core economic activities quantity and quality of the basic education received by
and services. the population. Basic education increases the efficiency
Effective modes of transport—including quality of each individual worker. Moreover, workers who have
roads, railroads, ports, and air transport—enable received little formal education can carry out only simple
entrepreneurs to get their goods and services to manual tasks and find it much more difficult to adapt to
market in a secure and timely manner and facilitate more advanced production processes and techniques,
the movement of workers to the most suitable jobs. and therefore contribute less to come up with or execute
Economies also depend on electricity supplies that are innovations. In other words, lack of basic education
free of interruptions and shortages so that businesses can become a constraint on business development,
and factories can work unimpeded. Finally, a solid with firms finding it difficult to move up the value chain
and extensive telecommunications network allows for by producing more sophisticated or value-intensive
a rapid and free flow of information, which increases products with existing human resources.
overall economic efficiency by helping to ensure that For the longer term, it will be essential to avoid
businesses can communicate and decisions are made significant reductions in resource allocation to these
by economic actors taking into account all available critical areas, in spite of the fact that government
relevant information. budgets will need to be cut to reduce the deficits and
debt burden.
Third pillar: Macroeconomic environment
The stability of the macroeconomic environment is Fifth pillar: Higher education and training
important for business and, therefore, is important for Quality higher education and training is particularly
the overall competitiveness of a country.10 Although crucial for economies that want to move up the value
it is certainly true that macroeconomic stability alone chain beyond simple production processes and
cannot increase the productivity of a nation, it is also products.12 In particular, today’s globalizing economy
recognized that macroeconomic instability harms the requires countries to nurture pools of well-educated
economy, as we have seen over the past years, notably workers who are able to perform complex tasks and
in the European context. The government cannot adapt rapidly to their changing environment and the
provide services efficiently if it has to make high-interest evolving needs of the economy. This pillar measures
payments on its past debts. Running fiscal deficits limits secondary and tertiary enrollment rates as well as
the government’s future ability to react to business the quality of education as evaluated by the business
cycles and to invest in competitiveness-enhancing community. The extent of staff training is also taken into
measures. Firms cannot operate efficiently when inflation consideration because of the importance of vocational
rates are out of hand. In sum, the economy cannot grow and continuous on-the-job training—which is neglected
in a sustainable manner unless the macro environment in many economies—for ensuring a constant upgrading
is stable. Macroeconomic stability has captured the of workers’ skills.
attention of the public most recently when some
European countries needed the support of the IMF and Sixth pillar: Goods market efficiency
other euro zone economies to prevent sovereign default, Countries with efficient goods markets are well
as their public debt reached unsustainable levels. positioned to produce the right mix of products and
services given their particular supply-and-demand
The Global Competitiveness Report 2012–2013 | 5
© 2012 World Economic Forum

22. 1.1: The Global Competitiveness Index 2012–2013
conditions, as well as to ensure that these goods can Eighth pillar: Financial market development
be most effectively traded in the economy. Healthy The recent economic crisis has highlighted the central
market competition, both domestic and foreign, is role of a sound and well-functioning financial sector
important in driving market efficiency and thus business for economic activities. An efficient financial sector
productivity by ensuring that the most efficient firms, allocates the resources saved by a nation’s citizens, as
producing goods demanded by the market, are those well as those entering the economy from abroad, to their
that thrive. The best possible environment for the most productive uses. It channels resources to those
exchange of goods requires a minimum of impediments entrepreneurial or investment projects with the highest
to business activity through government intervention. For expected rates of return rather than to the politically
example, competitiveness is hindered by distortionary or connected. A thorough and proper assessment of risk is
burdensome taxes and by restrictive and discriminatory therefore a key ingredient of a sound financial market.
rules on foreign direct investment (FDI)—limiting foreign Business investment is also critical to productivity.
ownership—as well as on international trade. The Therefore economies require sophisticated financial
recent economic crisis has highlighted the degree of markets that can make capital available for private-sector
interdependence of economies worldwide and the investment from such sources as loans from a sound
degree to which growth depends on open markets. banking sector, well-regulated securities exchanges,
Protectionist measures are counterproductive as they venture capital, and other financial products. In order to
reduce aggregate economic activity. fulfill all those functions, the banking sector needs to be
Market efficiency also depends on demand trustworthy and transparent, and—as has been made
conditions such as customer orientation and buyer so clear recently—financial markets need appropriate
sophistication. For cultural or historical reasons, regulation to protect investors and other actors in the
customers may be more demanding in some countries economy at large.
than in others. This can create an important competitive
advantage, as it forces companies to be more innovative Ninth pillar: Technological readiness
and customer-oriented and thus imposes the discipline In today’s globalized world, technology is increasingly
necessary for efficiency to be achieved in the market. essential for firms to compete and prosper. The
technological readiness pillar measures the agility with
Seventh pillar: Labor market efficiency which an economy adopts existing technologies to
The efficiency and flexibility of the labor market are enhance the productivity of its industries, with specific
critical for ensuring that workers are allocated to their emphasis on its capacity to fully leverage information
most effective use in the economy and provided with and communication technologies (ICT) in daily activities
incentives to give their best effort in their jobs. Labor and production processes for increased efficiency
markets must therefore have the flexibility to shift and enabling innovation for competitiveness.14 ICT has
workers from one economic activity to another rapidly evolved into the “general purpose technology” of our
and at low cost, and to allow for wage fluctuations time,15 given the critical spillovers to the other economic
without much social disruption.13 The importance of sectors and their role as industry-wide enabling
well-functioning labor markets has been dramatically infrastructure. Therefore ICT access and usage are key
highlighted by last year’s events in Arab countries, where enablers of countries’ overall technological readiness.
rigid labor markets were an important cause of high Whether the technology used has or has not
youth unemployment, sparking social unrest in Tunisia been developed within national borders is irrelevant
that then spread across the region. Youth unemployment for its ability to enhance productivity. The central
is also high in a number of European countries, where point is that the firms operating in the country need
important barriers to entry into the labor market remain to have access to advanced products and blueprints
in place. and the ability to absorb and use them. Among the
Efficient labor markets must also ensure a clear main sources of foreign technology, FDI often plays
relationship between worker incentives and their a key role, especially for countries at a lower stage of
efforts to promote meritocracy at the workplace, and technological development. It is important to note that, in
they must provide equity in the business environment this context, the level of technology available to firms in
between women and men. Taken together these factors a country needs to be distinguished from the country’s
have a positive effect on worker performance and the ability to conduct blue-sky research and develop new
attractiveness of the country for talent, two aspects that technologies for innovation that expand the frontiers
are growing more important as talent shortages loom on of knowledge. That is why we separate technological
the horizon. readiness from innovation, captured in the 12th pillar,
described below.
6 | The Global Competitiveness Report 2012–2013
© 2012 World Economic Forum

23. 1.1: The Global Competitiveness Index 2012–2013
Tenth pillar: Market size Twelfth pillar: Innovation
The size of the market affects productivity since large Innovation can emerge from new technological and non-
markets allow firms to exploit economies of scale. technological knowledge. Non-technological innovations
Traditionally, the markets available to firms have are closely related to the know-how, skills, and working
been constrained by national borders. In the era of conditions that are embedded in organizations and
globalization, international markets can to a certain are therefore largely covered by the eleventh pillar of
extent substitute for domestic markets, especially for the GCI. The final pillar of competitiveness focuses on
small countries. Vast empirical evidence shows that technological innovation. Although substantial gains
trade openness is positively associated with growth. can be obtained by improving institutions, building
Even if some recent research casts doubts on the infrastructure, reducing macroeconomic instability, or
robustness of this relationship, there is a general sense improving human capital, all these factors eventually
that trade has a positive effect on growth, especially seem to run into diminishing returns. The same is true for
for countries with small domestic markets.16 The case the efficiency of the labor, financial, and goods markets.
of the European Union illustrates the importance of the In the long run, standards of living can be largely
market size for competitiveness, as important efficiency enhanced by technological innovation. Technological
gains were realized through closer integration. Although breakthroughs have been at the basis of many of the
the reduction of trade barriers and the harmonization of productivity gains that our economies have historically
standards within the European Union have contributed experienced. These range from the industrial revolution
to raising exports within the region, many barriers to a in the 18th century and the invention of the steam engine
true single market, in particular in services, remain in and the generation of electricity to the more recent digital
place and lead to important border effects. Therefore revolution. The latter is transforming not only the way
we continue to use the size of the national domestic and things are being done, but also opening a wider range
foreign market in the Index. of new possibilities in terms of products and services.
Thus exports can be thought of as a substitute for Innovation is particularly important for economies as they
domestic demand in determining the size of the market approach the frontiers of knowledge and the possibility
for the firms of a country.17 By including both domestic of generating more value by only integrating and
and foreign markets in our measure of market size, we adapting exogenous technologies tends to disappear.18
give credit to export-driven economies and geographic Although less-advanced countries can still improve
areas (such as the European Union) that are divided into their productivity by adopting existing technologies
many countries but have a single common market. or making incremental improvements in other areas,
for those that have reached the innovation stage of
Eleventh pillar: Business sophistication development this is no longer sufficient for increasing
There is no doubt that sophisticated business practices productivity. Firms in these countries must design
are conducive to higher efficiency in the production of and develop cutting-edge products and processes to
goods and services. Business sophistication concerns maintain a competitive edge and move toward higher-
two elements that are intricately linked: the quality of a value-added activities. This progression requires an
country’s overall business networks and the quality of environment that is conducive to innovative activity and
individual firms’ operations and strategies. These factors supported by both the public and the private sectors. In
are particularly important for countries at an advanced particular, it means sufficient investment in research and
stage of development when, to a large extent, the development (R&D), especially by the private sector; the
more basic sources of productivity improvements have presence of high-quality scientific research institutions
been exhausted. The quality of a country’s business that can generate the basic knowledge needed to build
networks and supporting industries, as measured by the new technologies; extensive collaboration in research
the quantity and quality of local suppliers and the extent and technological developments between universities
of their interaction, is important for a variety of reasons. and industry; and the protection of intellectual property,
When companies and suppliers from a particular in addition to high levels of competition and access
sector are interconnected in geographically proximate to venture capital and financing that are analyzed in
groups, called clusters, efficiency is heightened, greater other pillars of the Index. In light of the recent sluggish
opportunities for innovation in processes and products recovery and rising fiscal pressures faced by advanced
are created, and barriers to entry for new firms are economies, it is important that public and private sectors
reduced. Individual firms’ advanced operations and resist pressures to cut back on the R&D spending that
strategies (branding, marketing, distribution, advanced will be so critical for sustainable growth going into the
production processes, and the production of unique and future.
sophisticated products) spill over into the economy and
lead to sophisticated and modern business processes
across the country’s business sectors.
The Global Competitiveness Report 2012–2013 | 7
© 2012 World Economic Forum

24. 1.1: The Global Competitiveness Index 2012–2013
Figure 1: The Global Competitiveness Index framework
GLOBAL COMPETITIVENESS INDEX
Basic requirements Efficiency enhancers Innovation and sophistication
subindex subindex factors subindex
Pillar 1. Institutions Pillar 5. Higher education and Pillar 11. Business sophistication
training
Pillar 2. Infrastructure Pillar 12. Innovation
Pillar 6. Goods market efficiency
Pillar 3. Macroeconomic environment
Pillar 7. Labor market efficiency
Pillar 4. Health and primary education
Pillar 8. Financial market
development
Pillar 9. Technological readiness
Pillar 10. Market size
Key for Key for Key for
factor-driven efficiency-driven innovation-driven
economies economies economies
Note: See the appendix for the detailed structure of the GCI.
The interrelation of the 12 pillars best way for France to do so. This is because Cambodia
While we report the results of the 12 pillars of and France are in different stages of development: as
competitiveness separately, it is important to keep countries move along the development path, wages tend
in mind that they are not independent: they tend to to increase and, in order to sustain this higher income,
reinforce each other, and a weakness in one area often labor productivity must improve.
has a negative impact in others. For example, a strong In line with the economic theory of stages of
innovation capacity (pillar 12) will be very difficult to development, the GCI assumes that economies in the
achieve without a healthy, well-educated and trained first stage are mainly factor-driven and compete based
workforce (pillars 4 and 5) that is adept at absorbing new on their factor endowments—primarily low-skilled labor
technologies (pillar 9), and without sufficient financing and natural resources.19 Companies compete on the
(pillar 8) for R&D or an efficient goods market that makes basis of price and sell basic products or commodities,
it possible to take new innovations to market (pillar 6). with their low productivity reflected in low wages.
Although the pillars are aggregated into a single index, Maintaining competitiveness at this stage of development
measures are reported for the 12 pillars separately hinges primarily on well-functioning public and private
because such details provide a sense of the specific institutions (pillar 1), a well-developed infrastructure
areas in which a particular country needs to improve. (pillar 2), a stable macroeconomic environment (pillar 3),
The appendix describes the exact composition of and a healthy workforce that has received at least a
the GCI and technical details of its construction. basic education (pillar 4).
As a country becomes more competitive,
STAGES OF DEVELOPMENT AND THE WEIGHTED productivity will increase and wages will rise with
INDEX advancing development. Countries will then move
While all of the pillars described above will matter to a into the efficiency-driven stage of development, when
certain extent for all economies, it is clear that they will they must begin to develop more efficient production
affect them in different ways: the best way for Cambodia processes and increase product quality because
to improve its competitiveness is not the same as the wages have risen and they cannot increase prices. At
8 | The Global Competitiveness Report 2012–2013
© 2012 World Economic Forum