The 12 Pillars of Competitiveness

The Global Competitiveness Index (GCI) determines its rankings by (1) their Executive Opinion Survey and (2) various economic data sources. The goal of the executive survey is to capture valuable information on a broad range of factors that are critical for a country’s competitiveness and development, which data sources scarce or non-existent[i]. Combined with the prior years results, a formula assesses the grades and, through a complex methodology, determines a score. Frankly, due to the amount of exceptions, balancing/weight schemes and the sheer complexity of the formula, I expect only those who work at the WEF understand the process. You can see what I mean by looking at “Box 2” on page 90 and 91 of the report.  

Although the accuracy of the Executive Opinion Survey is easy to question and criticize, I think the specific categories – what the WEF calls “the 12 pillars of global competitiveness” – are particularly useful for business managers. These pillars measure everything from mobile phone and internet subscriptions to the prevalence of HIV. See the 12 Pillars below.

The pillars contain the following measurable/hard data:

Pillar 1: Institutions – strength of investor protection[ii]

Pillar 2: Infrastructure – hard data includes the number of mobile phone subscriptions and fixed telephone lines

Pillar 3: Macroeconomic environment – hard data includes government budget, gross national savings, inflation, government debt, country credit ratings

Pillar 4: Health and primary education – hard data includes malaria and tuberculosis incidences, HIV prevalence, infant mortality, primary education enrollment rate

Pillar 5: Higher education and training – secondary education enrollment

Pillar 6: Goods market efficiency – total tax rate, number of procedures and the time required to start a business, trade tariffs, and imports as a percentage of GDP

Pillar 7: Labor market efficiency – redundancy costs, female participation

Pillar 8: Financial market development – legal rights index

Pillar 9: Technological readiness – internet users, fixed broadband and internet subscriptions, internet bandwidth, and mobile broadband subscriptions

Pillar 10: Market size – domestic market size, foreign market size, GDP, exports as a percent of GDP

Pillar 12: Business sophistication – Patent Cooperation Treaty patent applications

This measurable data (or hard data) may possibly one of the most useful features of the GCI for firms and their international strategy. Consider, for instance, that a growing technology firm is participating in FDI for the first time. While all the pillars tie into business somehow or another, pillars 9 and 12 may prove to be a significant aide in their decision, Pillar 2 for a construction/engineering firm or automobile manufacturer, Pillar 10 for a textile firm, and perhaps Pillar 6 if the firm is seeking a locations specific benefit (i.e. the current ‘inversion’ deal debate[iii]).