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Matthew Vella
Malta has dropped a staggering 13 places in the World Economic Forum’s Growth Competitiveness Index (GCI) for 2004, falling from 19th place in 2003 to 32nd this year. Malta also registered a drop in the Business Competitiveness Index (BCI), straddling at position 50 out of a total of 103 countries, our sister paper, The Malta Financial and Business Times, reports this week.
Malta registered one of the highest drops in its index out of the “advanced” countries, but retains the second highest position amongst the EU’s new Member States. Malta’s GCI score was 4.79, with Finland’s, which ranked first, being 5.95. Malta ranked 21st in the technological index, with a score of 4.85, 30th in the public institutions index, with 5.39, and 47th in the macroeconomic environment index, with a score of 4.11.
The GCI is composed of three “pillars” defined as being critical to economic growth by the World Economic Forum: the quality of the macroeconomic environment, the state of a country’s public institutions, and the country’s technological readiness. The index is compiled using a combination of publicly available hard data and information from the WEF’s Executive Opinion Survey.
Economist and APS Bank Chairman Lino Delia, however, is cautious about such an index: “They have invented an index by throwing in so many indicators into a pot and mixed them altogether. You cannot define competitiveness,” Delia said, whose statements run counter to current trends amongst Maltese economists.
“We have to evaluate each different sector of the Maltese economy. There are some aspects of our economy in which we compete which cannot be calculated by any index. If you take tourism for example, and we have to compete with that product, you cannot exactly calculate the visual impact created by an unclean environment around our heritage sites. No index calculates this.
“But apart from that, what we have to achieve is productivity in labour and capital. We cannot have hotels dormant for months throughout the year. We have to get better returns from our capital. We have to see how we can adopt a strategy to improve our tourism product if we are going to compete. This happens independently of what is happening in other countries,” Delia said.
For the third time during the last four years, Finland topped the GCI rankings. The WEF report describes the Nordic country as “extremely well managed at the macroeconomic level”, scoring very high in those measures which assess the quality of its public institutions. Finland also has very low levels of corruption and its firms operate in a legal environment in which there is widespread respect for contracts and the rule of law. Its private sector shows a “proclivity for adopting new technologies, and nurtures a culture of innovation.” For several years, Finland has also been running budget surpluses, in anticipation of future claims on the budget associated with the ageing of its population.
The United States has ranked second, with overall technological supremacy, and high scores on indicators for research and developing expenditure, scientific creativity, and personal computer and internet penetration rates.
The countries showing the largest drops in ranking in 2004, such as Bolivia, Pakistan, Peru, the Philippines, Poland and Vietnam, were described as having witnessed deterioration in one or more areas tracked by the index. Namely, these have included highly visible instances of official corruption, a crackdown on press freedom and civil liberties which saw more capital outflow from the countries, political instability linked to domestic infighting, and a weakening of the rule of law.
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