North Africa
Tunisia places 83rd in this year's Report. The country's positioning reflects the important challenges Tunisia will have to tackle in order to put its economy onto a sustainable growth path and resolve its daunting unemployment problem.
The country's macroeconomic fundamentals need to be brought back on track by narrowing the budget deficit and further reducing inflation. Ensuring that the labor market contributes to more efficiently using talent is crucial to raising competitiveness.
The country currently ranks very low at 132nd overall on the labor market efficiency pillar.
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At the same time, financial markets do not efficiently fulfill their role in providing the business sector with financial means to grow. Moreover, the banking system needs to be stabilized further to build trust and confidence, which at present is ranked a low 129th.
Egypt drops by 11 positions to reach 118th place in this year's GCI.
This assessment is likely influenced by the country's continued transition since the events of the Arab Spring. The deteriorating security situation and tenacious political instability are undermining the country's competitiveness and its growth potential going forward.
Although resolving political friction needs to remain the priority as this Report goes to print, many of the underlying factors that will be decisive about the sustainability of the country and the cohesion of the society over the medium to longer term are economic in nature.
Establishing confidence through a credible and far-reaching reform program will be vital to the country's future and to realizing the considerable potential of the country's large market size and proximity to key global markets.
According to the GCI, three areas are of particular importance.
First, the macroeconomic environment has deteriorated over recent years to reach 140th position mainly because of widening fiscal deficit, rising public indebtedness, and persisting inflationary pressures. A credible fiscal consolidation plan, accompanied by structural reforms, will be necessary in order to maintain macroeconomic stability in the country.
This may prove difficult in times of rising energy prices, as energy subsidies account for a considerable share of public expenditure. However, better targeting of subsidies could allow for fiscal consolidation while protecting the most vulnerable.
Second, measures to intensify domestic competition would result in efficiency gains and contribute to energizing the economy by providing access to new entrants.
This, in turn, would make the country's private sector more dynamic, thereby contributing to job creation. And third, making labor markets flexible (141st) and more efficient (145th) would allow the country to increase employment in the medium term.
Sub-Saharan Africa
Sub-Saharan Africa continues its impressive growth rate of close to 5 percent in 2012 (with similar projections for the next two years), providing something of a silver lining in an otherwise uncertain global economy.
Indeed, only emerging Asia registers higher growth. Growth has largely taken place on the backs of strong investment, favorable commodity prices, and a prudent macroeconomic stance.
There are, however, some regional variations, and in fact, in terms of underlying competitiveness, sub- Saharan Africa continues to reflect one of significant regional variations in the GCI, ranging from Mauritius (overtaking South Africa and coming in at 45th this year) to the lowest ranked Chad at 148th.
Economies with closer ties to advanced economies, such as South Africa, have not yet returned to pre-crisis growth rates. More generally, sub-Saharan Africa as a whole trails the rest of the world in competitiveness, requiring efforts across many areas to place the region on a firmly sustainable growth and development path going forward: the region continues to register a profound infrastructure deficit.
In addition, sub-Saharan Africa overall continues to underperform significantly in providing health and basic education (only Mauritius and Seychelles rank in the upper half of the rankings). Higher education and training also need to be further developed.
The region's poor performance across all basic requirements for competitiveness stands in stark contrast to its comparatively stronger performance in market efficiency, where particularly the region's middle-income economies fare relatively well (South Africa, Mauritius, and Kenya rank in the top 20 percent in financial market development).
Moving forward, technological uptake continues to remain weak, with only three economies (South Africa, Mauritius, and Seychelles) featuring in the top half of the overall GCI rankings on this pillar.
Mauritius moves up by nine places this year to 45th place, becoming the highest ranked country in the region. The country benefits from relatively strong and transparent public institutions (39th), with clear property rights, strong judicial independence, and an efficient government (29th).
Private institutions are rated as highly accountable (14th), with effective auditing and accounting standards and strong investor protection. The country's infrastructure is well developed by regional standards (50th), particularly its ports, air transport, and roads.
Furthermore, notable improvements have taken place in the areas of market efficiency. Financial markets have deepened, lifting Mauritius' rank up to 26th on the back of improved access to different modes of financing and financial services.
This is further reflected in company spending on R&D - which seems to be increasing, albeit from low levels - thus somewhat enhancing Mauritius' innovative capacity.
Furthermore, the country boasts an efficient goods market (25th) driven by greater foreign prevalence and more competition.
The labor market is relatively flexible (55th), although the country does not deploy its talent efficiently: Mauritius ranks 92nd in its capacity to retain talent, and the share of women in the labor force remains low at 118th. This is further reflected in the low availability of scientists and engineers (102nd).
South Africa is ranked 53rd this year, overtaking Brazil to place second among the BRICS. South Africa does well on measures of the quality of its institutions (41st), including intellectual property protection (18th), property rights (20th), and in the efficiency of the legal framework in challenging and settling disputes (13th and 12th, respectively). The high accountability of its private institutions (2nd) further supports the institutional framework. Furthermore, South Africa's financial market development remains impressive at 3rd place.
The country also has an efficient market for goods and services (28th), and it does reasonably well in more complex areas such as business sophistication (35th) and innovation (39th).
But the country's strong ties to advanced economies, notably the euro area, make it more vulnerable to their economic slowdown and likely have contributed to the deterioration of fiscal indicators: its performance in the macroeconomic environment has dropped sharply (from 69th to 95th).
Low scores for the diversion of public funds (99th), the perceived wastefulness of government spending (79th), and a more general lack of public trust in politicians (98th) remain worrisome, and security continues to be a major area of concern for doing business (at 109th).
Building a skilled labor force and creating sufficient employment also present considerable challenges. The health of the workforce is anked 133rd out of 148 economies - the result of high rates of communicable diseases and poor health indicators more generally. The quality of the educational system is very poor (146th), with low primary and tertiary enrollment rates.
Labor market efficiency is poor (116th), hiring and firing practices are extremely rigid (147th), companies cannot set wages flexibly (144th), and significant tensions in labor-employer relations exist (148th).
Raising educational standards and making the labor market more efficient will thus be critical in view of the country's high unemployment rate of over 20 percent, with the rate of youth unemployment stimated at close to 50 percent.
Rwanda is ranked 66th this year, retaining its third place in the sub-Saharan African region. As do the other comparatively successful African countries, Rwanda benefits from strong and relatively well-functioning institutions, with very low levels of corruption (an outcome that is certainly related to the government's no-tolerance policy, and a good security environment.
Its labor markets are efficient, its financial markets are relatively well developed, and Rwanda is characterized by a capacity for innovation that is quite good for a country at its stage of development.
The greatest challenges facing Rwanda in improving its competitiveness are the state of the country's infrastructure, its low secondary and university enrollment rates, and the poor health of its workforce.
Botswana moves up five places to 74th, taking fourth spot in the region.
Improvements are driven in large part by a sounder macroeconomic environment. Among the country's strengths are its relatively reliable and transparent institutions (34th), with efficient government spending, strong public trust in politicians, and low levels of corruption.
Botswana's primary weaknesses continue to be related to its human resources base. Educational enrollment rates at all levels remain low by international standards, and the quality of the educational system receives mediocre marks.
Yet it is clear that by far the biggest obstacle facing Botswana in its efforts to improve its competitiveness remains its health situation. The rates of disease in the country remain very high, and health outcomes are poor despite improvements in recent years.
For a middle-income country in transition to an efficiency-driven economy, the goods market must become more efficient (92nd). Going forward, combined efforts across all areas will be needed if the country was to reduce its heavy dependence on the mining sector and to set its economy on a more diversified growth path.
Seychelles ranks 80th overall, rounding out the top five countries in the region. The country registers a solid performance in the basic requirements for competitiveness: It benefits from strong and well- functioning institutions by regional standards (45th), with strong public trust in politicians (32nd) and a government that is seen as efficient (37th).
Infrastructure is also relatively well developed (43rd) and the Seychelles do well in regional comparison when it comes to health and primary education (55th). As the country is now approaching the innovation-driven stage of development, it needs to lay the fundamentals for higher-value added growth.
This will require improvements in higher education and training (79h) particularly in view of its very low tertiary enrollment rates (2.6 percent), its weak math and science education and limited availability of research and training services (93rd).
Namibia reverses its downward trend of recent years slightly, improving by two places to reach 90th place. The country continues to benefit from a relatively well-functioning institutional environment (48th), with well-protected property rights, an independent judiciary, and reasonably strong public trust in politicians.
The country's transport infrastructure is also good by regional standards (47th). Financial markets are reasonably developed (39th) and buttressed by solid confidence in financial institutions (21st), although their overall assessment has weakened for three years in a row. In order to improve its competitiveness, as in much of the region, Namibia must improve its health and educational systems.
The country is ranked a low 123rd on the health subpillar (down five places), with high infant mortality and low life expectancy--the result, in large part, of the high rates of communicable diseases.
On the educational side, enrollment rates remain low and the quality of the educational system remains poor (124th). In addition, Namibia could do more to harness new technologies to improve its productivity levels (90th).
Kenya moves up by an impressive 10 places and is ranked 96th this year on the back of greater confidence in institutions (88th). The country's strengths continue to be found in the more complex areas measured by the GCI. Kenya's innovative capacity is ranked an impressive 46th, with high company spending on R&D and good scientific research institutions that collaborate well with the business sector in research activities.
Supporting this innovative potential is an educational system that - although educating a relatively small proportion of the population compared with most other countries - gets relatively good marks for quality (44th) as well as for on-the-job training (49th).
The economy is also supported by financial markets that are well developed by international standards (31st) and a relatively efficient labor market (35th).
On the other hand, Kenya's overall competitiveness is held back by a number of factors. Health remains an area of serious concern (121st), with a high prevalence of communicable diseases contributing to the low life expectancy of fewer than 58 years and reducing the productivity of the workforce. The security situation in Kenya also remains worrisome (131st).
Senegalcomes in at 113th place this year. Although the country's institutions rank still relatively low at 82nd, our data suggest an improvement across a range of indicators since the 2012 elections, albeit from low levels.
Senegal also benefits from relatively efficient goods and labor markets (59th and 65th, respectively), red tape to start a business is low even in international comparison, FDI faces relatively few barriers, and labor-employer relations are reasonably good (57th).
Moreover, Senegal hosts good ports (47th), although all other modes of transport require significant upgrades (95th overall). The country's competitiveness is further pulled down by the poor health and basic education of its population (131st).
Indeed, only three out of four children receive primary education, which is very low compared with its middle- income peers, and communicable diseases continue to erode at the health of the general population.
Ghana declines this year to 114th in large as a result of a deterioration in its macroeconomic indicators (reversing last year's trend). With regard to strengths, the country seems to be improving its public institutions, which are already somewhat strong by regional standards (up by five places to 70th), with relatively high government efficiency (57th).
In addition, some aspects of its infrastructure are good for the region, particularly the state of its ports, and its financial and goods markets are also relatively well developed (52nd and 70th, respectively). On the other hand, Ghana must do much more to develop and deploy talent in the country.
Education levels continue to trail international standards at all levels, labor markets are characterized by inefficiencies, and the country is not sufficiently harnessing new technologies for productivity enhancements (ICT adoption rates continue to be very low).
Nigeria is ranked 120th this year. The country continues to benefit from its relatively large market size (32nd), which has the potential for significant economies of scale and is an important factor for attracting investment. Nigeria also benefits from an efficient labor market, and the financial market has been recovering gradually from the 2009 crisis.
Yet efforts need to be taken to diversify its economy into the non-oil sector and increase long-term competitiveness. Institutions remain weak (129th) with insufficiently protected property rights, high corruption, and undue influence. The security situation in the country, already seriously worrisome, continues last year's downward trend to 142nd.
Additionally, Nigeria must continue to upgrade its infrastructure (135th) as well as improve health and primary education (146th). Furthermore, the country is not harnessing the latest technologies for productivity enhancements, as demonstrated by its low rates of ICT penetration.
Tanzania is ranked 125th this year. Its institutions have been deteriorating over the past years--although government regulation is not seen as overly burdensome(53rd), corruption has been worsening (106th) and policymaking has become less transparent. In addition, some aspects of the labor market - such as the country's strong female participation in the labor force (5th) and reasonable redundancy costs - lend themselves to efficiency.
On the other hand, infrastructure in Tanzania is underdeveloped (134th), with poor roads and ports and an unreliable electricity supply (131st). And although primary education enrollment is commendably high, providing universal access, enrollment rates at the secondary and university levels are among the lowest in the world (at 134th and 138th place, respectively), while the quality of the educational system needs upgrading.
A related area of concern is the country's low level of technological readiness (126th), with very low uptake of ICTs such as the Internet and mobile telephony. The basic health of its workforce is also a serious concern: the country is ranked 125th in this area, with poor health indicators and high levels of communicable diseases.
Côte d'Ivoire is ranked 126th this year. Like many of its sub-Saharan peers, the country's labor market is relatively efficient (68th), a ranking that is primarily driven by its high flexibility (36th).
Furthermore, the country does well in attracting FDI - prevalence of foreign ownership is perceived as very high by the business community. Going forward, however, critical challenges remain.
Institutions remain low (104th) despite a gradual improvement over recent years, and infrastructure is underdeveloped (107th). Moreover, the country does not meet primary needs in terms of health and basic education (142nd), ranking among the lowest 10 countries worldwide on the related pillar. Only 60 percent of all children are enrolled in primary education, and the burden of communicable diseases - particularly the high incidence of malaria and HIV - weighs heavily on the workforce.
Furthermore, technological adoption is very low across private users and the business sector, with only 2 percent of the population using the Internet.
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Ethiopia falls six places to 127th this year, facing challenges across all pillars. The country ranks above 100th only for its market size (67th) and the quality of its institutions (95th), although it should be noted that the assessment of institutions has been falling over recent years across almost all indicators, including property rights, ethics and corruption, undue influence, and government efficiency.
Furthermore, the country's goods (136th) and labor markets (108th) seem to be deteriorating, with more procedures and time required to start a business along with increasing concerns about the quality of labor-employer relations (121st), hiring and firing practices (99th), and the alignment between pay and productivity (125th).
Ethiopia also requires significant improvements in the areas of infrastructure (124th), higher education and training (137th), and technological readiness (139th). On a more positive note, security - ranked 55th - is better than in many of its sub-Saharan peers, primary education with a net enrollment rate of 87 percent is comparatively good (although the quality of primary education is very low), and women account for a high percentage of the country's labor force.
Liberia ranks 128th in this year's GCI. The country features a well-developed goods and labor market by regional standards (47th and 60th, respectively), with few procedures and low cost to start a business in the country, and a taxation regime that is not overly distortive to economic decision making. In order to enhance its competitiveness, Liberia must focus on improving its physical infrastructure (131st) and enhancing human resources by improving the health and education levels of its workforce (144th).
Zimbabwe remains relatively stable at 131st position. Public institutions continue to receive a weak assessment, particularly related to corruption, security, and government favoritism, although overall the assessment of this pillar has improved somewhat since a few years ago.
Yet major concerns remain with regard to the protection of property rights (137th), where Zimbabwe is among the lowest-ranked countries, reducing the incentive for businesses to invest.
And despite efforts to improve its macroeconomic environment - including the dollarization of its economy in early 2009, which brought down inflation and interest rates - Zimbabwe still receives a low rank in this pillar (114th), demonstrating the extent of efforts still needed to ensure its macroeconomic stability.
Weaknesses in other areas include health (132nd in the health subpillar), low education enrollment rates, and formal markets that continue to function with difficulty (particularly with regard to goods and labor markets, ranked 130th and 140th, respectively).
Mozambique ranks 137th this year, with efforts required across many areas to lift the economy onto a sustainable growth and development path, particularly in view of its natural resource potential. The country's public institutions receive a weak assessment on the basis of low public trust in politicians, significant red tape faced by companies in their business dealings, and the perceived wastefulness of government spending.
Macroeconomic stability is still weak (98th) although recent efforts seem to be bearing some fruit in containing price rises (inflation is down to 2 percent from double-digits last year).
Looking ahead, significant reform will be needed to advance the country's long-term competitiveness, including making critical investments across all modes of infrastructure (ranked 130th), establishing a regulatory framework that encourages competition to foster economic diversification, and developing a sound financial market (132nd).
Also critical, in view of the country's rapidly growing population and high unemployment, are investing in the healthcare system and primary education (138th) as well as higher education and training (143rd).
Angola re-enters the GCI this year at 142nd place. As with its oil-exporting peers, a positive fiscal balance and low public debt contribute to a comparatively stable macroeconomic environment (54th), but much remains to be done across the board to build out the country's competitiveness.
Given its favorable fiscal stance, the country has a unique opportunity to invest revenues in competiveness-enhancing measures.
In this context, its poor performance across all governance indicators is worrisome: Both public and private institutions are characterized by widespread corruption, and inefficient government spending casts doubt on the country's ability to spend resource receipts in the most important areas.
Furthermore, the country's infrastructure is one of the least developed globally (145th), and its population would be well served by improvements in the educational and health systems (137th).
