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Egypt Occupies 94th Position in the WEF 2011-12 Global Competitiveness Index

Speaker(s): Iman Al-Ayouty (ECES)

Sep 2011

Cairo, Egypt [September 25, 2011] - Egypt occupies 94th position (out of 142 countries) in the 2011-12 Global Competitiveness Index (GCI) ranking—13 places lower than the 2010-11 position (out of 139 countries). As a tool used by the World Economic Forum (WEF), the index evaluates how countries fare on competitiveness. Evaluation is based on their performance on three main pillars (‘basic requirements’, ‘efficiency enhancers’ and ‘innovation and sophistication factors’). These pillars are weighted depending on the stage of development that countries fall into (based on GDP/capita and other indicators) so as to calculate their individual GCIs. Egypt’s classification as transitory from a factor- to efficiency-driven economy places the bulk of weight on basic requirements and efficiency enhancers. ECES is a partner institute of the World Economic Forum in the preparation of the Global Competitiveness Report.

Under basic requirements, Egypt’s weakening institutional environment, quality of overall infrastructure and of primary education have greatly contributed to the deterioration in this year’s rank. The institutional environment has been characterised by favouritism and lack of transparency in government officials’ decisions, high business costs of crime and violence, and inadequate corporate governance. The quality of overall infrastructure mainly relates to roads, ports and electricity supply, while primary education calls attention to school quality and curricula. Moreover, issues related to the deteriorating macroeconomic environment continue to loom in the background—high unemployment, high inflation, skewed pattern of income distribution, widening fiscal deficit, albeit with a reduced public debt relative to GDP.Among the efficiency enhancers, Egypt does not fare well either on labour market efficiency, goods market efficiency, or higher education and training. The status of the labour market raises concerns over the rigidity of wage determination and of labour regulations, inefficient use of available talent, and an ineffective system of collective bargaining coupled with the relative absence of trade unions as legitimate venues for voicing employees’ concerns. Efficiency in the goods market remains handicapped by limited local competition across most industries and feeble anti-monopoly practices. Higher education remains in need of revisiting math and science curricula, the quality of management or business schools, and the extent of high quality specialised staff training at the business level.

On a positive note, Egypt’s large market size and great potential for exploiting economies of scale may help reinforce its ‘efficiency enhancers’. Egypt’s innovation and sophistication factors call for addressing the of quality local suppliers, the extent of international marketing and distribution practiced by domestic firms, and the breadth of their presence across the value chain—all being prerequisites of a more effective engagement under globalization. Enhancing Egypt’s competitiveness also requires addressing the quality of scientific research institutions and their twinning with business needs, as well as the intensity of research and development and their implications for product and process innovation.

For perspective, Egypt’s rank has been on a downward trend for three years in a row (rank out of total number of countries): 70/131 (2009/10); 81/139 (2010/11); 94/142 (2011/12). Such a trend points to the need to continue to endorse private-led growth and to support small and medium enterprises in order to mobilise additional demand for labour and help improve social justice. It is equally important to gear educational outcomes more strongly towards business community needs, thereby addressing a pronounced skill mismatch that has, to date, hindered additional employment creation. Increasing investment in higher education and revamping training both call for a thorough review of the quality of the educational system and of the efficiency of staff training at the business level. For further details about this press release, please contact Iman Al-Ayouty (senior economist, ECES)