Need to look deeper into UAE's global rank­ings

The Pak Banker - - OPINION - Dr. Kai L. Chan

WITH 2015 left be­hind and the new year ahead, it is a good time to pause and take stock of the UAE's com­pet­i­tive­ness as the coun­try edges closer to 2021, and as the KPIs (key per­for­mance in­di­ca­tors) of the Na­tional Agenda loom closer. The UAE has set many of its devel­op­ment goals based on mea­sures of com­pet­i­tive­ness, as re­ported by third-party in­ter­na­tional or­gan­i­sa­tions. These in­clude the Global Com­pet­i­tive­ness Re­port (GCR), Global In­no­va­tion Index (GII), Hu­man Devel­op­ment Re­port (HDR), and the World Hap­pi­ness Re­port (WHR). The big head­line in 2015 was the oil shock: Crude price fell by half. Al­though the UAE econ­omy is well di­ver­si­fied (oil counts for less than a third of gross do­mes­tic prod­uct, or GDP), a steep drop in the price of the coun­try's pri­mary ex­port has not gone un­no­ticed. Gov­ern­ment cof­fers con­tinue to rely heav­ily on oil rev­enues and, sub­se­quently, pub­lic in­vest­ments in large in­fra­struc­ture projects slow down.

The UAE is also im­pacted by low oil price in­di­rectly, through the re­duc­tion in the in­flows of in­vest­ments and visi­tors from other oil-rich coun­tries. Dubai, in par­tic­u­lar, is a gate­way to the Mid­dle East and North Africa re­gion (Mena) and much of the re­gion's petrowealth flows through the emi­rate.

Many might have per­ceived 2015 as a less strong year in the na­tion's com­pet­i­tive­ness - not be­cause of the drop in oil prices but also be­cause of the drop of the UAE's rank­ing across a num­ber of re­lated in­ter­na­tional in­dices. Hav­ing said that, a deeper look is nec­es­sary to truly un­der­stand the real per­for­mance and what were the ac­tual re­sults of the com­pet­i­tive­ness KPIs for the UAE.

It is true that the head­line fig­ures for some re­ports tracked by the na­tion did de­cline but, as is of­ten the case when deal­ing with tech­ni­cal re­ports, the prima fa­cie "facts" may in­deed be false. The flag­ship re­port on na­tional com­pet­i­tive­ness is the Global Com­pet­i­tive­ness Re­port (GCR). In 2014 the UAE ranked 12; in 2015 we fell to 17. In the Global In­no­va­tion Index (GII) - a re­port of high im­por­tance given the na­tion's drive to be­come a knowl­edge-based econ­omy - the UAE's rank fell from 36 to 47. Mean­while, the Hu­man Devel­op­ment Re­port - one of the most broad­based mea­sure of devel­op­ment - re­ported that the UAE re­gressed from 40 to 41. Like­wise, the UAE rank in the World Hap­pi­ness Re­port (WHR) de­clined from 20 to 28 in the jus­tre­leased 2016 edi­tion.

Taken to­gether, it might seem that the coun­try's com­pet­i­tive­ness de­te­ri­o­rated in 2015. In­deed, many of the me­dia re­ports took this prima fa­cie (mis­in­formed) an­gle.

But just look­ing at the high-level num­bers, 2015 was ac­tu­ally a year where the UAE made a lot of progress; it im­proved in the Do­ing Busi­ness Re­port, Global En­trepreneur­ship Index, Global In­for­ma­tion Tech­nol­ogy Re­port and the Travel & Tourism Re­port. So al­though many of the flag­ship re­ports showed a (prima fa­cie) de­cline, many of the spe­cialised re­ports im­proved.

So is the news of a slip­page in the UAE's com­pet­i­tive­ness in the flag­ship re­ports mis­lead­ing? The an­swer lies in some nu­ances un­der­neath the head­line fig­ures. The UAE's score on the GCR de­clined from 5.33 to 5.24, but a sin­gle in­di­ca­tor (out of 114) was re­spon­si­ble for the ma­jor­ity of the drop. In fact, the down­ward move­ment was a re­sult of how the re­port deals with miss­ing in­dicters. This is not a short­com­ing of the re­port, per se, but rather all in­dices need to deal with how to treat miss­ing vari­ables. In the case of the GCR, an in­di­ca­tor which was not avail­able in 2014, but which took on a re­ported value in 2015 spurred the de­cline. It is not as if the in­di­ca­tor value was much dif­fer­ent be­tween the two years, but rather its in­clu­sion in the 2015 re­port drove the drop due to tech­ni­cal de­tails of the index. The GII gar­nered neg­a­tive pub­lic­ity ow­ing to a rather steep eleven-rank drop in the re­port. Did the UAE's in­no­va­tion ca­pa­bil­i­ties re­ally regress so much? In fact, the ma­jor­ity of the in­di­ca­tors in the re­port ac­tu­ally im­proved.

What drove the rank­ing change was, once again, a tech­ni­cal de­tail of how the index treats miss­ing in­di­ca­tors. Namely, two in­di­ca­tors that had un­re­ported val­ues in 2014 but then took on val­ues in 2015 drove the 3.21 drop in the index score. In fact, if not for the miss­ing in­di­ca­tors that as­sumed a value in the most re­cent re­port, the UAE's GII score would have im­proved by over 2 points and the coun­try's rank would have re­mained un­changed.

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