Competitiveness rankings fail the ‘so what’ test

EACH year, there are a number of “competitive rankings” of countries published by various organizations. The best known of these is the World Economic Forum’s ( WEF) annual Global Competitiveness Report, but there are many others. Some deal with entire economies, while others focus on particular niches, such as digital competitiveness or environmental sustainability.

A careful study of the 2020 IMD World Competitiveness Yearbook released earlier this week should lead one to a certain conclusion about such reports: they are essentially innocuous outcomes of academic calisthenics, of little practical value to anyone except business reporters who need something to write about, and the reports’ parent institutions’ marketing departments that need to convince business executives to fork over piles of cash for “consulting services.”

The IMD World Competitiveness Yearbook is published annually by, unsurprisingly, IMD, a private management school headquartered in Lausanne, Switzerland. IMD stands for the Institute of Management Development, but the school uses the acronym as its name now, because it’s cool and contemporarysounding, like KFC. The school and its flagship product have been around since 1989; up until 1996, IMD produced the competitiveness report in partnership with the WEF, but both have done their own versions since then.

The World Competitiveness Yearbook is just one of the products of the IMD’s World Competitiveness Center. It also publishes an annual ranking of World Digital Competitiveness, and World Talent, “based on countries’ performance in three main categories — investment and development, appeal and readiness,” the IMD’s website says. All these reports are products in their own right, as well as supporting the IMD’s main work of providing management consulting services, because getting paid to tell other people how to do their jobs is actually a really good business.

The competitiveness report follows a fairly standard format, combining hard data and a survey of business executives in each of the countries it covers. The 2020 World Competitiveness Yearbook uses full-year statistics from 2019 and survey responses gathered from February to April this year, and so at least subjectively reflects some of the impact of the ongoing

Wuhan Virus pandemic.

The IMD report covers a smaller group of economies than the WEF’s Global Competitiveness Index — 63, compared with 141 for the latter in its latest editions — which are “chosen based on the availability of comparable international statistics and our collaboration with local Partner Institutes,” who help gather and validate data, it says.

For what it’s worth, the Philippines in this year’s World Competitiveness Yearbook is ranked 45th out of 63 countries, up one spot from the 2019 report, behind Italy and ahead of Turkey. The only other Southeast Asian countries included in the report are Singapore, Malaysia, Thailand and Indonesia, which are ranked 1st, 27th, 29th and 40th, respectively.

The Philippines’ improvement in its overall ranking is evidently only the result of other countries performing more poorly compared to last year, because in each of the four main “pillars of competitiveness” that make up the overall score, the Philippines declined. Its ranking in economic performance slid to 44th from 38th; in government efficiency, from 42nd to 41st; in business efficiency, from 33rd to 32nd; and in infrastructure, stayed in the 59th spot.

So how exactly is this information useful to the Philippines or to prospective investors? The short answer is, it’s not. Unless one is wholly ignorant about a subject country, reports like “competitiveness rankings” do little more than state the obvious in broad terms. Even mediocre policymakers have access to their own countries’ economic data and probably have at least some sense of local business sentiment, and any serious business investor worth his salt is likely to prefer doing his own assessment firsthand. While competitiveness as a descriptor is good in a general sense, no country seriously uses “comparative competitiveness” as a key performance indicator. Likewise, for investors, the concept is only meaningful in the context of their specific business requirements and objectives.

But as I said earlier, these reports are, at least, material to help business reporters meet their daily story quotas, and they provide an opportunity for nerds whose knowledge is worth money to display their plumage, so there is nothing harmful about them, as long as their relevance is not overestimated. Philippine policymakers and economy watchers should neither be unduly pleased nor unduly rattled by the conclusions of this or any other “country ranking.”