Spain at the Global Competitiveness Report 2010-2011

Hi all, following the tip of my colleague at Sweden, Eike Frix, this post is written in english to give everybody the chance to follow the blog ;) Sorry for the extrasize of the post!

Since many years ago the World Economic Forum publishes periodically a report about the macro environment competitiveness. This source is one of the most used in order to evaluate the competitive position for each country or region.
Spain has lost nine positions (from 33th to 42th) at the ranking.
As Spaniard, I would like to analyze the reason why that happened. In order to understand that is firstly necessary to evaluate what drivers or indicators are measured by the responsible economists. The methodological approach tries to evaluate twelve points, classified under three kinds depending on what they contribute to the economy in order to transform it.
The attached image shows the twelve pillars of the report.

Let’s go to describe the situation of Spain regarding each pillar:

Institutions form the framework within which individuals, firms, and governments interact to generate income and wealth in the economy. The report points only three positive indicators of out of twenty-one. The worst factors are “Public trust of politicians” and “Property rights protection”.

Infrastructure ensures the effective functioning, the location and kinds of activities or sectors of the economy. At this point we get a strong competitive position as a consequence of last decade effort focused on modernization. The question we must take into the account is: What is the cost of these investments? Are these public efforts sustainable and efficient?

Macroeconomic stability alone cannot increase the productivity of a nation, it is also recognized that macroeconomic disarray harms the economy. Here we find the economic macro indicators. Regarding the Government budget balance Spain has a difficult position not only economic but also political. The interest spread gap has been reduced at the last ECB actions but it keeps elevate if we compare with stronger Economies as German or Swedish. There is also another component maybe not taken into the account when doing the study. This fact is the international investor’s prejudices against the peripheral economies, as a consequence of Greece last news.

Health and primary education of the workforce is vital to the latter’s efficiency. The Spanish health system is one of the most valuable assets of the country but efforts must be done in order to maintain it sustainable. Regarding the basic education the ratio of non-success students still being too high what produce a huge level of non-qualified workforce.

Higher education and training measures the workers’ adaptability to their changing environment, and crucial for raising the value chain beyond simple processes and products. Although the rates of secondary and tertiary education enrollment are high the quality of the system is not enough. There is many things to do , cause the gap between different degrees quality is growing. The report points out as a advantage the QUALITY OF MANAGEMENT SCHOOLS ;)

Goods market efficiency ensures the production of the right mix of products and services given supply-and-demand conditions, and the effective trade of these goods. In spite of we have reduce trade barriers, implementing non-monopoly strong regulation and that direct investment has been reach; we have any inefficiencies at our industrial markets as burocracy and the incident of the non-flexible labor force.

Labor market efficiency and flexibility ensure workers allocation to their most efficient economic use and are provided with incentives to give their best effort in their jobs.
This is a hurt by a bomb pillar for our economy. The report does not identify any favorable item regarding the labor force. The main problem is the lack of flexibility at this market. I would like to say that there is another big problem with the central social negotiation cause the most of the companies are not able to support the minimums agreed at this level so a strong recommendation is to decentralize the collective bargaining process.

Financial market sophistication allocates the resources saved by a nation’s citizens as well as those entering the economy from abroad to their most productive uses.
Although we reach a good level of sophistication, nowadays the main problem to be competitive is the hard effort that a company must to suffer in order to access to the capital markets cause there is no credit at the capital markets.

Technological readiness measures the economy’s agility in adopting existing technologies to enhance its industrial productivity and commercial transactions. The extension an access to the Internet and new technologies is high but the problem is the lack of investments and technological companies. Is really surprising why entrepreneurs are not funding tech companies with the speed reach at other countries, when there are a lot of examples of Spanish firms being successfully.

Market size allows firms to exploit economies of scale; and with globalized and open trade, international markets have become a substitute for domestic markets. The Spanish market still being attractive and the region is one of the leaders one so that implement the competiveness.

Business sophistication, the quality of a country’s overall business networks and of individual firms’ operations and strategies, is conducive to higher efficiency in the production of goods and services. The report points out as negative point the not delegate organizational corporate culture. We need a change in order to create a new organizational order where meritocracy works.

Technical Innovation is a must in the frontiers of knowledge, and in design and development of cutting-edge products and processes to maintain a competitive edge.
In my opinion this is the KEY PILLAR for growing in competiveness. However we have not really good grades at factors as: Capacity for innovation, Quality of scientific research institutions, Company spending on R&D, University-industry collaboration in R&D, Government’s procurement of advanced tech products and Availability of scientists and engineers (cause the go abroad where the find better institutions).

More the next day!