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Bahrain has gone down by a rank compared to last year in the Global Competitiveness Index (GCI) 2009-10 of the World Economic Forum.
The kingdom is ranked 38th (last year 37th) in the overall index that is topped by Switzerland, which edged out the US.
In the provision of basic requirements Bahrain comes third in the GCC with rank 22 outclassing Saudi Arabia (30), Oman (25) and Kuwait (40). The topper in this class is the UAE, ranked 9th, followed by Qatar at rank 17.
Bahrain's rank is 44 in efficiency enhancers and a poor 60 in innovation factors.
Among the GCC countries Qatar tops the list in overall rankings with 22 (last year 26) followed closely by the UAE with 23 (last year 31). Saudi Arabia comes next with 28 (last year 27) followed by Bahrain, Kuwait-39 (last year 35) and Oman-41 (last year 38).
Qatar continues to weather the economic crisis well thanks to its abundant resources in natural gas, with an estimated 18 per cent growth rate in 2009, the fastest-growing economy in the Gulf Co-operation Council region. This positive economic performance is reflected in a number of indicators captured by the GCI.
Over the past year, the country moved up by six places from last year's already high base in the macroeconomic stability pillar, to 13th. This is a reflection of both absolute improvements - notably in the budgetary surplus and public debt levels - and the poorer macroeconomic performance of many other countries due to the financial crisis and concurrent countercyclical measures.
In terms of macroeconomic management, the country's priorities remain to reduce inflation, which was exacerbated by rising food and housing prices in 2008, and to expand credit.
Qatar is moving in the right direction in many areas of competitiveness. The upgrading of the institutional framework continues (9th), and goods and labour markets are more efficient than in previous years, ranked 21st and 14th, respectively.
In addition, the country has made great strides in harnessing the latest technologies, such as mobile telephony (2nd) and broadband (37th), and in opening up to foreign investment (it is ranked 13th on the restrictiveness of rules and regulations on FDI). Moving forward, improving competitiveness will necessitate further measures to encourage students to pursue tertiary education, where enrollment rates remain low (93rd).
Additionally, the stability of Qatar's financial sector (35th) would benefit from a stronger protection of investor's rights. The country ranks 71st for the strength of investor protection and 98th for the strength of legal rights.
The UAE has improved by eight positions to 33rd in this pillar, although the score has gone down. It has to be noted, however, that businesses assess banks as somewhat less sound than previously (down by five positions to 36th). The changing global environment is also reflected in the intensifying competition in goods markets in the Emirates, which may in turn have positive effects on the country's future development path.
The consistent upgrading of institutions and infrastructure and rising technological readiness and innovative capacity over the past few years will help the UAE maintain its competitive edge in the longer term.
Perhaps more emphasis will be needed on education, where quantitative measures still point to low secondary and tertiary enrolment rates (50th and 81st, respectively), and on further boosting the country's innovative capacity, which remains constrained by the quality of research institutions (53rd) and relative disconnect between universities and businesses (39th).
However, serious doubts persist about the sustainability of public finances in Dubai and the potential effect a further deterioration may have on the country as a whole. As the global downturn continues to limit the availability of finance and reduces tourism and trade, the country's main sectors of activity are likely to be adversely affected. However, in spite of the fall in real estate prices, the assessment of its financial markets so far proves more resilient than for many other countries.
What is the relevance of competitiveness in the current economic scenario?
Experts at the WEF say that today's difficult economic environment underscores the importance of not losing sight of long-term competitiveness fundamentals amid short-term urgencies.
Competitive economies are those that have in place factors driving the productivity enhancements on which their present and future prosperity is built. A competitiveness supporting economic environment can help national economies to weather business cycle downturns and ensure that the mechanisms enabling solid economic performance going into the future are in place.
How are countries graded in a WEF competitiveness report?
The WEF defines competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the sustainable level of prosperity that can be earned by an economy. In other words, more competitive economies tend to be able to produce higher levels of income for their citizens. The productivity level also determines the rates of return obtained by investments in an economy.
The WEF bases its assessment on a range of factors, key for any country to prosper. The index includes economic data such as growth but also health data or the number of internet users.
The index also factors in a survey among business leaders, assessing for example the government's efficiency or the flexibility of the labour market.
