For centuries, economists have deeply studied factors that impact economic productivity and competitiveness. Launched in 2005 and applied to assess the Global Competitiveness Index (GCI), GCI Model has become a tool to measure competitiveness and prosperity of national economies in the world.
In 2013 and 2014, the GCI model was actively modified and improved to better fit with development and general requirements by the World Economic Forum (WEF).
12 pillars of assessment
The WEF GCI model is composed of 12 pillars of evaluation. WEF specifies its pillars of assessment. First pillar: Institutions include concepts relating to the protection of property rights, the effectiveness and transparency of administrative framework; the political dependence of the judicial system; and security factors, business ethics and corporate governance of public and private institutions in each country. Second pillar: Infrastructure is assessed on the following aspects: Transport, electricity and quality of readiness of telecommunications network. Third pillar: Macroeconomic environment comprises of monetary financial indicators and public debt ratio. Fourth pillar: Health and primary education consists of public health quality indicators and primary education. Fifth pillar: Higher education and training includes the following criteria: quality and secondary and tertiary enrolment rates. Sixth pillar: Goods market efficiency comprises factors that help increase competitiveness of domestic market and foreign markets, and demand. Seventh pillar: Labour market efficiency embraces the following factors: flexibility and efficiency of the labour market, meritocracy and gender equality in the workplace. Eighth pillar: Financial market development includes the following factors: the effectiveness, stability, and reliability of the banking and financial system. Ninth pillar: Technological readiness is measured from the application of information and communication technologies (ICTs). Tenth pillar: Market size consists of the following factors: Sizes of domestic market and export market. Eleventh pillar: Business sophistication is measured by the efficiency and sophistication of business processes of a country. Twelfth and final pillar: Innovation is focused on technological innovations, including the capacity and commitment to technological innovation.
The GCI model introduced development phases in association with pillars and specific stages of economic development. These pillars are divided into three main groups based on a certain stage of development. These groups include key for factor-driven economies, key for efficiency-driven economies, and key for innovation-driven economies.
Vietnam’s competitiveness
According to the Global Competitiveness Report 2015-2016 released by WEF in September 2015, Vietnam ranked at No. 56 out 140 economies, up 12 places compared to the 2014-2015 period. Particularly, market size pillar had the highest score, ranked 33rd, followed by the labour market efficiency pillar (ranked 52nd). Low-ranked factors include institutions (85th), higher education and training (ranked 95th), financial market development (ranked 84th), technological readiness (ranked 92nd) and business sophistication (ranked 100th).
The continuous increase in rankings in recent years reflects the efforts of the Government of Vietnam in the context of deeper integration into the global playing field. Resolution 19/NQ-CP on major tasks and measures of improving the business environment and enhancing national competitiveness, issued in 2014, is a major effort of the Government and is enthusiastically supported by enterprises.
Institutional reform - a master key
Most recently, in mid-December 2015, the National Council for Sustainable Development and Competitiveness Improvement, chaired by Deputy Prime Minister Vu Duc Dam, pointed out slowness and lateness in improvement, even regressions in some areas. The most concerning factor is still institution. Specifically, the time of carrying out construction permission procedures is extended by 52 days. Property ownership registration procedures increase while the score of the quality of administrative land procedures is below average. The investor protection index has not been improved. Notably, cross-border trade index dropped two consecutive years (according to the World Bank - WB) because of renovation slowness in specialised management. Contract dispute settlement index has little changes in scores and rankings.
Among solutions to improving the business environment and enhancing the national competitiveness, Deputy Prime Minister Vu Duc Dam asked the Ministry of Planning and Investment, the Government Electronic Portal and the Vietnam Chamber of Commerce and Industry (VCCI) to continue to develop mechanisms to collect and process reviews from companies and seriously take into account the consistent implementation of government policies at all levels from national to local levels.
In the framework of research cooperation on “Vietnam 2035 Report” conducted by the Vietnam Academy of Social Sciences (VASS) and the World Bank, there is a thorough standpoint that Vietnam needs to build benchmarks for monitoring and comparing complete institutions, effectively manage the movement of public and private boundaries to ensure the legitimacy of the State. To have good institutions, it is necessary to combine ideas of scientists, actions of enterprises, the consensus of society and public confidence in government, said the report.
Nguyen Thanh
Vietnamese
