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MONGOLIA IN WORLD COMPETITIVENESS 2013
MONGOLIAIN WORLDCOMPETITIVENESS2013
FEBRUARY 2013МONGOLIA IN WORLD COMPETITIVENESS 2013
DDC330MON-81
ISBN 978-99973-924-0-4
©
IMDChemin de Bellerive 23P.O. Box 915CH-1001 LausanneSwitzerland
Tel: +41 21 618 02 51Fax: +41 21 618 02 04
E-mail: [email protected]: www.imd.org
EPCRCSan Business Center, 9th floorPrime Minister Amar street 29Sukhbaatar duureg,UlaanbaatarMongolia
Tel: +976 11 321927Fax: +976 11 321926
E-mail: [email protected]: www.ecrc.mn
All rights reserved. No part of this publication may be transmitted in any form or by any means,including photocopying and recording, or by any information storage and retrieval system. Nor mayany part of this publication be included as a reference in any other work without authorization.
FOREWORD
Dear Readers,
In today’s globalized world, Mongolia has been one of the leaders in terms of eco-nomic growth. However, economic data alone cannot fully define Mongolia’s overall development. In fact, the prosperity of a nation encompasses much broader points of view such as social, infrastructural, and environmental aspects. On the other hand, in order to see whether the development “on paper” also exists in real life, one must look at the people’s wellbeing and quality of life. What kind of image would we get if we look back at the progress made over the past years? In order to an-swer this question, the Economic Policy and Competitiveness and Research Center has published a comprehensive report on Mongolia’s competitiveness for the fourth consecutive year.
According to the research findings, we are still ranked as the least competitive compared to the other 14 countries. Nevertheless, there are some positive changes in governance and business environment indicators due to the strong economic growth in recent years, which in turn boosted Mongolia’s overall competitiveness score. Moreover, some notable improvements were observed in the infrastructure sector, which was one of the drawbacks for Mongolia’s competitiveness last year. This was mostly influenced by private sector initiatives that are of strategic impor-tance including introduction of advanced technology in energy sector, communica-tions sector and investment in education. Despite such improvements, we are yet to achieve prerequisites for sustainable economic growth. Now the question we should ask is: What can we do? A major indicator of Mongolia’s economic fragility is its overdependence on global commodity price fluctuations. Recent decline in commod-ity prices led to increased budget expenditure and inflation. Hence, measures aimed at economic diversification and stabilization should be prioritized. Our economy will be immune to such external fluctuations only when these two are accomplished. This will lead us towards a more competitive nation.
The development and prosperity of our nation will depend on whether we are long or short sighted today. Having said that, I am pleased to present “Mongolia in World Competitiveness 2013” report for our esteemed readers’ referral in evaluating and reflecting on the development progress.
Puntsag TSAGAAN
Chairman of the Board
FOUNDING MEMBERS
TS.BOLDBAATAR
P.TSAGAAN
NEWCOM GROUP
MOBICOM CORPORATION
MAK GROUP
TRADE AND DEVELOPMENT BANK
MCS GROUP
JUST GROUP
Dear Readers,
Since 2010, Economic Policy and Competitiveness Research Center, in cooperation with the World Competitiveness Center, has been publishing Mongolia in World Com-petitiveness report, comparing Mongolia’s competitiveness to that of 14 different nations. This year, we are happy to present the fourth edition of this report. The de-mand for the report, as well as number of readers have increased through the years, motivating and encouraging our team to always strive forward with greater effort.
Taking this opportunity, I would like to thank our partners for their continuous support and kindly bestowed assistance. In particular, on behalf of our team, I would like to express my gratitude to Swiss Agency for Development and Coopera-tion, World bank, Asian Development Bank, and GIZ among others. I am confident that our cooperation will further flourish to build a more competitive and prosperous Mongolia together.
Last but not least, I hope that Mongolia in World Competitiveness report will serve as a tool for our readers, to learn from the past and to look at the future with more clairty.
ACKNOWLEDGEMENTS
Boojoo LAKSHMI
DIRECTOR GENERAL
STRATEGIC PARTNERS
SWISS AGENCY FOR DEVELOPMENT AND COOPERATION
ASIAN DEVELOPMENT BANK
WORLD BANKTHEWORLDBANK
Deutsche Gesellschaftfür internationaleZusammenarbeit (GIZ) GmbH
GERMAN SOCIETY FOR INTERNATIONAL COOPERATION
National sources
Bank of MongoliaEnergy Regulatory Commission Financial Regulatory Commission General Department of TaxationInformation Technology, Post and Telecommunications Agency Intellectual Property Office Ministry of Economic DevelopmentMinistry of Education and ScienceMinistry of Environment and Green DevelopmentMinistry of FinanceMinistry of HealthMinistry of LabourMongolian Customs General AdministrationNational Statistical Office
Ms. Lakshmi Boojoo Director General Ms. Odonchimeg Ikhbayar Head of Research/Manager Mr. Ganbat Chuluun Research Economist Ms. Tungalag Erdenebat Research Economist Ms. Yesunchuluu Khuderchuluu Research Specialist Mr. Otgon-Erdene Khandaa Research Economist Ms. Delgerjargal Dorjsuren Research Economist Mr. Nicholas Plummer Economic project officer www.ecrc.mn
ECONOMIC POLICY AND COMPETITIVENESS RESEARCH CENTER
IMD WORLD COMPETITIVENESS CENTER
At IMD Anne-France Borgeaud Pierazzi research / methodology / special projects Professor Arturo Bris project director William Milner research / partner institutes Carin Grydbeck coordination / marketing / press relations Madeleine Hediger research / partner institutes / online services Karla Beer-Espinosa marketing / business development Catherine Jobin order & sales administration with the collaboration of IMD’s Information Center and Information Systems Department
At KAESCO Jean-François KaeserConsulting
We also have the privilege of collaborating with a unique network of Partner Institutes, and other organizations, which guarantees the relevance of the data gathered.
For further information, please contact the IMD World Competitiveness Center at:
www.imd.org/[email protected]
Copyright © 2013-2014 by IMD
For the fourth year, the IMD World Competitiveness Center is pleased to release its report on the Mongolian path towards competitiveness. As in previous years, the objective of our analysis is to assess to what extent Mongolia manages the totality of its competencies to achieve long-term prosperity. Ultimately, competitiveness should translate into job creation, wealth, and sustainable growth.
Mongolia remains an economic wonder in terms of growth. During the last four years, its Real GDP has
grown at an average of 8.52 percent per year. At this pace, Mongolia should catch up with economies of the size of today’s Hungar y in about 20 years . The
performance in terms of wealth per capita is even more impressive. With GDP per capita of $3,594 in 2012, and average growth of 19.6% in the last three years, Mongolian population will be at this rate as rich as the Swiss in 17 years; and in only 10 years Mongolia should reach the wealth levels of current South Korea and Taiwan.
We want to highlight the main issues to consider in the near future so Mongolia’s path to sustainable growth continues. Our analysis is based on the success stories of other economies that have been confronted with similar challenges. The Mongolian
economic miracle has resulted from the combination of three factors: liberalization of the economy in some key areas; access to new and massive natural resources; emphasis on institutional development.
Future competitiveness will stil l rest on these. Additionally, our analysis allows us to establish four priorities in the country’s development agenda.
First , it is paramount that the economy’s growth remains sustainable and does not result in massive income inequalities. Second, Mongolia needs to
manage a high level of government debt through a more disciplined fiscal policy. Third, in an economy dominated by the mining industry, the main risks in the horizon are commodity prices. Finally, Mongolia should not forget that the industrial and service sectors requires the development of a sound financial system to satisfy their financial needs—especially in capital intensive industries.
We detail these priorities below:
1. Preserving an equal distribution of wealth
Mongolia’s Gini coefficient—a measure of income inequality that varies between 25 for Denmark and 58 for Colombia in 2013—is 37. This is similar to Malaysia’s Gini coefficient in 2007, which is today at 46, and with milder rates of GDP growth in the last years—an average of 5 percent per year. Economic development has been historically associated with an increase in inequalities. However it is important that Mongolia undertakes now the necessary measures to ensure that the massive inflow of wealth from
.wef a ylno tifeneb ton seod reggirt ot gniog si gninimFiscal policy will be, in this context, a very effective tool. Mongolia’s ranking this year is 9th among the 15 economies. Fiscal policy ranks the highest among all Government Eff iciency subfactors. Collective and property taxes still represent 0.15% of GDP and put Mongolia among the three countries in our sample with the lowest tax revenue. However, the perception of tax evasion in the country is relatively low (it ranks 7th).
2. The challenges of reducing government debt
Related to the previous issue, we should expect the country to f ind the right balance between spending and indebtedness. Mongolia’s budget def icit is 8.93 percent of GDP and the highest among the f if teen economies. At the same time,
ON THE RIGHT TRACK From an economic miracle to a competitive economy
Arturo Bris
Mongolia’s Real GDP Growth Ranking
2010 2011 2012 2013 1st 1st
6th 8th
“Mongolia’s economic miracle has resulted from the combination of three factors”
general government expenditure to GDP is 43.65 percent, near the bottom of comparable economies. However it seems that there is still some room for the central government to play a role as a motor of the domestic economy, which cannot certainly be financed with debt: between 2012 and 2013, the ratio of government debt to GDP has skyrocketed from 28 to 43 percent of GDP. Consequently the numbers seem to suggest that , in a context of expansionary fiscal policy, the country should focus on (i) tightening government spending by focusing on a few priorities and (ii) developing a consistent tax policy that spreads the benefits, as well as the cost of economic development in an even way.
Over the last year, FDI inflows as a percentage of GDP have plummeted (from 53.4 in 2011 to 43.19 percent in 2012). These f igures pose a ser ious cha l l enge on the ability of the central government to attract
foreign investment , maintain the stability of the currency, and ultimately finance public policy.
An over v iew of the economies in the IMD World Competitiveness Yearbook shows that , independently of the amount of government debt, the countries that grow the fastest are those where the contribution of the government to total spending
is the lowest (S ingapore , Switzerland); in the contrary, the European economies where governments account for a larger fraction of the domestic economy, display relatively lower long-term
growth rates. The lesson for Mongolia is that balancing the needs of the people with a proactive development of the private sector is key to develop the competitiveness of the country.
3. Export concentration
Mongolia is to become, with the full development of the Oyu Tolgoi project, the holder of the largest copper reserves on Earth. This is undoubtedly a massive source of wealth for the population. The demand for copper remains high, especially from emerging markets in general and from China in particular. Copper prices are volatile (with a price volatility of about 30 percent in the last ten years, using data from the London Metal Exchange), and they have fallen 15 percent in the last 12 months. Most of the copper production is currently exported to China. Therefore, Mongolia needs to overcome the risks of relying on a concentrated source of
national revenue. For one, it is important to diversify the economy. Potential ly, investing in smelting capacity to generate value added is advisable, so Mongolia should in the medium term start exporting processed commodities.
4. Development of a sound financial system
In the early stages of economic growth, countries should deve lop a manufac tur ing sector that contributes to job creation, savings, consumption and ultimately competitiveness. In the medium term however, f inancial development has to happen in parallel. Mongolia still ranks low in several measures of the quality of the financial sector: it ranks third to last in Financial Markets Regulation and last in Stock Market Capitalization. Besides, our survey shows that, among 15 economies, respondents put Mongolia last on whether Stock Markets provide adequate f inancing to companies. Reforms have been spectacular, yet the country still ranks last in Shareholder Protection. More needs to be done to move from a banking economy to a pure market economy. Currently there are two major risks affecting the banking system: one is the reliance in dollar-denominated debt . The experience of the Asian economies circa 1997—with fixed-exchange rates and excessive dollar borrowing—should be considered as a demonstration of the explosive combination of a volatile currency and debt. The second risk of the system is the banking sector’s balance sheet: in 2013, the loan-to-deposit ratio is 122 percent. With relatively few alternatives for small and medium enterprises, banking problems would automatically spread to the corporate sector. Not surprisingly, in our report , Mongolia ranks last in the survey question “Small and medium-size enterprises are efficient by international standards.”
Good and Bad News
With respect to our previous report , Mongolia has made spectacular progress in its regulatory environment . F irst and foremost , the Foreign Investments Act is an important initiative to remove certain restrictions to foreign ownership. Protecting the ownership of key strategic assets should be balanced against the country’s need for foreign capital. And both issues should as well be considered in light of the dollar-denominated debt repayments that are due in the coming years (see in that regard the strategic challenges identified by the Economic Policy and Competitiveness Research Center of Mongolia later in this report).
edam sah ailognoM“spectacular progress
in its regulatory environment”
“balancing the needs of the people with a proactive development of the private sector is key”
Mongolia’s FDI in US$ (& trend line)
2009 2010 2011 2012
$624 $1691 $4715 $4452
Our analysis above suggests that the development of stock markets is key for sustainable growth and prosperity. We welcome the new Securities Law that was enacted in January 2014. The Mongolian stock market capitalization ($1.58 bn) is still low,
even in relat ive terms (18 percent of GDP) and far from compar ab le economies —the median economy in the comparable group has a stock market that is 100 times larger. Comparable economies show
that success in this arena is possible: Kazakhstan ranks 10th in stock market capitalization ($43 bn) in 2013. Relative to the country’s GDP, stock market capitalization in 2002 was only 5.45 percent . It reached a peak of 50 percent in 2009 but has now dropped to 23 percent (in 2011).
As a result, one of the biggest improvements in the report corresponds to the assessment regarding finance and banking regulation (moving up to 13th, suggesting that financial regulation is still a work in progress). There is now a perception that banking and financial services are contributing more to the country’s prosperity.
Mongolia ranks well in the ease of doing business (10th) and labor regulation (9th). However, to what extent these assessments apply only to large enterprises, and not so much to small and medium businesses, is still an open question. Mongolia’s employment is still dominated by family businesses and the shadow economy is growing. Leveling the playing field for enterprises should not ignore the needs of people (see our discussion on income inequal ity above). Overal l , qual it y of l i fe has improved significantly over the last year. Yet some clouds in the horizon remain.
Social cohesion has deteriorated significantly and Mongolia only ranks above Russia, Ukraine and Bulgaria—only one year ago the country ranked 6th. Why could that be? As discussed, progress has not yet reached the lower class: health expenditure per capita is still the lowest among 15 economies ($124 per capita and year), despite a signif icant improvement in 2013 (from $91 the year before). Overall, the Human Development Index that we include in our report still ranks Mongolia the lowest in 2012-2013.
Exchange rate volat i l it y could jeopardize the country’s path to competitiveness. The aggressive quantitative easing program initiated by the central bank in the past year has def initely helped the economy. Alas, the new US monetary policy and in particular the tapering strategy of the Federal Reserve will have a severe impact on emerging markets, especially those with unstable and small currencies. The major challenge for the Mongolian
administrat ion is therefore to manage agents’ expectations so the tughrik does not become a destabilizing force. With a massive stock of dollar-denominated debt in the balance sheet of the banking sector; a severe dependence of the foreign sector; and an economy depending to a large extent from China, there is no exchange rate policy that will result in a perfect equilibrium. The only policy is to take the necessary steps to enhance the credibility of policymakers and the central bank. In a turbulent currency market during the last years, we have seen the two extremes: central banks that have shown commitment and determination with consistent monetary policies (Switzerland, United States for instance), and central banks that have hindered, more than helped, economic growth (Euroland).
Conclusion
Mongolia remains in the right path to achieve compet i t iveness . In 2013 we have witnessed astonishing economic growth that is sustained by a sound monetary policy; improvements in the business climate in order to attract foreign capital; openness of the economy. Ultimately this should naturally lead to welfare, prosperity and competitiveness. We hope that the IMD World Competitiveness Center 2013 Report on Mongolia serves as a tool to assess, record, and illuminate such progress.
Professor Arturo Bris, IMD February 2014
“the development of stock markets is key for sustainable growth and propserity”
1MONGOLIA IN WORLD COMPETITIVENESS 2013
TA BLE OF CON T EN TS
Foreword
Founding Members
Acknowledgements
Strategic Partners
EPCRC & IMD WCC Teams
Preface
Table of Contents 1
Selected Countries From The World Competitiveness Scoreboard 2013 With Mongolia 3
Methodology and Principles of Analysis 5
Factor Breakdown 16
Competitiveness Factor Rankings 18
Sub-Factor Rankings 22
Competitiveness Structures 23
27
Competitiveness - Overall 28
Factor Breakdown 30
Evolution 32
Twenty Strongest Criteria 33
Forty Weakest Criteria and Simulation 34
Statistical Data 36
Statistical Tables 53
Acknowledgements 150
Partner Institutes 151
Frequently Asked Questions 157
The Fundamentals and History of Competitiveness 160
The Competitiveness Roadmap: 2013 - 2050 176
Notes and Sources 183
Alphabetical list of sources 213
MONGOLIA IN WORLD COMPETITIVENESS 20132
3MONGOLIA IN WORLD COMPETITIVENESS 2013
SELEC T ED COUN T R IES FROM T HE WOR LD COM PETIT I V ENESS
SCOR EBOA R D 2 013 WIT H MONG OLI A
MALAYSIA 2
QATAR 3
KOREA 4
THAILAND 5
CHILE 6
MEXICO 7
KAZAKHSTAN 8
RUSSIA 9
PERU 10
UKRAINE 12
SLOVENIA 13
BULGARIA 14
100.000
95.583
94.591
91.065
88.131
85.509
83.682
81.548
80.233
76.682
75.597
75.519
74.493
72.238
62.292 MONGOLIA 15
SLOVAK REPUBLIC 11
SINGAPORE 1
0 10 20 30 40 50 60 70 80 90 100
MONGOLIA IN WORLD COMPETITIVENESS 20134
5MONGOLIA IN WORLD COMPETITIVENESS 2013
M ET HODOLOG Y A ND PR INCIPLES OF
A N A LYSIS
By Anne-France Borgeaud Pierazziand IMD’s WorldWW Competitiveness CenterTeaTT m
MONGOLIA IN WORLD COMPETITIVENESS 20136
Mongolia in World Competitiveness
This analysis, commissioned by the Mongolia Economic Policy and Competitiveness Research Center (EPCRC), benchmarks Mongolia with some of the most competitive countries in the world. As in the years 2010-2012, the objective is to analyze Mongolia’s competitiveness compared with 14 other economies selected by EPCRC and covered in the World Competitiveness Yearbook (WCY) published by IMD. The methodology is the same as that used to determine the
of Mongolia’s competitiveness was created to portray the main features, strengths and weaknesses of the Mongolian economy.
To complement the statistical data which were collected in collaboration with the EPCRC, IMD sent the WCY Executive Opinion Survey to middle and top executives in Mongolia to help evaluate competitiveness issues about which information
with a time lag. There were 81 surveys returned to IMD from October to December 2013.
What is the World Competitiveness Yearbook?
The IMD World Competitiveness Yearbook (WCY) is the world’s most renowned and comprehensive annual report on the competitiveness of nations, published every year since
world competitiveness, providing objective benchmarking and highlighting trends, as well as a source of worldwide
of key economies. The WCY analyzes and ranks the ability of nations to create and maintain an environment that sustains the competitiveness of enterprises.
In other words, how do nations and enterprises manage
economy’s competitiveness cannot be assessed based only on GDP and productivity statistics because enterprises must also cope with political, social and cultural dimensions. Therefore nations need to provide an environment with the most
competitiveness of enterprises.
The WCY 2013 provides extensive coverage of 60 economies, all key players in world markets. These economies were chosen because of their impact on the global economy and the availability of comparable international statistics. For the purposes of this Special Report, however, a selection of only 14 WCY countries is used to benchmark Mongolia’s competitiveness. These countries are: Bulgaria, Chile, Kazakhstan, Korea, Malaysia, Mexico, Peru, Qatar, Russia, Singapore, Slovak Republic, Slovenia, Thailand and Ukraine.
Over 300 competitiveness criteria have been selected by IMD as a result of extensive research using economic literature, international, national and regional sources, and feedback from the business community, government agencies and academics. The criteria are revised and updated on a regular basis as new theory, research and data become available and as the global economy evolves. A long-established collaboration with 55 Partner Institutes worldwide also helps ensure that the data is reliable, accurate and as up-to-date as possible.
The methodology used for Special Projects, such as this analysis for Mongolia, is the same as that used in the World Competitiveness Yearbook 2013. The results are based on the same criteria, when available or relevant, to analyze Mongolia’s performance in various facets of competitiveness. One of the objectives is to help government and business leaders to better assess the competitiveness of their economy and thus help them in the pursuit of insightful decision making.
Economic Performance (79 criteria) Macro-economic evaluation of the domestic economy: Domestic Economy, International Trade, International Investment, Employment and Prices.
(70 criteria) Extent to which government policies are conducive to competitiveness:
Public Finance, Fiscal Policy, Institutional Framework, Business Legislation and Societal Framework.
(71 criteria) Extent to which the national environmnent encourages enterprises to
and Attitudes and Values.
Infrastructure (113 criteria) meet the needs of business:
Basic Infrastructure , Technological Infrastructure , Scienti f ic Infrastructure, Health and Environment and Education.
TABLE 1 � Competitiveness Factors
7MONGOLIA IN WORLD COMPETITIVENESS 2013
Who uses the World Competitiveness Yearbook?
The WCY is an invaluable, dynamic and constantly updated “toolbox” for decision-makers. The business community uses it to help determine and validate investment plans and to assess locations for new operations. Governments use important indicators to benchmark their policies against those of other countries, to evaluate their performance over time and to learn from the “success stories” of nations that have improved their competitiveness. The academic world also uses the exceptional wealth of data in the WCY to better understand and analyze how nations (and not only enterprises) compete in world markets.
How does the World Competitiveness Yearbook measure Competitiveness?
Over the past two decades, the methodology to assess the
to take into account the evolution of the global environment and new research. In this way, the WCY keeps pace with structural changes in national environments and the rapidly changing technological revolution. We made these changes gradually so that we could continue to compare the results from year to year and highlight the evolution of an economy’s performance relative to the competitiveness of others. Based on analysis made by leading scholars and by our own research and experience, the methodology of the WCY divides the national environment into four main Competitiveness Factors: Economic Performance, Government Efficiency, Business Efficiency and Infrastructure. Each of these four factors has been broken down into five sub-factors, each highlighting different facets of competitiveness. Altogether, the WCY features 20 such sub-factors. (See Tables 1 and 2).
Some of these sub-factors have been further divided into
All criteria have been grouped into these sub-factors and categories. However, each sub-factor does not necessarily include the same number of criteria (for example, it takes more criteria to assess Education than to evaluate Prices). Each sub-factor, independently of the number of criteria it contains, has the same weight in the overall consolidation of results, that is 5% (20 x 5 = 100). This allows us to “lock” the weight of the sub-factors regardless of the number of criteria they include. We believe that this approach improves the reliability of the results and helps ensure a high degree of compatibility with past results. Statistics are sometimes prone to errors or omissions… Locking the weights of sub-
prevents problems from spreading in a disproportionate way.
and qualitative issues separately. Statistical indicators are acquired from international, national and regional organizations, private institutions and our network of 55 Partner Institutes worldwide. These statistics are referred to in the WCY as “Hard data” and include 130 criteria used to determine the overall rankings and 87 criteria presented as valuable background information but which are not used in the calculation of the rankings. The 130 Hard criteria represent a weight of approximately two-thirds in the overall ranking. An additional 116 criteria are drawn from our annual Executive Opinion Survey and are referred to in the WCY as “Survey data”. The survey questions are included in the Yearbook as individual criteria and are also used in calculating the overall ranking, representing a weight of approximately one-third.
Productivity
Labor Market
Finance
Management Practices
Attitudes and Values
Economic Performance
Domestic Economy
International Trade
InternationalInvestment
Employment
Prices
Infrastructure
Basic Infrastructure
Technological Infrastructure
Health and Environment
Education
Government
Public Finance
Fiscal Policy
Institutional Framework
Business Legislation
Societal Framework
TABLE 2 � The Breakdown of Competitiveness Factors
MONGOLIA IN WORLD COMPETITIVENESS 20138
Executive Opinion Survey
Every year, we conduct an Executive Opinion Survey in order to complement the statistics that we use from international, national and regional sources. Whereas the Hard data shows how competitiveness is measured over a specific period of time, the Survey data measures competitiveness as it is perceived. The survey was designed to quantify issues that are not easily measured, for example: management practices, labor relations, corruption, environmental concerns or
competitiveness and indications for the future by business executives who are dealing with international business situations. Their responses are more recent and closer to reality since there is no time lag, which is often a problem with Hard data that show a “picture of the past”.
The Executive Opinion Survey is sent to executives in top- and middle management in all of the economies covered by the WCY and Special Reports. In order to be statistically representative, we select a sample size which is proportional to the GDP of each economy. The sample of respondents should be representative of the entire economy, covering a cross-section of the business community in each economic sector (primary, industry/manufacturing and services) based on their contribution to the GDP of the economy.
The survey respondents are nationals or expatriates, located in local and foreign enterprises in the country and which, in general, have an international dimension. They are asked to evaluate the present and expected competitiveness conditions of the economy in which they work and have resided during the past year, drawing from the wealth of their international experience, thereby ensuring that the evaluations portray an in-depth knowledge of their particular environment. All responses returned to IMD are treated as
The respondents assess the competitiveness issues by answering the questions on a scale of 1 to 6. The average value for each economy is then calculated and converted into a 0 to 10 scale. Finally, the survey responses are transformed into their standard deviation values, from which the rankings are calculated.
How are the rankings computed?
The essential building block for the rankings is the standardized value for all the criteria, which we call the STD
criterion using the data available for all of the economies. We then rank the economies based on the 246 criteria that are used in the aggregation: 130 Hard and 116 Survey data. The additional 87 criteria are presented for background information only. They are not included in the aggregation of data to determine the overall rankings. In most cases, a higher value is better, for example, for Gross Domestic Product; the
while the one with the lowest is last. However, with some criteria the inverse may be true, where the lowest value is
In these cases, a reverse ranking is used: the economy with the highest standardized value is ranked last and the one with
Since all economies’ statistics are standardized, they can be aggregated to compute indices. We use these index values, which we call “scores”, to compute the following rankings: the Overall Scoreboard, Competitiveness Factor rankings and Sub-factor rankings. When data is unavailable or too old to be relevant for a particular economy, it appears at the bottom of the statistical table for the criterion being measured and a dash is shown. In the aggregation of the statistics, all missing data are given STD values imputed from the average of existing data within the sub-factor.
The methodology used for this Special Report is to first compute the standardized value for each criterion using the data for Mongolia and the 14 selected WCY economies. The economies, including Mongolia, are then ranked based on the available data. Consolidated rankings: overall, factors and sub-factors are determined using the same methodology as that of the WCY.
How to use the Special report on Competitiveness?
The analytical part of the WCY Special Report for Mongolia is divided into the following main sections (see Table 3: How to Use the Yearbook?).
The World Competitiveness Scoreboard for Mongolia
The World Competitiveness Scoreboard for Mongolia presents the overall rankings for the 14 selected economies covered by the WCY 2013 and Mongolia. In this Special Report, Mongolia ranks in 15th position after Bulgaria. This overall ranking is calculated on the basis of the 246 ranked criteria included in the WCY: 130 Hard and 116 Survey data. The economies are ranked from the most to the least competitive and the index value or “score” is also indicated for each economy.
Competitiveness Factor Rankings
This section (pages 18-21) presents an overview of Mongolia’s performance in the four major dimensions of competitiveness: Economic Performance, Government Efficiency, Business Efficiency and Infrastructure. Again, the economies are ranked from the most to the least competitive. Similar to the Overall Scoreboard, the index values or “scores” are indicated for each Factor.
Mongolia ranks in 15th position for both Economic
9MONGOLIA IN WORLD COMPETITIVENESS 2013
Sub-factor rankings
A summary of the rankings for all 20 sub-factors is presented for the 14 selected WCY economies and Mongolia (page 22). It is possible, at a glance, to determine in what areas of competitiveness an economy excels or has particular weaknesses and to make comparisons between the economies. These rankings provide a more detailed
to the factor rankings, can be used, for example, to evaluate the business environment, support international investment decisions, or assess the impact of various public policies.
Mongolia’s best sub-factor rankings are for its International Investment (6th), Fiscal Policy (9th) and Productivity (10th). The country’s weakest sub-factors include Public Finance and Basic Infrastructure.
We view the rankings as a tool for government officials, business managers and academics to use when they analyze the above questions. Obviously, each company must take into consideration the logic of its own economic sector, economic forecasts and its own traditions, and governments the national identity and value system of their country, region or state.
Competitiveness Structures (Spider Charts)
This section (pages 23-26) compares the index values of the four Competitiveness Factors for each of the 14 WCY economies to those of Mongolia. It may occur that Mongolia has a higher index value for a particular Competitiveness Factor than another economy, even though it has a lower overall ranking. These charts help identify in which environment an economy may have a particular strength or weakness. See Table 5.
TABLE 3 � How to Use the Yearbook ?
MONGOLIA IN WORLD COMPETITIVENESS 201310
Mongolia
An in-depth prof i le (pages 27-51) o f Mongol ia ’ s competitiveness includes the following results (see Table below):
I Overall Competitiveness challenges and Competitiveness Landscape
II Key Challenges & Key Attractiveness Indicators The key attractiveness factors as perceived by our Survey respondents. III Competitiveness Trends & Evolution of the four Factors and twenty Sub-Factors over time. Balance Sheet Forty strongest and forty weakest criteria by Competitiveness Factor
IV Competitiveness Evolution Biggest improvements and declines (2012 versus 2013)
V Twenty Strongest Criteria The twenty strongest criteria overall with the highest STD values
VI Competitiveness Simulation How Mongolia would rank if the 40 criteria with the lowest STD values were changed to the average values of the 14 WCY economies
VII Statistical Data Criteria list with Mongolia’s values, rankings and average-values
Overall Competitiveness and Challenges
for the Mongolia economy, its competitiveness structure (spider chart) as well as the competitiveness challenges facing the economy. These challenges have been provided by the EPCRC. A Competitiveness Landscape shows the overall strengths and weaknesses based on sub-factor rankings. These 20 sub-factors indicate categories of competitiveness that are comprised in the four Factors: Economic Performance,
Competitiveness Trends
This page shows Mongolia’s performance over time for each of the four Competitiveness Factors (Economic Performance,
over four years and the twenty Sub-Factor rankings for 2012 and 2013.
Competitiveness Balance Sheet
This page highlights the 10 strengths and 10 weaknesses by Competit iveness Factor and underl ines where Mongolia performs best and worst in the four dimensions of competitiveness. The strengths and weaknesses are determined by the standard deviation values of the criteria and are broken down into the four different competitivenessfactors. In other words, the criteria selected present the highest STD values and lowest STD values within each Factor, and could thus be considered Mongolia’s competitive advantages and disadvantages. Please see Table 6.
Competitiveness Evolution
Since a similar analysis was undertaken in 2012, we believe it is interesting to highlight the 25 biggest improvements and the 25 biggest declines in 2013 compared with 2012.
Twenty Strongest Criteria
In competitiveness theory, it is important to capitalize on the strongest competitive advantages that a country, region or
criteria overall, regardless of which Competitiveness Factor they are included in. The selected criteria are broken down by the 13 hard and 7 survey criteria with the highest STD values, representing a ratio of 2/3 hard data to 1/3 survey data. This ratio indicates the proportion of each type of data in the overall ranking.
We feel that this approach is more representative of the economy’s strongest facets of competitiveness rather than selecting the 20 criteria with the highest STD values since, for some economies, the survey data may be predominant. These 20 strongest criteria could thus be considered Mongolia’s most important assets combining a quantitative and qualitative point of view.
It is important to note that what constitutes a strength or weakness is relative to each economy’s circumstances or development. Certain criteria have been excluded from the selection: for example, those for which the authorities have no control or which may have only a very limited impact on competitiveness.
