Puerto Rico Global Competitiveness Potential: World Economic Forum … · World Economic Forum GCR...

Dr. Francisco Montalvo Fiol, MBA, DM

Project Coordinator

World Economic Forum Puerto Rico

International Competitiveness Institute

Inter American University of Puerto Rico

Bayamón Campus

Puerto Rico Global Competitiveness Potential: World Economic Forum 2012

World Economic Forum GCR 2012

Puerto Rico Competitiveness

• Competitiveness: what it is and why is it

important

The World Economic Forum ‘s Global Competitiveness

Report (GCR) is recognized as the most important

comparative study of countries in the world in terms of the

factors that influence the potential for economic

competitiveness.

First published in 1979, the report provides the most

comprehensive assessment of competitiveness of 144

developed and emerging economies.



Instituto de Competitividad International de Puerto Rico

Puerto Rico International Competitiveness Institute

I C I

• In Puerto Rico:



• Competitiveness: what it is and why is it

important

Competitiveness is a complex and controversial issue in

a very complex and uncertain world and global economy.

Intensity of spread and response to globalization forces,

rapid technical change, shrinking economic distances,

and market liberalization.

Governments concerned with retaining technological and

economic lead seek benchmarks.

Many countries, provides and states produce local

competitiveness rankings.



• We live in turbulent world...

Prosperity

Quality of Life

Sustained Growth

Productivity

Physical

Infrastructure

Knowledge

Infrastructure

Entrepreneurial

Ecosystems

Prices

&

Costs

Competitiveness

Human

Resource

(Talent)

Business

Performance

Essential

Conditions

Basic

Inputs



• Competitiveness:

Expected

Outcomes

(outputs)



Competitiveness

Index

Three

Sub-indexes

12 Pillars 110

Variables

1/3 Hard

Data

2/3 Executive

Survey

• Basic

Requirements

• Efficiency

Enhancers

• Innovation

Index Main Driver

Government

Private

Sector

Mix

Academia

• Methodology:



• Methodology:



Environmental

sustainability

Pillar (E)

Social

sustainability

Pillar (S)

Global

Competitiveness

Index (GCI)

Sustainability

Adjusted

(GCI)

Environmental

Sustainability

Adjusted

(GCI x E factor)

Social

Sustainability

Adjusted

(GCI x S factor)

• Global Sustainability

Index: (in development)



• WEF GCR – Most competitive potential

Switzerland Singapore Finland Sweden Holland Germany United States United Kingdom Hong Kong SAR Japan China Chile Brazil México Panama

Puerto Rico Population 3.7 M GDP 2010 $98.8B Per capita $26,500 Stage 3

31 (+4)

de 144

2012 2011

1 2 3 4 5 6 7 8 9

10 29 33 48 53 40

1 2 4 3 7 6 5

10 11 9

26 31 53 58 49

• Basic Requirements (+4%) • Efficiency Enhancers (+2%) • Innovation (+7%)



• Historical Trends:

Puerto Rico

Top Tier (1 -10)

Second Tier (11 - 30)

Medium Tier (31 -50)*

Lower Tier (51 -70+)

4.55/4.18 4.51/4.20 4.48/4.17 4.49/4.18

2011 2008 2009 2010 2007

Nordic Countries

Eurozone Middle East Gulf States

America

Latin (+)

Africa – Sub Sahara

Asia (+)

G8 Countries

BRICS

Asia (top)

2012

1.089% 1.074% 1.074% 1.074% 4.58/4.20 1.090%

4.67/4.20 1.112%



Puerto Rico

4.55 4.51 4.48 4.49

4.58

4.67

4.8

5

4.8

5

5.1

4.9

4.5

4.4

4.5

4.4

4.5

4.6

4.3 4.3

4.2 4.2

4.3

4.6

4

4.2

4.4

4.6

4.8

5

5.2

5.4

5.6

2007 2008 2009 2010 2011 2012

GCI

BR

EE

INN

Pu

ntu

ac

ión

BR – Basic

Requirements Government

EE – Efficiency

Enhancers Private

Enterprise

INN – Innovation Private Enterprise

& Academia

• Historical Trends:



Barbados

44/42

Puerto Rico

31/35

Panama

40/49

Brasil

48/53

Mexico

53/58

Canada

14/12

United States

7/5

Argentina

94/85

Uruguay

74/63

Chile

33/31

Perú

61/67

Colombia

69/68

Venezuela

124/126

Rep. Dominicana

105/110

Costa Rica

57/61

Country

Rank/Rank

2012 2011

Americas 2012

Paraguay

42/43

Bolivia

104/103

Ecuador

86/101

Guatemala

83/84

Jamaica

97/107

Trinidad & Tobago

84/81



• Executive Survey: Puerto Rico

WEF 12 Pillars

Institution

Infrastructure

Macroeconomic Environment

Health & Primary Education

Higher Education & Training

Goods Market Efficiency

Labor Market Efficiency

Financial Market Efficiency

Technological Readiness

Market Size

Innovation

Business Sophistication



Challenges Strengths

* GCI 2007 to 2012 results vs. average median results for total participating countries

• Historical Trend: Puerto Rico*



• Puerto Rico: Strenghts

Business sophistication factors:

o Local supplier quality

o Production process sophistication

o Extent of marketing

o Willingness to delegate authority

Technological readiness factors:

o Firm-level technology absorption

o Internet usage

Goods market efficiency factors:

o Intensity of local competition

o Degree of customer orientation

o Buyer sophistication

Innovation factors:

o Availability of scientist and engineers

o Capacity for innovation



• Puerto Rico: Strenghts (continued)

Institutional, Health and Infrastructure factors:

o Property rights

o Intellectual property protection

o Efficiency of legal framework

o Strength of auditing standards

o Quality of air transport infrastructure

o Tuberculosis and Malaria

Labor market efficiency factors:

o Reliance on professional management

Financial market efficiency factors:

o Availability and affordability of financial services

o Regulations and securities exchanges

o Legal rights

Higher education factors:

o Tertiary enrollment

o Availability of research and training

services



• Puerto Rico: Challenges

Institutional, Health, Infrastructure and Macroeconomic factors:

o Burden of government regulations

o Business cost of crime and violence

o Wastefulness of government spending

o Transparency of government policymaking

o Quality of electrical supply

o Government debt as % of GDP

o National savings as % of GDP

o Prevalence of HIV % of adult population

o Business impact of HIV/AIDS

Labor market efficiency factors:

o Brain drain

o Hiring and firing practices

Financial market efficiency factors:

o Ease of access to loans

o Perception – soundness of banks

o Venture capital availability



• Puerto Rico: Challenges (continued)

Primary and Higher education factors:

o Quality of primary education system

o Quality of math and science education

Innovation factors:

o Government procurement of advanced tech products

o Company spending on R&D

Market size factors:

o Domestic market size

o Foreign market size



• Competitiveness - Golden Rules:

Create a stable and predictable legislative environment.

Invest in traditional and technological infrastructure.

Promote private savings and domestic investment.

Develop aggressiveness on the international markets as well as FDI

Maintain a relationship between wage levels, productivity and taxation.

Preserve the social fabric by reducing wage disparity - strengthened middle class.

Invest heavily in education and life-long training of the labor force.

Ensure substantial wealth creation, while preserving the value systems that citizens

desire.



• Policy implications for Puerto Rico:

Address the brain drain

Increase national savings rate (banks and credit unions)

Enhance business and entrepreneurial clusters

Increase contribution form government procurement of advance technology

Reduce overall tax rate

Improve labor regulations

Sustainable

Socio

Economic

Development

Global

Positioning

Branding

(Puerto Rico)

Cluster

Dynamics

Social and

Entrepreneurial

Capital

Micro-multinationals

Market

Size

Macroeconomic

Environment

Innovation

Operational

Cost and

Productivity

Primary and Higher

Education

Savings

and Capital

Health and

Primary

Education

Talent

and

Human Capital

Fiscal Stability

Exports

Regional

Competitiveness

Labor Market

Capacitación



I C IInstituto de Competitividad Internacional de Puerto Rico

Puerto Rico International Competitiveness Institute

Thank You!

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