Question: Describe the different measures that countries can take in order to improve their national competitiveness. Discuss the advantages and disadvantages of these various measures
This report presents an analysis of various approaches adopted by countries to enhance economic competency. The report further explains the strengths and weakness of each approach. The report commences with a brief introduction that serves to give the meaning of important words in the discussion and give the reader a clear snapshot of the paper. This is then followed by the competitiveness improvement strategy discussed in a stepwise manner. Finally, the report wraps up with a short conclusion of the whole report.
Competitiveness can be described as a specific set of policies, institutions, and factors that define the level of productivity of a country or an institution (Branscomb, 2013). The world economic forum has been at the forefront of measuring economic competitiveness among countries since 1979. A good way to understand how the country becomes competitive is by determining the satisfaction of the citizen and estimate the well-being of the citizens. Therefore a competitive economy is productive and leads to growth. All these can only be observed by evaluating the well-being of the citizens and therefore it is evident that the living standards of the citizens can be used to determine the country’s economy. To efficiently measure the competitiveness of a country, we must put into consideration key elements including institutions, infrastructure, macroeconomic environment education and health. These pillars are the basis of any economy and any country that is development-oriented must address them as the first priority. They determine how far a country’s economy can grow and expand.
This assignment is aimed at discussing various strategies employed by countries to improve their competitiveness, the pros, and cons of the strategies so as to determine their fitness in helping countries grow. The growth in a country’s economy is largely dependent on the how it economic setbacks and ensures the well-being of the citizens. This assignment is therefore focused on deciphering the possible ways in which countries may use the make their economy competitive on a global scale.
A country’s labor productivity defines the productivity of a country significantly. Considering labor is the key determinant productivity at institutional or country level, the impact of labor in economic performance con not be underestimated. Labor is the key driver of the economy and the people involved in the actual labor take a greater responsibility in ensuring sustainable production and economic growth. Labor can, therefore, be used as a key indicator to estimate the growth of a country’s economy and competitiveness. A growing economy will demonstrate a similar growth in the level of labor.
Labor can be categorized into different categories depending on the level and type of training offered. First is the manual laborers, these perform most of the work hands-on. They are like the engine of the economy as they get things done by themselves. For instance, in the building sector, manual laborers do the real lifting of materials and putting them where they are required to come up with a construction. This category receives the lowest level of training and depend largely on instructions given by their seniors. Secondly are the semi-specialized skilled laborers who in most cases directly supervise the manual laborers. At the top, we have the skilled laborers who are the specialist in the particular field and give the instructions to both the semi-skilled and the manual laborers.
For a country to grow in its competitiveness, it is important to invest in the training of the r so as to ensure that there exist no skill gaps (Branscomb, 2013). The most frustrating thing for any country is to rely on imported labor. However, it is expensive and time requiring to train and impart skills on the citizens. A better alternative is, therefore, to promote a more flexible labor market by reducing powers of trade unions, encouraging part-time work and encouraging new business start-ups. A disadvantage associated with this strategy is the reduction in job security and reduced wages. The greatest disadvantage of this strategy, however, is the high cost associated with the training of workers and payment of their salaries. It is imperative that highly trained workers will attract high wages which may not be manageable by the country. This has led to the phenomenon of brain drain in many countries as most highly trained workers like doctors opt to migrate to well developed and well-paying countries and seek jobs. The strength of the method is that the labor force in increased significantly and hence the productivity output is enhanced. Once productivity is enhanced, the country is not faced with shortage crisis.
Health competition in the trade market is necessary to ensure positive growth. Product market with many participants dealing in similar or products that serve the same purpose will obviously create a healthy competition by either improving the product quality of by offering the product at fair prices. When the dealers are faced with a steep competition, they have no otherwise but to supply the quality required by the customer fails to which the customers will opt for an alternative which is usually readily available. Competition in the manufacturing industry is that it will lead to the manufacture of high-quality products and offer them at fair prices. This, in turn, makes the country’s products the best in the global market and hence earns the country more revenue. Apart from just increasing the country’s revenue, it ensures consumer security in terms of product quality.
Governments can ensure increased competition in product market by reducing the berries to encourage participation, however, there must be laws to protect the consumer from unethical business dealings. Privatization of industry can as well help to improve competitiveness and enhance productivity. When the government privatizes companies, it reduces its involvement leaving much of the managerial roles to private investors who will stop at nothing to see the company grow to compete at global scale. It is the aim of many investors to take their companies to global operations and therefore privatization of companies will help to ensure the growth of the company. Reduction in monopoly power in product market also helps to ensure healthy business environment and hence competitiveness. This can be effectively done through regulations and competitive policies that create dynamic efficiencies. The advantages of economies of scale usually are lost when monopolies are broken down.
The disadvantage associated with this strategy is the loss of economies of scale when monopolies are dissolved. The monopoly companies may, therefore, reduce their operations and hence reducing the revenue earned. The cost associated with the improvement of product market may also be very huge while the final outcome of the improvement may not produce a huge impact on the country’s economic competitiveness. On the other hand, this approach has an advantage of enhancing market share of the country in the international market and therefore significantly improves its export trade and hence income and competitiveness.
Investment is a key determinant of economic growth for any country. Countries are there, on the move to create enabling an environment for investors so as to attract more investors in their countries. Investors essentially drive the economy of the country as they account for the largest percentage of the country’s revenue source. For economic improvement, most developing countries opt to collaborate with more developed countries and allow investors from the developed countries to invest in their countries so as to improve their economy. For instance in Kenya, the completion of the standard gauge railway was as a result of collaboration between the Kenya government and the China investors. There are also many Indian investors in Kenya especially in the field of healthcare who own some of the largest private hospitals like Agakhan and Medheal. This scenario is a depiction of a developing country exploring the option of investment level improvement so as to achieve economic competitiveness.
One of the ways in which a country can encourage investments is by keeping interest rates low. However, it does not stop at just keeping the interest rates low as the greatest task actually lies in the keeping the low-interest rates as stable as possible. This will both encourage investors and reduce risk. The danger that comes with low-interest rates is that associated with increased household spending which may lead to demand-pull inflation. Demand-pull inflation will obviously degrade the competitiveness of the country. Another mechanism of improving competitiveness through the investment improvement is to reduce the elasticity of the interest rate of investments. This implies that it is actually possible to increase the interest rate without negatively affecting the investment.
The macroeconomic environment is central to the improvement of the competitiveness. A country with a macroeconomic environment possess many advantages in terms of business opportunities with other countries as this provides a wider range of market share. A suitable macroeconomic environment also ensures that the country’s business operations with other countries are high. This, in turn, increases the revenue and returns enabling the country to grow economically and remain stable which translates to the competitiveness of the country. A stable macro-environment can be achieved through a combination of monetary and fiscal strategies. As noted early, higher interest rates discourage investors and distort the competitiveness in the long run. On the contrary, stable interest rates encourage investments and hence lead to positive growth in an economy that is associated with competitiveness. Additionally, it has been noted that stable interest rates reduce investment risks and uncertainties which attract more investment companies.
The flip side of the coin, however, is not without bad news for the countries that may choose to employ this strategy to enhance the competitiveness of their economy. For instance, achieving a macroeconomic environment is close to impossible especially in the resource-limited settings. Most of the developing countries may not be anywhere close to achieving a macro-environment for business and therefore they may be locked out of this strategy as an approach to attaining competitiveness. The high cost of achieving macro-environment; both monetary and resources like time put together, frustrates most of the developing countries. These represent some of the very critical factors to consider before applying this approach to create competitiveness.
Economic growth is no doubt largely dependent on the trade capacity of the country. The world’s most competitive economies like that of China and the US have a well-established local and international market shares in many countries. The concept of trade instability of the country’s economy is very crucial in terms of revenue earned. Although the growth rate of many resource-limited countries is very slow, these countries still hold on the objective of expanding their economy worldwide. This will see their economies being strong enough to compete worldwide. With this projected expansion of the developing countries’ economies, the developed countries should also think of strategies to improve their already strong economies so as to avoid competition from the growing countries in future. This can be effectively attained by expanding their market beyond the domestic market and adapt it to the current economic climate.
A continuous upscaling of the market is vital for the continued growth of competitiveness. Currently, the U.S. Chamber of Commerce, the US represents close to 73% of the global purchasing power and 87% of economic growth. These figures make the US a monopoly in the global market. However, the predicted growth in the economies of the developing countries will see this state reversed and increase the competitiveness of the developing countries.
The strength of this approach is based on the fact that some developing countries have a vast range of unexploited potential resources. If these resources are put to work, the developing countries may attain the capital necessary to expand their market to international levels. On the contrary, the disadvantage of this strategy is that it involves a lot of finances and it may take the developing countries a very long period of time to achieve market expansion. Furthermore, it is not an easy thing to outdo the developed countries from the market as it will require measures that will not be affordable in the resource-limited countries.
Talent is the only human attribute that can actually get the task done in a perfect way. Talent and innovation play a central role in the world of business and can help to improve business activities that can lead to economic stabilization and improve competencies. Nurturing talent at a young age may significantly lead to innovative technologies that can potentially help to improve the competencies of a country at large. For instance, most companies focus on their core competencies while aspiring to become the best in what they manufacture of supply, this continually requires skilled employees with the ability to think critically and decipher analytical problems so as to provide an answer to the company’s problems. It is important therefore for companies to develop creative strategies to source and also maintain employees with skills. This can be achieved only if the companies create good working conditions, establish employee training programs and collaborate with local universities to ensure talent and skills development and more importantly ensure that the courses offered to meet the market demands.
The problem with this approach is that it is difficult to come across individuals with such necessary talent and skill and those with such skills may not come out and take up the challenge leading to the countries spending a lot of resources in outsourcing such individuals. Moreover, the trend currently indicates an emergence of skills deficit. For instance in the US, by 2011 there was an unemployment rate of 9% while at the same time about 600,000 manufacturing jobs were unfilled at the time. This suggested a deficit in skills required to fill those job vacancies. The long term implication of skills deficit is that the corporate growth potential will remain limited. This approach, however, is not without advantages. One of the most obvious advantages of the strategy is that the approach offers a wide range of opportunities to improve competencies holistically. This is because people from different backgrounds with different skills can be recruited to help deliver solutions to multiple problems affecting the company. Another advantage is that one individual could possess several talents and skills and therefore provide a solution to a complex combination of problems facing the company. Innovative individuals can also serve to improve technology by coming up with new innovations that can be adopted by companies to attract donors and funders to invest their finances. This actually helps the company to grow progressively and improve its competencies.
Unemployment is the greatest enemy of economic growth that needs to be addressed urgently. The rate of unemployment is very high in African countries particularly those classified by WHO as low and middle-income countries (LMICs). The retardation in the growth of the economy in these countries can be partly explained by the high rate of unemployment reported. For example, Congo is faced with a huge unemployment crisis that has hit the country for a long time now. To improve competencies in such countries, it is fundamental that such problems are addressed. One of the approaches through which the crisis has been dealt with is through the creation of a network of NGOs that provide economic space to young unemployed people. This has been tried in numerous African countries and a few western countries including: Egypt, Jordan, Morocco, Palestine, Tunisia, and Yemen. This has been done by EFE-Maroc by partnering with overseas countries to avail world-class level professional and technical training which has significantly improved the competencies of these countries.
In most African countries, the unemployment exists despite the demand for labor which remains unmet due to the lack of required skills. The EFE-Maroc is committed to solving this problem of skill mismatch through the implementation of four critical programs. Teaching young Africans private sector professional skills, equipping fresh graduates with business-to-customer sales techniques, provision of ICT skills through the renown Microsoft’s Digital Literacy Curriculum and the provision of work-readiness training for students and fresh graduates.
The advantages accrued to this approach is that once the youths have been trained and imparted with business skills they can be able to come up with their own creative business ideas seek to fund and implement. Once such businesses have been initiated, they ultimately contribute to the national competencies of the country though in a small way but in a positive fashion. Another advantage of this approach is that it does not require the government to spend a huge portion of the revenue on achieving the training. Despite the small funding required to start of the strategy it contributes significantly to the economy of the country and ultimately to the competency of the country. A major flaw in the strategy is that it takes quite a long period to finally realize substantial gains. This is because small businesses may take quite a long time to pick up and stabilize to be able to contribute significantly to the national revenue. Another disadvantage of this approach is that the gains made can be reversed during the harsh economic times either temporarily or permanently.
National security is very fundamental to the growth of any country’s economy and international competency. Many countries experiencing violence and lack of peace have no luxury of improving their competency. Instead, they invest in trying to restore peace. This significantly compromises the efforts of improving their competency. Compared to other countries experiencing peace, these countries lag behind in their efforts to improve their competencies. Terrorism among the Middle East and African countries has significantly hampered their economic growth and hence competency. The lack of peace in particular countries, for instance, causes some western countries to issue a travel advisory to their citizens against traveling to those countries. This was once the case with Kenya when it was attacked by Al-Shabaab terrorists and the US government advised their citizens not to travel to some parts of Kenya. This significantly affected the tourism sector of the country reducing the revenue from the sector and hence compromised the ability of the country to enhance its competency.
Conversely, security plays a major role in ensuring the progressive growth of countries competency. When a country is peaceful, it attracts more investors to start companies in the country that in turn creates job opportunities to the citizens. The ultimate outcome of which is the gradual growth in the country’s economy and competency. Peaceful coexistence of citizens in a country also contributes significantly to the growth of trade within the border of the country and national competency. Peace out of the country’s border is also critical for the growth of competency and economy. For instance, international trade can only be successful if there is peace among all the participating countries. All countries must, therefore, work towards ensuring the existence of peace exclusively or even globally for the benefit of all.
This approach is indispensable for any country that needs to improve its competency and has the advantage of ensuring healthy interactions among individuals from different parts of the world in the line of business. Apart from ensuring national and international growth in competency, this approach also ensures the existence of global peace. However, this approach as any other is faced with the threat of high cost of maintaining peace. A more serious setback to this approach, however, is the continued increase in the terrorist threats and a series of attacks like the one that recently occurred in London. These threats are a serious setback not only to the growth of economy but also to the loss of human life. Humans who are supposed to be working towards creating more revenues to improve the competency of the country are killed in cold blood. The destruction of property during such attacks significantly drags behind the country’s economic growth and competence.
Research and innovation are the foundations upon which solutions to problems of humanity are provided. Research span across all walks of life from the health sector, environmental health, technology to economies and trade. Countries which need to improve in their competency, therefore, have no otherwise but to properly invest in research. Governments need to allocate considerably a bigger share of the annual budget to research so as to support the generation of new information that can potentially lead to a breakthrough that will give the country a competitive advantage over the others. The European Innovation Partnerships (EIPs) was launched in 2010 to improve the conditions for research and scale up the funding of research and innovation. This initiative taps innovative ideas and turns them into a reality, products or services needed to address major social challenges. The end result of which is the creation of competencies in the country. The initiative has developed strategic plans that help to facilitate the process of innovation and seals the gaps that normally exist between breakthroughs like resource and development results and prototypes. Currently, 5 have been completed and implemented including: agricultural sustainability, smart cities and communities, water and raw materials. Such initiatives are governed and implemented by private investors by using their own resources and benefit from the opportunities to influence the legislation, standards, and procurements, and to gain access to larger markets.
This approach is more conveniently applied in the developed countries with the necessary resource including the private investors who are willing to invest in such initiatives that will benefit the public more than themselves. For instance, in the US, businessman and philanthropic Bill Gate has an initiative called Melinda and Gate Foundation that funds research in all fields and believe in the concept that all lives are equal and must receive equal care. This foundation has led to a significant progress especially in human health. Such foundations help to create healthy competencies among many countries as the scientist from such countries compete for the research funds by writing proposals.
The advantage of such initiatives is that it focuses on many countries and not just one. This helps to build sustainability in many countries and therefore improving lives of many people across the world. Another advantage is that it does not just depend exclusively on the government for financing rather private investors who are willing to invest in the initiative come together and mobilize resources to support the initiative. Another strength of this approach is based upon the fact that the outcome of the research benefits many sectors and not just one. The approach is not specific to a particular field rather it targets multiple fields. On the other hand, the approach has a weakness of not reaching the less privileged in the society.
The higher vocational education is very critical to the employers as it helps to impart important skills to the potential employees. Due to the importance of higher learning skills, the Agency for Higher Vocational Education was founded back in 2009 to help mitigate the problem of lack of skilled workers that was then creating a major barrier to economic development. Since the development of the agency, there has been progressing in competency among the workers and employees. This is plausible since the skills are the most important thing that employers are looking for in any prospective employee. Every year the agency spends up to $275 million to ensure that both fresh graduates and workers have the specific skills required for their specialization and in 2012, 40,000 students were enrolled in 1,000 HVE programs.
This approach of creating competency is very advantageous as the program do not require payment of high fees as it receives much of the funding from private donors. While the only disadvantage with this approach is that it may fail whenever the private donors pull out of the project.
This report has discussed numerous approaches applied by countries to create and improve competency. From the discussions, it is evident that most countries especially those in resource-limited settings have not realized the full potential of their competency. This can be attributed to the lack of infrastructure and R&D necessary to attain the competency. On the contrary, developed countries have been able to achieve much due to their capacity to utilize the available resources maximally coupled with their innovation and technology. Developed countries have also been on the forefront in trying to help the developing countries to realize their full potential and improve their competency. The strengths and shortcomings of the approaches employed in achieving competency have also been discussed at length in this report and we can conclude that for any approach to be employed, there is need to evaluate the cost-benefit analysis and adopt it only if the benefits outweighs the cost
Branscomb, L. M. (2013). Creating Competitiveness: Entrepreneurship and Innovation Policies for Growth edited by David B. Audretch and Mary Linenstein Walshok. Science and Public Policy, 40(6), 828-829. doi:10.1093/scipol/sct036