Competitiveness has been studied through different metrics, considering economic aspects, institutional efficiency, and ease of doing business. Given the difficulty of analyzing competitiveness using a single metric, the World Competitiveness Index from the International Institute for Management Development is considered. This index considers economic aspects (such as employment, inflation, and GDP, among others), government efficiency, business efficiency, and infrastructure.
The ranking in the index is a measure that the public opinion (investors, consumers, producers, and civil society in general) can use to observe a country’s improvements and compare it with others. This year, Denmark holds the first position with a score of 100, while Venezuela ranks last at 26.18.
Now, let’s see how competitiveness has developed in Asia. Firstly, in the 1st position in the region and 4th globally, with a score of 97.44, is Singapore. On the other hand, Mongolia ranks 14th (last place) in the region and 62nd globally, with a score of 35.56. The difference between these extremes is not solely due to economic factors, but it encompasses various aspects, some of which will be discussed in this section.
Let’s begin by analyzing the economic aspects of Mongolia, a country where agricultural, livestock, mining, and oil industries prevail. During 2019-2021, it experienced an average annual GDP growth of 0.87% due to the global production decline caused by COVID-19 measures in 2020 and part of 2021. In addition, there needs to be better management to mitigate inflation, with an average of 5.91% and a cumulative rate of 29.57% during 2017-2021, which means the purchasing power was reduced to one-third during that time.
According to the Global Innovation Index, Singapore, ranked as the world’s top country in innovation inputs from 2020-2021, experienced an average annual GDP growth of 1.6% from 2019-2021. The inflation rate during 2017-2021 did not exceed 2.3%, averaging 0.74%, with a cumulative rate of 3.71%. Thus, it takes five years in Singapore to experience the same loss of purchasing power that Mongolia experiences in one year, generating a competitive advantage on the international stage.
Next, let’s analyze the governmental aspects that influence competitiveness improvement. Mongolia ranks 58th globally, with a score of 28.33. One of the reasons for this position is the risk of political instability, which has deteriorated over the past five years. Another reason is the business legislation, especially in the categories of taxes and ease of doing business, where it ranks 71st and 100th, respectively, according to the 2020 Doing Business Index.
As for Singapore, it ranks 7th globally with a score of 84.14. One of the reasons for this position is the decrease in public spending relative to GDP, which remained around 15%, except for the year 2020, when it increased to 24% due to the pandemic but returned to 15.41% in 2022. Moreover, the tax burden is one of the most competitive in the region, with an approximate rate of 13% relative to GDP over the past five years. Lastly, the perception of corruption in the public administration is one of the lowest in the world, ranking 5th in the Corruption Perceptions Index with a score of 83 points.
Lastly, we have the efficiency of doing business, which is of utmost importance for countries, as non-restrictive policies in business creation lead to an improvement in citizens’ quality of life, including increased employment, investment, and reduced taxes. In this aspect, Mongolia ranks last, with a score of 10.24 points, emphasizing that its productivity and work efficiency are among the most degrading due to low education quality. Additionally, the labor market is precarious due to the high costs of hiring personnel under existing legislation. Furthermore, limited access to the global financial market, resulting from little competition in credit provision by banks, places Mongolia among the lowest ranks in terms of financing access.
On the other hand, Singapore ranks 8th globally with a score of 85.50. This is due to legislation in innovation, income taxes, and education quality. The latter has been globally recognized, positioning Singapore as the top country in education quality, leading to improvements in the labor market, productivity, and efficiency, placing it among the top 10 in these metrics.
The above is just a tiny glimpse of Mongolia’s challenges compared to Singapore, which are primarily institutional problems, such as reducing public debt, facilitating business creation, and implementing flexible fiscal policies, among others.
* Ricardo Oliva Bravo is currently an intern at Fundación Internacional Bases
Source: We Are Innovation
