Ganeshan Wignaraja and Ashley Taylor1
There is a growing interest in policy circles in the developing world in comparing competitive performance across countries and obtaining guidelines for strategy. 2 Policy makers are typically concerned with how their economy has been performing in relation to: (a) countries at a similar level of economic development (or within the region) which they would like to outperform; and (b) countries at a higher level of economic development (e.g. Newly Industrialising Economies (NIEs) in East Asia) whose strategies they would like to emulate. Similarly, multinational companies constantly research the costs and benefits of production locations on a worldwide basis. This interest has fuelled several attempts to devise a competitiveness indicator at the national level, a composite measure ranking countries according to particular criteria. The number of rankings (published and unpublished) of national competitiveness prepared by governments, consultants and research organisations is growing and becoming increasingly influential in policy formulation.
Against this background, this chapter appraises some existing work and puts forward an alternative measure of competitiveness performance in the developing world. The section on The "Swiss" competitiveness indices' examines the two well-known indices contained in The Global Competitiveness Report 2001 of the World Economic Forum (WEE) and The World Competitiveness Yearbook 2001 of the International Institute for Management Development (IMD) and highlights weaknesses of such approaches. The section on 'Construction of the MECI' constructs a simple manufactured export competitiveness index (MECI) based on three subcomponents (current manufactured exports per capita, long-term growth in manufactured exports and the share of technology-intensive exports) and presents the results by country, region and income group. The country coverage of the MECI (eighty developing and transition economies) provides a more comprehensive representation of the developing world than the WEF and IMD exercises. The section on 'Factors affecting manufacturing export competitiveness' examines potential determinants of manufactured export competitiveness and concludes that sound macroeconomic conditions, trade liberalisation and an emphasis on supply-side factors (such as foreign direct investment (FDI), technological effort, human capital and communications infrastructure) are