Croatia Jumps 5 Places on Competitiveness Ladder: Here’s Why

Lauren Simmonds

The methodology is based on the analysis of the twelve pillars of competitiveness: institutions, infrastructure, the application of ICT, macroeconomic stability, health, skills, the product market, the labour market, the financial system, market size, business dynamics, and capacity for innovation, according to Poslovni Dnevnik on the 9th of October, 2019. In what way has Croatia managed to improve?

The National Competitiveness Council, as a partner of the World Economic Forum in the Global Competitiveness Program, has published the results of the “Global Competitiveness Report 2019”. In this year’s report, Croatia is ranked 63rd among 141 economies across the world and has improved its position by five places when compared to last year, which marks the largest shift in Croatia’s immediate region that any country has made.

”Croatia’s significant progress on the competitiveness ladder is due primarily to macroeconomic stability and the quality of infrastructure. The consistent efforts of the Croatian Government when it comes to fiscal discipline, resolving the troubled issues and withdrawing EU funds have resulted in greater competitiveness for Croatia. I believe that this will be an incentive for our society as a whole to further develop structural changes and improve regulatory frameworks, and thus contribute to the well-being of those living in Croatia,” said Ivica Mudrinić, President of the National Competitiveness Council.

The Global Competitiveness Index 4.0 places emphasis on the fourth industrial revolution and innovation that promotes new business models and accelerates growth.

The industrial revolution captures and reflects the changes that have come under the influence of advanced computer and communication technologies and have thus created a leap forward in the development of a new industrial paradigm. In order to prosper, economies must remain consistently open to new ideas, be efficient in embracing change, be determined to build an innovation ecosystem where innovation is present at all levels and invest in their employees as a key factor in their success. The index identifies the strengths and weaknesses of each individual economy, and helps identify important areas for improvement and tracks further progress.

The twelve pillars of competitiveness

As previously mentioned, the methodology is based on the analysis of the twelve pillars of competitiveness: institutions, infrastructure, the application of ICT, macroeconomic stability, health, skills, the product market, the labour market, the financial system, market size, business dynamics and the capacity for innovation. The pillars of competitiveness are also grouped into four groups: business environment, human capital, markets and the innovation ecosystem.

The total number of indicators is 103, and the share of “solid” statistical indicators is 70 percent, while 30 percent of the indicators refer to indicators obtained by the survey of businessmen’s opinions. Therefore, the overall ranking is much less dependent on perception, which is a common practice, and more on real, statistical indicators. This survey covers 99 percent of world GDP and 94 percent of the world’s population.

The methodology also measures the country’s distance from becoming the “ideal state” by a score of 0 to 100, and compared to last year, Croatia improved its rating by 1.8 and now stands at 61.9, which means that the country is now 38.1 away from being the ideal state (rating 100), which is likely a surprise for many.

This year’s report focuses on the care of the environment, which has become essential for the sustainable growth of a country’s economy. The focus is on climate change affecting agricultural production due to extreme weather changes and environmental pollution, the use of renewable energy sources and the availability of safe drinking water.

Singapore is the most competitive country in the world this year, followed by the United States, Hong Kong, the Netherlands, Switzerland, Japan, Germany, Sweden, the United Kingdom, and Denmark.

On the global competitiveness ladder, Croatia achieved the greatest progress in the pillar of macroeconomic stability, taking 43rd place, which is a jump of 63 places when compared to last year. Croatia is also better ranked in the pillar of infrastructure (32nd), health (47th) and the labour market (94th) than last year.

Compared to last year, there has unfortunately been a decline in the pillar of institutions (77th), ICT applications (60th), skills (69th), product markets (86th), the financial system (63rd), business dynamics (101st) and the capacity for innovation (73).

Among the competitive advantages are inflation (1st), the high level of electrification (2nd), trade barriers (6th), the quality of the roads (13th), workers’ rights (14th), etc.

Rather unsurprisingly, Croatia remains the worst in the efficiency of the legal system when it comes to dispute resolution.

As in previous years, Croatia remains the worst in the efficiency of the legal system in dispute resolution (140), the burden of government regulations (139), the efficiency of the legal system in challenging regulations (138), the ease of hiring a foreign workforce (137), the tendency towards entrepreneurial risks (137th), the government’s focus on the future (137th), finding skilled labour (137th), employment and layoffs (136th), etc.

The report shows that, by abolishing Croatia’s infamous, draconian and truly awful administrative procedures, creating a much needed atmosphere of legal certainty and reducing corporate giving, the government could improve the business and investment climate. In order to strengthen the innovation ecosystem, policies must encourage the transfer of technologies and knowledge in order to strengthen the technological readiness of the economy to apply new knowledge to the creation of innovative products and services, primarily by developing a scientific and educational system.

The main messages of the Global Competitiveness Report 2019 for Croatia are as follows:

Croatia needs to focus more on increasing competitiveness, as this is of great importance in order to improve overall living standards

Global economies are not ready for a future decline in productivity

Policy makers need to turn to policies other than monetary policies that increase investment and incentives to revive productivity growth

Finding a balance between technological integration and investment in human capital will be crucial to increasing productivity

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