World Economic Forum , 2000

Harvard University Michael E. Porter Peter K. Cornelius Jeffrey D. Sachs Macha Levinson Andrew M. Warner Klaus Schwab

The Global Competitiveness Report 2000

Co-chairs of the Advisory Board:

Professor Klaus Schwab President, World Economic Forum

Professor Michael E. Porter Harvard Business School

Professor Jeffrey D. Sachs Director, Center for International Development

New York • Oxford Oxford University Press 2000 The Global Competitiveness Report 2000 is Oxford University Press published by the World Economic Forum. The Report is the result of a collaboration between Oxford New York Athens Auckland the World Economic Forum and the Center for Bangkok Bogotá Buenos Aires Calcutta International Development (CID) at Harvard Cape Town Chennai Dar es Salaam Delhi University. Florence Hong Kong Istanbul Karachi Kuala Lumpur Madrid Melbourne Mexico City Mumbai Nairobi Paris At the World Economic Forum: São Paulo Singapore Taipei Tokyo Toronto Warsaw Professor Klaus Schwab President and associated companies in Dr Peter K Cornelius Berlin Ibadan Director Copyright © 2000 Dr Macha Levinson by World Economic Forum Director

Brad Ryder Published by Associate Oxford University Press, Inc. 198 Madison Avenue, New York, New York 10016 At Harvard University: http://www.oup-usa.org Professor Michael E Porter Harvard Business School and CID Oxford is a registered trademark of Oxford University Press Professor Jeffrey D Sachs Director, CID All rights reserved. No part of this publication Dr Andrew M Warner may be reproduced, stored in a retrieval sys- Research Fellow, CID tem, or transmitted, in any form or by any means, electronic, mechanical, photocopying, Chris Moore recording, or otherwise, without the prior per- Research Associate, CID mission of Oxford University Press. John M Tudor Research Associate, ISBN 0-19-513820-1 Harvard Business School Printing (last digit): 9 8 7 6 5 4 3 2 1 Daniel Vasquez Research Associate, Printed in the United States of America Harvard Business School on acid-free paper

Ha D Nguyen The term “country” as used in this report does Design not in all cases refer to a territorial entity that is Hope Steele a state as understood by international law and Copy Editor practice. The term covers well-defined, geo- graphically self-contained economic areas that are not states but for which statistical data are maintained on a separate and independent basis. Contents

Preface 7 by Klaus Schwab, World Economic Forum

Growth Competitiveness Ranking 11

Current Competitiveness Ranking 11

Executive Summary: Current Competitiveness and 14 Growth Competitiveness by Michael E. Porter, Jeffrey D. Sachs, and Andrew M. Warner, Harvard Business School; Center for International Development, Harvard University

Globalization and International Competitiveness: 18 Some Broad Lessons of the Past Decade by Jeffrey D. Sachs and Andrew M. Warner, Center for International Development, Harvard University

Economic Creativity 28 by Andrew M. Warner, Center for International Development, Harvard University

The Current Competitiveness Index: Measuring the 40 Microeconomic Foundations of Prosperity Competitiveness by Michael E. Porter, Harvard Business School

Measuring National Environmental Performance 60 and Its Determinants by Daniel C. Esty and Michael E. Porter, Yale University School of Law and Yale School of Forestry and Environmental Studies; Harvard Business School

Assessing the Euro’s Performance on the Basis of the 76 Executive Opinion Surveys by Peter Cornelius, Philippa Malmgren, and Andrew M. Warner, World Economic Forum; Center for International Development, Harvard University

Education for Technology or Technology for Education: 86 The Dilemma of the New Economy by Macha Levinson, World Economic Forum

The Executive Opinion Survey 92 by Peter Cornelius and Andrew M. Warner, World Economic Forum; Center for International Development, Harvard University

Country Profiles 101

Data 223

Technical Notes and Sources 332 Partner Institutes

Argentina Egypt IAE, Management and Business School, Austral University Federation of Egyptian Industries Professor Marcelo Paladino Dr Abdel Moneim Seoudi, Chairman Alberto Willi, Assistant Researcher Ahmed Ezz, Deputy Chairman Australia Loutfi Mazhar, Executive Director Business Council of Australia, Melbourne David Buckingham, Executive Director Club de l’Expansion, Paris Austria Centre de Prévision de l’Expansion, Paris University of Economics and Business Administration, Vienna Philippe Lefournier, Directeur Général Christian Bellak, Assistant Professor Greece Brazil Federation of Greek Industries, Athens Fundaçao Dom Cabral, Belo Horizonte John Chryssanthacopoulos, Economist, Relations with the State and Emerson de Almeida, Dean the Institutional Authorities Dr Aldemir Drummond, Professor Antonis Tortopidis, Economist, Coordinator Research and Analysis Bolivia, Costa Rica, Ecuador and El Salvador Hong Kong Latin American Center for Competitiveness and Sustainable The Hong Kong General Chamber of Commerce, Development, INCAE Ian Perkin, Chief Economist Alberto Trejos, Director Hungary Ligia Maria Castro-Monge, Associate Director KOPINT-DATORG Economic Research, Budapest Bulgaria András Köves, Deputy General Director Center for Economic Development, Sofia Gábor Oblath, Chairman 4 Dr George Prohasky, Director Agnes Nagy, Head of Section Dr Dimiter Ivanovski, Program Director Iceland Dr Anelia Damianova, Senior Expert Samtok Atvinnulifsins Canada Confederation of Icelandic Employers, Reykjavik Business Council on National Issues, Ottawa Dr Finnur Geirsson, President and CEO Thomas d’Aquino, President and Chief Executive Ari Edwald, Managing Director Chile David Stefansson, Consultant Universidad Adolfo Ibáñez India Professor Fernando Suárez, Director Confederation of Indian Industry, New Delhi Professor Gastón Galleguillos Tarun Das, Director General Ms Karin Arenaza, Research Assistant TK Bhaumik, Senior Advisor-Policy China Indonesia Institute of Economic System and Management Indonesian Chamber of Commerce and Industry, Jakarta State Council Office for Restructuring Economic Systems Dr Tulus Tambunan Mr Chen Li, Deputy Director Dr Sjahrir Dr Cao Yuanzheng, Research Fellow Ireland Dr Gao Shi Ji, Research Fellow Irish Management Institute, Dublin Colombia Barry Kenny, Chief Executive Departamento Nacional de Planeación Conor Hannaway, Director of Corporate Development Juan Carlos Echeverry, Vice-Director Kevin Hannigan, Head of Economic Research María Isabel Agudelo, Head, Foreign Investment Division Tatiana Nuñez, Assistant, Foreign Investment Division Manufacturers Association of Israel, Tel Aviv Czech Republic Moshe Nahum, Director, Foreign Trade and International CMC - Graduate School of Business, Celàkovice Relations Division Peter Loewenguth, President CMC Daniel Singerman, Economist Ing Jaroslav A Jiràsek, DrSc, Professor, Honourary Dean Italy Marie Kopalová, Assistant CMC Ambrosetti Studi e Servizi Ing Jana Bondyova, Department Head, Czech Statistical Office Internazionali, Milan Denmark Enrico Solimene, Managing Director Dr H A Hazard, Vice President, International Affairs Copenhagen Business School Singapore Keizai Doyukai, (Japan Association of Corporate Executives) Corporate Communications and Planning Division Mr Yotaro Kobayashi, Chairman Economic Development Board, Singapore Mr Koichi Minaguchi, Vice Chairman and President Slovakia Jordan ex LCP, AIESEC Bratislava Ministry of Planning Lubomir Chalupka Competitiveness Unit South Africa Ms Nesreen Barakat, Director Business South Africa, Johannesburg Korea Spain The Federation of Korean Industries High Council of Chambers of Commerce of Spain, Madrid Michael SJ Kim, Head of Economic Research Division Jose Manuel Fernández Norniella Malaysia President Fernando Gómez Avilés, Managing Director Federation of Malaysian Manufacturers, Kuala Lumpur Gonzalo Solana González, Economic Studies Director Lee Cheng Suan, Chief Executive Officer Juan José de Lucio Fernández, Mauritius Economic Studies Researcher Joint Economic Council of Mauritius, Port Louis Sweden Arnaud Dalais, President Institute of International Business Raj Makoond, Director Stockholm School of Economics Mexico Professor Örjan Sölvell, Director Mexican Investment Board, Mexico City Taiwan Dr Hermann von Bertrab, President Council for Economic Planning and Development, New Zealand Executive Yuan, Taipei 5 New Zealand Employers’ Federation Inc Dr PK Chiang, Chairman Ms Anne K Knowles, Chief Executive Dr Chi Schive, Vice Chairman Norway Mr KC Lee, Vice Chairman Norwegian School of Management Dr CY Hu, Director, Economic Research Department Department of Strategy, Sandvika Chung-Chung Shieh, Economic Research Department Professor Torger Reve, President Thailand Associate Professor Lars Huemer, Department of Strategy Economic Analysis and Projection Division, Peru Office of National Economic and Social Development Board Centro de Desarrollo Industrial, Lima Ukraine Dr Luis Tenorio, Executive Director Harvard Institute for International Development, Centro de Investigación de la Unversidad del Pacífico, Lima HIID/CASE Ukraine, Kyiv Dr Mercedes Araoz, Senior Researcher Natalya Mikhaylova Philippines Vladimir Durovskiy Makati Business Club, Makati City, Metro Manila Venezuela Guillermo M Luz, Executive Director CONAPRI, Venezuelan Council for Investment Promotion, Caracas Marc P Opulencia, Deputy Director Luis Soto, Executive Director Michael B Mundo, Research Manager Ernesto J Mata, Investment Manager Poland Gabriela Reveron, Business Analyst Warsaw School of Economics, Warsaw Vietnam Professor Bogdan Radomski Institute of Sociology, Hanoi Portugal Pham Xuan Dai Instituto Superior de Estudos Empresariais da Universidade Zimbabwe do Porto, Porto Zimbabwe National Chamber of Commerce, Harare Rui Guimarães, Dean John Makamure, ZNCC Chief Economist, Advocacy & Trade Manager Daniel Bessa, Professor Wonder Maisiri, ZNCC Chief Executive Russia Nhlanhla Masuku, ZNCC President Business Thesaurus Vladimir Buev, President Preface

KLAUS SCHWAB President, World Economic Forum

The global economy is undergoing tremendous change, upon a project that was launched in Davos earlier this year not only bringing about huge opportunities, but also by the Environmental Task Force of the Global Leaders important challenges. In several countries, most notably for Tomorrow of the World Economic Forum. In contrast the United States, the rapid development of information to this project, which attempts to measure sustainability in technology has led to increased productivity and higher a single index, the Report seeks to explain differences in economic growth. In Europe, a cyclical recovery is environmental performance across countries based on dif- underway, and it is hoped that monetary unification will ferences in their policy environments. provide renewed impetus for further deregulation and Finally, the Report assesses the recent experience with accelerated market-oriented reforms. In the emerging the Euro, the introduction of which in early 1999 markets, the financial crises are behind us, and many arguably represents the most important change in the countries have begun to return to a sustained growth international monetary system since Bretton Woods. In so path. On the other hand, large disparities in the global doing, the Report takes advantage of the information economy continue to exist. Indeed, there is a nontrivial contained in the Executive Opinion Survey, a truly unique risk that the digital divide—the gap between those coun- set of data. Comparing the views of key decision makers tries that have access to communications infrastructure and in the business community, not only across member coun- those that do not—will widen further, undermining eco- tries of the European Monetary Union but also over time, nomic integration and development in a large part of the suggests a number of important policy conclusions. 7 world. As it is becoming increasingly clear just how far- Seizing the opportunities of the network economy reaching the implications of globality are, it seems fitting and coping with the challenges of increased globalization that this year’s Report will reach a wider audience than requires substantial efforts on many fronts. First and fore- ever before. We are pleased that Oxford University Press most, however, this entails improving our understanding has agreed to publish the 2000 Edition, and its tradition of about the complexity of the dramatic changes in the excellence in publishing will surely contribute to the con- world economy. It is with great pleasure, therefore, tinued success of the Report. that I present the World Economic Forum’s Global The Global Competitiveness Report is the result of an Competitiveness Report 2000, which I hope will make extremely fruitful cooperation with our partners at an important contribution in this endeavor. Harvard University, especially Professor Michael Porter of Aiming at helping to make a difference—the theme the Harvard Business School and Professor Jeffrey Sachs of of this year’s annual meeting of the Forum—the Global Harvard’s Center for International Development, who Competitiveness Report 2000 includes a number of impor- each draw from their command of their disciplines to tant innovations, three of which are particularly worth make their intellectual mark on the Report. Important noting. To begin with, we attach significantly greater analytical and empirical contributions have again been weight than before to technology as a key driver of made by Dr Andrew Warner of the Center for sustained economic growth. As a result, our rankings International Development, helping to ensure the excel- reflect to a much larger degree whether countries belong lence of the Report. At the World Economic Forum, Dr to the group of innovators or adopters whose economies Peter Cornelius has been charged with heading the Global look set to expand particularly fast, or whether they Competitiveness Program under which the Global are technologically disconnected. In this context, the Competitiveness Report is published. I would like to thank Report also discusses the role of education in achieving especially Dr Macha Levinson, who has continued to technological progress and narrowing the gap. ensure the coordination of the Report and the execution Second, this year’s Report focuses on the environ- of the Executive Survey. mental performance of individual countries, recognizing that the standards of living are inextricably tied to the quality of the natural environment. This analysis builds Rankings Table 1. Growth Competitiveness Ranking* Table 2. Current Competitiveness Index Ranking Rankings

Growth Current Current Competitiveness Competitiveness Competitiveness Competitiveness Ranking 2000 Ranking 1999 Index Ranking 2000 Index Ranking 1999 United States 1 2 Finland 1 2 Singapore 2 1 United States 2 1 Luxembourg 3 7 Germany 3 6 Netherlands 4 9 Netherlands 4 3 Ireland 5 10 Switzerland 5 5 Finland 6 11 Denmark 6 7 Canada 7 5 Sweden 7 4 Hong Kong SAR 8 3 United Kingdom 8 10 United Kingdom 9 8 Singapore 9 12 Switzerland 10 6 Australia 10 13 Taiwan 11 4 Canada 11 8 Australia 12 12 Belgium 12 15 Sweden 13 19 Austria 13 11 Denmark 14 17 Japan 14 14 Germany 15 25 France 15 9 Norway 16 15 Hong Kong 16 21 Belgium 17 24 Iceland 17 22 Austria 18 20 Israel 18 20 Israel 19 28 New Zealand 19 16 New Zealand 20 13 Norway 20 18 Japan 21 14 Taiwan 21 19 France 22 23 Ireland 22 17 Portugal 23 27 Spain 23 23 Iceland 24 18 Italy 24 25 Malaysia 25 16 South Africa 25 26 Hungary 26 38 Chile 26 24 Spain 27 26 Korea 27 28 Chile 28 21 Portugal 28 29 Korea 29 22 Turkey 29 31 Italy 30 35 Malaysia 30 27 Thailand 31 30 Brazil 31 35 11 Czech Republic 32 39 Hungary 32 33 South Africa 33 47 Greece 33 36 Greece 34 41 Czech Republic 34 41 Poland 35 43 Jordan 35 32 Mauritius 36 29 Slovakia 36 48 Philippines 37 33 India 37 42 Costa Rica 38 34 Mauritius 38 30 Slovak Republic 39 45 Egypt 39 43 Turkey 40 44 Thailand 40 39 China 41 32 Poland 41 37 Egypt 42 49 Mexico 42 34 Mexico 43 31 Costa Rica 43 38 Indonesia 44 37 China 44 49 Argentina 45 42 Argentina 45 40 Brazil 46 51 Philippines 46 44 Jordan 47 40 Indonesia 47 53 Peru 48 36 Colombia 48 52 India 49 52 Peru 49 46 El Salvador 50 46 Zimbabwe 50 45 Bolivia 51 55 El Salvador 51 47 Colombia 52 54 Russia 52 55 Vietnam 53 48 Vietnam 53 50 Venezuela 54 50 Venezuela 54 51 Russia 55 59 Bulgaria 55 54 Zimbabwe 56 57 Ukraine 56 56 Ukraine 57 58 Ecuador 57 57 Bulgaria 58 56 Bolivia 58 58 Ecuador 59 53

*NOTE: The concept behind the “Growth Competitiveness Ranking, 2000” and the “Competitiveness Ranking, 1999” is the same: to measure growth potential. However, the methodology for the 2000 ranking has been revised in light of new evidence. Please see the Executive Summary and the chapter on Economic Creativity for further explanation.