Emerging from the fray in good competitive shape
Emerging from the fray in good competitive shape
Luxembourg has risen four places in the 2009-2010 Global Competitiveness Report, published by the World Economic Forum, ranking 21st out of 133 countries. The Report contains a detailed profile of each economy as well as data tables with global rankings covering over 100 indicators. Against what Klaus Schwab, executive chairman of the WEF, describes as “the backdrop of the deepest global economic slowdown in generations”, Luxembourg has emerged in good shape but needs to become more efficient and innovative if it is going to break into the top 20.
The survey is based on over 100 indicators grouped under 12 titles, or “pillars”.
Luxembourg owes much of its overall ranking to strength in the first four pillars (institutions, infrastructure, macroeconomic stability and health & primary education), grouped together as the Basic Requirements, and in which Luxembourg ranks 7th place worldwide . Under Institutions, Luxembourg ranks in the top ten for 12 out of 19 indicators, including top place for freedom from organised crime and second place for “efficiency of legal framework in challenging regulations”: that is, how efficient is the legal framework for private business in challenging the legality of government actions and /or regulations. Public trust of politicians also ranks highly, evidence of the good working relationship between the business community and the political authorities.
It is no surprise to learn that Luxembourg’s competitive advantages include openness to foreign trade and financial know-how, including first place for “financial market sophistication” and, importantly, 9th place for “regulation of securities exchanges”. The country also scores highly for technological readiness and infrastructure.
As a small country, Luxembourg is predictably less efficient in education, spending a relatively high amount of money per child, and is weak in the “choice of suppliers” in the broader business sphere.
Where can Luxembourg improve?
One area of weakness is the percentage of the population enrolling for tertiary education. A well-documented concern, this is in reality amply counterweighted in the economy by some 145,000 commuters – many highly qualified - who cross the borders from neighbouring France, Germany and Belgium every day. However it reflects a missed opportunity for the local population. An increasingly wide choice of 1st, 2nd and 3rd cycle university courses is on offer to both full-time and part-time students and should have a long term positive effect in this area.
Indeed, the GDP per capita figure (at $ 113,044, by far the highest of 133 countries) is falsely inflated by the income generated by cross-border commuters. If we add 145,000 commuters (leaving aside their families) to the population of 490,000, GDP per capita falls to below $85,000, behind Norway.
Another area is labour market efficiency. Though scoring well for labour-employer relations (12/133), the country has fourth quartile scores for flexibility in other areas. A comparison with the Nordic countries (Sweden, Denmark, Finland and Norway, ranked overall 4th, 5th and 6th and 14th respectively) reveals that progress might be made in this area, to Luxembourg’s competitive benefit, without abandoning its social policy.
In the area of innovation, Luxembourg scores well for university-industry collaboration, company spending on R&D and patent protection. However, there is an obvious structural bias towards finance in all this and the Grand Duchy is marked down for lack of scientific research and the availability of scientists and engineers. This should be compensated in the near future by qualified alumni from the Faculty of Science, Technology and Communication at the University of Luxembourg (founded in 2003) which has the support – amongst others – of the steel giant Arcelor-Mittal.