Russia Loses Nine Spots
// According to a Global Study by the World Bank
The Russian economy is continuing to evolve rapidly; Russian companies are appearing on international markets; and incomes are growing among the population. But does this show real economic strength? Yet another international rating is casting doubt on that question: in the "Report on Global Competitiveness" released annually by the World Economic Forum in Geneva, Russia's position is falling. The report was released only a few weeks after the World Bank's "Doing Business 2006" report rated Russia poorly in terms of conditions for business development.
The World Economic Forum rates countries chiefly on the basis of two rankings: the index of global competitiveness (GCI), in which Russia ranks 62nd, nine spots lower than last year; and the index of business competitiveness (BCI), in which Russia ranks 71st, again nine positions lower than last year. Among the countries of the former USSR, Russia is somewhere in the middle, behind the Baltic countries and Kazakhstan.
The main sources of data for the two rankings are polls of company management in more than 120 countries. They were asked for their opinions on the quality of the situation for entrepreneurial activity in their countries. In the number of people questioned, Russia ranked number one.
The index of competitiveness allows the strengths and weaknesses of Russia's economy to be assessed. The country still retains its former strong positions in the areas of personnel training and scientific research, but it is falling behind in terms of favoritism among state employees, corruption, and a lack of independent courts. Russian companies compete mainly by having lower prices instead of higher quality. It is assumed that the country's losses in position over the last year are mainly visible in such spheres as personnel qualification and governmental regulation. The first testifies to the erosion of the traditional competitive advantage of Russia, and the second to a low assessment of the effectiveness of government policies.
Russia's competitiveness was measured this year by polls in more than ten key regions in the country, and the results show a striking disparity in the quality of the business climate for international and large Russian companies and the conditions of doing business for small and medium-sized Russian companies. The situation is particularly difficult for the latter.
Opinion is divided on how Russia should react to the rankings. Some believe that the country can afford to ignore them as long as the oil revenues keep rolling in. But that strategy, which worked well for some Near Eastern countries, with their small populations, is not as simple for Russia. The Russian middle class will be able to live comfortably only if the country's economic competitiveness extends beyond the oil and gas sector.
An analysis of Russia's competitiveness that will hopefully help the Russian authorities to improve their management of the country's economy is currently being carried out in the framework of an ambitious project entitled "A Strategic Audit of the Russian Federation," which is being overseen by the Center for Strategic Development.
Kristian Ketels, Deputy Director of the Institute for Strategy and Competitiveness at Harvard Business School, and Aleksey Prazdnichnikh, coordinator of the Program for Global Competitiveness of the World Economic Forum in Russia
All the Article in Russian as of Sep. 27, 2006
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