Croatia, Montenegro and Turkey, none of them European Union members, are closer to meeting the EU's Lisbon criteria than Bulgaria - which ranks bottom of all 27 EU member states, according to a new report by the World Economic Forum (WEF).
This is according to a WEF report entitled The Lisbon Review 2008, released on October 27 ahead of the World Economic Forum on Europe and Central Asia to be held in Turkey from October 31 to November 1.
The WEF's review is the fourth in a biennial series that assesses the progress made by the EU member countries in the far-reaching goals of the EU's Lisbon Strategy of economic and structural reforms, the last of which was published in 2006.
In addition to assessing the performance of the 27 existing EU members, it also measures the competitive performance of the EU candidates and potential candidate countries.
Among key findings of the report was that Croatia, Montenegro and Turkey not only beat Bulgaria, they also were better-ranked than Poland.
The report said that 2004 accession countries were ranked ahead of many longer-standing EU members.
The eight dimensions measured by The Lisbon Review 2008 are: creating an information society for all, developing a European area for innovation and R&D, liberalisation (completing the single market; state aid and competition policy), building network industries, creating efficient and integrated financial services, improving the enterprise environment, increasing social inclusion and enhancing sustainable development.
The assessment is based on publicly available statistics (e.g. Internet penetration rates, unemployment rates) and data from the WEF's Executive Opinion Survey (EOS), an annual survey of business leaders that is carried out in over 130 countries, providing data for a variety of qualitative issues for which hard data does not exist (e.g. the quality of the educational system, the government's prioritisation of information and communications technologies).
Sweden is the most competitive economy as measured by the EU's Lisbon criteria, followed by Denmark, Finland and the Netherlands, according to the WEF report.
"In 2000 the EU set for itself an ambitious action and development plan with the Lisbon Agenda. With The Lisbon Review we aim to measure Europe's progress towards meeting its own criteria. What differentiates this study from many others is that much of the data used comes from a survey among CEOs and top executives in each of the countries under analysis. This means that the results can be interpreted in large part as the business community's perspective on how well these countries are meeting the Lisbon goals," said Jennifer Blanke, senior economist at the WEF's Global Competitiveness Network.
The Nordic countries are the strongest European performers in the area of innovation, attributable to their companies' aggressiveness in adopting new technologies and their level of spending on R&D, and the high degree of collaboration between universities and the private sector in research.
"Indeed, in terms of innovation `output', they register among the highest rates of patenting per capita internationally. The Nordics have also achieved a high level of social inclusion, with low unemployment (especially in Denmark, pioneer of the "flexicurity" system), and the strong participation of women in the workforce (especially in Finland and Sweden). These countries also ensure a high level of skills and skills upgrading through top-notch educational systems and strong on-the-job training programmes," a WEF media statement about the report said.
Among the other countries in the top 10, performance is more mixed, with some notable strength in specific areas. For example, the Netherlands is ranked first for the extent of liberalisation in the country, second for its achievements in fostering an information society, and third for the quality of financial services in the country.
Germany and France rank first and third, respectively, for their network industries, particularly due to their excellent infrastructure, although the enterprise environment is a comparative weakness for both countries, respectively ranked 15th and 13th in this area. Austria is ranked second for liberalisation, while Ireland and Luxembourg are ranked second and third, respectively, for the quality of their enterprise environments.
A striking deterioration since the last assessment relates to the decline in the United Kingdom's financial services assessment, ranked first in the last Lisbon Review and now at 11th place. This can be traced to a weakening across the board, most notably in the access to capital and concerns about the soundness of the banking sector, linked to turmoil in the financial sector which has hit the United Kingdom particularly hard, given the economy's strong dependence on the financial services sector, the WEF media statement said.
According to the study, several 2004 accession countries are ranked ahead of many longer-standing EU members, including Estonia, Slovenia and the Czech Republic. This implies that a number of these recent members are already closer to meeting the Lisbon goals than many of the original EU 15 members.
Among potential future members, Croatia, Montenegro and Turkey do better in many of the different dimensions, and in the overall ranking, than Poland and Bulgaria, two EU members.
"The assessment indicates that EU attention should be focused on three areas in order to get closer to the Lisbon goal of becoming `the most competitive and dynamic knowledge-based economy in the world': improving the environment for innovation and R&D, developing a stronger information society, and creating an enterprise environment that is more conducive for private sector economic activity," said Thierry Geiger, economist at the WEF's Global Competitiveness Network.
According to the report, Turkey ranks fourth among the 16 countries, behind the two most competitive Balkans, Croatia and Montenegro, as well as Azerbaijan, but ahead of most other countries. Turkey's overall score of 3.82 is notably higher than those of Poland and Bulgaria and very close to that of Romania. Turkey's main area of strength is the enterprise environment, where its score is not far behind the EU27 average and indeed nearly on a par with the accession country average.
The report said that this is related to the ease with which new companies can be started in Turkey, notably requiring only six days on average compared with an EU average of 17 days, although access to start-up capital remains comparatively difficult in the country at present.
Another related area of strength is liberalisation, where Turkey not only ranks first out of 16 non-EU Asian and European countries, but also on a par with the accession 12 average of 4.51.This relates to the rather effective antitrust policy in the country which ensures a high level of competition and comparatively high-quality players in the market, among others.
"Yet, there are a number of dimensions that Turkey must strengthen to bring its overall competitiveness up to EU levels. For example, efforts should be made to improve its
information society, encouraging greater uptake of ICTs among business, society and government, in view of enhancing productivity. More focus should also be placed
on sustainable development through more stringent and well-enforced environmental legislation. Yet Turkey's greatest area of comparative weakness relates to the lack of
social inclusion, where it ranks 14th out of all 16 countries (followed only by Macedonia and Bosnia and Herzegovina).Turkey has a relatively high unemployment rate and the participation rate of women in the economy is among the world's lowest," the report said.
"In this context, improving the formal educational system as well as professional training would better prepare the workforce to adapt to the rapidly changing global economy.
The report said that the non-EU Balkan countries were spread throughout the ranking of the 16 comparators, occupying the first two positions as well as the last two.
Croatia and Montenegro lead the group, based on a number of strengths. They are ranked as the top two countries for their financial services, with Montenegro in particular close to the accession country average. In addition, their efforts towards ensuring sustainable development also place them as the top two countries and well ahead of the accession 12 average, with Montenegro just behind the overall EU27 average. "This is perhaps linked to the critical importance of tourism for their economies," the report said.
Croatia is also ranked first for its network industries, where it outperforms the accession country average, related to the good quality of infrastructure in the country. Croatia is also ranked first for the development of its information society, although it still remains well behind the accession and overall EU averages in this area.
Macedonia (ninth), and Serbia (11th) constitute the second group of countries, which are clustered in the middle of the rankings of the 16 countries.
"They have some comparative strengths, such as Macedonia's comparatively high ranking for financial services (fourth).Yet, their performance still trails behind the EU average by a large margin in all areas, showing that much effort will be required to get them closer to EU competitiveness levels," the report said.
It said that, in these countries, of particular concern were the poor quality of infrastructure, the low level of innovation and the lack of focus on sustainable development.
The lowest two ranked countries were Albania (15th) and Bosnia and Herzegovina (16th).
"These countries trail all comparators as well as the EU members by a wide margin, with Albania ranked last in three areas (innovation, financial services and sustainable development) and Bosnia and Herzegovina ranked last of all countries in two areas (enterprise environment and the lack of social inclusion). "Efforts will be required across all fronts to improve the competitiveness of these two countries and prepare them for eventual membership in the EU," the WEF report said.
The full report is available at http://www.weforum.org/lisbon2008