WEF Global Competitiveness Report: A useful tool

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The World Economic Forum (WEF) recently released its Global Competitiveness Report for 2012 – 2013.   The World Economic Forum has a solid economic process that is used to determine a country’s competitiveness.  This process is called the ’12 Pillars of Competitiveness.’  These are:

  • institutions
  • infrastructure
  • macroeconomic environment
  • health and primary education
  • higher education and training
  • goods market efficiency
  • labour market efficiency
  • financial market development, technological readiness
  • market size
  • business sophistication
  • innovation.

As you can see, many of these factors are what we used in determining our SIF30 list.  WEF weights these factors differently, depending on whether the economy of the country is Stage 1 (factor-driven), Stage 2 (efficiency-driven) or Stage 3 (Innovation-driven).

Reports like this are useful in examining particular countries, but chose challenges in terms of ranking frontier markets, as this type of report considers all countries globally.  Our SIF30 countries were ranked as follows:

Country

Ranking

Ghana

103

Zambia

102

Tanzania

120

Kenya

106

Uganda

123

Nigeria

115

Rwanda

63

Malawi

129

Zimbabwe

132

Sudan

NR

Gabon

99

Cameroon

112

Nepal

125

Philippines

65

Kazakhstan

53

Pakistan

124

Mongolia

93

Kyrgyzstan

127

Guatemala

83

Bolivia

104

Peru

61

Argentina

94

Paraguay

116

Egypt

107

Palestine

NR

Kuwait

37

Iraq

NR

Jordan

64

Saudi Arabia

18

Papua New Guinea

NR

*NR, Not rated
From the table, it is clear that the countries in SIF30 and Frontier Markets as a whole do not do well in these rankings.  The sole exceptions being Saudi Arabia and Kuwait, both of which are wealthy, industrialized nations.  The only reason they are included in SIF30 is due to the nature of their capital markets (in Saudi Arabia’s case, lack of access, and in Kuwait’s case, nascent markets).These reports are quite useful however, in their country analysis.  An analyst at WEF has poured through loads of data and worked with onsite agencies to derive this ranking.For example, the country report for Argentina tell us that the top 5 issues with doing business in Argentina are inflation, political instability, corruption, foreign currency regulations, and access to financing.  This type of profile is a great starting point for your research on a particular market.

Investing in Frontier Markets necessitates an ability to tolerate volatility and uncertainty.  Diversification across Frontier Markets certainly helps to assuage much of this, but investors must always be cognizant of the fact that investments in Frontier Markets can suffer from tremendous volatility.  Reports such as this WEF report can help identify the sources of this potential volatility

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