World Economic Forum praises Turkey, but cites several factors limiting the growth of business in the Balkans.
By Menekse Tokyay for Southeast European Times in Istanbul -- 13/09/13
A sign in an Istanbul store window advertises discounted merchandise. [AFP]
The World Economic Forum's latest Global Competitiveness Report praised Turkey's vibrant business sector, while advising Balkan countries to improve weak macroeconomic indicators and boost the fight against corruption.
The 2013-2014 report, released September 4th, ranks 148 nations on the basis of performance of their institutions, market efficiency, infrastructure, innovation, macroeconomic environment, health and education, financial markets, market scope as well as business sophistication.
Turkey dropped one spot to 44th with a score of 4.5 out of a maximum of 7.
"The macroeconomic environment has deteriorated slightly, with a rising fiscal deficit and inflation nearing double digits, although the situation remains better than in many other European economies," the report said.
Turkey's business community benefits from its large domestic market and intense local competition, according to the report. The developed infrastructure, especially roads and air transport, is also mentioned as an advantage for the country's competitiveness.
The report suggests that Turkey should focus on boosting its human resources bases through better primary education and healthcare, as well as higher education and training. It also mentions the need for a more efficient labour market and more transparent and well-organised public institutions.
Experts said that in the fields of innovation and labour market efficiency, Turkey is far behind its international competitors, and that both areas require a comprehensive strategy.
Nur Gunay, director of the Centre for Innovation and Competitive-Based Development Studies at Bogazici University in Istanbul, told SETimes that the report's results for Turkey showed that it is vital to adopt a systemic approach to analyse and design policies within the complex network of relationships between the private sector, public institutions and civil society.
Gunay said the National Science, Technology and Innovation Strategy of Turkey's Scientific and Technological Research Council for the period 2011-2016 is expected to improve the competitiveness of products, processes and services and to develop human resources through action plans based on innovative technologies.
"In the near future, we hope to see results of these policies aimed at strengthening collective performance for generating, adopting and diffusing innovations as a part of National Innovation Systems in Turkey so Turkey can reach an innovation-driven stage," Gunay said.
Balkan countries showed a mixed record in terms of progress in competitiveness, with a need to focus more on innovation and macroeconomic indicators. Montenegro was in 67th place, followed by Macedonia (73rd) and Croatia (75th).
Romania climbed two positions to 76th with a score of 4.1. The report indicated that Romania’s business environment faces problems such as corruption, difficult access to financing, authorities’ inefficiency and the fiscal regime. At the same time, southeast and southwest Romania rank among the least competitive regions of the EU along with Severozapaden in Bulgaria and Notio Aigaio in Greece.
Experts say that despite progress made in recent years, Romania must do more to support the business environment.
"There have been changes, but not sufficient," Calin Mustareata, head of the financial consulting company Magna Development, told SETimes. "Romania remains a country with legal sideslips that kill entrepreneurship, we lack an educational culture, we do not appreciate merits, and we do not have a competent and dedicated political class."
Bosnia and Herzegovina moved up one place to 87th with a score of 4. BiH has shown progress in innovation, according to the report. But competitiveness was adversely affected by a worsening macroeconomic environment, poor sophistication of businesses, problems in acceding to financial resources and political instability.
Muris Čičić, a professor at the Faculty of Economics in Sarajevo, said the improvement of business conditions in the country has been necessary for several years.
"Unfortunately, the social and political situation is not in favour for these changes and we can say that authorities in the country do not even deal with these important issues. Reforms in all sectors of society are completely suspended, and without reforms we cannot expect a better situation in general," he told SETimes.
Albania dropped six places to 95th, with its score of 3.8 attributed to the poor record in market dimensions and innovation. The report cited Albania's strengths as health care and primary education.
Albanian professor Henri Cili, the administrator of the European University of Tirana, said the reasons for the change in Albania's ranking are related to the stalling of the reforms.
"The typical cases are the non-finalising of some processes of reforms related to property, health care, control of territory and the standards of the services offered as well as the ruining for corruptive reasons of the competition in sectors which are by now liberalised," Cili told SETimes.
Cili added that Albania can improve its ranking by finalising the liberalisation concept in each of those sectors, combining that with regulating elements that guarantee the quality of the products and reduce costs for consumers.
Serbia is the worst positioned of all the countries in the region, ranking 101st with a score of 3.8. The report cites Serbia's poor infrastructure, instability in its macroeconomic environment as well as its lack of labour market efficiency and development of financial markets.
The report states that the most problematic factors that affect the conduct of business in Serbia are corruption, inefficient administration, access to source of finance, and political instability.
"The main problem of the Serbian economy is that we spend more than we produce," Sava Smiljić, a professor at the University of Strategic and Operational Management in Belgrade, told SETimes, underscoring the need for a new economic approach based on reduced bureaucracy, elimination of subsidies to foreign companies for employment and investment in agriculture.
"The recipe for changing consciousness of the Serbian people might be based on the development of tolerance and love, because without changed attitude towards our own state, no economic reform will give satisfactory results," he added.
Correspondents Ana Lovakovic in Sarajevo, Paul Ciocoiu in Bucharest, Linda Karadaku in Pristina and Ivana Jovanovic in Belgrade contributed to this report.
What steps should governments take to promote greater competition in the business sector? Share your thoughts in the comments section.