Nation 45th in Competitiveness

Russia is no longer considered the least competitive country in the world.

Over the course of last year, Russia surpassed Colombia, Poland, Venezuela and Indonesia to take 45th place in terms of its competitiveness, according to a poll of business leaders conducted by the International Institute for Management Development, or IMD.

The Economic Development and Trade Ministry said the country's higher ranking demonstrates that attitudes toward Russia are changing.

Every year, the IMD business school in Lausanne, Switzerland, compiles a ranking of countries' competitiveness. This year, the list includes 49 countries, two more than last year. The purpose of the list is to demonstrate to what extent countries help their business leaders achieve greater competitiveness on the domestic and international markets. Countries are rated not only by objective economic factors, such as the rise of gross domestic product, but a long list of criteria that includes:

o 68 criteria for economic activity that evaluate macroeconomic indicators;

o 84 criteria for government performance, including general policies, tax policies and protection of investors;

o 60 criteria for effective business management, including profitability, responsibility and innovation;

o 74 criteria for infrastructure, measuring to what extent local, technical, scientific and human resources meet business needs.

In addition, IMD used statistics received from international organizations, national and private institutes and data compiled from a survey of 3,678 directors of large and medium-sized companies in the countries studied.

The Economic Development and Trade Ministry said the IMD survey could be used to gauge world opinion. "We keep track of such data," said Deputy Minister Arkady Dvorkovich. "It might not be entirely objective, but it's an indicator of attitudes toward us. Russia's position will continue to improve if the measures we propose are implemented."

However, the government does not study the country's competitiveness in its own analyses. "The rise in exports Ч that's the rise of our competitiveness," said Alexander Pakhomov, head of the Economic Development and Trade Ministry's trade policy department.

Using exports as an indicator, Russia ranks high. It's fourth in the world for the growth of exports and is second for its positive net trade balance. Moreover, Russia comes out on top in some categories. It has the highest correlation of the value of exports to the value of imports and the lowest cost of electrical energy for industry. Over the past year, the government achieved the greatest reduction of its state debt among the countries surveyed, with a 30.8 percent drop, not taking into account inflation.

Russia could perform much better if it targeted those areas where it particularly falls behind, said Suzanne Rosselet, who was responsible for the methodology used in IMD's research. If Russia brought results in its 20 weakest areas up to the IMD study's average, the country's rating would rise to 39.

Russia's weaknesses, in IMD's opinion, include the highest foreign debt as a percentage of GDP at 85.6 percent, the highest level of energy consumption at 62.7 kilojoules per dollar of GDP, the absence of a mechanism to protect foreign investment, and drug and alcohol abuse.

The ratings rose the fastest among countries that focused on government performance and effective management of infrastructure, Rosselet said. Finland and Sweden, for example, are increasing their competitiveness through large investments in new technology.

Hong Kong, significantly, improved its rating by returning to sixth place Ч the position it held in 1999 Ч from 12th place in 2000. Like Russia, Hong Kong achieved its higher ranking through an improved macroeconomic rating. Last year, Hong Kong's GDP rose 10 percent.

The institute's specialists warn that this year, the arrangement of power could change, given that the United State's economic slowdown and the current economic crisis in Japan will have a negative impact on other countries.

"The year 2000 was a year of economic excess, 2001 could be the year of the economic hangover," the report states.

"The United States and Japan create 46 percent of the world's gross national product," said Professor Stephane Garelli, director of the project. "A worsening economic situation in those countries could hurt every country in the world."

Japan's rating has fallen for the past 7 years. For eight years until 1994, Japan held first place. But the country is being undermined by the reluctance of its authorities to undertake reforms that would allow it to overcome stagnation. The Americans, who have held first place since 1994, are not in danger of losing their position.

"The leading countries have created conditions not only for attracting investment, but also the best minds," Garelli said. "The U.S. has been the most active in this area. From 1994 to 1999, they 'imported' 124,000 Indians, 68,000 Chinese, 57,000 Filipinos, 49,000 Canadians and 42,000 British citizens, all highly educated. In the race to increase competitiveness, the struggle is waged for bytes and minds."