The UAE has ranked 27th out of 140 countries in the latest Global Competitiveness report issued by the World Economic Forum (WEF)- the highest in the Middle East region.
The country had an overall score of 73.4 out of 100. It ranked 27th out of 135 countries in the 2017 edition – according to a comparison tool on the WEF website.
The Geneva-based organisation, which assessed economies across 98 different indicators, added new metrics to its 2018 rankings such as workforce diversity and press freedom.
The report focusses on 12 main drivers of productivity including – institutions, infrastructure; technological readiness; macroeconomic context; health; education and skills; product market; labour market; financial system; market size; business dynamism; and innovation.
The UAE economy’s main strength lies in the “quality of its enabling environment, as companies can operate under stable macroeconomic conditions (1st), make use of good infrastructure (15th) and one of the highest levels of ICT adoption in the world (6th)”, the report stated.
In all of these areas, the UAE is either at the global frontier or less than 20 points away from it.
“Sizeable investments in technological readiness have yet to fully turn into increased innovation capability, where the country lags further behind, ranking 35th globally and at only half the theoretical global frontier. The quality of the country’s human capital remains a key constraining factor, with the current workforce having on average less than 10 years of schooling and the labour market still characterised by inefficient use of the available pool of talent,” it added.
The report urged the UAE to continue adopting reforms to spur business dynamism and increase the efficiency of product markets, particularly in the service sector.
“Recent improvements of the insolvency framework represent a positive step in this direction,” it said.
Meanwhile Saudi Arabia ranked in the 39th position with a score of 67.5 out of 100.
The country relies on a “conducive macroeconomic environment that has weathered well the turmoil of the recent years”, which have been characterised by low oil prices.
It has modern infrastructure and a large market size, MENA’s largest and the 17th globally.
“The ambitious set of reforms included in its Vision 2030, once implemented, will increase private sector dynamism and innovation capability in the country, currently among its relative weaknesses,” the report stated.
“In particular, insolvency frameworks are currently penalising business dynamism, while research institutions and formal education will both need to improve in order to spur the country’s level of innovation.,” it added.
In past years, the kingdom has increased participation in the education system and, with a school-life-expectancy of 16.9 years, its future workforce is set to be one of the most educated globally.
“However, it will be equally important for Saudi Arabia to improve the quality of its education programs and their correspondence to the needs of the economy to ensure that graduates have the right set of skills. Labour market efficiency is impaired by a number of constraints and regulations that segment the market and decrease the overall level of efficiency and talent utilisation,” the report added.
Overall, competitiveness performance in the Middle East and North Africa remains diverse, the report found.
The pace of economic reforms in the region has accelerated, after a combination of economic, social and political factors increased the urgency to diversify the economy and broaden the benefits of growth, the report said.
It also lauded reforms in the region such as removal of subsidies and the introduction of VAT.
But limited technological and ICT readiness, gaps in business dynamism and labour market efficiency and weak insolvency frameworks are among the most urgent areas of reform for the region.
Globally, the rankings also saw Switzerland pushed off from the top spot for the first time in a decade, with the United States now ranking first.
Europe as a whole was found to be less competitive than East Asia and the Pacific regions.
“Competitiveness is neither a competition nor a zero-sum game—all countries can become more prosperous,” said Saadia Zahidi, member of the managing board and head of the Centre for the New Economy and Society.
“With opportunities for economic leapfrogging, diffusion of innovative ideas across borders and new forms of value creation, the Fourth Industrial Revolution can level the playing field for all economies. But technology is not a silver bullet on its own. Countries must invest in people and institutions to deliver on the promise of technology.”