UAE slides to 12th in global competitiveness ranking

The UAE is no longer among the world’s top 10 most competitive countries, as the lower oil price hits economic gains and its rivals spend more on health care and education, according to an annual ranking from the business school IMD. ​

The UAE fell to 12th place in the ranking this year, down from eighth place last year. This matches the ranking with the rival Global Competitiveness Report index, published annually by the World Economic Forum, which placed the UAE 12th in its 2014-15 report.

The UAE was the top-ranked country in the Middle East, one spot ahead of Qatar.

Sultan Al Mansouri, the UAE’s Minister of Economy, has said that the government wants the UAE to rank consistently among the 10 most competitive countries on the WEF index.

While productivity and competitiveness are unlikely to fluctuate much in the short term, details from the report provide a snapshot of areas in which experts believe the UAE needs to boost its competitiveness.

Low levels of spending on health care and education were significant drags on the country’s competitiveness ranking.

The UAE spent about 3 per cent of GDP on health care in 2012, the most recent year for which the IMF has data.

Even assuming an 11 per cent compound growth rate of spending in the UAE, as estimated by the investment fund Alpen Capital, the country’s health care spending this year will still be considerably below the average of 7.8 per cent among surveyed countries.

The UAE’s spending of 1.1 per cent of GDP on education in 2012, according to the most recent IMF data available is far lower than the average of more than 12 per cent spent by OECD countries.

According to the most recent Pupil International Student Assessment in 2012, which provides international comparisons of student mathematics, literacy and comprehension skills, the UAE was ranked 46th internationally – behind many of the countries it beat on both global competitiveness indexes.

But how the money is spent is also an issue, analysts said.

“People in the Gulf tend to choose education paths that will help them to gain jobs in the public sector,” said William Jackson, an emerging markets economist at Capital Economics. “But it tends to be the private sector where you get productivity increases that drive innovation and sustainably raise living standards.”

One of the UAE’s worst scores was for the involvement of women in business, for which the country was ranked 58th on the IMD index.

Female labour force participation has consistently lagged behind male labour force participation, with a large number of women in the UAE choosing to exit the labour force after maternity, according to Radhika Punshi of the HR consultancy The Talent Enterprise.

Masood Ahmed, the director of the Middle East at the IMF, talked to The National last month about the challenges faced by the UAE in increasing its economic competitiveness. He also highlighted the need to increase female labour force participation, improving the effectiveness of money spent on education included.

The study by IMD – a business school based in Lausanne, Switzerland – ranked 60 countries on a range of social, economic, and demographic variables related to their economic performance.

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