Speaking at the school’s annual Business Forum, IMD Professor of Finance Arturo Bris said the size of the public sector is negatively related to the growth of an economy and high levels of government debt are negatively correlated with economic growth.
“The BRICS economies have been the focus of attention of academics, executives and the media in the last decade. However, these countries have either or both big public sectors and high levels of government debt. Western economies are even worse. In comparison Middle East economies, especially the GCC countries, are in a much better position. Virtually all countries in the region rank within the lower quintiles of government size and public debt. This suggests that the region is a true motor for future world growth,” Professor Bris said.
The two most important competitive advantages of Middle East countries relative to the BRICS are their high-quality human capital and the excellent quality of their education sectors. This reflects the commitment and investment by governments in developing their countries’ knowledge sectors.
IMD’s World Competitiveness data show that Middle East economies rank near the top in institutional quality. The legal and regulatory framework encourages the competitiveness of enterprises and the UAE was top in the region on this measure in IMD’s 2012 World Competitiveness rankings. The adaptability of government policy to changes in the economy also helps to determine a country’s competitiveness, and the GCC countries rank high in this criterion too—again led by the UAE.
Other growth drivers evident in GCC countries, mainly led by the UAE and Qatar, are transparency of government policy, less protectionism, legislation in preventing unfair competition, ease of doing business, availability of IT skills and an educated workforce that meets management needs.
Professor Bris added, “In my opinion future growth lies not in China and other emerging markets. Perhaps not in Europe and the West either. The future is with companies investing in countries rich in “resources”, using efficient institutions and skills.”
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