OUTSIDE PERSPECTIVE

WEF's Global Competitiveness Report 2018 recognised Azerbaijan as a country with the highest social equality level.

According to the WEF, the Gini index (a statistical measure of distribution of economic inequality and wealth among a population) of Azerbaijan is 16.6%, which implies absolute equality versus 100% (absolute inequality). At the same time, Azerbaijan is ranked the 69^th on the competitiveness index among 140 countries.

Incidentally, Armenia is ranked as 70^th competitive country with the Gini index of 32.5%, which indicates social inequality in the country. In the CIS, this indicator is even higher in Russia - 37.7%, while the country is ranked as the 43^rd competitive.

The US economy is the most competitive in the world (1^st place) but has the lowest social equality (41.5%).

New Methodology

The Global Competitiveness Report 2018 was developed based on a new methodology taking into account global trends. The changes were so significant that the WEF called it a new generation methodology 4.0.

This new methodology inherited only 12 categories from the old one - the quality of institutions, the state of infrastructure, the level of modern technologies, macroeconomic stability, health, skills, consumer market, labour market, financial system, the size of domestic market, the dynamics of business development, and the ability to innovation. At the same time, the report indicators underwent significant changes: 84 of 114 indicators of past studies were excluded, which is 74% of the total, 68 new indicators were added and thus 70% of the 98 existing indicators were used for the first time.

According to the WEF's annual World Economic Study, the Fourth Industrial Revolution radically changes the very notion of competitiveness.

According to researchers, the globalisation is slowing down, and digital transformation and the Fourth Industrial Revolution are becoming the new drivers of economic growth. Currently, for most countries of the world, the ability to innovate is the weakest component of economic competitiveness (the median level for 140 countries is 36 points out of 100, 75% of countries are at less than 50 pp).

Also, the weaknesses of the majority of world countries include the quality of institutions (median 53).

According to developers, a significant difference between the leaders and the majority of other countries (including those in the mentioned areas) creates conditions for inequality.

“I foresee a new global gap between those countries that understand innovative transformations and those who do not,” WEF founder and president Klaus Schwab said.

According to the WEF, countries intending to increase the competitiveness of their economies need, in particular, to ensure resistance to external and internal shock factors, to create an innovation ecosystem in which all participants in economic processes will benefit from innovation.

Advances and challenges

Azerbaijan is in the upper half of the rating in the following categories: dynamic business (31), labour market (40), commodity market (37), infrastructure (46), skills (54), public institutions (58), market size (65), ICT potential (69).

Without exaggeration, the main category for estimating the competitiveness of countries is the indicator dynamic business, and according to this indicator, the economy of Azerbaijan occupies a leading position in the world in a number of indicators.

Thus, in sub-indicators, the launch of business and regulatory framework for bankruptcy, Azerbaijan is the 17^th best and the 21^st in the ratio of entrepreneurial risks. The WEF experts recognised Azerbaijan as the 25^th best in terms of the availability of companies implementing breakthrough ideas.

The WEF experts also acknowledge the steps taken by the Azerbaijani government on major investments in the development of the country's infrastructure. During the research period, international regional transport projects were completed, primarily the Baku-Tbilisi-Kars railway project. In the overall infrastructure ranking, Azerbaijan is the 46^th but in terms of indicators, the results are even more interesting: electrification of the country - 1^st; quality of service on air transport - 12^th; rail transport efficiency - 17^th; efficiency of seaports - 29^th; quality of roads - 34^th.

The rapid development of infrastructure in Azerbaijan is a reliable basis, using which businesses can expand and increase the competitiveness of their products in local and foreign markets. Moreover, to enhance the competitiveness of the Azerbaijani economy, there are noticeable prerequisites for digital skills among the population (15^th), as well as the access of the country to the Internet, with 78.2% of the population being Internet users (36^th).

Surely, WEF experts also point out the drawbacks. Thus, the forum experts were not an exception among international financial institutions and organisations that indicated problems in the financial sector in Azerbaijan. Accordingly, in the category of financial systems, Azerbaijan is ranked the 96^th, market capitalization to GDP - 119^th, insurance premiums to GDP - 119^th and overdue loans - 118^th. However, one needs to consider that the government continues reforms in this area with overall control of the situation.

Obviously, this WEF research on Azerbaijan is primarily important in the context of foreign experts' evaluation of the achievements and problems in the national economy. It is well-reasoned indicators will help to quickly implement reforms in areas that are still behind.