"A lack of competitiveness means we can's stand still"

Description

800 word regular Economy Watch article in Business Telegraph

Subject

https://www.belfasttelegraph.co.uk/business/northern-ireland/economy-watch-a-lack-of-competitiveness-means-we-cant-stand-still-38080951.html

 

NOTE, LONGER VERSION WITH REFERENCES INCLUDED- Competitiveness of Northern Ireland: Weighed in the balance and found wanting- international journal article

Dr Esmond Birnie, Senior Economist

“Along with colleagues from the Ulster University (Richard Johnston, Laura Heery and Professor Elaine Ramsey), Esmond Birnie has published an article in the international journal Regional Studies considering measurements of the competitiveness of the Northern Ireland economy. The glass is both half full, we now know more about Northern Ireland competitiveness, and half empty, over the last 60+ years the region’s competitiveness has always lagged behind many other countries/regions. One strong suggestion is that we need up-to-date research to identify the impact of “governance” (the quality of political and administrative decision making) and the capacities of business management.

This article critically assesses how the measurements have developed between 1957 and 2017 [Note to Editors 1]:

https://www.tandfonline.com/eprint/WytCK5QRfAJPM4A68qhB/full?target=10.1080/00343404.2019.1569757

Competitiveness matters to all of us and not only to government. It is a major determinant of the level of wages and hence broader living standards. Competitive businesses will tend to expand. Uncompetitive businesses will tend to shrink or collapse.

The article’s key findings include:

• Northern Ireland has had a substantial and chronic lag in competitiveness relative to the UK average and especially compared to the best international performers. Labour productivity has lagged behind the level in GB by substantial margin- this was true in comparisons using data relating to the 1930s and 1920s published in 1957 [Note to Editors 2]. Similar results were produced by labour productivity comparisons in the late 1980s using 1960s-80s data. Using a much more comprehensive and multi-faceted measure of competitiveness, the World Economic Forum (WEF) Index including 144 countries in 2012-13, Northern Ireland was ranked 42^nd from the top. That made it one of the lower performers within the “developed” or “Western” world, the UK overall was ranked 8^th and the Republic of Ireland 27th. A later comparison (2016), using data for 2010-15, and concentrating largely on countries which are either EU or OECD members put Northern Ireland in the sixth decile below the best performer: below average [Note to Editors 3]”.

• Over the last sixty of so years the methods used to measure competitiveness have changed substantially. First, statistical comparisons of output per worker (mainly to GB but also, sometimes, to countries such as West Germany and the US). Second, the WEF index applied to the Northern Ireland region. Third, the UUEPC index or Competitiveness Scorecard. Fourth, and most recently in 2017, there have been strong suggestions that the Department for the Economy (DfE) is moving towards concentrating on comparisons of Northern Ireland to a limited peer group of small and successful economies [Note to Editors 4].

• A critical assessment of the changing approach to measuring competitiveness implies there has been some “progress” in understanding the concept. The labour productivity measurements, as used in the 1950s and 1980s were quite narrow in scope. The application of the WEF index allowed a much more multi-dimensional consideration. The Scorecard allowed an opportunity to tailor the measurements towards the particular circumstances of Northern Ireland.

• There is unfinished business with respect to future research and policy making. Competitiveness is such an important topic that we cannot afford to leave things standing still- of course, there is a danger that too much fixation on Brexit could produce that outcome. The article suggests an agenda for the future:

  - 1. We must try to understand why the bulk of businesses in Northern Ireland conduct little or no R&D.

  - 2. There was a study in 2009 which benchmarked Northern Ireland management practices and capabilities compared to international best practice: along with the Republic of Ireland Northern Ireland did not fare well[Note to Editors 5]. That study has never been repeated but it should be.

  - 3. The WEF-based comparisons for 2012-13 included an assessment of “governance” in Northern Ireland (did business people trust politicians? how transparent was policy making?). There has to be a very strong suspicion that the relatively low ranking position indicated in 2012-13 would have worsened if such measurements were conducted for 2018-19 [Note to Editors 6]. That research should also be up-dated.

  - 4. Very importantly, research is likely to be of greatest benefit to policy makers if there is some scope to measure how Northern Ireland’s position has changed over time. That is most likely to happen if there is a degree of consistency in the basis of the measurements. In practice, the 2012-13 measurements and those in 2016 were conducted on a rather different basis and in DfE in 2017 was hinting at comparisons concentrating largely on the peer group of eight countries/regions”.

Ends

Note to Editors

1. E.Birnie, R. Johnston, L. Heery and E. Ramsey (March 2019), “A critical review of competitiveness measurement in Northern Ireland”, Regional Studies.

2. Some of the research findings contained in the study of the Northern Ireland economy by Queen’s University economists Isles and Cuthbert which was published in 1957.

3. The UUEPC Competitiveness Scorecard (2016) which was commissioned by the DETI Minister’s Economic Advisory Group.

4. In a 2017 DfE paper which accompanied and underpinned the draft Industrial Strategy of the same year the following comparators were identified: Singapore, Republic of Ireland, Denmark, Finland, Scotland, Estonia, New Zealand and Israel. The case for using such a peer group is that all of those countries/regions are “small”, like Northern Ireland, with populations of no more than about 5m but are also, unlike Northern Ireland relatively successful in terms of overall competitiveness. Peer group comparisons have also been favoured by policy makers in Scotland. However, there are a number of arguments against such an approach. Care needs to be taken to avoid bias in selection of the peer group. There may be particular problems in finding comparable data for Northern Ireland and the comparators.

5. This was a comparison of management techniques and capabilities using the measurement system developed by McKinsey Consultants and LSE. This research was commissioned by the DETI and DEL Departments, InterTradeIreland and the Irish Forfas economic development agency.

6. Ranking out of 145 comparisons (i.e. NI + 144 countries) 1^st being “best”, on public trust in politicians NI 57^th, UK 31^st and Republic of Ireland 51^st, and on transparency of decision making NI 86^th, UK 13^th and Republic of Ireland 28^th.