National competitiveness: a conceptual framework and its application to Turkey (WP)

This paper is an exploratory study proposing a conceptual model of national competitiveness and suggests that the competitiveness of a nation is primarily dependent on the rate of productivity growth. According to the conceptual model drawn, productivity growth in turn is dependent on the infrastructure, the human knowledge base and the government. The paper explains the way these factors interact in reinforcing the rate of productivity growth leading to greater national competitiveness. The concept of national competitiveness is based on an extensive literature review and formulation of a conceptual framework inspired by the theories and discussions. The second objective of the paper is to examine Turkey comprehensively in terms of its degree of national competitiveness based on the variables conceptualized in the model. The model also tries to identify the extent of success Turkey has realized and challenges it has faced in developing national competitiveness. Along with the objectives of maintaining endogenous growth so as to upgrade itself among the ranking in national competitiveness, and coupled with the efforts of its accession process to the European Union, Turkey has made some significant improvements in some of the competitiveness variables, though it needs to take further steps to enhance its growth. The data collection process of the study is based to a great degree on secondary data gathered from the reports of universities, companies, press, and Internet resources. Some statistical data and information are also derived from the State Statistical Institute (DIE) of Turkey, the Turkish Industrialists’ and Businessmen’s Association (TÜSİAD), the Scientific and Technical Research Council of Turkey (TÜBİTAK), and the Organization for Economic Cooperation and Development (OECD). Infrastructure is a very important component of productivity. The results suggest that though Turkey has made some advancement in technology and innovation, it needs to further enhance its physical and technological infrastructure in order to improve productivity and attract more foreign direct investment (FDI). Turkey should be taking significant actions to attract more FDI against high competition from other countries through more privatization initiatives taken by the government and by sustained political stability of the government. The second variable is the human knowledge base which includes the level and quality of education and labor force effectiveness in a nation. Turkey has made significant progress in the higher education sector, which presently comprises 85 universities. The fact that the labor force is a crucial component for rising productivity, the cost of labor in Turkey is found to be much lower than EU countries due to the average effective tax rates on labor. In addition, labor productivity has increased in both private and public sector. Furthermore Turkey has demonstrated improvements in its macro-stabilization by putting into effect institutional reforms after the 2000-2001 crisis. Today, Turkey maintains its macroeconomic stability which has resulted in the rise of GDP and continuous declines of inflation to single-digits. Turkey has achieved significant developments through its economical, political and social reforms. Nevertheless making a greater effort to strengthen domestic productivity, attracting more FDI, investing in the educational system and increasing labor productivity and government efficiency would significantly enable Turkey’s emerging economy to realize full competitiveness around the world in a critical period to accede endeavors to EU.