I am very attached to Romania. I have been living in the city of Timisoara since 2007, and this long stay ha permitted me to observe, from very close, the evolution of the country since the moment it joined the European Union.

One of the local universities invites me yearly to present some ideas about Competitiveness. As it is a subject that I very much enjoy, I do it with pleasure. Mainly because all of us started from the wrong point (the idea that to be competitive, something has to be cheap), and I can correct the audience’s approach. I hope this will help them understand that Competitiveness is not only about price nor quality; it is about meeting needs, about being wanted.

Every year the presentation is a little different because I see Romania struggling, and like all countries, not always in the best direction.

I want to understand better if the politics implemented in the last ten years have helped Romania to gain Competitiveness, and if yes, how much when compared to other European nations. I will do the same exercise with Spain, my home country, in another post.

I consider Romania (rank 67 in 2010) the centre of this analysis. I take the two closest European countries above, the Slovak Republic (60) and the Russian Federation (63), and the two European countries with below, Latvia (70) and Bulgaria (71). The most competitive country in the list has position 1.

All of these countries are in Eastern Europe, were part of the Soviet Union’s area of influence and all, except for the Russian Federation, have been members of the European Union during the considered period (2010-2019).

I wanted to verify their initial rank, yearly evolution, final position for 2010-2019 and the link between the evolution in the rank, and the scores.

Final scores come from the evaluation of the many parameters in the 12 pillars. It is an absolute figure. The rank results from putting the countries one after another. The list does not only depend on one’s performance but also the relative position of the others. An improvement in the score might lead or not to a similar development in the rank. In theory, one country could improve in score and lose positions in the rank, surpassed by a much more significant score increase by other countries.

The first step is to gather the data for the five countries from 2010 till 2019. The result is visible this grill and the representative chart.

The first conclusion is that the five economies have shown improvement in these ten years. They are more competitive than they were in 2010, which could be shocking to those who believe that to gain Competitiveness, a country needs to reduce labour costs. In the contrary, labour costs in the area have significantly grown: 76% in Latvia and 131% (!!!) in Romania.

Passing from position 70 to 41, Latvia has been the country in which Competitiveness most improved. Romania passed from 67 to be the last in this comparison with position 51.

The next step was to verify if this correlates with the score improvements (as the WEF was using different score tables, first I made them comparable). The evolution is similar: Latvia, the Slovak Republic and the Russian Federation fighting for the first positions while Bulgaria and Romania do not seem to have been the most successful.

Did this growth in Competitiveness lead to higher wealth? This chart shows the GDP per capita in US$ at PPP (Purchasing Power Parity) in 2010 and 2019. Similarly, all countries improved their wealth per capita. Latvia keeps leading the improvement. Romania is here the second best, 41% growth, for the smallest score variation, only 8,37%. In this classification, the Slovak Republic has seen the smallest increase.

Wait, if you are a Romanian citizen, save your hurras for later. This chart is tricky because some countries such as Romania and Bulgaria have seen constant drops in population. When relating to the total GDP growth, the results converge much more.

The conclusion is quite clear. Competitiveness growth seem to go hand in hand with wealth growth, thou not in a proportional way. Salaries growth does not result by itself in a loss of Competitiveness (we will see in a future post if a rapid increase in wages, not accompanied with similar improvements in other pillars, can push Competitiveness down. This is, in my opinion, what happens in Romania). Romania sees one of the largest GDP growth in the region in spite of the lowest competitiveness improvement. To see how they relate to each other requires a much longer and deeper analysis. The reader could say that it is not necessary to heavily invest in Competitiveness to grow wealth, but we cannot jump so quickly to the conclusions. Competitiveness is a sure base for growth and a guarantee of resistance in moments of uncertainity.

Why did some countries improve their Competitiveness much more than others? We will soon compare in detail Latvia and Romania to try to understand why the first, departing from a lower score surpasses Romania in this time.