CAIRO: Egypt s ranking tumbled 14 spots in this year's "Global Competitiveness Report for 2008 due to a dismal labor market efficiency score. Published by the World Economic Forum this week, the competitiveness report ranked Egypt 77 out of 131 countries, down from 63 in 2007 and dropping 25 spots since 2005. Egypt's labor market efficiency score, placed at second to last, marred the country's overall ranking. The report's dour tone, which appeared to conflict with the World Bank's generally glowing endorsements of Egypt's reforms, ruffled some analysts and stirred worry that foreign investment could suffer a blow. "This is not a positive thing, said NematAllah Choucri, co-head of research at HC Brokerage. "The least we can say is it will send a negative signal to some investors. Egyptian economic growth depends largely on foreign direct investment (FDI) for the time being, she said, so a drop in investor confidence could lead to a fall in growth. However, she added, investment has so far grown this year, up to $11 billion. Reham El-Desoki, senior economist at Beltone Financial, said she was taken aback to see so many of Egypt's rankings fall, especially given the flurry of reforms advanced here since 2004. She listed macroeconomic stability, technological readiness and financial market and business sophistication as areas where she had not expected Egypt to decline. "The deterioration in these items and in items like infrastructure, goods and labor market efficiency and in health and education, however, reflect the serious need for maintaining the pace of reforms and, more importantly, to expand the reform process to areas and sectors in the economy that represent the foundation for economic activity, she said. The report did hint at some silver linings. In contrast to the overall slump, Egypt's business competitiveness ranking climbed from 76 to 70. Egypt ranked 69 in the sophistication of its companies and 71 in the quality of its business environment. The World Economic Forum committee devises scores and rankings based on a trio of categories: "Basic requirements, which include the quality of institutions and infrastructure, are the first category; "efficiency enhancers, such as higher education and technology, follow; and "innovation and sophistication factors are the last factor. Egypt fared worst in labor market efficiency, where it fell to 130 from 85 last year, and macroeconomic stability, down to 124 from 108. Its strongest attributes were its market size, with a rank of 31, and the quality of its institutions, notched at 51. The biggest holdups in Egypt's institutional quality were reported as the "business costs of terrorism and opaque state policymaking. Low organized crime rates and judicial independence were the leading pros. The report labeled government deficits and debt the two biggest threats to macroeconomic stability. It also said that barriers facing women in the workforce are hindering efficiency, alongside high firing costs and "brain drain, a phenomenon in which educated workers leave their home markets for opportunities elsewhere. The forum's statement listed inefficient state bureaucracy as the biggest hurdle to doing business here, with low access to financing and a poorly educated workforce following closely. The report also noted that the private sector makes up about 72 percent of Egypt's growth. Egypt's ranking hovered in the region of many former Soviet blocs and Yugoslavian nations like Bulgaria, Ukraine, Romania and Montenegro. At 76 and 78, Botswana and Jamaica were Egypt's closest competitive analogies. The United States maintained its perennial perch at the top of the list, scoring 5.67. A cadre of Scandinavian, Western European and Asian countries - including Switzerland, Denmark, Germany, Sweden, Singapore, Japan and South Korea - occupied the next ten spots. Chad, with a score of 2.78, rounded out the bottom.
