2020 has been a year unlike any other and today we have arrived at a pivotal moment amid amplifying calls for “building back better”. Hence WEF’s, Global Competitive Report has dedicated its 2020 special edition to expound on the priorities for economic revival and recovery, considering the basic building blocks required while transitioning towards new economic systems which combine “people”, “planet” and “productivity” targets.
The present moment solicits unprecedented shifts in policy. In this edition of the report, experts have analyzed historical trends on competitiveness factors along with latest thinking on future imperatives to provide policy and priority recommendations for the immediate term (for revival over next 1-2 years) and in the future (rebooting and transforming economic systems over 3-5 years). Here are the four groups of recommendation that the report elaborates on:
Reviving and Transforming:
- The Enabling Environment
Before the pandemic, consistent erosion of major government institutions led to a growing lack of trust among the people. In this context, in the revival stage, governments must improve its long-term planning and thinking capacity and upgrade mechanisms of public service delivery, prioritizing digitization of public services. In the next phase of transformation, governments must strengthen governance principles of public institutions to regain the trust of people by serving them better.
Rising levels of debt and widening inequalities had been a grave area of concern before the Covid-19 crisis. The stimulus measures sanctioned to curb the economic effects of the pandemic and erosion or shifting of tax bases, pushed public debt to unprecedented levels.
To address these issues, in immediate term support measures must be extended to low-income countries that are already highly indebted and plans must be implemented for public debt deleveraging in the future. In the long-term transformation phase, countries must shift to progressive taxation by rethinking the methods of taxation for wealth, corporations and labor. This will need national reforms and an international cooperative framework.
- Human Capital
Human Resource was already facing problems like talent shortage, skills mismatch and misalignment between employee rewards and incentives. The pandemic intensified these issues along with increasing unemployment and loss of income.
In the revival phase countries should focus on reskilling and upskilling labor and transition to fresh labor market opportunities and rethink labor market policies. In the long-term, leaders must focus on updating education curricula, and create more courses that impart skills needed for the jobs of future; and also revisit labor laws and adopt new talent management technologies as per the new requirements of the future workforce.
The pandemic has highlighted the lags of healthcare systems and their capacities. To cater to this issue, in the near term, countries need to expand their healthcare system capacity in order to treat the pandemic patients and normal healthcare needs of the future. In the long run, however, efforts must be made to expand childcare, eldercare and healthcare infrastructure and innovation.
- Markets
Despite having a stable financial system in the last decade, the recent years saw some fragility like amplified corporate debt risks and liquidity mismatch. In this respect, countries must prioritize stabilizing the financial markets and introduce financial incentives to encourage adoption of sustainable and inclusive practices by companies. In the transformation stage, long-term investments and expansion of inclusion must be encouraged to strengthen stability through direct incentives to financial resources.
Before the crisis, there was a rise in market concentration due to large gaps in productivity and profitability in many large firms. In the revival stage, countries must create the right balance between providing support to firms and stop excessive industry consolidation so that “zombie firms” can be identified and plucked out. In the long term, countries need to rethink competition and anti-trust structures for the Fourth Industrial Revolution and ensure market access globally and locally.
The pandemic resulted in curbing trade openness and reduction of people’s movement internationally. In this regard, for the next five years, countries must work towards striking the right balance between global movement of people and goods while ensuring regional prosperity and develop strategic resilience in local supply chains.
- The Innovative Ecosystem
The world now needs innovation more than ever. To this end, in the short-term, countries must enhance public investment towards R&D, encourage venture capital and private sector R&D and support diffusion of technologies which support new business creation and employment in markets of future. In the transformation phase, countries should favor and reward long-term investments in research, invention and innovation and encourage companies to embrace diversity and equity to boost creativity.
