Influences On International Competitiveness

Question 1

State + explain the micro influences on international competitiveness.

Answer 1

• Productivity: determines ULCs + P competitiveness of X + ability to attract FDI.
• Regulations: strong regulations increase C + P + make it harder to bring FDI into country.
• Labour Market Flexibility: keeps C + P low + attracts FDI.
• Competition + Subsidies: keep C + P low + attract FDI.
• Strong Investment, R&D, Banking Sector: strong I + R&D - good for P competitiveness + non-P competitiveness. Strength of banking sector determines the ability to attract FDI - if strong banking sector + its easy to access finance - big factor in attracting FDI + boosting domestic I - driving P + non-P competitiveness.

Question 2

State + explain the macro influences on international competitiveness.

Answer 2

• Tax Rates: low corporation tax rates, low VAT rates - good in keeping C low, P competitive + bringing in FDI.
• Low Relative Inflation: keeps X P competitive.
• Exchange Rates: SPICED / WIDEC
• Infrastructure: all firms in economy rely on transport infrastructure in some way - better the transport infrastructure , the more P competitive X will be. Also attracts FDI.
• Government Finances: stable gov finances promote FDI.
• Protectionism: that foreign countries are imposing / our country is imposing can affect our competitiveness. Tariffs on M raw materials increases P + worsens X competitiveness.