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Competitiveness defines as the set of institutions, policies, and factors that

determine the level of productivity of a country. The level of productivity, in
turn, sets the sustainable level of prosperity that can be earned by an economy.
In other words, more-competitive economies tend to be able to produce higher
levels of income for their citizens. The productivity level also determines the
rates of return obtained by investments in an economy. Because the rates of
return are the fundamental drivers of the growth rates of the economy, a more-
competitive economy is one that is likely to grow faster in the medium to long
run. The concept of competitiveness thus involves static and dynamic
components: although the productivity of a country clearly determines its ability
to sustain its level of income, it is also one of the central determinants of the
returns to investment, which is one of the key factors explaining an economy¶s
growth potential. We define competitiveness as the set of institutions, policies,
and factors that determine the level of productivity of a country. The level of
productivity, in turn, sets the sustainable level of prosperity that can be earned
by an economy. In other words, more-competitive economies tend to be able to
produce higher levels of income for their citizens. The productivity level also
determines the rates of return obtained by investments in an economy. Because
the rates of return are the fundamental drivers of the growth rates of the
economy, a more-competitive economy is one that is likely to grow faster in the
medium to long run. The concept of competitiveness thus involves static and
dynamic components: although the productivity of a country clearly determines
its ability to sustain its level of income, it is also one of the central determinants
of the returns to investment, which is one of the key factors explaining an
economy¶s growth potential.


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The determinants of competitiveness are many and complex. Economists have
long tried to understand what determines the wealth of nations. This attempt has
ranged from Adam Smith¶s focus on specialization and the division of labour to
neoclassical economists¶ emphasis on investment in physical capital and
infrastructure and, more recently, to interest in other mechanisms such as
education and training, technological progress (whether created within the
country or adopted from abroad),macroeconomic stability, good governance,
the rule of law, transparent and well functioning institutions, firm
sophistication, demand conditions, market size, and many others. Each of these
conjectures rests on solid theoretical foundations. The GCI captures this open-
ended dimension by providing a weighted average of many dif ferent
components, each of which reflects one aspect of the complex concept that we
call competitiveness. We group all these components into 12 pillars of
competitiveness:

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The institutional environment is determined by the legal and administrative
framework within which individuals, firms, and governments interact to
generate income and wealth in the economy. ? Accommodation in almost all of
Zambia's higher learning institutions has not expanded at the rate at which
student enrolment has, leading to shortages .? Government resources are
overstretched and this is one of the major reasons why it has failed to build
more infrastructures at institutions of higher learning to match the growing
students' population. ?This will significantly address some of the challenges such
as student accommodation that has affected the institution and help UNZA earn
revenues from the business ventures.
.
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Extensive and efficient infrastructure is an essential driver of competitiveness. It
is critical for ensuring the effective functioning of the economy, as it is an
important factor determining the location of economic activity and the kinds of
activities or sectors that can develop in a particular economy. Of Zambia's
66,935 kilometres (41,500 miles) of roads, relatively few are of good quality
and paved except for those routes linking Lusaka to main border posts. The
publicly-owned Zambia Railways (ZR) controls most of the 2,169 kilometres
(1,345 miles) of national rail infrastructure. Rail routes to regional seaports are
very important because Zambia is landlocked. The railway track linking Zambia
to the seaport of Dar es Salaam in Tanzania is jointly run by the Tanzania -
Zambia Railway Authority (TZRA), which is not part of ZR. Other seaports
used for Zambia's imports and exports are Beria in Mozambique, Durban in
South Africa, and Walvis Bay in Namibia. Lusaka International is Zambia's
primary airport; the main secondary airports are based at Ndola, Livingstone,
and Mfuwe. All of these airports are run by the publicly-owned National
Airport Corporation (NAC).? The state-owned Zambia Telecommunications
Company (ZAMTEL) is the national provider of telecommunication services
(predominantly telephone lines). ZAMTEL is planned to be partially privatized.

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Although it is certainly true that macroeconomic stability alone cannot increase
the productivity of a nation, it is also recognized that macroeconomic disarray
harms the economy. ? The Zambian authorities are to be commended for
implementing prudent macroeconomic policies, which, in the context of high
copper prices and debt relief, contributed to robust economic growth, markedly
lower inflation, a reduction of poverty, and a build -up of international reserves.
Efforts to improve expenditure management and budget execution, and revenue
collection, will continue. Reforms will also strengthen monetary operations and
deepen the financial sector, especially through developing the secondary ma rket
for government securities. The authorities will adopt a strategy to ensure an
adequate and reliable supply of electricity, including raising electricity tariffs to
cover the cost of service and increasing the operational efficiency of the public
electric power utility company.

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A healthy workforce is vital to a country¶s competitiveness and productivity.
Workers who are ill cannot function to their potential and will be less
productive. Over the last decade, Zambia has embarked on a radical
transformation process aimed at creating a well functioning, cost effective and
equitable district-based health care system. Such reforms were in response to
the government's growing awareness of the innumerable health chal lenges
afflicting the nation. These reforms were based on a primary health care
concept, as it was believed that most diseases in Zambia were either preventable
or could be managed at the primary health care level. Thus, primary health care
was chosen as a vehicle through which to deliver health services to the
population. A number of progressive health laws and regulations were devised,
together with the Basic Health Care Package (BHCP).

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Achieving a university education is still the key to status. The first institution of
higher education in the country, the University of Zambia in Lusaka, was
officially opened in 1966, two years after the attainment of Zambian
independence. The second uni versity is the Copper belt University, which was
until 1987 part of the University of Zambia (UNZA). The Zambia Institute of
Technology, which was part of the Department of Technical Education and
Vocational Training (WEVT), is now merged with the Copper belt University.
The former offers courses in agriculture, education, engineering, humanities and
social sciences, law, medicine, mining, natural sciences, and veterinary
medicine, but only business, industrial, and environmental studies are available
at Kitwe. The basic program is four years, although engineering and medical
courses are of five and seven years' duration, respectively. Higher education is
provided by two universities under the aegis of the Ministry of Education and
various specialised institutions (colleges and institutes) controlled by the
Ministry of Science, Technology and Vocational Training. Primary and pre -
primary school teachers are trained at primary school teacher -training colleges
while secondary school teachers are trained in teach er colleges and at the
University of Zambia. 



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Market failure occur due to several reasons

1. Environment as a public good

Certain parts of the environment such as communal land in Zambia could be
considered a public good and as such have a characteristic of non excludability.
Commonly owned land where there are no established property rights produces
little incentive to care for the environment. Slash and burn agriculture or
chitemene can lead to deforestation, as cutting down trees incurs no cost given
that the farmers are shifting to new areas. However the environment does not
conform to the other characteristic of public goods that of being non -rivalrous.
Using the land for farming means that the land cannot be used for conserving
wildlife. The environment is scarce and if the use of environment is free then it
will invariable be over-used.

2. The existence of externalities

The production of agricultural goods, horn, ivory, electricity and tourism all
involve incurring private costs and yield private benefits. Typically the market
price of a good or service reflects these private costs and benefits. The
production and consumption of goods and services can involve additional
external costs or negative externalitie s experienced by people other than those
who are directly producing or consuming the good. For instance the relocation
of people when the Kariba Dam was built or the diversion of water supplies for
the benefit of the tourist industry. These spillover effec ts can also impact on the
natural history such as the extinction of species of wildlife. The socially
efficient level of output and price would be at a level where these external costs
were taken into account. This would result in a higher price and a lowe r output.

3. Ignorance
Given the limited access to education there is considerable lack of knowledge
about the impact of poaching and hunting on the population of many species of
animals. Markets fail where the lack of information means that rational
decisions are not made. If the communities were educated about the impact of
their actions on the level of sustainability then different decisions might be
taken.

4. Short term benefit versus long term benefits

Killing a rhino and selling its horn will generate considerable income and give
significant benefit to the family of the hunter. However the impact of killing the
rhino on future generations is not considered. Self-interest, one of the guiding
principles of the free market fails to take into account of the future interests of
others. Little if any consideration is given to the future.

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Labour markets must therefore have the flexibility to shift workers from one
economic activity to another rapidly and at low cost, and to allow for wage
fluctuations without much social disruption. The dismal economic performance
has had clear negative effects on employment and the labour market. Formal
sector employment has contracted to less than 10 per cent of the labour force, of
which more than half consists of employment in the private sector. Besides the
contraction of formal employment opportunities, demo graphic factors put
pressure on Zambian labour markets. Efficient labour markets must also ensure
a clear relationship between worker incentives and their efforts, as well as the
best use of available talent ²which includes equity in the business environmen t
between women and men.

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Zambia¶s market for agricultural finance is fundamentally dysfunctional. From
the farmers¶ perspective, credit is scarce and expensive and heavily skewed
towards the larger, corporate sector. Loan terms are often too short to
accommodate the long term nature of agriculture, and the processing of loan
applications by banks often takes too long. These problems cause an already -
risky sector to become even riskier. From the bankers¶ perspective, agricultural
lending is both risky and expensive.

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This pillar measures the agility with which an economy adopts existing
technologies to enhance the productivity of its industries. In today¶s globalized
world, technology has increasingly become an important element for firms to
compete and prosper. The penetration levels of ICTs in Zambia¶s education
institutions remains low, with those schools that are equipped mostly utilizing
second-hand and refurbished computers. The integration of ICTs in l earning and
teaching practice has been limited, although the introduction of computer
studies as a school study subject has begun to change this. The recent adoption
of a national ICT policy, as well as the development of a draft ICT policy for
education and an associated implementation framework, provides an enabling
policy environment to promote far greater access and use of ICTs across all
sectors of Zambia¶s education system, including a system for enhancing
education management, administration, and teaching and learning. While the
goals and targets set in these policy documents seem realistic, realising them
within the established time frames remains a challenge.


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The size of the market affects productivity because large markets allow firms to
exploit economies of scale. ? Zambia has a relatively large domestic market
comprising a population size of about 12.2 million (2007 estimate). In the
SADC region, Zambia¶s major trading partner is South Africa which accounts
for about 60% of Zambia¶s trade. Further, Zambia¶s central location offers
trading opportunities with all the 8 surrounding countries.

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Business sophistication is conducive to higher efficiency in the production of
goods and services. This leads, in turn, to increased productivity, thus
enhancing a nation¶s competitiveness. Business sophistication concerns the
quality of a Zambia¶s overall business networks as well as the quality of
individual firms¶ operations and strategies. It is particularly important for
countries at an advanced stage of development, when the more basic sources of
productivity improvements have been exhausted to a large extent. The quality of
a Zambia¶s business networks and supporting industries, which we capture by
using indicators of the quantity and quality of local suppliers and the extent of
their interaction, is important for a variety of reasons. When companies and
suppliers from a particular sector are interconnected in geographically
proximate groups (clusters´), efficiency is heightened, greater opportunities for
innovation are created, and barriers to entry for new firms are reduced.
Individual firms¶ operations and strategies (branding, marketing, the presence of
a value chain, and the production of unique and sophisticated products) all lead
to sophisticated and modern business processes.

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The final pillar of competitiveness is innovation. Although substantial gains can
be obtained by improving institutions, building infrastructure, reducing
macroeconomic instability, or improving human capital, all these factors
eventually seem to run into diminishing returns. The same is true for the
efficiency of the labour, financial, and goods markets. In the long run, standards
of living can be expanded only with innovation. Innovation is particularly
important for economies as they approach the frontiers of knowledge and the
possibility of integrating and adapting exogenous technologies tends to
disappear. Religious innovation in Zambia as super -structural reconstruction
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1.01?Property rights 80
1.02 Intellectual property protection 65
1.03 Diversion of public funds 89
1.04 Public trust of politicians 84
1.05 Irregular payments and bribes 81
1.06 Judicial independence 69
1.07 Favouritism in decisions of government officials 59
1.08 Wastefulness of government spending 88
1.09 Burden of government regulation 28
1.10 Efficiency of legal framework in settling disputes 54
1.11 Efficiency of legal framework in challenging regulations 66
1.12 Transparency of government policymaking 47
1.13 Business costs of terrorism 55
1.14 Business costs of crime and violence 87
1.15 Organized crime 64
1.16 Reliability of police services 71
1.17 Ethical behaviour of firms 72
1.18 Strength of auditing and reporting standards 72
1.19 Efficacy of corporate boards  39
1.20 Protection of minority shareholders¶ interests 62
1.21 Strength of investor protection* 59

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2.01 Quality of overall infrastructure 103
2.02 Quality of roads 110
2.03 Quality of railroad infrastructure 84
2.04 Quality of port infrastructure 95
2.05 Quality of air transport infrastructure 111
2.06 Available airline seat kilometres* 109
2.07 Quality of electricity supply 106
2.08 Fixed telephone lines* 131
2.09 Mobile telephone subscriptions* 124

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3.01 Government budget balance* 76
3.02 National savings rate* 62
3.03 Inflation* 131
3.04 Interest rate spread* 127
3.05 Government debt*  35
3.06 Country credit rating* 110

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4.01 Business impact of malaria 132
4.02 Malaria incidence* 127
4.03 Business impact of tuberculosis 136
4.04 Tuberculosis incidence* 131
4.05 Business impact of HIV/AIDS 136
4.06 HIV prevalence* 133
4.07 Infant mortality* 133
4.08 Life expectancy* 137
4.09 Quality of primary education 92
4.10 Primary education enrolment rate* 56

4"%
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5.01 Secondary education enrolment rate* 115
5.02 Tertiary education enrolment rate* 134
5.03 Quality of the educational system 52
5.04 Quality of math and science education 77
5.05 Quality of management schools 78
5.06 Internet access in schools 113
5.07 Local availability of research and training services 86
5.08 Extent of staff training 81

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6.01 Intensity of local competition 85
6.02 Extent of market dominance 77
6.03 Effectiveness of anti-monopoly policy 53
6.04 Extent and effect of taxation 79
6.05 Total tax rate* 9
6.06 Number of procedures required to start a business*  34
6.07 Time required to start a business* 65
6.08 Agricultural policy costs 54
6.09 Prevalence of trade barriers 48
6.10 Trade tariffs* 106
 6.11 Prevalence of foreign ownership 18
6.12 Business impact of rules on FDI  30
6.13 Burden of customs procedures 71
6.14 Degree of customer orientation 78
6.15 Buyer sophistication 107

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7.01 Cooperation in labour-employer relations 71
7.02 Flexibility of wage determination 91
7.03 Rigidity of employment* 50
7.04 Hiring and firing practices 36
7.05 Redundancy costs* 131
7.06 Pay and productivity 102
7.07 Reliance on professional management  48
7.08 Brain drain 81
7.09 Female participation in labour force* 82

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8.01 Availability of financial services 69
8.02 Affordability of financial services 74
8.03 Financing through local equity market 54
8.04 Ease of access to loans 106
8.05 Venture capital availability 118
8.06 Restriction on capital flows 60
8.07 Soundness of banks 56
8.08 Regulation of securities exchanges 56
8.09 Legal rights index*  6


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 9.01 Availability of latest technologies 89
9.02 Firm-level technology absorption 86
 9.03 FDI and technology transfer 71
9.04 Internet users* 113
 9.05 Broadband Internet subscriptions* 118
 9.06 Internet bandwidth*

129


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10.01 Domestic market size index* 114
 10.02 Foreign market size index* 110



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 11.01 Local supplier quantity
11.02 Local supplier quality
82
98
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!""# 11.04 Nature of competitive advantage 86 '#$"* 
**"'6 $ 11.05 Value chain breadth 107 ", 789
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11.09 Willingness to delegate authority 66
 

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 12.01 Capacity for innovation 104
 12.02 Quality of scientific research institutions
12.03 Company spending on R&D
74
87
 12.04 University-industry collaboration in R&D 67
12.05 Government procurement of advanced tech products 72
 12.06 Availability of scientists and engineers 88
12.07 Utility patents per million population* 90




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GCI 2009±2010 (out of 133) 112 3.5
GCI 2008±2009 (out of 134) 112 3.5
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1st pillar: Institutions. 65 3.9
2nd pillar: Infrastructure. 118 2.6
3rd pillar: Macroeconomic environment 120 3.6
4th pillar: Health and primary education 128 4.1
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65
5th pillar: Higher education and training 114 3.2
6th pillar: Goods market efficiency. 65 4.2
7th pillar: Labor market efficiency 107 4.0
8th pillar: Financial market development. 49 4.5
9th pillar: Technological readiness 110 2.9
10th pillar: Market size. 111 2.6
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11th pillar: Business sophistication 90 3.6
12th pillar: Innovation 80 3.0

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Access to financing...........................................................18.8
Corruption.........................................................................14.6
Inadequate supply of infrastructure .................................10.5
Tax rates ...........................................................................8.9
Inefficient government bureaucracy.. ................................8.8
Inflation .............................................................................7.2
Poor work ethic in national labor forc e ............................6.8
Tax regulations .................................................................6.2
Crime and theft .................................................................3.9
Inadequately educated workforce......................................3.8
Policy instability................................................................3.2
Foreign currency regulations.............. ...............................3.2
Poor public health............................... ...............................2.1
Restrictive labour regulations...........................................1.7
Government instability/coups ............ .............................0.4