Is Costa Rica ready to reactivate and transform into an economy of tomorrow?
Part 1 of 4
01/22/2021 Written by: Priscilla Vega Valderrama, V&V Consulting Group
In summary, the Global Competitiveness Report, 2020 edition of the World Economic Forum (WEF), focuses on the main drivers of growth and productivity that have degraded the financial crisis due to COVID-19. This edition pauses the global competitiveness ranking, and instead is dedicated to establishing guidelines for recovery and reactivation, considering the aspects that are fundamental to transform economic systems such as productivity, people and the planet.
This edition analyzes historical trends on competitiveness factors and future priorities. It provides recommendations against three timelines: First, those priorities that emerge from the historical analysis before the health crisis; second, those priorities necessary to restart the economy (reactivation plan for the next 1 to 2 years); third, those priorities and policies necessary to restart economic systems in the long term (transformation for the next 3 to 5 years).
The recommendations and time frames are grouped into 4 areas of action: reactivating and transforming the innovation ecosystem, reactivating and transforming the suitable environment, reactivating and transforming human capital, and reactivating and transforming markets. An initial analysis of how ready countries are to transform leads to turning key priorities into quantitative measures for 37 economies.
Each of the recommendations will be analyzed individually and published one at a time, in order to dedicate the necessary space to compare the government’s proposals and goals with respect to each area and their compliance not only with the proposals in this report, but also also with numbers shown by the World Bank and the OECD.
Reactivate and Transform the Innovation Ecosystem:
Below is a table that summarizes the trend or impact and the short and long-term proposals proposed by the WEF.
The following table will present the government’s proposals regarding each phase (reactivate and transform), and whether or not it meets the conditions, structure, and characteristics necessary to achieve the changes proposed by the WEF.
Data taken from the National Development and Investment Plan (PNDIP) 2019-2022
According to the World Bank, data from 2018, the world spent 2.27% of GDP on research and development, on the other hand, the OECD spent 2.37% of GDP, while Costa Rica spent only 0.42% of GDP. Although the government’s goals were exceeded, there is still a need to increase the investment destined to this issue, the problem is that there is no competitive technological and digital structure that allows to increase this percentage. An example is the Digital Solidarity Agenda, which according to Law 8642 is defined as: a set of short, medium and long-term actions aimed at guaranteeing the human development of economically vulnerable populations, providing them with access to ICTs (Technologies of Information and Communication), which is one of the government’s star projects. This example is intended to conceptualize that although it is positive to seek the digitization of vulnerable populations, there are no goals that include R&D directed at companies, and there is not enough support to create new companies, a point that will be better explained in the transform phase. Finally, for this phase, there are also no conditions to have “the markets of tomorrow”, which are: invention, production, demand, standards, coding and infrastructure.
According to the World Bank, data from 2019, averaging the information from all the countries analyzed, the time required to start a business is 19.5 days. According to the World Bank, it takes Costa Rica 23 days to start a business, therefore, the time to install an investment project, for both manufacturing and services, should be around that many days. Rather, the reality is that it takes a person 180 days for manufacturing and 90 days for services. Therefore, there must be a significant decrease in days for the country to have a competitive level compared to other nations.
On the other hand, according to INEC 2019 data, regarding inclusion, 670,640 people in Costa Rica have some type of disability, that is equivalent to 18.2% of the population, 61% are women and 39.1% are men; additionally, 56.4% of these people are in poverty or extreme poverty. In such a way that the goal of incorporating 89 people (which is equivalent to 2.35%) to the market shows that the government is not making enough efforts to generar fair working conditions for this population.
Finally, regarding the energy issue, the government set the goal of being carbon neutral by 2050, with a well-structured roadmap focused on processes and stages for its correct fulfillment, although some facts such as that in its plan are a bit contradictory. (PNDIP 2019-2022) suggests the use of other fossil fuels, on the other hand, the monopolization of energy production that limits the use of alternative energies and raises their production costs and little action against the pollution generated for illegal mining.
Therefore, it can be concluded that the necessary conditions are not being met to achieve compliance with both phases, and the government will need to make a significant effort in terms of mentality, culture and resources to achieve compliance with the proposals of the WEF innovation ecosystem. in the time frame set.
OECD source: OECD (2021), Gross domestic spending on R&D (indicator). doi: 10.1787 / d8b068b4-en (Accessed on 21 January 2021)
Source BM: World Bank, (2021), Indicadores, https://datos.bancomundial.org/indicador/GB.XPD.RSDV.GD.ZS?view=chart
Source MIDEPLAN: National Development and Competitiveness Plan 2018-2022 nhttps: //mideplan5n.mideplan.go.cr/DelphosPortal_PNDIP/Analizer/wfrmContenedora.aspx? Browser = Netscape & First = 1? Width = 1440 & height = 800 & WIDTH = 1431 & ALTO = 810
Source INEC: https://www.presidencia.go.cr/comunicados/2019/05/mayoria-de-personas-con-discapacidad-en-costa-rica-son-mujeres-y-viven-en-situacion-de -poverty/
Source CN: Decarbonization Plan 2019-2050, https://cambioclimatico.go.cr/wp-content/uploads/2020/01/PLAN.pdf
Source WEF: weforum (2021), The Global Competitiveness Report 2021, http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2020.pdf