Measuring competitiveness in the world’s smallest economies: introducing the SSMECI

This paper seeks to contribute to the process of new policy development in small states by measuring their industrial competitiveness record using a composite index and benchmarking them against each other.

Because of the lack of adequate indices, the paper constructs its own small states manufactured export competitiveness index (SSMECI), based on three subcomponents, namely manufactured exports per capita, average growth in manufactured exports, and share of manufacturing in GDP.

Findings include:

• the European small states (Malta/Estonia) perform well, as do other traditional regional small state “powerhouses”, such as Fiji Islands, Mauritius, and Trinidad and Tobago
• the high performance of the BLNS (Botswana, Lesotho, Namibia, Swaziland) countries in the Southern African Customs Union is of note, and perhaps points toward the benefits of integrated trade and investment relationships with larger neighbours
• tiny microstates record a particularly weak competitiveness performance, suggesting that even within the world’s smallest economies, country size matters for competitiveness
• high-performing small states had better macroeconomic conditions, higher levels of FDI, more trade openness, better levels of education, and modern infrastructure, suggesting that the adoption of a coherent marketoriented, competitiveness strategy in small states is vital to success on international markets

The study concludes that in order to truly understand the drivers of competitiveness, there is a need for greater exploration of specific policy environment, and institutional and firm-level competitiveness factors, which requires detailed case studies of individual small states.