Estonia, Slovenia, and Lithuania are the standout performers in a new Knowledge Economy (KE) Index launched by the EBRD. The Index measures the performance of the 38 economies where the Bank invests, alongside the economies of eight frontier innovators, including the USA, Germany, and Japan.
The new data on how individual countries are progressing in their development of the skills, technology, and infrastructure needed to deliver innovative economies will provide important guidance to both policymakers and investors.
Mattia Romani, EBRD Managing Director, Economics, Policy & Governance, said: „This is an important initiative which will help our countries identify their strengths and weaknesses in innovation. Such an impartial analysis is a prerequisite for developing policy guidance and targeting our investment.“
He added: „There are no one-size-fits-all policies to promote the knowledge economy. Rather, countries should adopt reforms that take into account the stage of their knowledge-economy development.“
The Index is part of the EBRD’s new approach to measure countries’ progress according to six qualities of a sustainable market economy: competitive, resilient, green, integrated, well-governed and inclusive. It has four pillars with 38 indicators:
- Institutions for innovation, including economic openness, business environment, and good governance
- General skills and specialized skills for innovation
- Inputs and outputs of the innovation system and the linkages within the system
- Information communication technology (ICT) infrastructure, including ICT availability and sophistication.
Scoring countries from the theoretically least advanced (1) to the theoretically most advanced (10) results in Estonia achieving 6.82, followed by Slovenia with 6.65 and Lithuania with 6.03. These countries are not too far from OECD comparators (7.36). In contrast, Egypt, West Bank, and Gaza and Turkmenistan produced the lowest scores with results around 3.
The report also examines the progress the EBRD regions made between 2011 and 2018. While all countries improved their KE during this period, Serbia, Belarus, and Georgia were the KE growth champions, while Turkmenistan and Egypt improved the least:
- Belarus and Kazakhstan made the largest progress on institutions. Their progress was driven by better business environment and higher economic openness. Unfortunately, some EBRD countries worsened their institutions (e.g. Egypt or Tunisia) mostly due to weaker governance or political stability.
- On skills, the most prominent reformers are Uzbekistan and Turkey. At the same time, some EBRD countries (e.g. Lebanon or Montenegro) have worsened their skills during 2011-2018.
- Of all EBRD countries, Azerbaijan and Tajikistan improved their innovation system the most. These improvements came mostly from higher R&D spending and stronger linkages within the innovation system. At the same time, Tunisia or Montenegro declined the most on this measure.
- It is positive that all EBRD countries improved their ICT infrastructure. In particular, some countries like Serbia and Montenegro made remarkable progress. Unfortunately, some countries (e.g. Turkmenistan or Kosovo) showed only very limited improvements in the ICT infrastructure between 2011 and 2018.
