Romania ranks 79th in a global index of change readiness

Latest KPMG Change Readiness Index Highlights the Impact of Inclusive Growth and Income Inequality on the Capacity for Responding to Change.

KPMG International today released its 2015 Change Readiness Index (CRI), ranking 127 countries for their capacity to prepare for and respond to accelerating change brought about by everything from natural disasters and economic and political shocks, to long term trends such as demographics, and new technologies.


Produced in partnership with Oxford Economics, the CRI is the only global study of its kind, designed for use by both the public and private sectors to better inform decisions on policy making and investments. The release of the CRI comes as United Nations member states prepare to adopt Sustainable Development Goals in September that will help guide policies for the next 15 years.


Revealing Insights into Countries’ Capacity for Change


The 2015 CRI provides unique and in some cases unexpected insights with smaller, less wealthy and resource-endowed countries often outperforming larger economies on key measures of change readiness.


“The CRI shows that there are no absolutes when it comes to change readiness,” said Serban Toader, Senior Partner, KPMG in Romania. “A country’s wealth is certainly a contributing factor, but many countries compensate for lesser wealth with robust governance, a strong social foundation, and a positive business environment.”

“A revealing trend from this year’s CRI is that countries with higher scores for more inclusive economies tend to perform better in the Index, while conversely, income inequality tends to be associated with low change readiness,” noted Toader. “In fact the nine countries ranked highest for inclusive growth are all in the top 15 of the Index. It sends a clear message thatpolicies promoting inclusive growth can help countries be more equipped to manage inevitable change.”


Top Ranked Countries for Change Readiness


The CRI was expanded to 127 countries for 2015, from the 90 countries included in the study’s 2013 ranking. In the 2015 Index, Singapore repeated its number one ranking from 2013, while Northern and Western European countries dominated the top 20 overall:


*Countries that are new to the 2015 CRI


Additional resources, along with interactive country profiles that allow comparisons between countries, regions and income levels, are available online at kpmg.com/changereadiness.



Lower Income Countries That Stand Out


A number of lower income countries perform well in the CRI, demonstrating the benefits of effective policy and investment in compensating for lower levels of wealth. India was one of the strongest movers from the 2013 CRI (up 17 places based on that ranking), which the Index shows is a reflection of a much improved business environment.


“We are witnessing the unfolding of complex circumstances characterized by global trends gaining momentum, the strongest ever competition on international markets, aggravated regional risks and an identity crisis that has a long-standing history in Romania,” said Daniela Nemoianu, Executive Partner, KPMG in Romania. “The culture of instant gratification, corruption, lack of an integrated systemic vision, the expanding gaps and the shrinking administrative capacity, all point out to the stringent need for a Country Project to be crafted and calibrated, for strategic directions and priorities that should embrace the national values and interests of the country. The Country Project is a concept that goes beyond individual political or economic interests, which would enable Romania to competitively adapt to the all surrounding changes. ‘Together for a Strong Romania’ presupposes an integrated alignment of systemic actions to protect the national interest, a unique chance of progress shared and endorsed by the whole nation, an opportunity to map out and build a far-reaching and long-term strategic vision to the benefit of the country. Such an initiative, well-thought-out and coordinated, will also be an opportunity for the political class and society to join forces together,” added Nemoianu.


Determining a Country’s Change Readiness


In assessing capability for change readiness, the CRI measures a country’s capacity in three areas:


* Enterprise capability – a country’s business environment

* Government capability – including fiscal, regulatory and security aspects

* People and civil society capability – civil society institutions, inclusiveness of growth, education, health and technology access


“The CRI is designed so that users can drill down in each of the pillars for an in-depth picture of a country’s performance for each capability, gaining an understanding of why some nations perform better than others, and what could be done to close the gap,” said Nemoianu. “Change readiness is complex, and the CRI enables governments, NGOs and private investors to go beyond headlines, unravel this complexity and ultimately make more informed decisions.”




Executive Summary for Romania

Romania ranks 79th in the Change Readiness Index (CRI) prepared by KPMG International in partnership with Oxford Economics from a total of 127 countries surveyed. The CRI measures countries’ capacity to prepare and respond to accelerated change brought about by economic and political shocks or long term trends such as demographics and new technologies, as well as natural disasters. Romania has improved its overall CRI score since the last survey in 2013, which is built on three main pillars: enterprise capability, government capability and people and civil society. Romania scores best for the people & civil society capability, although this is the only major category for which the country’s score has fallen compared with the last survey.


Although income is an important trigger for increasing change readiness, Romania being included in the upper-middle income countries category (USD 4,086-12,615), it is outpaced in the CRI ranking by 13 lower-middle income countries and even by 5 low-income countries from Africa. Romania belongs to the Eastern Europe and Central Asia group of countries, where it ranks 14th out 16 countries, while the Czech Republic, Hungary and Slovakia hold the first three positions.


Romania is ranked 79th for enterprise capability which reflects the soundness of a country’s business environment. Romania performs better in terms of technology infrastructure (50th place), economic openness (51st) and labor market flexibility (61st). The subdivision in this category which is cause for concern is innovation and R&D for which Romania performs badly (109th), due to poor financing and cooperation between research institutes and industry. Romania also scores poorly for business environment (95th place) reflecting difficulties in starting a business; the degree of government regulation, property and contract laws, taxation, and investor protection. Romania also performs badly in the financial sector (93rd), as this indicator mainly measures the efficiency of funding to enterprises and entrepreneurs.


Government capability is Romania’s weakest pillar in the change readiness index, for which the country ranks 86th, mainly because of poor government strategic planning as well as suboptimal fiscal and budgeting management. Romania also ranks weakly in terms of responsiveness to environment and climate change as well as food and energy security. Romania has shown signs of improvement in terms of bureaucracy, positive regulatory policies and a more stable macroeconomic framework, for which it is placed near the average of the classification.


Although the score has fallen since the last survey, people and civil society are Romania’s strongest capability, taking 62nd place in the ranking. Consequently, we should focus more on developing these capabilities, especially as it takes a long time for the results to be noticeable in this area. Romania’s weakest point lies in its demographics, as it is ranked last but one (126th out of 127), due to a low fertility rate and high migration. According to the survey, Romania has poor safety nets and entrepreneurship capabilities, as a result of low support from the state. Romania ranks well in terms of technology use, inclusiveness of growth and good health, due to high life expectancy at birth (74,6 years) and a low infant mortality rate.


About the Research

The Change Readiness Index (view the online tool) covers 127 countries including the 90 covered in the 2013 CRI plus a combination of additional developed and developing nations. The expanded selection of countries provides greater opportunity for comparison across regions and income levels. The CRI is structured around three pillars (Enterprise capability, Government capability, People & Civil Society capability), that signify a country’s underlying ability to manage change. Researchers at Oxford Economics gathered primary survey data from 1,270 country experts around the world, which was combined with a rich secondary dataset made up of more than 120 variables, which are clustered into 73 secondary data indicators within the index. Secondary data sources include, for example, the World Economic Forum, World Bank, Legatum Institute, International Monetary Fund and United Nations. For full details on the pillars, pillar sub-indicators and weighting, primary survey questions, and secondary data sources, go to: kpmg.com/changereadiness-methodology.