Background

In March 2000, the Lisbon European Council agreed on the strategic goal to "make the European Union the most competitive and dynamic knowledge-based economy in the world by 2010".

In its 2001 note on the role of the state, the Economic and Social Council (CES, Conseil économique et social) in Luxembourg indicated that the primary role of the state is to contribute to the achievement and maintenance of a sustainable and high quality of life for the people of the country. According to the CES, competitiveness is a means to achieve these goals. According to a prevalent definition, formulated by the European Commission in its economic policy reflexions for 1998, "a country is internationally competitive if concurrently:

• its productivity increases at a rate which is similar to or higher than that of its major trading partners with a comparable level of development;
• it maintains external equilibrium in the context of an open free-market economy; and
• it realises a high level of employment."

In Luxembourg, however, the notion of competitiveness is seen in a more comprehensive way. Thus, the CES emphasises other dimensions and defines competitiveness as the ability of a nation to durably improving the standard of living of its inhabitants, to procure a high level of employment and social cohesion while preserving the environment at the same time.

In May 2003, the Luxembourg Tripartite Coordination Committee (Comité de coordination tripartite) recognized the need for a permanent tool for observing competitiveness and its related indicators. These reflections culminated in July 2003 in the establishment of the Observatory of competitiveness (ODC, Observatoire de la compétitivité) within the Ministry of the Economy. A first mission of the ODC was to prepare for the Tripartite Coordination Committee a draft report on the competitiveness of the Luxembourg economy. In order to do so, an external expert had been appointed, Professor Lionel Fontagné, who published his report “Compétitivité du Luxembourg: une paille dans l’acier” in November 2004. This report served as a basis for the establishment of a national competitiveness scoreboard, which the ODC updates annually since then. Following a review of the tool, done jointly with the CES and the social partners, the ODC has redesigned the national competitiveness scoreboard for the 2017 edition.

Concerning the involvement of the ODC in the work related to the EU economic governance, the Luxembourg Government Council mandated the ODC in May 2005 with the coordination at national level of the Lisbon Strategy, replaced in 2010 by the EU’s Europe 2020 Strategy in the framework of the European Semester.

In December 2010, the Luxembourg Government Council decided to create an Observatory of price formation (OFP, Observatoire de la formation des prix) integrated in the ODC.

In September 2018, the Luxembourg Government Council decided that the ODC should contribute to the work of the National Productivity Board (CNP, Conseil national de la productivité). The creation of the CNP results from a recommendation of the Council of the European Union, implemented in Luxembourg by a grand ducal decree (Arrêté grand-ducal du 23 septembre 2018 portant création d'un Conseil national de la productivité au Luxembourg).

The ODC annually publishes the results of its main activities and studies in the "Competitiveness Report", the first edition of which dates back to 2006.