Switzerland global competitiveness star again; Ireland at 24th rank
For the seventh year in a row, Switzerland has been ranked as the top star of global competitiveness by the World Economic Forum (WEF) which said in its latest assessment published Tuesday, that Switzerland, Singapore and the US have been nurturing innovation and talent that has kept them at the top of the Global Competitiveness Index, which profiles 140 economies.
The Global Competitiveness Report 2015-2016 assesses the competitiveness of 140 world economies. Using a mixture of quantitative and survey data, it ranks countries overall by combining 113 indicators grouped under 12 pillars of competitiveness: institutions; infrastructure; macroeconomic environment; health and primary education; higher education and training; goods market efficiency; labour market efficiency; financial market development; technological readiness; market size; business sophistication; and innovation.
Ireland had a 25 rank in 2014/2015 and a 22nd rank in 2008/2009. Austria is at 23 and Saudi Arabia at 25.
Germany improves by one place to 4th in this year's rankings and the Netherlands returns to the 5th place it held three years ago. Japan (6th) and Hong Kong, China (7th) follow, both stable. Finland falls to 8th place — its lowest position ever — followed by Sweden (9th). The United Kingdom rounds up the top 10 of the most competitive economies in the world.
In Europe, Spain, Italy, Portugal and France have made significant strides in bolstering competitiveness. The WEF says thanks to reform packages aimed at improving the functioning of markets, Spain (33rd) and Italy (43rd) climb two and six places respectively. Similar improvements in the product and labour market in France (22nd) and Portugal (38th) are outweighed by a weakening performance in other areas. Greece stays in 81st place this year, based on data collected prior to the bailout in June. Access to finance remains a common threat to all economies and is the region’s greatest impediment to unlocking investment.
Among the larger emerging markets, the trend is for the most part one of decline or stagnation. However, there are bright spots: India ends five years of decline with a spectacular 16-place jump to 55th. South Africa re-enters the top 50, progressing seven places to 49th. Elsewhere, macroeconomic instability and loss of trust in public institutions drag down Turkey (51st), as well as Brazil (75th), which posts one of the largest falls. China, holding steady at 28, remains by far the most competitive of this group of economies. However, the WEF says its lack of progress moving up the ranking shows the challenges it faces in transitioning its economy.
Among emerging and developing Asian economies, the competitiveness trends are mostly positive, despite the many challenges and profound intra-regional disparities. While China and most of the South-East Asian countries performing well, the South Asian countries and Mongolia (104th) continue to lag behind. The five largest members of the Association of Southeast Asian Nations (ASEAN) — Malaysia (18th, up two), Thailand (32nd, down one), Indonesia (37th, down three), the Philippines (47th, up five) and Vietnam (56th, up 12) — all rank in the top half of the overall GCI rankings.
The WEF says on the top 10:
Switzerland’s infrastructure is strong, its public institutions are effective and transparent, and its macroeconomic environment is more stable than most. Still, the cost of doing business in Switzerland is high – and its strong currency, negative real interest rates and uncertainty about future immigration policy are all cautions against complacency.
Singapore beats everyone but Switzerland for the fifth consecutive year. Its competitiveness is broad-based — it scores in the top 10 in nine out of the 12 pillars. Its particular strengths are the efficiency of its goods, labour and financial markets and the quality of its higher education and training system. It also scores strongly for its infrastructure, macroeconomic stability and the transparency and efficiency of institutions. Areas for improvement include a relatively low rate of participation of women in the workforce.
The United States holds steady in third place. The foundations for its competitiveness include human capital, sophisticated businesses and capacity for innovation, with high levels of spending on research and development and good collaboration between the private sector and academia.
Germany is the first mover in this year’s index, climbing one place to fourth thanks in part to improvements in its macroeconomic environment. It has also advanced on the efficiency of financial markets and the labour market — although its low score on labour market flexibility indicates that there is still considerable scope to bolster competitiveness here through further reforms. Germany’s competitive strengths include its highly sophisticated businesses, excellent on-the-job training, rapid uptake of new technologies and supportive research environment.
The Netherlands climbs three places to fifth, regaining its highest-ever position in the index on the back of small improvements across a wide range of indicators. Its strongest scores come in areas including education, infrastructure, institutions, business sophistication and innovation; its weaknesses include inflexibilities in the labour market and continuing doubts about its financial markets. Its score on financial market development is still significantly lower than in 2007, before the global financial crisis and the bursting of the Netherlands’ real estate bubble.
Japan remains in sixth place. Its competitiveness is founded on excellent infrastructure, a 'healthy workforce' and a strong ecosystem for innovation thanks to sophisticated businesses, early adoption of new technologies and high-quality research institutions. Its macroeconomic environment scores more highly than a year ago, due in part to the return of moderate inflation. Japan’s continuing areas of relative weakness include human capital, with a low rate of female participation in the labour force showing that the country is failing to use its talent efficiently.
Hong Kong, China places seventh for the third consecutive year, with a performance almost unchanged from last year and showing a good degree of consistency across the 12 pillars. Its particular strengths include its well-developed financial sector, transport infrastructure and dynamic goods and labour markets. Innovation is among the pillars of competitiveness on which it performs relatively less well, with business leaders citing Hong Kong’s capacity to innovate as their biggest concern.
Finland drops to eighth from fourth last year, having been third for the two previous years. With unemployment at 9.5%, GDP still 6% lower in 2014 than in 2008, and growing public deficit and debt, Finland’s macroeconomic situation gives some cause for concern. However, the WEF says it still beats many other advanced economies and the country retains some strong fundamentals: its public institutions are rated as the most transparent and efficient in the world; its higher education and training system is excellent; and it has a strong capacity for innovation.
Sweden overtakes the United Kingdom to claim ninth place, with its competitiveness based on its efficient and transparent institutions, excellent education system, sophisticated businesses and an innovation ecosystem that benefits from high levels of technological adoption. Among the country’s remaining weak spots are overly restrictive labour regulations and tax rate on profits that, while it has decreased in recent years, remains high by international standards.
The United Kingdom slips one place to 10th, despite improving its performance in many areas. Its strengths include solid institutions and some of the best universities in the world. The country’s weak spots include its macroeconomic environment, with high government deficits meaning the public debt has doubled since 2007. The UK’s financial market is still recovering from the crisis, but remains one of the best developed in the world.
The authors commented on a review of the index:
"The GCI represented the latest thinking on national competitiveness at the time of its introduction. However, in the last 10 years economic thinking has evolved and recent events have brought to light new elements that affect competitiveness, once again calling for a review. For example, the recent global financial crisis highlighted new channels through which a country’s competitiveness can be affected by global financial fragilities; furthermore, the speed and modes of technological change have redefined how economists think about the innovation process. Recently the role of information technologies in how production is structured has changed and new consumption models, such as the 'sharing economy,' are emerging. In addition, new indicators have become available that can provide better measurements of established concepts."