[AfrICANN-discuss] most competitive economies - world

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U.S. drops to 6th on list of most competitive economies

	Author: RP news wires
 	Issue: /

 http://www.reliableplant.com/article.aspx?articleid=2760&pagetitle=U.S.+drops+to+6th+on+list+of+most+competitive+economies

Switzerland, Finland and Sweden are the world's most competitive
economies according to The Global Competitiveness Report 2006-2007,
released September 26 by the World Economic Forum. Denmark, Singapore,
the United States, Japan, Germany, the Netherlands and the United
Kingdom complete the top 10 list, but the United States shows the most
pronounced drop, falling from first to sixth.

"The top rankings of Switzerland and the Nordic countries show that
good institutions and competent macroeconomic management, coupled with
world-class educational attainment and a focus on technology and
innovation, are a successful strategy for boosting competitiveness in
an increasingly complex global economy," said Augusto Lopez-Claros,
Chief Economist and Director of the World Economic Forum's Global
Competitiveness Network. "Business activity in these countries
benefits from a well-developed institutional framework, characterized
by the rule of law, an efficient judicial system and high levels of
transparency and accountability within public institutions. Excellent
infrastructure is an additional positive feature of the business
environment. Our indicators point to the rapidly growing importance of
higher education and training as engines of productivity growth.
Countries that, like the Nordics, are investing heavily in education
are likely to see rising levels of income per capita, growing success
in reducing poverty and an increasing ability to establish a presence
in the global economy."

The rankings are drawn from a combination of publicly available hard
data and the results of the Executive Opinion Survey, a comprehensive
annual survey conducted by the World Economic Forum, together with its
network of Partner Institutes (leading research institutes and
business organizations) in the countries covered by the report. This
year, more than 11,000 business leaders were polled in a record 125
economies worldwide. The survey questionnaire is designed to capture a
broad range of factors affecting an economy's business climate that
are critical determinants of sustained economic growth. The Forum
annually delivers a comprehensive overview of the main strengths and
weaknesses in a large number of countries, making it possible to
identify key areas for policy formulation and reform.

Global Competitiveness Index 2006 and 2005 comparisons
	




	

GCI
	

GCI
	

GCI
	


	



Country/Economy
	

2006 Rank
	

2006 Score
	

2005 Rank
	

Changes 2005-2006

Switzerland
	

1
	

5.81
	

4
	

ä
	

3

Finland
	

2
	

5.76
	

2
	

à
	

0

Sweden
	

3
	

5.74
	

7
	

ä
	

4

Denmark
	

4
	

5.70
	

3
	

æ
	

-1

Singapore
	

5
	

5.63
	

5
	

à
	

0

United States
	

6
	

5.61
	

1
	

æ
	

-5

Japan
	

7
	

5.60
	

10
	

ä
	

3

Germany
	

8
	

5.58
	

6
	

æ
	

-2

Netherlands
	

9
	

5.56
	

11
	

ä
	

2

United Kingdom
	

10
	

5.54
	

9
	

æ
	

-1


Download the full Global Competitiveness Rankings (PDF or Excel format)

This year marks an important progression in The Global Competitiveness
Report's methodology, with the adoption of a new, more comprehensive,
tool to assess countries' competitiveness: the Global Competitiveness
Index (GCI). Developed for the World Economic Forum by professor
Xavier Sala-i-Martin of Columbia University, the new index –
representing two years of collaboration with him and feedback from a
broad set of users – extends and deepens the concepts and ideas
underpinning the earlier index used by the Forum.

"The introduction of the Global Competitiveness Index is a logical
extension of the World Economic Forum's competitiveness work. Changes
in the global economy and the increasing complexity which characterize
the business environment have made it necessary to develop an
instrument that captures a larger set of factors affecting the
evolution of economic growth," said Lopez-Carlos. "We are confident
that this index, elegant in design and with a strong conceptual
underpinning, will become an important tool for dialogue with
policy-makers and the business community on the key drivers of
productivity."

"With the growing complexity of the global economy, The Global
Competitiveness Report is a contribution to enhancing our
understanding of the key factors which determine economic growth and
will help explain why some countries are much more successful than
others in raising income levels and opportunities for their respective
populations. By providing detailed assessments of the economic
conditions of nations worldwide, the report offers policy-makers and
business leaders an important tool in the formulation of improved
economic policies and institutional reforms," noted Klaus Schwab,
founder and executive chairman of the World Economic Forum.

Harvard Business School professor Michael E. Porter presents the
results of the Business Competitiveness Index (BCI), an especially
useful complement to the GCI, with its emphasis on a range of
company-specific factors conducive to improved efficiency and
productivity, such as the sophistication of the operating practices
and strategies of companies and the quality of the microeconomic
business environment in which a nation's companies compete. Results of
the BCI rankings are fully reported in the executive summary and
available online at www.weforum.org/gcr

The World Economic Forum continues to expand geographic coverage of
The Global Competitiveness Report and with the current instalment
featuring a total of 125 economies, this report is the most
comprehensive of its type. This year, coverage has been expanded to
Angola, Barbados, Burkina Faso, Burundi, Lesotho, Mauritania, Nepal,
Suriname and Zambia.

This year's report features a number of country-specific boxes on
Argentina, Brazil, France, Hungary, Israel, Japan, South Africa,
Turkey and the United States, providing an in-depth analysis of the
issues affecting national competitiveness.  Moreover, it contains a
number of external studies on pertinent issues related to global
competitiveness and, more generally, themes which emanate from the
World Economic Forum's concern with growth and development. In
addition to these, the report also includes an interview, in which
Lopez-Claros talks to Harvard professors Richard Cooper and Kenneth
Rogoff about the ramifications of global imbalances.

The report contains a detailed country/economy profile for each of the
125 economies featured in the study, providing a comprehensive summary
of the overall position in the Index rankings as well as a guide to
what are considered to be the most prominent competitive advantages
and competitive disadvantages of each. Also included is an extensive
section of data tables with global rankings covering over 100
indicators.


Highlights

• Switzerland is No. 1 in The Global Competitiveness Report for the
first time, reflecting the country's sound institutional environment,
excellent infrastructure, efficient markets and high levels of
technological innovation. The country has a well developed
infrastructure for scientific research, companies spend generously on
R&D, intellectual property protection is strong and the country's
public institutions are transparent and stable.

• The United States, previously in first place, continues to enjoy an
excellent business environment, efficient markets and is a global
center for technology development. However, its overall
competitiveness is threatened by large macroeconomic imbalances,
particularly rising levels of public indebtedness associated with
repeated fiscal deficits. Its relative ranking remains vulnerable to a
possible disorderly adjustment of such imbalances, including
historically high trade deficits.

• As has been the case in recent years, the Nordic countries hold
prominent positions in the rankings this year, with Finland (2),
Sweden (3) and Denmark (4) all among the top 10 most competitive
economies. The Nordic countries have been running budget surpluses and
have lower levels of public indebtedness on average than the rest of
Europe. Prudent fiscal policies have enabled governments to invest
heavily in education, infrastructure and the maintenance of a broad
array of social services. Finland, Denmark and Iceland have the best
institutions in the world (ranked 1, 2 and 3, respectively) and,
together with Sweden and Norway, hold top ten ranks for health and
primary education. Finland, Denmark and Sweden also occupy the top
three positions in the higher education and training pillar, where
Finland's top ranking is remarkable for its durability over time.

• Germany and the United Kingdom continue to hold privileged
positions, ranked eighth and 10th, respectively. In the areas of the
safety of property rights and the quality of the judicial system,
Germany is second to none. By contrast, both countries score poorly
for their macroeconomic environments, though Germany does less well.
In both cases public sector deficits and rising levels of public
indebtedness as well as a strengthening of the currency in both
countries in 2005 are the main causes of this. The United Kingdom
excels in market efficiency, enjoying the most sophisticated financial
markets in the world. Its flexible labor market and low levels of
unemployment stand in sharp contrast to Germany, whose business
community is burdened with sclerotic labour regulations. But Germany
does somewhat better than the United Kingdom in innovation indicators
and the sophistication of its business community is peerless.

• Italy's competitive position has continued on a downward trend, well
established over the past few years, dropping four places to 42 in
this year's report. The list of problems is long. Italy's underlying
macroeconomic environment is poor due to having run budget deficits
without interruption for the past 20 years. The fiscal situation has
deteriorated sharply since 2000 and public debt levels are well over
100 percent of GDP, among the highest in the world. The poor state of
Italy's public finances may itself reflect more deep-seated
institutional problems, which are shown in low rankings for variables
such as the efficiency of government spending, the burden of
government regulation and, more generally, the quality of public
sector institutions.

• As in previous years, Poland remains the worst performer among the
EU economies, with a rank of 48, right behind Greece (47) and well
behind Estonia (25), the Czech Republic (29) and Slovenia (33),
Central and Eastern Europe's top performers. Particular weaknesses in
Poland stem from the highly protected and rigid labor markets,
particularly harmful in a country where unemployment is close to 18
percent. As in many transition economies, businesses have to deal with
uncertainties stemming from weak institutions, corruption and crime,
favouritism, an easily influenced judiciary and a weak property rights
regime. Deeper reforms will be necessary if Poland is to increase
productivity and stay competitive in the face of rising labour costs.
Among the candidate countries, Turkey and Croatia both seem to have
benefited from the "EU bonus", moving up impressively in the rankings
by 12 places each, to positions 59 and 51, respectively.

• Russia has fallen from its 53rd rank in 2005 to 62nd in 2006. The
private sector in Russia has serious misgivings about the independence
of the judiciary and the administration of justice. Legal redress in
Russia is neither expeditious, transparent nor inexpensive, unlike in
the world's most competitive economies. A ranking of only 110 among
125 countries in 2006 suggests that it is time-consuming,
unpredictable and a cost burden to enterprises. Partly because of
this, the property rights regime is extremely poor and worsening.
Russia's ranking in this indicator during the last two years has
suffered a precipitous decline, from 88 in 2004 to 114 in 2006, among
the worst in the world.

• Leading within Asia are Singapore and Japan, ranked fifth and
seventh respectively, closely followed by Hong Kong (11) and Taiwan
(13). These economies are characterized by high-quality
infrastructure, flexible and efficient markets, healthy and
well-educated workforces and high levels of technological readiness
and innovative capacity. Malaysia, ranked 26th overall, has one of the
most efficient economies in the region with flexible labour markets,
relatively undistorted goods markets and public institutions which in
many areas (e.g., rule of law, the legal system) are already operating
at the level of the top performing new EU members.

• Korea's (24) performance is slightly more uneven than that of
Malaysia. The country has already reached world-class levels in
certain areas, such as macroeconomic management, school enrolment
rates at all levels, penetration rates for new technologies and
scientific innovation, as captured by data on patent registration.
However, Korea continues to be held back by institutional weaknesses,
both public and private, for which it has not yet reached the
standards of Finland, Sweden, Denmark or Chile. Taiwan (13) continues
to operate at a high level of efficiency but has dropped below last
year's "top-10" status. It is an innovation powerhouse, with levels of
per capita patents registration exceeded only by the US and Japan. It
continues to excel in higher education and training indicators (ranked
seventh overall) but, like Korea, its overall rank is weighed down by
weaknesses in the institutional infrastructure.

• India ranked 43rd overall with excellent scores in capacity for
innovation and sophistication of firm operations. Firm use of
technology and rates of technology transfer are high, although
penetration rates of the latest technologies are still quite low by
international standards, reflecting India's low levels of per capita
income and high incidence of poverty. Despite these encouraging
results, insufficient health services and education as well as a
poorly developed infrastructure are limiting a more equitable
distribution of the benefits of India's high growth rates. Moreover,
successive Indian governments have proven remarkably ineffective in
reducing the public sector deficit, one of the highest in the world.

• China's ranking has fallen from 48 to 54, characterized by a
heterogeneous performance. On the positive side, China's buoyant
growth rates coupled with low inflation, one of the highest savings
rates in the world and manageable levels of public debt have boosted
China's ranking on the macroeconomy pillar of the GCI to sixth place –
an excellent result. However, a number of structural weaknesses need
to be addressed, including in the largely state-controlled banking
sector. Levels of financial intermediation are low and the state has
had to intervene from time to time to mitigate the adverse effects of
a large, non-performing loan portfolio. China has low penetration
rates for the latest technologies (mobile telephones, Internet,
personal computers), and secondary and tertiary school enrolment rates
are still low by international standards. By far the most worrisome
development is a marked drop in the quality of the institutional
environment, as witnessed by the steep fall in rankings from 60 to 80
in 2006, with poor results across all 15 institutional indicators, and
spanning both public and private institutions.

• As in previous years, Chile, ranked 27th, leads the rankings in
Latin America and the Caribbean. Chile's position reflects not only
solid institutions – already operating at levels of transparency and
openness above those of the EU on average – but also the presence of
efficient markets that are relatively free of distortions. The state
has played a supportive role in the creation of a credible, stable
regulatory regime. Extremely competent macroeconomic management has
been a critical element in creating the conditions for rapid growth
and sustained efforts to reduce poverty. The resources generated by
Chile's virtuous fiscal policy have gone to finance investment in
infrastructure and, increasingly, education and public health. Given
Chile's strong competitive position, the authorities will have to
focus attention on upgrading the capacity of the labour force with a
view to rapidly narrowing the skills gap with respect to Finland,
Ireland and New Zealand, the relevant comparator group for Chile.

• Brazil's ranking, 66th overall, down from 57th last year, reflects a
particularly poor position in the macroeconomy pillar of the GCI
(114th, as compared to 91st in 2005), resulting from a large budget
deficit relative to that of other countries, if not to its historical
performance. High levels of government debt and a wide interest rate
spread give an indication of the heavy intermediation costs in the
Brazilian banking sector, which negatively affect private sector
investment and contribute to lower economic growth.

• Mexico's ranking has remained broadly stable, moving up one place to
58. The country's somewhat uneven performance over the various pillars
of the GCI is shown by relatively high scores for health and primary
education, goods' market efficiency and selected components of
technological readiness, e.g., FDI and technology transfer, no doubt
reflecting the close links of the Mexican market to the US in the
context of NAFTA. However, this is offset by the same institutional
weaknesses as are prevalent in the rest of Latin America.

• A lack of sound and credible institutions remains a significant
stumbling block in many Latin American countries. Bolivia (97),
Ecuador (90), Guyana (111), Honduras (93), Nicaragua (95) and Paraguay
(106) achieve low rankings overall and, in particular, are among the
worst performers for basic elements of good governance, including
reasonably transparent and open institutions. These countries all
suffer from poorly defined property rights, undue influence,
inefficient government operations, as well as unstable business
environments. Perceived favouritism in government decision-making, an
insufficiently independent judiciary, and security costs associated
with high levels of crime and corruption make it difficult for the
business community to compete effectively.

• As in previous years, Venezuela's overall performance (88, down four
places) continues to deteriorate, despite the emergence of a
government budget surplus, a phenomenon seen in all oil-exporting
countries. The single most important obstacle to development, however,
appears to be the insufficient quality of Venezuelan institutions,
especially to combat corruption, undue influence in decision-making
and to reduce government intervention, all areas in which Venezuela
figures among the worst ranks. For all the talk about the social
dimension of the government's "benign" revolution, school enrolment
rates are either mediocre or poor, with Venezuela ranking 84th, just
behind Vietnam, Suriname and China, at the secondary school level.
Venezuela's infant mortality rate of 16 per 1,000 live births is on a
par with Albania and is higher than that of Russia or the Ukraine, two
countries still recovering from decades of public health neglect.

• Within the Middle East and North Africa (MENA) region, the Gulf
States continue to perform quite well in the overall GCI rankings. The
United Arab Emirates (UAE) ranked 32nd while Qatar moved up eight
places to rank 38th. Terms-of-trade gains linked to oil prices have
boosted growth rates and reinforced already high levels of confidence
in the business community, resulting from ongoing institutional
modernization and improvements in macroeconomic management. However,
in many of the resource-rich countries, the availability of public
finance appears – at least for now – not to have translated into
improvements in human capital, which would play an important role in
helping these economies that are highly dependent on oil and
vulnerable to external shocks to diversify their economic base.

• Tunisia, the most competitive economy in the region ranked 30th,
Algeria (76) and Morocco (70) all improved remarkably from last year,
thanks in part to significant improvements in institutions. Egypt
dropped nine ranks to 63rd this year, due to an extremely sharp drop
of 58 places to rank 108 in the macroeconomy pillar, as it struggled
with worsening government finances and a large debt ratio. It also
fell back in the areas of higher education and training and
innovation.

• In sub-Saharan Africa, South Africa (45th) does particularly well in
a number of areas typically reserved for rich, innovation-driven
economies. Its economic sophistication is reflected in high ranks for
property rights, private institutions, goods and financial market
efficiency, business sophistication and innovation.

• Botswana, ranked 81st, has succeeded in using its wealth from key
natural resources to boost the growth rate. Key to Botswana's success
have been its reliable and legitimate institutions, the prudence of
government spending and public trustworthiness of its politicians. The
transparency and accountability of public institutions have
contributed to a stable macroeconomic environment, efficient
bureaucracy and market-friendly regulation.

• On the other hand, Tanzania and Uganda ranked 104th and 113th,
respectively, suffer from large weaknesses in health and education.
Their failure to make a significant improvement in these basic
requirements is likely to continue to dent their growth prospects.
Nigeria is down 18 places to 101, on the back of poor macroeconomic
management despite the surge in oil export revenues and Zimbabwe at
119 continues its rapid descent to the bottom of the rankings, due to
a further deterioration of the institutional climate, including the
erosion of property rights and rule of law, as well as problems of
corruption and the implications these and other factors have had for
macroeconomic management.