1. What’s going on?
At the end of May 2019, the IMD World Competitiveness Center¹ launched the 2019 World Competitiveness Rankings.
In this year’s ranking, the centre sees Singapore dethroning the United States of America as the world’s most competitive economy.
2. An in-depth look: Defining ‘Competition’
This article will first introduce the project including the factors taken into consideration for the ranking purpose. It is hoped that this helps to contextualise how the countries assessed rose, fell or stood still about their competitiveness.
Competitiveness is a thorough and all-encompassing idea. It assesses the degree to which a nation cultivates a situation where endeavours can accomplish maintainable development, produce employments and, at last, increment welfares for its residents.
No country has prevailed economically without saving up esteem creation for the long haul and competitiveness alludes to such a goal. Its intensity helps it remain a healthy competition as countries mainly focus on building up their positions rather than on defeating others.
Project: The IMD World Competitiveness Rankings (est.1989)
Factors: World events, governmental policies, and private sector initiatives impacting 4 categories, (further split into 235 indicators!)
Source: Statistics and executives’ perceptions.‘Hard’ statistics include unemployment, gross domestic product (GDP) and government spending on health and education while ’soft’ data is derived from an Executive Opinion Survey covering topics such as social cohesion, globalization and corruption.
The information was then used to score countries against four categories:
|Business Efficiency||Economic performance||Infrastructure||Government efficiency|
|Productivity||Domestic policy||Basic infrastructure||Public finance|
|Labour market||International trade||Technological infrastructure||Fiscal policy|
|Finance||International investment||Scientific infrastructure||Institutional framework|
|Management practices||Employment||Health & Environment||Business legislation|
|Attitudes & Values||Prices||Education||Societal framework|
Table 1.1 Subfactors in each category²
- The first category lists countries based on their business efficiency. This category measures how innovative, profitable and responsible businesses are in each country. Productivity and efficiency of the private sector and ease of access to finance are among the concerns.
- The second category concerns the economic performance of the countries. This category measures the competitive strengths of the domestic economy and its macroeconomic performance, taking into consideration international trade and investment.
- The countries will also be assessed on their infrastructure. This category measures how effective infrastructure is in delivering the basic, technological, scientific and human resources needs of the business. Aside from hardware facilities, health and environmental sustainability, as well as education, are also important factors in this measurement.
- Lastly, countries are positioned according to respective government efficiency: this category measures the effect of government policies on competitiveness. This includes governmental discipline with internal financing, the rule of law and the improvement of inclusive institutions.
There is no one-size-fits-all solution for competitiveness, but the best-performing countries tend to score well across all four categories.
3. Singapore’s emerging growth
Categorically, Singapore ranked third place in the world for government efficiency, behind Hong Kong and the UAE. Singapore also ranked fifth in the categories of economic performance and innovative businesses.
While it was not one of the top five countries for effective infrastructure, Singapore’s rise to the top was driven by its advanced technological infrastructure, the availability of skilled labour, favourable immigration laws, and efficient ways to set up new businesses. In the Director of IMD World Competitiveness Centre, Arturo Bris’ words, these made up a ‘simple recipe for competitiveness’.
4. Why does the ranking matter to us?
Economists view competitiveness as essential for the long haul strength of a nation’s economy as it engages organizations to accomplish reasonable development, produce occupations and, eventually, upgrade the welfare of residents
Be that as it may, competitiveness is not a zero-sum game where the advantages of one economy are the misfortunes of another. Unexpectedly, intensity gives a structure that enables us to perceive the elements that encourage flourishing in a given economy. Furthermore, this is the way we anticipate that our rankings should be utilized and translated: intensity is both an apparatus and a target of financial strategy.
There isn’t only one way of competitiveness change. Economies of high competitiveness share over the normal execution above all intensity factors. Be that as it may, their intensity portfolio changes: One economy at a given time may seek after an unmistakable and impalpable framework competitiveness procedure, while another may concentrate on administrative productivity like business enactment or comprehensive foundations. At the end of the day, a ‘one-measure fits-all’ formula to improve competitiveness just does not exist.
5. The bigger picture
In general, Southeast Asia has seen optimistic progress as compared to other regions. Indonesia leapt eleven places to 32nd, enjoying the region’s biggest improvement, thanks to increased efficiency in the government sector as well as improvement in infrastructure and business conditions. The southern Asian country is characterized by the lowest cost for labour across the 63 economies studied. Thailand, driven by an increase in foreign direct investments and productivity, advanced five places to 25th position in 2019. The Philippines had also progressed four steps forward from last year’s 50th position while Malaysia holds onto the 22nd.
While domestic policies have contributed substantially for this regional progress, it is also partly due to global economic conditions such as the trade war’s effects, which have led companies to relocate some parts of their supply chains out of China and into Southeast Asian countries.
The former champion, the United States of America has been toppled. Arguably, the initial boost to confidence from President Donald Trump’s first wave of tax policies appears to have faded in the United States, according to the ranking. While still setting the pace globally for levels of infrastructure and economic performance, the competitiveness of the world’s biggest economy was hit by higher fuel prices, weaker hi-tech exports and fluctuations in the value of the dollar.
“That’s what we saw last year indeed, that after the tax decreases in the United States, the U.S. climbed to the top position,” Bris commented. “This year, on the contrary, we have observed the impact of the trade war.”
Meanwhile, in Europe, competitiveness has struggled to gain ground with most economies on the decline or standing still. The Nordics, traditionally a powerhouse region for competitiveness, have failed to make significant progress this year, while ongoing uncertainty over Brexit has seen the United Kingdom fall from 20th to 23rd.
¹ IMD, World Competitiveness Centre <https://www.imd.org/wcc/world-competitiveness-center/>
² Nektaria Berikou, A Comparative Analysis of World Competitiveness Records and a Cost Projection resulting from the lack of competitiveness in the Greek Economy (2007).
Writers: Max Kong
Reviewers: Vikky Beh, Koh Su Yen