Singapore is the third most competitive economy in the world, according to the World Economic Forum's Global Competitiveness Report 2009. It was fifth last year. The city-state has become more competitive, according to business leaders, because of the manner in which the government has tackled the recession.
"The country’s institutions continue to be ranked as the best in the world; at a time when confidence in governments in many countries has diminished, they are assessed even more strongly than in past years," says the report.
Switzerland is now ranked the world's most competitive economy, pushing America down to second spot.
But Singapore could be more innovative and more high-tech, says the report, and encourage more broadband Internet use.
Apart from that, the report is all admiration for Singapore. It says:
"Singapore places 1st for the efficiency of its goods and labour markets and 2nd for its financial market sophistication… Singapore also has world-class infrastructure (ranked 4th), leading the world in the quality of its roads, ports, and air transport facilities. In addition, the country’s competitiveness is propped up by a strong focus on education, providing highly skilled individuals for the workforce. In order to strengthen its competitiveness further, Singapore could encourage even stronger adoption of the latest technologies—especially broadband Internet—as well as the innovative capacity of its companies."
Another reason why Singapore does so well in these surveys – and why America fell from first to second place – is money: how the government raises and spends it. High public debt is anathema to business leaders. They value what the report calls "macroeconomic stability". America's "greatest overall weakness continues to be related to its macroeconomic stability," says the report, adding: "Repeated fiscal deficits have led to burgeoning levels of public indebtedness, which are presently being exacerbated by significant stimulus spending." In other words, it does not like President Barack Obama's economic policies.
What the report measures is how good a country is for business – and not its gross domestic product or the size of its economy. China, for example, the third largest economy in the world, is ranked 29th, India 49th.
The 10 most competitive economies are:
|Country||Current rank||Score||2008 rank|
Hong Kong is ranked 11th. It is first in financial market sophistication, second only to Germany in infrastructure, second also in goods market efficiency, fourth in labour market efficiency and ninth in technological readiness.
Singapore is ranked first in institutions, goods market efficiency and labour market efficiency, second in financial market sophistication, fourth in infrastructure, fifth in higher education and training, sixth in technological readiness, eighth in innovation, 13th in health and primary education, 14th in business sophistication, 35th in macroeconomic stability and 39th in market size.
The rankings are based on the so-called 12 pillars of competitiveness: Institutions, infrastructure, macroeconomic stability, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market sophistication, technological readiness, market size, business sophistication, and innovation. (See the full report on the World Economic Forum website.)
Taiwan is 12th, Australia 15th, South Korea 19th and New Zealand 20th among the 133 countries and territories surveyed. Rounding off the top 20, Britain is 13th, Norway 14th, France 16th and Belgium 18th.
Closer to Singapore, Malaysia is 24th, Brunei 32nd, Thailand 36th and Indonesia 54th. Among other countries in the region, Vietnam is 75th, Sri Lanka 79th, the Philippines 87th, Pakistan 101st, Bangladesh 106th, Cambodia 110th and Nepal 125th.
Why Switzerland is No 1
The report says:
"Switzerland’s economy continues to be characterized by an excellent capacity for innovation and a very sophisticated business culture, ranked 3rd for its business sophistication and 2nd for its innovation capacity. The country is characterized by high spending on R&D. Switzerland’s scientific research institutions are among the world’s best, and the strong collaboration between the academic and business sectors ensures that much of this research is translated into marketable products and processes, reinforced by strong intellectual property protection. This strong innovative capacity is captured by the high rate of patenting (148.27 per million inhabitants) in the country, for which Switzerland ranks 7th worldwide on a per capita basis.
"Switzerland’s public institutions are rated among the most effective and transparent in the world (7th), ensuring a level playing field and enhancing business confidence; these include an independent judiciary, a strong rule of law, and a highly accountable public sector. Competitiveness is also buttressed by excellent infrastructure (5th) and a well-functioning goods market (5th), as well as a labour market that is among the most efficient in the world (2nd, just behind Singapore).
"And Switzerland’s macroeconomic environment, although weakening somewhat since last year, continues to be assessed as stable compared in particular with the United States and many European neighbors (ranked 17th).
"On the other hand, the university enrollment rate of 47 percent continues to lag behind many other high-innovation countries, placing the country 46th on this indicator. Although gaps are currently being filled through immigration, efforts should be made to boost higher education attainment to ensure sufficient national talent. Financial markets have also weakened somewhat, reflecting in particular difficulties in the national banking sector. However, this has been muted compared with many other countries.
Why America dropped from first to second place
The report says:
"The country continues to be endowed with many structural features that make its economy extremely productive and that place it on a strong footing to ride out business cycle shifts and economic shocks. However, a number of escalating weaknesses have taken their toll on the US ranking this year. The United States is home to highly sophisticated and innovative companies operating in very efficient factor markets. The country is also endowed with an excellent university system that collaborates strongly with the business sector in R&D. Combined with the scale opportunities afforded by the sheer size of its domestic economy—the largest in the world by far—these qualities continue to make the United States very competitive.
"Labour markets are ranked 3rd, characterized by the ease and affordability of hiring workers and significant wage flexibility. The country’s goods markets (12th) are also characterized by low levels of distortion within the context of a very competitive environment.
"Although the country is very competitive overall, there are some weaknesses in particular areas that have deepened since the last assessment. Some aspects of the institutional environment could be strengthened, with particular concerns on the part of the business community about the government’s ability to maintain arms-length relationships with the private sector (48th), and in the perception that the government spends its resources wastefully (68th).
"There is also increasing concern related to the functioning of private institutions, with a measurable weakening of the assessment of auditing and reporting standards (down from 20th last year to 39th this year), perhaps not unexpected in the context of recent turmoil and scandals within the financial sector in particular. More generally, given that the financial crisis originated in large part in the United States, it is hardly surprising that there has been a weakening of the assessment of its financial market sophistication, dropping from 9th last year to 20th overall this year in that pillar.
"The country’s greatest overall weakness continues to be related to its macroeconomic stability, where it ranks 93rd, down from 66th last year. The United States has built up large macroeconomic imbalances over recent years. Repeated fiscal deficits have led to burgeoning levels of public indebtedness, which are presently being exacerbated by significant stimulus spending."