SA’s World Competitiveness Ranking Improves One Spot
by Steuart Pennington
Every year three Competitiveness Rankings are produced:
- The World Economic Forum’s Global Competitiveness Report on 140 countries published in September
- The IMD World Competitiveness Report on 61 countries published in May
- The Economist’s Pocket Book of World Figures on 190 countries published in February.
They are very different.
The WEF Report assembles the views of local business people and their perceptions of their own countries performance against 12 competitive ‘pillars’ using +/- 120 measures. The obvious short-coming is the relative ignorance that the contributors have of conditions in the 139 ‘other’ countries included in the report. For example SA’s Maths and Science education is ranked 140/140 – one has to ask how much is known of Maths and Science education in Mali (110/140) or Cape Verde (77/140) or Malawi (128/140).
The IMD Report is the product of University Research based on analysis made by leading scholars and by their own research and experience, including just the views of local business people. Their methodology thus divides the national environment into four main factors:
- Economic Performance
- Government Efficiency
- Business Efficiency
In turn, each of these factors is divided into 5 sub-factors which highlight every facet of the areas analyzed. Altogether, the World Competitiveness Yearbook features 20 such sub-factors.
The Economist’s Pocket World in Figures is based on research and is more encyclopedic in nature providing a huge range of data from country size, population size and GDP size etc all the way to the number of people in the country aged 16 – 24 who smoke marijuana!
The table below is the IMD’s World Competitiveness Rankings 2016
The 2016 edition ranks China Hong Kong first, Switzerland second and the USA third, with Singapore, Sweden, Denmark, Ireland, the Netherlands, Norway and Canada completing the top 10.
Professor Arturo Bris, Director of the IMD World Competitiveness Center, said a consistent commitment to a favourable business environment was central to China Hong Kong’s rise and that Switzerland’s small size and its emphasis on a commitment to quality have allowed it to react quickly to keep its economy on top.
“The USA still boasts the best economic performance in the world, but there are many other factors that we take into account when assessing competitiveness,” he said.
“The common pattern among all of the countries in the top 20 is their focus on business-friendly regulation, physical and intangible infrastructure and inclusive institutions.”
A leading banking and financial center, China Hong Kong encourages innovation through low and simple taxation and imposes no restrictions on capital flows into or out of the territory.
It also offers a gateway for foreign direct investment in China Mainland, the world’s newest economic superpower, and enables businesses there to access global capital markets.
China Hong Kong and Singapore aside, however, the research suggests Asia’s competitiveness has declined markedly overall since the publication of last year’s ranking.
Taiwan, Malaysia, Korea Republic, and Indonesia have all suffered significant falls from their 2015 positions, while China Mainland declined only narrowly retaining its place in the top 25.
The study reveals some of the most impressive strides in Europe have been made by countries in the East, chief among them Latvia, the Slovak Republic and Slovenia.
Western European economies have also continued to improve, with researchers highlighting the ongoing post-financial-crisis recovery of the public sector as a key driver.
Meanwhile, 36th-placed Chile is the sole Latin American nation outside the bottom 20, while Argentina, in 55th, is the only country in the region to have improved on its 2015 position.
Each ranking is based on analysis of over 340 criteria derived from four principal factors: economic performance, government efficiency, business efficiency and infrastructure.
Responses from an in-depth survey of more than 5,400 business executives, who are asked to assess the situation in their own countries, are also taken into consideration.
Professor Bris said: “One important fact that the ranking makes clear year after year is that current economic growth is by no means a guarantee of future competitiveness.
“Nations as different as China Mainland and Qatar fare very well in terms of economic performance, but they remain weak in other pillars such as government efficiency and infrastructure.”
Data gathered since the first ranking was published more than 25 years ago also lend weight to fears that the rich are getting richer and the poor poorer, said Professor Bris.
“Since 1995 the world has become increasingly unequal in terms of income differences among countries, although the rate of increase is now slowing,” he said.
“The wealth of the richest countries has grown every year except for the past two, while the poorer countries have seen some improvement in living conditions since the millennium.
“Unfortunately, the problem for many countries is that wealth accumulation by the rich doesn’t yield any benefits for the poor in the absence of proper social safety nets.
“Innovation-driven economic growth in poorer countries improves competitiveness, but it also increases inequality. This is obviously an issue that demands long-term attention.”
Says Arturo Bris, Director IMD World Competitiveness Center and Professor of Finance
“We are dedicated to the advancement of knowledge on world competitiveness by offering benchmarking services for countries and companies using the latest and most relevant data on the subject.
“There is no single nation in the world that has succeeded in a sustainable way without preserving the prosperity of its people. Competitiveness refers to such objective: it determines how countries, regions and companies manage their competencies to achieve long-term growth, generate jobs and increase welfare. Competitiveness is therefore a way towards progress that does not result in winners and losers: when two countries compete, both are better off.”
For over 25 years IMD World Competitiveness Center has pioneered research on how nations and enterprises compete to lay the foundations for future prosperity.
The competitiveness of nations is probably one of the most significant developments in modern management and IMD intends to remain leader in this field.