Pacific Money

Singapore and Hong Kong Shine in Global Competitiveness Index

Each year the World Economic Forum publishes its Global Competitiveness Index. How did Asia do?

Each year the World Economic Forum – better known for its Davos meetings – publishes its detailed Global Competitiveness Index, comparing nearly 150 economies across a range of categories, and eventually arriving at an overall ranking.

The criteria used are focused around 12 “pillars” of competiveness.  These include institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication and innovation.  Each of these pillars can be further broken down into between 2 and 22 sub-categories.  In all, the Global Competitiveness Index is the most comprehensive non-government backed look at the relative merits of the world’s economies.

For the Asia-pacific region, tiny Singapore and Hong Kong achieved rankings in the top 10  in the 2012-2013 rankings. Singapore maintained its rank of second, behind Switzerland, whilst Hong Kong SAR came in ninth behind the U.S. and the UK, two places better than last year’s ranking, (and ahead of Japan).

Taiwan held its position at 13th, whilst the mainland fell 3 places from last year to come 29th, behind Ireland and Brunei.  The most troublesome factors for doing business in the mainland were a lack of access to financing, inflation, inefficient bureaucracy, corruption, and political instability.

China was not alone in falling in this year’s rankings. Malaysia dropped from 21st last year to 25th. Its main problems were inefficient bureaucracy, corruption, an inadequately educated workforce, a poor work ethnic and restrictive labor regulations.  Despite these, Malaysia remains above trend when compared to “developing Asia” on GDP per capita at Purchasing Power Parity. (PPP)

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Vietnam’s problems have been explored in this blog before. In the WEF Competiveness Index, the country has fallen from 59 in 2010-2011 to 75th for this year.  Like China, access to financing was reported as the most problematic factor for doing business, along with inflation, an inadequate infrastructure and an inadequately educated workforce

Neighbour Cambodia improved her ranking dramatically over the last three years, from 109th two years ago to 85th today.  The most problematic factors for doing business this year are listed as corruption, an inadequately educated workforce, inefficient government bureaucracy, and a lack of access to financing.

Surprisingly, Indonesia, current darling of foreign investors, slipped from 46th last year to 50th this year.  The WEF report mentions that Indonesia’s “performance varies considerably across the different pillars”, with the institutional framework being undermined by corruption and bribery and “unethical” behaviour in the private sector – factors previously identified as problems.  The doubts in this area are continuing to haunt the country even as Indonesia’s other areas, such as the macroeconomic environment, remain strong.  

Overall, the Asia-Pacific economies had an average performance  in this year’s report. More fell in the rankings than rose, but the stellar top 20 performances of Singapore, Hong Kong SAR, Japan, South Korea and Taiwan continue to set fine examples for other nations in the region.