Hong Kong may have lost top spot to the United States, but the Asia-Pacific region has again been awarded high marks in the latest IMD world competitiveness rankings. However, the Swiss business school’s annual study of the world’s top 60 economies also had a message for economists: austerity does not equate to competitiveness.
Announcing the results on May 29th, Prof. Stephane Garelli, director of the IMD World Competitiveness Center, said in a statement: “While the eurozone remains stalled, the robust comeback of the U.S. to the top of the competitiveness rankings, and better news from Japan, have revived the austerity debate. Structural reforms are unavoidable, but growth remains a prerequisite for competitiveness.
“In addition, the harshness of austerity measures too often antagonizes the population. In the end, countries need to preserve social cohesion to deliver prosperity."
The survey ranks companies on economic performance, government efficiency, business efficiency and infrastructure, including global economic data and questionnaires sent to business leaders.
This year’s winner was the United States, which regained its No. 1 ranking “thanks to a rebounding financial sector, an abundance of technological innovation and successful companies.”
China continued its ascent, gaining two places to 21st, while Japan advanced three places to 24th as “Abenomics…[had] an initial impact on the dynamism of the economy.”
However, it was Asia’s smaller nations that led the way, with Hong Kong placed third, Singapore fifth and Taiwan 11th. Malaysia and Australia both dropped one place to 15th and 16th respectively, while South Korea held steady at 22nd and New Zealand slipped one spot to 25th. Thailand (27th), the Philippines (38th) and Indonesia (39th) all gained ground, but India disappointed by slipping five places to 40th.
The report said the winners demonstrated similar features: export-oriented manufacturing, diversification, strong small and medium-sized enterprises, fiscal discipline, investment in education and infrastructure, and above all, social cohesion.
Asia’s media showed differing responses to the results, largely depending on whether their country had climbed or fallen down the rankings.
The South China Morning Post said Hong Kong had performed worse in all four major categories, noting that Singapore was the only other Asian economy in the top 10.
"The crux of the problems of Hong Kong are high property prices and rents. The business environment is getting worse and this would discourage overseas investors too," the newspaper quoted Chinese University economist Dr Andy Kwan Cheuk-chiu as saying.
Singapore’s Straits Times said the island republic had “slipped for the third year running,” dragged down by “rising costs and an economic slowdown”.
The Taipei Times noted Taiwan’s “lowest performance since 2009,” quoting a government official who said the country had not liberalized regulations as strictly as others.
The China Daily was more upbeat, pointing to its improved rankings in business efficiency and infrastructure and the IMD’s praise for China’s “positive effect on the region’s competitiveness”. Yet it mentioned challenges ahead, including “reforming public administration toward a service-oriented system, controlling the real estate bubble, and addressing the emerging deficit of the social insurance fund.”
By contrast, Japan’s Nikkei gave the IMD report a positive rap, particularly due to the “expansionary economic policies” of Prime Minister Shinzo Abe.
The business daily said Japan had posted a sharp rise in its domestic economy’s ranking, from 19th to 5th, while productivity and efficiency also surged from 44th to 28th. The world’s No. 3 economy “topped the global list in terms of the Gini coefficient, a measure of income equality,” with improvements in gross domestic product, government decision-making and other categories.
However, the Australian Financial Review’s economics correspondent, Jacob Greber criticized “rising costs, weak labor productivity growth and a fractious political climate” for delivering Australia its worst ranking in 17 years.
Australia’s labor productivity dived from 26th to 51st, with the nation rated 43rd for economic diversification and 53rd for cost of living.
In reviewing the winners and losers since 1997, the IMD found that China, South Korea and Taiwan were among the biggest gainers, while Japan, New Zealand and the Philippines were among the biggest losers.
“The winners have been those countries which have really applied the rules of the game – it’s really that simple,” the IMD’s Garelli told Greber in his May 30th report.
As Harvard Business School Prof. Michael E. Porter wrote: “Natural prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value”.