Asia’s ability to maximize the value of limited natural resources has been demonstrated in the latest global competitiveness index, with Singapore, Hong Kong and Japan ranked among the top 10 world leaders. However, the strong performance failed to hide continued disappointing results from some of the region’s emerging economies, notably India.
Singapore placed second to Switzerland in the World Economic Forum’s (WEF’s) latest Global Competitiveness Report, with Hong Kong climbing two spots to seventh, Japan gaining one place to ninth and Taiwan up one to 12th place.
New Zealand also performed strongly by climbing five places to 18th, outshining its larger regional neighbor Australia (21st), which suffered from its “labor regulations and bureaucratic red tape.”Enjoying this article? Click here to subscribe for full access. Just $5 a month.
China ranked highest among the BRIC economies in 29th place, while Indonesia continued its improved performance to reach 38th place, one spot below Thailand. Among other Asian economies, South Korea dropped six places to 25th on perceived weaknesses in its institutions, labor and financial markets, while Malaysia ranked 24th after improvements in fighting red tape.
However, India dropped to 60th place in a continuation of a downward trend that started in 2009, being penalized for its “very disappointing performance in the basic drivers underpinning competitiveness” such as transport, energy and communications.
“The Indian business community repeatedly cites infrastructure as the single biggest hindrance to doing business, ahead of corruption and cumbersome bureaucracy,” the report said.
The report featured a record 148 economies, assessed on 12 factors comprising the institutional environment, infrastructure, macroeconomy, 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.
Singapore was the only economy to feature in the top three countries in seven of the 12 pillars, receiving high praise for its goods and labor market efficiency, on top of excellent infrastructure and education.
Hong Kong topped the infrastructure pillar for the fourth consecutive report, “reflecting the outstanding quality of its facilities across all modes of transportation,” in addition to its domination of the financial market development ranking.
Japan received praise for its edge in business sophistication, where it placed first for the fifth straight year, along with its high research and development spending and ability to innovate. However, its overall performance was dragged down by “severe macroeconomic weaknesses” including a budget deficit of around 10 percent of GDP and high public debt.
“It is unlikely that the coming year will see a reversal in these trends in light of the country’s aggressive monetary policy and various stimulus packages,” the report said. It also noted its rigid labor market, low level of female participation and “burdensome regulation” along with its “relative isolation.”
“It remains to be seen whether the government will deliver on its promises to address those structural issues as part of its strategy to revitalize Japan’s economy,” the report said.
Yet while Asia remains home to some of the world’s most competitive nations, the WEF noted the region’s mixed performance, with a number of countries including Pakistan and East Timor seemingly unable to make strides in competitiveness.
“The competitiveness of most ASEAN countries is still impeded by poor transport, inadequate energy and communication infrastructures, low enrolment rates and/or mediocre quality in education, and low levels of technological readiness,” the report warned.
However, it noted that ASEAN economies were showing positive trends, faring better than most developing Asian nations.
“The Philippines, once 40 places behind, is now ahead of India,” it noted.
The authors said regional initiatives such as ASEAN integration and “competitiveness champions” such as Singapore could help spur further improvements.
Commenting on the results, WEF’s founder and executive chairman Klaus Schwab said: “Innovation becomes even more critical in terms of an economy’s ability to foster future prosperity. I predict that the traditional distinction between countries being ‘developed’ or ‘less developed’ will gradually disappear and we will instead refer to them much more in terms of being ‘innovation rich’ vs ‘innovation poor’ countries.”
In his famous essay, “The Competitive Advantage of Nations,” Harvard Business School’s Michael E. Porter wrote: “National 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.”
Asia’s economic policymakers could do worse than study Porter’s work and the WEF report should they wish to continue the region’s improving trend.