The most competitive economies in the Asia-Pacific region are holding steady in this year’s Global Competitiveness Index: five of the region’s top ten occupy exactly the same position as in last year’s overall Index, while two have dropped a single place and three have moved forwards.
In the lower reaches of the overall Index, too, more of the region’s economies are advancing than regressing – there are year-on-year advances for Lao PDR (83rd of the 140 economies analysed), Cambodia (90th), Nepal (100th), Bangladesh (107th) and Myanmar (131st), with only Mongolia (104th) and Bhutan (105th) regressing. South Asia still generally lags behind South East Asia, but Narendra Modi’s election has seen India leap forward a remarkable 16 places to 55th overall.
The Global Competitiveness Index ranks countries on 12 “pillars” of competitiveness, using a mixture of quantitative data and surveys of executive opinion.
Singapore. For the fifth year in a row, Singapore is both the top Asia-Pacific nation and second only to Switzerland in the overall rankings. With a consistently good performance – it ranks in the top two in seven out of the 12 pillars – the country’s strengths include the efficiency of its goods, labour, and financial markets, and its globally top-ranked higher education and training system. It also has top-notch infrastructure and a transparent and efficient institutional framework. There is still some scope to improve on the pillars of innovation and business sophistication, however, and the participation of women in the workforce remains relatively low.
Japan. Retaining 6th place in the overall rankings, Japan scores even lower than Singapore on female labour force participation, showing it could make better use of its talent. In contrast to Singapore, however, the pillars of innovation and business sophistication are among Japan’s strengths – despite both registering slight declines on last year. The country also benefits from excellent infrastructure and one of the world’s healthiest workforces. It is steadily improving on the pillars of institutions, goods market efficiency and financial market development, while its macroeconomic environment has also improved on last year but still drags the overall score down.
Hong Kong SAR. With little change in its performance since last year, Hong Kong places 7th for the third consecutive edition of the Index. It is ranked as having the best infrastructure in the world, and like Singapore it posts especially strong scores for the dynamism and efficiency of its goods, labour and financial markets. Hong Kong also registers top ten scores on institutions and technological readiness. Its challenge is to improve on innovation – among the weakest aspects of the economy’s performance, and the biggest concern of surveyed executives.
Taiwan, China. Dropping a place in the overall Index to 15th, Taiwan nonetheless scores consistently across the 12 pillars – it ranks between 11th and 17th in seven of them, and in the 20s on the other five. It posts two significant improvements on last year’s rankings – in the macroeconomic environment pillar, with a better budget balance and lower debt, and the labour market efficiency pillars, thanks to more flexibility in wage determination. However, these are counterbalanced by slight drops in the rankings on seven other pillars.
New Zealand. Up one from last year to 16th overall, New Zealand continues its rise up the rankings from 25th four years ago. It leads the world in financial market development and also registers top 10 scores in five other pillars: institutions, health and primary education, labour market efficiency, goods market efficiency, and higher education and training. It underperforms relatively on pillars including innovation, business sophistication and infrastructure, the latter being regarded by executives as the biggest concern for doing business in the country.
Malaysia. Up to 18th and the leading Asia-Pacific economy which is classified as developing rather than advanced, Malaysia has now improved its position for four years in a row. It ranks in the top 50 in all 12 pillars and the top 10 in two of them: goods market efficiency and financial market development, despite slipping year-on-year in the latter. Its weakest pillar is technological readiness, but a strong year-on-year advance here is encouraging. The participation rate of women in the labour force is among the lowest outside the Arab world.
Australia. Having previously fallen in the rankings for four years in a row, Australia is back up one position to 21st this year. A consistent performer, it has improved significantly year-on-year in its weakest area – labour market efficiency – and now scores no lower than 36th on any of the 12 pillars. It has three top ten scores: financial market development, health and basic education, and higher education and training. Despite its world-class universities, however, it still underperforms its overall ranking on innovation – an area in which it will have to keep improving, given that global commodity prices are expected to remain low for the foreseeable future.
Korea, Rep. For the second year in a row, Korea ranks 26th in the overall index. It has the fifth-strongest macroeconomic environment in the world, and also outperforms its average ranking on infrastructure and innovation – where, however, it has been falling over the years. Its three weakest pillars, by some distance, are financial market development, labour market efficiency and institutions. The score on institutions has improved in the last year, for the first time in a decade, but Korea remains one of the poorest performers on this pillar among advanced economies, and policy instability is ranked by executives as their top concern.
China. Also retaining its overall position from last year, 28th, the consistency of China’s performance in the Index over the last six years suggests that competitiveness returns are diminishing on the factors which have driven the country’s economic progress in recent decades. This points to the need to evolve towards a new model in which further productivity gains are sought primarily through innovation and market efficiencies; insufficient capacity to innovate topped the list of executives’ concerns in China.
Thailand. Having jumped six places in the last Index, Thailand drops a place to 32nd overall this year. It has improved in the last year on technological readiness, innovation and business sophistication but slipped on the macroeconomic environment pillar, reflecting a lower credit rating and worsening government budget balance. Unsurprisingly, following the May 2014 coup, government instability tops the list of executives’ concerns – followed closely by three other institutional factors (corruption, government bureaucracy and policy instability), reflecting the country’s relatively low ranking on the institutions pillar.
The Global Competitiveness Report 2015-2016 is available here.
Author: Thierry Geiger, Head of Analytics and Quantitative Research, Global Competitiveness and Risks, World Economic Forum
Image: People look at the skyline of the central business district in Singapore REUTERS/Edgar Su