Category: Global Market
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September 17th 2012 / By: wefmediateam
Switzerland
retains its 1st place position again this year as a result of its
continuing strong performance across the board. The country’s most
notable strengths are related to innovation and labor market efficiency,
where it tops the GCI rankings, as well as the sophistication of its
business sector, which is ranked 2nd.
Switzerland’s
scientific research institutions are among the world’s best, and the
strong collaboration between its academic and business sectors, combined
with high company spending on R&D, ensures that much of this
research is translated into marketable products and processes reinforced
by strong intellectual property protection. This robust innovative
capacity is captured by its high rate of patenting per capita, for which
Switzerland ranks a remarkable 2nd worldwide.
Productivity
is further enhanced by a business sector that offers excellent
on-the-job-training opportunities, both citizens and private companies
that are proactive at adapting the latest technologies, and labor
markets that balance employee protection with the interests of
employers. Moreover, public institutions in Switzerland are among the
most effective and transparent in the world (5th). Governance structures
ensure a level playing field, enhancing business confidence; these
include an independent judiciary, a strong rule of law, and a highly
accountable public sector.
Competitiveness
is also buttressed by excellent infrastructure (5th), well-functioning
goods markets (7th), and highly developed financial markets (9th).
Finally, Switzerland’s macroeconomic environment is among the most
stable in the world (8th) at a time when many neighboring economies
continue to struggle in this area.
While
Switzerland demonstrates many competitive strengths, maintaining its
innovative capacity will require boosting university enrollment rate,
which continues to lag behind that of many other high-innovation
countries, although this has been increasing in recent years.
Singapore
retains its place at 2nd position as a result of an outstanding
performance across the entire Index. The country features in the top 3
in seven of the 12 categories of the Index and appears in the top 10 of
three others. Its public and private institutions are rated as the best
in the world for the fifth year in a row. It also ranks 1st for the
efficiency of its goods and labor markets, and places 2nd in terms of
financial market development.
The
country also has world-class infrastructure (2nd), with excellent
roads, ports, and air transport facilities. In addition, the country’s
competitiveness is reinforced by a strong focus on education, which has
translated into a steady improvement in the higher education and
training pillar (2nd) in recent years, thus providing individuals with
the skills needed for a rapidly changing global economy.
Finland
moves up one place since last year to reach 3rd position on the back of
small improvements in a number of areas. Similar to other countries in
the region, the country boasts well-functioning and highly transparent
public institutions (2nd), topping several indicators included in this
category. Its private institutions, ranked 3rd overall, are also seen to
be among the best run and most ethical in the world.
Finland
occupies the top position both in the health and primary education
pillar as well as the higher education and training pillar, the result
of a strong focus on education over recent decades. This has provided
the workforce with the skills needed to adapt rapidly to a changing
environment and has laid the groundwork for high levels of technological
adoption and innovation. It is also one of the most innovative
countries in Europe, ranking 2nd, behind only Switzerland, on the
related pillar. Improving the country’s capacity to adopt the latest
technologies (ranked 25th) could lead to important synergies that in
turn could corroborate the country’s position as one of the world’s most
innovative economies. Finland’s macroeconomic environment weakens
slightly on the back of rising inflation (above 3 percent), but fares
comparatively well when contrasted with other euro-area economies.
Sweden,
overtaken by Finland, falls one place to 4th position. Like
Switzerland, the country has been placing significant emphasis on
creating the conditions for innovation-led growth. The quality of its
public institutions remains first-rate, with a very high degree of
efficiency, trust, and transparency. Private institutions also receive
excellent marks, with firms that demonstrate excellent ethical behavior.
Nevertheless,
we registered a slight but consistent deterioration in the country’s
institutional framework over the past three years. Additional strengths
include goods and financial markets that are very efficient, although
the labor market could be more flexible (ranking 92nd on the flexibility
subpillar). Combined with a strong focus on education over the years
and a high level of technological readiness (1st), Sweden has developed a
very sophisticated business culture (5th) and is one of the world’s
leading innovators (4th). Last but not least, the country boasts a
stable macroeconomic environment (13th), with a balanced budget and
manageable public debt levels. These characteristics come together to
make Sweden one of the most productive and competitive economies in the
world.
The Netherlands
continues to progress in the rankings, moving up to 5th place this
year. The improvement reflects a continued strengthening of its
innovative capacity as well as the heightened efficiency and stability
of its financial markets. Overall, Dutch businesses are highly
sophisticated (4th) and innovative (9th), and the country is rapidly and
aggressively harnessing new technologies for productivity improvements
(9th). Its excellent educational system (ranked 5th for health and
primary education and 6th for its higher education and training) and
efficient markets—especially its goods market (6th)—are highly
supportive of business activity.
Although
the country has registered fiscal deficits in recent years (5.0 percent
of GDP in 2011), its macroeconomic environment is more stable than that
of a number of other advanced economies. Last but not least, the
quality of its infrastructure is among the best in the world, reflecting
excellent facilities for maritime, air, and railroad transport, ranked
1st, 4th, and 9th, respectively.
Germany
maintains its position at 6th place this year. The country is ranked an
excellent 3rd for the quality of its infrastructure, boasting in
particular first-rate facilities across all modes of transport. The
goods market is quite efficient, characterized by intense local
competition (8th) and low market dominance by large companies (2nd).
Germany’s business sector is very sophisticated, especially when it
comes to production processes and distribution channels, and German
companies are among the most innovative in the world, spending heavily
on R&D (4th) and displaying a high capacity for innovation
(3rd)—traits that are complemented by the country’s well-developed
ability to absorb the latest technologies at the firm level
(16th). These attributes allow Germany to benefit greatly from its
significant market size (5th), which is based on both its large domestic
market and its strong exports.
On
a less positive note and despite some efforts, Germany’s labor market
remains rigid (119th for the labor market flexibility subpillar), where a
lack of flexibility in wage determination and the high cost of firing
hinder job creation, particularly during business cycle downturns. In
addition, improving the quality of the educational system—where the
country continues to trail its top 10 peers at 28th place—could serve as
an important basis for sustained innovation-led growth. In view of
continued economic difficulties in the euro area, Germany’s performance
in the macroeconomic pillar remains remarkably stable, with the country
even registering a reduction in the fiscal deficit to –1 percent of GDP,
but concerns about potential effects of the European sovereign debt
crisis are reflected in the downgrading of the country’s credit rating.
The United States
continues the decline that began a few years ago, falling two more
positions to take 7th place this year. Although many structural features
continue to make its economy extremely productive, a number of
escalating and unaddressed weaknesses have lowered the US ranking in
recent years. US companies are highly sophisticated and innovative,
supported by an excellent university system that collaborates admirably
with the business sector in R&D. Combined with flexible labor
markets and the scale opportunities afforded by the sheer size of its
domestic economy—the largest in the world by far—these qualities
continue to make the United States very competitive.
On
the other hand, some weaknesses in particular areas have deepened since
past assessments. The business community continues to be critical
toward public and private institutions (41st). In particular, its trust
in politicians is not strong (54th), perhaps not surprising in light of
recent political disputes that threaten to push the country back into
recession through automatic spending cuts. Business leaders also remain
concerned about the government’s ability to maintain arms-length
relationships with the private sector (59th), and consider that the
government spends its resources relatively wastefully (76th). A lack of
macroeconomic stability continues to be the country’s greatest area of
weakness (111th, down from 90th last year). On a more positive note,
measures of financial market development continue to indicate a
recovery, improving from 31st two years ago to 16th this year in that
pillar, thanks to the rapid intervention that forced the deleveraging of
the banking system from its toxic assets following the financial
crisis.
The United Kingdom (8th)
continues to make up lost ground in the rankings this year, rising by
two more places and now settling firmly back in the top 10. The country
improves its performance in several areas, benefitting from clear
strengths such as the efficiency of its labor market (5th), in sharp
contrast to the rigidity of those of many other European countries. The
United Kingdom continues to have sophisticated (8th) and innovative
(10th) businesses that are highly adept at harnessing the latest
technologies for productivity improvements and operating in a very large
market (it is ranked 6th for market size).
The
financial market also continues its recovery, ranked 13th, up from 20th
last year. All these characteristics are important for spurring
productivity enhancements. On the other hand, the country’s
macroeconomic environment (110th, down from 85th last year) represents
the greatest drag on its competitiveness, with a fiscal deficit nearing 9
percent in 2011, an increase of 5 percentage points in public debt
amounting to 82.5 percent of GDP in 2011 (127th) and a comparatively low
national savings rate (12.9 percent of GDP in 2011, 113th).
As the second-placed Asian economy behind Singapore (2nd), Hong Kong
SAR rises to 9th position while slightly improving its score. The
territory’s consistently good performance is reflected in very good
showing across most of the areas covered by the GCI. As in previous
years, Hong Kong tops the infrastructure pillar, reflecting the
outstanding quality of its facilities across all modes of transportation
and its telephony and electricity infrastructure.
Moreover,
the economy’s financial markets are second to none, revealing high
efficiency and trustworthiness and stability of the banking sector. The
dynamism and efficiency of Hong Kong’s goods market (2nd) and labor
market (3rd) further contribute to the economy’s very good overall
positioning. To maintain and enhance its competitiveness going forward,
continued improvements in two important areas—higher education (22nd)
and innovation (26th)—will be necessary. Although the quality of
education in Hong Kong is good (12th), participation remains below
levels found in other advanced economies (53rd). Improving educational
outcomes will also help boost Hong Kong’s innovative capacity, which
remains constrained by the limited availability of scientists and
engineers (36th), among other things.
Japan
falls one place to rank 10th this year, with a performance similar to
that of last year. The country continues to enjoy a major competitive
edge in business sophistication and innovation, ranking 1st and 5th,
respectively, in these two pillars. Company spending on R&D remains
high (2nd) and Japan benefits from the availability of many scientists
and engineers buttressing a strong capacity for innovation. Indeed, in
terms of innovation output, this pays off with the fifth-highest number
of patents per capita.
Furthermore,
companies operate at the highest end of the value chain, producing
high-value-added goods and services. The country’s overall competitive
performance, however, continues to be dragged down by severe
macroeconomic weaknesses (124th), with the second-highest budget deficit
in this year’s sample (143th). Repeated over recent years, this has led
to the highest public debt levels in the entire sample (nearly 230
percent of GDP in 2011). In addition, we observe a downward assessment
of labor market efficiency (from 13th two years ago to 20th place this
year), with the business sector perceiving the alignment between pay and
productivity, hiring and firing practices, and brain drain less
favorably than in previous years.
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