October 24, 2018
The World Economic Forum has released the latest version of its Global Competitiveness Index which saw differing fortunes for longstanding Asian giants.
The 2018 edition of the World Economic Forum’s competitiveness Index saw China slip down in the rankings on the back of a slowing macroeconomic situation and longstanding barriers within the Chinese work force.
The rankings were led, in Asia, by Singapore and Japan who made significant changes to the economy and work force to make it more competitive and future-proof.
According to Singapore Deputy Prime Minister Tharman Shanmugaratnam, employers and educators must address a fundamental challenge for competitiveness, which is to create quality jobs for the future.
“It is a challenge because, one way or another, if we succeed in improving speed and efficiency, there will not as be as many jobs in manufacturing in the long term. There will be jobs, there will be much higher quality jobs, but they will not be as many.
“We’ve got to create jobs outside of manufacturing, so that it is still a job-rich future, quality jobs in every sector of the economy. And this is a major challenge for all countries,” said Mr Tharman.
The 2018 edition of the rankings used a completely overhauled methodology that gave priority to digital age factors such as idea generation and agility, integrating what WEF calls the Fourth Industrial Revolution into the standards of competitiveness, and adapting the report to account for the importance of technology as a driver of economic progress in the modern era.
The countries on the upswing
Singapore, a regional economic powerhouse, comes in at second on the list, but was beat out for the first position by the United States, which placed in the top spot thanks to the new methodology. While Singapore didn’t make it to the very top, the report did deem the country to be the most “future ready” according to the World Economic Forum’s idea of the Fourth Industrial Revolution, and credited the “openness” of the country’s markets as a key driver of its success.
The report counts Japan as its “most improved” out of the top ten economies. The country rose three spots to be fifth overall on the Index. The WEF points out that Japan is already a standout as an innovation hub but needs to improve with regard to the “‘softer’ drivers of the innovation ecosystem”—the country scores low on such soft skills as entrepreneurial culture, risk-taking and critical-thinking.
South Korea rose by on the list by two spots, placing 15th on the Index. The report notes that the country boasts some of the highest rates of ICT adoption and spending on research and development. In fact, the only country in the world that spends a higher percentage of its GDP on R&D is Israel. Seoul’s most notable achievements were in the areas of ICT adoption and macroeconomic stability, where it maintained the No. 1 position.
The country was also evaluated as the sixth most competitive in terms of infrastructure. Its weaknesses were its product market and its labor market, which respectively ranked 67th and 48th in the world, the report showed. The most serious problems in these areas included market monopolies, labor relations and workers’ rights.
Malaysia improved its ranking by one spot, placing 25th on this year’s list. Malaysia was one of only three non-high-income countries that cracked the list’s top 40—the other two were China at 28th, and Thailand at 38th, which climbed two spots since last year. The country’s best performing index was its macroeconomic stability where it was given a perfect score of 100.
The report bumped Indonesia up by two spots this year at 45th. According to the report, the country scored points for its vibrant entrepreneurial culture and business dynamism, but fell short on factors related to innovation and infrastructure.
India rose by five places compared with the backcast 2017 data to land at 58th on the list. According the the WEF report, that represents the largest gain among the G20 economies. The report states that India remains its region’s main driving force through the sheer size of its economy and the quality of its research institutions.
The Philippines improved its standing on the list by 12 full places, coming in at 56th. However, the report also placed the country on a list that is not so complimentary. “Nigeria, Yemen, South Africa, Pakistan and the Philippines” the report says, “are other countries with notable problems related to violence, crime or terrorism, and where the police are considered unreliable.” This weaker performance when it comes to a key pillar, “security” is one of the factors holding the Philippines from climbing even higher when it comes to competitiveness.
Taiwan, which remained stable on the list at 13th, was described by the report as one of the region’s primary innovation hubs, but it like South Korea and Japan has been cautioned not to forget innovation’s softer side.
The countries that lost ground
China slipped by one top spot, down to 28th, in this year’s list, but it still leads the BRICS economies in the rankings. The report calls out China’s competitive edge in some key areas like artificial intelligence, while cautioning that in order to pull in line with “super innovators” like the United States, Germany and Switzerland it will need to invest more in areas the country has overlooked—diversity, collaboration and openness.
Bangladesh slipped lower on the list, but only by one spot, down to 103. The country’s overall score improved from 2017-2018, but Bangladesh’s position fell in nine of the twelve pillars on which the WEF assigns rankings. The country’s lowest rankings are in business dynamism, for which it ranked 120th and product market development, for which it ranked 123rd among the 140 countries
Sri Lanka slipped four places on the list from last year’s backcast data down to 85th. However, in this case perhaps remaining a relatively small slip might be viewed as a good thing, since the country landed at after experiencing a drop of 14 full slots from 2016-2017 year’s rankings. The report commended Sri Lanka for its standout health and education indicators—the country has the the highest healthy life expectancy in its region (67.8 years) and the workforce with the highest amount of schooling (9.8 years).
Pakistan slipped just one spot on the list compared to its position last year with a new ranking of 107 out of 140 countries. The country ranked particularly low on the list with regards to ICT adoption—where it was placed 127—and press freedom—at the 112th position.
Cambodia dropped by one spot to 110th, Laos slipped two spots to come in at 112th and Mongolia lost four places to come in at 99th. All three countries, according to the report, show “major weaknesses that threaten sustained growth.” These weaknesses, WEF says, make them vulnerable to shocks such as faster-than-expected rise in interest rates in advanced economies and escalating trade tensions.
The WEF was unsurprised by Nepal’s slip in the rankings. The country is ranked 109th, a drop of one spot since last year. Addressing the country’s economic growth, the report says a “slowdown is expected after the fast recovery of 2017 when the country rebounded from the aftermath of the 2015 earthquake.”
Vietnam, which dropped three spots in the rankings to 77th was nonetheless touted by the report, along with Cambodia, Laos, the Philippines and China as having experienced economic growth exceeding 6 percent in 2017.