A never-ending race

IMD’s competitiveness index ranks the nations

The race is on. Pixabay | Geralt

The United States ranked again as the world’s most competitive country and Venezuela as its least competitive in the 2014 World Competitiveness Yearbook (WCY) by Swiss business school IMD. And within the top 10 out of the 60 economies surveyed, there was little change compared with the ups and downs seen in the rest of the pack.

In total, only seven countries kept their 2013 ranking — but four out of these seven were in the top ten most competitive economies. Besides the US at the top, these were Switzerland as runner up and Canada and the United Arab Emirates in positions seven and eight. Also Singapore, Hong Kong and Sweden made reappearances in places three to five.

Of the other 50 countries in the 2014 rankings, 26 moved up and 22 fell. But only nine countries moved by five or more positions. Romania advanced eight places from 55 to 47 and achieved the biggest gain; other top climbers were Spain, Latvia and Estonia, each at six positions up, and New Zealand with five. The four countries with the most significant drops in ranking position were Qatar and Mexico, each nine down, Peru, down seven, and Israel, down five.

Measurements of competitiveness provide companies and policy makers with both overall rankings and very detailed profiles of factors that encourage or hinder performance. Some of the basics of competitiveness, like domestic market size, change very little from year to year; some measure economic performance, such as the rate of change in GDP or stock market capitalization, and can vary significantly by year; some indicators are subject to change based on political decisions and regional contexts; and some reflect perceptions of the countries’ economic actors.

Taken together, the wide range of measures makes for an increasingly coherent global picture of trends in the competitiveness of nations. The detailed pictures on the country level can thus be of great value for companies when selecting new markets or production locations. On the other hand, as a competitiveness measurement exercise such as IMD’s today has a 25-year track record, there are few big surprises in the findings — which the researchers can announce — and year-on-year changes in competitiveness positions increasingly mirror regional economic contexts and macroeconomic fluctuations.

IMD’s WCY 2014 ranked the same 60 economies as it did in 2013. The yearbook assesses four factors with five subfactors each and relies on a mix of hard data, surveys and background information. For the 2014 edition, IMD said that 338 criteria were used for calculating the results of the 20 subfactors and thus the factor and overall rankings.

Factor Subfactors
Economic Performance Domestic economy; international trade; international investment; employment; prices
Government Efficiency Public finance; fiscal policy; institutional framework; business legislation; societal framework
Business Efficiency Productivity & efficiency; labor market; finance; management practices; attitudes and values
Infrastructure Basic infrastructure; technological infrastructure; scientific infrastructure; health and environment; education


Keeping up with the neighbors

Of the three Arab economies covered in the WCY, the UAE remained an upward outlier in 2014 when compared with its peers in the Middle East and Africa or with countries of less than 20 million inhabitants. The strongest advantages of the UAE were in government efficiency, owing to the country’s extremely business friendly taxation regime, and in 2014, also in public finance due to last year’s improvement in government debt. Another notable area of strength was pro-business attitudes and values such as openness to globalization and foreign ideas.

Main weaknesses were shown to exist in very specific areas such as women’s participation in the workforce, high per capita energy consumption, low public expenditure on education, and low positions in research and development. Ongoing challenges for the UAE were identified in the need to improve the ecological balance and enhance innovation, especially research and development.

Qatar, despite dropping from 10th to 19th place in the WCY rankings this year, exhibited continued top rankings in the area of economic performance. This was based on factors such as an extremely positive trade balance, high per capita GDP and near full rate of employment. As it did in 2013, the country again ranked highly for government efficiency but dropped substantially in the area of business efficiency, and specifically fell from being first in the subfactor ranking for productivity and efficiency in 2013 to rank 27 in 2014. Despite a last place finish in the rate of change of real GDP per person employed — a 7.2 percent year-on-year drop in 2013 — the country managed to maintain a lead over most other countries in the absolute GDP per person employed estimate.

Jordan, the third Arab country covered by WCY, is positioned in a lower tier of the competitiveness rankings but in 2014 regained three spots to place 53 after it had dropped from 49 to 56 in the 2013 edition. Its economic performance took a small hit this year as the Jordanian economy suffered in the areas of consumer prices and youth unemployment.

The country improved its competitiveness ranking by a few notches in business efficiency, and its reading for government efficiency returned to the levels of 2012 after dipping nine places in 2013. In the infrastructure ranking, where Jordan is naturally disadvantaged by its lack of arable land and its limited access to water and commodities, the country edged up two spots. The scientific infrastructure subfactor here showed the most improvement, apparently influenced by improved survey perceptions of Jordan’s knowledge transfer, quality of scientific research and attractiveness to researchers and scientists.

The IMD rankings did not include any other Arab nations.

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years.