The new wave of digital technologies creating a new set of challenges for governments and businesses runs the risk of impacting growth and productivity in the near future.
This is the central finding of the World Economic Forum’s (WEF) 'Global Competitiveness Index 4.0'. The Geneva-based organisation which is known for its annual economic forum in Davos, Switzerland has been publishing competitive reports since 1979.
The 'Global Competitiveness Index 4.0' is slightly different from previous editions of the annual report, in that it has updated its methodology in order to reflect "the changing nature of economic competitiveness in a world that is becoming increasingly transformed by new, digital technologies".
The report maps the competitiveness landscape of 140 economies through 98 indicators organised into 12 pillars or drivers of productivity. These pillars are: Institutions, Infrastructure; Technological readiness; Macroeconomic context; Health; Education and skills; Product market; Labour market; Financial system; Market size; Business dynamism; and Innovation.
One unifying theme among the world’s most competitive economies is that they all possess considerable room for improvement. According to the study, many of the key factors that will have the greatest impact in driving competitiveness in the future, such as idea generation, entrepreneurial culture, openness and agility, have not yet been the focus of major governmental policy making.
One of the report’s most concerning findings is the relative weakness across the board when it comes to mastering the innovation process, from idea generation to product commercialisation.
The 10 most competitive economies
With a score of 85.6 out of 100, the United States was named the world's most competitive economy with its strengths including business dynamism, particularly its vibrant entrepreneurial culture, its strong labour market and financial system. It was followed by Singapore (83.5) and Germany (82.8). Switzerland (82.6) came in at 4th place, followed by Japan (82.5), Netherlands (82.4), Hong Kong SAR (82.3), the United Kingdom (82.0), Sweden (81.7) and Denmark (80.6).
The 10 least competitive economies were Chad, Yemen, Haiti, Angola,Burundi, Congo, Sierra Leone, Mozambique, Liberia, Mauritania.
Australia (14th, 78.9) and Korea (15th, 78.8) were among the top 20. The biggest gap in this region lies in the development of an innovation ecosystem—New Zealand ranked 20th on the Innovation Capability pillar, while the Republic of Korea ranked 8th. Emerging markets such as Mongolia (99th, 52.7), Cambodia (110th, 50.2) and Lao PDR (112th, 49.3) were only half way to the ideal state of 'frontier’ of competitiveness WEF said.
Of the BRICS grouping, China was the most competitive, ranking 28 with a score of 72.6. It was followed by Russia in 43rd place. No other emerging markets were ranked among the 50 most competitive economies. Next was India, which ranked 58, up five places on 2017: with a score of 62, it registered the largest gain of any country in the G20. India was followed by South Africa, which fell 5 places this year to 67. Last was Brazil, which slipped 3 places to 72.
WEF found that the continent’s basic competitiveness factors, such as health, education, infrastructure and skills, are firmly in place, despite continuing fragility from recent political shifts. Sweden (9th, 81.7) was the highest ranked of the Nordic economies, while France (17th, 78.0) was among the top 20. WEF also acknowledged that the greatest disparities in the region lie in national innovation ecosystems, with countries in Eastern Europe and the Balkans lacking basic innovation infrastructure, while countries such as Germany and Switzerland set the global standards for innovation.
LATIN AMERICA AND CARIBBEAN
Chile (33rd, 70.3) led the Latin America and the Caribbean region by a wide margin, ahead of Mexico (46th, 64.6) and Uruguay (53rd, 62.7). Venezuela (127th, 43.2) and Haiti (138th, 36.5) close the march. “The region’s competitiveness remains fragile and could be further jeopardized by a number of factors including increased risk from trade protectionism in the United States; spillover of Venezuela’s economic crisis; policy uncertainty from elections in the region’s largest economies, and disruptions from natural disasters threatening the Caribbean. Insecurity and weak institutions are two of the biggest challenges for most countries” reads the report.
MIDDLE EAST AND NORTH AFRICA
Competitiveness performance in the Middle East and North Africa remained diverse. Israel (20th, 76.6) and the United Arab Emirates (27th, 73.4), led the way in the region. Saudi Arabia was in 39th position with a score of 67.5 out of 100. “A focus on intra-region connectivity, in combination with improvements in ICT readiness and investment in human capital would improve the region’s capacity to innovate, foster business dynamism and increase its competitiveness performance” WEF said.
Seventeen of the 34 sub-Saharan African economies studied were among the bottom 20, and the region’s average (45.2) placed it less than halfway to the ideal state of 'frontier’ of competitiveness.
Mauritius (49th, 63.7) led the region, ahead of South Africa and nearly 30 points and 91 places ahead of Chad (140th, 35.5). Kenya was in 93rd position with a score of 53.7 while Nigeria was in 115th position with a score of 47.5 out of 100.
A key message of the report is that there are no winners and losers - but rather, in the face of new technological challenges, countries can learn from each other.
“Competitiveness is neither a competition nor a zero-sum game—all countries can become more prosperous. With opportunities for economic leapfrogging, diffusion of innovative ideas across borders and new forms of value creation, the Fourth Industrial Revolution can level the playing field for all economies. But technology is not a silver bullet on its own. Countries must invest in people and institutions to deliver on the promise of technology” said Saadia Zahidi, Member of the Managing Board and Head of the Centre for the New Economy and Society.
The Report is part of the World Economic Forum’s Centre for the New Economy and Society.