Singapore still leads pack

Business Asia, August 2, 1999

Singapore is still the world's most competitive economy but other Asian nations have slipped behind, according to the World Economic Forum's (WEF)1999 Global Competitiveness Report.

Despite the economic buffeting of the past two years, Singapore leads the poll for the fourth year in a row.

Following Singapore is the United States, Hong Kong (which was ranked second last year), Taiwan and Canada.

The report also rejects assessments that Asia's meltdown was caused by the region's style of "crony capitalism", laying the blame instead on the new global reliance on short-term financial capital.

The WEF, which sponsors an annual gathering of world leaders in Davos, Switzerland, said its competitive index study ranked countries on eight factors: openness, government, finance, infrastructure, technology, management, labour and institutions.

The report judged that Singapore had the highest capacity for medium-term growth taking into account its starting level of income.

"Despite the slump in 1998, Singapore still has high rates of saving and investment, an efficient government supported by low marginal tax rates, openness to trade, fairly high-quality education and flexible labour markets," the report said.

While Hong Kong has fared worse than Singapore in economic terms since 1997, the WEF found it retained many of the economic infrastructure attributes of the city-state.

"Its (Hong Kong) ranking declined slightly due to a decline in its government saving rate from 3.1 per cent to 0.7 per cent of GDP, and due to a new wage data that shows Hong Kong's wages outside the manufacturing sector are not as highly competitive as previously measured," it said.

Other crisis-struck Asian countries did not fare well.

Indonesia, Thailand and Malaysia, three of the worst-hit countries, saw their competitiveness plummet. Indonesia fell 22 places from the 1997 pre-crisis rankings to be listed at 37, Thailand fell 12 places from 1997 to rank 30th and Malaysia dropped seven spots to be at 16 this year. Australia jumped five places from 1997 to be at 12.

The report's authors have defended the high pre-crisis rankings of Asian countries and denies they were "overestimates of Asia's medium-term growth potential".

Unlike other economic analysts, the report does not place the blame for the crisis on deep structural failings within Asian economies, but says the reversal of bank loans coupled with the reliance on short-term borrowing were the main contributors.

"When the East Asian crisis broke out in 1997, some leading policy makers declared that the crisis was proof of the failings of Asia's style of `crony capitalism'," the report said.

"If these economies were really in such a bad condition, why did the leading international investors put so much money into these economies?

"One main problem is that the new system of global capitalism has generated enormous flows of short-term financial capital that can respond as much to swings of euphoria and panic as they do to long-term signals of competitiveness."

WORLD'S BEST

Competitiveness Rankings

Country Ranking         '99     '98     '97

Singapore                 1       1       1
United States             2       3       3
Hong Kong                 3       2       2
Taiwan                    4       6       8
Canada                    5       5       4
Switzerland               6       8       6
Luxembourg                7      10      11
United Kingdom            8       4       7
Netherlands               9       7      12
Ireland                  10      11      16
Finland                  11      15      19
Australia                12      14      17
New Zealand              13      13       5
Japan                    14      12      14
Norway                   15       9      10
Malaysia                 16      17       9
Denmark                  17      16      20
Iceland                  18      30      38
Sweden                   19      23      22
Austria                  20      20      27
Chile                    21      18      13
Korea                    22      19      21
France                   23      22      23
Belgium                  24      27      31
Germany                  25      24      25
Spain                    26      25      26
Portugal                 27      26      30
Israel                   28      29      24
Mauritius                29     n/a     n/a
Thailand                 30      21      18
Mexico                   31      32      33
China                    32      28      29
Philippines              33      33      34
Costa Rica               34      34      43
Italy                    35      41      39
Peru                     36      37      40
Indonesia                37      31      15
Hungary                  38      43      46
Czech Republic           39      35      32
Jordan                   40      34      43