World's 20 most competitive nations; US slips

With the balance of economic activity shifting away from the advanced economies towards the emerging markets, policymakers are struggling to find ways to manage the present economic challenges.

While leaders are preparing their economies to perform well in an increasingly complex global landscape, the World Economic Forum's Global Competitiveness Report 2011-2012 comes out with some interesting facts.

While the top 10 countries in the list continue to be dominated by European nations, India dropped 5 places from 51 to rank 56 in the latest list.

The study said India demonstrates only minor changes in its competitiveness performance since last year.

Among the BRICS, India continues to rank on a par with South Africa (50th) and Brazil (53rd) and ahead of Russia (66th), but its gap with China is widening. The score difference between the two economies has increased sixfold between 2006 and today -- from less than 0.1 to 0.6 points.

India continues to rank low in the areas considered to be the basic factors underpinning competitiveness.

Supply of transport, ICT, and energy infrastructure remains largely insufficient and ill-adapted to the needs business -- India is ranked 89th.

Health and basic education -- India is ranked 101st.

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In the past five years, discontent in the business community about the lack of reforms and the apparent inability of the government to provide a more conducive environment for business has been growing.

Corruption (99th) and burdensome regulation (96th) certainly fuel this discontent.

The  country's macroeconomic environment (105th) continues to be characterised by large and repeated public deficits and the highest debt-to-GDP ratio among the BRICS.

More recently, the stability of the country's macroeconomic environment is being undermined by high inflation. As a result, India has been hovering around the 100 mark in this pillar for the past five years.

The report, however, goes on to say that despite these considerable challenges, India does possess a number of remarkable strengths in the more advanced and complex drivers of competitiveness.

The country, the report says, boasts a vast domestic market that allows for economies of scale and attracts investors.

It can rely on a well-developed and sophisticated financial market (21st) that can channel financial resources to good use, and it boasts reasonably sophisticated (43rd) and innovative (38th) businesses.

China...

China
Rank: 26

China continues its steady progression in the rankings, rising by one rank to 26th. It has, indeed, improved its score and rank each year since 2005.

The world's most populous country continues to lead the BRICS economies by a significant margin.

As in previous years, its macroeconomic situation is again very favorable (10th), despite a prolonged episode of high inflation.

China is one of the world's least indebted countries, boasts a savings rate of some 53 per cent of GDP, and runs only moderate budget deficits.

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Switzerland
Rank: 1

Switzerland retains its 1st place position again this year.

The country's most notable strengths are related to innovation, technological readiness, and labour market efficiency. Switzerland's scientific research institutions are among the world's best.

Competitiveness is also buttressed by excellent infrastructure (5th), well-functioning goods markets (5th), and highly developed financial markets (7th).

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Singapore
Rank: 2

Singapore moves up by one place to 2nd position, maintaining the lead among Asian economies.

The country's institutions continue to be ranked 1st for both their lack of corruption and government efficiency.

Singapore places 1st and 2nd, respectively, for the efficiency of its goods and labour markets and leads the world in terms of financial market development.

The country also has world-class infrastructure (3rd), with excellent roads, ports, and air transport facilities.

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Sweden
Rank: 3

Sweden, overtaken by Singapore, falls one place to 3rd position. The quality of its public institutions is first-rate, with a very high degree of efficiency, trust, and transparency.

Private institutions also receive excellent marks (3rd), with firms that demonstrate the highest ethical behavior (3rd), supported by strong auditing and reporting standards (2nd) and well-functioning corporate boards (1st).

Sweden has developed a very sophisticated business culture (2nd) and is one of the world's leading innovators (2nd).

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Finland
Rank: 4

Finland moves up three places since last year to reach 4th position. The country boasts well-functioning and highly transparent public institutions (3rd).

It also occupies the top position in the higher education and training pillar.

Finland is one of the innovation powerhouses in Europe, ranking 3rd.

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The United States
Rank: 5

The United States continues the decline that began three years ago, falling one more position to 5th place.

The business community continues to be critical toward public and private institutions (39th).

In particular, its trust in politicians is not strong (50th), it remains concerned about the government's ability to maintain arms-length relationships with the private sector (50th), and it considers that the government spends its resources relatively wastefully (66th).

In comparison with last year, policymaking is assessed as less transparent (50th) and regulation as more burdensome (58th).

A lack of macroeconomic stability continues to be the United States' greatest area of weakness (90th).

Over the past decade, the country has been running repeated fiscal deficits, leading to burgeoning levels of public indebtedness that are likely to weigh heavily on the country's future growth.

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Germany
Rank: 6

Germany is ranked 6th this year, a decline of one place. The country is ranked an excellent 2nd for the quality of its infrastructure.

Despite the slight drop in rankings, the goods market is quite efficient, characterized by intense local competition (9th) and low market dominance by large companies (3rd).

Germany's business sector is highly 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 (5th) and displaying a strong capacity for innovation (3rd).

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The Netherlands
Rank: 7

The Netherlands improves one rank to 7th this year.

Overall, Dutch businesses are highly sophisticated (5th) and innovative (12th), and the country is rapidly and aggressively harnessing new technologies for productivity improvements (5th).

The quality of its infrastructure is among the best in the world, reflecting excellent facilities for maritime, railroad, and air transport, ranked 2nd, 6th, and 5th, respectively.

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Denmark
Rank: 8

Denmark moves up one position to 8th place.

The country benefits from what is one of the best-functioning and most transparent institutional frameworks in the world (5th) and an excellent infrastructure for transport as well as electricity and telephony.

Denmark continues to distinguish itself as having one of the most efficient labour markets internationally, with more flexibility in setting wages, firing, and therefore hiring workers than in the other Nordics and in most countries more generally.

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Japan
Rank: 9

Japan falls three places to rank 9th.

The country continues to enjoy a major competitive edge in business sophistication and innovation, ranking 1st and 4th, respectively.

The country's overall competitive performance, however, continues to be dragged down by severe macroeconomic weaknesses (113th), with high budget deficits over several years (135th), which have led to the highest public debt levels in the entire sample by far (over 220 percent of GDP in 2010).

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The United Kingdom
Rank: 10

The United Kingdom continues to make up lost ground in the rankings this year, rising by two more places.

It continues to have sophisticated (8th) and innovative (13th) businesses.

On the other hand, although improved since last year, the country's macroeconomic environment (85th) represents the greatest drag on its competitiveness.

The situation is made worse by the mounting public debt (77 percent of GDP in 2010, 120th) and a comparatively low national savings rate (12.3 percent of GDP in 2010, 119th).

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Hong Kong
Rank: 11

As the third-placed Asian economy behind Singapore (2nd) and Japan (9th), Hong Kong SAR maintains its 11th position.

Hong Kong tops the infrastructure pillar with the outstanding quality of its facilities across all modes of transportation and its telephony infrastructure.

The dynamism and efficiency of its goods market (3rd), labour market (3rd), and financial market (2nd) also contribute to the economy's very good overall position.

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Canada
Rank: 12

Canada has dropped two positions this year to 12th place.

Canada continues to benefit from highly efficient markets (with its goods, labour, and financial markets ranked 12th, 5th, and 13th, respectively), well-functioning and transparent institutions (11th), and excellent infrastructure (11th).

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Taiwan
Rank: 13

Taiwan remains stable in 13th position.

The economy relies on a high level of technological readiness (24th) and well-developed infrastructure, with the exception of air transport (51st).

Among the country's relative weaknesses, its labor market is characterized by much rigidity (98th).

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Qatar
Rank: 14

Qatar reaffirms its position as the most competitive economy in the region by moving up three places to 14th position.

Low levels of corruption and undue influence on government decisions, high efficiency of government institutions, and high levels of security are the cornerstones of the country's very solid institutional framework. These institutional attributes provide good foundations for efficiency.

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Belgium
Rank: 15

Belgium is up four spots since last year.

The country has outstanding health indicators and a primary education system that is among the best in the world (2nd).

Business operations are distinguished by high levels of sophistication and professional management.

On the other hand, there are some concerns about government inefficiency (56th), and its macroeconomic environment is burdened by persistent deficit spending and high public debt.

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Norway
Rank: 16

Norway is down two places since last year.

The country is characterised by well-functioning and transparent public institutions; private institutions also get admirable marks for ethics and accountability.

Markets in the country are efficient, with goods, labor, and financial markets ranked 31st, 18th, and 5th, respectively.

Productivity is also boosted by a high uptake of new technologies, ranked 7th overall for technological readiness.

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Saudi Arabia
Rank: 17

Saudi Arabia maintains the second-best place in the region and moves up by four ranks.

The macroeconomic environment benefitted from rising energy prices.

However, health and education do not reach the standards of other countries at similar income levels.

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France
Rank: 18

France is down three places from last year.

The country's infrastructure is among the best in the world (4th), with outstanding transport links, energy infrastructure, and communications.

The health of the workforce and the quality and quantity of education are other clear strengths (ranked 16th for health and primary education and 20th for higher education and training).

In addition, the sophistication of the country's business culture (14th) and its leadership in the area of innovation (17th), bolstered by a highly developed financial market (18th) and a large market (7th), are important attributes that have helped to boost the country's growth potential.

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Austria
Rank: 19

Austria has a well-developed social market economy, and a high standard of living.

Labour movements are particularly strong in Austria and have large influence on labour politics. Next to a highly developed industry, international tourism is the most important part of the national economy.

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Australia
Rank: 20

Australia drops four spots to 20th place.

Among the country's most notable advantages are its efficient financial system (6th), supported by a banking sector that counts among the most stable and sound in the world, ranked 4th.

Australia's public and private institutions are transparent and efficient, ranked 17th and 8th, respectively, and physical security is assured (19th), although business leaders continue to be concerned about the burden of government regulation (75th).