May 27, 2015
IMD today announced its annual world competitiveness ranking. As part of its ranking of 61 economies for 2015, the IMD World Competitiveness Center looks at several aspects of each country as a place to conduct business.
Highlights of the 2015 ranking
The USA remains at the top of the ranking as a result of its strong business efficiency and financial sector, its innovation drive and the effectiveness of its infrastructure. Hong Kong (2) and Singapore (3) move up overtaking Switzerland, which drops to fourth place. Canada (5), Norway (7), Denmark (8), Sweden (9) and Germany (10) remain in the top 10. Luxembourg moves to the top (6) from 11th place in 2014.
Results for Asia are mixed. Malaysia (12 to 14), Japan (21 to 27), Thailand (29 to 30) and Indonesia (37 to 42) move down. Taiwan (13 to 11), Republic of Korea (26 to 25) and the Philippines (42 to 41) slightly rise in the ranking. Most Asian economies in decline have seen a drop in their domestic economies and are impacted by weakening/aging infrastructure.
Eastern Europe experiences a mixture of results as well. Poland (36 to 33), the Czech Republic (33 to 29) and Slovenia (55 to 49) move up in the ranking. In the Baltic States, Estonia (30 to 31) and Latvia (35 to 43) rank lower than last year; although, Lithuania gains in the ranking (34 to 28). Elsewhere in the region, current events in Russia (38 to 45) and Ukraine (49 to 60) highlight the negative impact that armed conflict and the accompanying higher market volatility have on competitiveness in an increasingly interconnected international economy.
A pattern of decline is observed in Latin America. Chile moves from 31 to 35, Peru from 50 to 54, Argentina from 58 to 59 and Venezuela remains at the bottom of the table. Colombia stays at 51.
Among large emerging economies, Brazil (54 to 56) and South Africa (52 to 53) slightly drop, China (23 to 22) and Mexico (41 to 39) experience improvements while India remains at the same spot (44). This trend shows the difficulty in grouping emerging markets in one category, as the issues impacting their competitiveness differ. China's slight increase stems from improvements in education and public expenditure, whereas Brazil suffers from a drop in domestic economy and less optimistic executive opinions.
A question of business efficiency
The ranking highlights one particular commonality among the best ranking countries. Nine countries from the top 10 are also listed in the top 10 of the business efficiency factor.
Business efficiency focuses on the extent to which the national environment encourages enterprises to perform in an innovative, profitable and responsible manner. It is assessed through indicators related to productivity such as the labor market, finance, management practices and the attitudes and values that characterize the business environment.
"Simply put, business efficiency requires greater productivity and the competitiveness of countries is greatly linked to the ability of enterprises to remain profitable over time," said Professor Bris. "Increasing productivity remains a fundamental challenge for all countries."
Long-term business profitability and productivity are difficult to achieve because they are largely underpinned by the strategic efforts of companies striving to maximize positive externalities that originate in economic activities.
Impact of business efficiency
Luxembourg experiences one of the largest gains in this factor (14 to 4) which greatly contributes to its ascendency in the ranking. Qatar's improvement (19 to 13) in the ranking largely reflects its recovering in terms of the business efficiency factor (24 to 11) due to increases in its overall productivity. Greece's recovery (57 to 50) also comes on a strong performance in business efficiency in which it increases from 54 to 43. The UAE's drop (8 to 12) in the ranking is partly the result of lower scores (15 to 18) in the business factor. Similarly, Germany's retreat (6 to 10) is a reflection of its fall in business efficiency (9 to 16). Likewise Indonesia's decline in the ranking is accompanied by a steep drop in the business efficiency factor (22 to 34).
An expanded ranking
Mongolia is a new addition to the competitiveness ranking in 2015. Mongolia is a fast-growing country (11.6% GDP growth, 2013). Although, growth slowed to 5.3% in 2014 (data for the first half of the year), the country's economic performance remained strong. Growth is driven by mining and natural resources, domestic consumption growth, levels of employment, an education system that promotes talent, and a favorable fiscal environment for enterprises. During the 2013-2014 period, however, Mongolia experienced a 74% decline in foreign direct investment which may reflect investor perceptions of the country's political and financial stability, its adherence to rule of law, the soundness of its corporate governance practices and imbalance risk-return trade-offs.
The IMD World Competitiveness Yearbook
measures how well countries manage all their resources and competencies to facilitate long-term value creation. The overall ranking released today reflects more than 300 criteria, approximately two-thirds of which are based on statistical indicators and one-third on an exclusive IMD survey of 6,234 international executives.
Watch World Competitiveness Center Director Arturo Bris discuss the results in this video