S'pore the second most competitive economy

Business Times - 15 May 2008


S'pore the second most competitive economy

It is closing the gap on top-ranked US; 2008 may be the year the US falls from its pole position

By ANNA TEO

(SINGAPORE) Singapore remains the world's second most competitive economy but is closing the gap on the top-ranked United States, according to an annual analysis.

Now in its 20th year, the World Competitiveness Yearbook (WCY) by Swiss business school IMD gives Singapore a score of 99.33 in its 2008 study, up from 99.12 last year. The US - firmly entrenched in pole position since 1994 - has the 100 perfect score.

But the latest report has IMD asking if the US run will continue - or go the way of Japan, which was by far the most competitive in 1989, when the WCY was first published but has since dropped out of the top league, beset by numerous domestic economic crises. (In the 2008 rankings, Japan is 22nd, up from 24th in 2007.)

Says Stephane Garelli, director of IMD's World Competitiveness Center: 'In our 20th anniversary edition this year, we may be seeing the US in the number one position for the last time. Singapore is closing the gap with the US and 2008 might be the turning point where the US falls from its leadership of top competitors.'

Taking lessons from Japan's downfall in the 1990s, Prof Garelli says that the present turmoil in the US 'bears some resemblance' with past crises in Japan that followed 'a period of economic boom, real estate price follies and exuberant assets expansion'.

But there are also huge differences between the two economic societies, he notes: Apart from 'notable successes' such as Toyota and Canon, much of Japanese industry was 'paralysed' by the 1990s as 'the Japanese never practised creative destruction'.

The US, on the other hand, 'because of its openness, resilience and entrepreneurship, always seems to find the means to re-invent itself in ways that Japan (and much of Europe) often lacks', he says.

In any case, one takeaway from 20 years of analysing competitiveness: 'No nation, however competitive, is immune to a breakdown, especially when it stems from the financial sector.'

The WCY - which sees competitiveness as essentially the capacity of a country to manage its long-term prosperity - uses a mix of hard statistical data and soft survey feedback for its analyses. In all, 55 economies are assessed on some 330 criteria in four broad factors: economic performance, government efficiency, business efficiency and infrastructure.

Singapore is third on economic performance (up from fourth last year); up to second on business efficiency (fourth in 2007); and retains for the second straight year its first and third places on government efficiency and infrastructure, respectively.

Singapore's challenges are, in the short term, managing costs in a global inflationary environment, and in the medium term, becoming a globalised, entrepreneurial and diversified economy, IMD notes.

According to Prof Garelli, a more advanced economy increasingly focuses on the 'something else' that makes the difference between economic growth and prosperity, such as sustainable development, quality of life, even happiness. 'These objectives, which would not be attainable without economic growth, are very subjective, hard to measure and linked to national value systems,' he says. 'Managing the 'softer' side of an economy is thus a priority for any leader today.'

Competitiveness encompasses all these dimensions, and remains the key to success and prosperity, he maintains.