Nordic states top of list for competitiveness

Finland, followed by the US and Sweden, remains the most competitive economy in the world, according to the latest rankings from the World Economic Forum.

Geneva-based WEF, best known for organising the Davos business forum, has ranked 117 economies on a range of criteria intended to capture the determinants of productivity and growth.

These criteria, drawn from statistical sources and a survey of nearly 11,000 business leaders, include economic indicators, technological competence and innovation, and the quality of public institutions.

Thus the US, despite “overall technological supremacy”, is let down by poor economic management and the perceived negative influence of business lobbies on government policy.

None of the other members of the Group of Eight large industrialised nations is in the top 10. Japan is in 12th place, followed by the UK, Canada and Germany.

Respondents in the UK, down to 13th place, cited an inadequately educated workforce as the most problematic factor of doing business in the UK. This was followed by tax regulation – with Britain ranked 67th in terms of the efficiency of its tax system – and inadequate infrastructure.

While ranked number one for the sophistication of its financial markets, Britain came 51st for its burden of government regulation.

WEF says the “stellar performance” of the Nordic countries – all of which are in the top 10 – is due to sound economic management and efficient public institutions. It argues this challenges “the conventional wisdom that high taxes and large safety nets undermine competitiveness, suggesting that what is important is how well government revenues are spent, rather than the tax burden per se”.

Another big state spender, France, though the third most popular destination for foreign investment, trailed at 30. Italy, at 47, was the worst performing European Union country apart from Poland, which has nevertheless jumped nine places to 51. Russia, meanwhile, has slipped to 75.

China and India, which have notched up impressive economic growth in recent years, are ranked at 49 and 50 respectively, reflecting a fall of three places for China and a gain of five places for India since last year.

But, warns Augusto Lopez-Claros, WEF’s chief economist, both countries suffer from institutional weaknesses that could slow their “ascension to the top tier” of the world’s most competitive economies.

In Latin America, Chile (23) leads the pack with Venezuela sliding further to 89. Though African countries are mostly grouped near the bottom of the rankings, relative success stories include South Africa (42), Botswana (48) and Mauritius (52).

Rival competitiveness rankings by the IMD management school in Lausanne use a similar methodology to that of WEF, though differences in the indicators and their weightings produce some variation in results.

The latest IMD league table, published in May, put the US, Hong Kong and Singapore in the first three places – but, like WEF, gave high ratings to the Nordics, Switzerland and Australia.

The most notable divergence concerns Hong Kong, which WEF ranks in 28th place, citing worries over judicial independence, favouritism in policymaking and corruption.