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Index Ranks Countries' Productivity and International Trade Environment

By Karen Lynch

In the economic competition of nations, many consider the World Economic Forum's (WEF's) Global Competitiveness Index1 to be the world's scoreboard. The 137-nation index ranks countries' productivity and prosperity, drilling down into myriad indicators that can also impact international trade.

In the latest index, released in September 2017, Switzerland again took the top ranking, followed by the United States (which rose from third place) and Singapore (which dropped a rank). More on this leaderboard later.

 

What might interest international business executives as much as the overall findings could be the interactive ability, online, to almost endlessly rearrange the rankings based on specific indicators.2 For example, a global supply chain manager might look at the ranking for fewest non-tariff barriers, to find that Singapore, Hong Kong, and Finland take the top three slots. Or, a vice president of international marketing might look at the indicator for buyer sophistication, to find that the United States, Korea, and Switzerland "win, place, and show." Or, a chief financial officer might see that New Zealand ties for the top spot with Singapore in the indicator measuring strength of investor protection, followed by a tie among Hong Kong, Kazakhstan, and Malaysia.

 

Alternatively, an international business executive interested in expanding into China could review a detailed country profile, showing China's top-level improvement from the 28th to 27th most competitive nation, along with over 100 other indicators. Among them are the most problematic factors for doing business in China (with access to financing topping the list), intensity of local competition (4.5 on a scale of 7), and labor market efficiency (38 out of 137 countries).

 

Publication of the index was followed in October 2017 by the World Bank's Doing Business 2018 report, which also provides a useful reference for international trade strategists. There, the Top 10 nations where doing business is easiest are (in order) New Zealand, Singapore, Denmark, Korea, Hong Kong, United States, United Kingdom, Norway, Georgia, and Sweden.3

 

Top-level Results

 

"Competitiveness," as defined by WEF, is "the set of institutions, policies, and factors that determine the level of productivity of an economy." The Competitiveness Index's top-level ranking is drawn from statistics routinely gathered by such multilateral organizations as the International Monetary Fund, World Bank, and various United Nations specialized agencies. It is also informed by WEF's Executive Opinion Survey of nearly 13,000 international business executives.

 

To return to the leaderboard cited above, the rest of the Top 10 list of nations with the most competitive economies includes the Netherlands (4th), Germany (5th), Hong Kong (6th), Sweden (7th), the U.K. (8th), Japan (9th), and Finland (10th). There is little change from last year in the Top 10, except that Hong Kong rose from 9th to 6th. Hong Kong's most significant improvement was in business sophistication and innovation, according to the index.

 

The rankings vary more dramatically in the middle of the index. For instance, Cyprus rose from 83rd to 64th this year. Kuwait dropped from 38th to 52nd.

 

Upon release of the index, local media outlets and politicians around the world celebrate or lament their country's ranking. Headlines tell many stories: "Invest in India, Doing Business Here Easier Now,"4 "Rwanda Beats African Economic Giants in Latest Global Competitiveness Index,"5 and "Ireland Slips One Place to 24 in Global Competitiveness Index."6

 

Putting U.S. in Perspective

 

The United States' second-place ranking in the index is supported by various indicators, primarily reflecting technological progress and innovation. However, the U.S. ranks 25th in basic requirements, and its macroeconomic environment ranks 83rd. "Successfully meeting institutional challenges relating to both public and private institutions, improving the macroeconomic environment, and investing in human capital—particularly in the areas of health and primary education—will be crucial for the United States to maintain its position near the top of the competitiveness rankings," according to the index.

 

Indicators for International Trade

 

Focusing on indicators related to international trade, the index provides the following Top 10 rankings (in order) for each indicator:

 

  • Quality of port infrastructure: Netherlands, Singapore, Hong Kong, United Arab Emirates, Finland, Panama, Belgium, Iceland, United States, and Denmark.
  • Lowest tariffs: Hong Kong, Singapore, Mauritius, Georgia, Croatia, Austria, and 27 (mostly European Union) countries tied for 6th place.
  • Fewest non-tariff barriers: Singapore, Hong Kong, Finland, New Zealand, United Arab Emirates, Portugal, Chile, Qatar, Estonia, and United Kingdom.
  • Least burdensome customs procedures: Singapore, Finland, Hong Kong, United Arab Emirates, New Zealand, Netherlands, Sweden, United States, Luxembourg, and Estonia.
  • Least restrictive rules on foreign direct investment: Singapore, Hong Kong, Finland, Luxembourg, United Kingdom, Ireland, Portugal, Switzerland, Estonia, and Sweden.

 

In terms of the robustness of a potential target market, relevant Top 10 rankings (in order) include:

 

  • Quality of overall infrastructure: Switzerland, Singapore, Hong Kong, United Arab Emirates, Netherlands, Japan, Finland, France, Austria, and United States.
  • Intellectual property protection: Switzerland, Finland, Luxembourg, Singapore, New Zealand, Netherlands, United Kingdom, Belgium, Hong Kong, and Israel.
  • Intensity of local competition: Japan, Malta, Hong Kong, Korea, Taiwan, United States, Netherlands, Australia, Turkey, and Germany.
  • Irregular payments and bribes: Finland, New Zealand, Singapore, Iceland, Luxembourg, United Arab Emirates, Denmark, Switzerland, Hong Kong, and Norway.
  • Strength of investor protection: New Zealand, Singapore, Hong Kong, Kazakhstan, Malaysia, United Kingdom, Canada, Georgia, and United Arab Emirates/Israel/Norway/Slovenia (tied at 9th).

 

The

Takeaway:

In the recent release of WEF's Global Competitiveness Index for 2017-2018, international business executives can find a tool to help analyze countries' international trade environments as well as their attributes as potential target markets. The annual index ranks 137 countries across more than 100 indicators of productivity and prosperity, including such specific trade conditions as tariff and non-tariff barriers, port infrastructure, and rules regarding foreign direct investment.

Karen Lynch - The Author

The Author

Karen Lynch

Karen Lynch is a journalist who has covered global business, technology and policy in New York, Paris and Washington, DC, for more than 30 years. Karen also is a principal at Content Marketing Partners.

Sources

1. Global Competitiveness Report 2017-2018, World Economic Forum; http://www3.weforum.org/docs/GCR2017-2018/05FullReport/TheGlobalCompetitivenessReport2017%E2%80%932018.pdf
2. “Global Competitiveness Report 2017-2018: Select Index Component,” World Economic Forum; http://reports.weforum.org/global-competitiveness-index-2017-2018/
3. “Doing Business Records Nearly 3,200 Reforms in 15 Years to Improve Business Climate Worldwide,” World Bank; http://www.worldbank.org/en/news/press-release/2017/10/31/doing-business-records-nearly-3200-reforms-in-15-years-to-improve-business-climate-worldwide
4. “Invest in India, Doing Business Here Easier Now: PM Modi to Global Investors,” Hindustan Times;http://www.hindustantimes.com/india-news/invest-in-india-doing-business-here-easier-now-pm-modi-to-global-investors/story-cR7cEsXwTXqZesEt7VZe9M.html
5. “Rwanda Beats African Economic Giants in Latest Global Competitiveness Index,” Face2Fact Africa; https://face2faceafrica.com/article/rwanda-beats-african-economic-giants-in-latest-global-competitiveness-index
6. “Ireland Slips One Place to 24 in Global Competitiveness Index, RTE; https://www.rte.ie/news/2017/0927/907809-wef_competitiveness/

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