The World's Most Competitive Countries

The World's Most Competitive Countries

The U.S. is still No. 1, but not for long, according to IMD's annual list. With Singapore leading the way, Asia looks like an unstoppable force

by Jennifer Fishbein

Asian economies are overtaking the U.S. and Northern Europe to become the most competitive in the world, according to an annual study by one of Europe's top business schools.

The 20th World Competitiveness Yearbook, released May 15 by IMD business school in Lausanne, Switzerland, ranks the U.S. No. 1 for the 15th straight year. But the report's author, professor Stéphane Garelli, expects Singapore to take the top spot next year. The small city-state trails the U.S. by less than seven-tenths of a point in the 2008 rankings. While it still has the world's strongest domestic economy, the U.S. is particularly vulnerable because its financial sector contributes 40% to corporate profits.

Meanwhile, Asia has proven relatively immune to the financial crisis gripping the U.S. Garelli says that Asia's roaring economies, led by China, will likely raise their competitive edge relative to the star-spangled superpower and slowing European countries this year. "Asia is discovering that it is not so much the hostage of the American economy, that it can have a life by itself," Garelli says. "They make life difficult for European countries, especially because, let's face it, Europe is suffering from the euro."

Among the top 20 economies out of the 55 ranked, those in Asia-Pacific posted the greatest gains compared with last year. Malaysia climbed four spots to No. 19, while Taiwan and Australia each jumped five places to No. 13 and No. 7, respectively. Other strong gains were made by Thailand, which rose six spots to No. 27, and the Philippines, up five to No. 40.

A Detailed Study
IMD produced the rankings using 331 criteria ranging from gross domestic product growth and unemployment to the number of Internet users and the price of local cell-phone calls. Hard data from sources such as the World Bank and U.N. comprised two-thirds of the inputs; the rest came from nearly 4,000 survey responses from executives in each country—many of them IMD alumni—regarding the availability of skilled employees, government regulation, the availability of venture capital, and other more qualitative issues.

The top 10 economies have changed little from last year (BusinessWeek.com, 5/14/07). Iceland, which ranked seventh in 2007, was removed from this year's list due to its volatile economy and financial problems at the local institute that had supplied data to IMD. Hong Kong retained its third-place position, followed by the usual top performers: Switzerland, Luxembourg, and Denmark. Canada moved up two places to No. 8, while the Netherlands dropped two to No. 10. Sweden remained unchanged at No. 9.

No. 17-ranked China posted the highest annual GDP growth, 11.9%, "pulling the whole region upward," Garelli says. In contrast, U.S. GDP rose 2.2%. In turn, Asian economies are developing not only domestic markets but also regional ones. Growing investment and trade among Asian nations "is creating a very strong level of confidence in the region," Garelli says. The emerging economies of Vietnam and Kazakhstan will join the rankings before long, he adds.

A Swelling Consumer Class
The rapid growth of the middle class in emerging economies—particularly in China and India—will boost consumption in the coming years, and this, too, will likely influence their ranking. Roughly 50 million people in India are considered middle class, and this figure will probably swell to 580 million by 2030, Garelli says. Since 2000, about 600 million people around the world reached middle-class status, spending an average of $4 billion annually on brand-name products, new homes, vacations, and other indulgences.

The annual IMD survey uses different methodology and data but comes up with relatively similar findings to an annual ranking of economic competitiveness from the Geneva-based World Economic Forum. The most recent WEF ranking, in November, 2007, also found the U.S. on top, followed by a half-dozen European countries (BusinessWeek.com, 11/6/07).

The WEF also produces an annual study of "tech-readiness" that assesses countries on their IT and communications infrastructure and how well they exploit it to drive growth (BusinessWeek.com, 4/9/08).

See BusinessWeek.com's slide show of the top dozen countries in this year's IMD competitiveness ranking.

Fishbein is a reporter in BusinessWeek's Paris bureau .

	IMD World Competitiveness Yearbook		WEF Global Information Technology Report
	Rank 2008	Rank 2007	Rank 2008	Rank 2007
USA	1	1	4	7
Singapore	2	2	5	3
Hong Kong	3	3	11	12
Switzerland	4	6	3	5
Luxembourg	5	4	24	25
Denmark	6	5	1	1
Australia	7	12	14	15
Canada	8	10	13	11
Sweden	9	9	2	2
Netherlands	10	8	7	6
Norway	11	13	10	10
Ireland	12	14	23	21
Taiwan	13	18	17	13
Austria	14	11	15	17
Finland	15	17	6	4
Germany	16	16	16	16
China Mainland	17	15	57	59
New Zealand	18	19	22	22
Malaysia	19	23	26	26
Israel	20	21	18	18
United Kingdom	21	20	12	9
Japan	22	24	19	14
Estonia	23	22	20	20
Belgium	24	25	25	24
France	25	28	21	23
Chile	26	26	34	31
Thailand	27	33	40	37
Czech Republic	28	32	36	34
India	29	27	50	44
Slovak Republic	30	34	43	41
Korea	31	29	9	19
Slovenia	32	40	30	30
Spain	33	30	31	32
Jordan	34	37	47	57
Peru	35	N/A	84	78
Lithuania	36	31	33	39
Portugal	37	39	28	28
Hungary	38	35	37	33
Bulgaria	39	41	68	72
Philippines	40	45	81	69
Colombia	41	38	69	64
Greece	42	36	56	48
Brazil	43	49	59	53
Poland	44	52	62	58
Romania	45	44	61	55
Italy	46	42	42	38
Russia	47	43	72	70
Turkey	48	48	55	52
Croatia	49	53	49	46
Mexico	50	47	58	49
Indonesia	51	54	76	62
Argentina	52	51	77	63
South Africa	53	50	51	47
Ukraine	54	46	70	75
Venezuela	55	55	86	83
Iceland	N/A	7	8	8