Singapore leads East Asian surge in global economic competitiveness

The annual competitiveness index, which calibrated drivers of productivity and long-term growth in its 40th annual assessment, saw eight of the 19 listed economies in the Indo-Pacific region improve their rankings. The world’s second-largest economy – China – held on to the 28th position.
Meanwhile, a peek below the surface of the rankings shows a wide gap between the highest-performing East Asian and Pacific countries and the lowest. The gap is wider than the comparable data for Europe and North America.
Thanks to an improvement in its overall score, combined with a diminished performance by the United States, Singapore has overtaken the US as the world’s most competitive economy.
The WEF particularly highlighted Singapore’s financial system, market efficiency and macro-economic stability. The country, however, scored less impressively when it came to markers like freedom of the press — it ranks 124th — and sustainability.
Rising four places since last year’s report, Hong Kong SAR ranked third overall, behind Singapore and the United States. Hong Kong features in the top 10 on eight pillars — a new record. In addition, Hong Kong ranks first on four pillars, the most for any economy. But the ongoing protests – now in its fourth month – are likely to dampen these impressive gains.
Japan ranked sixth in the overall rankings this year, down a notch from 2018. Despite the slight drop in the overall score, the economy’s performance across the 12 pillars the WEF grades on remained almost unchanged. The WEF listed Japan’s technological capacity as one of its major boons, calling it “one of the most technology-savvy nations in the world”. In terms of areas where Japan could improve, the WEF suggested that Japan should look to tackle rigidities that existed within its labour market, which are currently holding it back.
Taiwan rose one spot to finish this year’s ranking at 12th. Taiwan also has the distinction of being one of four economies to score above 80 in the innovation capability rankings, on par with Germany, the United States, and Switzerland.
South Korea rose two spots to 13th. It features in the top 10 in five competitiveness pillars, and leads the world in ICT adoption. The report particularly highlights Korea’s achievements in fibre optics and internet penetration. “The country boasts the most optical fibre connections per capita in the world [31.9 subscription per 100 people] and 96 per cent of the population uses the internet on a regular basis.” Areas where Korea showed less promise included market inefficiency, partly due to lack of domestic competition, and high trade barriers. Another area holding South Korea back is its labour market, a category in which the country ranks low at the bottom. The WEF writes of Korea’s job system as one that “is characterised by a rigid, de facto two-tier system of ‘insiders’ who enjoy permanent contracts and generous benefits, and precarious ‘outsiders’”.
Vietnam stands out globally as the most improved economy, according to the report. The country rose 10 spots to finish 67th in this year’s rankings. Two countries which, in comparison with Vietnam’s success, illustrate the sheer disparity in Asia’s most competitive economies are Cambodia (up four spots to 106th) and Lao PDR (down one spot to 113th), both of which the WEF describes as having “significant competitiveness deficits”.
As far as the wider Asian region goes, another country showing good improvement is Sri Lanka, which the WEF highlighted as South Asia’s most improved economy, coming in at 84th this year. There was no mention of the impacts of the deadly Easter bombings on the country. Nepal rose one spot to 108, but that isn’t much reason to celebrate. The country has one of the least competitive economies in South Asia, only coming out ahead of Pakistan. Overall, the WEF took issue with Nepal’s economy in terms of innovation capability, information, communication and technology adoption, product market development, judicial independence and the government’s long-term vision.
China ranks 28th this year, unchanged from 2018, and remains the best performer among the BRICS economies: 15 places ahead of the Russian Federation, 32 places ahead of South Africa, and some 40 places ahead of both India and Brazil. China benefits from the sheer size of its market and macroeconomic stability.
But, the report warns, as the shadow of the Great Recession approaches, with a looming global economic slowdown, emerging economies like China are at risk of suffering from a slowdown or stagnation.
One particular bright spot the WEF chose to highlight in the case of China was its promising overtures for greater environmental sustainability, including greater investment in renewable energy. The country has invested $132 billion in clean energy technologies so far, with much more expected.
Malaysia, which once again took the second spot in Asean for the third year in a row, however fell two spots to 27th.
Thailand, which ranks third in Asean, fell two places to 40th in part because it did not keep pace with the other economies that showed improvement. Coming in fourth was Indonesia, which ranked 50th this year, down five places from 2018. The WEF, however, was quick to point out that Indonesia’s performance remained essentially unchanged from the previous year. A large part of Indonesia’s strength comes from the sheer size of its economy, as the largest in Southeast Asia, but the country also scored high when it came to macroeconomic stability and business dynamism.
Also seeing a dip in its ranking this year was the Philippines, ranked fifth among Asean nations. The Philippines dropped eight places compared to last year, coming in at 64th.
India dropped 10 places to rank 68th. The drop, the WEF clarified, was only partly the consequence of a relatively small decline in score. More significant was the surge of several countries previously ranked close to India.
India ranks beyond 100 on five of the pillars but features in the top 50 in four pillars. However, it did relatively well in terms of its scores on macroeconomic stability and market size. India also performed well when it came to innovation, well ahead of most emerging economies and on par with several advanced economies.
Another weak point for India is the labour market, which the WEF points out is characterised by a lack of protection for worker rights, insufficiently developed active labour market policies and critically low participation of women.
One bright spot for India, as with China, has to do with the country’s efforts to boost environmental sustainability. Like China, India is making big investments in the field of renewable energy.
Bangladesh fell two places this year to 102nd. Its relative lack of competitiveness is owed partly to weakening macroeconomic stability, deterioration of labour market conditions, lack of ICT adoption and inadequate progress in infrastructure, according to the report. The country’s lack of preparedness when it came to fourth Industrial Revolution technologies was a particularly weak point. Among other South Asian economies, Pakistan slipped three spots this year to rank 110th out of 140 countries. The country scored towards the bottom when it came to infrastructure, macroeconomic stability, market products and labour system, but had some relative bright spots when it came to market size and business dynamism.