Israel, Malaysia leapfrog NZ for global competitiveness

New Zealand has been named the 25th most competitive economy out of 142 countries, conceding two places from last year's ranking after being leapfrogged by Israel and Malaysia.

New Zealand has been named the 25th most competitive economy out of 142 countries, conceding two places from last year's ranking after being leapfrogged by Israel and Malaysia. 

Comparison chartSwitzerland placed first for the third year in a row in the Global Competitiveness Report – produced annually by the World Economic Forum – followed by Singapore which overtook Sweden to claim second position.

The competitiveness index consists of 111 indicators categorised into 12 pillars of competitiveness in three sub-indices: Basic requirements such as institutions and infrastructure; efficiency enhancers such as market efficiency and size; and innovation and sophistication factors.

While New Zealand continues to do well in in the first two areas, rated 17th (14th last year) and 18th (same as last year) respectively, our infrastructure ranking falls short – particularly in quality of electricity supply, mobile telephone subscriptions, rail and road. 

 Performance in innovation and sophistication factors continues to bring our overall ranking down, and remains both the greatest challenge and opportunity, according to think-tank The New Zealand Institute.

Director Dr Boven said much more effort and investment would be required to improve competitiveness and lift prosperity.

"The countries that are improving competitiveness have well-formulated strategies and much more investment. To illustrate, there is still nowhere in New Zealand offering full-time world class professional training in international marketing and sales to lift the success of our many hundreds of internationalising businesses. Complacency must be replaced by urgency or we will continue to fall behind.”

Areas that continue to constrain overall competitiveness include government procurement of advanced technology products (71st), availability of scientists and engineers (69th), state of cluster development (60th) and value chain breadth of exporting companies (59th). Hiring and firing practices were another area of poor performance, in which New Zealand ranked 86th.

The New Zealand Institute’s research shows that shortages of specialised talent and capital availability are also holding back innovation performance.

RankingsIt was the second year in a row that New Zealand dropped rank, from 23rd last year, and 20th the previous year. 

World Economic Forum founder and executive chairman, Klaus Schwab, said much of the developing world was seeing relatively strong growth while advanced economies were experiencing a sluggish recovery from the global recession.

The US declined for a third year to fifth place and Canada dropped out of the top 10 to 12th, replaced by the UK. Australia fell four spots to 20th.

China improved by one place to 26th, continuing to lead the way for large developing economies. Among the four other BRICS economies, South Africa (50th) and Brazil (53rd) move upwards while India (56th) and Russia (66th) experienced small declines.

Nordic countries continued to flourish in the competitiveness stakes, with Sweden third, Finland fourth, Denmark eighth and Norway at 16th.

In a recent speech to the Agricultural and Horticultural Summit, the Prime Minister's chief science advisor Sir Peter Gluckman pointed to Denmark's example of investing 1 percent of GDP in publicly-funded research, and 2.5 percent in privately-funded R&D. 

“If one looks at other small advanced economies such as Singapore, Israel, Denmark, Norway and Finland, all have seen science and innovation as central  to their viability and growth and these countries took this approach at least 1-2 decades ago. All are now reaping dividends as a result.”

Boven said while the government had increased investment in innovation, there had been no evidence of any impact to date.

The GCI based its findings on hard data is collected from various international and national sources and soft data is based on an annual executive opinion survey – more than 13,000 business leaders, including 51 from New Zealand, took part in the 2011-2012 study.

New Zealand also slipped down the scale in the 2011 Global Innovation Index, recently compiled by by business school INSEAD.

After climbing to 9th last year from 27th in 2009, we placed 15th out of 125 economies.

Switzerland topped that index as well, followed by Sweden and Singapore.

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