Singapore jumps to second spot in global ranking on competitiveness

The Straits Times, May 11, 2007
By Erica Tay, Economics Correspondent

BOOMING trade and surging investment have allowed Singapore to leapfrog Hong Kong to grab second spot in the world rankings for competitive economies.

But Singapore's robust effort failed to dislodge the United States from the top spot in the annual league table of 55 economies compiled by Swiss business school IMD.

The survey also saw emerging economies swiftly closing in on industrialised nations. China climbed three places from last year, passing Taiwan on the way, to become the only Asian economy other than Singapore and Hong Kong to make the top 15.

IMD looked at four main criteria when assessing economies for its World Competitiveness Yearbook.

It found that Singapore was top in terms of government efficiency, especially in the area of implementing business-friendly regulations.

It also fared well in the categories of business efficiency and economic performance, coming in fourth in both, and third for infrastructure.

Singapore registered the biggest leaps in its scores for investment flows - both inwards and overseas - and in improving its jobless rate.

But drawbacks arose as well, including higher consumer price inflation and steeper living costs, which take into account prices of goods and services.

One sub-factor that raised eyebrows was Singapore's climb in the cost-of-living index, which covers the cost of goods and services in major cities.

Its score went from 88 to 92, with New York City as the benchmark at 100.

Office and apartment rents have also been rising.

However, economists felt that this is a by-product of a booming economy.

United Overseas Bank economist Jimmy Koh said that if housing rents keep rising, Singapore will be a less attractive place for highly- skilled talent to live.

Overall, Singapore has moved from third to second place in worldwide competitiveness and from second to the top spot among Asia Pacific economies.

Although third-placed Hong Kong leads the world in terms of productivity and efficiency, its declining quality of life, a bigger 'brain drain' and a falling level of legislative support for scientific research caused it to slip behind Singapore.

One challenge that is here to stay for all the leading industrialised nations is the threat from emerging giants, with China, Russia and India playing a mean catch-up game.

Professor Stephane Garelli, director of IMD's World Competitiveness Centre, noted: 'Economic and business power is shifting to new countries: China, Russia and India have together stacked up more than US$1.7 trillion (S$2.6 trillion) in foreign currency reserves.

'Local companies from South-east Asia, India, China, Russia and the Gulf countries are buying industrial assets the world over.

'In all likelihood, industrialised nations will find it hard to tolerate such a power shift...We shall thus face a year of rising protectionist measures.'