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Switzerland Ousts US As World's Most Competitive Economy

by Ulrika Lomas,, Brussels

28 September 2006

Switzerland, Finland and Sweden are currently the world's most competitive economies, according to a survey of 125 countries by the Geneva-based World Economic Forum (WEF).

The Global Competitiveness Report 2006-2007, released Tuesday, said that Switzerland and the Nordic countries topped this year's global ranking due to their sound institutions, competent macroeconomic management, world-class education systems, and focus on technology and innovation.

These factors, according to Augusto Lopez-Claros, Chief Economist and Director of the World Economic Forum’s Global Competitiveness Network, combine to form a "successful strategy for boosting competitiveness in an increasingly complex global economy".

"Business activity in these countries benefits from a well-developed institutional framework, characterized by the rule of law, an efficient judicial system and high levels of transparency and accountability within public institutions. Excellent infrastructure is an additional positive feature of the business environment," Lopez-Claros said.

This year's index however, points to the "rapidly growing importance of higher education and training as engines of productivity growth," he noted.

"Countries that, like the Nordics, are investing heavily in education are likely to see rising levels of income per capita, growing success in reducing poverty and an increasing ability to establish a presence in the global economy," observed Lopez-Claros.

Of all the countries in the index this year, the US showed perhaps the most alarming dip in competitiveness, falling as it did from first place last year to sixth this year. According to the WEF, while the US continues to enjoy an excellent business environment and efficient markets, and is a global centre for technology development, its overall competitiveness is threatened by large macroeconomic imbalances, particularly rising levels of public indebtedness, associated with repeated fiscal deficits. The report also warned that its relative ranking remains vulnerable to a possible disorderly adjustment of such imbalances, including historically high trade deficits.

Meanwhile, Germany (8th) and the UK (10th) continued to shine among the most competitive economies. The report found that in the areas of the safety of property rights and the quality of the judicial system, Germany is second to none, while the United Kingdom excels in market efficiency, enjoying the most sophisticated financial markets in the world. The UK's flexible labour market and low levels of unemployment also stand in sharp contrast to Germany, although Germany does somewhat better than the United Kingdom in innovation indicators and the sophistication of its business community.

Leading within Asia are Singapore and Japan, ranked 5th and 7th respectively, closely followed by Hong Kong (11) and Taiwan (13). These economies are characterized by high-quality infrastructure, flexible and efficient markets, healthy and well-educated workforces and high levels of technological readiness and innovative capacity, the report said.

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