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Switzerland World's Most Competitive Economy

by Ulrika Lomas, Tax-News.com, Brussels

11 September 2012


For the fourth consecutive year, Switzerland has topped the World Economic Forum's (WEF) Global Competitiveness rankings, which evaluates nations on the frameworks and policies they have in place to promote business and economic development.

In respect of Switzerland, the WEF noted that the country has performed strongly across the board in terms of all benchmarks. It reported the nation's most notable strengths are related to innovation and labor market efficiency, where it tops the GCI rankings, as well as the sophistication of its business sector, in which it ranked 2nd.

Furthermore, public institutions in Switzerland are said to be the most effective and transparent in the world.

"Governance structures ensure a level playing field, enhancing business confidence; these include an independent judiciary, a strong rule of law, and a highly accountable public sector," states the report. "Competitiveness is also buttressed by excellent infrastructure (5th), well-functioning goods markets (7th), and highly developed financial markets (9th). Finally, Switzerland’s macroeconomic environment is among the most stable in the world (8th) at a time when many neighboring economies continue to struggle in this area."

After Switzerland, Singapore remains in second position followed by Finland in third position, overtaking Sweden (4th). These and other Northern and Western European countries dominate the top 10 with the Netherlands (5th), Germany (6th) and United Kingdom (8th). The United States was placed 7th, Hong Kong (9th) and Japan (10th).

Among the large emerging market economies, China (29th) continues to lead the group, despite seeing its ranking fall three places since last year's report. Of the others, only Brazil (48th) moves up this year, with South Africa (52nd), India (59th) and Russia (67th) experiencing small declines in their ratings.

Despite growing its overall competitiveness score, the United States continues its decline for the fourth year in a row, falling two more places to seventh position. In addition to its perceived macroeconomic vulnerabilities, some aspects of the country’s institutional environment continue to raise concern among business leaders says the report, particularly the low public trust in politicians and a lack of government efficiency. On a more positive note, the country still remains recognized as a global innovation powerhouse and its markets work efficiently.

The report indicates that Switzerland and countries in Northern Europe have been consolidating their strong competitiveness positions since the financial and economic downturn in 2008. On the other hand, countries in Southern Europe, i.e. Portugal (49th), Spain (36th), Italy (42nd) and particularly Greece (96th) continue to suffer from competitiveness weaknesses in terms of macroeconomic imbalances, poor access to financing, rigid labour markets and an innovation deficit.

Behind Singapore, several Asian economies are performing strongly, with Hong Kong SAR (9th), Japan (10th), Taiwan, China (13th) and South Korea (19th), all placing in the top 20.

In the Middle East and North Africa, Qatar (11th) leads the region while Saudi Arabia remains among the top 20 (18th). The United Arab Emirates (24th) improved in the rankings.

In sub-Saharan Africa, South Africa (52nd) and Mauritius (54th) feature in the top half of the rankings. However, most countries in the region continue to require efforts across the board to improve their competitiveness, the WEF said.

In Latin America, Chile (33rd) retains the lead, and improvements were seen in the competitiveness of other regional nations including as Panama (40th), Brazil (48th), Mexico (53rd) and Peru (61st).

Xavier Sala-i-Martin, Professor of Economics, Columbia University, USA, said: “The Global Competitiveness Index provides a window on the long-term trends that are shaping the competitiveness of the world’s economies. In this light, we believe [the report] offers useful insight into the key areas where countries must act if they are to optimize the productivity that will determine their economic future.”

“Persisting divides in competitiveness across regions and within regions, particularly in Europe, are at the origin of the turbulence we are experiencing today, and this is jeopardizing our future prosperity.” said Klaus Schwab, Founder and Executive Chairman, World Economic Forum. “We urge governments to act decisively by adopting long-term measures to enhance competitiveness and return the world to a sustainable growth path.”

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