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Singapore climbs back to 3rd place from 5th in global competitiveness ranking

Author: Francine Ho

SINGAPORE has climbed back up to become the world’s 3rd most competitive economy, after having slipped to 5th place in 2021 following 2 straight years at the top.

In the 2022 Institute for Management Development (IMD) World Competitiveness Ranking, Denmark claimed the top spot for the first time, pushing Switzerland down to 2nd place. Singapore, Sweden and Hong Kong follow in 3rd, 4th and 5th position respectively.

Produced annually by the IMD World Competitiveness Center, the ranking looks at criteria across the 4 factors of economic performance, government efficiency, business efficiency and infrastructure, with each having 5 sub-factors. Denmark came top in the 2 sub-factors of digital competitiveness and sustainability.

This year’s rankings reflect “the relative speed of recovery” of economies, said Arturo Bris, head of IMD’s World Competitiveness Center, in reply to queries from The Business Times.

In a press release on Wednesday (Jun 15), IMD attributed Singapore’s position to its strong economic performance and gross domestic product growth, with “substantial improvements in the domestic economy, employment, public finance and productivity and efficiency.”

The country ranked top globally in the sub-factors of domestic economy, international trade and technological infrastructure. But it remained in relatively low positions in sub-factors such as management practices (14th), scientific infrastructure (16th) and health and environment (25th).

“Indicators based on executives’ sentiment also highlight concerns with respect to hybrid work models and the overall attractiveness of the city-state to foreign highly-skilled professionals,” said IMD.

“If these concerns materialise, they might hinder Singapore’s capacity to attract overseas talent in the following years, potentially curbing its long-term competitiveness.”

Respondents to an Executive Opinion Survey were given 15 indicators and asked to choose 5 that reflect their economy’s attractiveness. For Singapore, policy stability and predictability was the top factor, chosen by 67.9 per cent, while cost effectiveness was chosen by the fewest (8.9 per cent).

Singapore’s “exceptional fall” in the 2021 rankings was due to its strict pandemic curbs and isolation from international flows of services and people, “in contrast to Western economies which were more lenient”, said Bris.

To potentially edge out Denmark and regain its top position, Singapore needs to improve in the area of sustainability to “position itself as a regional champion that walks the talk” just as Denmark has done, he added.

Singapore remains the most competitive economy in the Asia-Pacific, with other markets in the region also rising in the global ranks.

Hong Kong reclaimed its spot in the top 5 worldwide on the back of an improvement in domestic economic performance and international investment. Meanwhile, India jumped 6 spots to 37th place, mainly due to better economic performance and business efficiency.

China, on the other hand, fell 1 rung to 17th, due to a poor economic recovery exacerbated by its zero-Covid strategy.

Since 2020, China has strengthened its business environment, and its domestic market has nurtured growth opportunities for competitive enterprises, said IMD. But China’s growth is projected to slow throughout 2022 as the economic model of using resource-intensive manufacturing, exports and low-paid labour is reaching its limits.

“Going forward, China needs to restructure the economy from manufacturing to high-value services and from investment to consumption. It also needs to build a unified national market to enhance long-term economic prosperity, and it will only achieve its socio-economic development goals by using a macroeconomic policy,” said economists from IMD’s World Competitiveness Center.

According to IMD, this year’s results reflect the negative effects of inflationary pressures on businesses and thus on economic competitiveness.

Besides inflationary pressures, other global challenges include Covid-19 variants, differing national pandemic policies and the invasion of Ukraine by Russia, said World Competitiveness Center chief economist Christos Cabolis.

First published in 1989, the IMD World Competitiveness Ranking ranks 63 economies using hard data and survey responses from executives.

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Photo Credits: Ingo – Pexels

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