IN TOUCH : Oh-oh – our slip is showing

New Zealand has slipped five places to 20 out of 58 economies measured on the world competitiveness scoreboard, according to the IMD World Competitiveness Yearbook released last month.
The slip has worsened the trans-Tasman gap, with Australia improving two places to now rank as the world’s fifth-most-competitive economy.
For the first time in decades, the United States of America has been toppled from its usual slot as the world’s most competitive economy. Singapore and Hong Kong are now one and two respectively, according to Professor Stephane Garelli, Director of the IMD’s World Competitiveness Centre. “However, they are so closely ranked that it would be better to define them as the leading trio,” he added.
New Zealand’s economic performance, business efficiency and infrastructure performance all slipped slightly, but sufficiently overall to negatively impact the economy’s total performance. Only its government efficiency rating improved – from seventh to fifth place. Too many other countries improved their relative performance and consequently pushed New Zealand down the list.
Taiwan’s competitive progress is particularly spectacular. It climbed from mid-field position of 23rd to eighth. Malaysia moved from 18th to 10th and Israel from 24th to 17th.
Singapore and Hong Kong have shown “great resilience” through the financial and economic crisis, says Garelli. “Despite suffering high levels of high volatility in their economic performance, they are now taking full advantage of strong expansion in the surrounding Asian region,” he said.
The 2010 World Competitiveness rankings were strongly affected by unusual volatility in economic growth (GDP data), exchange rates (especially the dollar versus the Euro), financial assets (the financial crisis), trade and investment flows (because of the recession) and employment, said Garelli.
“In reset mode, world competitiveness is not just about improving performance, but also about damage control. Competitiveness highlights the relative position of nations in the pursuit of prosperity – but in free-fall environment, the winners may simply be the ones who are the most resilient to downward trends,” he said.
The 2010 IMD World Competitiveness Yearbook ranks countries on their ability to create and sustain enterprise competitiveness. The New Zealand data, compiled in partnership with the New Zealand Institute of Management, is disappointing but perhaps not surprising, according to Institute Northern chief executive Kevin Gaunt, the NZIM’s spokesperson on the survey.
IMD and NZIM identified five challenges facing New Zealand in 2010. The first – the country’s need to encourage savings, create incentives and boost productivity through taxation reform – might be addressed, at least in part, by this year’s budget, he said after the findings were released.
The other four challenges included the need to:
• Initiate long-term growth by improving access to capital and world markets.
• Begin building nationwide ultra-fast broadband network to underpin growth.
• Invest in transport development programmes to lower costs and remove blockages.
• Address education gaps and skills shortages in limited population environment.
IMD this year ranked 58 economies on more than 300 criteria grouped into four: the competitiveness factors of economic performance, government efficiency, business efficiency and infrastructure. New Zealand enhanced its position on government efficiency, from seventh to fifth place. However, it dropped one place on infrastructure (from 21 to 22), dropped from 30th to 31st on economic performance and slipped from 21st to 22nd on business efficiency.
“It is bad enough to slip five places in the global ranking,” said Gaunt. “But to widen the gap with Australia by seven settings isn’t doing much to help the Government achieve its stated aim of parity across the Tasman.”
“The big issues for us are still our overall mediocre economic performance, our inability to attract investment funds, our corporate tax rates, our unemployment legislation, the brain drain, our shortage of communications technology investment and the high costs of some technology services, such as mobile, which is also an ongoing concern for New Zealand.
“Our senior managers still lack the kind of international experience they need to compete globally and we need to export more. As we have also said before, much of the solution to New Zealand’s enhanced global competitiveness rests with positive attitudes toward better and more sustained management education and training, starting at secondary school level and continuing through trade training. And the relationship between enhanced productivity and economic performance is linked directly to greater management capability. We now have the government-sponsored Management Matters research report to verify that,” says Gaunt.

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