The Global Competitiveness Report 2006-2007

The Global Competitiveness Report 2006-2007

The Global Competitiveness Report (GCR) is an annual publication of The World Economic Forum (WEF) that enhances global understanding of the factors influencing private-sector led economic growth and explains why some countries are much more successful than others at creating new employment opportunities and raising the income level of their respective populations.

For participating countries, the GCR reports on performance and policy conditions affecting the ability of private sector firms to be globally competitive – able to create and add value within the global marketplace. According to the Global Competitiveness Report 2006 - 2007, Malaysia ranked 26 falling from 25 position in 2005 with GCI (Global Competitive Index) score of 5.11 for the 2006 period, released by the World Economic Forum on 26 September 2006., in the Growth Competitiveness Index from the 117 countries listed.

According to the report, Malaysia, ranked 26th overall, has one of the most efficient economies in the region with flexible labour markets, relatively undistorted goods markets and public institutions which in many areas (e.g., rule of law, the legal system) are already operating at the level of the top performing new EU members.

Switzerland, Finland and Sweden are the world’s most competitive economies according to The Global Competitiveness Report 2006-2007, while Denmark, Singapore, the United States, Japan, Germany, the Netherlands and the United Kingdom complete the top ten list, but the United States shows the most pronounced drop, falling from first to sixth.

The rankings are drawn from a combination of publicly available hard data and the results of the Executive Opinion Survey, a comprehensive annual survey conducted by the World Economic Forum, together with its network of Partner Institutes (leading research institutes and business organizations) in the countries covered by the Report. This year, over 11,000 business leaders were polled in a record 125 economies worldwide.

"The top rankings of Switzerland and the Nordic countries show that good institutions and competent macroeconomic management, coupled with world-class educational attainment and a focus on technology and innovation, are a successful strategy for boosting competitiveness in an increasingly complex global economy," according to Augusto Lopez-Claros, Chief Economist; Director, Global Competitiveness Network.

Raising productivity—meaning making better use of available factors and resources—is the driving force behind the rates of return on investment which, in turn, determine the aggregate growth rates of an economy.Thus, a more competitive economy will be one which will likely grow faster in a medium to long-term perspective.

Education and training are emerging as key drivers of competitiveness. As the global economy has become more complex, it has become evident that to compete and maintain a presence in global markets it is essential to boost the human capital endowments of the labor force, whose members must have access to new knowledge, be constantly trained in new processes and in the operation of the latest technologies. As coverage of primary education has expanded rapidly in the developing world, higher education has gained importance. Thus, countries which have invested heavily in creating a well-developed infrastructure for tertiary education have reaped enormous benefits in terms of growth.

As noted above, the GCI, albeit simple in structure, provides a holistic overview of factors that are critical to driving productivity and competitiveness, and groups them into nine pillars:

1. Institutions
2. Infrastructure
3. Macroeconomy
4. Health and primary education
5. Higher education and training
6. Market efficiency
7. Technological readiness
8. Business sophistication
9. Innovation

It is important to note that none of these factors alone can ensure competitiveness.The value of increased spending in education will be undermined if rigidities in the labor market and other institutional weaknesses make it difficult for new graduates to gain access to suitable employment opportunities. Attempts to improve the macroeconomic environment—e.g., bringing public finances under control—are more likely to be successful and receive public support in countries where there is reasonable transparency in the management of public resources, as opposed to widespread corruption and abuse. Innovation or the adoption of new technologies or upgrading management practices will most likely not receive broad-based support in the business community, if protection of the domestic market ensures that the returns to seeking rents are higher than those for new investments. Therefore, the most competitive economies in the world will typically be those where concerted efforts have been made to frame policies in a comprehensive way, that is, those which recognize the importance of a broad array of factors, their interconnection, and the need to address the underlying weaknesses they reveal in a proactive way.