The World Economic Forum issued the 2018 edition of its Global Competitiveness Report, marking a milestone with the introduction of the new Global Competitiveness Index 4.0. The new index sheds light on an emerging set of drivers of productivity and long-term growth in the era of the Fourth Industrial Revolution.
With the inclusion of new concepts and extensive new data gathering efforts, the GCI 4.0 provides novel and more nuanced insights on the factors that will grow in significance as the 4IR gathers pace: human capital, innovation, resilience and agility.
The GCI 4.0 introduces a new progress score ranging from 0 to 100. The frontier (100) corresponds to the goal post for each indicator and typically represents a policy target.
Each country should aim to maximize its score on each indicator, and the score indicates its current progress against the frontier as well as its remaining distance.
According to the report, the US is the closest economy to the frontier, the ideal state, where a country would obtain the perfect score on every component of the index. With a competitiveness score of 85.6, it is 14 points away from the frontier mark of 100, implying that even the top-ranked economy among the 140 has room for improvement.
Top 10 economies
- US (85.6)
- Singapore (83.5)
- Germany (82.8)
- Switzerland (82.6)
- Japan (82.5)
- Netherlands (82.4)
- Hong Kong SAR (82.3)
- United Kingdom (82.0)
- Sweden (81.7)
- Denmark (80.6)
Regional highlights
- Globally, the median score is 60.0.
- Between the US (85.6, 1st) and Chad (35.5, 140th) there is a wide range of performance across regions and countries.
- Europe and North America are, combined, home to seven of the 10 most competitive economies.
- East Asia and the Pacific region, home to the other three top ten economies, achieves the highest median score (72.6) among all regions, ahead of Europe and North America (70.8).
- At the other end of the spectrum, 17 of the 34 sub-Saharan African economies studied are among the bottom 20 globally, and the region’s median is a low 45.2, less than halfway to the frontier.
- While regional averages are helpful for global comparisons, there are vast disparities within regions, implying that economies are not necessarily hampered by geography in their quest for competitiveness.
- The existence of pockets of over- or under-performance within each region suggests the need for proactive policies and leadership. For example, in Europe, there are four very distinct groups of countries with very different competitiveness levels and, within the EU, Germany’s overall competitiveness score (82.8, 3rd) is 20 points higher than Greece (62.1, 57th).
- In Latin America, Chile’s score (70.3, 33rd) is nearly twice that of Haiti (36.5, 138th).
- Mauritius (63.7, 49th), Sub-Saharan Africa’s best performer, is nearly 30 points and over 91 places ahead of Chad.
- In South-East Asia, Singapore (2nd, 83.5) is 34 points closer to the frontier than Lao PDR (49.3, 112th).
- In some cases, the score differential between two neighbouring countries is large; there are approximately 20 points between the Dominican Republic (57.4) and Haiti (36.5), between Colombia (61.6) and Venezuela (43.2), and between Thailand (67.5) and Cambodia (50.2).
A mixed performance across the G20 and the BRICS
- Within the G20, almost 30 points and 80 ranks separate the US (85.6, 1st) from Argentina (57.5, 81st), the best and worst performing economies of the group, respectively.
- Of the BRICS grouping of large emerging markets, China is the most competitive, ranking 28th and with a score of 72.6, followed by Russia, which is ranked 43rd. These are the only two in the top 50. Next is India (58th), up five places from 2017: with a score of 62.0, it registers the largest gain of any country in the G20. India is followed by South Africa, which falls five places this year to 67th. Last is Brazil, which slips three places to 72nd place.
- Within the G20, on health, the clear leader is Japan, which ranks first with a perfect score of 100, while South Africa is 127th with a score of 43.2.
- Differences on the financial system pillar are small—there are fewer than 20 points between Canada (86.1, 11th) and Italy (64.3, 49th) —but the same cannot be said when it comes to the Macroeconomic stability pillar. While 11 of the 19 members obtain a score above 90 on this pillar, the context in Turkey (67.3, 116th), Brazil (64.6, 122nd) and Argentina (44.9, 136th) remains volatile.
- The Republic of Korea is the world’s champion in terms of broadbased ICT adoption, with a near perfect score of 91.3 on this pillar. By contrast, India is among the weakest performers, with a score of 28.0 (117th), despite its vibrant IT sector.
- There is also a physical infrastructure gap among G20 economies (about 30 points between Japan and Indonesia, the best and worst performers, respectively).
- There are stark contrasts in terms of innovation capabilities, too. While Germany (87.5), the US (86.5), Japan (79.3), the UK (79.2) and Korea (79.2) are beacons of innovation, other G20 countries are significantly lower. China’s innovation score (64.4) is similar to Italy’s (65.8), not too far from Australia’s (69.8), and more than 10 points above India’s (53.8) and Russia’s (50.7).
Key conclusions
- All economies must invest in broader measures of competitiveness today to sustain growth and income in the future
- Enhancing the fundamentals of competitiveness today will improve resilience to shocks
- While openness is good for growth governments must support those who lose out to globalization
- Technology-based leapfrogging remains elusive
- Agility and future-readiness are key in a changing world
- Weak institutions continue to hamper competitiveness
- A formula for innovation remains obscure for most economies
- The financial system continues to be a source of weakness in some economies
- Achieving equality, sustainability and growth together is possible but needs proactive, far-sighted leadership.
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