ASIA NEWS NETWORK
WE KNOW ASIA BETTER
Competitiveness rankings defy logic
Publication Date : 07-09-2012
The World Economic Forum (WEF) has just issued its Global Competitiveness Index 2012-2013 rankings.
Thailand's competitiveness ranking has improved slightly to 38th spot this year, while Switzerland has edged out Singapore to become the most competitive nation on earth.
The WEF has its own formula in ranking the competitiveness of each country. However, the WEF's ranking does raise some eyebrows. According to the WEF, Spain is more competitive than Thailand because its overall ranking is 36th. This ranking is questionable. Spain is planning to seek a full bailout from the European Union.
The European Central Bank is about to monetise its debt. It has received 100 billion euros in bailout funds already. Some 75 billion euros in deposits has fled the Spanish banking system. Spain is in a similar situation to Thailand in the first part of 1997 before Thailand sought a bailout from the International Monetary Fund. By this measure, Spain should not get a ranking higher than Thailand.
Switzerland, ranked No 1, will not enjoy its position as an oasis of peace and prosperity in Europe for too long in the event of a euro implosion. Swiss banks' assets, which are tied to the European banking crisis, are more than 300 per cent of the country's GDP.
The United States has slipped to 7th in the rankings. The US economy is in big trouble. Some 46 million Americans are on food stamps. There are 10 million Americans unemployed, including another 12 million who are doing odd jobs.
Some 18 million American households are having a tough time making ends meet. The banking system is a shambles. The US national debt has hit US$16 trillion, or about 100 per cent of the GDP. The budget deficit is chronic. The country is years away, if ever, from being able to balance its budget. Most important, the Federal Open Market Committee will meet on September 12 to determine whether it will go ahead with a bond-buying programme, or QE3, to further prop up the financial system. The US's finances are in very bad shape indeed.
Japan is ranked in 10th spot. Does it deserve this position? The whole world knows that Japan has the world's largest public debt at more than $12 trillion, or 230 per cent of its GDP. Japan's debt is largely financed by domestic bonds. But with an ageing society, Japan will face higher interest costs from its borrowing, which will put the health of its finances into further question.
The Japanese economy is far from recovering from its crisis of 1990s. Japan is facing sluggish growth and also high energy costs in the aftermath of the Fukushima nuclear plant disaster. Its export sector is feeling the pinch from the strong yen. If the consumer markets in Europe or US were to slacken even more, Japan's export machines will wobble. Foreign exchange earnings will plunge, while domestic demand has been in a weak state all along.
Saudi Arabia, ranked at 18th, is the world's largest oil exporter. But a Citibank report issued this week said Saudi Arabia might have to import energy by 2030 if the current pace of domestic consumption and exports continues.
Israel is ranked 26th, though it is facing off against Iran in the Middle East. A war could break out between the two countries at any time, given the tensions between their leaders.
China is ranked 29th, although it is the richest country in terms of foreign exchange reserves. Its reserves stand at US$3 trillion. China is the world's production factory. Its economy is the world's second largest after the United States. It is improving fast in technology and innovations.
Moreover, China is also building up its military and has nuclear weapons in store. Apparently, China does not deserve this relatively low ranking. This also applies to other Brics countries such as Russia (67th), Brazil (48th) and India (59th). How is it possible that the Philippines musters at 65th, two notches higher than Russia, which is still a superpower, rich with resources. The Philippines is vulerable to food price increases and also to natural disasters.
The WEF may have its own method of measuring the competitiveness of each country. But its rankings defy common sense and the stark reality of what is going on in the world.