Singapore’s competitiveness slips

Singapore has dropped one place in an important global competitiveness study, coming in fourth, behind Hong Kong, the United States and Switzerland.

The Republic’s ranking in the IMD World Competitiveness study was dragged down by fast-rising prices, a slowing economy and falling productivity.

This is the second year running that Singapore’s ranking in the study has fallen. It grabbed the top spot in 2010 but slid to third place last year, in the annual study of 59 economies conducted by Swiss business school IMD.

Hong Kong topped the latest rankings, with high scores for being business-friendly and having an effective legal framework.

Singapore did well in government and business efficiency. It also came out tops in higher education, the credibility of its managers and environmental laws, among other factors.

But the Republic fared poorly in terms of the cost of living, where it was ranked 57th, falling from 54th last year.

It also did badly in exchange rate stability, where it was ranked 45th, and in total health expenditure, where it came in 55th.

The IMD survey is one of two global competitiveness surveys that are keenly watched by businesses and policymakers.

The other, the World Economic Forum Global Competitiveness Index, puts Singapore as the second most competitive economy after Switzerland.

  • Economists blamed recent moves to restructure the economy and to bring about more inclusive growth here as reasons for the fall in competitiveness.
  • The Government has begun to restrict the flow of foreign workers, capped the increase of the car population and allowed the Singapore dollar to strengthen.

All these have contributed to falling competitiveness, said Citigroup economist Kit Wei Zheng.

“The supply side constraints, partly exacerbated by policy measures under the inclusive growth strategy, have extracted a price in terms of cost competitiveness.”

But while cost competitiveness will be a worry in the short term, Kit said it may not be wise to reverse recent policies as the long-term goal remains the same: to engineer a change in the way the economy functions.

DBS economist Irvin Seah said he was not surprised by the drop in the competitiveness ranking, adding that other countries were catching up.

He noted that apart from cost competitiveness, Singapore’s drop in the productivity and efficiency category from second to 14th place was also glaring.

“The fall was probably directly related to the slowdown in productivity last year, which grew by just 1 per cent,” he said. “But productivity is also directly linked to economic growth – it is basically calculated as GDP (gross domestic product) divided by the number of workers – and could see further slowdowns in the near term as the economy slows too.”

He also noted that Singapore’s research and development culture as well as “open and positive attitudes” ranked near the bottom among executives here.

They had been polled on what they thought were the most attractive parts of a country’s economy.

Just 3.8 per cent of respondents said a strong R&D culture was a key attractive indicator in Singapore, and only 5.7 per cent cited open and positive attitudes.

Aaron Low
The Straits Times  ,  Publication Date : 31-05-2012

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