ECONOMY: Argentina and Turkey See Competitiveness Collapse

By Gustavo Capdevila Reprint | | Print |

Gustavo Capdevila

GENEVA, Nov 12 2002 (IPS) - Argentina and Turkey have suffered the most pronounced decline this year in economic competitiveness, according to the rankings presented by the World Economic Forum, Tuesday, in which the United States earned top honours.

Argentina and Turkey have suffered the most pronounced decline this year in economic competitiveness, according to the rankings presented by the World Economic Forum, Tuesday, in which the United States earned top honours.

The Global Competitiveness Report 2002-2003 also highlights the positive performances of Japan, China and India, and the backsliding of France, Italy, New Zealand and Brazil.

The report, which the WEF has issued periodically since 1979, provides a comparative assessment of the economic strengths and weaknesses of 80 countries.

The competitiveness ranking takes into account factors the WEF believes contribute to economic growth, including the use of technology, quality of public institutions and macroeconomic conditions.

According to the founder and president of the World Economic Forum, Klaus Schwab, “In view of the fragility of global economic recovery, it is more important than ever to assess the growth prospects of countries.”

The annual meeting, which since 1971 has been held in January or February in the Swiss mountain resort city of Davos, this year was moved to New York, as a tribute to the victims of the Sep 11, 2001, terror attacks in the United States.

The next annual meeting, slated for Jan 23-28, 2003, is returning to the Davos venue.

The Global Competitiveness Report 2002-2003 indicates that Argentina and Turkey “experienced the largest drop” in this year’s rankings.

The Forum’s diagnosis is that future growth prospects for both countries are particularly bleak because their declines “were not only due to lower macroeconomic environment scores.”

The fact that both countries’ positions in the WEF public institutions index also worsened “does not augur well for their prospects of immediate recovery,” states the report.

The first-place ranking this year went to the United States for its “stellar performance in technology-related factors.”

Also serving as a boon to the ranking of the U.S. economy – which last year was displaced by Finland – is its business environment, considered “conducive to entrepreneurship and risk taking”.

The performance of the United States also scored high with respect to its macroeconomic environment, “although the country’s low savings rate remains a matter of concern,” states the study.

Peter Cornelius, the WEF chief economist, has some further warnings for the future of the U.S. economy.

Its high ranking this year “should not lead to complacency,” said Cornelius. “To maintain this leading position, the country has to resolve outstanding reform issues, especially the need to improve its governance system.”

The highlights of the Global Competitiveness Report begin with recognition that the United States “is the most competitive economy in the world, mainly due to its excellent performance in technology.”

Japan is also cited as an example of strong competitiveness. Although its macroeconomic environment and public institutions are on the decline, according to the index rankings, “Japan’s position rises in the overall Growth Competitiveness Index.”

The key to the Asian nation’s improved performance lies in technological innovation, according to the Forum report.

China and India demonstrate significant strengthening of their competitive positions with respect to the rest of the world. India’s gains are largely attributable to its performance in technology and in the macroeconomic environment, as measured by the WEF.

In the case of China, progress is based mostly on improvements in the rating measuring public institutions, says the study.

The performance of the European countries varied greatly. Sweden rose from ninth to fourth place in the competitiveness ranking, and Switzerland improved from 15th to ninth.

In contrast, France fell from 20th to 26th on the list, and Italy dropped from 30th to 39th in this year’s index.

In the technological sphere, Israel was the surprise, marking a sharp improvement – 19 places – from 26th to 7th place. New Zealand, on the same list, “experienced the hardest fall”: 16 places.

As far as the macroeconomic environment, the Forum says the worst performers were Brazil and Argentina, dropping 34 and 25 places, respectively, in the ranking. The best performances in this arena were achieved by India and Russia.