IMD announces the 2011 World Competitiveness Rankings

and the results of the “Government Efficiency Gap”

Towards World Competitiveness 2.0

May 17, 2011

IMD announces data from the 2011 World Competitiveness Yearbook (WCY), which places the US and Hong Kong as the most competitive countries, both slightly ahead of last year’s winner, Singapore. In 2010, the US ranked third, losing the top ranking for the first time in decades.

Also in the rankings, Sweden jumps to 4th place, highlighting the competitiveness of the Nordic model. Germany shines and gains 6 ranks to 10th position thanks to buoyant exports and a more flexible labor market. Qatar, Korea and Turkey continue their ascent in competitiveness. The recession highlighted the “resistant” (Switzerland) and the “resilient” (Taiwan). Only 4 big economies are in the top 20.

“The world of competitiveness becomes more national. ‘World Competitiveness 2.0’ is thus characterized by a greater self-reliance of countries. It increasingly emphasizes re-industrialization, exports, and a more critical look at delocalization,” said IMD Professor Stéphane Garelli, Director ofIMD’s World Competitiveness Center.

“This trend is triggered by the rise in commodity and transport prices and higher labor costs in emerging economies. National champions are favored everywhere and borders re-surface – again!”

IMD also released its first Government Efficiency gap results, which compares a country’s government and business efficiency to determine whether countries have “the government they deserve.”

According to the findings, the overall competitiveness of the US was “rescued” by its business efficiency. In more advanced economies (Japan, Belgium, Ireland, US, Germany, etc.) the government lags behind business in efficiency. Switzerland is the exception. In emerging economies, Brazil and India are struggling, while Russia, South Africa, Chile, Estonia and Indonesia are ahead. A sound ‘balance’ between government and business efficiency can be found in Hong Kong, Singapore and Australia.

“Government spending has reached new highs since the recession: on average 47% of the GDPs in the most advanced economies. 12 European countries are already above the 50% threshold. The 23 biggest spenders are all European governments. How long can it last? In a new world of ‘state capitalism’, government efficiency will become a key determinant to competitiveness. Alas, the time lag between government reforms and economic imperatives keeps on increasing,” Professor Garelli said.

The following table compares how countries rank in Government and Business Efficiency, and shows the gap in their relative competitiveness. Some governments—listed below—heavily trail behind business competitiveness, others pave the way ahead. Do countries always have the government they deserve?