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 The
latest World Economic Forum Global Competitiveness Report
once again ranks Hong Kong among the most competitive
economies in the world. While the overall ranking slipped
from 22nd to 24th, two important changes need to be
kept in mind. First, the authors revamped the way in
which government involvement in the economy is assessed.
Second, the number of countries surveyed rose from 80
to 102.
Within Asia, Taiwan took top honours (5th), followed
by Singapore (6th), Japan (11th) and Korea (18th). Malaysia
ranked 29th, Thailand 32nd, China 44th, and India 56th.
At the opposite end of the scale, Haiti came in last,
ahead of Bangladesh (98th), Pakistan (73rd), Indonesia
(72nd), the Philippines (66th) and Vietnam (60th).
As should be expected in a broad-brush review of over
100 different economies, several aspects of the survey
do not necessarily reflect the strengths of the Hong
Kong economy particularly well. While the competitiveness
of public institutions applies across-the-board (and
Hong Kong ranks 10th), the availability (24th) and quality
(19th) of local suppliers favours more manufacturing-intensive
economies. Local availability of components and suppliers
(51st) should perhaps be ranked closer to that of China
(6th), given the intensity with which the SAR works
with other parts of China.
Nevertheless, the survey does point out strengths and
weaknesses that are useful in mapping out the areas
on which to capitalise, and those needing more attention.
Hong Kong's worst score is in the ranking of government
fiscal balances, where we placed 70th -- even before
last year's further decline. The effectiveness of anti-trust
legislation (55th), tertiary enrolment (51st, although
no credit is given for students studying abroad who
return to use their talents at home) and the effectiveness
of law-making bodies (48th) are clearly areas deserving
attention.
Where Hong Kong shines is in the light administrative
burden for start-ups, flexibility of wage determination,
private sector employment of women, and hiring and firing
practices. In each of these areas, the SAR is the best
in the world. Second place rankings show up in foreign
ownership restrictions (after the U.K.), the burden
of regulation (after Singapore), government intervention
in corporate investment (behind Finland), and pay and
productivity (next best to the U.S.).
Hong Kong also ranks in the top-10 in property rights,
irregular payments for exports and imports, breadth
of international markets, value chain presence, transparency
of government policymaking, business costs of crime
and violence, prevalence of illegal political donations
and the quality and use of the internet and cellular
phones.
Much of the above will seem to be common sense, but
the exercise provides a useful benchmark for cross-border
comparisons. However, there are some unexpected results
that might challenge the conventional wisdom of even
seasoned executives.
Which country is which?
In a comparison of national competitiveness, the answers
are not always intuitive. See if you can identify the
two countries described below (hint: neither is Hong
Kong or Singapore):
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Country A
- Government subsidies are greater than
in Turkey, the Philippines, Pakistan or
Egypt
- Banks are the least sound among 102
countries
- Venture capital is less readily available
than in Egypt, Portugal, India or Tunisia
- Intellectual property rights are better
protected than in Portugal, Mexico or
Poland
- Administrative regulations are more
burdensome than in Australia, Canada or
the U.K.
- Lawmaking bodies are less effective
than in Uganda, Kenya or Vietnam
- Irregular payments (bribes) for public
contracts are more likely than in Korea,
El Salvador or France
- The administrative burden of starting
a new company is greater than in Ethiopia,
Pakistan or Mali
- Pay is more closely related to productivity
than in France, The Netherlands or Germany
- Foreign ownership of companies is more
difficult than in Ghana, India or Bangladesh
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Country B
- Government subsidies are less than in
the U.S., Canada, Switzerland or Germany
- Banks are more sound than in Honduras,
Indonesia or Uruguay
- Venture capital is more readily available
than in Costa Rica, Mexico or Argentina
- Intellectual property rights are less
well protected than in Greece, Costa Rica
or India
- Administrative regulations are less
burdensome than in Germany, Chile or Norway
- Lawmaking bodies are more effective
than in Israel, Korea or Germany
- Irregular payments (bribes) for public
contracts are less likely than in South
Africa, India or Venezuela
- The administrative burden of starting
a new company is less than in Belgium,
Spain or Panama
- Pay is less closely related to productivity
than in Thailand, Vietnam or Latvia
- Foreign ownership of companies is less
difficult than in Vietnam, Guatemala or
Iceland
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At first blush, Country A appears to be a less attractive
place to do business than Country B. However, while
these indicators give a sense of what the globally savvy
investor might expect, there is little evidence of the
business opportunity in either place. Country A is Japan,
and Country B is China, at least according to the latest
World Economic Forum Global Competitiveness Report.
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