labels: economy - general, world economic forum
US falls five places to finish sixth in world competitiveness ranking news
26 September 2006

Mumbai: The United States, the world's largest economy and technology leader, has fallen five places from being leader to rank sixth in the World Economic Forum's 2006 global competitiveness rankings. Switzerland has taken over as the world's most competitive economy, replacing the US, which had topped the 2005 ranking.

The WEF report ranked Switzerland as the most competitive economy in 2006, followed by Finland, Sweden, Denmark and Singapore. The United States was placed sixth, followed by Japan, Germany, the Netherlands and Britain, coming in the seventh, eighth ninth and tenth positions respectively.

The debacle is more due to macroeconomic concerns which eroded prospects for the world's largest economy, the Geneva-based WEF said. The report cited its huge defence and homeland security spending commitments, plans to lower taxes further, and long-term potential costs from health care and pensions as worrisome fiscal strains.

"With a low savings rate, record-high current account deficits and a worsening of the US net debtor position, there is a non-negligible risk to both the country's overall competitiveness and, given the relative size of the US economy, the future of the global economy," it said.

WEF said, Switzerland and other Nordic countries benefited from their well developed infrastructure, plentiful scientific research, intellectual property protection and sophisticated business culture helped launch the country to the index's leading position.

These countires also had strong institutions and excellent education and training though they lagged in labour market flexibility, the report said.

While Italy's competitiveness ranking fell to 42nd from 38th last year, the report said most European Union countries had stable competitiveness readings over the year.

India gained two places to rank 43rd in the WEF ranking despite persistent poverty, weak health infrastructure and a large public sector deficit offsetting advances in technological services while China's ranking fell from 48 to 54.

India holds the 43rd position ahead of China at 54, Russia at 62 and Brazil at 66.

WEF attributed to China's muted performance to banking weakness, poor penetration rates for mobile phones, computers and other technology, and low secondary and tertiary school enrollment rates this year which muted its fast growth, low inflation and high savings rates.

Russia slipped nine places to 62nd this year, largely due to private sector problems.

"Legal redress is Russia is neither expeditious, transparent nor inexpensive, unlike in the world's most competitive economies," it said. "Partly because of this, the property rights regime is extremely poor and worsening."
Chile, ranked 27, was the star performer in Latin America while Brazil slipped nine places to 66th. Bolivia, Ecuador, Nicaragua and Paraguay ranked much lower and were listed as "among the worst performers." Venezuela slipped to 88 despite a budget surplus.

In the Middle East, oil price gains have improved business confidence in countries such as the United Arab Emirates and Qatar, ranked 32nd and 38th. But, WEF said the OPEC members needed stronger institutions to fight graft and reduce government interference in the economy.

The report said more investments in human capital would help the energy-dominated region diversify its economies and further improve its competitive prospects.

See: Table 1: Global Competitiveness Index rankings and 2005 comparisons

also see : Table 1: Global Competitiveness Index rankings and 2005 comparisons

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US falls five places to finish sixth in world competitiveness ranking