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Singapore Named World’s Second Most Competitive Economy

Singapore skyline daytime - Copy

There are many things we Singaporeans pride ourselves on. We have (arguably) one of the best street-food cultures in the world – think nasi lemak, laksa, char kway teow, chicken rice…. – and we’re also known as one of the cleanest and safest cities to live in.

Another source of pride could perhaps also be our rate of economic growth. While there are signs of a widening wealth-gap (based on the GINI coefficient) between the haves and have-nots, Singapore’s economy has indeed exhibited wondrous growth over the years as our Gross Domestic Product per capita has nearly tripled from around S$20,000 in 1990 to S$60,000 in 2012.

The growth in the economy here has also benefitted our stock market, with the Straits Times Index (SGX: ^STI), a market-barometer, nearly tripling from 834 points at the start of 1988 to around 3200 points today.

While the growth in the economy has done great things for investors and businesses (it should also be noted that investors and businesses themselves also contribute to economic growth; it’s a virtuous cycle), ordinary citizens have also benefitted from it. Because of that, the competitiveness of our nation’s economy is of great importance to all.

On that front, we could look toward the World Economic Forum for guidance. It recently released its annual Global Competitiveness Report 2013/2014 which “assesses the competitiveness landscape of 148 economies.” The WEF defines competitiveness as “the set of institutions, policies, and factors that determine the level of productivity of a country.”

It has developed a Global Competitiveness Index (GCI) based upon 12 pillars of competitiveness to rank the various economies. These pillars are: Institutions; Infrastructure; Macroeconomic Environment; Health and Primary Education; Higher Education and Training; Goods Market Efficiency; Labour Market Efficiency; Financial Market Development; Technological Readiness; Market Size; Business Sophistication; and Innovation.

For this year, Singapore was ranked number 2 in the GCI, unchanged from the the previous year. The top spot fell to the European nation of Switzerland.

Within Asia, Hong Kong and Japan were also ranked highly with positions 7 and 9 respectively. The table below shows the countries with the top 10 rankings:

Country GCI Rank 2013/2014
Switzerland 1
Singapore 2
Finland 3
Germany 4
United States 5
Sweden 6
Hong Kong 7
Netherlands 8
Japan 9
United Kingdom 10

Source: WEF Global Competitiveness Report 2013/2014

Digging in further, the report praised Singapore’s labour market and goods market efficiency. Singapore’s infrastructure – roads, ports and air transport facilities – were also reserved for special mention and were termed “world-class” by the WEF.

In addition, Singapore was also noted for a stable macroeconomic environment and prudent fiscal management, given that our budget surplus was 5.7% of GDP last year.

However, the report also highlighted areas where we could improve on. Business sophistication and Innovation, “both keys to Singapore’s future prosperity” are what the WEF thinks our country could do better in.

Given the likelihood of increasingly important business-and-economic-ties between the ASEAN countries, it would also be good to keep an eye out for how our neighbours are doing. On that front, these are how some of our fellow South-East Asian economies fared in WEF’s assessment:

Country GCI Rank 2013/2014
Malaysia 24
Brunei Darussalam 26
Thailand 37
Indonesia 38
Philippines 59
Vietnam 70
Lao PDR 81
Myanmar 139

Source: WEF Global Competitiveness Report 2013/2014

According to the WEF, Malaysia’s “most notable advantages are its efficient and competitive market for goods and services, its well-developed and sound financial market, and its business-friendly institutional framework.” The report also praised the country’s effectiveness in combating corruption and red tape in a region – South-East Asia, that is – plagued by them.

Thailand, on the other hand, faces some strong challenges in improving its competitiveness. The WEF still sees excessive bureaucracy, unstable policies and “omnipresent” corruption as just some of the problems the country faces.

Indonesia saw great improvement in its infrastructure – such as roads, ports, water faciltiies and power plants – but bribery and security remain big concerns for the country. Even so, the country has experienced great economic growth over the past decade with GDP increasing at a clip of 5.2% per annum.

Myanmar is a first-time entrant and starts off at the 139th position, signalling that its road toward prosperity “will be long and dauntingly arduous.” A number of Singapore-listed companies like Yoma Strategic Holdings (SGX: Z59) and Interra Resources (SGX: 5GI) have substantial business interests in the country and has seen their shares grow by 93% and 31% respectively over the last 12 months even as the STI has only advanced by 6%, likely on the promise of great growth ahead for Myanmar.

Myanmar’s position on the GCI rankings is perhaps a party-pooper of sorts for those who envision life going-forward to be a bed of roses for the country, but it’s also a good reminder that growth, while promising, will take time and serious-effort to accomplish with many bumps along the way.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned