New Zealand’s world competitiveness improves
New Zealand has improved its international rating two places to 16th on the just released world competitiveness
scoreboard. And the gap between New Zealand and Australia has shortened dramatically, with Australia slipping from 4th
to 9th place on the 60-country survey.
The United States topped the poll again this year, with Hong Kong improving from 6th to 2nd place and Singapore slipping
from 2nd to 3rd. Bottom of the list are Venezuela (60), Indonesia (59) and Argentina at 58.
New Zealand registered significant improvements in economic performance and government efficiency, which helped bump up
the country’s overall rating. On criteria like ethical practices, a subsidy free economy and no price controls to hinder
competition, New Zealand ranks number one. But when it comes to environmental laws hindering business competitiveness we
are bottom of the class with a 60th place ranking.
The 2005 IMD World Competitiveness Yearbook ranks 60 countries on their ability to “create and maintain an environment
that sustains the competitiveness of enterprise”. The New Zealand Institute of Management is IMD’s New Zealand partner
in coordinating the local survey data which was obtained by an opinion survey of senior managers and statistics supplied
by Statistics New Zealand, Treasury and the Reserve Bank.
The five challenges NZIM and IMD believe New Zealand must tackle in 2005 include the need to:
Enhance the corporate tax structure to attract foreign investment
Adopt policies to encourage more skilled migrants
Ensure the security of supply and affordability of energy and water
Increase investment and resolve bottlenecks in road and rail infrastructure
Encourage workplace productivity and improve management and business capability
When it comes to business efficiency, New Zealand ranks well in corporate citizenship – ethical practice, corporate
board performance, high female participation and social responsibility, and a good image abroad.
We are, however, short of skills, subject to brain drain, we don't rank highly on productivity growth, and the
competency of our senior managers is “low”.
Our overall economic performance ranking improved three places based on a buoyant domestic economy, high employment,
direct investment and terms of trade index.
Government efficiency improved four places from 2004 – with a well-balanced budget, an independent public service that
is relatively corruption free and has few protective practices.
On the downside, the survey suggests New Zealand’s investment incentives are unattractive to foreign buyers, the
exchange rate lacks stability, the cost of capital deters business development and our management of public finances is
expected to worsen.
There are infrastructure problems too. Environment laws and compliance hinder business competitiveness, cellphone
networks are too expensive and the country’s energy infrastructure is inadequate. The maintenance and development of the
country’s infrastructure (read transport systems) is also “not adequately planned and financed”.
2005 imbalance forecast
The past year has been characterised by global recovery, but the world competitiveness landscape for this year carries a
higher degree of risk, according to the IMD’s Professor Stephane Garelli.
Garelli suggests in the 2005 Competitiveness Yearbook's executive summary that an "unusual level of risk accumulating on
the horizon" may compromise the global economy's ability to handle a slowdown without slipping into recession.
Risk factors include economic and political tensions created by uneven growth rates, persistent US deficits, rising
interest rates, inflation concerns and a growing gap between the performance of the global economy and a less buoyant
domestic sector – particularly in Europe. So far this is not a problem in New Zealand.
In theory, lowering taxes increases incentives to invest or spend and so helps sustain economic competitiveness. But,
says Garelli, the evidence for it is inconclusive and he describes the relationship between taxation and competitiveness
as "a minefield".
There is, he says, no clear correlation between total tax pressure incurred in a country and its overall competitiveness
or growth rate. Some countries happily blend high growth with high tax pressure (Finland, Norway, Sweden) while others
achieve only low growth rates under low tax pressure regimes (Japan, Switzerland).
“Tax policy is no substitute for competitiveness," says Garelli. The "real engines" for the latter are science,
technology, entrepreneurship, finance, logistics and education.
“Our improved showing this year is heartening,” said NZIM National Chief Executive David Chapman. “However, we have some
serious issues to address. It is concerning to see that the competency of our senior management ranks down at 43. This
should give encouragement to the Government’s current programme to help organisations like ours to lift management
competency in New Zealand. We strongly believe that economic performance generally is directly related to the
performance of individual managers, particularly managers at the top,” said Mr Chapman.
“And with so much emphasis on the case for a single economic market with Australia it is heartening to see that we are a
little closer together on overall economic performance. But we need to lift our game even more and not rely on Australia
slipping back.
“We are also concerned about the shortage of skilled labour, the outflow of our well-educated and skilled people and the
perception that our senior managers lack international experience. We are making progress and that should be encouraged
but we have an awful lot still to do, particularly on our infrastructure strategies and planning,” said Mr Chapman.
ENDS