5 September 2012
MEDIA RELEASE
Competitiveness Improves But New Zealand Still Lags in Innovation
New Zealand has ranked 23rd out of 144 economies, in the latest World Economic Forum’s (WEF) Global Competitiveness
Index. That reversed a previous decline in ranking and the country’s overall score rose from 4.93 to 5.09.
Dr Oliver Hartwich, Executive Director of the New Zealand Initiative, says the lift in ranking and overall score on 111
indicators of performance is positive but the country’s performance remains weak compared other OECD countries and the
35 most innovation-driven economies around the world.
New Zealand lifted its ranking in 9 of the 12 pillars of competitiveness the WEF measured and is particularly strong in
institutions, health and education, goods and labour market efficiency and financial market development. However
macroeconomic factors, infrastructure and innovation are constraining overall performance.
“Both government and businesses need to address areas of under-performance such as clustering, innovation capacity,
access to financing, hiring and firing practices, supply of scientists and engineers,” says Dr Hartwich.
“The government’s budget and debt management, New Zealand’s restrictive regime on foreign direct investment, and the
regulation of product markets need to be the focus of improvement. We should also increase efforts to attract highly
qualified migrants for sectors in which we experience skills shortages.”
In the WEF’s 33rd report, Switzerland topped the overall rankings for the fourth consecutive year. Singapore remains in
second position and Finland in third position, overtaking Sweden (4th). These top countries are small, strong and stable
with sophisticated innovation approaches.
The United States declined for a fourth consecutive year down to 7th position as macroeconomic vulnerabilities and some
institutional factors continue to raise concern among business leaders, particularly low trust in politicians and a lack
of government efficiency.
Denmark (12th) slipped out of the top ten, replaced by Hong Kong. Australia’s ranking was stable at 20th. Despite
declining three places, China (29th) continues to be the most competitive of the large emerging BRICS economies. Of the
others only Brazil (48th) moves up this year, with South Africa (52nd), India (59th) and Russia (67th) experience small
declines in rankings.
The WEF founder and Executive Chairman, Klaus Schwab says, “Persisting divides in competitiveness across regions and
within regions, particularly in Europe, are at the origin of the turbulence we are experiencing today, and this is
jeopardising our future prosperity.” A competitiveness gap is widening between northern and western European countries
compared to southern and eastern European countries. Gaps are also arising in other regions with South-east Asia
performing better than South Asia, and marked differences between countries in the Southern Africa region. “Governments
are urged to act decisively and adopt long-term measures to enhance competitiveness and return the world to a
sustainable growth path,” says Professor Schwab.
Overall New Zealand ranked 23rd but its strongest performance is among efficiency enhancers at 14th (18th last year) and basic requirements at 19th (a slight decline from 17th last year). New Zealand ranks 1st among all 144 economies on institutional
indicators such as diversion of public funds, irregular payments and bribes, judicial independence, favouritism in
decisions of government officials, ethnical behaviour of firms and strength of investor protections. First placed
rankings also apply to goods market efficiency indicators such as the number of procedures and the number of days
required to start a business, agricultural policy costs and prevalence of trade barriers.
Rankings are weaker for the quality and supply of infrastructure and macroeconomic indicators such as government budget
balance, % GDP (124th), gross national savings, % GDP (95th), general government debt, % GDP (62nd) and inflation change
(58th).
Performance in innovation and sophistication factors ranked 27th (up one since last year). That remains the greatest challenge and opportunity for New Zealand.
Areas that most constrain competitiveness include the state of cluster development (64th), government procurement of
advanced technology products (57th), availability of scientists and engineers (55th) and value chain breadth of
exporting companies (45th).
Over the past few years the WEF has been developing a sustainable competitiveness framework for comparing nations. An
assessment of 79 countries was included in the 2012-13 report. The main finding is that there is no necessary trade-off
between being competitive and being sustainable. When the additional 18 indicators were applied, New Zealand’s overall
ranking improved between +5% to +15% for both environmental and social sustainability, performing better than Australia
on the environmental pillar.
A presentation summarising New Zealand’s competitiveness is available at http://www.nzinitiative.org.nz/uploads/1/1/4/9/11495661/global_competitiveness_report_2012-13.pdf
The full Global Competitiveness Report 2012-13 is available at http://www.weforum.org/issues/global-competitiveness
Catherine Harland is a Research Fellow with The New Zealand Initiative
Additional background notes
The Global Competitiveness Report remains the most respected assessment of national competitiveness, providing a mirror image of a nation’s economic
environment and its ability to achieve sustained levels of prosperity and growth.
The rankings are calculated from both publicly available international and national data and the Executive Opinion
Survey, a comprehensive annual survey conducted by the World Economic Forum together with its network of Partner
Institutes (leading research institutes and business organisations) in the countries covered by the Report. This year, a
total of 14,059 surveys of business leaders in 144 economies were included. The survey is a one-of-a-kind tool for
capturing timely and vital information that is not otherwise available on a global level. The data gathered provides a
unique source of insight and a qualitative portrait of each nation’s economic and business environment. The Report
includes comprehensive listings of the main strengths and weaknesses of countries, making it possible to identify key
priorities for policy reform.
The Global Competitiveness Report’s competitiveness ranking is based on the Global Competitiveness Index (GCI),
developed for the World Economic Forum by Sala-i-Martin in 2004 and adopted in 2005. The GCI is based on 12 pillars of
competitiveness, providing a comprehensive picture of the competitiveness landscape in countries around the world at all
stages of development. The pillars include: 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.
The Report contains a detailed profile for each of the 144 economies featured in the study, providing a comprehensive
summary of the overall position in the rankings as well as the most prominent competitive advantages and disadvantages
of each country/economy based on the analysis used in computing the rankings. Also included is an extensive section of
data tables with global rankings for 111 indicators. www.weforum.org
The World Economic Forum is developing a framework to assess the sustainable competitiveness of nations by applying 9 indicators for environmental sustainability and 9 indicators for social sustainability. In 2012-13 79 countries with sufficient data available were assessed.