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Nordic economies lead in competitiveness: report

September 28, 2005

By Robert Evans

GENEVA (Reuters) – Nordic countries with Finland in the
lead have some of the world’s most competitive economies,
despite high taxes and extensive social security systems,
according to a study issued on Wednesday.

In the study, the Geneva-based World Economic Forum set the
United States second after Finland in its annual
competitiveness league but recorded growing business concern
over the Bush administration’s handling of the nation’s
finances.

Apart from Finland, four other Nordic nations — Sweden at
third, Denmark at fourth, Iceland at seventh and Norway at
ninth — were among the top 10 in the table issued with the
Forum’s Global Competitiveness Report 2005.

The others in the top 10 were Taiwan, fourth, Singapore,
fifth, Switzerland, eighth, and Australia — up from 14th last
year — at 10th.

The study, based on hard economic data and business opinion
surveys in 117 countries, said the north European nations “are
challenging the conventional wisdom that high taxes and large
safety nets undermine competitiveness.”

While their own business communities pointed to high tax
rates as a potential problem area, “there is no evidence that
these are adversely affecting the ability of these countries to
compete effectively in world markets, or to provide … some of
the highest standards of living in the world,” Forum Chief
Economist Augusto Lopez-Claro said.

The Forum, organizer of the annual gathering of global
business and political leaders in the Swiss mountain resort of
Davos, has been issuing the report for the past 26 years.

MEMO TO GOVERNMENTS

It says the survey’s findings on the strengths and
weaknesses of a wide range of economies help governments in
developed and developing countries to identify key areas for
reform and policy evaluation.

The study, this year involving 11,000 business leaders in
the countries surveyed and a wide range of research institutes,
focuses on factors affecting overall economic performance, from
the quality of public institutions to technology and
innovation.

Finland, the United States and Sweden also occupied the top
three places in the table last year, but the report indicated
that the United States could have emerged top but for worries
about current policies and attitudes in Washington.

Although it enjoyed overall technological supremacy and had
a “powerful culture of innovation,” the report said, it ranked
low on contracts and law “with particular concerns on the part
of the business community about the government’s ability to
maintain arm’s-length relationships with the private
sector….”

It ranked even lower — 47th out of the 117 countries
studied — on the health of its macroeconomic environment,
echoing, the Forum said, growing international concern about
economic imbalances, “especially as regards public finances.”

Dropping down the list were Japan, from ninth to 12th, and
Hong Kong, at 28th from 21st in 2004 — the latter due “to a
tangible deterioration in the quality of the institutional
environment” affecting the law and property rights.

Other poor performers were Mexico, which fell from 48th to
55th and Brazil, down from 57th to 65th.

Both suffered from a perceived decline in the quality of
public institutions, “including such factors as judicial
independence and favoritism of government officials in
policy-making and procurement decisions,” the report said.




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