The International Institute for Management Development (IMD) has lowered Taiwan’s competitiveness ranking this year by three notches to 14th in its latest World Competitiveness Yearbook, dragged by a poor economic showing and a lack of business efficiency.
The ranking was the nation’s worst performance among 61 economies since 2010, according to the report released on Monday by the Lausanne, Switzerland-based institute.
IMD World Competitiveness Center director Arturo Bris said Taiwan’s fundamentals were little changed from the previous year, but its overall ranking was dragged down by a “significant decline in GDP growth.”
The challenge for Taiwan, like many other Asian economies, is where it goes next, Bris said.
“Taiwan needs to find its own strategy. Taiwan still needs to rely on its big neighbor [China] and this is unfortunately what is happening all over the world, but Taiwan needs to find a sector, activity, a driver of growth that will make it competitive vis-a-vis mainland China,” Bris said, suggesting possibilities such as tourism, information technology infrastructure and construction services.
In response to the report, the Ministry of Economic Affairs said it would promote five innovative industries touted by the new government, while also diversifying export markets and carrying out the “new southbound policy.”
National Development Council Deputy Minister Kao Shien-quey (高仙桂) said Taiwan’s economic performance was lackluster due to the sluggish world economy.
“The decline shows the domestic economy is not only fragile, but also lacking in resilience and diversification,” compared with its peers in the region, Kao said.
Countries are ranked by the IMD based on an analysis of more than 340 criteria grouped in four main categories — economic performance, government efficiency, business efficiency and infrastructure.
Taiwan’s economic showing dropped from 11th to 15th, consistent with disappointing GDP growth, foreign investment and price levels last year, Kao said.
The economic weakness affirms the longstanding need for structural reform of the economy and the government has proposed measures to help companies reinvent themselves, expand and innovate, Kao said, referring to a planned equity fund and national trading company.
Taiwan held steady at ninth in terms of government efficiency, but slipped one notch in business efficiency and two berths in infrastructure in the report.
The price ranking fell eight notches, suggesting higher living, lodging, transportation and dining costs, the report said.
Meanwhile, the investment ranking dropped four berths because of a lack of foreign investment, while overseas production by local manufacturers failed to benefit the local economy, the report said.
Kao said the IMD report examines the nation’s overall economic health, offering a valuable reference for policymakers.
This year, Hong Kong has overtaken the US as the world’s most competitive economy and it came ahead of Switzerland as it encourages innovation through low and simple taxation, placing no restrictions on capital flows into or out of the territory, the report said.
The US still boasts the best economic performance, but the sheer power of the economy is no longer sufficient to keep it at the top of the global rankings, the report said.
Hong Kong also offers a gateway for foreign direct investment in China and enables businesses there to access global capital markets, it said.
Rounding out the top 10 were Singapore, Sweden, Denmark, Ireland, the Netherlands, Norway and Canada.
Hong Kong and Singapore aside, Asia’s overall competitiveness has declined, as Taiwan, Malaysia, South Korea and Indonesia all fell in the rankings compared with last year.
China was ranked 25th, down three notches from the previous year.
China’s problem is that while its economy is huge, it needs to do more to be competitive, Bris said.
Additional reporting by CNA
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