In the 2011 World Competitiveness Rankings released recently by the International Institute for Management Development (IMD), Taiwan moved up two slots to No. 6, and was singled out for its “resilient” economy. In government efficiency, however, it fell back four places to No. 10. The real question now is how the country can capitalize on its resiliency to create enduring competitiveness.
Two-thirds of the total IMD score comes from hard statistical data, with the remaining third from the Executive Opinion Survey administered to top and middle management working in each country. Such executives have direct experience of the nation’s economic performance, investment environment, infrastructure and government efficacy, and their perceptions reflect the views of international corporations, something governments around the world take very seriously.
After Taiwan dropped down to 23rd in 2009, the government set up a task force on international rankings, headed by the Council for Economic Planning and Development minister, to review standings every quarter and improve on weak performances in any category. Last year Taiwan advanced 15 places, and then two more this year, indicating that the administration has done some things right.
In the IMD ratings, the category of economic performance has improved the fastest, shooting up from No. 16 in 2010 to No. 8. Last year’s economic growth hit 10.82 percent, putting Taiwan third in the world, while growth of 34.8 percent in exports was fourth.
In the infrastructure category, the country went up one notch to 16th, improving most in basic infrastructure, but regressing in both scientific and technological infrastructure, as well as health and environment.
Taiwan stayed at No. 3 in business efficiency, with corporate adaptability to change ranked No. 1 for the second year in a row.
In government efficiency, however, Taiwan tumbled from 6th to 10th. Among the five subfactors in this category, only business legislation showed progress, while fiscal policy performed worst, falling back seven spots.
The CEPD pointed out that the IMD data provide a clear road map for improvement in government efficiency—the extent to which bureaucracy hinders business activity plummeted from 12th to 35th, while state ownership of enterprises as a threat to business activities crashed from eighth to 20th.
This year the IMD introduced a new measure, the “government efficiency gap,” a comparison of government and business efficiency, noting that “in a new world of ‘state capitalism,’ government efficiency will become a key determinant to competitiveness.” The ratings show that in most developed countries government efficiency lags well behind business efficiency.
Taiwan is no exception, with the government seven places behind business, putting it among the 10 countries with the largest gaps. This means that government inefficiency is a drag on the nation’s competitiveness. With central government restructuring just over the horizon, the time is ripe for a real upgrade in administrative efficacy.
The U.S., Hong Kong and Singapore are perennially ranked the three most competitive economies, in both boom times and recessions. This is where Taiwan should look, to learn how to see the big picture beyond the details.
In the IMD analysis, world competitiveness is now characterized by countries’ greater self-reliance, with increasing emphasis on reindustrialization, exports and delocalization. The resiliency shown by Taiwan’s rapid recovery from the financial tsunami should now be applied to improving the country’s global competitiveness.
Taiwan is a small, open economy, so maintaining a high level of competitiveness is a crucial factor in long-term national development. A lasting, unbeatable edge is a must. (THN)
(This commentary originally appeared in the Economic Daily News May 19.)
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