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Executive Perspectives

EXECUTIVE PERSPECTIVE: Tackling ASEAN’s competitiveness divide

Thierry Geiger

12 Jun 2013

Competitiveness will feature prominently in the programme of the 2013 World Economic Forum on East Asia, taking place this week in Nay Pyi Taw, Myanmar’s capital. And rightly so: competitiveness is a critical driver of both prosperity and integration.

The Global Competitiveness Report 2012-2013 paints a mixed picture of ASEAN’s competitiveness. In the ranking of 144 economies, Singapore comes in second overall behind Switzerland. Cambodia, ASEAN’s worst performer, places 85th among the 144 economies studied (Myanmar and Lao PDR are not included). This profound competitiveness divide partly explains the slow progress towards the realization of the ASEAN Economic Community.

The heat map below shows how countries rank in each of the 12 “pillars” – from infrastructure to innovation – that make up the Global Competitiveness Index, the methodology used to compile the rankings. The different shadings make it easy to identify strengths, weaknesses and regional patterns:

  • Singapore is in a league of its own, while Malaysia performs consistently well. But with the exception of “financial development”, there is still room for improvement.
  • The competitiveness gap within ASEAN is deep across all dimensions.
  • The state of transport and electricity infrastructure, as well as low technological readiness, is an area of concern for most ASEAN countries.
  • The performance of most countries is inconsistent across the different dimensions.
  • The macroeconomic environment is sound in a majority of countries, much sounder than many troubled European economies.

Much remains to be done therefore. The Global Competitiveness Report provides an indication of a country’s capacity to sustain growth in the medium term – its resilience. Most members are boasting high growth rates, but our research shows that the foundations remain shaky. It is no time to be complacent.

However, there are reasons for optimism. First, ASEAN members fare well compared with the rest of developing Asia. In the latest report, Cambodia is well ahead of Mongolia, Bangladesh, Pakistan, Nepal and Timor-Leste, ASEAN’s aspiring member.

Second, most ASEAN countries are moving in the right direction. All the ASEAN members have either improved or maintained their rank since 2005. Cambodia has leapfrogged its way up the rankings; in 2005, a mere 6% of countries ranked below it. Today, the figure is 40%. Meanwhile, Pakistan and Bangladesh have dropped considerably.

Since its creation, ASEAN has made significant strides. But evolving from a loose association to a tightly knit group will require stepping up efforts, starting with narrowing the competitiveness gaps. In 2012, at the World Economic Forum Annual Meeting in Davos, Lim Hng Kiang, Singapore’s Minister of Industry and Trade, used a nice analogy to refer to ASEAN: “Like the swan, we do not always move forward. We sometimes go in rounds, but always gracefully.” It is time for the swan to soar.

ASEAN countries’ performance in the 12 pillars of the Global Competitiveness Index 2012-2013

 

Rank /144 Global Competitiveness Index 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 Innovation
Singapore

2

1

2

17

3

2

1

2

2

5

37

14

8

Malaysia

25

29

32

35

33

39

11

24

6

51

28

20

25

Brunei

28

31

57

1

31

57

73

13

56

64

124

65

59

Thailand

38

77

46

27

78

60

37

76

43

84

22

46

68

Indonesia

50

72

78

25

70

73

63

120

70

85

16

42

39

Philippines

65

94

98

36

98

64

86

103

58

79

35

49

94

Vietnam

75

89

95

106

64

96

91

51

88

98

32

100

81

Cambodia

85

73

104

91

102

111

50

28

64

100

89

74

67

 

Author: Thierry Geiger is an Economist and Associate Director with the World Economic Forum’s Global Competitiveness Network, where he leads the Asia competitiveness practice.

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