Weakness in innovation
Many of the factors that will have the greatest impact in driving competitiveness in the future have never been the focus of major policy decisions in the past. These include idea generation, entrepreneurial culture, openness, and agility.
“I foresee a new global divide between countries who understand innovative transformations and those that don’t. Only those economies that recognize the importance of the Fourth Industrial Revolution will be able to expand opportunities for their people.”
Inclusion must complement openness
For example, those economies performing in indicators that denote openness also tend to perform well in terms of innovation and market efficiency. The indicators include low tariff and non-tariff barriers, ease of hiring foreign labour and collaboration in patent application among others
This data suggests that global economic health would be positively impacted by a return to greater openness and integration. However, it is critical that policies be put in place to improve conditions of those adversely affected by globalization within countries.
With no inherent trade-off between competitiveness and inclusion, it is possible to be pro-growth and inclusive at the same time.
Need for broad-based approach to raise competitiveness
A key message from the report is the need for a broad-based approach to raising competitiveness. This is where a strong performance in one area cannot make up for a weak performance in another.
This is especially true when it comes to innovation. It is true that a strong focus on technology can provide leapfrogging opportunities for low and middle income countries. However, governments must not lose sight of ‘old’ developmental issues. These include governance, infrastructure and skills.
In this light one worrying factor is thrown up by this year’s Index. It is that for 117 of the 140 economies surveyed, quality of institutions remains a drag on overall competitiveness.
“With opportunities for economic leapfrogging, diffusion of innovative ideas across borders and new forms of value creation, the Fourth Industrial Revolution can level the playing field for all economies.
“But technology is not a silver bullet on its own. Countries must invest in people and institutions to deliver on the promise of technology.”
Regional and country highlights
These three economies boast world-class physical and digital infrastructure and connectivity, macroeconomic stability, strong human capital, and well-developed financial systems.
Australia (14th, 78.9) and Korea (15th, 78.8) are among the top 20.
The biggest gap in this region lies in the development of an innovation ecosystem. New Zealand ranks 20th on the Innovation Capability pillar, while the Republic of Korea ranks 8th.
Emerging markets such as Mongolia (99th , 52.7), Cambodia(110th, 50.2) and Lao PDR (112th, 49.3) are only half way to the frontier. This makes them vulnerable to a sudden shock, such as a faster-than-expected rise in interest rates in advanced economies and escalating trade tensions.
China top among BRICS
Next is India, which ranks 58, up five places on 2017, with a score of 62. It registers the largest gain of any country in the G20. India is followed by South Africa, which falls 5 places this year to 67. Last is Brazil, which slips 3 places to 72.