Economy loses competitive edge

The economy's hands are tied Keystone

Switzerland has for the first time slipped out of the top ten of the most competitive nations – from ninth to 14th place.

A study by the Lausanne-based business school, IMD, blamed the poor performance on the country’s failure to implement economic reforms fast enough.

The United States has again been ranked number one – a position it has held since 1994 – in this year’s World Competitiveness Yearbook.

The US was followed by Singapore and Canada.

To compile the report, IMD ranked 60 countries and major economic regions within countries, using diverse criteria to analyse the way governments create and maintain an attractive business environment.

IMD also divided states into those with populations above and below 20 million.

Among nations with populations under 20 million, Switzerland fell from sixth to tenth place.

Nothing new

“The big news is that there is nothing new,” Stéphane Garelli, the author of the report told swissinfo, commenting on Switzerland’s poor performance.

“There are two factors which explain its ranking. The first is Switzerland’s growth rate,” Garelli added.

“It was one of the few countries to have experienced a recession in 2003 and its growth rate over the past ten years has been below the European average.

“Switzerland has also been penalised on the American and Asian markets by the high value of the Swiss franc.”

Repeating a criticism levelled at Switzerland one year ago, Garelli said the economy was slowed by complex legislation.

“It’s absolutely necessary for the Swiss to simplify procedures and bureaucracy.”

He says one just needs to look at the package of complicated fiscal reforms coming to a nationwide vote on May 16 to understand this criticism.

Reform failure

In individual categories, Switzerland was ranked near the bottom – 46th place – because of its poor record in implementing social and economic reforms.

However, the country was ranked fourth thanks its strong trade balance even if its deficit continued to grow last year.

The country also remains strong in research (fifth), job creation (sixth) and education (eighth).

Switzerland was not the only European country to drop significantly in the rankings.

Luxembourg fell from second to ninth place while Finland moved from third to eighth.

Garelli said many European nations were losing ground to Asian and central European competitors where labour costs are much lower.

“Most industrialised nations are paying more than $20 an hour while China, India and Russia pay less than $1,” he said.

He said these countries are no longer just providing services for Western companies but have started competing in their own right with their own brands.

“They will assail Western markets, just as Japan did before but on a much wider scale.”

swissinfo with agencies

Key facts

The top ten in the 2004 World Competitive Yearbook:
United States
Singapore
Canada
Australia
Iceland
Hong Kong
Denmark
Finland
Luxembourg
Ireland

In brief

To compile the yearbook, IMD takes into account various factors, divided into sub categories.

They are economic performance, government efficiency, business efficiency and infrastructure.

A key trend revealed this year:
Investments are moving east but not only to Asia. Central European nations, where labour costs are only a fraction of what they are in their western neighbours, are also benefiting.