NZ still in the top 20, but only just, says global competitiveness survey

Thursday 20th May 2010

Weak capital markets, management skills, and export performance are the biggest factors behind New Zealand's slide five places down the rankings on the IMD World Competitiveness Index, released on the eve of the John Key-led government's second Budget.

But the country scores well on its capacity to weather the storm of debt created in the "old industrialised nations" by the global financial crisis, thanks to relatively low public debt to Gross Domestic Product.

The IMD Swiss business school's annual survey of businesspeople and policymakers in 54 developed or emerging economies is a widely watched indicator for the quality of country governance and public investment, as well as the investment environment. The survey was conducted for IMD in New Zealand by the NZ Institute of Management.

While New Zealand remains in the top 20 in 2010, the country has slid from 15^th place last year, while Australia has jumped from 7^th to 5^th as the most competitive venue for commercial activity.

Singapore, Hong Kong and the USA continued to rank a closely fought top three. Switzerland remains in 4^th place.

The Nordics, Sweden (6th) and Norway (9th), are in the next five, as are Australia look-alike Canada (7) and the powerhouse Asian economies of Taiwan (8^th) and Malaysia (10^th).

Mainland China moves from 20^th last year to 18^th this year, while the Middle Eastern emirate of Qatar takes New Zealand's old spot, 15^th.

The latest report card suggests New Zealand's enduring strengths are low inflation, general incorruptibility, a sound social and legal framework, and good quality higher education. On a "peer group ranking" for the Asia-Pacific region, New Zealand drops from 4^th to 7^th.

However, on most measures of economic dynamism, New Zealand is either in the middle of the pack or a laggard.

Among the biggest changes in ranking between 2009 and 2010 was a dramatic revision of stock market capitalisation as a proportion of Gross Domestic Product from 36.9% last year to 19.2% this year, along with a marked fall in foreign direct investment.

There was also a big shift in government finance rankings, an inevitable casualty of the global financial crisis, but New Zealand's public debt to GDP ratio of 23% is well below the 60% "bearable" limit that IMD introduces in a "debt stress test" included with this year's survey, because of the Eurozone bailout crisis. The stress test ignores private debt, where New Zealand is comparatively heavily exposed.

The exchange rate was also ranked a weakness by respondents to the economic performance questions in the survey. On export of goods, New Zealand ranked 50^th out of 54. On the other hand, the country ranked sixth for patent registration.

The NZ Institute of Management for IMD identified the challenges for 2010 as being:

Encourage savings, create incentives and boost productivity through taxation reform;
Initiate long-term growth by improving access to capital and world markets;
Beging building a nationwide ultra-fast broadband network to underpingrowth;
Invest in transport development programmes to lower cost and remove blockages;
Address education gaps and skills shortages in a limited population environment.

Businesswire.co.nz

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