Countries must innovate to be globally competitive in Fourth Industrial Revolution

For the ninth consecutive year, Switzerland is the world’s most competitive economy, narrowly ahead of the United States and Singapore, according to data from the World Economic Forum’s Global Competitiveness Report 2017-2018. Other G20 economies in the top 10 are Germany (5), the United Kingdom (8) and Japan (9). China is the highest ranking among the BRICS group of large emerging markets, moving up one rank to 27.

However, many economies still remain at risk from further shock and are ill-prepared for the next wave of innovation and automation. Drawing on data going back 10 years, the report highlights in particular three areas of greatest concern. These include the financial system, where levels of “soundness” have yet to recover from the shock of 2007 and in some parts of the world are declining further. This is especially of concern given the role the financial system plays in supporting investment in the age of the Fourth Industrial Revolution.

The Report also states that competitiveness is enhanced, not weakened, by combining degrees of flexibility within the labour force with adequate protection of workers’ rights. With vast numbers of jobs set to be disrupted as a result of automation and robotisation, creating conditions that can withstand economic shock and support workers through transition periods will be vital.

GCI data also suggests that the reason innovation often fails to ignite productivity is due to an imbalance between investments in technology and efforts to promote its adoption throughout the wider economy.

“Global competitiveness will be more and more defined by the innovative capacity of a country. Talents will become more important than capital and therefore the world is moving from the age of capitalism into the age of ‘talentism’. Countries preparing for the Fourth Industrial Revolution and simultaneously strengthening their political, economic and social systems will be the winners in the competitive race of the future,” said Klaus Schwab, Founder and Executive Chairman, World Economic Forum.

Among the 17 East Asia and Pacific economies covered, 13 have increased their overall score – albeit marginally – with Indonesia and Brunei Darussalam making the largest strides since last year. Singapore, the most competitive economy in the region, slipped from second to third place, while Hong Kong advanced from ninth to sixth place – passing Japan, now ranked ninth. There have been signs of a productivity slowdown among the region’s advanced economies and in China, suggesting the need to pursue efforts to further increase technological readiness and promote innovation.

Xavier Sala-i-Martin, Professor of Economics at Columbia University, stressed that countries must establish an environment that enables citizens and businesses to create, develop and implement new ideas that will allow them to progress and grow.

“The (Global Competitiveness Report) comes at a time when increasing the ability of countries to adopt innovations is critical to achieving broad-based growth and economic progress.”

 

Cover image: Singapore, the third most competitive country in the world