The Global Competitiveness Index (GCI) 5.0
The 2021/22 edition of the Global Competitiveness Report presents a revised Global Competitiveness Index with expanded foundations, adding new pillars on the environment and social protection as well as embedding new technological, environmental and fairness considerations in the traditional drivers of competitiveness.
The Report also features a complementary dashboard of policy targets which collects contextual data to assess the quality of growth achieved.
The GCI continues to be organized into four basic building blocks: the enabling environment, human capital, markets and the innovation ecosystem. The dimensions of these building blocks are extended in important ways in the GCI 5.0. New markers are introduced to support policy makers in transforming national economies into more resilient systems covering environmental sustainability, equity and inclusion, and technological readiness.
Figure 2.1: The Global Competitiveness Index (GCI) 5.0
Source: World Economic Forum
The four new Enabling Environment pillars are designed to capture to what extent there are clear and fair rules of the game, physical security, the level of trust between actors, a healthy natural environment as well as sustainable and widely accessible infrastructure on which the economy is run:
Pillar 1: The Public Institutions pillar captures the functioning of the state, measured as the strength of checks and balances, the efficiency of an economy’s public administration and the government’s long-term vision. Next to press freedom, judicial independence, and corruption, the GCI 5.0 also considers privacy legislation and protection of civil and political rights as two new indicators under checks and balances. Government efficiency comprises perceived ease of compliance with regulation and the tax system, policy stability, the possibility to obtain government services digitally and the strength of property rights. As part of a broader government vision, it captures business perceptions of governments’ future orientation and further introduces the number of environmental treaties signed by a government as a new metric.
Pillar 2: The Security and Social Cohesion pillar assesses the level of safety and trust in an economy. It contains four measures of physical security which are the reliability of police services, the homicide rate, terrorism incidence, and the perceived costs to business from organized crime. It further introduces two new indicators to get a grasp on the level of social cohesion, namely a measure of division between social groups and secondly, social capital.
Pillar 3: The Environment pillar is a new introduction to the index, recognizing that it is a prerequisite for a stable human and economic system. It tracks seven elements of a healthy natural ecosystem: it aims to capture the sustainability of resource use, including water, energy, soils and forests. It further tracks biodiversity, pollution arising from emissions and the most important drivers of climate change. The pillar draws heavily on the “ecosystem vitality” dimension of Yale’s Environmental Performance Index.[54] Additional environmental metrics are embedded in the Infrastructure, Public Health and Future Orientation of Business pillars.
Pillar 4: The Infrastructure pillar captures the quality and density of transport infrastructure (air, road, rail, and shipping as well as public transport), the efficiency and sustainability of utility infrastructure as well as the level and quality of digital connectivity of a country. The pillar is designed to reflect both efficiency and inclusion dimensions. For example, a well-designed transport network (road, rail, public transport) is important to ensuring different regions within a country are connected to labour markets. In addition, digital connectivity will become ever more important for individuals to participate in education and labour markets as more of the economy moves online.
Secondly, the three expanded Human Capital pillars focus policy makers’ attention on public health, the quality of education and relevance of workers’ skills for today’s labour market as well as the extent to which people are supported through periods of ill fortune, additional family responsibilities or at the end of their working lives. These elements are captured in three pillars: Public Health, Social Protection and Education and Skills.
Pillar 5: The Public Health pillar takes a new approach in the updated index, switching from one measure of health outcomes used in previous editions to a set of measures that reflect both healthcare accessibility and exposure to health risks. This is in the context of the ubiquitous warnings of the increasing frequency and lethality of disease epidemics and even pandemics. The first set of indicators include accessibility of healthcare services, density of healthcare infrastructure and health workers as well as healthcare coverage and healthcare quality. Health risks included in the Index are air pollution, unsafe drinking water, and exposure to heavy metals and waste. The health risks component again draws on Yale’s Environmental Performance Index.
Pillar 6: As an economic stabilizer in the face of the unprecedented level of social inequality, the Social Protection pillar is a new introduction to the GCI. It reflects the degree of risk sharing borne by the social system. It encompasses metrics on social protection coverage of services related to both labour force participation (e.g. unemployment, injuries during employment) and independent of labour force participation (e.g. pension, disabilities). It further captures access to social services such as childcare and eldercare as well as the reach of active labor market policies.
Pillar 7: The Education and Skills pillar combines metrics of educational quality with metrics of equality in accessibility to education. It expands the traditional focus from K-12 education to the availability and quality of lifelong learning opportunities that allow workers to adapt to the evolving demands of a rapidly transforming labour market. In the quality dimension, it tracks the level of digital and technology skills, the availability of qualified teachers, the learning adjusted years of schooling as well as business leaders’ perception of school system quality. When it comes to equal access, it considers a measure of education inequality, the level of household connectivity and both government and business-driven lifelong learning opportunities.
Thirdly, the three Markets pillars continue to cover labour, financial and product markets. In addition to capturing the extent to which economies are allocating resources to their most productive use and creating surplus for consumers, the GCI 5.0 puts significant weight on fairness considerations, covering both equal opportunities in hiring and career progression into leadership as well as equitable access to finance. The competition pillar further takes into account growing barriers to entry associated with the data economy, tracking the ease of data portability between firms.
Pillar 8 Labour Markets: As labour markets are rapidly transforming, policy must be designed to allow for rapid adjustment to new needs while at the same time protecting workers. The labour market pillar therefore captures both the level of dynamism and the fairness of labour conditions. The labour market dynamism dimension includes hiring and contract termination, worker-employer relations, labour market participation and talent availability. Fairness factors included in the new index are a measure of workers’ rights, the percentage of vulnerable employment, the gender wage gap and the level of equality of opportunity in hiring and promotions into leadership positions for women, marginalized groups, individuals borne to low-income parents, with disability and identifying as LGBTI. The disaggregation of hiring and mobility to leadership positions by the aforementioned axes of inequality is novel in this index, recognizing the mounting evidence that diverse and inclusive workforces are not only the fair thing to do but also make for competitive and innovative workforces.
Pillar 9: The Financial Conditions pillar covers four dimensions of an economy’s financial conditions that are conducive to long-term productivity growth: financial system depth, financial inclusion, banking system stability, and macroeconomic stability. Financial system depth considers the percentage of domestic credit to the private sector, availability of financing for SMEs, venture capital availability and the size of the non-life insurance market. It further covers individuals’ access to financial services, including digital payments and more traditional banking services. The final two components are banking system stability (soundness of banks, banks’ regulatory capital ratio, bank non-performing loans, and the strength of auditing and accounting standards) and macroeconomic stability, comprising of a country’s credit rating and the level of inflation.
Pillar 10: Competition: A dynamic process of creative destruction is at the core of a well-functioning market economy. The competition pillar reflects the country’s overall market size, the level of competition domestically and to what extent international firms can exert competitive pressures on local markets. It includes traditional markers of a level playing field such as the extent of market dominance, distortive effects coming from taxes and subsidies, barriers to inward FDI and trade but also the ease of data portability between firms.
Fourthly, the updated Innovation Ecosystem pillars comprise countries’ innovation capabilities and the future orientation of business more broadly. The future orientation of business pillar introduces a series of new indicators to complement traditional business dynamism indicators, proxying for the degree to which businesses take a stakeholder approach, monitoring their supply chains for social and environmental impact, and for the positive pressures exerted by customers on compliance with ESG standards.
Pillar 11:
Innovation is one of the most important drivers of productivity growth and will need to underpin the green transition. The updated innovation pillar of the GCI includes metrics for both knowledge assets and innovation resources. It takes stock of patent and trademark applications as well as resources that can be deployed towards innovation such as R&D expenditure, the number of researchers, the level of university-industry collaboration, the degree of cluster development and the prominence of research institutions.
Pillar 12: The Future Orientation of Business pillar captures the private sector’s capacity to adopt new technologies and new ways to organize work through a culture that embraces delegation, disruptive ideas, entrepreneurial risk and has taken on board ESG standards. It reflects openness to collaboration through international patent co-applications and the perceived collaboration between companies. It further introduces a new set of indicators that aims to capture to what extent firms are responding to and learning from consumers and extending ESG considerations to suppliers.
In what follows, we present the results of the Global Competitiveness Index 2021. The next section discusses global performance at the pillar level: Who are the top performers in each dimension of competitiveness as well as its subcomponents? Which countries are getting ahead of the curve on some of the more future-oriented indicators? The subsequent section presents country profiles of the global top 10 most competitive economies as well as the G20.
Accounting for a broader set of foundations to competitiveness as measured by the GCI 5.0, makes the following ten economies the most competitive in the world: the 2021/22 GCI rankings are led by Switzerland, Finland and Denmark with the Netherlands, the US, Sweden, Germany, Austria, Japan and France taking the remaining spots in the top 10.
The highest regional performers outside the top 10 are Israel (25th) and the UAE (30th) in the Middle East and North Africa, Chile (38th) and Uruguay (46th) in Latin America and the Caribbean, Russia (40th) and Azerbaijan (48th) in Central Asia, Mauritius (55th) and Botswana (63rd) in Sub-Saharan Africa and Sri Lanka (74th) and India (80th) in South Asia. The leading spots of their respective income groups are taken by China (28th) followed by Bulgaria (38th) for upper middle-income countries, Vietnam (50th) and Indonesia (53rd) in the group of lower-middle income countries and Rwanda (93rd) in the group of low-income countries.
The global top three most competitive economies are characterised by a very even performance across all twelve pillars.
Switzerland’s leadership is carried by top global ranks for public institutions (1st), public health (1st) and education and skills (1st) and is further supported by ranks in the top ten across all other dimensions of competitiveness. Other Swiss strong points are its infrastructure (2nd), labour market dynamics and opportunities (3rd), security and social cohesion (4th) and the future orientation of Switzerland’s business sector (4th).
Finland’s profile is similarly balanced, offering a national competitiveness context that is characterized by a very well-functioning financial market with the highest level of financial inclusion and banking system stability (1st), public institutions which are among the most independent and efficient in the world (2nd), a high level of security and social cohesion (2nd), top education and skills (2nd), very good public health (3rd), strong social protection (3rd), and relatively good environmental performance (8th).
Denmark which comes third in the overall ranking, tops the environment and social protection pillars (1st), comes 2nd on labour market dynamics and opportunities, 3rd on financial conditions, 5th on institutions and 6th on the future orientation of its businesses. Its only scores outside of the top 10 (with the exception of public health, where it ranks 11th) are due to Denmark’s small population and market size, reflected in the competition (18th) and innovation (20th) pillars.
For lower ranks within the top 10, performance becomes more uneven across the different dimensions of competitiveness, in particular for major economies such as the US, Germany, and Japan. The US for example, combines top global ranks for innovation capacity (1st), the future orientation of business (1st) and competition (1st) on the one hand, with low scores in particular on security and social cohesion (61st), public health (29th) and the environment (27th). Ranks for Germany vary from a second place for its innovation ecosystem and public health to a 25th rank on labour market dynamics and a 28th rank on security and social cohesion. Japan in turn provides unmatched infrastructure (1st), exhibits outstanding innovation capability (3rd) and its public health (4th) and competition (6th) environments are among the world’s best, yet labour dynamics and opportunities (30th), environmental conditions (28th) and its education and skills system (25th) are more tilted towards the lower end of its peer group.
Considering the distribution of scores for each pillar across all 117 economies included in the Report reveals stark global patterns (Figure 2.2). The dispersion of scores is widest for the social protection and innovation pillars. Public health and education and skills scores vary similarly widely across the global economy.
Technology transfer from economies at the innovation frontier can go a long way toward making up for the large disparities in the sophistication of innovation ecosystems. No such direct mechanism of convergence exists for the three human capital pillars. The extremely wide global disparities in public health, education and social protection indeed pose a tremendous challenge to the recovery in low- and middle-income economies and do not bode well for a rapid return to global income convergence.
Figure 2.2: Score distribution by GCI pillar
It is also worth noting that the distribution of scores on the environment pillar is the narrowest compared to the other pillars and the mean performance is among the lowest (Figure 2.2). Economies collectively are still furthest away from best practice when it comes to environmental sustainability. Other pillars with low average performance are innovation capability (average score of 42.4), competition (43.3) and the future orientation of business (46.2). The highest average scores across the index are attained for financial conditions (66.8) and infrastructure (65.3).
There are further large gaps between the top country and the rest of the world for the future orientation of business and competition pillars, where the US scores highest by a significant stretch. Similarly, when it comes to innovation capability, the US, Germany, Japan, China, Korea, France and the UK lead with a wide margin over the other economies. Denmark is a positive outlier on the environment pillar with a more than 4-point lead over Austria which ranks second in this dimension.
Scores by income levels are reflective of the disparity in institutional, financial and technological capacities of economies to foster long-term and resilient productivity growth. The average score of overall Competitiveness mimics the order on 11 out of the 12 pillars. The only exception is on the environment pillar where the average score of lower-middle income economies is the lowest owing to the environmental conditions in economies such as India, Vietnam and Indonesia.
Figure 2.3: GCI pillars by income group
Public Institutions, Security and Social Cohesion, Environment and Labour Market Dynamics and Opportunities stand out as being very skewed, with low, lower-middle and upper-middle income countries having similarly low scores and a large gap vis-à-vis the group of high-income countries. Progression across income groups seems only weakly related to improving institutions, security/social cohesion, environment and labour market conditions. When it comes to environmental performance, middle income countries perform relatively worse, since industrialization has taken a toll on the environment, but income is not yet high enough to invest in environmental restoration and protection. For other pillars average scores are more evenly distributed although the gap between upper-middle and high-income countries is also relatively large for public health, social protection, financial conditions and innovation capability.
The divergences in the enabling environment by income level are concomitant with some of the widest disparities across the remedial forces of human capital. This implies that economies which remain the most vulnerable to failing public institutions and infrastructure, and social and environmental crisis are also worst prepared with social protection, health and education systems.
In terms of markets, the dispersion of average scores by income groups is smaller on labour market dynamics as compared to financial conditions. Additionally, the average frontier of financial conditions of high-income economies overtakes the average frontier on labour dynamics and opportunities by almost 14 percentage points and average frontier on the competition pillar by almost 18 points. High income economies such as Australia, France, Korea, Chile that rank relatively higher on financial conditions show lackluster scores on labour dynamics and opportunities and competition. On the other hand, low-income economies generally have persistent low scores across the three pillars.
On the innovation ecosystem, the disparity on innovation capability is large, however, middle income economies such as China, Russia, India, Brazil, and Turkey perform relatively strongly. Similarly, on future orientation of business, middle income economies such as China, Indonesia, Malaysia, Vietnam are ahead of multiple high-income economies. This paints an optimistic picture of the potential of these economies to drive productivity through innovation. However, the lower end of the distribution on both pillars are populated by lower middle income and low-income economies. Economies such as Rwanda, Mali perform better on the future orientation of business than on the innovation capacity.
The disparity in competitiveness between higher and lower income economies poses questions on the collective vision of prosperity. Further, such disparity in competitiveness is a daunting sign of uneven dynamics which can wildly derail global productivity. It can trigger geopolitical tensions, shortage of skilled labour, an epidemic or pandemic, disruption in food sourcing, supply chains, or migration crises. [add para on new forms of international collaboration needed].
Pillar 1 Public Institutions: Switzerland leads the pillar ranking for public institutions, followed by Finland and Luxembourg. The top 10 are mostly taken by Western and Northern European economies, as well as Singapore (7) and Uruguay (10). Mauritius (28) and China (29) lead the upper-middle income group, overtaking a number of high-income countries. Indonesia (31) and Ghana (45) top the group of lower-middle income countries and Rwanda (37) and Malawi (78) are perceived to have the best institutional environment among low-income countries.
Looking across the different elements of the public institutions pillar, average global scores are worryingly low on judicial independence and corruption incidence. Furthermore, the perception data also suggests that the ease of compliance with government regulation and tax systems needs to be improved in a large number of economies. On the other hand, the data suggest that a number of governments have made significant headway in moving their services online, leading to a high average performance for e-participation.
The governments of Singapore and the UAE are perceived by their respective business sectors to have the strongest vision for the economic future of the country and are also among the top performers for public sector efficiency. Finland and Switzerland are the countries which are judged to have the strongest checks and balances in place, while they are equally among the most efficient governments.
Pillar 2 Social Cohesion and Security: The top ranked countries on the social cohesion and security pillar are Iceland, Finland and Singapore. Other top performers are mostly European economies, such as Switzerland, Ireland, Portugal, Luxembourg and Denmark, as well as the UAE (9) and New Zealand (10). Top performers by income group are Mauritius (24) and Costa Rica (30) for upper middle-income countries, Mongolia (25) and Vietnam (26) for lower-middle income countries, and Sierra Leone (59) and Malawi (70) for low-income countries.
The weakest component on this pillar is the level of division among social groups which seems to afflict many countries. The range of scores is extremely wide from 95 for the top performer Iceland to eight countries scoring in the single digits. The data further suggest that physical security and social cohesion do not necessarily go hand in hand. While Qatar for example comes 12th overall, ranking 8 on security and 20 on cohesion, Sweden comes 14th overall, ranking 57th on security and 4th on social cohesion.
The ranking for social cohesion is led by Iceland, Finland and Ireland who also have the least divisions between different social groups with a significant margin to the subsequent ranks. Countries with the strongest social capital are Denmark, Finland and Iceland, with Indonesia in 5th place and Vietnam in 12th.
Pillar 3 Environment: The top three performers on the environment dimension are Denmark, Austria and Sweden. Romania (14th) and Bulgaria (34th) perform strongest among upper middle-income countries, Egypt (48th) and Nepal (50th) are top ranked among lower middle-income countries and the Democratic Republic of Congo (52nd) and Malawi (57th) are the best performers among low-income countries. As noted above, the environment pillar is the only instance where average scores by income group do not systematically increase with income.
The data suggest that countries overall are struggling the most with sustainable water use as well as renewable energy consumption which has the lowest average score across the environmental indicators with only 28 out of 100 points. While energy consumption is overall much lower, the share in renewables consumption is highest currently in the Democratic Republic of Congo, followed by Tanzania, Zimbabwe, Nigeria and Cameroon.
Performance across indicators is very unbalanced across the board, even for the top scoring countries. While the leading countries perform strongly on biodiversity, climate change mitigation, pollution reduction and sustainable water use, scores are significantly lower for preservation of tree cover and renewable energy consumption. Gaps for top performers become apparent on the latter dimension as the difference between the share of renewables produced in a country and that consumed can be significant: for example, 80% of energy produced in Switzerland is renewable, while only 25% of energy consumed is. There is further room for improvement among top performers on soil health through a reduction in the use of nitrogen in agriculture.
Pillar 4 Infrastructure: The infrastructure pillar is topped by Japan, Switzerland and the Netherlands. Other countries in the top 10 are Singapore (4th), Korea (5th) and the US (6th) and further include a number of European countries (Spain, Denmark, Austria, Sweden). China (25th) and Romania (37th) are leading among upper middle-income countries, Vietnam (46th) and Indonesia (54th) among lower middle-income countries and Rwanda (87th) and Mali (109th) among low-income countries.
Infrastructure turns out to be one of the strongest components of the Index relative to the other dimensions of competitiveness, with the second highest average pillar score. Some variation exists across the three subcomponents, with a slightly lower global average score on transport (65) compared to utilities (72) and ICT (70).
When it comes to transport infrastructure, the top spots are taken by three Asian economies, Japan, Singapore and Korea, which perform very highly across different transport means, including air, railroad, liner shipping but also public transport. Scores for these countries are high both from an efficiency and density/connectivity point of view. Compared to the other two subcomponents in the pillar (utilities and ICT), scores on the transport dimension, however, drop fairly rapidly across the distribution.
Scores on ICT infrastructure are fairly high overall, and in particular, much progress has been made in providing basic internet access (3G). Gaps are much bigger when it comes to the provision of high-speed broadband which is important in particular for businesses to be able to compete internationally.
Turning to the state of utilities infrastructure a large gap becomes apparent between efficiency and sustainability consideration. Considerable room for improvement exists on the sustainability dimensions, including overall infrastructure sustainability and in particular existing renewable energy capacity. Scores on perceived efforts to invest in green energy and infrastructure are the lowest within this subcategory, suggesting that the pipeline for sustainability improvements is currently still fairly empty.
Pillar 5 Public Health: Switzerland, Germany and Finland lead on the public health dimension of this year’s GCI. The top ten rankings on this pillar are taken by high-income economies whose systems combine high access to quality healthcare with limited vulnerabilities from air pollution, low sanitation and water quality, and exposure to heavy metals and waste. Other countries in the top 10 are Japan, Austria, Luxembourg, Iceland, France, Sweden and the Netherlands. Top performers among upper-middle income countries are Bulgaria (39th) and Mauritius (40th), the Ukraine (38th) and Sri Lanka (70th) among lower-middle income countries and Rwanda (96th) and Malawi (108th) among low-income countries.
The COVID19 pandemic revealed deep vulnerabilities in health systems worldwide and also highlighted the connection between public health and socio-political factors such as trust in institutions and the quality of the social fabric. The overall spread of scores on the health pillar is one of the widest compared to the other dimensions of competitiveness and the average pillar score is one of the lowest (54.5).
The two sub-pillars, healthcare access and health risks both show significant variation at the indicator level. Globally, countries are most challenged on health infrastructure (i.e. hospital beds per 1,000 population) and health worker density when it comes to access. Large economies such as China, India, South Africa, and Indonesia in particular have a low density of skilled health professionals. On the health risks dimension, exposure to waste and low air quality stand out as major challenges. While top-ranking countries on the health risks sub-pillar (led by Finland, Sweden and Switzerland) secure high scores across the four risk factors, air pollution scores deteriorate rapidly along the rank order. In the case of solid waste exposure, more than 30 countries score below 10 / 100.
Pillar 6 Social Protection: Denmark, Austria and Finland score highest on the Social Protection Pillar, followed by Iceland, France, the Netherlands, Germany, Luxembourg, Switzerland, and Sweden. Russia (20th) and Bulgaria (31st) are leading the group of upper-middle income countries, the Ukraine (29th) and Mongolia (47th) the group of lower middle-income countries and Rwanda (98th) and Mali (101st) the group of low-income countries.
Out of the twelve dimensions of competitiveness, global scores are spread out the widest on the social protection pillar, with gaps between countries getting bigger lower in the ranking. The top six countries for social protection score consistently over 80 across the four indicators, offering high levels of labour and non-labour social protection, access to care services, and active labour market policies. In seventh place on the overall pillar, Germany is an outlier on access to care services where it only attains a 30th rank.
While scores stay high on non-labour social protection coverage (i.e. pensions and disability benefits) for the top 40 countries, they start dropping more rapidly for labour social protection coverage (injuries and unemployment) as well as access to care services. On average, coverage is much higher for pensions and disability benefits (59.7 average score for non-labour social protection) than injuries and especially unemployment (37.3 average score for labour social protection). As the frequency of shocks to economies and societies can be expected to increase, social protection systems will need to be urgently upgraded, in particular with respect to unemployment benefits.
Pillar 7 Education and Skills: Switzerland, Finland, and the United States take the top three ranks on the education and skills pillar, followed by Singapore, Denmark, Sweden, Iceland, Estonia, Ireland, and the Netherlands. Leaders among the group of upper middle-income countries are Azerbaijan (28th) and Georgia (33rd), Indonesia (50th) and the Ukraine (51st) for lower middle-income countries and Mali (109th) and Rwanda (112th) for the group of low-income countries. Economies with some of the largest working age population such as China (43rd), Indonesia (50th), Brazil (80th), and India (94th) have further dispersed rankings.
Scores across the different subcomponents of the pillar vary widely, with countries performing better on average on education quality (63) versus education access (51). While most of the top-ranking economies score robustly across most indicators such as imparting digital and technology skills, learning-adjusted years of schooling, and equality in education, the scores are rather lacklustre for the more forward-looking indicators such as investments in mid-career skills by both governments and employers.
On the education quality sub-pillar, Singapore leads followed by Finland and Switzerland, buoyed by their scores across digital and technology skills, availability of qualified teachers, learning-adjusted years of schooling and school system quality. Overall, there is relatively higher variance on digital and technology skills and school system quality on this sub-component.
For equal access to education and lifelong-learning, Switzerland (score: 85.5), the United States (85.5) and Denmark (83.5) rank the top 3, with strong performance on household’ s access to the internet and low inequality in education access. The highest score on investment in skills is taken by United States, followed by Singapore and Switzerland, however, with significant gaps in scores between the three frontier countries (79, 75.1, and 71.1 respectively).
Pillar 8 Labour Dynamics and Opportunities: Iceland, Denmark and Switzerland take the top three ranks of this pillar. The countries completing the top 10 are the United States, Singapore, Sweden, the Netherlands, Luxembourg, Qatar and Finland. Top in the group of upper middle-income countries are Costa Rica (21st) and Botswana (23rd), Vietnam (29th) and Benin (33rd) in the group of lower middle-income countries as well as Rwanda (56th) and Malawi (77th) for the group of low income countries.
Most of the top ten economies score high on labour force participation and have low vulnerable employment. However, there is considerable variance in workers’ rights, where on one hand Iceland, Denmark and Switzerland remain close to the frontier, while the United States and Qatar rank relatively low. Further, G20 economies such as Turkey, Brazil and India rank in the bottom end of the distribution on the workers’ rights dimension.
On the dynamism of the labour market, Switzerland, the United States, Qatar take the top three spots. G20 economies are dispersed on this sub-pillar with China, Canada, Indonesia also ranking relatively higher, however, India, Argentina and Brazil are among the lowest scorers. Denmark, Switzerland and Singapore are the top scorers for cooperation in labour-employer relations. For Talent Availability MENA countries such as UAE, Qatar, Bahrain, Saudi Arabia feature in the top 10 with a slightly higher score on the sub-component ease of skilled talent by hiring foreign labour than hiring in the local labour market.
On the sub-pillar fairness of labour conditions, Sweden, Finland and Iceland take the top three spots. There is significant difference between the global average of the indicators under this sub-pillar. The global average score for Workers’ rights and Vulnerable Employment is 76.8 and 69.3 respectively. On the other hand, the global average score on perceived equality of opportunity in hiring and leadership is 53.9 and 53.1 respectively. Disaggregating these scores by group reveals that perceived leadership opportunities for women and workers raised by low-income parents are higher on average (61.4 and 59 respectively) compared to individuals with disabilities or identifying as LGBTI (45.3 and 44.5 respectively). A similar pattern holds true for equal opportunities in hiring. Finland, New Zealand, Denmark and the United States rank in the top 5 on both perceived equality of opportunity in hiring and leadership. Japan, China, Indonesia who rank relatively higher on the overall pillar have much room for improvement on these two dimensions.
Pillar 9 Financial Conditions: The top three leading countries on financial conditions are Finland, the US and Denmark. Other spots in the top 10 are taken by Luxembourg, Sweden, Switzerland, Canada, the Netherlands, Australia and New Zealand. China (25th) and Malaysia (34th) lead the group of upper middle-income countries, Indonesia (57th) and Morocco (59th) the group of lower middle-income countries and Rwanda (75th) and Malawi (101st) the group of low-income countries.
Financial centres such as the United States (2nd), Luxembourg (4th), Switzerland (6th) and the United Kingdom (11th) are ranked side by side with smaller economies such as Finland (1st), Denmark (3rd) and Sweden (5th).
Finland’s top performance is carried by a sound credit market and a very good access to venture capital as Finnish start-ups have attracted the most venture capital investments in Europe (as % of GDP) in 2018 and 2019. Furthermore, use of digital payments in Finland, Denmark and Sweden is significantly higher than in the United States, Luxembourg and Switzerland. In addition, some of the Nordic countries have put in place stringent financial regulation to prevent financial crises. On this dimension, some of the large financial hubs underperform: the United States for example rank 16th, Japan 33rd.
Looking across the four subcomponents of the pillar, which includes financial system depth, access to finance, banking system stability and macro stability reveals financial system depth as the most significant global obstacle to competitiveness on the finance dimension. The global average score is 53 compared to an overall average score of 67 on the pillar (which is the highest average across the four dimensions of competitiveness).
Pillar 10 Competition: The top three performers on the competition dimension are the United States, Singapore and the UK, followed by Germany, China, Japan, the Netherlands, France, Italy and Switzerland. China (5th) and Turkey (30th) lead the group of upper middle-income countries, Indonesia (19th) and Vietnam (29th) the group of lower middle-income countries and Rwanda (96th) and Mali (103rd) the group of low-income countries.
The competition pillar considers market size as well as additional indicators to proxy for the toughness of domestic and foreign competition, such that both large economies and small open economies are among the top scorers. The overall average score on the competition pillar is the second lowest across the twelve dimensions of competitiveness, which implies there is currently a significant drag on the dynamic process of creative destruction. The data suggest that the biggest challenge on the competition front lies in overcoming distortive effects of national fiscal measures, domestic market dominance and inefficiencies in border clearance.
The introduction of a digital economy competition metric, data portability, brings a new perspective beyond the traditional “market dominance” concept and suggests that traditional competition champions will need to turn their focus more strongly toward competition issues emerging in the digital economy. For instance, Germany is 4th on the overall pillar ranking but 90th in terms of data portability, highlighting specific areas where even some of the most successful economies are not at the frontier. Similarly, Japan is 6th overall but 113th on data portability. Leading countries on this indicator are the United States (82.1) and Estonia (80.5) and Saudi Arabia (74.1).
Pillar 11 Innovation Capability: The innovation capability pillar identifies the innovation frontier as lying with the United States, Germany and Japan who take up the first three spots on the pillar. Other top performers taking the remainder of top 10 spots are China, Korea, France, the UK, Italy, India and Switzerland, all of which host regional innovation hubs and some of the most innovative companies in the world. China (4th) and Russia (14th) lead the group of upper middle-income countries, India (9th) and Iran (39th) the group of lower middle-income countries, and Mali (91st) and Rwanda (105th) the group of low-income countries.
The innovation capability pillar has the lowest average score and one of the widest distributions out of the twelve dimensions of competitiveness, with scores dropping off rapidly across economies. The results can be broken down between the knowledge asset sub-pillar and the innovation resources sub-pillars. The top five economies (US, Germany, Japan, China and Korea) perform well on both. They have built up a large knowledge asset base and simultaneously continue investing in research and innovation, via public and private sector.
Considering average score across indicators suggests that the biggest gaps between countries exist in terms of the number of researchers contributing to innovation and the quality of research institutions. Only 9 countries score above 80 on research institutions prominence: the United States, Germany, China, France, the UK, Spain, Russia, Japan and India. On the other hand 99 countries score below 25 on this particular indicator. Most global activity on the innovation dimension is happening in terms of trademark applications, which has a global average pillar score of 72 (vs 15.5 global average on research institutions prominence).
It should be noted that larger economies perform better on the innovation pillar by design. They can draw from a larger pool of ideas and talent (and also have a market advantage in testing and deploying new technologies). This market size argument is often cited as one of the reasons why the US and China have been more successful than Europe in developing information technology applications.
[comment on green patents]
Figure 2‑4: Green patents
Source: OECD, 2021
Pillar 12 Future Orientation of Business: the future orientation of business pillar is the most forward-looking one of the twelve and is based almost entirely on perception data from the Executive Opinion Survey. The United States lead on this dimension of competitiveness with a significant margin, followed by China and Sweden. The remaining countries making up the top 10 are Switzerland, Finland, Denmark, Canada, the Netherlands, South Korea and Belgium. Leaders among the upper middle-income countries are China (2nd) and Malaysia (28th), Indonesia (17th) and Vietnam (27th) for lower middle-income countries and Rwanda (70th) and Mali (104th) among low-income economies.
The average global score is the third lowest across the twelve pillars (46.2), suggesting significant room for improvement when it comes to collaboration, business practices, buyer sophistication and oversight of production processes.
Among the new dimensions introduced in this year’s edition, it is worth noting that a disaggregation of buyer sophistication by product/production feature suggests consumers have the highest awareness when it comes to product performance and product impact on health and well-being. They seem much less aware of environmental impact, labour standards and D&I considerations when choosing products.
When it comes to production oversight, business communities on average seem to be more attentive to enforcing labour standards over environmental standards. Low scores across the dimensions of the pillar suggest that significant efforts are still needed to operationalize inclusive and sustainable business practices.
In the 2021 edition of the Global Competitiveness Index, the 1st rank is secured by Switzerland. The country’s public institutions (1), public health (1), and education and skills (1) are the global benchmark for excellence. Infrastructure (2) and labour dynamics and opportunities (3) are on par with the world’s best. The country’s lowest individual rankings, of its competition (10) environment and innovation capability (10), are still within the global top 10.
Upon closer inspection, even the highest-ranked public institutions leave room for further improvement. Stellar perceptions of property rights (1), policy stability (1), and judicial independence (2) contrast with a lower rate of e-participation (18) and number of environmental treaties (21). Similarly, public health is perceived to provide outstanding accessibility of physical healthcare services (1), health worker density (3), and general healthcare quality (4) while universal health coverage (12) and health infrastructure density (25) could be improved further. Switzerland’s education and skills environment is perceived to include a school system of the highest quality (1) where qualified teachers are widely available (1), although the learning-adjusted years of schooling are lower (23). Digital and technology skills (13) as well as household internet access (22) could be improved.
The competition environment is mainly held back by the country’s small market size (35). A distorting effect of fiscal measures (25) is being perceived and there is room for more data portability between firms (19). Trade tariffs (39), FDI rules (14) and border clearance efficiency (15) could be streamlined. The country’s innovation capability relies on very high R&D expenditure (3), university-industry collaboration in R&D (3) and advanced cluster development (3) but lacks researchers (36).
Although there is some room for improvement in ICT (17) and airport connectivity could be increased (27), Switzerland’s outstanding infrastructure needs to be highlighted. Public transport (2), train services (2), and air transport services (5) are all perceived to be highly efficient.
The second spot on the GCI’s global podium is taken by Finland. Stellar financial conditions (1) and sound public institutions (2) provide the foundation for outstanding rankings in various social dimensions. Education and skills (2), security and social cohesion (2), public health (3) and social protection (3) are all among the world’s best. On the downside, Finland’s competitive environment (21), innovation capability (21), and infrastructure (14) could be improved.
Looking closer at the country’s financial conditions, both access to finance (1) and the stability of the banking system (1) are at the very top. Despite lower positions in terms of domestic credit to the private sector (27) and non-life insurance premiums (35) the depth of the financial system (5) is among the best in the world. Macroeconomic stability (11) ranks lower due to the country’s credit ratings (11). Finland’s checks and balances (1) are considered to be the best in the world and safeguard an efficient public administration (5). Surprisingly, the government’s long-term vision (33) is perceived to be wanting.
Finland is denied a higher competition ranking due to its small market size (53), a factor that good domestic competition (15) and outstanding foreign competition (2) rankings are not able to compensate for. Its innovation capability is similarly constrained by a small number of researchers (41), lacking prominence of research institution (37), and the state of cluster development (21). In terms of infrastructure, liner shipping connectivity (71) and airport connectivity (46) stand out negatively, the efficiency of seaport services (3) and utility infrastructure (4) positively.
Finland’s school system (2) is second in quality only to Switzerland’s. The level of digital and technology skills (1) is perceived to be the world’s best, despite a shortage of qualified teachers (42) for which the country sets high standards. Labour dynamics and opportunities (10) are limited by excessively complex regulations (96th) and it is difficult to find skilled employees (49th). At the same time, it is also among the fairest in the world (2).
The third spot on the GCI’s global podium is taken by Denmark. Social protection (1) and environmental footprint (1) are without equal, labour dynamics and opportunities (2) and financial conditions (3) outstanding. Room for improvement remains in terms of the country’s innovation capability (20), competition environment (18) and public health (11).
The main strength of the country is its well-established flexicurity system which drives efficiency and resilience in the labour market. The system combines top levels of social protection (1st) and fairness in working conditions (4th) with effective labour market dynamism (7th). This is achieved through setting a framework of close cooperation between workers and employers (1st), a relatively simple regulation on hiring or firing workers (3rd) with strong protection of basic workers’ rights (3rd), robust safety nets for unemployed and injured workers (3rd) and widespread access to unemployment income, training and re-deployment (6th).
The capacity to re-train and redeploy is sustained by an educational system that provides high-quality (6th) and inclusive (3rd) schools and life-long learning opportunities. For instance, Danish students, on average, attain 11.1 learning-adjusted years of schooling (19th, the highest level is Singapore’s 12.8 years), and business leaders rate positively both the quality of vocational training (7th) and the quality of tertiary education (8th). In addition, access to skills-development is supported by investments by the government (12th) and firms in mid-career training (6th).
The country’s health care system (19th) could benefit from expanding healthcare capacity, both in terms of hospital beds (2.6 per 1,000 people, 56th) and personnel (14.3 per 1,000 people, 19th). Further, innovation capabilities (20th) are held back by few top research institutions (38th) and a low number of development of clusters (23rd), despite significant investments in R&D (3.03% of GDP, 8th).
The positive contribution of the private sector to the country’s competitiveness comes from a strong future orientation of business (6th), which is not only open to new disruptive ideas (6th), and willingness to delegate authority (1st), but is also among the most advanced in the world to ensure oversight of the impact of production on work standards and the environment throughout the supply chains (2nd).
The Netherlands rank 4th in the Global Competitiveness Index. Outstanding infrastructure (3) and public institutions (4) stand out among very high rankings in all dimensions. Security and social cohesion (15), environmental footprint (12) and innovation capability (12) could be improved to secure a spot on the podium.
Although the country scores comparatively low on airport (24) and road connectivity (27) and the sustainability of utility infrastructure (11) misses a top spot, all other aspects of infrastructure are among the very best in the world. A closer look on public institutions reveals an equally outstanding picture, although the ease of compliance with both government regulation (17) and the tax system (19) could be improved. A government long-term vision (25) is perceived to be missing.
Room for improvement remains in the domain of security and social cohesion. A high terrorism incidence (71), business costs of organized crime (35) and social group divisions (26) weigh on the ranking. The country achieves a high environmental footprint ranking despite a very low level of renewable energy consumption (100) and high nitrogen use in agriculture (67). Climate change (32) and ecosystem services (29) could also be addressed with a higher priority. Innovation capability is relatively good but held back by a low number of researchers (20), research institutions’ prominence (17) and R&D expenditure (13).
Additional strong points are the country’s social protection (6) systems and its labour dynamics and opportunities (7). Reducing the gender gap in estimated income (41) as well as the amount of vulnerable employment (39) could unlock additional potential.
The US takes the 5th place in this year’s rankings. Performance across pillars is very uneven, combining top global ranks for innovation capacity, the future orientation of business and competition, a second spot for financial conditions and a fourth place for labour market dynamics and opportunities on the one hand, with low scores in particular on security and social cohesion (61st) and the environmental footprint (27th). Compared to its peer group, scores for public health (29th) and social protection (14th) are also relatively low.
The country’s strength very clearly lies in its world-leading innovation ecosystem and the future orientation of its business community, where it comes top on all but one of the sub-components. The US are a world leader on trademarks (1st) and patents (2nd) and can rely on very strong research institutions as well as excellent links between universities and industry.
When it comes to business culture, the US equally come top for the way the culture embraces disruptive ideas and attitudes towards entrepreneurial risk. US businesses also benefit from highly sophisticated consumers who expect high product performance at the same time as considering environmental and social impact. The country further reaches the top global score for public reporting of ESG metrics. While the gender wage gap is still significant (43rd), the US perform relatively well compared to their peers when it comes to equal opportunity to move into leadership positions (2) and equal opportunity in hiring (3rd).
By far the largest gaps become apparent on the security and social cohesion dimension, where the US rank 79th on the security dimension with high numbers of homicides and high business costs of organized crime. The progressing social polarization which the country has experienced in recent years is further reflected in a 73rd rank on divisions between social groups. Yet social capital is perceived to be relatively strong (15th).
Sweden places 6th in this year’s GCI with top 10 scores on all but the social cohesion and security (14th), competition (15th) and innovation capability (15th). The country performs particularly strongly on the environment pillar (3rd), the future orientation of its businesses (3rd) and financial conditions (5th).
Sweden also performs well on the labour market dimension (6th) with good labour market dynamism (17th) and, importantly, labour conditions that are judged to be the most egalitarian globally. This results from a strong performance on workers’ rights (3rd), a low gender pay gap (3rd), and high scores for equal opportunity in hiring (12th) and attaining leadership positions (13th). The data suggest that the biggest opportunity gap exists for workers born to low-income parents to move into leadership positions (33rd).
Sweden’s future labour market will further benefit from an education system that is ahead of the curve with a population that has strong digital and technology skills (3rd) and egalitarian access to education, staff training and lifelong learning (7th). In addition, the country takes the top spot for non-labour social protection and has strong performances for access to both childcare and eldercare (7th).
When it comes to the future orientation of its businesses, Sweden performs very strongly across the board with high ranks for collaboration (7th), forward-looking business practices such as embracing risk, disruptive ideas and ESG standards (7th), buyer sophistication (2nd) and firm oversight of supply chains (5th) both in terms of work standards and the environment.
Financial conditions for companies and households in Sweden are favourable thanks to good financial system depth (6th), very egalitarian access to finance for individuals (3rd) and a strong macroeconomic environment (7th).
Sweden performs poorly on the security dimension with only a 57th rank, pushing its overall security and social cohesion performance out of the top 10 (14th), however, its social cohesion is seen as one of the strongest in the world (4th).
Germany ranks 7th in this year’s GCI. Variability of ranks across the twelve pillars is relatively high from a second place on its innovation ecosystem and public health to a 25th rank on labour market dynamics and opportunities and a 28th rank on security and social cohesion.
Germany is among world leaders in trademark (2nd) and patent applications (4th) and performs very well on different elements of the innovation ecosystem such as R&D expenditure, research clusters and the prominence of its research institutions, earning it a second place overall on the innovation resources dimension. However, the rankings suggest that Germany’s business community is not as dynamic in embracing new ideas as its innovation community is in producing them. Germany ranks 18th on the future orientation of businesses with low scores on willingness to embrace disruptive ideas, take risks and perceived low influence by consumers to improve performance, environmental and social impact of products.
On the human capital dimension, Germany performs very well on public health (2nd) and social protection (7th), with very good access to healthcare and a high level of both labour and non-labour social protection. An exception is access to childcare and eldercare, where the country ranks 35th and 28th respectively.
Germany’s performance on education and skills (16th) as well as labour market dynamics and opportunities (25th) is somewhat below its peer group. The perception is that digital skills among the population are weak relative to peers (61st) and the quality of primary education is judged as relatively weak (42nd) compared to secondary and tertiary education (26th and 19th); an exception is vocational training, where Germany ranks highly in the global comparison (8th).
While labour market performance is evaluated as low in dynamism (51st), labour conditions are seen as relatively fair (17th). However, disaggregating the fairness score reveals a relatively strong performance on workers’ rights combined with a weak performance on equal opportunities in hiring (38th) and equal opportunities to move into leadership positions (40th).
Germany’s lowest rank is on security and social cohesion (28th). This is mainly driven by low scores on the security dimension (53rd), while social capital is Germany is perceived as strong (13th).
Austria ranks 8th in the 2021 edition of the GCI with a very strong performance on the environment (2nd) and social protection (2nd). The country also performs in the top 10 for institutions (9th), infrastructure (9th), and public health (5th). Its lowest pillar ranking is for labour market dynamics and opportunities (15th), competition and innovation capability (16th).
Austria’s environmental score is strong thanks to sustainable resource use such as good soil health and high rates of water recycling as well as low emissions. The country’s environmental performance is supported by a high sustainability of its utility infrastructure (3rd) with perceived high investment activity in green energy and infrastructure (4th) and a low rate of fossil fuel subsidies of less than 1% of GDP, the 6th lowest rate globally.
The country performs also among the very top globally on social protection across all dimensions measured in the GCI. It ranks among the top five for access to active labour support, social protection coverage for both labour and non-labour issues and provides very good access to both child- and eldercare. In addition, the country has a high-quality education system (11th) which provides equal access to education and life-long learning (6th).
Relative to other pillars, some gaps become apparent on the dimension of labour market dynamics and opportunities. Austria has very good perceived employer-employee relations (6th) but a relatively low score on talent availability (56th). While scores on workers rights are high, the country performs much less well on equal opportunities both in terms of hiring (34th) and even less so in terms of equal opportunities to move into leadership positions (41st). The income gender gap is also significant, landing Austria in 81st place on this indicator.
Japan ranks 9th on the Global Competitiveness Index. The country provides unmatched infrastructure (1), exhibits outstanding innovation capability (3) and its public health (4) and competition (6) environments are among the world’s best. Labour dynamics and opportunities (30), the country’s environmental footprint (28) and the supply of education and skills (25) deny a higher overall ranking.
Even though road connectivity (56) is surprisingly low, Japan secures the top spot in the global infrastructure ranking due to its benchmark-setting efficiency of public transport (1), train services (1), and air transport services (2). The efficiency of utility infrastructure (5) is also among the world’s best, only its sustainability (41) is not. The country’s innovation capability is a result of outstanding innovation resources (3) and the country has the highest number of IP 5 patent applications (1). Additional synergies could be unlocked through increased university-industry collaboration in R&D (23). Public health is supported by some of the world’s best access to healthcare (2) and could be improved by further reducing health risks (10).
A closer look at labour dynamics and opportunities reveals considerable room for improvement. Although cooperation in labour-employer relations (4) is perceived to be among the world’s best, hiring and firing practices (99) and talent availability (92) are on the other end of the scale. A similar discrepancy appears upon closer inspection of the fairness dimension. Worker’s rights (16) are relatively strong and vulnerable employment (19) is low but the country has a large gender gap in estimated earned income (75) and does not provide equal opportunity both in leadership positions (60) and in hiring (43). Education and skills need an upgrade, particularly in terms of digital and technology skills (83). The low availability of qualified teachers (39) and subpar school system quality (40) make this difficult. Improvements could also be made to the country’s environmental footprint, with very low levels of renewable energy consumption (99) and comparatively high pollution emissions (56).
The competition environment could be improved by revisiting the impact of rules on FDI (46) and increasing data portability between firms (112). Given the country’s market size (4), small changes in these areas could potentially make a large difference.
France closes out the top 10 in this year’s GCI, marked by a high variability of ranks across the different dimensions of competitiveness. France’s economy combines strong innovation capacity (6th) with a high level of social protection (5th) and can build on a strong public health system (8th) yet is held back by significant social divisions (54th), challenging labour market conditions (41st) and a relatively weak performance on education and skills compared to its peers (30th).
When it comes to innovation, France is among the global leaders in trademark (6th) and patent applications (6th), spends a high proportion of its GDP on R&D (12th) and ranks very highly on the prominence of its research institutions (3rd). However, similar to Germany, French companies are perceived to be less future oriented (21st). Risk appetite (77th) and embracing disruptive ideas (59th) are not as much part of French business culture as for some of the other top innovating countries. Consumers are also perceived as placing less stringent demands on companies in terms of product performance and social impact (37th). On the other hand, French companies score relatively well on supply chain oversight on work standards (13th) and sustainability (25th).
Social protection as well as the healthcare system are strong in France. Active labour market policies (4th) as well as labour (5th) and non-labour (1st) social protection coverage is broad and access to childcare (16th) and eldercare (7th) among the best. Similarly, France performs very well on healthcare access (6th) with a high density of health infrastructure and healthcare workers. Health risks such as air pollution are also relatively low (13th). Yet on another dimension of the human capital dimension, France is behind its peers, ranking 30th on education and skills. Gaps are apparent in particular when it comes to digital skills (48th) and the availability of qualified teachers (59th).
Competitiveness is also held back by relatively low performance on the security and social cohesion dimension (54th). Large divisions between social groups and relatively low perceived social capital are resulting in a 63rd rank for France on social cohesion.
The UK ranks in 11th place in this year’s GCI. The UK economy’s competitive strengths lie in a high innovation capability (7th), a high level of competition in product markets (3rd) as well as strong financial markets (11th) and public institutions (11th). Weaker areas are public health (15th) and security and social cohesion (46th).
Innovation strength in the UK comes from both accumulation of knowledge assets (5th) and a strong R&D ecosystem, with prominent research institutions (5th) and relatively high levels of R&D expenditure, number of researchers and university industry collaboration (20, 8, 20). Compared to their continental European neighbours, UK companies are also more willing to delegate authority (10th) and embrace risk (21th). The UK’s innovation approach is further highly open as reflected in the fact that the country ranks 4th on international patent co-applications.
Market size, openness to trade and FDI is also what boosts the UK’s rank on the competition dimension to 3rd place. UK companies are also perceived to perform relatively well on allowing data portability between companies (14) which bodes well for future of competition as more activity moves online.
The financial sector remains a strong pillar of UK competitiveness (11th) with high performance across the four components of financial system depth (8th), access to finance for households (8th), banking system stability (10th) and macro stability (15th). There is however room for improvement when it comes to financing SMEs (24th) and venture capital availability (24th). The labour market on the other hand performs slightly less well (20th), with low scores on dynamism in particular when it comes to talent availability (73rd). Ranks across the fairness dimension vary considerably between a large gender pay gap (70th) and a relatively good relative performance on equal opportunity in hiring and leadership (both 11, although scores on this dimension globally are relatively low).
Luxembourg ranks 12th in this year’s GCI with strong scores across most pillars, yet with a slightly weaker performance on its innovation capacities (35th) and the future orientation of its businesses (24th). Luxembourg performs particularly well on the quality of its public institutions (3th), financial conditions (4th), public health (6th), and security and social cohesion (7th). The country further has a vibrant and inclusive labour market (8th) which is further supported by a strong social protection system (8th).
Luxembourg ranks highly on all dimensions of the public institutions dimension, coming top on future-orientation of its government, and among the top 10 for both checks and balances (7th) and public administration efficiency (7th). It does particularly well on privacy protection (2nd) and civil and political rights (1st) and ranks in second place after Switzerland in ensuring policy stability. While the public administration is generally seen as efficient, its 66th rank on e-participation suggests that this score can be boosted even further by improving the provision of government services online.
Luxembourg’s competitiveness is further buoyed by well-functioning markets across the board, comprising its financial markets (4th) and labour markets (8th). Notably, the country achieves a good balance between market efficiency and fairness for both labour and financial markets. There is, however, still room for improvement in providing greater equality of opportunity in both hiring (18th) and leadership (18th) and further closing the gender wage gap (35th).
Gaps become apparent for the country’s overall innovation ecosystem, partly owing to its smaller size, but also relatively low investment compared its peers (29th for R&D expenditure) as well as low appetite for risk (66th) and disruptive ideas (43rd). Luxembourg’s companies, however, perform well on another dimension of future orientation, the production sustainability side. While overall scores on supply chain oversight globally are still low, Luxembourg scores highly on oversight of production on both work standards (7th) and environmental standards (9th).
Canada ranks 13th on the Global Competitiveness Index. Financial conditions (7) and future orientation of business (7) are among the best in the world, competition (11), education and skills (12), and innovation capability (13) are very good. Social protection (33) could be strengthened, and the country’s environmental footprint (25) could be improved.
On a deeper level, supreme macroeconomic stability (1), financial system depth (2), and access to finance (5) create outstanding financial framework conditions. The banking system’s stability (27), however, is not perceived to be on the same level. The future orientation of business is characterized by strong collaboration (6) and buyer sophistication (7). Companies embrace disruptive ideas (17) and report ESG metrics publicly (16), but to a lesser degree. A pressure point remains the supply chain impact on work standards (24) and the environment (27).
Diving deeper into the country’s environmental footprint ranking, ecosystem services (69) could be upgraded. Biodiversity and habitat (67) need support and renewable energy consumption (58) is low. And although the pollution emissions (1) ranking stands out positively, preparations for climate change (33) could be strengthened. The comparatively low ranking on social protection is due to relatively low coverage of the disabled (56), the unemployed (32), and the injured (37). Access to care services (39) and active labour support (34) could be improved as well.
Education and innovation are among the country’s strengths, with good rankings on knowledge assets (12) and innovation resources (13). Although the availability of qualified teachers (49) could be increased, education quality (13) is high and equal access to education and lifelong learning (8) justify a positive outlook for the future.
The Republic of Korea ranks 16th on the Global Competitiveness Index. The country has excellent infrastructure (5) and innovation capability (5) and its businesses are future oriented (9). Social protection (30) and environmental footprint (33) could be improved, labour dynamics and opportunities (73) should be.
Looking closer at infrastructure, public transport (4), train services (3) and air transport services (4) are highly efficient. Road connectivity (25) and railroad density (22) are very good as well, particularly given the country’s topography. A higher infrastructure ranking could be achieved by improving the sustainability of utility infrastructure (36). The country’s strong innovation capability ranking is composed of high R&D expenditure (2) and high numbers of researchers (5). More potential could be unlocked by increasing the state of cluster development (18) and more university-industry collaboration in R&D (14). Collaboration between companies (9) is already high (9) and explains the future orientation of business, together with high buyer sophistication (6).
The country’s main bottleneck are its concerning labour dynamics and opportunities. Cooperation in labour-employer relations (104) ranks among the worst in the world. Workers’ rights (91) are weak and there is a large gender gap in estimated earned income (91). Equal opportunity in leadership positions (59) and in hiring (60) still has a long way to go. Hiring and firing practices (85) are concerning and labour force participation (74) is rather low. Even though some talent is available (29), the overall image of the labour market remains negative. The country’s environmental footprint is negatively influenced by low rankings for biodiversity and habitat (62) and ecosystem services (61) and an extremely low rate of renewable energy consumption (107). Pollution emissions (1), however, are on par with the world’s best.
Two areas of strength are public health (13) and education and skills (15). The country has very good healthcare access (10) and low health risks aside from air quality (27). Education quality (11) is very high and could be further increased by reducing inequality in education (49).
Australia ranks 17th on the Global Competitiveness Index. The country’s financial conditions (9) are among the world’s best, security and social cohesion (13), public health (14) and competition (14) rankings are only slightly behind. A higher overall ranking is denied by weaker labour dynamics and opportunities (42), the current state of infrastructure (28) and the somewhat lacking future orientation of business (23).
Upon closer inspection, the country’s financial conditions include superior macroeconomic stability (1), excellent banking system stability (7) and access to finance (9) and very good financial system depth (12). Only the banks’ regulatory capital ratio (66) and the availability of venture capital (38) fail to reach similarly high rankings. Security and social cohesion are supported by reliable police services (14) as well as a low level of social group divisions (21) and could be increased if the terrorism incidence (65) were to be reduced. Public health benefits from supreme air quality (2) and universal health coverage (2) while health infrastructure density could be improved (37).
Clear need for action remains for the labour market. Hiring and firing practices (90) rank surprisingly low and the country has a substantial gender gap in estimated earned income (96). Workers’ rights (55) are somewhat lacking and talent availability (75) is severely constrained. Infrastructure is a challenge given the country’s size and a very low ranking on railroad density (89) needs to be interpreted accordingly. Problematic are the level of 3G coverage (43), broadband speed (43) and the number of internet users (33).
The relevance of these indicators for the country’s future calls for action, particularly because the future orientation of business is among the lower rankings as well. Collaboration between companies (47) as well as attitudes towards entrepreneurial risk (37) could be improved. Road connectivity (13), airport connectivity (18), and the efficiency of air transport services (19), however, are good.
Italy ranks 22nd on the Global Competitiveness Index. Top positions in competition (9) and innovation capability (8) as well as very good infrastructure (16) stand out positively. Conversely, labour dynamics and opportunities (46), security and social cohesion (43) and public institutions (42) leave room for improvement.
The country’s innovation capability is characterized by an exceptional state of cluster development (4), producing a very high amount of knowledge assets (8). Additional synergies could be unlocked through higher university-industry collaboration in R&D (25) and higher R&D expenditure (24). The competition environment is healthy and combines good scores on market size (13), domestic and foreign competition (22), although the impact of rules on FDI (57) could be improved. Italy’s infrastructure is very good overall and outstanding in terms of 3G coverage (1) and broadband speed (7), although the number of internet users (59) is surprisingly low. Further gains could be realized by increasing the efficiency of air transport services (48), the quality of road infrastructure (55) and the efficiency of public transport (51).
On a more detailed level, both the labour market’s dynamism (68) and labour force participation (88) are rather low. Challenges also remain in terms of the fairness of labour conditions (35). Although workers’ rights (5) rank among the highest in the world, a large gender gap in estimated earned income (73) persists. Unequal opportunities in leadership positions (58) as well as in hiring (58) point towards untapped potential. Public institutions are denied a higher ranking due to inefficiencies in public administration (55). Neither the tax system (85) nor government regulation (76) in general are easy to comply with. A perceived lack of policy stability (68) and long-term vision (70) are limiting factors as well.
Against this backdrop, the strong future orientation of business (22) stands out even more. Collaboration (15) and buyer sophistication (15) are very high, and companies mostly embrace disruptive ideas (25). Although the oversight of production impact (44) could be strengthened, healthy attitudes towards entrepreneurial risk (25) complete an optimistic picture.
China ranks 28th on the Global Competitiveness Index. The Chinese economy’s competitiveness is built on an exceptional competition (5) environment, outstanding innovation capability (6) and one of the most future-oriented business sectors (2). The economy can further rely on solid financial conditions (25), very good provision of infrastructure (25) and strong public institutions (29). A negative outlier is the country’s environmental footprint (108) and both security and social cohesion (63) as well as public health (57) leave room for improvement.
China excels on the future orientation of its businesses with very high scores in all subcategories. Chinese companies embrace disruptive ideas (3), collaborate (2) with each other, and exhibit healthy attitudes towards entrepreneurial risk (5). ESG metrics are publicly reported (4) and buyer sophistication (3) is very high across all subdimensions. The country’s exceptional innovation capability is explained by the world’s highest ranking on knowledge assets (1), number of researchers (1), and outstanding cluster development (2). Research institutions’ prominence (2) and university-industry collaboration in R&D (5) are equally strong, overall R&D expenditure (14) only slightly weaker.
The worrying environmental footprint ranking is a result of low scores for climate change (82), pollution emissions (74), renewable energy consumption (78) and one of the world’s lowest rankings for biodiversity and habitat (115). The state of the environment also factors in the relatively low ranking on public health, where air quality (94) and exposure to heavy metals (90) take a heavy toll. Better treatment of the environment could thus boost the country’s competitiveness in multiple dimensions.
One of the strongest points is China’s competition environment, defined by its unmatched market size (1). Domestic competition (11) is healthy and further improvements to foreign competition (68) could clear the way to the very top of the global rankings.
The Russian Federation ranks 40th on the Global Competitiveness Index. Positive influences on the ranking are the country’s strong innovation capability (14) and social protection (20). Competition (32), labour dynamics and opportunities (34) as well as education and skills (37) are its foundation. On the downside, the country’s security and social cohesion (94) is concerning and public institutions (88) could be strengthened.
The innovation environment benefits from one of highest number of researchers (6) in the world and from research institutions’ prominence (7) at an equally high level, producing a good amount of knowledge assets (24). Additional synergies could be unlocked by strengthening university-industry collaboration in R&D (49) and improving the state of cluster development (50). Social protection covers disability and retirement fully (1), injury (16) and unemployment (10) mostly. Access to care services (47) and to active labour support (45) could be further improved.
Looking closer at security and social cohesion, the high number of homicides (96) and terrorism incidence (96) stand out. Social group divisions (92) are another cause for concern. The country’s low ranking on public institutions is a result of weak privacy protection (109), little freedom of the press (102), a high incidence of corruption (98), weak protection of civil and political rights (95) and a worrying state of property rights (95).
Given the country’s size, infrastructure (45) is a disproportionate challenge. On a more detailed level, low scores on railroad density (65), quality of road infrastructure (76) and population covered by 3G (76) reflect this. In particular, the sustainability of utility infrastructure (106) is worrying. High scores on airport connectivity (14), the efficiency of train services (15), and ICT (22) infrastructure, however, show that the country is rising to the challenge.
Saudi Arabia ranks 42nd on the Global Competitiveness Index. The country has a healthy competition (22) environment, good innovation capability (31) and its businesses are future oriented (25). While public institutions (30) are in a good position, security and social cohesion (78) as well as the country’s environmental footprint (77) are not.
Domestic competition (2) is excellent, but foreign competition (61) could be improved. The innovation environment produces a good amount of knowledge assets (30) and benefits from a very good state of cluster development (12), although the number of researchers (74th) is relatively low. Businesses’ future orientation manifests through healthy attitudes towards entrepreneurial risk (18) and public reporting of ESG metrics (19).
Looking into the details of the social cohesion and security dimension reveals a uniquely diverse picture. The country has both some of the most reliable police services (15) and some of the highest terrorism incidence (101). Similarly, social group divisions (109) are among the widest in the world while social capital (37) is relatively high. Another duality can be found within the country’s environmental footprint ranking. Although ecosystem services (6) are among the best, renewable energy consumption (116) is among the worst. The overall impression tilts more towards the negative, however, with biodiversity and habitat (99) as well as pollution emissions (103) ranking very low.
Diving deeper into the country’s public institution ranking underlines an image rich in contrast. One of the highest rankings for judicial independence (11) stands next to one of the lowest for freedom of the press (113). Civil and political rights (117) are severely constrained and privacy protection (97) hardly exists. At the same time, compliance with government regulation (6) is easy, policy stability (15) is high, property rights (14) are protected and compliance with the tax system (17) is simple. One of the most promising Government long-term vision (3) rankings in the world is cause for optimism that in the future the country’s weaknesses can be turned into strengths.
Indonesia ranks 53rd on the Global Competitiveness Index. Aside from a very good competition (19) environment and future orientation of business (17), the country’s public institutions (31) leave a good impression. On the downside, the country’s environmental footprint (105) ranking is among the worst in the world and public health (85) as well as social protection (77) could be improved.
On a more detailed level, the domestic competition environment (9) is among the best in the world while foreign competition (62) could be improved. Businesses are future oriented, embracing disruptive ideas (7) with positive attitudes towards entrepreneurial risk (4) and through collaboration between companies (3). Public institutions have a long-term vision (14) and compliance with government regulations is easy (15). Room for improvement remains when it comes to checks and balances (53) and public administration efficiency (30) could further benefit from increases in e-participation (54).
The environmental dimension gives cause for concern. Ecosystem services (104) and water resources (100) as well as pollution emissions (95) need improvement. Worries remain also in the domains of public health, where health infrastructure density (97), universal health coverage (95), and healthcare quality (96) are very low. Given the concerning level of health risks (81), improvements could unlock a large amount of potential. Social protection suffers from low coverage of both non-labour (103) and labour (92) related conditions.
The country’s innovation capability (41) and education and skills (50) leave a good impression. In particular, the overall quality of the school system (25) is perceived as good and investment in skills (6) are among the best in the world. Inequality in education (70) could be further reduced. The innovation system exhibits both an extremely high level of cluster development (9) and an extremely low level of R&D expenditure (% of GDP, rank 92), pointing to significant untapped potential.
Brazil ranks 57th on the Global Competitiveness Index. The country’s strengths are its innovation capability (22), environmental footprint (36), and future orientation of business (41). On the other end of the spectrum, security and social cohesion (103), labour dynamics and opportunities (96), education and skills (80) as well as its public institutions (77) raise concerns.
The national innovation system is highly dynamic and characterized by very high trademark applications (11), a large number of researchers (10) and prominent research institutions (13). University-industry collaboration in R&D (70), however, could be strengthened. Brazil’s environmental footprint ranking is explained by its rich biodiversity and habitat (29) and its relatively high renewable energy consumption (26) while its contribution to climate change (69) and ecosystem services (78) leave room for improvement. (Note: has someone in our team worked on Brazil before? The part about the environment needs double-checking!)
A serious concern is the security situation. Both the homicide ranking (108) and business costs of organized crime (110) are among the worst in the world. Divisions among social groups (90) and lacking social capital (90) are equally worrisome. On the labour market, hiring and firing practices (109), cooperation in labour-employer relations (100) and talent availability (104) need improvement. Diving into education and skills, digital and technology skills (104) need an urgent upgrade. On a more general level, the quality of the school system needs improvement (106) and inequality in education (86) is high. Public institutions need to deliver but suffer from a lack of efficiency (101). In particular, the tedious compliance structure for government regulation in general (116) and in the tax system (116) is of concern.
Investigating public health (50) closer leaves a positive impression. Both health worker density (24) and universal health coverage (24) are fairly high while healthcare quality (76) and the accessibility of physical healthcare services (89) leave room for future improvements.
Turkey ranks 60th on the Global Competitiveness Index. High innovation capability (24) and a strong competition (30) environment point towards a healthy entrepreneurial core. Relatively solid infrastructure (47) complements this picture. At the same time, very low rankings for security and social cohesion (108), labour dynamics and opportunities (100) as well as public institutions (92) reveal fundamental structural issues.
Further investigation of the country’s innovation capability reveals a particularly high prominence of research institutions (16) and number of researchers (18). Both trademark applications (14) and IP 5 patent applications (22) are very high. Cluster development (54) could be improved and a lack of university-industry collaboration in R&D (59) points towards unrealized synergy effects. The strong competition environment is mainly a reflection of the country’s market size (12).
Significant challenges remain in terms of security and social cohesion. Turkey ranks last in terms of social group divisions (117) and close to last in terms of social capital (103) and terrorism incidence (109). Labour dynamics and opportunities are afflicted by a very low dynamism of the labour market (101) and a lack of fairness of labour conditions (94), which can again be explained by a large gender gap in income (98) and unequal opportunities in leadership positions (94) and in hiring (93) in general. Public institutions rank among the worst in terms of press freedom (105) as well as civil and political rights (106).
A strong point of the country is its infrastructure, which reveals airport connectivity (13) and efficiency of air transport services (8) among the very best in the world. Additional gains could be realized by improving broadband speed (86) and increasing the number of mobile broadband subscriptions (70), further improving the country’s readiness for the future.
South Africa ranks 66th on the Global Competitiveness Index. The overall ranking is carried by above-average performance in innovation capability (38), future orientation of business (44), and public institutions (51). On the downside, education and skills (87), labour dynamics and opportunities (83) and an alarming security and social cohesion (111) environment require attention.
The country’s innovation system produces a good amount of knowledge assets (34) despite a somewhat lower state of cluster development (69). Businesses’ future orientation manifests in a comparatively advanced state of public reporting of ESG metrics (25). Public institutions have relatively good checks and balances in place (36) but public administration efficiency is low (72) and policy stability (100) is lacking.
The key challenge remains the country’s security situation. Homicides (112), business costs of organized crime (112) and terrorism incidence (94) are among the highest, reliability of police services (112) among the lowest in the world. On the education and skills front, low levels of digital and technology skills (111), a lack of qualified teachers (105) and a low quality of the school system (107) remain major flashpoints. Labour dynamics and opportunities are driven to a large degree by a lack of dynamism in the labour market (114) while a relatively high ranking on the fairness of labour conditions (38) marks a positive counterpoint.
Another positive signal can be seen in South Africa’s ranking for financial conditions (47). Financial system depth (33) as well as a stable banking system (34) provide a solid backbone while SME financing (102) and the prevalence of unbanked individuals (109) highlight room for improvement in the future.
Mexico ranks 68th on the Global Competitiveness Index. Mexico’s competitive strengths lie in its relatively good innovation capabilities (29) and competition (33) as well as a moderate environmental footprint (49) ranking. The two weakest dimensions are the country’s security and social cohesion (114) as well as its public institutions (94).
Looking closer at competition, Mexico’s large market size (11) could be leveraged with improvements to the domestic competition environment (69). Mexico also achieves a moderate rank on the future orientation of its businesses (61), mostly due to a high number of international patent co-applications (28). Business practices could be improved by adopting a greater willingness to embrace disruptive ideas (75) and a healthier approach to entrepreneurial risk (70). A greater willingness to delegate authority (82) and more public reporting of ESG metrics (86) could also have a positive impact.
While Mexico’s financial conditions (63) rank just below the median of 59, labour dynamics and opportunities (82) are of concern. Labour market dynamism (90) is putting a strain on Mexico’s competitiveness and fairness of labour conditions (76) is perceived to be low. In particular, a high gender gap in income (88) and unequal opportunities in hiring (90) and leadership positions (100) are problematic.
The biggest challenge is the country’s security situation. The unreliability of police services (115) and business costs of organized crime (117) are perceived to be major obstacles. The homicide rate (111) and the incidence of terrorism (92) are some of the highest in the world. Public institutions are characterized by a lack of freedom of the press (97), a low degree of judicial independence (91) and a high incidence of corruption (93). Neither the tax system (92) nor other types of government regulation (102) are easy to comply with. Most concerning, however, is a perceived lack of policy stability (107) and long-term vision (112).
Mexico performs relatively strongly on innovation, ranking 26th on the combined count of trademark and patent applications and 47th on its innovation resources. Although university-industry collaboration in R&D (75) could be improved, prominent research institutions (19) and a good state of cluster development (33) create a promising creative foundation.
Argentina ranks 69th on the Global Competitiveness Index. Innovation capability (42), public health (44), and security and social cohesion (52) are above average. Of concern are the country’s financial conditions (112), competition (93) environment, public institutions (107) and labour dynamics and opportunities (95).
The country’s ranking on innovation capability is positively affected by trademark application (26) performance, number of researchers (29) and prominent research institutions (25). Untapped potential could be unlocked by improving cluster development (94) and increasing university-industry collaboration in R&D (81). The security and social cohesion ranking reflects relatively small social group divisions (30) and low terrorism incidence (51), but also police services (100) perceived to be unreliable, a high number of homicides (88), high business costs of organized crime (85) and low social capital (92).
Argentina’s financial conditions are in dire need of improvement. Country credit ratings (115) and Inflation (114) are prominent pressure points but lacking domestic credit to the private sector (106), missing financing of SMEs (113) and very low venture capital availability (107) are equally problematic. Public institutions are inefficient (112) and unstable (116). Compliance with government regulation (115) and the tax system (117) is tedious. In terms of competition, fiscal measures have a distortive effect (117) and the impact of rules on FDI (114) needs an overhaul.
Public health is an area where Argentina ranks relatively high. Health infrastructure density (22) is high and overall health risks (43) are above average. Further improvements in healthcare quality (66) and increased health worker density (62) could underline this impression.
India ranks 80th on the Global Competitiveness Index. The country’s outstanding innovation capability (9), above average future orientation of business (40) and average rank for competition (54) are a stark contrast to low and very low ranks on all other indicators. Challenging labour dynamics and opportunities (116) as well as low levels of education and skills (94) highlight the country’s bottlenecks. The image is framed by concerns over security and social cohesion (102), a worrisome environmental footprint (111) and the state of public health (109).
The country’s strongest asset is its innovation capability. Given the challenges reflected in other indicators, India’s performance on knowledge assets (10) and innovation resources (9) is a welcome positive outlier. The state of cluster development (86) is of concern, but also points towards significant untapped potential. Given the country’s market size (3), large gains remain unrealized. This impression is reinforced by a closer look at the future orientation of business, where collaboration (16) is very high. Improving the oversight of production impact (96) and business practices (67) in general could create substantial momentum.
Room for improvement also remains in the domains of infrastructure (69) and public institutions (70). Although complying with the tax system is tedious (97) and property rights are hard to enforce (101), e-participation is comparatively high (28). Taking a closer look at infrastructure illustrates both the dimension of the country’s challenges and its creativity in addressing them: India ranks 101st in terms of electric power losses and 3rd in energy efficiency regulation at the same time.