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Switzerland world's most competitive nation; US slips to number 7

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In the latest World Economic Forum rankings, Switzerland gets high marks for innovation and efficiency. The US slips as a result of lack of confidence in its politicians and institutions.

What's the best place in the world to launch or sustain a business? Switzerland, for the fourth consecutive year, tops the overall rankings in the World Economic Forum's Global Competitiveness Report 2012-2013. Singapore remains in second position and Finland in third position, overtaking Sweden (4th). These and other Northern and Western European countries dominate the top 10 with the Netherlands (5th), Germany (6th) and United Kingdom (8th).

The United States (7th), Hong Kong (9th) and Japan (10th) complete the ranking of the top 10 most competitive economies. The US has slipped from 5th place last year, however.

The authors of the latest report examined the business climates of 144 nations,and produced the rankings based on factors such as institutions, infrastructure, macroeconomic climates, health, primary education, higher education, training, goods market efficiency, labor market efficiency, technological readiness, business sophistication, and innovation.

Switzerland retained the highest ranking as a result of its strengths "related to innovation and labor market efficiency, well as the sophistication of its business sector," the report states. "Switzerland’s scientific research institutions are among the world’s best, and the strong collaboration between its academic and business sectors, combined with high company spending on R&D, ensures that much of this research is translated into marketable products and processes reinforced by strong intellectual property protection."

The central European nation also gets high marks for its productivity, fueled by "excellent on-the-job-training opportunities, both citizens and private companies that are proactive at adapting the latest technologies, and labor markets that balance employee protection with the interests of employers." The only place Switzerland lags is slipping university enrollment rates, the report states.

While the United States remains in the top 10, the nation's competitiveness has been on the decline, the report states. "Although many structural features continue to make its economy extremely productive, a number of escalating and unaddressed weaknesses have lowered the US ranking in recent years." These weaknesses include a purported "lack of macroeconomic stability," as well as a lack of business confidence in public and private institutions and politicians. "Business leaders also remain concerned about the government’s ability to maintain arms-length relationships with the private sector, and consider that the government spends its resources relatively wastefully."

On the plus side, the report adds, "US companies are highly sophisticated and innovative, supported by an excellent university system that collaborates admirably with the business sector in R&D. Combined with flexible labor markets and the scale opportunities afforded by the sheer size of its domestic economy—the largest in the world by far—these qualities continue to make the United States very competitive."

The large emerging market economies (BRICS) display different performances. The People’s Republic of China (29th) continues to lead the group. Of the others, only Brazil (48th) moves up this year, with South Africa (52nd), India (59th) and Russia (67th) experiencing small declines in rankings.

Behind Singapore, several Asian economies are performing strongly, with Hong Kong SAR (9th), Japan (10th), Taiwan, China (13th) and the Republic of Korea (19th) all in the top 20.

Overall, the report observes, countries in Northern Europe have been doing very well in terms of competitiveness, while Southern Europe, "i.e. Portugal (49th), Spain (36th), Italy (42nd) and particularly Greece (96th) continue to suffer from competitiveness weaknesses in terms of macroeconomic imbalances, poor access to financing, rigid labor markets and an innovation deficit."

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure