Based on more than 300 criteria of doing business in 60 selected regions or countries around the world, the study shows where enterprise competitiveness allows the best return on investment. "The real engines of competitiveness are science, technology, entrepreneurship, finance, logistics, and education," says institute professor Stéphane Garelli, commenting on the yearbook''s findings.
As with the previous study, the 2005 competitiveness scoreboard lead off with the United States, followed by Hong Kong, which jumped from sixth place, and Singapore as number three, which fell one point from last year. Canada has dropped to number five from third place. Chile, on the other hand, sprang from 26th to 19th place and Israel jumped from 33rd to 25th place.
Coming in last was Venezuela, preceded by Argentina and Indonesia. Plastics processing powerhouse Germany dropped from the 17th most competitive economy in 2001 to 23rd this year. Specific weaknesses hurting German business are listed as low foreign direct investment, poor economic growth, and a limiting tax system. What the country needs is a reform of its social security and health insurance systems, consolidation of public funding, less state intervention in the economy, more flexible labor agreements, and the development of a financial strategy, the study says.
Garelli says that although taxation remains a contentious point and reason for processors to relocate abroad, politicians often overlook the underlying problem. "The real impact of taxes is on job creation or destruction. As far as competitiveness is concerned, the simplicity of a tax system is just as important as the level of tax per se," he says. "A simpler flat-tax system may be more valuable in the long run than a complex low-tax regime."
Some world regions rated in the study are doing better than their home country. Bavaria, at 18th, ranked ahead of Germany; Lombardy, at 41st, outpaced Italy in 53rd; Catalonia, at 32nd, topped Spain at 35th.