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Global Development

Lack of reform holds back world economy

The Geneva-based World Economic Forum (WEF) has released its annual study of the world's most competitive economies. Some countries are lagging due to a failure to implement reforms, it says.

Germany slips in world competitiveness table

Stalled reforms and developmental differences are the biggest obstacles to sustainable global growth. This is the conclusion of the Global Competitiveness Report 2014-2015, published by the Geneva-based World Economic Forum on Wednesday (03.09.2014).

The report also underlines the importance of youth development and innovation. It also calls on public and private institutions in different countries to work together more efficiently to bring about sustainable and comprehensive economic development.

"The report is coming out at a time when the global economy is for the first time in a long time registering positive growth rates," WEF economist Caroline Galvan told DW.

"We see that the growth rates for the emerging market economies - and also the projections for the advanced economies - are positive. The report investigates the institutions, policies and factors that can influence productivity and long-run competitiveness."

A competitive world

The result is a ranking of the competitiveness of individual countries - the so-called Global Competitiveness Index (GCI), which was introduced by the World Economic Forum in 2004. The GCI score for a particular country is based on data in twelve categories that together provide a comprehensive picture of competitiveness. These 12 factors include infrastructure, health and education, an efficient labor market, and technological development.

The rankings in the current report suggest the United States has improved its competitive position for the second year in a row. The US advanced to third place thanks to its strong position in the areas of institutional frameworks and innovation, up two places from last year.

For the sixth consecutive year, Switzerland is in first place in the rankings. Singapore remains in second place, while the rise of the US has pushed both Finland (4th place) and Germany (5th) back one place.

The usual suspects

They are followed by sixth-place Japan, which rose three places, and Hong Kong, which remained unchanged at 7th. European economies round out the top 10, with the Netherlands still 8th, the United Kingdom moving up a notch to 9th, and Sweden the world's 10th most competitive economy.

The leading economies in the rankings have one thing in common: a policy agenda that puts a priority on fostering talent and investing in innovation. The study says this is made possible by close cooperation between the public and private sectors.

Reform drive required

A number of European countries that have been hit hard by the economic crisis, such as Spain (ranked 35th), Portugal (36th) and Greece (81st) have made significant progress in their efforts to boost their markets and improved the use of production resources.

World Economic Forum founder Klaus Schwab
(Photo: REUTERS/Denis Balibouse)

Klaus Schwab founded the WEF in 1971 to modernize European management practices

At the same time, countries such as France (23rd) and Italy (49th) are still relatively weak in terms of competitiveness, largely due to a failure to implement structural reforms.

Besides the persistent gap in Europe between a competitive north and a lagging south and east, there is now also a clear distinction between countries that are implementing reforms, and those that are doing little.

Emerging economies have caught up

Some of the biggest emerging markets around the world continue to face difficulty in improving competitiveness and have fallen in the rankings. This group includes Saudi Arabia (24th), Turkey (45th), South Africa (56th), Brazil (57th), Mexico (61st), India (71st) and Nigeria (127th).

In contrast, China (28th) has advanced one place and is holding onto its position as the highest-ranked BRICS country.

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