[GLOBAL EYE]Prematurely cheering a rankingKorea’s national competitiveness ranking has skyrocketed. In the “Global Competitiveness Report 2005-2006” by the World Economic Forum in Geneva, Switzerland, Korea moved from 29th place in 2004 to 17th place. On top of the stock market rally, the sudden jump in the national competitiveness ranking is raising expectations for an economic recovery.
If we look closer, however, we cannot simply welcome the jump. Over the last year, there has been little improvement in the Korean economy. While growth prospects are becoming increasingly conservative, our competitiveness ranking advanced 12 steps. The ranking has been very inconsistent, having dropped 11 steps in 2004 from 18th the year before to 29th place, only to bounce back a year later. Moreover, Korea was ranked 29th among 60 surveyed nations in the 2005 global competitiveness ranking by the Switzerland-based International Institute for Management Develop-ment, a rival of the World Economic Forum, in May.
National competitiveness is the ability of a country or its companies to generate relatively more wealth than a rival country or its companies. It is calculated by comprehensively considering the competitiveness of companies and political, economic, social, cultural and educational environments. Factors such as a world-class information technology environment with regard to the Internet; technological advances in semiconductors, mobile communication and biotech areas; increasing investment in research and development, collaboration between academia and industries; and improvement in macroeconomic environment factors such as low interest rates and high savings rates have all contributed to a jump in the competitiveness ranking.
Moreover, the ranking seems to reflect the Korean authorities’ aggressive efforts to publicize the actual status of Korea after the ranking dropped 11 steps last year. However, Korea’s business competitiveness index, which reflects the quality of the environment for business activities, remains in 24th place. Korea received very low scores for its labor-management relations, market openings and restrictions, invitation of foreign investors and employment of foreign workers. And in the game of growth, Korea’s business competitiveness fell behind, especially compared to its major rivals: Taiwan, Singapore and Japan.
Of course, the competitiveness ranking is not an absolute measure, and the ranking drastically varies depending on which agency rates the countries. Finland has been the top of the World Economic Forum’s ranking for the last few years, but the United States has been the indisputable first place winner in the International Institute for Management Develop-ment’s ranking. Hong Kong, which is second in the IMD ranking, came in at 28th, 11 steps below Korea, in the WEF ranking. China, the “factory of the world,” and India, the “software giant,” are ranked in the top 40 by the IMD, but they are placed 49th and 50th respectively in the WEF ranking. How can Finland, a country with a population of 5 million and limited natural resources, take first place over the United States, the innovation center of the world?
Competitiveness is a moving target, and its substance is the growth engines and the social and systematic environment that flexibly bolsters the country. When companies are backed up by transparent and honest public policies and a trustworthy social, systematic environment, a country can go into overdrive. The bantamweight Finland could top the rankings over a heavyweight because the WEF had a high regard for the merits of the small yet strong country. As the influence of China grew, Hong Kong’s ranking dropped because of the aggravating quality of the systematic environment, such as corruption, violation of intellectual property rights, and government intervention. China and India are held back by systematic weaknesses and an aggravation of their macroeconomic environments.
The competitiveness ranking is not an annual report card. It is an index for countries to compare the merits and demerits of one another and to improve and correct their shortcomings and faults. The growth of each country through bona-fide competition results in the overall growth and economic health of the world. The message of the ranking is to constantly check one’s growth engines and create an environment to maximize economic drive. Moderate government, liberty of business activities and globalization are the three standards of global competitiveness. How do you rate our reality according to these standards? Companies and those who have are under pressure, and the principles of growth and competition in the economic, social and educational fields have been pushed out by the theory of distribution and balance. Along with the financial deficit, the grand investment project on the Korean Peninsula under the banner of nationalism has already been garnering international attention as the biggest potential risk for the Korean economy. For three consecutive years, the growth rate has been 3 to 4 percent. If growth slows any further, the Korean economy might be trapped in low growth, like Germany. It is no time to be relieved by the jump in the competitiveness ranking.
* The writer is a senior columnist at the JoongAng Ilbo.
by Byun Sang-keun