Press Releases
September 26th, 2006
Canada’s Global Competitiveness Declines in 2006
Tuesday September 26, 2006—Toronto—In the “Global Competitiveness Report 2006-2007” released today by the World Economic Forum, whose Canadian partner is the Institute for Competitiveness & Prosperity, Canada moved down in the rankings over 2005’s results in both of its competitiveness indices. On the “Business Competitiveness Index,” Canada moved down to 15th from 14th. On the “Global Competitiveness Index,” Canada also fell – to 16th from 13th.
“These annual indices help Canadians determine trends in the competitiveness of our economy versus our global competitors,” said Roger Martin, Chairman of the Institute for Competitiveness & Prosperity and Dean of the University of Toronto’s Rotman School of Management. “What they indicate is that Canada is not living up to its full potential in economic performance.”
Business Competitiveness Index
The “Business Competitiveness Index,” developed by Michael Porter, Director of the Harvard Business School’s Institute for Strategy and Competitiveness, draws on economic data and surveys of over 11,000 business leaders in 121 economies around the world to develop indicators that measure the set of institutions, market structures, and economic policies supportive of high national prosperity. The Index consists of two sub-indices: the quality of the business environment – which includes a country’s financial markets, the impact of competitive pressure and support in the economy as well as public administrative effectiveness - where Canada fell from 14th to 16th - and the sophistication of companies’ operations and strategies - where Canada slipped one rank to 18th. Taking Canada’s performance on the two sub-indices together, Canada’s overall ranking on the Business Competitiveness Index fell to 15th from 14th – returning to the rank it held two years ago.
Martin views the one-year drop in rankings as part of a longer term trend which indicates that Canada is not fulfilling its full economic potential. “In 1998, Canada stood sixth in this ranking of our business competitiveness,” said Martin, “and in 2001 we stood 11th. Over the years we’ve drifted down in the rankings as countries like Norway and Japan have stepped up their competitiveness.” On a more positive note, Martin noted that among the larger economies – those with half of Canada’s population or more – Canada actually improved its ranking from 8th to 6th moving past France and Australia. Among these larger countries and economies Canada has consistently ranked between 6th and 8th over the past five years.
Martin also observed that Canada’s national business environment is still a cause for concern. “Canadian business and government leaders still have a lot of work to do to strengthen Canada’s competitive position in the world”, said Martin. He noted that against the number one ranked US, Canada continued to lag in important factors such as the intensity of local competition and the sophistication of customer buying processes – although this performance gap shrank modestly.
“Our work at the Institute points to the need to strengthen our market structures in Canada so that businesses have the pressure to innovate from capable rivals and sophisticated and demanding customers, as well as the support from specialized factors such as scientific research institutions,” said Martin.
On the other sub-index, company operations and strategy, Canada’s rankings in company operations have traditionally been in a tight band between 14th and 18th in the world and in 2006 we stood 18th. To improve Canada’s ranking and overall competitiveness our business leaders need to become more competitive through unique products and processes and compete more on adding value to products and services in areas such as product design and added services. And this will occur if we step up the pressure and support for innovative strategies.
The top ranking countries in the global Business Competitiveness Index were:
1. United States
2. Germany
3. Finland
4. Switzerland
5. Denmark
Global Competitiveness Index
In the World Economic Forum’s other global index, the Global Competitiveness Index, Canada fell from 13th to 16th. This Index provides an overview of factors that are critical to sustainable growth in productivity and competitiveness. It consists of three sub-indices which measure the quality of each country’s “basic requirements”, “efficiency enhancers”, and “innovation factors”.
On the first sub-index which measures the basic requirements as provided by institutions, infrastructure, the overall economy, and health and primary education, Canada fell from 11th to 13th. In Martin’s view the ongoing distrust of political institutions and people is hurting Canada on this sub-index. Restoring trust in public institutions is important to improving the economic environment. Canada does, however, benefit from the second highest ranking in health and primary education.
The second sub-index, efficiency enhancers, measures the impact of higher education and training, market efficiency, and technological readiness. Canada worsened from 11th to 15th. Canada fell in the rankings on higher education and training but improved in its technological readiness – a function of the penetration of personal computers and the Internet.
On the third sub-index, innovation factors which measures business sophistication and innovation, Canada’s ranking was unchanged at 16th.
Countries showing the most significant improvement in the Global Competitiveness Index were Sweden, Switzerland, Japan, Norway, and Israel. The United States fell from 1st in 2005 to 6th in 2006. According to the World Economic Forum, The US continues to enjoy an excellent business environment, efficient markets, and technology development. However its overall competitiveness is threatened by rising levels of public indebtedness and rising trade deficits.
Top ranking countries for the Global Competitiveness Index were:
1. Switzerland
2. Finland
3. Sweden
4. Denmark
5. Singapore
For more information about The Global Competitiveness Report and other activities and publications of the World Economic Forum’s Global Competitiveness Programme, please visit http://www.weforum.org/gcp
About the Institute for Competitiveness & Prosperity
The Institute for Competitiveness & Prosperity is an independent not-for-profit organization established in 2001 to serve as the research arm of Ontario’s Task Force on Competitiveness, Productivity and Economic Progress. It is also the Canadian partner of the World Economic Forum. Research conducted by the Institute is primarily intended to inform the work of the Task Force. In addition, it is designed to raise public awareness and stimulate debate on a range of issues related to competitiveness and prosperity.
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For more information contact James Milway, Executive Director of the Institute for Competitiveness & Prosperity at 416.920.1921 ext. 222
