Canada Falls in Two Global Competitiveness Rankings
Toronto—Canada’s rank fell in two competitiveness indices according to the “Global Competitiveness Report 2003-2004” released today by the World Economic Forum. The Forum’s Canadian partner is the Toronto-based Institute for Competitiveness and Prosperity. On the Business Competitiveness Index, Canada fell from 10th last year to 12th in 2003. On the Global Competitiveness Index, Canada fell from 9th to 16th.
The “Business Competitiveness Index” was developed by Michael Porter, Director of the Institute for Strategy & Competitiveness of the Harvard Business School. The Index draws on economic data and surveys of more than 4,800 business leaders around the world to develop microeconomic indicators that measure the set of institutions, market structures, and economic policies supportive of high national prosperity. It was formerly referred to as the “Microeconomic Competitiveness Index”.
The Business Competitiveness Index consists of two sub-indexes, the quality of the business environments - financial markets, the balance of competition and co-operation in the economy, and public administrative effectiveness - where Canada fell from 7th to 10th - and the sophistication of companies’ operations and strategies where Canada fell from 13th to 14th.
Roger Martin, Dean of the University of Toronto’s Rotman School of Management and Chairman of the Institute for Competitiveness and Prosperity, noted that the fall in rankings indicates that last year’s reversal from a longer term trend of decline was short-lived. “Last year I was pleased that we had returned to the top ten and that perhaps we were reversing the downward trend we’ve been experiencing. In 1998 we ranked 6th and fell every year after that until we hit 12th in 2001 and then rebounded to 10th last year”. Canadian business and government leaders still have a lot of work to do to strengthen Canada’s competitive position in the world. He noted that Canada’s fall in the business environment ranking was driven by business respondents’ perceptions of Canada’s bureaucratic red tape, and distortive regulations and subsidies. On the fall in company operations ranking, Martin noted, “our rankings in company operations have stayed in a tight band between 12th and 16th over the last six years. If we are to break out of this malaise, 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.”
In the World Economic Forum’s other global index, the Growth Competitiveness Index, Canada fell from 9th to 16th, largely as a result of worsened perceptions among Canadian respondents of public institutions and processes. The Growth Competitiveness Index estimates the underlying prospects for growth over the next five to eight years. It consists of three sub-indexes which measure the quality of each country’s “technology”, “public institutions”, and “macro-environment”. Canada fell from 9th to 24th ranking in the area of public institutions. According to Martin, a large part of the public institutions sub-index is based on survey data. The survey which was conducted between February and April this year picked up a major shift in attitudes towards government institutions ranging from public trust of politicians to the control of corruption. “It’s hard to pick out a specific response here that would have driven our rankings so low; it seems like a heightened level of general cynicism towards our public institutions. Around the time of the survey we had SARS, Iraq, and some of our political leaders - federally and provincially - were having difficulties. Whether it’s permanent or just a temporary phenomenon we won’t know until next year’s results come out.” On the technology factor in the Growth Competitiveness Index, Canada’s rank fell from 8th to 11th. On the macroeconomic factor, Canada actually improved from 12th to 11th based on ongoing improvements in the fiscal situation and other economic factors.
About the Institute
The Institute for Competitiveness and 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.
Working Papers published by the Institute are primarily intended to inform the work of the Task Force. In addition, they are designed to raise public awareness and stimulate debate on a range of issues related to competitiveness and prosperity.
For more information contact James Milway, Executive Director of the Institute for Competitiveness and Prosperity at 416.920.1921 ext. 222.