Mixed results in Canada ‘s rankings in latest global competitiveness indexes

Released October 13th, 2004

Toronto—  Canada ‘s rank fell in one competitiveness index and improved its position in another according to the “Global Competitiveness Report 2004-2005” 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 12 th last year to 15 th in 2004.  On the Growth Competitiveness Index, Canada improved slightly from 16 th to 15th.

The “Business Competitiveness Index” was developed by Michael Porter, Director of the Institute for Strategy and Competitiveness of the Harvard Business School .  The Index draws on economic data and surveys of more than 8,700 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.  The Business Competitiveness Index consists of two sub-indexes, the quality of the business environments – financial markets, the impact of competitive pressure and support in the economy, and public administrative effectiveness – where Canada fell from 10 th to 13 th – and the sophistication of companies’ operations and strategies where Canada fell from 14 th to 16th. 

Roger Martin, Dean of the University of Toronto ‘s Rotman School of Management and Chairman of the Institute for Competitiveness & Prosperity, noted that this year’s fall in rankings is part of a trend. In all but one of the last six years, Canada has fallen in the Business Competitiveness Index Rankings. “In 1998, Canada stood sixth in this ranking and in 2004 we stand 15 th , said Martin. Among the larger economies – those with half of Canada ‘s population - we’ve fallen from 5 th to 8 th” . Martin noted that among the larger economies, Japan has shown the most improvement over the last six years, moving from 18 th to 8 th . Martin also observed that the real source of Canada ‘s decline in the WEF’s rankings has been the quality of the national business environment. 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 US , Canada fell further behind in important factors such as the intensity of local competition and the sophistication of local buyers’ products and processes. “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 index, company operations and strategy, Martin noted, “our rankings in company operations have stayed in a tight band between 12 th and 16 th 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. And this will occur if we step up the pressure and support for innovative strategies”

In the World Economic Forum’s other global index, the Growth Competitiveness Index, Canada improved from 16th to 15 th . 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 “public institutions”, “macro-environment”, and “technology”.  Canada improved from 24 th to 18 th ranking in the area of public institutions.  According to Martin, “we noticed a heightened antipathy towards government institutions in 2003 and this improved slightly this year, but not back to the 2002 levels”. In 2004, the Institute believes that the sponsorship scandals in Ottawa had their impact on the macroeconomic environment sub-index which captures perceptions among business leaders about the impact of “government waste”. On the macroeconomic stability factor, Canada fell from 11 th to 18 th. On the technology factor in the Growth Competitiveness Index, Canada’s rank fell from 11 th to 13 th continuing a trend where Korea and Singapore are moving up through the ranks displacing Canada and others. 

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.

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 & Prosperity at 416.920.1921 ext. 222.