On competitiveness, Canada remains at 7th place among top 60 countries

On competitiveness, Canada remains at 7th place among top 60 countries

The International Institute for Management Development (IMD) has published the World Competitiveness Yearbook (WCY) since 1989. The WCY is the world’s most thorough and comprehensive report on national competitiveness, comparing 60 countries across 338 criteria, which fall into four categories: economic performance, government efficiency, business efficiency, and infrastructure. The IMD uses a combination of statistics and the results of an executive survey to determine the rankings. The Institute was honoured to be selected as a partner institute for this year’s WCY exercise.

Comparing the competitiveness of the top 60 nations of the world, Canada remains at 7th place in 2014. Canada has several key strengths that ensure its top 10 position, including its high employment rate, stable exchange rate, strong central bank policy, and excellent health care and education systems.

Yet there remains much to be done. Many of the challenges Canada faces have deep roots in its history and are inherent to the characteristics of the nation. For instance, most of Canada’s exports go to the United States and natural resources, especially oil and gas, form the bulk of those exports. Canada’s population is also aging, which will undermine its competitiveness unless measures are taken to replace workers or extend the working lives of the existing labour force. 

Specifically, the WCY and the Institute have five key recommendations that would boost Canada’s global competitiveness: 

Trade diversification – Canada has an export concentration by partner of 86.4 percent, placing it in 59th place. This high concentration is due to Canada’s close proximity to the United States and therefore more than 75 percent of exports are US-bound. Canada is also ranked 39th on export concentration by product as more than 41 percent of its exports are either mineral fuels and oils or motor vehicles. To improve, Canada needs to increase trade with countries other than the United States and develop innovative products and services to export. The WCY identified the percentage of exports to GDP, which stands at 25.1 percent as low and therefore diversifying trade will increase this percentage as well.

Lower the cost of telecommunications services – Canada has a surprisingly low penetration of mobile telephone subscribers, at 800.5 users per 1,000 inhabitants, which is the second lowest among the 60 countries. This reason, combined with the protectionism of the telecommunications industry has led Canada to have some of the highest mobile telephone costs among the countries ranked. On the other hand, the country has 325.6 broadband internet subscribers per 1,000 inhabitants, which is 11th highest, yet residential users pay nearly $40 USD per month for usage, 6th highest among comparator countries. While there are many barriers to achieving lower rates, both residential and commercial broadband and cellphone monthly costs could be further decreased to help raise Canada’s competitiveness.

Consider lowering the secondary school student-teacher ratio – According to the latest available data for 2011, the average student-teacher ratio in secondary schools was 15.3, a decrease from 17.1 in 2010. Even though class size is not a significant factor in determining the educational outcomes of students, Canada shares its 46th place ranking with countries such as Mexico, Brazil, and Turkey, nations known to have much lower secondary school enrollment and per capita total public expenditure on education. Canadian provinces should look to lowering the student-teacher ratio to maximize its investment and meet the educational needs of students.

Balance the budget – Government debt and Canada’s deficit position is a concern expressed in the WCY. The Institute’s Working Paper 16 provides a balanced and comprehensive view on provincial finances and debt and finds that while government debt can become a problem, debt, if used wisely, can be used to increase a country’s competitiveness. The federal government has expressed that its budget will be in surplus by 2015, but this must be done without downloading further fiscal responsibilities onto the provinces and municipalities.

Increase tourism from abroad – A previous blog post examines the need for increased tourism, especially from international visitors. Tourism receipts now form less than 1 percent of GDP and each of the provinces could greatly benefit from more international tourists as these individuals spend more on per trip on average than US visitors ($1,874 compared to $518 by US tourists).

For more results from the WCY, please visit worldcompetitiveness.com.

Photo Credit: koya79, Getty Images

Category: Economic Progress, Trade, Education, Infrastructure