The New Zealand Institute

International report highlights the need to strengthen NZ’s global competitiveness

01 Nov 2007

New Zealand’s global competitive position has declined over the past year according to the latest data from the World Economic Forum.  The World Economic Forum’s 2007/08 Global Competitiveness Report, released today, ranks New Zealand 24th for competitiveness, down from 21st last year.  Although New Zealand scores well on a number of measures, the Report also highlights areas where New Zealand needs to strengthen its competitive position relative to other advanced economies.

New Zealand Institute chief executive, Dr David Skilling, observes that “This international survey again indicates that New Zealand’s relative competitive position is not improving.  Some recently introduced policies, such as KiwiSaver, will likely strengthen New Zealand’s competitive position over the long term.  But much more is required to improve New Zealand’s competitive standing in what is an increasingly fast-paced international environment with countries aggressively upgrading their competitive position.  This will require progress across all of the drivers of competitiveness, but there is a particular need to prioritise investment into those areas that will enable New Zealand to become a truly innovation-driven economy.  The Report also highlights the need for New Zealand firms to act to improve their individual competitiveness”.

The 2007-2008 Global Competitiveness Index ranks the United States as the world’s most competitive nation with Switzerland in second position.  Denmark, Sweden, Germany and Finland, followed by Singapore, Japan, the United Kingdom and the Netherlands make up the top 10 most competitive countries in the world.  Australia is in 19th position.

The World Economic Forum defines competitiveness as the set of institutions, policies and factors that determine the productivity level of a country.  The more competitive the country, the more likely it is to grow quickly over the medium to long term, and the more likely it is to provide higher levels of income for its population.

The Global Competitiveness Index ranks countries on 12 pillars of competitiveness, which are broken into three groups.  The Basic Requirements for competitiveness include Institutions, Infrastructure, Macroeconomic Stability, and Health and Primary Education.  These factors are important to the competitiveness of all countries.

Efficiency enhancing factors, which are defined as Higher Education and Training, Goods Market Efficiency, Labour Market Efficiency, Financial Market Sophistication, Technological Readiness, and Market Size, are key to the competitiveness of those countries that have developed more efficient production processes and increased product quality. 

For developed countries, including New Zealand, factors such as Business Sophistication, and Innovation, become significant drivers of economic performance, in addition to the basic requirements and efficiency enhancers. 

According to the Index, New Zealand performs better in the basic requirements and efficiency enhancers ranking 17th and 18th respectively.  Within these categories, New Zealand has achieved top 10 positions for its Health and Primary Education, Financial Market Sophistication, Institutions, Labour Market Efficiency, and Goods Market Efficiency.

However, New Zealand does not deliver on all of the basic requirements.  New Zealand ranks 33rd in Infrastructure due to weaknesses in road and rail infrastructure and electricity supply.  And New Zealand ranks 36th in Macroeconomic Stability, due to weaknesses in areas such as the interest rate spread and inflation.  New Zealand ranks a very poor 108th out of 131 countries for its national savings rate. 

And in terms of the efficiency enhancing factors, New Zealand ranks 23rd in terms of Technological Readiness and 59th in terms of Market Size.  The latter is due to the small domestic market and relatively low level of New Zealand’s exporting activity.

However, the area in which New Zealand’s competitiveness is weakest is in those indicators relevant to advanced, innovation-driven economies. 

The Global Competitiveness Report identifies 31 economies, including New Zealand, as being innovation-driven.  New Zealand has an overall rank of 25th in terms of the Innovation factors that are linked to sustaining higher wages and standards of living through the production of new and unique products. 

New Zealand ranks 29th in terms of Business Sophistication, scoring particularly poorly in terms of the breadth of firms’ value chains and the state of cluster development.  Control of international distribution and production process sophistication by New Zealand firms are also identified as areas in which New Zealand is at a competitive disadvantage relative to its peers.

New Zealand ranks 25th in terms of Innovation.  It ranked 27th out of 131 for its capacity for innovation, 38th for its company spending on R&D, 51st in terms of government procurement of advanced tech products and 61st for its availability of scientists and engineers. 

More information on the World Economic Forum and the Global Competitiveness Report, including the New Zealand data, is available at http://www.weforum.org/gcr A presentation describing the key New Zealand findings has been prepared by the New Zealand Institute and is available for download at http://www.nzinstitute.org

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For more information please contact:
Dr David Skilling, Chief Executive, The New Zealand Institute, Ph: (09) 309 6230
Email:

About the Global Competitiveness Report
The Global Competitiveness Report is produced by the World Economic Forum, an independent, not-for-profit, and non-political organisation based in Geneva.  The World Economic Forum’s Global Competitiveness Report has been issued every year since 1979.

The World Economic Forum has developed a comprehensive index of competitiveness that can be used as a tool to understand what countries can do, in terms of institutions and policies, to improve economic prosperity.  This year’s survey includes 131 countries.

The Global Competitiveness Report has been updated over time to reflect the latest thinking on the drivers of competitiveness.  The latest methodology has been developed for the World Economic Forum by Columbia University Professor Xavier Sala-i-Martin. This ranking builds on the work by Harvard Business School Professor Michael Porter and the Columbia University Professor Jeffrey Sachs, among others.

The rankings in the Global Competitiveness Report are calculated from both ‘hard’ data, from range international sources, and ‘soft’ data, gathered as part of the World Economic Forum’s annual Executive Opinion Survey, which canvases the views of over 11,000 business leaders globally.  The soft data included in New Zealand’s analysis is based on 55 respondents from a range of industries.  The New Zealand Institute and Business New Zealand distributed the surveys to the New Zealand respondents.