SINGAPORE — Battered by violent anti-government protests, Hong Kong has tumbled down a list of the world’s most competitive economies, amid growing fears over Beijing’s efforts to rein in the semi-autonomous territory.
Hong Kong dropped from second to fifth place in the “World Competitiveness Ranking 2020” released Tuesday by Swiss business school IMD. It was overtaken by Denmark, Switzerland and the Netherlands.
Singapore maintained its position as the world’s most competitive economy for the second year in a row in the annual ranking that compares 63 economies based on their economic performance, government efficiency, business efficiency and infrastructure.
“Singapore has two ingredients that are very important: It has very strong institutions, and it has very low political instability and uncertainty. And these are very strong in promoting business environments,” Christos Cabolis, chief economist at the IMD World Competitiveness Center, told the Nikkei Asian Review in an online interview.
Despite economic growth of 0.7% last year, the slowest pace in a decade, stability in both Singapore’s education system and in its technological infrastructure — such as internet speeds — as well as its skilled labor force and high-quality employee training helped it hold onto the top spot, the report said.
Hong Kong’s decline appears mainly due to the street protests that escalated last year. And its economy shrank 1.2% as well. Poor economic performance, along with growing political instability and weaker social cohesion, pushed the territory down the list.
Denmark and Switzerland moved into to second and third place, up from eighth and fourth place, respectively, last year.
Overall, the latest rankings show a decline for Asia’s key economies, with the region’s biggest economy, China, dropping from last year’s 14th place to 20th this year. Malaysia fell five places to 27th, Thailand fell four places to 29th, Japan fell four places to 34th, and Indonesia fell eight places to 40th.
“If there is a common element that we can see, it is probably the effect of the tension between the U.S. and China — spillover effects of elements related to international trade,” said Cabolis.
For China, whose economic growth rate fell to a 29-year low of 6.1% last year, economic performance dropped from last year’s second place to seventh this year due to a slowdown in trade and employment, according to the report.
The U.S. also slid from last year’s third place to 10th this year due to slowing economic growth and tighter immigration rules.
Japan, Asia’s second-largest economy, slipped down the ranking for the second straight year due to inefficiencies in its government and business systems. Japan’s government efficiency was ranked 41st out of the 63 economies surveyed, while its business efficiency rank was a poor 55th, with elements such as companies’ digital transformation lagging.
Elsewhere in Asia, Taiwan and South Korea each climbed five places, to 11th and 23rd, respectively, thanks to strong technological infrastructure, such as high-tech exports and cybersecurity.
“Trade wars have damaged both China and the U.S. … reversing their positive growth trajectories,” IMD said in a news release.
Looking ahead, COVID-19 is likely to alter the competitiveness landscape. Cabolis pointed out that the pandemic has already caused unemployment, dampened consumption and disrupted supply chains. “So COVID-19 will affect the issues related to economic performance,” in the future rankings, he said.
Whether governments can effectively address the impact of the pandemic on business will be key issues for most economies. With respect to Singapore, this year’s report pointed out that one of the challenges in 2020 is to “leverage the downturn to deepen the capabilities of workers and enterprises, and ensure that they are well positioned to capture opportunities during the subsequent recovery.”
One of the world’s most famous competitiveness rankings, along with the World Economic Forum’s Global Competitiveness Report, IMD’s assessment has been published annually since 1989.