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Canada drops from top 10 in global competitiveness ranking


September 12, 2011
By Julian Beltrame The Canadian Press

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Canada has slipped out of the top 10 in global competitiveness, dropping two spots to 12th place behind the United Kingdom and Hong Kong, according to an annual report released by the World Economic Forum.

The report, which ranked Switzerland first, said that Canada needs to be more innovative and develop lucrative value-added products, services and markets.

The Conference Board of Canada, which ranked the countries for the forum, said Canada’s fall this year reinforces how global competitors continue to gain ground.

“Canada should not be satisfied with its 12th place ranking,” said Michael Bloom, vice-president of organizational effectiveness and learning at the Conference Board.

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“Much more can be done to improve productivity, economic performance and global competitiveness,” Bloom said in a news release. “Businesses continue to underperform in using our peoples’ skills and knowledge to generate new or improved products, processes or services.”

Policy-makers, including Bank of Canada governor Mark Carney, have long flagged the country’s poor productivity as a detriment to economic growth and living standards.

But although firms have picked up the pace of capital spending in the past year, they still lag significantly behind competitors.

The Conference Board’s Doug Watt said a key to reversing the trend is for businesses to become better at innovating; not just producing new products, but improving the way they operate.

“Our sense is that the capacity for innovation in Canadian firms is pretty low and it’s part of a misunderstanding of what innovation is,” he said. “It’s not just building a new product, it could be new systems and new processes to become more productive.”

He said firms can do so by investing more in research and development, and government can help by spending on infrastructure, such as ports to help get Canadian products on the global market.

The country has fallen three places in the global rankings since 2009 despite achieving almost identical overall competitiveness scores over the last three years, the report noted.

The Conference Board of Canada did a survey for the World Economic Forum to get corporate leaders’ perceptions of the business climate. The overall rankings were calculated from both publicly available data and the survey, which included more than 14,000 business leaders, including 82 in Canada, in a record 142 economies.

The report found that several emerging economies and developing countries – particularly Asian economies – were closing the gap between the traditional “rich” and “poor” countries. The results show that while competitiveness in advanced economies has stagnated over the last seven years, in many emerging markets it has improved.

“Much of the developing world is still seeing relatively strong growth despite some risk of overheating, while most advanced economies continue to experience sluggish recovery, persistent unemployment and financial vulnerability with no clear horizon for improvement,” said Klaus Schwab, founder and executive chairman of the World Economic Forum.

Singapore overtook Sweden to claim the second spot, and Finland jumped three positions to No. 4, dropping the United States to fifth. Since losing first place to Switzerland in 2009, the United States has continued to slip in the rankings, due to weak economic fundamentals and increasing concerns about the efficiency and effectiveness of U.S. institutions and leaders.

Germany was ranked sixth, the Netherlands seventh, and Denmark was eighth. Japan ranked ninth.

The report has repeatedly demonstrated that Canada is not a leader when it comes to innovation, despite an efficient labour market, top results in primary and secondary education, an effective post-secondary education system and openness to immigration, the Conference Board said.

“Canadian businesses continue to be blessed in terms of ability to be ‘hewers of wood’ and exporters of our natural resources; but Canada needs to take advantage of our people’s skills and expertise to develop other lucrative value-added products, services and markets,” it said.

Canada earned top scores in both inflation and country credit rating, but those strengths were offset by a ranking of 80th in terms of gross national savings as a percentage of gross domestic product, and a ranking of 129th out of 142 countries in terms of overall government debt levels as a percentage of GDP.

The Conference Board has announced it will set up a new centre for business innovation to help improve Canada’s world ranking in competitiveness.

www.conferenceboard.ca