Growth is good, but not good enough
The US fell to sixth place after placing first last year.
Israeli is ranked 15th in the World Economic Forum’s (WEF) 2006 Global Competitiveness Index, up from 23rd place in 2005. The US fell from first to sixth place. Israel outranks Canada, Austria, France, Australia, Belgium and Ireland, which follow it in descending order.
The WEF ranks countries’ competitiveness according to a set of criteria, arranged into nine groups: macroeconomic policy, market efficiency, business sophistication, technological readiness, innovation, infrastructure, health and primary education, higher education and training, and institutions. The WEF believes that these factors affect an economy’s productivity, which in turn affects its ability to maintain sustained growth over many years. The rankings include figures for the criteria derived from surveys of business managers.
The WEF says the jump in Israel’s ranking was primarily due to the reforms led by the Bachar committee, which instilled in Israel a considerable degree of competitiveness and professionalism, and laid the groundwork for a revolution in asset management. The report’s author, WEF chief economist Augusto Lopez-Claros says Israel is attracting a growing number of foreign investors, and that there were extremely impressive developments in Israel’s financial markets and that it now had developed along regional and international standards.
The WEF goes on to say that Israel benefits from innovation, supported by top-of-the-line higher education and scientific research institutions. Israel has become a global technology powerhouse, which has a huge impact on the rest of the economy, and is good news for the future. High-tech products comprise 70% of Israel’s industrial exports, the highest proportion in the world.
Israel’s lowest ranking is for macroeconomic policy, where is ranked 50th. Israel was ranked 29th in the institutions and basic requirements subindex. The report favorably notes Israel’s fiscal policy and tax cuts. Israel’s public spending/GDP ratio was 47.3% in 2005, above the OECD average of 41.8%, but the WEF favorably cites Israel’s efforts to cut this ratio to 34.4% by 2010. Tax reforms instituted in mid-2005 boosted Israel’s rating in the macroeconomic index to 17th place.
The WEF attributed the plunge in the US’s ranking to sixth place, behind Switzerland, Finland, Sweden, Denmark and Singapore, to growing imbalances in some macroeconomic indicators, and the US’s huge fiscal deficit is jeopardizing the country’s competitiveness.
The WEF ranking Switzerland as the world’s most competitive country, thanks to “a combination of a world class capacity for innovation and the presence of a highly sophisticated business culture.” Rapidly growing emerging markets, which are changing the global balance of economic power, got middling rankings: India is ranked 43rd, China 54th, Russia 62nd, and Brazil 66th.
Published by Globes [online], Israel business news - www.globes.co.il - on September 27, 2006
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006
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