NEWS ANALYSIS

Singapore's competitiveness: The good, the bad and the ugly

It slips to third in WEF ranking; it scores in areas such as higher education but is lacking in others such as innovation

Singapore

SINGAPORE remains one of the world's most competitive economies across the board. Period. But if you prefer to nitpick, let's do that (too).

After basking in the sweet spot of being second for at least five straight years in the World Economic Forum's (WEF) flagship Global Competitiveness Index, the city state slipped one notch to third spot in the latest 2017-18 rankings, switching places with the United States.

Should there be reason to be alarmed? No. Third out of the 137 countries that were ranked in the index is not shabby (by any stretch).

Is there room for improvement? Absolutely - unless a country scored an overall perfect score or in WEF speak, "most desirable outcome", of 7/7, which incidentally none did. (Switzerland, which has long held pole position, scored highest this year with a 5.86 score versus Singapore's score of 5.71).

"There is a tendency to be a bit obsessed with rankings. There's also a healthy sense of paranoia in the country. This is good as it means that we are constantly identifying the gaps that need to be improved on," said ANZ economist Ng Weiwen.

So, if you accept the index as a guide for policymakers' relentless pursuit to raise their game in an increasingly competitive world economy, which the WEF hopes it does with this report, then there are weak spots in the detailed data that ought to be examined, put into context, and then remedied.

Singapore seems unmatched in two of 12 pillars - higher education and training and goods market efficiency - and stood at second and third spots in five others including institutions, infrastructure, labour market efficiency, health and primary education and financial market development.

Its lowest rank, at 35 out of 137 countries, fell under the market size pillar. No surprises here given Singapore's geographical girth and population of five million that have long compelled its outward oriented and free trade policies and shaped its success story.

One aspect of the report - Singapore's "persisting deflationary spell" - has clearly been overtaken by events. After a two-year stretch of negative CPI readings, Singapore's inflation swung back into positive territory in December last year and has remained so all of this year so far.

"We definitely don't expect Singapore to get back to deflation but we are going to see a structurally low regime," said ANZ's Mr Ng, adding that this was largely led by the slack in the labour market.

Another part must have cut deep; the WEF remarked that Singapore continues to lag behind the world's most prolific innovation powerhouses in innovation and business sophistication factors.

Yet, according to this year's Global Innovation Index, Singapore was ranked first in Asia and seventh (out of 127 countries) in the world. The mixed jury notwithstanding, there is clearly room for betterment here and Singapore is slogging away.

To stay relevant and to reinvent itself, it has formed a high-powered Committee on the Future Economy (CFE) with ground-shifting strategies to transform the economy and to tap opportunities in the digital economy.

There are other big agendas in place like the Smart Nation initiative and the push for financial technology or fintech. "Singapore's Smart Nation drive should improve 'technological readiness', help with the absorption and transfer of new technology, and increase the number of internet and broadband users," said Maybank Kim Eng economist Chua Hak Bin.

All of these need time to take shape as they are "multi-year policies with a long gestation period", said ANZ's Mr Ng.

But there are other tricky areas. One in particular, "restrictive labour regulations", was identified as the most problematic factor for doing business in Singapore. "There is no easy solution to this as policymakers have to balance the political reality and economic considerations," said CIMB economist Song Seng Wun.

One leadership saying comes to mind - sometimes one needs to know when to set aside the important things to accomplish the vital ones.

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