Despite good performance, we lack the sparkle

New Zealand is the 18th most competitive country in the world, according to this year’s Global Competitiveness Index (GCI).

The Index ranks countries according to their performance on factors such as innovation, market size, market efficiency, infrastructure and business sophistication.

New Zealand has overtaken five countries, including Australia, to move its overall ranking to 18th place, up from 23rd place in last year’s Survey.

This year’s results again highlight the strength and integrity of New Zealand’s institutions while pointing to the need for improvement in areas such as innovation, infrastructure, exports and bureaucracy.

New Zealand ranks well on many issues, but the critical ones supporting innovation-driven exports are in need of improvement.

With one of our most problematic factors being ‘an inadequately educated workforce’, the consequences for innovation are obvious. Our economy has a critical need for more relevant skills. We urgently need to see more of the right applied skills coming out from our secondary and tertiary education institutions.

At the business level, there is a great need for collaboration with research bodies to drive higher-value and higher-technology products. With the establishment of Callaghan Innovation, we should see improved outcomes in future for business development based on science and technology.

Better industry-university collaboration (20th ranking) and more company spending on R&D (34th ranking) would help grow the numbers of new, innovative goods and services, while the low placing (74th) for size of foreign markets indicated the scope for extending more exports to more markets.

Following are among the key findings for New Zealand.

Institutions: New Zealand was ranked second for strength and integrity of institutions, achieving the first place for ethical behaviour of firms, judicial independence, absence of bribes, and absence of diversion of public funds.

Other New Zealand institutions ranked less well, with rankings of 10th for wastefulness of government spending, 12th for property rights and 13th for burden of regulation.

Infrastructure: We achieved a poor ranking of 43 for overall infrastructure.

Macroeconomic environment: New Zealand performed well for control of inflation (First equal) and country credit rating (16th) but poorly for government debt (63rd), a balanced budget (70th) and national savings (101st).

Higher Education & Training: New Zealand scored 11th for quality of educational system, 12th for quality of mathematics and Science education and 24th for quality of school management.

Market Efficiency: We ranked first for agricultural policies and smallest number of days and procedures needed to start a business, but 31st for intensity of local competition and 64th for the impact on business of rules on foreign direct investment.

Labour Market Efficiency: We scored for flexibility in hiring & firing practices (61st) and ability to retain talent onshore (79th), dragged down labour market efficiency rankings overall.

Financial Market Development: Protection of borrowers’ & lenders’ rights (1st equal), soundness of banks (second) and ease of access to loans (9th) were New Zealand’s highest rankings for financial markets.

Technological Readiness: we performed reasonably well for use of Internet (8th), firm-level technology absorption (19th), and availability of latest technologies (21st), but we were ranked only 56th for available bandwidth.

Market Size: While New Zealand cannot do much about the size of its domestic market (60th), there is much scope for growing the size of its foreign markets, namely growing exports (ranked 74th).

Business Sophistication: Rankings were relatively low for production sophistication (28th), uniqueness of products (36th), presence in value chains (58th) and amount of cluster development (73rd).

Innovation: Patents per population (22nd), university-industry collaboration in R&D (20th), company spending on R&D (34th) and availability of scientists and engineers (58th) showed room for improvement in innovation.

The problems

The most problematic factors for doing business in New Zealand in 2013 were judged to be inadequate infrastructure, inadequately educated workforce, insufficient capacity to innovate and inefficient government bureaucracy.

New Zealand has mostly been ranked between 20th and 24th place in previous Global Competitiveness Index surveys.

The top ten places this year were similar to previous years’ rankings – Switzerland, Singapore, Finland, Germany, US, Sweden, Hong Kong, Netherlands, Japan and UK.

Phil O’Reilly is Chief Executive of BusinessNZ based in Wellington. GCI is a compilation of economic data and surveys of businesses in 148 countries, coordinated in New Zealand by BusinessNZ and The NZ Initiative.

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