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Title: IMD World Competitiveness Yearbook 2003-[Text]

Notes: The good news is that the world economy is not in recession. The bad news is that nobody believes it. Out of the 59 countries and regions of the world analyzed by the World Competitiveness Yearbook 2003, only four have seen a contraction of their GDP in 2002: Argentina (-11.2%), Iceland (-0.5%), Israel (-1.1%) and Venezuela (-9.6%). All other economies have been growing. China Mainland and Zhejiang Province lead the pack with staggering growth rates of 8.0% and 12.3%, followed by Turkey (7.8%), Korea (6.3%), Estonia (5.8%), Thailand, and the Philippines at 5.2%. The other economies are suffering continued sluggishness but growth is not shrinking. The general state of confidence in the economic future, nevertheless, remains very low and a `wait and see` attitude seems to prevail. As the leader in world competitiveness, the performance of the US economy has thus a strong impact on every other nation. In 2001, the US barely escaped a recession with 0.3% growth. In 2002, the economy did not experience the strong upturn that some would have expected. However, 2.3% growth last year, given the very volatile economic and political environment, is still quite an achievement. The perspectives for European competitiveness are more divergent. The 15 European Union countries show a great diversity in performance. Larger economies have encountered significant difficulties in adapting and reforming the role of Government to enhance their competitiveness. This is the case for France, Germany, and Italy, where slower growth places them on the borderline of recession. Smaller economies suffered not so much from inadequate domestic structures but from their vulnerability to the international economic situation. This is especially true for Ireland where the growth rate has been halved in two years to 5.1% (compared to 11.5% in 2000). Upcoming economies, such as Slovenia, the Czech Republic, Hungary, the Slovak Republic, or Estonia, benefited from strong growth rates (between 3.2 and 5.8%). Their low cost base will allow them to reap greater benefits from their entry into the European Union. This is not a good period of time for the competitiveness of Latin America. Argentina has suffered a massive -11.2% decline in its GDP in 2002. Venezuela, confronted by political instability and repetitive strikes, has shown a decline of - 9.6%. Latin America is in dire need of stability and predictability. Spending in infrastructure, and capital investment in general, has slowed down. Very few competitive industrial clusters are being developed, with the exception of Chile. Education, especially in primary and secondary schools, does not receive sufficient funding. The short-term pressures are harming the future. The competitiveness of Asia has always been characterized by a high degree of volatility and excessive dependence on IT technologies and the US market. 2002 was no exception to the rule. The region has experienced higher growth rates than other parts of the world; these include Korea (6.3%), the Philippines (5.2%), Thailand (5.2%), Malaysia (4.2%), and even Indonesia (3.7%). However, Taiwan and Hong Kong are less dynamic with growth rates of 3.5% and 2.3%. Singapore, for a long time the beacon of the region, reports a disappointing growth of ""only"" 2.2%. All these nations have suffered, to different degrees, from the collapse of the IT sector worldwide and the slowdown of the US economy. South East Asian nations are trying to diversify their economies by focusing on more service-oriented activities such as financing or logistics. China Mainland and Zhejiang Province stand out with formidable growth rates of 8.0% and 12.3% (9.9% for China during the first quarter of 2003). Despite all the economic turmoil, China is on its way to becoming ""The"" manufacturing center of the World. India`s relatively weak performance in 2002 at 4.4% growth (compared to 5.6% in 2001) is probably the result of a difficult year in the agricultural sector, which accounts for about one fourth of the GDP. The two ""advanced"" economies of the region, Japan and Australia, have experienced a very different fate. Japan continues to have disappointing performance of 0.3% in 2002 (0.4% in 2001) whereas Australia, with 3.8% growth in 2002, is one of the fastest growing nations in the OECD group. The perspectives for 2003 however, are dimmed by the reevaluation of the Australian dollar, weaker exports, and international political uncertainties. In 2003, the competitiveness landscape is characterized by two fundamental principles: - Nations should concentrate once again on sound infrastructure: for economic purposes such as Communication, Administration, and Sciences, and for social purposes, such as Education, Health, and Security. Governments cannot escape this ultimate responsibility, even if implementation is sometimes delegated to the private sector. - Companies should rediscover the virtues of transparent and ethical behavior inside the nation in which they operate. No enterprise can be successful, and consequently no nation can be competitive, if public opinion is distrustful of the business community.

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