Singapore has staged a comeback, climbing two spots to become the world's third-most competitive economy, after falling from first to fifth last year.

Denmark (at No.1) and Switzerland rank ahead of the Republic in the Institute for Management Development(IMD) World Competitiveness Ranking, which released its latest list on Wednesday (June 15).

IMD is based in Switzerland and Singapore.

The Republic, which held the highest spot in 2019 and 2020, is the top Asia-Pacific economy this year, followed by Hong Kong (fifth), Taiwan (seventh) and China (17th).

IMD said Singapore's recovery stems from huge improvements in the domestic economy, where it leapt from 15th position to first, while employment jumped from 18th to third, public finance from 12th to sixth, and productivity and efficiency from 14th to ninth.

The Republic bagged the top spot in both international trade and technological infrastructure, and second place for business legislation.

But Singapore came in 14th for management practices, 16th for scientific infrastructure, and 25th for health and environment.

"Indicators based on executives' sentiment also highlight concerns with respect to hybrid work models and the overall attractiveness of the city-state to foreign highly skilled professionals," said IMD.

"If these concerns materialise, they might hinder Singapore's capacity to attract overseas talent in the following years, potentially curbing its long-term competitiveness."

IMD said the rankings this year show how differing Covid-19 policies have helped or hindered economic recovery from the pandemic.

Mr Christos Cabolis, chief economist at IMD's World Competitiveness Centre, which produces the ranking, said global challenges affecting the competitiveness of countries include Covid-19 variants and the number of infected people around the world; differing national policies to address the pandemic ranging from zero tolerance to living with the virus; as well as Russia's invasion of Ukraine.

"Inflationary pressure is affecting most economies," he added. "It is clear that inflationary pressure is now amplifying the already problematic supply-chain bottlenecks throughout the world."

The IMD World Competitiveness Ranking this year compared 63 economies, by measuring economic wellbeing through statistical data and survey responses from executives.

 

 

IMD said Russia and Ukraine were not included this year due to the limited reliability of the data collected.

Bahrain entered the ranking for the first time, at 30th.

CIMB Private Banking economist Song Seng Wun said government support measures during the pandemic helped boost local businesses and domestic economic consumption, as well as ensure people have jobs.

"In aviation and hospitality, for example, Singapore's efforts last year paid off in the rankings, because we have the resources to roll out support measures, and scale back support for industries like F&B and retail that are recovering amid the eased restrictions - while continuing to upgrade and take advantage of new trends and tech like fintech."

He added that Singapore's Covid-19 policy has a scientific basis and clear messaging, which allows businesses to know what the days ahead will bring, and plan accordingly.

"We must continue to do things in a confident manner with no policy flip-flops so people continue to invest in Singapore, as they have a sense of security that investments will pay off and not be subjected to political or other risks."

National University of Singapore (NUS) business professor Lawrence Loh said the Republic has shown that it is possible to coexist with the coronavirus with its Covid-19 strategies, including the vaccination drive and progressive easing of restrictions.

"Singapore has managed to flatten the curve totally for many months even though we have opened up quite a lot," he added.

Prof Loh said that throughout the pandemic, the country has remained an international transshipment hub and continued to sustain the momentum of the flow of goods and services.

For the area of management practices which the Republic did not fare as well in, Prof Loh, who also heads the Centre for Governance and Sustainability in NUS Business School, said Singapore companies should disclose their best practices more rigorously and look at improving board diversity, to square up to other Asian and Western countries.

 

 

"This is important for stakeholders, investors and consumers. They need to know what the company is up to," he added.

IMD also cautioned against focusing on short-term pressures, instead of long-term ones such as sustainability.

It said business executives now perceive inflationary pressures, geopolitical conflicts and supply chain bottlenecks to be impacting their businesses more than regulation on greenhouse emissions and socioeconomic disparities.

"This short-term issue prioritisation may lead to the neglect of long-term trends, such as those related to environmental sustainability, which could have a severe global impact," said Mr José Caballero, senior economist at IMD.

Noting Singapore's sustainability efforts such as the carbon tax in 2019, Prof Loh said: "Sustainability might impose a cost on businesses, but we're running a marathon.

"In the long run, carbon tax will be a good incentive for businesses to switch to better practices and the whole system will be collectively better off."

 

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