- The Washington Times - Saturday, November 1, 2003

The United States has been ranked the second-most competitive economy in the world, behind Finland, for the third consecutive year by the World Economic Forum.

A report released by the Forum last week blamed some weakening in the quality of public institutions and public finances for the United States again missing the top spot.

Technology is the key to competitiveness in the United States as well as in Japan, said Xavier Sala-i-Martin, editor of the 2003 Global Competitiveness Report that measures the potential sustained economic growth in 102 countries.

However, the United States suffers from macro-economic problems, especially regarding budget deficits and inefficiency in government spending, said Augusto Lopez-Claros, chief economist of the forum, which sponsors the annual global economic conference in Davos, Switzerland.

Based on public data combined with current perceptions of business leaders operating in a given country, the report focused on the macro-economic environment, quality of institutions and state of technology as key ingredients of long-term economic growth and prosperity.

Taxes, inefficient bureaucracy and restrictive labor regulations are also considered as the most problematic factors for doing business in the United States, the report said.

Finland was rated as the most competitive economy of the world for the third year mainly for its judicial independence and its technological sophistication, the report said.

As in 2002, Sweden ranks third and Denmark fourth. But Europe’s four biggest economies lag far behind: Germany (13), Britain (15), France (26) and Italy (41).

At the fifth and sixth positions are Taiwan and Singapore, the most competitive countries of Asia. The report cited an “excellent performance in technology” in Taiwan and a good macro-economic environment and quality of public institutions in Singapore.

China, which stood at 38 in 2002, moved down to 44 this year because of corruption in the public sector and lack of independence in its judiciary, the report said.

Corruption, along with high inflation and a poor banking system, also was blamed for Russia ranking 70.

Harvard professor Michael Porter, co-chairman of the report committee, said Russia has most of the assets that the other countries on the list have, but it is not able to realize its potential because of a lack of transparency in its institutions.

Chile, at 28, is ranked the highest among Latin American countries because of coherent economic reforms, according to Mr. Lopez-Claros. Mexico came in at 47 and Argentina at 78.

Haiti, the poorest country in the Western Hemisphere, is at the bottom of the list, at 102, mostly due to its weak public institutions and the lack of technological progress. Last year Haiti was also ranked the least competitive.

Among the 10 countries at the bottom of the ranking, six are from Africa — Mozambique (93), Zimbabwe (97), Madagascar (96), Mali (99), Angola (100) and Chad (101).

Mr. Lopez-Claros attributed the poor performance of African countries to corruption and the lack of democracy. In the African continent, democracy doesn’t have strong roots yet, he said.

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