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Business >> Thursday May 10, 2007
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McKinsey Quarterly
Global Insights

Thai competitiveness ranking falls yet again


Thailand's overall competitiveness in 2007 dropped to among the worst in the Asia-Pacific region, according to the latest findings by the Switzerland-based Institute for Management Development (IMD). The IMD, in its 2007 World Competitiveness Yearbook, said Thailand ranked 33rd out of 55 economies surveyed, down from 29th place in 2006 and 25th in 2005.

Thailand must restore investor confidence, strengthen industrial competitiveness, reduce logistics costs, implement legal and regulatory reforms and bolster human resources, the report said.

Within Asia-Pacific, Thailand ranked 11th for 2007, down one spot from the year before and four spots down from seventh place in 2005.

Thailand's economic performance actually improved to 15th in 2007 from 19th the year before. Strengths included employment, the cost of living and tourism. Economic weaknesses included the volatile exchange rate, per capita GDP and a relatively low amount of direct investment abroad.

Government efficiency ratings slid seven spots to 27th for 2007. Central bank policy, government policy and political stability were all cited as weaknesses. Business efficiency fell to 34th from 25th, with the stock market, small business efficiency and productivity seen dragging down the ratings.

Thailand's infrastructure ratings also dropped to 48th for 2007 from 42nd last year. Health care, research and development spending and Internet penetration were all viewed as weak spots.

Among global economies, the United States remained the most competitive nation on the planet. Other regional economies, particularly Singapore, narrowed the gap with the United States. The island state's competitiveness rose to 99.121 points, close to the US benchmark of 100 points. Thailand scored 57.758.

As for others in the region, Hong Kong was the second most competitive at 93.541, followed by Australia with 82.387 and China at 79.484. Bringing up the rear were Indonesia at 37.410, the Philippines at 47.163, and Thailand. Japan was the region's biggest loser, falling to eighth spot in 2007 from fourth.

On a global scale, Hong Kong ranked third, followed by Luxembourg, Denmark, Switzerland and Iceland.

China came in at number 15, followed by Taiwan at 18 and Malaysia at 23.

Of the 55 economies ranked by the IMD, 40 are increasing or maintaining their competitiveness relative to the United States. Only 15 are losing ground.

Professor Stephane Garelli from the IMD said the way others were catching up to the leader showed that economic and business power was shifting to new countries.

China, Russia and India together have $1.7 trillion in foreign currency reserves. Local companies from Southeast Asia, India, China, Russia and the Persian Gulf are buying industrial assets the world over.

''In all likelihood, industrialised nations will find it hard to tolerate such a power shift,'' Prof Garelli wrote.

''They will not accept the loss of some of their 'business jewels' to newcomers without a fight. We shall thus face a year of rising protectionist measures.''

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