The country is now ranked 27th out of 63 countries in the World Competitiveness Ranking 2020 report by the Institute for Management Development (IMD), which analysed global economies and ability to generate prosperity.
Last year, the report ranked Malaysia the 22nd most competitive economy in the world, the same spot it held in 2018.
According to the IMD report, countries that overtook Malaysia in the world competitiveness ranking in 2020 were the United Kingdom (19th), South Korea (23rd), Saudi Arabia (24th), Belgium (25th) and Israel (26th).
The Switzerland-based business school noted Malaysia’s government efficiency ranking dropped six positions to 30th, while business efficiency fell 11 rungs to 29th and infrastructure dropped three spots to 31st.
However, Malaysia’s economic performance ranking improved two spots to 9th.
Economists told StarBiz the IMD report served as a reminder to policymakers of the need to continuously improve on the country’s efficiencies, lest it loses out to countries that are aggressively making improvements.Bank Islam chief economist Mohd Afzanizam Abdul Rashid, for one, said there are areas that the Government can work on to boost the country’s competitiveness.
Citing Bank Negara’s 2017 report on Rethinking Investment Incentives, which featured a long list of incentives administered by various government agencies, Afzanizam said streamlining the procedures, monitoring agencies and reducing red tape would be a step in the right direction.
“I would like to think the country has a decent infrastructure such as electricity, water, highways as well as pool of talented people which can always be the catalyst to improve the level of competitiveness.
The government would just need to harness these so that the businesses can operate almost seamlessly, ” Afzanizam said, adding that it was also necessary to beef up the country’s ICT infrastructure to bolster the digital economy.
Another economist noted that Malaysia is in a fierce competition to attract foreign investments, particularly now that major companies are looking at relocating out of China to other countries within the region, hence the need to boost competitiveness.
“While the Government has implemented many economic-stimulative policies in the wake of the Covid-19 pandemic, policymakers need to improve on the structural weaknesses so that the long-term competitiveness of the country can be improved, and Malaysia can remain an attractive investment destination and a place to do business, ” he said.
“Business-friendly policies aside, the Government also needs to step up its effort in eradicating corruption, improving transparency and reducing bureaucracy... government performance is also important and it has long-term implications on the country’s competitiveness and economic performance, ” he added.
Within Asean, Malaysia remained the second most competitive economy after Singapore, which had also retained its the top position in the global ranking for the second year in a row.
As for the other regional peers, the Philippines was the only country that saw improvement, up one spot to 45th, while Thailand fell four places to 29th, and Indonesia saw the largest drop from 32nd to 40th.
IMD said the impact of Covid-19 on the competitiveness ranking was partially captured by executives’ opinions about the effectiveness of the different health systems.
“In the ASEAN countries included in our sample, only Singapore (remains at 4th) and Thailand (improved from 28th to 22nd) have a positive performance in the effectiveness of the health infrastructure, ” it said.
“Indonesia slightly declines from 36th to 38th, and the Philippines from 45th to 49th. Malaysia experiences the largest decline in the health infrastructure (from 17th to 23rd) among ASEAN countries, ” it added.
In Asia-Pacific, Malaysia was ranked the 8th most competitive behind South Korea, New Zealand, China, Australia, Taiwan, Hong Kong and Singapore.
With the exception of Singapore, the Philippines, Taiwan and South Korea, most Asian economies dropped in rankings this year, IMD pointed out.
“The reason for the Asian economies’ less stellar performance as a region this year is partly the result of the trade frictions between China and the US, particularly because these economies are highly dependent on trade with China, ” it said.
“Therefore, any negative economic repercussions felt in China also ripple to other countries in the region, ” it explained.
China dropped six rungs to 20th place in the rankings this year.
The top five were Singapore, Denmark, Switzerland, the Netherlands and Hong Kong.
Meanwhile, IMF noted Malaysia faced several challenges this year that could have implications on its global competitiveness ranking.
These included minimising the impact of Covid-19 to the country’s economic, social and environment with sound policies; accelerating workforce up-skilling with application of strong online platform mechanism; strengthening productivity and competitiveness through change of mindset and creativity; strengthening infrastructure development to push for economic recovery; and intensifying the adoption of fourth industrial revolution technologies for SMEs.
IMD noted among the criteria that saw biggest declines in Malaysia this year were exchange rate stability; population growth; risk of political stability; state ownership of enterprises; public sector contracts; bureaucracy; pollution problems; bribery and corruption; skilled labor; and social cohesion.
Among the criteria that saw major improvements, however, were long-term employment growth; high-tech exports; electricity costs for industrial clients; gasoline prices; and start-up procedures.
Source: The Star