World Economic Forum

 

Korea’s global competitiveness is getting mixed reviews. While Korea’s rank in the World Economic Forum (WEF) global competitiveness index has dropped by six places, foreign experts and media see Korea as a high-performer at a time of crisis.

The government is also arguing that the WEF report has problems in its evaluation indicators. The government’s plan to issue foreign exchange stabilization bonds in foreign currency is also interpreted as a sign of confidence.

WEF Rank Drops by Six Places

According to the Ministry of Strategy and Finance (MOSF) and WEF on September 4, Korea’s rank in the 2013 global competitiveness was at 25th among the 148 countries, six places lower than last year. This is the lowest rank since 2004 when Korea placed 29th.

After ranking its record high of 11th place in 2007, Korea’s rank has steadily declined, except for going up to 19th place in 2012 from 24th place the previous year. Looking at the twelve pillars, except for macroeconomic environment, which rose from 10th to 9th, all of othem saw a large decline.

Financial market development took the largest fall (71st→81st), followed by institutions (62nd→74th), health and primary education (11th→18th), labor market efficiency (73rd→78th), technological readiness (18th→22nd), higher education and training (17th→19th), and business sophistication (22nd→24th).

Among the evaluation indicators, transparency of government policymaking placed 137th in the world. Cooperation in labor-employer relations (132nd), efficacy of corporate boards (130th), protection of minority shareholders’ interests (124th), redundancy costs (120th), and extent of market dominance (118th) also performed poorly. 

On the other hand, inflation (1st), tertiary education enrollment rate (1st), intensity of local competition (8th), Internet users (4th), Broadband Internet subscription rate (5th), and foreign market size (5th) performed well.

“Surveys for this report were carried out in April and May, when North Korea risk was at its peak following North Korea’s 3rd nuclear test in February and withdrawal of workers from the Gaeseong industrial complex in April. Eight consecutive quarters of low growth rates below 1% may also have had a negative effect on the businessmen who answered the surveys,” analyzed MOSF.

Ministry of Strategy and Finance Says “Problems in the evaluation indicators”

However, MOSF is not accepting the results as is. They pointed out that the same evaluation indicators received different rankings based on the evaluating institution. Even when using the same methodology, the rankings can change based on the survey target and survey period.

In fact, the International Institute for Management Development (IMD) ranked Korea 22nd, the same as last year. While the WEF rankings have seen huge declines recently, Korea has been ranked a record high of 22nd for three consecutive years by the IMD evaluation.

MOSF also questioned the indicators that went against intuition. Korea’s mobile telephone subscription rate is above 100%, but it was ranked only 70th of the 148 countries. From Hong Kong, which placed first, to Ghana, which placed 92nd, countries with more SIM cards than the population ranked high in the index, putting Korea at a lower rank. In fact, the mobile telephone subscription rate in Hong Kong reached 227.9%, Kuwait 191.1%, Gabon 187.4%, and Panama 186.7%. Primary education enrollment remained similar to last year at 98.6%, but Ireland saw a rise from 95.1% to 99.7%, and Myanmar (99.6%) and Tunisia (99.4%) entered the index, pushing Korea downwards in the rankings.

WEF statistical data was collected directly from the International Monetary Fund (IMF), World Bank (WB), United Nations (UN), World Health Organization (WHO), and surveys were conducted through the Korea Advanced Institute of Science and Technology (KAIST), and Korea Development Institute (KDI).

“Efficient Economic Management” in Face of North Korean Nuclear Threats

Foreign press and experts are more positive about Korea’s performance. Considering there was a high North Korean nuclear risk at the time of evaluation, the new government has shown relatively efficient economic management in its first 5 months.

“Investors are attacking emerging economies with high current account deficits and short-term foreign debts, but Korea has remained relatively calm,” reported the Wall Street Journal (WSJ) at the end of last month, citing US Federal Reserve officials and market experts.
 
International credit rating agencies Moody’s, Standard & Poor’s (S&P), and Fitch have also given ratings of Aa3, A+, and AA- to the foreign exchange stabilization bonds to be issued in US dollars by the Korean government.

“Credit ratings for the Korean government reflect a favorable policy environment, healthy financial situation, and overall fair levels of net external debts,” explained S&P.

However, GDP growth declining for the second consecutive year, and its rank plummeting from 57th to 117th among 189 countries, is seen as a bad sign.

Copyright © BusinessKorea. Prohibited from unauthorized reproduction and redistribution