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Hong Kong economy

Hong Kong overtaken by US as world’s most competitive economy due to declining standards in education, health and the environment

Latest rankings from IMD World Competitiveness Centre drop city down a spot despite slight improvement in economic performance

PUBLISHED : Thursday, 24 May, 2018, 11:56am
UPDATED : Thursday, 24 May, 2018, 10:57pm

Hong Kong’s decline in education, health and the environment means the city is no longer the world’s most competitive economy, according to the latest rankings from the IMD World Competitiveness Centre.

The United States, meanwhile, jumped three places to claim top spot, with Hong Kong dropping to second on the list compiled by the Switzerland-based organisation, which was released on Thursday.

Regional rival Singapore remained in third place, according to the centre, which ranks 63 regions around the world annually.

According to this year’s ranking, Hong Kong continued to lead the world in government and business efficiency, and improved slightly in economic performance from the 11th last year to 9th.

However, the city dropped three places to 23rd in infrastructure. The slip was caused by a drop in its education ranking, which slipped three places to 18th, while the city fell five places to 23rd in the health and environment category. Technological infrastructure dropped one place to 19th.

The ranking report identified a series of weaknesses in the city’s infrastructure, such as total public expenditure on education, business expenditure on research and development, total expenditure on research and development, and health expenditure.

In his budget speech in February, Financial Secretary Paul Chan Mo-po estimated that the government would spend HK$113.7 billion on education in year 2018-19, an increase of 28.4 per cent from HK$88.5 billion the previous financial year.

China must innovate now or lose its economic competitiveness

The expenditure on public health care services will also increase by 13 per cent to HK$71.2 billion.

Innovation and technology has also seen a five-fold budget boost to HK$50 billion.

Chan conceded that Hong Kong scored notably low in technological and scientific infrastructure, but stressed the government had already spent substantial resources to improve this area.

In compiling the rankings, researchers collected data from international sources such as the United Nations, World Bank and International Monetary Fund, as well as from a range of private institutes, such as known consultancy firms.

An opinion survey with business executives, that is also part of the process, is conducted between February and April every year.

A government spokesman said on Thursday that the ranking again recognised the city as one of the most competitive in the world.

“Amid the fierce competition from other economies, it is of utmost importance for us to consolidate Hong Kong’s competitive edges, including the fine tradition of the rule of law, an open and free market, an efficient public sector and a robust institutional framework,” he said.

He added that the government would strive to develop innovation and technology as the “new engine of economic growth”, as well as seize the opportunity to “play a unique role” in mainland China’s major development strategies such as the “Belt and Road Initiative” and the Guangdong-Hong Kong-Macau Bay Area development plan.

Hongkongers most confident of economy in three years, survey finds

The ranking, in its 30th year, defines competitiveness based on economic performance, government efficiency, business efficiency and infrastructure. Each indicator contains a set of sub-indicators.

Mainland China rose five places to the 13th spot this year. Its economic performance remained second, business efficiency rose three places to 15th, and infrastructure rose six places to 19th.

However, its government efficiency slipped one place to 46th.

Taiwan was ranked 17th, falling three places. The island dropped in all four indicators, ranking 14th in economic performance, 12th in government efficiency, 20th in business efficiency and 22nd in infrastructure.