Why Switzerland ranks near the top of the 2019 global competitiveness ranking

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Solar Impulse 2 – an example of Swiss innovation – © Ryan Fletcher | Dreamstime.com

Switzerland made the the top 5, after dropping from 4th to 5th, in this year’s World Economic Forum (WEF) Global Competitiveness Index. Switzerland’s decline was largely due to a down weighting of a factor where it is strong, according to WEF’s Saadia Zahidi.

The Global Competitive Index measures performance in 114 areas that influence a nation’s productivity. Productivity, a measure of how much value is produced from a given set of resources, is seen as a key driver of long term economic growth.

In 2019 WEF ranked 141 economies, accounting for over 98% of global GDP.

So why does Switzerland perform so well?

According to the report investment in people powers the nation’s success. Switzerland ranks first on education, collaboration between employees and employers and its capacity to retain and attract talent from abroad. Switzerland also possesses a dual vocational and education training system, which promotes and values apprenticeship, allowing it keep youth unemployment low – Switzerland has youth unemployment of 8% compared to the European average of 25%.

In addition, with the highest international patent application rate per inhabitant in the world, Switzerland is reaping the rewards of decades of visionary policies and smart investment into an ecosystem that favours human innovation, said the report.

What keeps Switzerland from first place?

Trade. The big difference between Switzerland and first-placed Singapore is trade openness. Singapore ranks first on this measure with a score of 88.7, well ahead of Switzerland, which ranks 87th and scores only 54.7.

In addition, Switzerland is the worst nation in the report on complexity of trade tariffs, ranking last with a score of 11.3. It is also well down the list on border clearance efficiency (16th) and on prevalence of non-trade barriers (40th).

What risks lie ahead for Switzerland?

According to the authors of the report, tendencies towards isolationism and withdrawal could affect the immigration of skilled foreign workers who contribute to the country’s success on all levels, although tighter controls to prevent wage abuses and dumping are necessary.

In addition, skills shortages remain a problem. Business executives who participated in the survey cited the shortage of qualified labour as the most problematic factor for doing business in the country. At the end of June 2014, there were more than 52,000 vacancies in Switzerland.

Finally, Switzerland’s demographics are unfavourable. With an ageing population, Switzerland needs to encourage more women work, said the report. In Switzerland, only 17% of mothers work full time. It also needs to develop a more positive attitude towards “ageing” workers and greater willingness to employ and train them. These measures would help preserve and possibly enlarge the talent pool, and address the looming pension crisis, according to the authors.

A breakdown of Switzerland’s score can be seen here.