Insight Report

Klaus Schwab, World Economic Forum

The GlobalCompetitiveness Report2014–2015

Rank Score(out of 144) (1–7)

GDP (PPP) per capita (int’l $), 1990–2013

Percent of responses

Note: From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

2.1: Country/Economy Profiles

206 | The Global Competitiveness Report 2014–2015

0 5 10 15 20 25 30

10,000

20,000

30,000

40,000

50,000

60,000

1990 1992 19961994 1998 2000 2002 20062004 20102008 2012

Institutions

Infrastructure

Macroeconomic environment

Health and primary

education

Higher education and training

Goods market efficiency

Labor market efficiency

Financial market development

Technological readiness

Market size

Business sophistication

Innovation

1

2

3

4

5

6

7

Key indicators, 2013

Population (millions) .......................................... 7.2GDP (US$ billions) ........................................ 273.7GDP per capita (US$) ................................. 37,777GDP (PPP) as share (%) of world total ............ 0.44

Global Competitiveness Index

GCI 2014–2015 ........................................................ 7 ..... 5.5GCI 2013–2014 (out of 148) ....................................... 7 ......5.5GCI 2012–2013 (out of 144) ....................................... 9 ......5.4GCI 2011–2012 (out of 142) ..................................... 11 ......5.4

Basic requirements (20.0%) .........................................3 ......6.2Institutions .................................................................. 8 ......5.6Infrastructure .............................................................. 1 ......6.7Macroeconomic environment ................................... 14 ......6.2Health and primary education ................................... 32 ......6.3

Efficiency enhancers (50.0%) .......................................3 ......5.6Higher education and training ................................... 22 ......5.4Goods market efficiency ............................................ 2 ......5.6Labor market efficiency .............................................. 3 ......5.6Financial market development .................................... 1 ......5.9Technological readiness .............................................. 5 ......6.1Market size ............................................................... 27 ......4.9

Innovation and sophistication factors (30.0%) ...........23 ......4.8Business sophistication ........................................... 16 ......5.1Innovation ................................................................. 26 ......4.4

The most problematic factors for doing business

Insufficient capacity to innovate .........................................17.7

Inefficient government bureaucracy ...................................14.5

Inflation ..............................................................................11.7

Restrictive labor regulations ...............................................11.4

Inadequately educated workforce ........................................9.9

Policy instability ...................................................................9.8

Inadequate supply of infrastructure ......................................6.5

Access to financing .............................................................4.4

Poor work ethic in national labor force ................................3.5

Foreign currency regulations ................................................2.5

Government instability/coups ..............................................2.0

Tax rates ..............................................................................2.0

Corruption ...........................................................................1.8

Tax regulations ....................................................................1.2

Poor public health ...............................................................1.1

Crime and theft ...................................................................0.1

Hong Kong SAR

Hong Kong SAR Advanced economies

Stage of development

Factordriven

Efficiencydriven

Innovationdriven

1 Transition 1–2 2 Transition

2 –3 3

Hong Kong SAR Advanced economies

© 2014 World Economic Forum

The Global Competitiveness Index in detail

The Global Competitiveness Report 2014–2015 | 207

2.1: Country/Economy Profiles

Notes: Values are on a 1-to-7 scale unless otherwise annotated with an asterisk (*). For further details and explanation, please refer to the section “How to Read the Country/Economy Profiles” on page 101.

1 See the “Technical Notes and Sources” section.

INDICATOR VALUE RANK/144

6th pillar: Goods market efficiency (cont’d.) 6.06 No. procedures to start a business* .......................... 3 ............10 6.07 No. days to start a business* ................................. 2.5 ..............5 6.08 Agricultural policy costs.......................................... 4.0 ............47 6.09 Prevalence of trade barriers ................................... 5.5 ..............1 6.10 Trade tariffs, % duty* .............................................. 0.0 ..............1 6.11 Prevalence of foreign ownership ............................. 6.1 ..............5 6.12 Business impact of rules on FDI ............................. 6.2 ..............3 6.13 Burden of customs procedures .............................. 6.1 ..............2 6.14 Imports as a percentage of GDP* ...................... 249.1 ..............1 6.15 Degree of customer orientation .............................. 5.7 ..............7 6.16 Buyer sophistication ............................................... 4.6 ..............7

7th pillar: Labor market efficiency 7.01 Cooperation in labor-employer relations ................. 5.5 ..............9 7.02 Flexibility of wage determination ............................. 6.1 ..............4 7.03 Hiring and firing practices ....................................... 5.7 ..............1 7.04 Redundancy costs, weeks of salary* ...................... 5.8 ............16 7.05 Effect of taxation on incentives to work .................. 5.9 ..............5 7.06 Pay and productivity ............................................... 5.5 ..............1 7.07 Reliance on professional management ................... 5.2 ............27 7.08 Country capacity to retain talent ............................. 5.3 ..............7 7.09 Country capacity to attract talent ........................... 5.6 ..............7 7.10 Women in labor force, ratio to men* ..................... 0.77 ............83

8th pillar: Financial market development 8.01 Availability of financial services ............................... 6.2 ..............3 8.02 Affordability of financial services ............................. 6.0 ..............4 8.03 Financing through local equity market .................... 5.7 ..............1 8.04 Ease of access to loans ......................................... 4.5 ..............5 8.05 Venture capital availability ....................................... 4.3 ..............5 8.06 Soundness of banks .............................................. 6.5 ..............7 8.07 Regulation of securities exchanges ........................ 6.0 ..............3 8.08 Legal rights index, 0–10 (best)* ............................... 10 ..............1

9th pillar: Technological readiness 9.01 Availability of latest technologies ............................ 6.1 ............18 9.02 Firm-level technology absorption ............................ 5.6 ............19 9.03 FDI and technology transfer ................................... 5.1 ............23 9.04 Individuals using Internet, %* ............................... 74.2 ............30 9.05 Fixed broadband Internet subscriptions/100 pop.* . 30.8 ............16 9.06 Int’l Internet bandwidth, kb/s per user* ........... 1,762.8 ..............2 9.07 Mobile broadband subscriptions/100 pop.*.......... 95.4 ..............9

10th pillar: Market size 10.01 Domestic market size index, 1–7 (best)* ................. 4.4 ............33 10.02 Foreign market size index, 1–7 (best)* .................... 6.2 ..............5 10.03 GDP (PPP$ billions)* .......................................... 381.9 ............35 10.04 Exports as a percentage of GDP* ...................... 245.0 ..............1

11th pillar: Business sophistication 11.01 Local supplier quantity ........................................... 5.4 ............12 11.02 Local supplier quality .............................................. 5.4 ............18 11.03 State of cluster development .................................. 5.0 ............15 11.04 Nature of competitive advantage ............................ 5.3 ............17 11.05 Value chain breadth ................................................ 5.0 ............17 11.06 Control of international distribution ......................... 4.8 ............13 11.07 Production process sophistication .......................... 5.2 ............22 11.08 Extent of marketing ................................................ 5.5 ............12 11.09 Willingness to delegate authority ............................ 4.5 ............26

12th pillar: Innovation 12.01 Capacity for innovation ........................................... 4.5 ............32 12.02 Quality of scientific research institutions ................. 4.8 ............32 12.03 Company spending on R&D ................................... 3.9 ............26 12.04 University-industry collaboration in R&D ................. 4.6 ............28 12.05 Gov’t procurement of advanced tech products ...... 4.0 ............30 12.06 Availability of scientists and engineers .................... 4.5 ............36 12.07 PCT patents, applications/million pop.* ................ n/a1 ...........n/a

INDICATOR VALUE RANK/144

1st pillar: Institutions 1.01 Property rights ....................................................... 6.1 ..............6 1.02 Intellectual property protection ............................... 5.8 ............10 1.03 Diversion of public funds ........................................ 5.8 ............10 1.04 Public trust in politicians ......................................... 4.6 ............18 1.05 Irregular payments and bribes ................................ 6.2 ............12 1.06 Judicial independence ............................................ 6.3 ..............5 1.07 Favoritism in decisions of government officials ....... 4.3 ............19 1.08 Wastefulness of government spending ................... 4.5 ............14 1.09 Burden of government regulation ........................... 5.0 ..............5 1.10 Efficiency of legal framework in settling disputes .... 5.9 ..............3 1.11 Efficiency of legal framework in challenging regs. ... 5.4 ..............3 1.12 Transparency of government policymaking ............. 5.8 ..............4 1.13 Business costs of terrorism .................................... 5.7 ............49 1.14 Business costs of crime and violence..................... 5.7 ............12 1.15 Organized crime ..................................................... 5.8 ............25 1.16 Reliability of police services .................................... 6.2 ..............6 1.17 Ethical behavior of firms ......................................... 5.5 ............18 1.18 Strength of auditing and reporting standards ......... 6.2 ..............7 1.19 Efficacy of corporate boards .................................. 5.4 ............20 1.20 Protection of minority shareholders’ interests ......... 5.5 ..............8 1.21 Strength of investor protection, 0–10 (best)* .......... 9.0 ..............3

2nd pillar: Infrastructure 2.01 Quality of overall infrastructure ............................... 6.5 ..............2 2.02 Quality of roads ...................................................... 6.0 ..............7 2.03 Quality of railroad infrastructure .............................. 6.3 ..............3 2.04 Quality of port infrastructure ................................... 6.5 ..............4 2.05 Quality of air transport infrastructure....................... 6.6 ..............3 2.06 Available airline seat km/week, millions* .......... 2,533.4 ............16 2.07 Quality of electricity supply ..................................... 6.8 ..............2 2.08 Mobile telephone subscriptions/100 pop.* ......... 238.7 ..............1 2.09 Fixed telephone lines/100 pop.* ........................... 63.0 ..............2

3rd pillar: Macroeconomic environment 3.01 Government budget balance, % GDP* ................... 0.8 ............16 3.02 Gross national savings, % GDP* .......................... 26.7 ............34 3.03 Inflation, annual % change* .................................... 4.3 ............86 3.04 General government debt, % GDP* ..................... 33.8 ............48 3.05 Country credit rating, 0–100 (best)* ...................... 83.8 ............17

4th pillar: Health and primary education 4.01 Malaria cases/100,000 pop.* ................................M.F. ...........n/a 4.02 Business impact of malaria ............................. N/Appl. ...........n/a 4.03 Tuberculosis cases/100,000 pop.* ....................... 77.0 ............85 4.04 Business impact of tuberculosis ............................. 6.0 ............50 4.05 HIV prevalence, % adult pop.* ............................... 0.1 ..............1 4.06 Business impact of HIV/AIDS ................................. 5.8 ............58 4.07 Infant mortality, deaths/1,000 live births* ................ 1.6 ..............1 4.08 Life expectancy, years* ......................................... 83.5 ..............1 4.09 Quality of primary education ................................... 4.9 ............28 4.10 Primary education enrollment, net %* .................. 93.5 ............75

5th pillar: Higher education and training 5.01 Secondary education enrollment, gross %* .......... 88.7 ............73 5.02 Tertiary education enrollment, gross %*................ 59.7 ............43 5.03 Quality of the education system ............................. 4.8 ............20 5.04 Quality of math and science education .................. 5.4 ..............9 5.05 Quality of management schools ............................. 5.4 ............14 5.06 Internet access in schools ...................................... 6.0 ............16 5.07 Availability of research and training services ........... 5.4 ............16 5.08 Extent of staff training ............................................ 4.6 ............26

6th pillar: Goods market efficiency 6.01 Intensity of local competition .................................. 6.1 ..............4 6.02 Extent of market dominance .................................. 4.4 ............27 6.03 Effectiveness of anti-monopoly policy ..................... 4.3 ............50 6.04 Effect of taxation on incentives to invest ................. 5.7 ..............6 6.05 Total tax rate, % profits* ....................................... 22.9 ............18

Hong Kong SAR

© 2014 World Economic Forum

Percent of responses

GDP (PPP) per capita (int’l $), 1990–2013

Rank Score(out of 144) (1–7)

Note: From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

2.1: Country/Economy Profiles

154 | The Global Competitiveness Report 2014–2015

0 5 10 15 20 25 30

0

2,000

4,000

6,000

8,000

10,000

1990 1992 19961994 1998 2000 2002 20062004 20102008 2012

Institutions

Infrastructure

Macroeconomic environment

Health and primary

education

Higher education and training

Goods market efficiency

Labor market efficiency

Financial market development

Technological readiness

Market size

Business sophistication

Innovation

1

2

3

4

5

6

7

Key indicators, 2013

Population (millions) ................................... 1,360.8GDP (US$ billions) ..................................... 9,181.4GDP per capita (US$) ................................... 6,747GDP (PPP) as share (%) of world total .......... 15.40

Global Competitiveness Index

GCI 2014–2015 ...................................................... 28 ..... 4.9GCI 2013–2014 (out of 148) ..................................... 29 ......4.8GCI 2012–2013 (out of 144) ..................................... 29 ......4.8GCI 2011–2012 (out of 142) ..................................... 26 ......4.9

Basic requirements (40.0%) .......................................28 ......5.3Institutions ................................................................ 47 ......4.2Infrastructure ............................................................ 46 ......4.7Macroeconomic environment ................................... 10 ......6.4Health and primary education ................................... 46 ......6.1

Efficiency enhancers (50.0%) .....................................30 ......4.7Higher education and training ................................... 65 ......4.4Goods market efficiency .......................................... 56 ......4.4Labor market efficiency ............................................ 37 ......4.6Financial market development .................................. 54 ......4.3Technological readiness ............................................ 83 ......3.5Market size ................................................................. 2 ......6.9

Innovation and sophistication factors (10.0%) ...........33 ......4.1Business sophistication ........................................... 43 ......4.4Innovation ................................................................. 32 ......3.9

The most problematic factors for doing business

Access to financing ...........................................................15.8

Corruption .........................................................................12.4

Tax regulations ....................................................................9.1

Inadequate supply of infrastructure ......................................8.4

Inefficient government bureaucracy .....................................6.6

Inflation ................................................................................6.4

Policy instability ...................................................................6.3

Tax rates ..............................................................................6.0

Insufficient capacity to innovate ...........................................5.0

Restrictive labor regulations .................................................4.9

Foreign currency regulations ................................................4.8

Inadequately educated workforce ........................................4.0

Government instability/coups ..............................................4.0

Poor work ethic in national labor force ................................3.6

Crime and theft ...................................................................1.8

Poor public health ...............................................................1.0

China

China Emerging and Developing Asia

Factordriven

Efficiencydriven

Innovationdriven

1 Transition 1–2 2 Transition

2 –3 3

Stage of development

China Emerging and Developing Asia

© 2014 World Economic Forum

Notes: Values are on a 1-to-7 scale unless otherwise annotated with an asterisk (*). For further details and explanation, please refer to the section “How to Read the Country/Economy Profiles” on page 101.

The Global Competitiveness Index in detail

The Global Competitiveness Report 2014–2015 | 155

2.1: Country/Economy Profiles

INDICATOR VALUE RANK/144

6th pillar: Goods market efficiency (cont’d.) 6.06 No. procedures to start a business* ........................ 13 ..........135 6.07 No. days to start a business* ............................... 33.0 ..........116 6.08 Agricultural policy costs.......................................... 4.7 ............11 6.09 Prevalence of trade barriers ................................... 4.5 ............54 6.10 Trade tariffs, % duty* ............................................ 11.1 ..........115 6.11 Prevalence of foreign ownership ............................. 4.5 ............71 6.12 Business impact of rules on FDI ............................. 5.0 ............26 6.13 Burden of customs procedures .............................. 4.3 ............55 6.14 Imports as a percentage of GDP* ........................ 24.8 ..........130 6.15 Degree of customer orientation .............................. 4.5 ............70 6.16 Buyer sophistication ............................................... 4.3 ............18

7th pillar: Labor market efficiency 7.01 Cooperation in labor-employer relations ................. 4.4 ............58 7.02 Flexibility of wage determination ............................. 4.8 ............84 7.03 Hiring and firing practices ....................................... 4.6 ............15 7.04 Redundancy costs, weeks of salary* .................... 27.4 ..........120 7.05 Effect of taxation on incentives to work .................. 4.0 ............36 7.06 Pay and productivity ............................................... 4.8 ............15 7.07 Reliance on professional management ................... 4.6 ............43 7.08 Country capacity to retain talent ............................. 4.2 ............31 7.09 Country capacity to attract talent ........................... 4.2 ............27 7.10 Women in labor force, ratio to men* ..................... 0.84 ............60

8th pillar: Financial market development 8.01 Availability of financial services ............................... 4.5 ............63 8.02 Affordability of financial services ............................. 4.4 ............50 8.03 Financing through local equity market .................... 4.2 ............34 8.04 Ease of access to loans ......................................... 3.7 ............21 8.05 Venture capital availability ....................................... 3.9 ............13 8.06 Soundness of banks .............................................. 5.0 ............63 8.07 Regulation of securities exchanges ........................ 4.4 ............58 8.08 Legal rights index, 0–10 (best)* ................................. 5 ............85

9th pillar: Technological readiness 9.01 Availability of latest technologies ............................ 4.3 ............97 9.02 Firm-level technology absorption ............................ 4.7 ............68 9.03 FDI and technology transfer ................................... 4.5 ............81 9.04 Individuals using Internet, %* ............................... 45.8 ............75 9.05 Fixed broadband Internet subscriptions/100 pop.* . 13.6 ............51 9.06 Int’l Internet bandwidth, kb/s per user* .................. 4.2 ..........120 9.07 Mobile broadband subscriptions/100 pop.*.......... 21.4 ............78

10th pillar: Market size 10.01 Domestic market size index, 1–7 (best)* ................. 6.8 ..............2 10.02 Foreign market size index, 1–7 (best)* .................... 7.0 ..............1 10.03 GDP (PPP$ billions)* ..................................... 13,395.4 ..............2 10.04 Exports as a percentage of GDP* ........................ 26.3 ..........109

11th pillar: Business sophistication 11.01 Local supplier quantity ........................................... 5.1 ............24 11.02 Local supplier quality .............................................. 4.5 ............63 11.03 State of cluster development .................................. 4.6 ............25 11.04 Nature of competitive advantage ............................ 3.9 ............45 11.05 Value chain breadth ................................................ 4.3 ............37 11.06 Control of international distribution ......................... 4.5 ............31 11.07 Production process sophistication .......................... 4.1 ............56 11.08 Extent of marketing ................................................ 4.5 ............52 11.09 Willingness to delegate authority ............................ 3.9 ............49

12th pillar: Innovation 12.01 Capacity for innovation ........................................... 4.2 ............40 12.02 Quality of scientific research institutions ................. 4.3 ............39 12.03 Company spending on R&D ................................... 4.3 ............23 12.04 University-industry collaboration in R&D ................. 4.4 ............32 12.05 Gov’t procurement of advanced tech products ...... 4.3 ............10 12.06 Availability of scientists and engineers .................... 4.4 ............43 12.07 PCT patents, applications/million pop.* ................ 11.7 ............34

INDICATOR VALUE RANK/144

1st pillar: Institutions 1.01 Property rights ....................................................... 4.5 ............50 1.02 Intellectual property protection ............................... 4.0 ............53 1.03 Diversion of public funds ........................................ 3.9 ............45 1.04 Public trust in politicians ......................................... 4.1 ............26 1.05 Irregular payments and bribes ................................ 4.0 ............66 1.06 Judicial independence ............................................ 4.0 ............60 1.07 Favoritism in decisions of government officials ....... 4.1 ............22 1.08 Wastefulness of government spending ................... 4.1 ............24 1.09 Burden of government regulation ........................... 4.1 ............19 1.10 Efficiency of legal framework in settling disputes .... 4.1 ............49 1.11 Efficiency of legal framework in challenging regs. ... 3.6 ............47 1.12 Transparency of government policymaking ............. 4.5 ............33 1.13 Business costs of terrorism .................................... 5.0 ............85 1.14 Business costs of crime and violence..................... 4.8 ............52 1.15 Organized crime ..................................................... 4.7 ............70 1.16 Reliability of police services .................................... 4.3 ............61 1.17 Ethical behavior of firms ......................................... 4.2 ............55 1.18 Strength of auditing and reporting standards ......... 4.4 ............82 1.19 Efficacy of corporate boards .................................. 4.5 ............78 1.20 Protection of minority shareholders’ interests ......... 4.1 ............67 1.21 Strength of investor protection, 0–10 (best)* .......... 5.0 ............83

2nd pillar: Infrastructure 2.01 Quality of overall infrastructure ............................... 4.4 ............64 2.02 Quality of roads ...................................................... 4.6 ............49 2.03 Quality of railroad infrastructure .............................. 4.8 ............17 2.04 Quality of port infrastructure ................................... 4.6 ............53 2.05 Quality of air transport infrastructure....................... 4.7 ............58 2.06 Available airline seat km/week, millions* ........ 14,163.0 ..............2 2.07 Quality of electricity supply ..................................... 5.2 ............56 2.08 Mobile telephone subscriptions/100 pop.* ........... 88.7 ..........108 2.09 Fixed telephone lines/100 pop.* ........................... 19.3 ............59

3rd pillar: Macroeconomic environment 3.01 Government budget balance, % GDP* ................. –1.9 ............50 3.02 Gross national savings, % GDP* .......................... 50.0 ..............5 3.03 Inflation, annual % change* .................................... 2.6 ..............1 3.04 General government debt, % GDP* ..................... 22.4 ............22 3.05 Country credit rating, 0–100 (best)* ...................... 77.5 ............25

4th pillar: Health and primary education 4.01 Malaria cases/100,000 pop.* ................................. 0.5 ............15 4.02 Business impact of malaria .................................... 5.0 ............32 4.03 Tuberculosis cases/100,000 pop.* ....................... 73.0 ............84 4.04 Business impact of tuberculosis ............................. 4.9 ............96 4.05 HIV prevalence, % adult pop.* .............................<0.1 ..............1 4.06 Business impact of HIV/AIDS ................................. 5.0 ............88 4.07 Infant mortality, deaths/1,000 live births* .............. 12.1 ............62 4.08 Life expectancy, years* ......................................... 75.2 ............53 4.09 Quality of primary education ................................... 4.2 ............59 4.10 Primary education enrollment, net %* .................. 99.9 ..............4

5th pillar: Higher education and training 5.01 Secondary education enrollment, gross %* .......... 89.0 ............72 5.02 Tertiary education enrollment, gross %*................ 26.7 ............85 5.03 Quality of the education system ............................. 4.0 ............52 5.04 Quality of math and science education .................. 4.3 ............56 5.05 Quality of management schools ............................. 3.9 ............85 5.06 Internet access in schools ...................................... 5.3 ............38 5.07 Availability of research and training services ........... 4.4 ............58 5.08 Extent of staff training ............................................ 4.3 ............46

6th pillar: Goods market efficiency 6.01 Intensity of local competition .................................. 5.4 ............44 6.02 Extent of market dominance .................................. 4.3 ............29 6.03 Effectiveness of anti-monopoly policy ..................... 4.5 ............38 6.04 Effect of taxation on incentives to invest ................. 4.0 ............44 6.05 Total tax rate, % profits* ....................................... 63.7 ..........131

China

© 2014 World Economic Forum