Taiwan's global competitive ranking drops to 14th place

This article was published by the Taiwan Headlines on May 12, 2006. It reports that in the Competitiveness Scoreboard 2006 released by Switzerland-based IMD, Taiwan suffered a steep decline in its ranking for the factor of business efficiency. It was a sharp contrast to the nation's outstanding performance in this area in the past.

According to industry analysts, the decline is a warning signal to Taiwan's financial environment and business competitiveness. It shows that Taiwan has lagged behind many other countries in the acute global competition.

According to this article, the factor of business efficiency is an indicator of business competitiveness. It contains elements such as labor-management relationship, working hours, corporate governance, and innovation capability, which in turn reflect the decision-making capability and global perspective of enterprises. In 2006, Taiwan's ranking in this factor plunged to the 14th place, down from the 6th place in 2005. This change was mainly due to declines in certain detailed evaluation items, such as banking management and transparency, corporate debt, corporate supervision, and corporate accounting.

Meanwhile, overall ranking for Taiwan's competitiveness plunged to the 18th place in 2006, from the 11th place in 2005. This was only one place above China, whose ranking jumped 12 places to the 19th place.

Taiwan also slipped in the rankings for the other three factors in the global competitiveness evaluation, which covers 61 countries. Specifically, Taiwan's ranking for economic performance dropped to the 27th place, that for government efficiency dropped to the 24th place, and that for infrastructure dropped to the 20th place.

Industry analysts attributed the decline to the impact of Taiwan's second financial reform on the financial market. The decline has triggered concern about Taiwan's financial environment among foreign investors and lowered their evaluation of the transparency of Taiwan's banking management.

The government's Council for Economic Planning and Development attributed the decline of Taiwan's competitiveness ranking to the deteriorating impression of Taiwan's economic environment among multinational managers, whose opinions had a weighting of 30 percent in the evaluation. When questionnaires for the survey were handed out to these multinational managers in March 2006, the government in Taiwan just proposed the policy of "active management and effective opening" on Chinese investments. The conservative policy sparked heated debates between various political parties and among many business and industry sectors. It obviously also triggered concern among members of the foreign business community over Taiwan's overall business environment.

Specifically, Taiwan's ranking for the item of "whether banking control impedes business development" dropped to the 46th place in 2006, from the 34th place in 2005. The nation's ranking for the item of "whether bank financing can support business activities" also dropped to the 31st place in 2006, from the 17th place in 2005. Finally, Taiwan's rankings for the item of "risk for political instability" and "social cohesiveness" both plunged to the 58th place in 2006.