National competitiveness is a central preoccupation of government and industries. There are several indices that measure the competitiveness of a nation, based on various factors.

The more widely quoted indices are the World Economic Forum's (WEF) Global Competitiveness Index and the IMD World Competitiveness Yearbook.

Others like the Economic Intelligence Unit Quality of Life Index and AT Kearney's Globalisation Index measure specific areas of competitiveness. There are also specialised reports such as the AT Kearney study on outsourcing.

While their validity and/or accuracy can be debated, the indices are generally accepted as giving a general indicator of how a country ranks in relation to competitors against a set of variables.

This article compares the performance of Malaysia against Singapore and Taiwan, two economies that have similar development patterns with Malaysia, and against India and China -two late developers who will pose the greatest challenge to Malaysia in the near future.

The WEF-GCI looks at selected factors grouped under nine pillars which they consider critical to driving productivity and competitiveness. The pillars are institutions, infrastructure, macro- economy, health and primary education, higher education and training, market efficiency, technological readiness, business operations and innovation.

The IMD-GCR looks at selected factors grouped under four key areas namely, economic performance, government, business efficiency and infrastructure.

The AT Kearney FDI Confidence Index (ATK-FDI-CI) ranks countries and tracks the impact of likely political, economic and regulatory changes on the foreign direct investment intentions and preferences of the leaders of the world's leading companies.

Rankings for India and China should be read carefully as these nations provide the extremes. India and China have the best universities, as well as a high illiteracy rate. They have world class companies, but also high under-employment. They are at the cutting edge of technology, yet are unable to provide basic healthcare for all citizens.

Competitiveness rankings

This ranking (see Chart) gives cause for concern to Malaysians.

Singapore is ranked in the top10 bracket, while Malaysia is in the category of also-rans.

Firstly, Singapore, an island economy of 4 million people, outranks Malaysia by a considerable distance. Secondly, China and India are not very far behind Malaysia.

India and China's ranking reflect their current status as late developers, but the ATK-FDI-CI reflects where investors see the future. Malaysia has slipped in the IMD ranking, but has improved in the WEF ranking.

The ATK report further establishes Malaysia as a country that is fast dropping off the radar screen of foreign investors. In 2003, Malaysia was ranked 23rd but improved its position to 15th in 2004 possibly on the back of euphoria aroused by the supposedly squeaky clean regime of Prime Minister Abdullah Ahmad Badawi. However, it dropped out of the top 25 last year.

On closer observation, Malaysia's weakness can be identified as being caused mainly by the government. Malaysia's ranking in the WEF basic requirements are woeful compared to Singapore.

Although Malaysia's basic requirements are close to Taiwan's performance, the latter's efficiency enhancers and innovation factors push it way ahead of Malaysia.

India and China too are fast catching up in these categories, even with more than a billion people each and with problems far more complex than in Malaysia. Singapore and Taiwan are not far behind either.

Should China and India move up the national competitiveness ranking, it would mean the end of Malaysia, as both countries have the potential to provide most of the manufactured goods that Malaysia produces.

Indisputable conclusions

While the data can lead to many interpretations, the following facts cannot be disputed:
- Malaysia's competitiveness as a nation is on a downtrend;
- Singapore, our main competitor in the region, is way ahead of Malaysia in almost all sectors except innovation factors;
- Malaysia's basic requirements are not meeting the required standards to raise the nation's competitiveness; and
- Malaysia's technological readiness and higher education are not performing up to the mark.

All is not lost, though, because Malaysia is far more competitive than India and China as a nation.

However, the government must re-evaluate its policies as this is the obvious reason for Malaysia's dismal performance.

While Malaysia ranks highly overall, it must be noted that world trade - and thereby wealth - is concentrated in the hands of a few countries. If Malaysia intends to join that number, a regime change is necessary.

MK GRACIAN is a Malaysian economist concerned about the future of his country.