US government 'hampers competition'

The Australian

THE competitiveness of the US economy, still the highest in the world, is being undermined by the US government, allowing more efficient and smaller Asian and Nordic economies to catch up, a leading ranking of the most competitive nations shows. "A growing gap between governments and economic performance is always a bad omen for the future," said Stephane Garelli, editor of the IMD business school's 2006 World Competitiveness Yearbook.

The IMD report assesses economic performance, government and business efficiency, and infrastructure - including factors like education, technology, health and social services - to establish its annual ranking. China (19th) demonstrated its sharp economic growth by continuing its surge up the league table, leapfrogging 12 places since last year to reach the top 20.

Despite the criticism, the United States remained at the head of an unchanged top four, in front of Hong Kong, Singapore and Iceland. Australia moved up the overall ranking from ninth to sixth position, while Japan improved by four places to 17th. But the US lead is diminishing despite solid economic growth and exports, largely due to Washington's management of its huge budget deficit and debt which is increasing by an estimated $US2.1 billion a day, the report said. "The competitiveness of the United States is a paradox: the economy is still the most competitive in the world, although its lead on other nations is shrinking," said Mr Garelli.

"Hong Kong and Singapore are catching up with the US because their governments are more in synchronisation with economic performance," he said. Mr Garelli also underlined that the US debt was now largely financed by Asian central banks through their holding of US treasury bonds - mainly Japan, China, Taiwan, South Korea, and Hong Kong, as well as Russia. China now owns $US819 billion of foreign currency reserves, just behind Japan. "It is a quite remarkable fact that the largest communist nation in the world may soon become the first creditor of the largest capitalist nation in the world," Mr Garelli said. However, China is one of 29 economies in the survey of 61 nations or regions where government is rated as having negative impact on competitiveness.