However, Vietnam and Indonesia expected to surpass Malaysia and Thailand and even Japan over 5 years. Vietnam will ranked 10th (18th in 2013) in 5 years and Indonesia will ranked 11th (17th in 2013) in 5 years.
Malaysia will benefited from flood in Thailand in 2011. Just drop one place from 13th to 14th over 5 years whereas Thailand will drop to 15th over 5 yeas from present 11th.
Germany are only European country on top 10 list
Drivers in Global Manufacturing competitiveness
1. Talent-driven innovation
2. Economic, trade, financial and tax systems3. Cost and availability of labor and materials
4. Supplier network
5. Legal and regulatory system
6. Physical infrastructure
7. Energy costs and policies.
8. Local market attractiveness
9. Healthcare systems
10. Government investment in manufacturing and innovation
1. Talent-driven innovation
Although Germany and the U.S. have strong Innovation Index scores, countries — such as South Korea and Singapore — are very competitive on multiple measures like researchers per million population and basic math and science test scores.
one could argue that South Korea and Singapore are laying a very solid foundation and infrastructure required for their own innovation ecosystems. This is reflected from the higher ranking of Singapore, South Korea and Japan on the Innovation Index and researchers per million population.
Hence, unless more significant strides are made in improving their education systems and raising the human capital bar further, developed nations like the U.S, Germany, and Japan would continue to be surpassed by other emerging nations like Singapore — which is ranked fourth in the World Economic Forum’s (The Forum) Global Competitiveness Report2 among 142 countries with respect to secondary education and training, ranked number one in terms of quality of math and science education, has a high per capita of researchers.
2. Economic, trade, financial and tax systems
It is interesting to note that smaller Asian nations — Singapore, Taiwan and South Korea are making their presence felt not only in terms of manufacturing competitiveness but also in their relative share of high and medium technology products.
There is quite evident from the gradual shift of low technology jobs from China to other nations like Vietnam, Bangladesh and Indonesia.
3. Cost and availability of labor and materials
China are beginning to shift production to lower cost countries for more commoditized products. For example , China, is now shifting production to countries like Thailand and Vietnam, and is one example of this dynamic.4. Supplier network
China, with its focused efforts to localize supply chains and create innovation hubs, is seen by CEOs as the only emerging nation offering the same supplier network advantages as developed nations
5. Legal and regulatory system
CEOs viewed the legal and regulatory systems in developed nations more than twice as strong as those in emerging nations, primarily as a result of stability and clarity within their legal and regulatory environments.
6. Physical infrastructure
Research reveals that ongoing investments in infrastructure results in long-term economic benefit. Specifically, a recent estimate by the United States Congressional Budget Office suggests that every dollar of infrastructure spending generates an additional 60 cents in economic activity (for a total increase to GDP of $1.60). This multiplier effect bodes well for India, which recently announced plans to invest USD $1 trillion on infrastructure through 2017.
7. Energy costs and policies.
Supplemental research reveals that China’s electricity costs (7.4 cents per KWH) were on par with Canada (7.4 cents per KWH) and higher than the U.S. (6.9 cents per KWH); however, they were significantly lower than other emerging economies, including Brazil (15.4 cents per kWH) and India (10.1 cents per kWH) and also developed nations, such as Japan (17.9 cents per kWH) and Germany (15.7 cents per kWH).
Open markets and falling levels of energy import dependence in the U.S., as well as new discoveries in areas such as shale gas, have the potential to make the country energy secure.
8. Local market attractiveness
Of the emerging nations, executives felt the local markets in India and Brazil were less attractive than first-ranked China (Figure 16), despite all three nations experiencing substantial 10-year CAGR growth for per capita personal disposable income between 2001 and 2011
9. Healthcare systems
Germany is rated as the most competitive nation in this catagory. Japan is close behind Germany in healthcare system competitiveness. While the U.S. ranks third
10. Government investment in manufacturing and innovation
The Fraunhofer Societyin Germany, which is a leading example of public-private collaboration. Fraunhofer is Europe’s largest applied-research oriented organization and aims to transform scientific findings and basic research into useful innovations to further economic growth and job creation. Founded in 1949, Fraunhofer receives approximately 40 percent of its funding from the public sector and about 60 percent from contract research earnings; and it operates between application-oriented fundamental research and innovative applied research and early stage commercialization development projects.
The Industrial Technology Research Institute in Taiwan (ITRI)18, which received 50 percent of the funding from government, was developed with a similar mission and model as the Fraunhofer Society. ITRI describes itself as a national research organization, with a mission of conducting technological research, promoting industrial development, creating economic value, and improving social welfare for Taiwan.19 Today, ITRI is Taiwan’s largest applied technology R&D institution.20 ITRI has continued to evolve since its inception in 1973 and is now spearheading original and innovative industrial research, transfer of technology and product developments, thereby proliferating domestic and international industries.
Singapore
Advantage
| • Highly-educated workforce: ––The Forum’s Competitiveness Report, rank’s Singapore’s secondary education and training fourth among 142 countries with the quality of math and science education ranked number one. ––In addition to four locally grown universities, the country has attracted 10 world-class institutions including France’s INSEAD and U.S — based MIT. ––The government also offers professional and skills-based training even after joining the workforce. It also provides tax relief to employees on training course fees. • Investment friendly climate: ––FDI inflow in Singapore increased at a CAGR of 23.4 percent between 2005 and 2011. Government provides tax incentives, depreciation schemes, favorable loan conditions, and high-quality industrial estate to attract investment. ––Manufacturing of electronics, pharmaceuticals, and petroleum remain primary magnets for investment. Government is also trying to attract MNC investment in high-technology sectors while trying to expand the country’s role as a global financial center. • R&D Incentives: Considering base deduction, additional and enhanced deduction, Singapore allows 400 percent tax deduction on the S$400,000 (US$319,440) for qualifying R&D expenses. |
• High-quality infrastructure and intellectual property protection: ––WEF’s Competitiveness Report, rank’s Singapore’s infrastructure third among 142 countries with the quality of both port and air transport infrastructure ranked first. ––Singapore’s stringent intellectual property protection mechanism (ranked second globally by WEF) makes it easier for companies to invest in R&D. • Transparency and government efficiency: ––Heritage foundation ranks Singapore second (of 184 countries) in terms of economic freedom in the 2012 World Economic Index report. ––Singapore ranks first in terms of freedom from corruption as per the World Economic Index report as the country’s regulatory environment is flexible and transparent. • Favorable tax system: ––Singapore’s corporate taxes are at 17 percent compared to the U.S. at 39 percent and Japan at 38 percent. According to EIU, 80 percent of the companies pay tax at a rate of less than 10 percent in Singapore. |
| • Increasing business costs and inflation: ––Unit business costs (UBC) in the manufacturing sector increased by 3.7 percent year over year in second quarter of 2012, following the 5.4 year over year percent increase in the first quarter and 2.6 percent in 2011. ––According to a study by Singapore’s Ministry of Trade and Industry, for every 1 percent increase in UBC, export prices increase by only one-fifth, hence negatively impacting profit margins. ––In 2011, inflation was 5.2 percent due to higher transport, housing, and food costs. Average inflation rate between 2002 and 2006 was 0.6 percent compared to 3.5 percent between 2007 and 2011. |
• High living costs: ––Living costs spurred by inflation and an inflow of expatriates. In Singapore, property prices, rents, costs of owning a car, and private schooling expenses are very high. ––According to an HSBC survey, 50 percent of expats in Singapore earned more than $200,000 in 2011, making it the country with the highest expat salaries in Asia. |
Singapore only Asean country on top 10 and it is smallest country on top 10.
Singapore ranked high and specifically mentioned on first driver...... "talent driven innovation". Ex-partner of George Soros, Jim Roger feel Singapore education system and healthcare system is better than US. That is the reason he migrate to Singapore.
40% of immigrant of Singapore are from Malaysia. When foreign direct investor move up value chain. It benefited neighbouring country like Malaysia and Thailand. Many company have move to Penang of Malaysia like National Semiconductor, H&P(now Agilent in Penang) etc. western digital also have present in Thailand other than Malaysia.
Thailand
Thailand ranked 11th on 2013 as a Detroit of Asia and have some investment on Hard disk Drive manufacturer like Western digital. However, a flood in 2011 make it drop to 15th, below Malaysia in 5 years.
The flood in 2011 seem have little affact of car and automoble manufacturer. It seem Thailand able to maintain it Detroit of Asia status. However, the flood might affected investment in Electrical and Electronic industry. Couple with competition from neighbour like vietnam. Deloitte expected it to drop to 15th in 5 years.
Malaysia
Malaysia ranked 13th on 2013 Global Manufacturing Competitiveness Index. It expected to be take over by Vietnam and Indonesia but Malaysia seem able to overtake Thailand. Thus, expected to drop one spot to 14th in 5 years.
Malaysia have an uphill task to compete with Singapore on Driver No 1. Talent-driven innovation. Lee Kuan Yew latest book "One Man’s View of the World” also comment on Malaysia talent policy. Top students’ failure to get places in public varsities become a yearly affairs in Malaysia. Usually, such student might be offer a scolarship by other country like Singapore and Taiwan and cause brain drain. This seem no improvement for many years due to race base politic. Even former Prime Minister Mahathir also wrote on his latest book "A Doctor in the House" that he knew civil servant practice a manipulated version of "meritocracy" and never practise directive of cabinet. Thus, this will never change in near future.Out of 10 Drivers in Global Manufacturing competitiveness. I feel Malaysia should ranked high in Supplier network(E&E industry), Legal and regulatory system , Physical infrastructure.
Malaysia a bit difficult to compete with Vietnam and Indonesia on Local market attractiveness.
However, as a net exporter of oil and gas industry. Malaysia have an advantage on Driver 7. Energy costs and policies. Malaysia have Bakun but, unfortunately,it is at East Malaysia, Sarawak.
In a recent interview with The Star , Perwaja’s major shareholder and executive chairman, Tan Sri Abu Sahid Mohamed said “Everybody in the world thinks that Perwaja gets cheap gas prices (from Petroliam Nasional Bhd or Petronas).
Let me tell you, today, Perwaja pays the highest gas price in the country at RM18.35 per million metric British thermal unit or mmbtu,” he says .
He points out that this price is higher than what the independent power producers (IPPs) and other steel manufacturers in the country pay.
“In fact, Petronas’ gas prices for us have increased by over 40% within the past six years,” adds Abu Sahid. this mean Malaysia never take advantage of oil producing country and net exporter of oil and gas.
Recent downgrade of rating by Fitch might pressure Malaysia to practise Fuel Cost Past Through (FCPT) mechanism for Tenaga National Berhad. However, I feel government should careful that not to severely affected manufacturing competitivenes of Malaysia when formulated any policy.
I feel a bit funny that PenjanaBebas, the association of independent power producers (IPPs), cried foul over what it saw as an “unfair advantage” that national utility company Tenaga Nasional Bhd (TNB) had when bidding for new power plant projects in Malaysia.
Actually, PenjanaBebas president Zainal Abidin Jalil, who is also CEO of Malakoff Corp Bhd, under MMC Corporation.
"Open tender,Competitive bidding is crucial to the electricity sector as it keeps prices at reasonable levels and encourage healthy competition" TNB vice-president (new business and major projects) Datuk Mohd Nazri Shahruddin .
TNB unable to lower it price due to unfair contract term by IPP like Malakoff. IPP should try to lower it bid if they want to win the tender.
Malaysia already have Competition Act 2010. PenjanaBebas should reported to Malaysia Competition Commission (MyCC) if they feel TNB violated Competition Act 2010 rather than lobby to government. MYCC also should investigate whether a requested to excluded TNB from tender process violated Competition Act 2010?
Related : India and Brazil
Update : Let competitive bidding run its course
