The World Economic Forum has released its Global Competitiveness Report 2013-2014. Not surprisingly, Switzerland maintained its top ranking for the fifth year in a row. Out of a total of 148 countries surveyed, Germany moved up to fourth place (from sixth), the United States moved up to fifth position from seventh, the Netherlands dropped three notches to eighth spot, and Canada remained in fourteenth position.

The rankings are based on assessments of twelve indicators of competitiveness ranging from the efficiency of the country’s institutions to labour market efficiency, technological readiness, business sophistication, innovation, etc.

In terms of quality of overall infrastructure, Switzerland ranked number one globally, followed by Hong Kong, Finland, the UAE, Singapore, France, Iceland, Austria, the Netherlands and Germany. Canada ranked 15th overall. In terms of port infrastructure, the Netherlands ranked number one, followed by Singapore, Hong Kong, the UAE, Finland, Panama, Belgium, Iceland, Germany and Sweden. Canada ranked 20th.

As for quality of roads, the UAE ranked in first place, followed by France, Oman, Portugal, Hong Kong, Austria, Singapore, Switzerland, Finland and the Netherlands. Canada ranked 19th.

Lastly, in terms of railroad infrastructure, Japan ranked first, while Canada ranked in 16th spot. In quality of air transport infrastructure, Singapore ranked first, while Canada ranked 19th.

Areas where Canada ranked high included property rights (6), strength of auditing and reporting standards (9), strength of investor protection (4), inflation (1), country credit rating (5), quality of management schools (7), ease of starting a new business (1), country capacity to attract talent (9), availability of financial services (9), soundness of banks (1), and availability of scientists and engineers (9). Factors in which Canada did not excel included the business of fighting terrorism (88), business impacts of organized crime (53), government debt (133), government budget deficits (86), imports as a percentage of GDP (118), foreign direct investment and technology transfers (52), and exports as a percentage of GDP (100).

Judging by the rankings, Canada possesses good government, regulatory and financial institutions and generally ranks highly in terms of all of the criteria that the World Economic Forum has identified as underlying country success. On the other hand, the message is clear that government deficits and debt need to be reined in before they will have longer term negative impacts on competitiveness. In addition, Canada’s trade balance needs to be improved, and foreign direct investment and inbound technology transfers could help improve Canada’s competitiveness.

Can we learn from Switzerland?

How did a country with a tiny population of 7.6 million (Canada 33.9 million) achieve such astonishing results? What is it that the Swiss are doing to earn them top marks year after year? According to WEF, three of the most important drivers of Swiss competitiveness are its excellent institutions, the dynamism of its markets, and its capacity for innovation. However, many qualities drive Switzerland’s excellent economic performance and one cannot point to a single factor that has brought about success.

Institutions and decision making

Overall, public institutions in Switzerland are among the most effective and transparent in the world (ranked 5th). The political system ensures cohesive and inclusive leadership across political boundaries, which enables the country to implement a long-term economic agenda. Also important is the country’s strong collaborative culture among stakeholders. Government, business, and civil society work together in a coherent way to find solutions for the country. This effort is facilitated by the strong involvement of its population, which votes on major decisions directly. Governance structures – including an independent judiciary, a strong rule of law, and a highly accountable public sector – ensure a level playing field, enhancing business confidence and thus reinforcing competitiveness.

A good environment for business to thrive

Productivity is further enhanced by a highly sophisticated business environment supported by well-functioning labour and financial markets. Swiss companies offer high-quality products (ranked 1st) and compete across a very sophisticated product range (ranked 1st). Indeed, their highly diversified and wide-ranging product and service offerings – which extend from financial and insurance services and watches to industrial machines and pharmaceuticals – has helped alleviate the adverse effects of the strong appreciation of the Swiss franc, with the market share of Swiss goods having remained largely stable. Yet the country’s goods market features characteristics of a dual nature. The country benefits from an outward-looking, export-led economy that relies on highly sophisticated products and management practices.

Against the current high unemployment in Europe and other parts of the world, Switzerland compares extremely well: it boasted an unemployment rate of just 4.2 per cent in 2012. The country has a top-notch labour market that is both flexible and efficient in deploying its talent. Employee protection and the interest of employers are well aligned, with strong employer-employee relations (ranked 1st), and with conflict resolution resting on social dialogue rather than responding with strikes. Further, the educational system, also ranked 1st, is perceived as outstanding, producing a highly skilled labor force that continues to receive important on-the-job training.

Innovation

Innovation is not just about developing new products – it is also about doing things differently. For this to happen, the entire innovation ecosystem, which consists of a set of closely intertwined and reinforcing factors, is critical. In the case of Switzerland, an excellent innovation ecosystem has been a significant part of making the country an attractive place to work for highly qualified people. Its well-functioning labour market and excellent educational system provide the fundamentals for innovation to prosper, instigating the close relationships among enterprises, universities, and research institutes that have made the country a top innovator. Its scientific research institutions are among the world’s best, and the strong collaboration between its academic and business sectors, combined with high company spending on research and development, ensures that much of this research is translated into marketable products and processes reinforced by strong intellectual property protection. This robust innovative capacity is captured by its high rate of patenting per capita, for which Switzerland ranks 2nd.

Our takeaways

While it is clear that Canada’s natural resource-based economy is different in nature from Switzerland’s, it is equally clear that Canada’s economy and opportunities for Canadian workers would benefit from greater diversification in the direction of a knowledge-based economy. From that point of view, greater collaboration between business and academic institutions has the potential for more research to be commercialized. A national strategy is needed to reform Canada’s “provincial” attitudes toward education and training that currently do not produce “world-class” results. In the meantime, attitudes toward vocational training, and inter-provincial recognition of worker credentials would help worker mobility, and reduce inefficiencies and higher costs to both government and business dealing with surplus labour or labour shortages in different parts of the country.

Last, but not least, one cannot overstate the value of corporations with global brands whose Head Offices are located in Canada. Such corporations provide plenty of high-value job opportunities both in the companies themselves as well as in the companies that supply goods and services to them. Typically, they are important exporters of goods and services, aiding the nation’s balance of trade. Importantly, such companies also have, and need to constantly defend, their culture of innovation and productivity because without these attributes they would not have risen to the top of the heap in the first place. Canada has done well in financial services and natural resource industries, but after Blackberry’s difficulties, has few enterprises that could be regarded as global brands. On the other hand, a country like Switzerland is home to a number of well-recognized global brands, such as ABB, Glencore, Nestle, Novartis, Credit Suisse, UBS and others. In the global logistics market, names like Kuehne+Nagel, Liebherr and Mediterranean Shipping Company are prominent brands.

Making structural changes to one’s economy takes decades to accomplish. We know that Canada can do better, but we need to have a plan. Now that Canada and the EU have agreed on a trade deal, and recognizing Canada’s strong desire to participate in the TPP, perhaps it’s time for leaders in government, business and labour to sit down to figure out what we can do collaboratively to take advantage of the new opportunities. If we choose not to exploit the new opportunities, other nations will.

With files from World Economic Forum