By Lee Hyo-sik
Staff Reporter
The nation suffered a major setback in this year's global competitiveness rankings due to poor labor-management relations, labor market rigidity and an inefficient financial market, according to the World Economic Forum (WEF), Tuesday.
In its Global Competitiveness Report 2009-2010, the Geneva-based institute said Korea ranked 19th in competitiveness among 133 countries, down six places from 2008.
The assessment is in stark contrast to an earlier report by the International Institute for Management Development (IMD) in May, which put the nation at 11th among 57 economies, the highest ever.
Based on a combination of publicly available data and a survey of over 11,000 business leaders in 133 countries across the globe, the WEF report gives an overview of the strengths and weaknesses of various economies every year.
Switzerland topped the list of the overall country rankings, followed by the United States. Among Asian countries, Singapore was the most competitive at third, followed by Japan at eighth. Hong Kong came in 11th and Taiwan 12th, while China fell one notch to 29th from a year earlier.
Korea received relatively high marks on macroeconomic management, school enrollment rates, technology levels and innovation, but continued to lag behind in financial market sophistication and labor market efficiency, according to the report.
The country ranked lower in all 12 competitiveness indices than the previous year. Its ranking in infrastructure fell to 17th this year from 15th last year, while competitiveness in higher education and training dropped by four notches to 16th. Additionally, Korea scored low on technology readiness (15th), business sophistication (21st) and innovation (11th).
In particular, the report pointed out the nation's weaknesses in health and primary education systems, labor rigidity, and its financial market inefficiency as the main culprits behind its sinking competitiveness ranking.
Korea ranked 53rd in institutions, which cover policy consistency, bureaucratic red tape and tax regulations; 27th in health and primary education; 84th in labor market efficiency; and 58th in financial market sophistication.
"Korea continues to be characterized by a number of strengths, which drive its overall productivity and keep it placed in the top 20 of the rankings. Specifically, Korea has world-class infrastructure, strong macroeconomic stability and an excellent higher education system, while it remains one of the world's innovation powerhouses," WEF said.
But it then said the steep ranking drop is mainly attributable to deteriorations in labor market flexibility.
"The business community's discount about the difficulty of hiring and firing employees leads companies to resort extensively to temporary employment. It creates precarious working conditions and gives rise to tensions. Korea ranks third to last for the quality of relations between employers and workers," the WEF said.
The institute said another area of concern is the financial market, particularly the banking sector, adding despite the waves of consolidation and restructuring the sector has undergone since the 1997-98 Asian financial crisis, banks are still seen as unsound.