European countries hailed as top locations for business

Switzerland, Finland and Sweden are the world's most competitive economies according to this year's assessment of the best places to do business by the Switzerland-based World Economic Forum (WEF).

The need to reduce costs and grow profits, coupled with relatively less barriers to trade, are the sparks of the ongoing globalisation in the pharmaceutical manufacturing industry. As such the rankings and analysis from the highly respected organisation provides a ready guide to which countries have cut the red tape and might be prime locations for setting up drug manufacturing plants. Switzerland topped the competitiveness league table, ousting the US who fell from first to sixth position on its ranking compared to the previous report compiled by the WEF - a non-profit business think-tank at the forefront of the globalisation movement.

"Switzerland's rise to number one on the list reflects the country's sound institutional environment, excellent infrastructure, efficient markets and high levels of technological innovation," stated Augusto Lopez-Claros, the WEF's chief economist.

"In particular, the country has a well developed infrastructure for scientific research, companies spend generously on R&D, intellectual property protection is strong and the country's public institutions are transparent and stable," he said.

Finland and Sweden nudged their way into positions two and three on the table - their growing competitiveness points to the growing importance being placed on higher education and training in maintaining a fertile environment for attracting businessess.

Denmark, Singapore, the US, Japan, Germany, the Netherlands and the UK completed the WEF's top ten list.

"Business activity in these top ten countries benefits from a well-developed institutional framework, characterized by the rule of law, an efficient judicial system and high levels of transparency and accountability within public institutions," the WEF stated.

"Excellent infrastructure is an additional positive feature of the business environment. Our indicators point to the rapidly growing importance of higher education and training as engines of productivity growth."

Finland, Sweden, and Denmark's high position is also due to the low levels of public indebtedness on average than the rest of Europe. Prudent fiscal policies have enabled governments to invest heavily in education, infrastructure and the maintenance of a broad array of social services, the WEF stated.

Finland, Denmark and Iceland are rated as having the best institutions in the world. Together with Sweden and Norway, they also are in the top ten leagues for health and primary education.

"Countries that, like the Nordics, are investing heavily in education are likely to see rising levels of income per capita, growing success in reducing poverty and an increasing ability to establish a presence in the global economy," stated Lopez-Claros.

Germany and the UK were cited for having a high degree of protection for property rights and judicial systems that rank among the top.

By contrast, both countries score poorly for their macroeconomic environments, though Germany does less well. Germany is faulted for high public sector deficits, rising levels of public indebtedness and the strengthening of its currency in 2005.

The UK excels in market efficiency, enjoying the most sophisticated financial markets in the world. Its flexible labour market and low levels of unemployment stand in sharp contrast to Germany, whose business community is burdened by what the WEF labels as "sclerotic" labour regulations.

"But Germany does somewhat better than the UK in innovation indicators and the sophistication of its business community is peerless," the WEF conceeded.

Meanwhile Italy is on the downswing, dropping four places to 42 in this year's report.

Italy's underlying macroeconomic environment is poor due to having run budget deficits without interruption for the past 20 years, the WEF stated. The country's fiscal situation has deteriorated sharply since 2000 and public debt levels are well over 100 per cent of GDP, among the highest in the world.

"The poor state of Italy's public finances may itself reflect more deep-seated institutional problems, which are shown in low rankings for variables such as the efficiency of government spending, the burden of government regulation and, more generally, the quality of public sector institutions," the WEF stated.

As in previous years, Poland remains the worst performer among the EU economies, with a rank of 48, right behind Greece (47) and behind Estonia (25), the Czech Republic (29) and Slovenia (33), which remain central and Eastern Europe's top performers.

"Particular weaknesses in Poland stem from the highly protected and rigid labour markets, particularly harmful in a country where unemployment is close to 18 per cent," the WEF stated. "As in many transition economies, businesses have to deal with uncertainties stemming from weak institutions, corruption and crime, favouritism, an easily influenced judiciary and a weak property rights regime."

Among the EU candidate countries, Turkey and Croatia both benefited from the "EU bonus", moving up in the rankings by 12 places each, to positions 59 and 51, respectively.

Russia has fallen from its 53rd rank in 2005 to 62nd in 2006 due to the private sector's distrust of the independence of the judiciary and the administration of justice.

Leading within Asia are Singapore and Japan, ranked fifth and seventh respectively, closely followed by Hong Kong (11) and Taiwan (13).

The WEF compiles its rankings using a combination of publicly available statistics and a survey of business executives. About 11,000 business leaders were polled in 125 economies worldwide.

A report by the World Bank and the International Finance Corp. (IFC), published last month, ranked Singapore first in the world on the ease of doing business. New Zealand moved to second place after two years at the top spot. The report ranks Georgia as the top reformer this year.

The fledgling economy improved its ranking in six of 10 areas the report studied. The result was business registrations rose by 20 per cent between 2005 and 2006.