A new index which aims to go beyond common GDP rankings to rate countries ‘holistically’ has found that Asian countries may be sacrificing long-term competiveness for short-term economic growth.
The Global Sustainable Competitive Index, launched by independent research firm SolAbility earlier this month, found that while Asian countries rank high for innovation, their global competitiveness may falter in the future due to natural resource constraints.
The inaugural report warned that several Asian countries which are experiencing rapid economic growth are risking future competitiveness by endangering their natural resources. For example, environmental and social factors such as high levels of pollution, arid climates and high population densities dragged down scores for China and India – ranked 36 and 100 respectively - because the combination of such factors could hinder future growth.
South Korea-based SolAbility chief executive Andy Gebhardt told Eco-Business in an interview that the index scores countries on key economic, social and environmental factors that are left out of GDP indices and thus shows a more complete picture of current development levels.
GDP calculations are prone to errors and depend on access to huge amounts of data; but more importantly, they provide only a momentary snapshot of a country’s economic health with no indication of how the country would weather environmental changes or depleted natural resources, he said.
Northern European countries dominated the overall rankings, with Denmark, Sweden and Norway taking the top three places. The only non-European country in the top ten was Japan, which ranked ninth.
SolAbility’s index showed surprising results for some of the world’s largest economies. Image: SolAbility
But Asian countries, led by Singapore, China and Japan, dominated in “sustainable innovation”, one of the four areas that form the overall score.
SolAbility’s index used data from the World Bank, the International Monetary Fund and other international agencies to compare 176 countries in four separate areas:
- Natural capital, for which the research firm evaluated the availability and level of degradation of natural resources such as fresh water, biodiversity and available farmland;
- Resource intensity and efficiency, which determines how efficiently countries use resources, both in terms of economic cost and natural resource consumption;
- Sustainable innovation competitiveness, which defines a country’s ability to compete in a knowledge-driven, high-tech world due to quality education, business-friendly policies, research and development activity and other factors;
- Social cohesion, which was determined by access to good health care, gender and economic equality, low crime levels and a high quality of life.
Countries with limited natural resources, such as Singapore – whose overall rank was 21 - can improve their sustainable competitiveness over time if they have “sufficient political will” and pragmatic policies coupled with the collaboration of government and communities, noted the report.
The report said that for poor countries, a low score indicates difficulties in achieving sustainable development; but for high-income countries a lower score than expected indicates a society in decline.
“Economies that are being deprived of investments sooner or later face decline, as some nations of the formerly ‘leading’ West are currently learning the hard way,” said the report, citing the United States (ranked 30th) and the United Kingdom (ranked 26th) as examples.
Mr Gebhardt, who indicated the index may be updated annually, said there is definitely an increasing willingness to look at more inclusive alternatives to GDP as a measurement of national success.
He noted that the Sustainable Competitiveness Index would foster a certain level of “sustainability competitiveness” amongst countries and encourage them to emphasize sustainable development policies.
“National rankings are a matter of national pride,” said Mr Gebhardt.
