Building on Ireland’s competitiveness gains

What makes a country competitive? For 25 years IMD, a Swiss business school, has been measuring global competitiveness, and ranking countries accordingly. Ireland, in 15th place among the 60 countries assessed in 2014, has regained much of the ground lost since the financial crisis. In the past four years the country has moved up nine places in the world rankings. The challenge now is to make further progress, as conditions become more difficult. The impact of recession and the terms of the bailout programme greatly helped to raise competitiveness. But further improvement in the world rankings will be harder to achieve, and require a greater emphasis on structural change.

The IMD rankings are based on more than 300 criteria, of which two-thirds are statistical data and one-third involve a survey of international executives. The rankings measure how well a country manages and mobilises its resources to increase its overall prosperity. In the four main categories – economic performance, government efficiency, business efficiency and infrastructure – Ireland showed a significant improvement in performance. Under a number of important sub-headings – including availability of skilled labour and investment incentives – Ireland held top position. These results greatly enhance Ireland's appeal as a location for foreign direct investment – which IDA Ireland has exploited with much success.

Nevertheless, last month the National Competitiveness Council (NCC), in a report on the cost of doing business in Ireland, struck a cautionary note. The NCC warned the economy was at a turning point in terms of cost competitiveness, and that Ireland's advantage, relative to our main competitors, was being eroded by rising costs - of labour, electricity charges and business services. Earlier price falls, as the NCC pointed out, largely represented a cyclical response to recessionary conditions. Structural changes are now needed to stay competitive, and to ensure that Ireland's place in the world rankings continues to improve.