US leads globally in digital competitiveness, followed closely by Singapore

José Caballero
The US, Singapore, Denmark, Sweden and Hong Kong take the top five spots in the IMD World Digital Competitiveness Ranking. Here’s why
An interview with
Senior Economist at the IMD World Competitiveness Center

Technology is playing a central role in helping the world come to grips with the health and economic impacts of the pandemic. In addition to the provision and delivery of medical services, technology is providing several businesses with a lifeline to survive the economic downturn.

Indeed, governments are preparing for the future by investing in their digital economy. COVID-19 is accelerating the process, as governments are increasingly acknowledging that post-pandemic recovery is going be long and slow. In this context, the value of digital competitiveness will shine through.

The US has topped the latest IMD World Digital Competitiveness Ranking for 2020, released yesterday, and is followed by Singapore and Denmark. Hong Kong and South Korea are the others from Asia in the global top 10.

The ranking measures the capacity and readiness of 63 economies worldwide to adopt and explore digital technologies for economic and social transformation. It relies on three factors: knowledge, which captures the intangible infrastructure necessary for the learning and discovery dimensions of technology; technology, which quantifies the landscape of developing digital technologies; and future readiness, that examines the level of preparedness of an economy to assume its digital transformation. Most of the survey responses were received during the first wave of COVID-19.

Unravel spoke with José Caballero, Senior Economist at the IMD World Competitiveness Center, about this year’s rankings, why some countries have done better than the others, and areas in which emerging economies have catching up to do.

Unravel: What do we mean by future readiness? Which countries do well across this parameter?

José Caballero: Future readiness measures the preparedness and adoption of technology in a country so as to take advantage of digital transformation. This factor is led by Denmark followed by the US, South Korea, Netherlands and Switzerland.

Unravel: Six of the top 10 are European countries. What are they doing better than others?

Mr Caballero: Their strengths vary. Denmark excels in future readiness. Sweden and Switzerland’s performances are stronger in knowledge. While the Netherlands’ and Finland’s strength are in future readiness, Norway’s is in technology. Such a variety is evidence of the lack of an “universal approach” to digital competitiveness.

Unravel: What are some key factors contributing to the US’ success?

Mr Caballero: The US performance is largely driven by the knowledge and future readiness factors. More specifically, it is sustained by factors related to scientific concentration (for example, percentage of scientific and technical employment and the use of robots in education and R&D), capital (such as, availability of venture capital), adaptive attitudes (for example, e-participation) and business agility (for instance, world robots’ distribution or the percentage share of world robots).

Unravel: Singapore is the best performing Asian country. What has it done better than other Asian countries?

Mr Caballero: Singapore’s advantages are mainly in its performance in the knowledge and technology factors (in which it ranks 2nd and 1st, respectively). Specifically, Singapore tops the rankings in talent, and in the regulatory and technological frameworks.

Unravel: China has been one of the top performers, improving its ranking from 30 in 2018 to 16 this year. What helps explain this improvement?

Mr Caballero: China’s improvement is driven by boosts in talent (19th to 13th), scientific concentration (9th to 2nd) and adaptive attitudes (24th to 17th). In particular, China advances in measures of scientific and technical employment, high-tech patent grants, IT & media stock market capitalisation, e-participation and e-government.

Unravel: Hong Kong has moved up from 11 to 5 in the same timeframe, despite the political turmoil over the past year. Has political turmoil impacted its performance in any way?

Mr Caballero: On the one hand, it is important to note that some of the hard data employed in the construction of the rankings may lag by one to two years, due to availability. In this sense, some indicators may not yet capture any effect of the political situation in Hong Kong. On the other hand, the survey-based indicators are current to the year of publication. In seven of those indicators (of a total of 20), Hong Kong presents some decline – for example, in the availability of foreign highly-skilled personnel and the effectiveness of public-private partnerships. Such drops reflect an increase in negative perceptions among the executives’ surveyed. However, it is impossible to assume that such shift in perceptions is directly linked to Hong Kong’s political situation.

Unravel: Would you say countries that have performed well in the rankings are better prepared for a post-COVID world?

Mr Caballero: The digital ranking is not designed to capture events such as the COVID-19 crisis. Intuitively, however, we can argue that countries that excel in the future readiness factor, particularly in adaptive attitudes and business agility, are equipped with the flexibility in terms of technological adoption to better circumnavigate the current crisis.

Unravel: What are some of the areas in which emerging economies lag, and how can they improve their performance in the rankings?

Mr Caballero: Emerging economies’ performance in the knowledge factor (or the know-how necessary to discover, understand and build new technologies) and technology factor (or the overall context that enables the development of digital technologies) are on average lower.

This reflects the need to tackle the development of talent, reinforce their current education strategies, strengthen the different factors that lead to scientific concentration and promote policies that are conducive to technological development. In doing so, emerging economies would advance the development and adoption of digital technologies.

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Senior Economist at the IMD World Competitiveness Center

Dr José Caballero is a Senior Economist at the IMD World Competitiveness Center. He is responsible for the Center’s different research projects and leads the research team in the development and implementation of new models of assessing competitiveness. His research interests focus on the sources of the competitiveness of countries and, more specifically, on the competitiveness of enterprises. José has also worked as a consultant for the European Union Support Program for Central American Integration, the Private Sector Advisory Department at the World Bank, the International Investment Corporation (World Bank), and the Inter-American Development Bank.

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