Macro Economic Project(1)

8/8/2019 Macro Economic Project(1)

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Competitiveness Index 2004 and 2005

This a table that consists of the growth competitiveness index rankings of 2005 and

2004 which includes countries of Asia, Australia, Europe and the North America. It

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Country 2005 Rank 2005 Score 2004 Rank Changes2004-2005

Changes2004-2005

Finland 1 5.94 1 ---

0United States 2 5.81 2 --- 0

Sweden 3 5.65 3 --- 0

Denmark 4 5.65 5 1

Taiwan 5 5.58 4 -1

Singapore 6 5.48 7 1

Iceland 7 5.48 10 3

Switzerland 8 5.46 8 --- 0

Norway 9 5.4 6 -3Australia 10 5.21 14 4

Netherlands 11 5.21 12 1

Japan 12 5.18 9 -3

United Kingdom 13 5.11 11 -2

Canada 14 5.1 15 1

Germany 15 5.1 13 -2

New Zealand 16 5.09 18

2Korea, Rep. 17 5.07 29 12

United Arab Emirates 18 4.99 16 -2

Qatar 19 4.97 n/a n/a

Estonia 20 4.95 20 --- 0

Austria 21 4.95 17 -4

Portugal 22 4.91 24 2

Chile 23 4.91 22 -1

Malaysia 24 4.9 31 7Luxembourg 25 4.9 26 1

Ireland 26 4.86 30 4

Israel 27 4.84 19 -8

Hong Kong SAR 28 4.83 21 -7


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is a comparison between the present year and the previous year. For the year of 2004

Singapore's and Hong Kong's growth competitiveness ranking were 7th and the 21st

respectively. For the year of 2005, Singapore's ranking increase one place from the

7th to the 6th compared to Hong Kong which fell from the 21st to the 28th place. The

final score of growth competitiveness for Singapore for the year of 2005 was 5.48 and

4.83 for Hong Kong.

Macroeconomic environment index

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1 Singapore 5.79

2 Norway 5.54

3 Finland 5.47

4 Denmark 5.36

5 Switzerland 5.24

6 Luxembourg 5.23

7 Netherlands 5.13

8 Austria 5.11

9 Taiwan 5.11

10 United Kingdom 5.11

11 Iceland 5.09

12 United Arab Emirates 5.09

13 Hong Kong 5.0514 Australia 5.04

15 United States 5.04

Description:

DEFINITION: The macroeconomic environment index indicates the quality of the macroeconomic

environment of a country

Macroeconomic environment index indicate the quality of macroeconomic

environment of a country. The main components of the index are Macroeconomic

Stability sub-index and credit rating. When the index is measured, many factors are taken

into account like chances of recession, credit climate, institutional investor, country

rating, inflation, unemployment and other related factors.

The macroeconomic environment of a country simple gives a first impression to all

investor before they go deep into it. All the factors considered may affect the stability

of the country and the policy made by the country.

Unemployment and inflation are the main concerns in all countries nowadays. After

the Asian Financial Crisis, all countries in Asian suffer from it. Thats why

unemployment and inflation is a worldwide concern and the key for a country to be

successful and become attractive. But inflation and unemployment also continue to

remain unstable.

As the economy is always fluctuated, so that stability is the main key to be

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considered. A stability country means a lower risk to invest and may gain a expect rate

of return and further the government is the one who manage and operate the country,

so the environment can be reflect by the action taken of the government. Fiscal

performance in Hong Kong has improved, reflecting the strong recovery and

implementation of deficit reduction measures and so as the Singapore.

In addition to unemployment and inflation, a flexible and effective exchange rate

system is the most important. A linked exchange rate system is a tool to stabilize the

value of Hong Kong Dollars hence reduces the fluctuation of the exchange rate.

The overall macroeconomic environment of Hong Kong would be deemed conducive

to competition and free trade. The key to competitiveness in a market is the high

degree of easiness of entry and exit. There was no barrier of entry as well as currency

control in Hong Kong which is the greatest advantage for foreign to invest in.

Government didnt invent any business activities too.

While in Singapore, strong economic performance reflects the success of its open and

outward-oriented development strategy. Singapore's economic achievement is a set of

sound macroeconomic policies aimed at maintaining a conducive environment for

long-term investment in the economy. Fiscal policy is directed primarily at promoting

long-term economic growth, rather than cyclical changes or distributing income. As a

result of its healthy fiscal position and consistent budget surpluses over the years,

Singapore has attained a high level of foreign reserves and the strongest sovereign

credit rating for long-term foreign-currency debt in Asia.

.

In the macroeconomic environment index, Singapore ranked first, followed by Taiwan

in 9th place; Hong Kong, 13th; Malaysia, 20th; Thailand, 23rd; Japan, 29th; Korea,

35th; Vietnam 58th; and the Philippines 69th.

Public Institution index

1 Denmark 6.59

2 Iceland 6.58

3 Finland 6.48

4 New Zealand 6.41

5 Norway 6.35

6 Sweden 6.31

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7 United Kingdom 6.23

8 Switzerland 6.22

9 Hong Kong 6.22

10 Singapore 6.21

11 Germany 6.21

12 Australia 6.1

13 Netherlands 6.08

14 Austria 5.99

15 Luxembourg 5.99

DEFINITION:Public institution index indicates the state of the country's public institutions.

In the society, seems like everything is between buyers and sellers. The seller produce

what consumers most wanted and consumer buy goods to satisfy themselves

depending on how much satisfaction they can receive from it. However, things dont

always go properly, therefore, the government has to set regulations, laws, and

financial strategies or even give out pension to retired people in order to enable the

country to run more efficient. For instance, sometimes government might need to set

up regulations or laws to control monopoly businesses power in order protect

consumers right. Furthermore, these regulations might even provide information to

consumer to purchase the right goods. This is because those firms might take their

opportunities to set higher prices as they are the only supplier for that particular

market. This might lead to inefficiency of using scarcity resources. Another example

could be government might need to subsidize businesses to combat other countries

firms or even set up tariffs on imports to control deficit from balance of payment. All

of these examples are related to public institution. Those institutions provide the best

strategies and laws that best fit for the country. However, it is hard to set up the best

strategies or rate of taxes to control the country.

From the table, Hong Kong and Singapore got a very close score which is 6.22 and

6.21 respectively.

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Technology Index

1 United States 6.24

2 Taiwan 6.04

3 Finland 5.92

4 Sweden 5.8

5 Japan 5.68

6 Denmark 5.34

7 Switzerland 5.25

8 Israel 5.25

9 Norway 5.17

10 Singapore 5.11

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11 Germany 5.08

12 Iceland 5.05

27 Malaysia 4.67

28 Hungary 4.66

29 France 4.65

30 Belgium 4.59

31 Chile 4.55

32 Lithuania 4.51

33 Hong Kong 4.49

DEFINITION: The technology index denotes the country's technological readiness. This index is

created with such indicators as companies spending on R&D, the creativity of its scientific community,

personal computer and internet penetration rates.

Technology is the technical means people use to improve their surroundings. It is also

knowledge of using tools and machines to do tasks more efficiently. Nowadays, we

use technology to control the world in which we live. Technology is people using

knowledge, tools, and systems to make their lives easier and better.

Various advantages can be benefited from technology to a country. To industry sector,

technology helps us to keep the process of production more systemized and

efficiently. It allows industry to increase productivity of the production with less

resource being wasted, which is known as productivity efficiency in economic term.

Secondly, it also increases labor productivity (output per hour) and it can be

decomposed into two components. The first arises from capital deepeningthe

increase in capital available per worker. The second comes from changes in the

composition of the workforce from increases in the skills of workers. The latter

captures increases in output that cannot be attributed in increases in labor or capital

and captures all improvements in the production process that come from

improvements in organization, more complete exploitation of economies of scale, and

externalities that arise both from general improvements in knowledge that allows formore efficient plant operations.

For businesses, a substantial part of the increase in capital spending has been in new

information and communications technology (ICT). Not only has the increase in

investment been focused on new types of equipment; it has also been applied to and

develops new areas such as the Internet. For instant, Communications through

countries can be more rapid via internet. Therefore, it helps to attract more investors

to invest in that country. This will boost up the economy with more outputs being

produced. A technological economy will normally force us to train our young people with

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useful skills in school instead of following a mindless, pointless neo-colonial education. This

will lead to the importance of education which we will mention it later.

Infrastructure

1 United States 100

2 Switzerland 86.402

3 Finland 86.029

4 Sweden 84.556

5 Australia 82.478

6 Canada 81.991

7 Germany 78.093

8 Iceland 77.256

9 Japan 76.424

10 Denmark 76.248

11 France 76.194

12 Singapore 74.995

25 Hong Kong 48.186

DEFINITION: Extent to which basic technological, scientific and human resources meet the needs of

business.

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Infrastructure in a country is extremely important in economic performance.

Infrastructure may be the transport, technology, the facilities like exhibition centre,

the conference centre, the financial centre. They are all the necessary tools for a

competitive country.

A good infrastructure is always the attractive point. Hong Kong and Singapore do

well in its own infrastructure projects. Whats making Singapore rank far high than

Hong Kong which is 12 and 25 respectively? The information technology may be.

Singapore has provide a system----Singapore ONE which is a national initiative

which delivers a new level of interactive, multimedia applications and services to

homes, businesses and schools throughout Singapore. Singapore ONE comprises two

distinct but integrated levels. The first is a broadband infrastructure level of high-

capacity networks and switches. The second is a level of advanced applications and

services that take advantage of the infrastructure's high-speed and high-capacity

capabilities. The key benefits are, such as faster movement of information and goods,

quicker response times to customers' requests, more accurate and timely availability

of information, improved customer relations and service, can all contribute to

maintaining a competitive edge both for individual firms and the country. Although

Hong Kong nowadays is a modern country which have developed most of technology

and make good use of them to improve the economic performance, however when

compare to Singapore, Hong Kong seem that it cannot provide a comprehensive

technology system like the Singapore ONE. In other parts of the infrastructure, Hong

Kong and Singapore do more or less the same. Both build a smooth and effective

transport system and comprehensive business facilities.

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Corruption

Country rank Country 2005 CPIscore*

1 Iceland 9.7

2 Finland 9.6

New Zealand 9.6

4 Denmark 9.5

5 Singapore 9.4

6 Sweden 9.2

7 Switzerland 9.1

8 Norway 8.9

9 Australia 8.8

10 Austria 8.7

11 Netherlands 8.6

UnitedKingdom

8.6

13 Luxembourg 8.5

14 Canada 8.4

15 Hong Kong 8.3

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The TI Corruption Perceptions Index (CPI) ranks countries in terms of the degree to

which corruption is perceived to exist among public officials and politicians. It is a

composite index, drawing on corruption related data in expert surveys carried out by a

variety of reputable institutions. It reflects the views of business people and analysts

from around the world, including experts who are locals in the countries evaluated.

Corruption is a major cause of poverty as well as a barrier to overcoming it, said

Transparency International Chairman Peter Eigen. The two scourges feed off each

other, locking their populations in a cycle of misery. Corruption must be vigorously

addressed if aid is to make a real difference in freeing people from poverty. Fighting

corruption must be central to plans to increase resources to achieve the goals, whether

via donor aid or in-country domestic action. Moreover, extensive research shows that

foreign investment is lower in countries perceived to be corrupt, which further thwarts

their chance to prosper. When countries improve governance and reduce corruption,they can improve their economic performance effectively and efficiently.

Corruption isnt a natural disaster: it is the cold, calculated theft of opportunity from

the men, women and children who are least able to protect themselves, said David

Nussbaum, Mischief Executive. Leaders must go beyond lip service and make good

on their promises to provide the commitment and resources to improve governance,

transparency and accountability.

Every coin has two faces, corruption is caused by ineffective legal system, unstable

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Country Rank Country 2004 CPIScore*

1 Finland 9,7

2 New Zealand 9,6

3 Denmark 9,5

Iceland 9,5

5 Singapore 9,3

6 Sweden 9,2

7 Switzerland 9,1

8 Norway 8,9

9 Australia 8,8

10 Netherlands 8,7

11 United Kingdom 8,612 Canada 8,5

13 Austria 8,4

Luxembourg 8,4

15 Germany 8,2

16 Hong Kong 8,0


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policy system. Simply speaking, on one hand, government is the main cause of

corruption due to the inappropriate control over the legal system. On the other hand,

the government is the key to reduce and control the corruption.

From 2004 to 2005 both the Hong Kong and Singapore has been improved. Singapore

rank the same in 2005 but with a high score (9.3 to 9.4) while Hong Kong improve

the ranking by one place, 15 to 16 and with a high score of 8.3. But still Singapore is

rank far higher than Hong Kong in term of corruption. Singapore is already the top ten

but Hong Kong isnt. As mentioned before, corruption isnt a natural disaster for all

countries, the government should continuous to fight against corruption. For example,

promote strong coordination among governments, the private sector and civil society

to increase efficiency and sustainability in anti-corruption and good governance

efforts.

Economic Freedom

Hong Kong

Singapore

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Country Rank Score

Hong Kong 1 1.28

Singapore 2 1.56

Ireland 3 1.58

Luxembourg 4 1.60

UnitedKingdom

5 1.74

Iceland 6 1.74

Taiwan 37 2.38


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Of the 157 countries graded in the 2006 Index, 99 improved their overall scores,

compared to 51 whose scores worsened and five that remained unchanged. Overall,

20 are classified as free, 52 as mostly free, 73 as mostly unfree and 12 as

repressed.

Hong Kong and Singapore, the economic jewels of Asia, finished 1st and 2nd in the

rankings for the 12th straight year which score 1.28 and 1.56 respectively this year.

According to editors Marc A. Miles, Kim R. Holmes and Mary Anastasia OGrady,

The countries with the most economic freedom also have higher rates of long-term

economic growth and are more prosperous than are those with less economic

freedom, .

Countries receive a 1-5 ratingwith one being the beston 10 broad measures of

economic freedom: trade policy, fiscal burden of government, government

intervention in the economy, monetary policy, capital flows and foreign investment,

banking and finance, wages and prices, property rights, regulation and informal

market activity. Those scores are averaged to create an overall score. The top finishers

are classified as free economies, followed by mostly free, mostly unfree and repressed

economies.

Hong Kong, which with the freest economic system improved its score again this

year. It decreased government spending as a percentage of gross domestic product

(GDP) to 20.7 percent, which helped lower its fiscal burden of government rating to1.80.2 better than last year. Hong Kong also has a lower government intervention

in the economy score.

Meanwhile, Singapore, ranked second in the world again, continues to improve. It cut

corporate tax rates from 22 percent to 20 percent, began to divest non-strategic

government-linked companies and cut the percentage of government expenditures as a

share of GDP by 1.2 percentage points to 15.7. Also, its judicial system was rated the

best in Asia in 2005 by Hong Kong-based Political and Economic Risk Consultancy.

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Besides, the banking and finance index is the one that we think the most important

under the economic freedom index. It is a sub-index of the overall Economic Freedom

Index. In most countries, banks provide the essential financial services that facilitate

economic growth; they lend money to start businesses, purchase homes, and secure

credit to purchase consumer durable goods, in addition to furnishing a safe place in

which individuals can store their earnings. The banking and finance factor measures

the relative openness of a countrys banking and financial system, and score this

factor by determining the openness of a countrys banking and financial system:

specifically, whether foreign banks and financial services firms are able to operate

freely, how difficult it is to open domestic banks and other financial services firms,

how heavily regulated the financial system is, the presence of state-owned banks,

whether the government influences allocation of credit, and whether banks are free to

provide customers with insurance and invest in securities. Thus, this index is derived

from these individual factors: Government ownership of banks , restrictions on the

ability of foreign banks to open branches and subsidiaries , government influence over

the allocation of credit, government regulations , freedom to offer all types of

financial services, securities, and insurance policies All country are graded based on

these factors. A lower value indicates a more conducive environment to banking and

finance.

In year 2006, Hong Kong score 1.0. Hong Kong is a global banking center. According

to the Economist Intelligence Unit, 71 of the world's largest 100 banks operate in the

territory. The government does not own any banks. Banking regulations under the

Banking Ordinance are not onerous and are intended to ensure adequate liquidity and

capital adequacy ratios and to guard against improper lending activity. Hong Kong

has passed legislation making it easier for foreign banks to enter the market by

removing restrictions on the number of branches foreign banks can operate in Hong

Kong and by lowering asset and deposit criteria for new foreign bank branches.

Further, Singapore score 2.0. Singapore's financial system is sound and well-regulated, but barriers to foreign banks and bank ownership persist.. Though the

Monetary Authority of Singapore (MAS) has shown greater willingness to grant

foreign banks QFB licenses and restricted bank licenses over the past few years, the

U.S. Department of Commerce reports that "foreign banks in the domestic retail

banking sector still face significant restrictions and are not accorded national

treatment. Aside from the limit on the number of foreign QFBs and their customer

service locations, foreign QFBs are not allowed to access the local banks' ATM

networks, a major competitive disadvantage, although they can share ATMs among

themselves and negotiate with the local banks to allow their card holders to obtain

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cash advances. Customers of foreign banks are also unable to access their accounts for

transfers or bill payments at ATMs operated by banks other than their own. Local

retail banks do not face similar constraints. The government has significant ownership

in financial markets.

Education

Hong Kong Singapore

EducationIndex

.83 .87

Education is a term that has always been mentioned all the time and society has

viewed education as an important part of life for many years. In definition, it is the

process of teaching or learning in a school or college, or the knowledge that you get

from it. Education makes man a right thinker and a correct decision-maker. It achieves

this by bringing him/her knowledge from the external world, teaching him/her to

reason, and acquainting him/her with past history, so that he/she may be a better judge

of the present, but in economics, education is actually more than that. For industry

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within a c country, education and training are vital to a company success. In order to

achieve economic efficiency, good strategies are needed to produce, prepare, retrain

and attract an educated workforce. Therefore, if the country is being educated,

innovation, skills and entrepreneurship will tend to drive the economic growth to a

better living standard. Secondly, education can play a critical role in equipping

consumers with fundamental knowledge required to choose the right products, which

means this will tend to force businesses to achieve allocation efficiency where they

produce what consumers most wanted. In addition, education can also help to provide

individuals with the financial knowledge necessary to create household budgets,

initiate savings plans, and make strategic investment decisions for their retirement or

children's education. Such financial planning can help families to maximize their

longer-term financial well-being. Another benefit of education is that it helps rural

sector shift to urban sector. For instance, parents don't need as much help around the

house and farm anymore; and women today are able to raise a family, take care of the

home and have a meaningful career just because they are all well-educated. Therefore,

unemployment rate will tend to go down if education is well-invested in that country.

In the education index, a higher value indicates a higher level of education that is,

Singapore ranked higher than Hong Kong.

Conclusion

The World Economic Forum has been producing The Global Competitiveness Report

for 26 years, and its unique mix of hard and soft data has made it possible to

accurately capture the broad range of factors seen to be essential to a better

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Ranking ofSingapore

Singapore Ranking ofHong Kong

Hong Kong

Macroeconomicenvironment

1 5.79 12 5.05

Public institution 10 6.21 9 6.22

Technology 10 5.11 33 4.49

Infrastructure 12 74.995 25 48.186

Corruption 5 9.4 15 8.3

Economic Freedom 2 1.56 1 1.28

Education ----- 0.87 ----- 0.83


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understanding of the determinants of growth. Each year it has delivered a

comprehensive overview of the mainstrengths and weaknesses in a large number of

countries, making it possible to identify key areas for reform and policy formulation.

In year 2006 nearly 11,000 business leaders were polled in a record 117 economies

worldwide. The survey questionnaire is designed to capture a broad range of factors

affecting an economys business environment that are key determinants of sustained

economic growth. Particular attention is placed on elements of the macroeconomic

environment, the quality of public institutions which underpin the development

process, and the level of technological readiness and innovation that are the three

main components.

Singapore is an economy that, through sustained good policies over the past few

decades, have lifted their citizens from poverty and therefore the ranking has

increased by one place. But when compared with another tiger, Hong Kong is ranked

much lower at 28th place, having dropped 7 places since last year. This is attributable

to a tangible deterioration in the quality of the institutional environment. Hong Kong

saw a weakening in perceived judicial independence, the protection of property rights

and in government favoritism in policy-making.

Hong Kong's rankings for the "Macroeconomic Environment Index" and "Technology

Index" went up. However, there is a marked decline in the "Public Institutions Index"

which led to a visible fall in Hong Kong's global competitiveness ranking from 21st to

28th. There is no sign of any deterioration in Hong Kong's competitiveness, Chief

Executive Donald Tsang says. The World Economic Forum's accusation of weakening

in the city's judicial independence and a rise in corruption is also ungrounded. Despite

the drop in ranking, the competitiveness of Hong Kong remains. According to recent

performance in the past few years, Hong Kong obviously has been recovered after the

Asian Financial Crisis, the unemployment rate has decreased, deflation to inflation.

Along the index that have included in part two, Singapore ranked higher than Hong

Kong in most of the index except the economic freedom index. Hong Kong ranks the

freest country in the world for 12 years and Singapore rank number 2. However the

distance and the score between Hong Kong and Singapore are small. While the

distance and ranking between them on other index is quite large, for example, the

technology index Hong Kong ranked 33 and Singapore ranked 10, and the

infrastructure index. The former ranked 12 and the latter ranked 25.The same result

occurred in other index.

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Innovation and technology, what we think can bring a country into a new century, is

far from enough in Hong Kong .The government of the SAR has a strategic vision of

making Hong Kong into a regional knowledge-intensive technology hub.

In year 1998 our ex-Chief Executive, Mr. Tung Chee-hwa, created and tasked the

Innovation and Technology Commission to explore ways in which Hong Kong could

take advantage of the global technology revolution. Our government is confident that

innovation and technology will increase Hong Kong's competitiveness relative to that

of Singapore and Taiwan.

Hong Kong has many special characteristics such as geographical location which is

one of the very best in Asia. It is a major economy in the region and its living or social

environment, which is unique and stimulating. Hong Kong should be attractive to

world top scientists and engineers which is lack of here. And other might suggest that

Mainland technocrats can be brought in. To encourage innovation, education and

talented people is a key to obtain success.

However, Hong Kong will face a great problem in about 30 years later so as the world

ageing population. Then where the talent people and the workforce come from? It

would be a worldwide concern every country should face in the future.

In conclusion, even though our chief executive Mr. Donald Tsang claims that our

competitiveness level is remain constant, but Hong Kong is unable to compete with

Singapore is a fact. It is the time for our economy to find ways to improve our whole

economy and bring Hong Kong to next stage.

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20/22

Feedback

LAU wing lam (059001S)

In this project, I was responsible for writing analyze of economic freedom, conclusion

and data searching.

Before working on this project, I know quite a little about Hong Kong and other

economic regions. In the process, I have read a lot of article from all aspects about

economic affairs. I think it is a good experience for you as it tell me that I am not

sensitive enough about the surroundings.

And also data searching is not so easy, we have spent a lot of time in finding the

ranking and references. Finally, I would like to say that I am appreciated this chance

to work on this project, my knowledge have been enriched.

Tiffany LAM (059002S)

Macroeconomic environment, Corruption, Infrastructure is my work on this task.

I learnt more about Hong Kongs economic system and structure, and how thesecomponents interact with each other so that Hong Kong is the most productive

country in the Asian Pacific region. Also after reading all the related materials, I have

a deeper understanding of some worldwide concerns.

A more useful skill which is combining the data together is one of the skills that I

have learnt from the group project.

I am pressed to have the opportunity to work on such a interesting and meaningful

job.

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Richard Dixon (059003S)

After completing this project, I find myself to be benefited from learning the

competitiveness of Hong Kong and Singapore. Derrick and I were responsible for the

technology, education, public institution part of the project which gave me more than

just a clearing understanding the competitiveness of those both countries, but it also

gave me an insight that microscopic things that work in our economy could influence

the economy deeply.

I also find that as a group, we shared the work evenly enough so that we could

maintain a steady pace of completing this project in advance. I find that this project is

very educative to me and equally self-satisfying.

Kwok Chun Yu (059004S)

Corruption, infrastructure, macroeconomic environment what we think is the three

factors that determine the competitiveness level between Singapore and Hong Kong is

my job.

After completing this tough task, I find myself becoming more educative and have

obtained lots of new knowledge from the project. As a group project, co-operation is

the most important factor to make the task successful, and it is shown in our group.I have a wonderful time during the work.

Derrick Chan (059005S)

In this project, I am responsible for the technology index and public index, education

index and the introduction. Before I do this project, my brain was totally empty about

the economy of Hong Kong. I have been educated in UK for the past few years,

therefore, most of the case studies we mainly focus on European countries and United

Stated of America. We rarely look at the Asians economy and case studies. The

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differences between European countries and Asian countries are enormous based on

different rate of population and other factors. And now, I found out that Hong Kongs

economy is very fascinating and interesting. This project has given me solid

knowledge and views about Asians economies, this has attracted me to find out more

from enthusiasm.

The End

P 23

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