Public sector reform key to competitiveness
Hisashi Kitahara, The Daily Yomiuri, Asia News Network, Tokyo
Japan has moved up five places to rank 11th in competitiveness among 102 countries and territories, according to the Switzerland-based World Economic Forum's annual Global Competitiveness Report for 2003.
As Japan was placed 16th last year and 21st two years ago, the ranking indicated that the country's competitiveness is gradually recovering.
However, a closer look at the report indicates that Japan faces several problems.
Of the three factors the report used for ranking competitiveness, Japan placed 24th for its macroeconomic environment and 30th for public sector efficiency.
The decline of Japan's international competitiveness has become an international topic since it was ranked lower than Taiwan (fifth this year) and Singapore (sixth) several years ago. The country is also ranked lower than Chile (19th), Jordan (20th), Botswana (26th), Estonia (28th) and Uruguay (29th) in terms of public-sector efficiency.
Japan's technology was ranked fifth this year, as it was in 2002. Companies were given credit for their eagerness to introduce new technology and for investment in research and development, resulting in their management and strategy being ranked sixth in the world.
However, the overall competitiveness of Japanese companies' was ranked only 13th. The ranking was pulled down by the nation's lowly 20th place in the league table for business environment -- which takes into account the administrative and policy support needed to do business.
In other words, although Japanese companies' technology and business strategies are first rate, they are held back by public sector inefficiency. Policies supporting business activities have not been implemented, impeding corporate competitiveness from gaining a higher ranking.
Harvard University Prof. Michael Porter, an expert on the international competitiveness of countries and businesses, has a theory -- dubbed "Porter's National Diamond" -- about international competitiveness.
The theory identifies demand conditions, factor conditions, related and supporting industries and firm strategy, and structure and competition as the four decisive factors governing international competitiveness.
According to the theory, demand for products will lead to human resources for production. Furthermore, development of related industries will lead to efficient production and rival companies' research programs will result in strong competitiveness.
However, it is indispensable for the government to establish a political, economic and legal environment if the theory is to hold true. Yet there is no question that the major stumbling block to Japan's competitiveness lies in the lack of such an environment.
However, one also wonders about the attitude of Japanese companies toward improving their competitiveness.
Finland, ranked No. 1 by the report, is an advanced, technological country.
In its capital, Helsinki, people can use their mobile phones for various services, including buying electronic subway tickets and calling taxis via e-mails sent from cell phones.
Mobiles are also widely used in Japan, but mobile phone e-mail services are chiefly a fun item for young people, not a serious business tool.
Charging to download new ring tones is one example of a business that is conducted over mobile phones in this country -- but it is hard to see that having much impact on daily life, or on the way we do business.
What can mobile phones playing complicated ring tones do for the country? In the future, maybe the sale of ring tones will grow into a leading international business -- but I wonder why some of Japan's leading firms are involved in this market.
Japanese companies are said to be long on applied technology and short on basic technology.
However, the number of international patents obtained by Japanese companies indicated that they have improved significantly in basic technology areas.
What they need is creativity and planning to manufacture innovative products and systems that make the best use of their technologies.
In order to improve competitiveness, the government and private sector have to work together to foster such resourcefulness.