PETALING JAYA: Malaysia has slipped to 34th position in the IMD World Competitiveness Ranking 2024 – down from 27th place in 2023.

The ranking divides data into four areas – economic performance, government efficiency, business efficiency and infrastructure. Together, they capture various aspects of competitiveness, such as macroeconomic stability, fiscal policy, institutional quality, market openness, business dynamism, innovation, education, health and environmental performance.

IMD World Competitiveness Centre director Arturo Bris, who has been behind the annual ranking since its inception in 1989, said that among the 14 Asia-Pacific countries, Malaysia was ranked 10th from its previous sixth placing.

“At a macro level, Malaysia ranked high in terms of prices (second), basic infrastructure (10th), and tax policy (11th),” he said.

He said despite the strong overall performance, IMD found that Malaysia was less competitive in several other areas, such as education (44th), business legislation (50th), and productivity and efficiency (53rd).

The report highlighted that for 2024, the main challenges for Malaysia will be to increase investment in research and development to boost business resilience.

“The country also has to optimise the labour market to maximise workforce productivity, update policies and regulations to improve global competitiveness, and leverage advanced technologies to accelerate productivity growth.”

Bris said Malaysia must mitigate the increasing costs of doing business through strategic productivity enhancements.

“We believe the most competitive economies of the future will be those that can anticipate and adapt to the changing global context while creating value and well-being for their people. This will translate into making them sustainable as well.”

He said the major competitiveness challenges for the world’s economies in 2024 and beyond were transitioning to a low-carbon and circular economy. “Countries also have to be mindful of emerging markets’ increasing integration into the world economy, and keeping up with digital transformation.”

Bris said the IMD rankings, which compute survey data and 164 pieces of statistics were conducted between March and May 2024 among 6,612 C-level and mid-level managers from 67 economies.

He said the three trends that survey respondents consider as having the greatest impact on businesses in 2024 were AI adoption (55.1%), risk of a global economic slowdown (52%), and geopolitical conflicts (36.1%).

“AI adoption is one thing, but using it is another matter. One of the key challenges for companies today is how to implement AI systems that improve efficiency without disrupting business activities.

“A related challenge is ensuring their chosen AI system’s accuracy because inaccurate systems lead to inefficiencies and reduced productivity.”

While 27% of executives surveyed consider the transition to zero emissions to be an important trend in the short term, just 12.2% highlighted the impact of global warming as relevant.

Bris said the results reflected a matter of priorities. For instance, executives needed to balance short-term priorities with long-term ones.

“Environmental risks are seen as being in the latter category and are being given too little relevance despite them already affecting us. The top 10 ranked economies are dominated by smaller ones, which strongly indicates that economic competitiveness is not a question of size.”