KUALA LUMPUR: Weighed down by uncontrollable external factors, Malaysia fell seven notches to the 25th spot out of 138 countries in the World Economic Forum’s (WEF) 2016-2017 Global Competitiveness Report (GCR) released today.

In a statement, International Trade and Industry Minister (Miti) Datuk Seri Mustapa Mohamed said global economic uncertainty, a strong US dollar, a fall in commodity prices and the slowdown in China’s economy were beyond policymakers’ ambit.

“There is also the issue of perception due to [the] irresponsible act of certain parties which continue to spread unfounded and baseless allegations about domestic political developments and the state of our economy.

“The fact is Malaysia remains politically stable and the economic fundamentals remain strong. This perception issue must be taken seriously and the government will continue engaging with various stakeholders to address it,” he said.

Ranked 18 in 2015, Malaysia was overtaken by Belgium, Austria, Luxembourg, France, Australia, Ireland and Israel in 2016 with a performance score of 5.16 out of seven, down 1.33% from 5.23 year-on-year.

Miti said Malaysia remained ahead of South Korea, Iceland and China, and that Germany, Japan, Hong Kong, Finland, Canada, France, Thailand, Indonesia and the Philippines slipped from its rankings this year.

Overall, the report ranked Switzerland as the most competitive economy in the world for the eighth consecutive year, ahead of Singapore and the US, followed by the Netherlands and Germany.

Malaysia ranked in the top 20% in each of the total 12 pillars despite declining in eight of them, Miti said.

It performed well in goods market efficiency and financial market development pillars while advancing four places to 43 in the technological readiness pillar, and two notches to 24 in market size.

The GCR is an annual report published by the WEF based on the Global Competitiveness Index (GCI) that combines 114 indicators integrating both macroeconomic and microeconomic aspects of competitiveness.

These indicators are grouped into 12 pillars comprising institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation.

The GCI is based on statistical data from internationally recognised organisations for 30% or 34 indicators. For the rest of the 80 indicators, qualitative assessments were made based on the WEF’s executive opinion survey.

Mustapa said although 2016’s ranking was disappointing, it strengthened the government’s resolve in undertaking necessary measures at a faster pace to improve the country’s competitiveness.

“The outcome of this report is not to be taken lightly — the government will address the shortcomings highlighted in the report, and consolidate efforts across ministries to maintain Malaysia’s status as a preferred investment destination and benchmark itself against the report’s best performers,” he said.

He urged companies to innovate fast given the prospect of being overtaken by the market and cautioned that competition would become more intense in the years ahead.

“Technology-enabled platforms, such as sensors that ease sharing and on-demand economies, are disrupting business models and forcing countries to rethink how they formulate economic policies,” he said.

Meanwhile, Miti’s Malaysia Productivity Corp director-general Datuk Mohd Razali Hussain told reporters that the health and primary education, and higher education and training pillars recorded a stark drop.

“These are quantitative data from the UN Educational, Scientific and Cultural Organisation (Unesco). Though improvement has been made in terms of data collection, we still have to further strengthen it and have it synchronised with Unesco. [Ours dropped] because countries with a low base improved more than us in these indicators,” he said.

As for innovation and sophistication pillars featuring a drop in business sophistication index, Mohd Razali said it mirrored the perception of small- and medium-enterprises who might not be able to control international distribution.

“These are soft data reflecting what respondents think. Perhaps they are not privy to information in terms of the economy. We need to do more outreach programmes to widen internal practices. This is what the data is telling us.

“Every year we get new respondents. This year, respondents are sending a strong message that we need to do a lot more in terms of providing more provisions,” he said.

On the main pillars — institutions, infrastructure, macroeconomic environment and health and primary education, which saw marginal or no changes, he said the authorities faced challenges in informing the business communities of inroads made in government spending, regulations and judiciary.

“Though we have made inroads, there is a lot of area to cover and once it is covered, we need to inform the business community. It is a test of how good we are in reaching them to tell them how efficient we are. For instance, investing in infrastructure — it is a question of whether we are doing it efficiently or not and if we comply with regulations,” he said.