Israel dropped five spots to 24th place out of 60 in the 2014 World Competitiveness Yearbook Ranking released Thursday, continuing a downward trend from 17th in 2010- 11 and 19th in 2012-13.
Compiled each year by the IMD business school, the rankings aim to measure economic performance, government efficiency, business efficiency and infrastructure.
While based mostly on hard data, a third of the score comes from surveys measuring perceptions on how the country is doing.
“How executives feel their country is being perceived is a potentially useful guide to future competitiveness developments there,” said Arturo Bris, director of the IMD World Competitiveness Center.
The lowest scores on Israel’s competitiveness ranking included its basic infrastructure, which came in at 48th, prices (43) and international trade (41). It scored 7th in its rank of attitudes and valued.
“The fact that Israel is ranked 40th in corporate taxes and 49th in cost of living clearly demonstrates that strengthening Israel’s economic resilience is not done through raising taxes, as proposed by the Bank of Israel, but by reducing the tax burden” Federation of Israeli Chambers of Commerce president Uriel Lynn said.
The Bank of Israel found that the 2015 budget would need NIS 18 billion of adjustments to hit its legal targets, although it did not specify how much should come from spending cuts or revenue increases.
The report laid out the most improved and worst declined competitive features in Israel.
The upside consisted mostly of macroeconomic indicators, such as its trade balance, interest rate, fiscal situation and GDP per capita.
Of the 15 fields in which Israel saw the most backsliding, however, 12 came from survey assessments, including people’s views on pensions funding, the exchange rate, corporate taxes and the threat of R&D centers relocating.
In an executive opinion survey that asked respondents to list the top five attractive attributes in Israel, 70.2 percent listed R&D and 62.8% listed education. On the other hand, only 8.5% listed labor relations, 6.4% listed cost competitiveness and 4.3% said government competency.
According to the report, the challenges facing Israel include problems with sustainable growth, bureaucracy and burden on the business sector, investments in periphery infrastructure (including education), increasing labor participation among minorities and decreasing economic disparities.
While Israel was ranked similarly to China (23) and Korea (26), the countries that took the top spots were the United States, Switzerland, Singapore and Hong Kong. Greece, Argentina, Croatia and Venezuela filled out the last four places.
Several start-ups at Israel’s MIXiii innovation conference shrugged of the results, saying they did not notice a major change.
“Bureaucracy is a part of life in Israel,” said Ronen Gur, CFO of Abracadabra Robotics.
Businesses have to jump through some hoops, he said, but it’s “overcomeable.”
Simon Galpin, director- general of InvestHK, said: “I think people pay a little bit of attention to rankings, but fundamentally it’s down to what business you’re in and the opportunities you have access to.”