The 5 Most Competitive Countries in the World

The 5 Most Competitive Countries in the World

What's behind the success of a great company? Strong financial growth, decisive leadership, a dominant market position? Perhaps the most critical and underlying key to a business' success is its economic environment. Throughout modern history, free, open, and innovation-embracing economies and nations have laid the foundation for thriving business, markets, and investors.

But which economies in the world are the most competitive and productive for business? Fortunately, we have the World Economic Forum for guidance: The WEF recently released its annual Global Competitiveness Report for 2013-2014, a comprehensive analysis of the world's business climate by country. Based on the WEF's definition of competitiveness as "the set of institutions, policies, and factors that determine the level of productivity of a country," here are 2013's five most productive economies.

5. The United States
Surprise! The U.S. fell out of the top five in the WEF's 2012-2013 report, but it's back at the fifth spot for this year, with a score of 5.48 on the organization's 1-7 competiveness score ranking. America's struggled to emerge from the depths of the recession, with poverty unchanged or rising in select demographic groups, according to recent census data. However, as a whole, the U.S. economy has recovered and turned back into one of the world's innovative powerhouses and a home for business rivaled by few global economies.

While the WEF cites the country's tax infrastructure and bureaucracy as impediments for business, America's economy is still the planet's largest by a long shot -- and the country also boasts one of the highest per-capita GDPs in the world. America's wealth and embrace of innovation -- the country ranked seventh in the world in the WEF's innovation ranking -- have helped some of the today's most promising business flourish, from small, growing firms to titans of industry.

Look no further than some of America's top companies to see how well U.S. investors have it. General Electric , one of the United States' most diversified and steadiest companies, has thrived in multiple areas across the markets to the benefit of investors, as have other massive conglomerates. GE has surged behind its rising aviation and oil and gas divisions that have posted strong sales growth in 2013 and helped this stock rise by more than 14% year to date.

More innovative companies have upped the ante in America's markets, with Google and other tech upstarts emerging into forces to be reckoned with in the business community. Google's forward-thinking moves helped the company rise to seventh on Forbes' "Most Innovative Companies" list. The company's ability to grow sales strongly in each of the past two years has been a windfall for investors, who have feasted on the stock's 64% rise over the past two years.

From small start-ups to corporate giants, the U.S. has proved itself deserving of a top-five spot among the world's most competitive economies.

4. Germany
Germany's known as a powerhouse of industry in recession-plagued Europe and one of the most export-reliant economies in the world. But Germany's more than just a trade hub: The WEF's report awarded the country the No. 3 ranking for sophistication of businesses, higher education and training, and infrastructure, all scores that beat out America's respective ranks in those categories. Its training and career track programs have in particular attracted the envy of the world, as Germany's unemployment rate stands at just 5.3% even as the country struggles to fend off Europe's ongoing economic woes.

Like the U.S., Germany's business-friendly environment has become a top market for investors. Chemical and pharmaceutical leader Bayer is among the companies that have thrived behind international expansion, as Bayer's Asia-Pacific sales grew by 7.5% in its Asia-Pacific region last year. The company's not done, either, opening an innovation center in Shanghai earlier this year to tap into a Chinese pharmaceutical market that's on track to soar in the future.

Bayer's only one of many German companies succeeding abroad as Europe struggles to its feet, but it and the country's other business leaders have helped the German economy -- and investors -- keep moving forward in the midst of the region's downturn. Any economy able to fend off a fall like Europe's deserves praise.

3. Finland
For all of Germany's strengths, it's not even the most competitive economy in the European Union. Scandinavia's Finland takes the third spot in the WEF's ranking. The country's economy isn't large, but Finland ranks as the report's top country in innovation, higher education and training, institutions, and health and primary education. While labor regulations hold the country's score back from being even higher, Finland's corruption and crime barely even registered in the WEF's report.

Finland's smaller economy has produced fewer top stocks for investors, but it's still home for some strong companies. Look no further than Nokia : The company's sales have struggled in recent quarters, but the development of its mobile business paid off in a big way for investors after the company sold the division to Microsoft in a $7 billion deal. That's innovation at work, and it's translated into a ridiculous 65% run-up for Nokia's stock in the past month. Nokia's headed into a new future after the sizable sale, but the company's located in just the right economy to ramp up its innovative development.

2. Singapore
Tiny Singapore's no small fry on the global economic landscape. The WEF ranked the country as the best in the world at both labor market efficiency and goods market efficiency. Singapore also ranked second in the world in both infrastructure, financial market development, health and primary education, and institutions.

Singapore's run-up as a business and economic power isn't over, either. In April, the International Monetary Fund predicted in its World Economic Outlook that the country's GDP will rise by 5.1% in 2014 and projected that the country has enough long-term growth to experience 3.9% GDP growth in 2018. That's a full percentage point higher than the IMF's projected U.S. GDP growth for 2018, and Singapore's cultivated a productive, efficient workforce with an unemployment rate of just 2.1% in 2013's second quarter. While Singapore boasts few major publicly traded companies of its own on U.S. stock exchanges, the country's economic rise has made it an Asian hub of American companies looking to break into the growing economies in the region. Singapore's already highly developed, but if its growth story continues, don't expect major companies to shy away from this economic hot spot anytime soon.

1. Switzerland
Perhaps it's no surprise that Switzerland, the European rebel that's managed to avoid the worst of the region's economic nosedive, takes the top spot on the WEF's list. It's the country's third-straight No. 1 annual ranking atop the Global Competitiveness Report, largely because of the country's strength in innovation, labor market efficiency, and sophistication of businesses, all of which rank second overall in their respective categories.

Switzerland's turned into a lucrative hub for investors amid Europe's struggles. Long known as a banking haven and the home of financial giant UBS, the country's pharmaceutical sector boasts two of the industry's powerhouse names in Roche and Novartis . Novartis in particular has performed well recently, as the company managed to grow its earnings and EPS last year despite Big Pharma's patent expirations of major drugs that have slammed sales and earnings across the big names in the industry.

Novartis is stocking up for the future in a great move for long-term investors as well, with a full 29 new drugs, indications, and formulations planned to be filed for regulatory approval between 2014 and 2016. The company's performance has paid off, with shares gaining more than 19% year to date, and if Novartis can realize its future potential while headquartered in such a business-friendly climate such as Switzerland, don't expect the stock to slow down in the coming years.

The best homes for competitiveness
One thing's true about all the countries on this top-five list: They're great places for doing business, whether that's for small, growing companies, the market's giants, or even investors looking at getting the most out of their portfolios. In an age where innovation has come to separate the world's leading companies from the pack, top nations from the U.S. to Switzerland have embraced the work being done to pave the future of the markets' stars.

For investors committed to the long-term rewards of a strong marketplace, there's no better foundation for great stocks and top companies in the long run than an economic climate dedicated to competitiveness.

America's path to the top
The U.S. moved up on the competitiveness chart this year, but it'll take much more effort to unseat Switzerland for the top spot. One of America's greatest investing legends, however, has spotted just what could be holding the country -- and investors -- back from an even stronger future. What macro trend was Warren Buffett referring to when he said "this is the tapeworm that's eating at American competitiveness"? Find out in our free report: "What's Really Eating at America's Competitiveness." You'll also discover an idea to profit as companies work to eradicate this efficiency-sucking tapeworm. Just click here for free, immediate access.

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