BNN | Business News Network

What goes up must come down. Not with the US, though, as far as global competitiveness goes.

A recent study shows that the US is still up there despite the massive trauma it endured from the global financial crisis. Conclusions derived from the 2009 World Competitiveness Yearbook published by Swiss business school IMB indicate that the US still leads in economic competitiveness, the criteria being quality of infrastructure, educational systems, business laws, and bureaucracy. The report shortlisted 57 economies and determined their potential to succeed in the 21st century global race.

The US has topped the list for 16 straight years, its crippled economy and widespread employment offset by its superior higher-education system, enormous economy, and powerful infrastructure. It remains the world’s dominant economic engine at present.

Other developed countries join the spotlight with the US, with only Qatar (14th) and China (20th) from so-called emerging economies sharing the stage. Last year, Asian countries like Malaysia and the Philippines showed great improvement.

What makes a country globally competitive? The study says that competitiveness is present in flexible and adaptive countries that have efficient domestic trade policies and bureaucracies with more accessible education systems, less corruption, and higher domestic financial stability. These are countries that are more likely to weather financial storms because of adaptability.

According to Stephane Garelli, IMD’s director, those at the top of the list are “better prepared to adapt to the current turbulent economic times.”

He was quick to point out that the list is not permanent and countries that are ahead today will not stay in that spot forever. An example is Japan, which topped the list in 1989 but was usurped by the US in 1994 as No. 1. Garelli said that complacency in sustaining investment in R & D, government control of businesses, and failure to maintain education standards will undermine a country’s ranking.

As far as the US goes, he gives a positive forecast, relying on the country’s capacity to reinvent itself.

After the storm caused by the controversial executive payouts, oil giant Royal Dutch Shell has announced it will adjust performance measures and modify its incentive program in response to shareholder recommendations.

Sir Peter Job, director for Shell, said the company has regular engagements and discussions with major shareholders on the implications of the pay controversy. Moreover, it has put up additional performance measures to guide future awards and amended provisions of its incentive program. Instead of basing rewards chiefly on total shareholder return, factors such as cash generation, oil production and earnings per share relative to its peer group will be considered.

In hindsight, Shell awarded huge bonuses to managers despite a failed bid to meet targets. Based on a 2005 company agreement, payouts equivalent to twice their salaries would be rewarded to executives in the event Shell outranks three peer companies. The company only came out fourth in the peer ranking, but the remuneration committee went ahead with the rewards anyway.

It gave 79,000 shares allocation worth £1.25 million to chief executive Jeroen van der Veer. It also awarded shares equaling a year’s salary to three directors: Peter Voser, Malcolm Brinded and Linda Cook.

These payouts pushed through despite widespread opposition from its shareholders. During its Annual Meeting at The Hague, 61% of Shell’s shareholders registered a non-binding negative or abstaining vote to the remuneration policy.

In defense, the pay committee maintained the move was made as an incentive to ensure prospective chief executives to stay, considering that van der Veer is set to retire next year.

Job, who is also chairman of the remuneration committee, had earlier expressed that Shell seriously “reflected” on the shareholders’ sentiments, but moving forward with the pay plan was “the right thing to do.”

Companies have seen a series of upheavals originating from executive payouts (BP and Amec, to name a few). Analysts say this development will make companies like Shell think twice in the future about its decisions and check on its governance.

Financial uncertainty and fears of inflation have translated to a rise in investor interest for precious metals.

Mints worldwide have recorded a rise in sales of physical gold products as a “safe haven market”, offering security to investors amidst the financial crunch.

On February 20, gold value climbed to its highest in 11 months ($1,005.40) as equity markets plunged, sending demand for hard assets, such as precious metals, on the rise. Traders around the world have observed a growing demand for physical gold products such as gold coins and bars.

The Royal Canadian Mint, producer of Maple Leaf bullion coins, reported a four-fold production increase because of the sharp rise in demand for gold and silver bullions. Similarly, the United States Mint reported unprecedented sales of one-ounce American Eagle gold bullions that skyrocketed to over 400% from 140,000 ounces per year in 2007 to 710,000 ounces in 2008.

French Mint had all their production of €100 gold coins pre-sold. Its chairman, Christophe Beaux, expects sales to rise by half this year considering that sales during the previous doubled. To answer demand, the company is planning to mint 10-ounce and 1-kilo coins this year.

South Africa has also seen a soar in demand for gold. The world’s second largest gold producer expects the same trend in the coming quarter.

New Zealand Mint head Michael O’Kane observed that bullion buying started to rocket since the collapse of investment giant Lehman Brothers in September. Since then, investors have shied away from banks and turned to hard assets. As a result, the company has catered to a growing number of overseas buyers, averaging sales equivalent to a month for a single day of transaction.

While investor demand for gold has risen, consumer demand for jewelry has gone down by 24% according to the World Gold Council. Moreover, industrial demand for gold required for production of electronic gadgets fell by 31%.

Japan’s economy, considered the world’s second largest, plunges deep into a record low for the first three months this year, recording a contraction by 4%. Figures from the Cabinet office also show the country’s fourth consecutive quarterly decline in GDP by 3.8% for October to December 2008. This is the most troublesome period for the Japanese economy since World War II.

The export dependent Japanese economy has failed to recover from the global financial distress as worldwide demand for cars and electronic gadgets continue to plummet. As a consequence, Japan’s exports fell by 26%.

Economists are not too keen on giving optimistic predictions for the economy in the coming months. The fragile corporate sector has led to a domino effect on households. With the upsurge in savings rate, there is a growing fear of job insecurity and people are spending less by 1.1%.

The economy has not revealed strong signs of recovery, notwithstanding the most recent ¥15.4 trillion aggressive stimulus plan laid down by Prime Minister Taro Aso to resuscitate Japan’s ailing automotive and electronics industry.

Aso had earlier announced plans to implement strong economic measures in order to “protect the livelihoods of people, to prevent the economy from falling through the floor and to give the people a sense of security”.

The stimulus package aimed to provide cushion to struggling firms and create safety nets for temporary workers. It also targeted the creation of two million jobs within a three-year period.

Experts opine that the recently released financial data show that Japan’s fate hangs on the revival of demand from its major export partners – Europe, China, and the United States. If the economy is showing signs of recuperation, it is but temporary, economists say. According to Hiroshi Shiraishi, an economist at BNP Paribas, “The Japanese economy may return to growth temporarily, but it could suffer a contraction again afterwards.” Its chances of recovery, along with other nations, depend on worldwide recovery trends.