Switzerland, Finland and Sweden this year took the lead in the rankings of The World Economic Forum's Global Competitiveness Index (GCI).

The US dropped five places, according to The Global Competitiveness Report 2006-2007, released by The WEF yesterday.

Denmark, Singapore, the US, Japan, Germany, the Netherlands and the UK completed the top ten list, but the US showed the most pronounced drop, falling from first to sixth.

The top rankings of Switzerland and the Nordic countries show that good institutions and competent macroeconomic management, coupled with world-class educational attainment and a focus on technology and innovation, are a successful strategy for boosting competitiveness in an increasingly complex global economy.

Business activity in these countries benefits from a well-developed institutional framework, characterised by the rule of law, an efficient judicial system and high levels of transparency and accountability within public institutions. Excellent infrastructure is an additional positive feature of the business environment.

"Our indicators point to the rapidly growing importance of higher education and training as engines of productivity growth. Countries that, like the Nordics, are investing heavily in education are likely to see rising levels of income per capita, growing success in reducing poverty and an increasing ability to establish a presence in the global economy," said Augusto Lopez-Claros, chief economist and director of the WEF's Global Competitiveness Network.

The rankings are drawn from a combination of publicly available hard data and the results of the Executive Opinion Survey, a comprehensive annual survey conducted by the forum, together with its network of Partner Institutes (leading research institutes and business organisations) in the countries covered by the Report. This year, over 11,000 business leaders were polled in a record 125 economies worldwide.

The survey questionnaire is designed to capture a broad range of  factors affecting an economy's business climate that are critical determinants of sustained economic growth. The forum annually delivers a comprehensive overview of the main strengths and weaknesses in a large number of countries, making it possible to identify key areas for policy formulation and reform.

Leading within Asia are Singapore and Japan, ranked 5th and 7th respectively, closely followed by Hong Kong (11) and Taiwan (13). These economies are characterised by high-quality infrastructure, flexible and efficient markets, healthy and well-educated workforces and high levels of technological readiness and innovative capacity. Malaysia, ranked 26th overall, has one of the most efficient economies in the region with flexible labour markets, relatively undistorted goods markets and public institutions which in many areas (eg, rule of law, the legal system) are already operating at the level of the top performing new EU members.

Korea's (24) performance is slightly more uneven than that of Malaysia. The country has already reached world-class levels in certain areas, such as macroeconomic management, school enrolment rates at all levels, penetration rates for new technologies and scientific innovation, as captured by data on patent registration.

India ranked 43rd overall with excellent scores in capacity for innovation and sophistication of company operations. The use of technology and rates of technology transfer are high, although penetration rates of the latest technologies are still quite low by international standards, reflecting India's low levels of per capita income and high incidence of poverty.

China's ranking has fallen from 48 to 54, characterised by a heterogeneous performance. On the positive side, China's buoyant growth rates coupled with low inflation, one of the highest savings rates in the world and manageable levels of public debt have boosted China's ranking on the macro-economy pillar of the GCI to 6th place - an excellent result.