Global Manufacturing Competitiveness: Which Countries Top the Rankings?

By Patricia Van Arnum - DCAT Editorial Director

April 27, 2016

For the pharmaceutical industry and other industrial sectors, deciding where to locate manufacturing facilities is a crucial decision that takes into account many factors, including the overall competitiveness of the country or region. So which countries rank the highest in global manufacturing competitiveness? DCAT Value Chain Insights (VCI) takes an inside look.

The Deloitte study asked global CEOs to rank nations in terms of current and future manufacturing competitiveness. As it did in 2010 and 2013, China earned the number one spot in 2016 with the US ranking second and Germany third. But things are changing as the US is projected to overtake China and move into the number one slot by 2020. So what is behind the ascent?

Inside the rankings
The 2016 Global Manufacturing Competitiveness Index (GMCI) is developed by Deloitte Touche Tohmatsu Limited and the Council on Competitiveness, a leadership organization in the US comprised of CEOs, university presidents and labor leaders. In this year's study, CEO survey respondents were asked to rank nations in terms of current and future manufacturing competitiveness. China, ranked number one in 2016, was followed by the Unites States in second place, Germany in number three, Japan fourth, and South Korea number five. Rounding out the top 10 were the United Kingdom (number six), Taiwan (seven), Mexico (eight), Canada (nine), and Singapore (10). India followed in the eleventh spot, followed by Switzerland, Sweden, Thailand, and Poland to round out the top 15 countries in 2016.

Table I: Global Manufacturing Competitiveness Index: Country Rankings
2016 Rank Projected 2020
1.China 1. United States
2. United States 2. China
3. Germany 3. Germany
4. Japan 4. Japan
5. South Korea 5. India
6. United Kingdom 6. South Korea
7. Taiwan 7. Mexico
8. Mexico 8. United Kingdom
9. Canada 9. Taiwan
10. Singapore 10. Canada
11. India 11. Singapore
12.Switzerland 12. Vietnam
13. Sweden 13. Malaysia
14. Thailand 14. Thailand
15. Poland 15. Indonesia
16. Turkey 16. Poland
17. Malaysia 17. Turkey
18. Vietnam 18. Sweden
19. Indonesia 19. Switzerland
20. Netherlands 20. Czech Republic
Note: Only rankings one through 20 are noted; full rankings include one through forty. Source: Deloitte Touche Tohmatsu Limited and US Council on Competitiveness, 2016 Global Manufacturing Competitiveness Index

In looking ahead to 2020, the key change is the ascent of the US from the number two spot to number one, with China moving down a notch to number two. Germany and Japan respectively keep their number three and four positions, but India makes a strong play, moving into the number five spot in 2020 from the eleventh spot in 2016.

The US improved its ranking from fourth in 2010 to second in the 2016 study and is expected to reach number one by 2020. The ascent is due to strong investment in talent and technology as the US is ranked highest as an advanced manufacturing economy and is highly competitive in terms of the share of high skill and technology contribution to exports and labor productivity as measured by gross domestic product. In addition, the US continues to position itself among the global leaders in research and development (R&D) activities by investing in top universities, R&D talent, and venture capital, investments that help move the company higher in overall manufacturing competitiveness.

Among the BRCI (Brazil, Russia, China, and India) countries, only China is viewed as a top manufacturing nation in 2016. The other three–Brazil, Russia, and India–have seen continuous declines in the study's rankings over the past six years. Brazil's political uncertainty, Russia's geopolitical activities and impact from the slide in global crude oil prices, matched with India's challenged economic and policy actions around infrastructure and investments, have likely triggered the decline from the BRIC's manufacturing competitiveness peak. In the 2016 study, Brazil ranked twenty-ninth and Russia ranked thirty-second in global manufacturing competitiveness although India fared much better at number eleven. Among the BRIC nations, manufacturing executives expressed optimism for only China and India by 2020, with expectations that India will regain some of its ranking position lost over the past several years and move in the number five spot in 2020.

Earning rising favor from CEOs in terms of manufacturing competitiveness, were the so-called "Mighty Five," made up of the five-Asia Pacific nations of Malaysia, India, Thailand, Indonesia, and Vietnam. According to the study, the MITI-V or "Mighty Five" could represent a "New China" and enter the top 15 rankings of global manufacturing competitiveness over the next five years. Low-cost labor, agile manufacturing capabilities, favorable demographic profiles, and market and economic growth are leading factors likely to position these countries to rise in rankings by 2020.

With these dynamics, North American and Asia are the two regions that are expected to dominate the competitive landscape in the next four years. All three North American countries (US, Canada, and Mexico) are in the  top 10 in manufacturing competitiveness rankings in 2016 and are expected to remain there in the 2020 outlook. The US stands out for the North American region with the highest level of manufacturing investments, a strong energy profile, and high-quality talent, infrastructure and innovation. Canada's low trade barriers, tariff-free zone and investments in sectors key to its growing high-tech manufacturing future, along with Mexico's 40 free trade agreements, low labor costs and close proximity to the US round out the region.

Five Asia-Pacific nations (China, Japan, South Korea, Taiwan, and India) factor into the study's top 10 in 2020. The dominant Asia Pacific countries of China, Japan, and South Korea are driven by talent and innovation and along with emerging newer powerhouses, such as Singapore and Taiwan, strengthen the region with a focus on high-tech exports. This region also houses the "Mighty Five" and five of the top 10 countries in current or future GMCI rankings.

European nations are lagging behind as they work through sluggish economic recovery efforts and look to their anchors, Germany and the United Kingdom, to pull them ahead. Most European nations, aside from Germany and the UK, are expected to slip in overall global manufacturing competitiveness rankings in next five years. Ireland, a strong source of pharmaceutical manufacturing, ranked thirty-first in the 2016 rankings and is expected to keep that position in 2020, according to the study.