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Incorporating AI technology from the top down will build digital nationhood in 2024, says new IMD report

The United States has staved off competition from its European and Asian chasers to triumph in the 2023 edition of the IMD World Digital Competitiveness Ranking, which hammered home the need to see beyond the hype when it comes to AI.
November 2023

The US last year fell to second place for the first time since the 2017 launch of the annual ranking produced by the IMD World Competitiveness Center (WCC), but this year achieved robust results across all three of the broad categories (“factors”) measured by the economists: knowledge, technology, and future readiness.

“We hope this year’s ranking sheds light on the key factors that can help countries combine prosperity and economic development with digital transformation and the development of AI solutions, in order to create the digital nations of 2024 and beyond,” said Professor Arturo Bris, Director of the WCC.

“There is ample evidence across our rankings that national competitiveness results from investment in education and the provision of those skills required by the labor market. When it comes to technology and AI, the need is even greater,” he added.

The Netherlands climbed four positions to rank second in the ranking. It was given a leg up by improvements in data measured such as the adequacy of the private sector’s cybersecurity, total public expenditure on education, and higher education achievement.

The north-western European nation was followed by Singapore, a familiar face in the top five of the WCC ranking series. The island nation excelled in the technology factor, which paints a picture of the context in which digital technologies can thrive in a given country, homing in on the three areas of regulatory framework, capital, and technological framework.

Tech trickles down, life improves

“Granting individuals access to technology and therefore having them reap the rewards of its benefits is primarily the responsibility of governments. Only when the necessary digital infrastructure and regulations are in place can private-sector companies develop solutions that improve our quality of life,” said Bris.

“Digital nations require a mix of infrastructure and regulation (which are intangible), plus digital talent and digital attitudes (also known as ‘readiness’). And we try to measure all of this,” he added.

Switzerland, which ranked top in the knowledge factor of this year’s ranking, maintained its overall position relative to last year, coming fifth. The knowledge factor groups together criteria that indicate what the know-how of a given economy is likely to be when it comes to discovering, understanding and building new technologies.

Individual attitudes towards technology are lagging in Switzerland. “It rejected the digital identity program, concerns about transparency are extremely high, digital banking isn’t as developed as in many other countries, and it doesn’t have Amazon or Google. This is all despite excellent digital infrastructure, amazing regulation, development of digital talent, and the ability of its companies to transform,” said Bris. It distinguished Switzerland from Singapore or the UAE (12th), he said.

If you compare Switzerland with Japan, where the adoption of technology is actually very good and yet it ranks among the bottom ten countries when it comes to agility and overall ranks 32nd, you get an idea of the “no-one-size fits-all” nature of the digital recipe.

“If you look at the Japanese corporate sector and you remove the Toyotas and the Mitsubishis of the world, you’ll see that the typical Japanese company (SME) is extremely reluctant to incorporate technology. They are often family businesses and employ Japanese labor in their vast majority,” Bris said.

Digital Europe?

“In terms of digital transformation, companies in Europe are not really doing any better this year than last and so it seems that the Next Generation digital funds from Europe have not yet transformed the digital culture,” said Bris.

Next Generation is the EU’s €800 billion temporary recovery instrument aimed at supporting economic recovery from the COVID pandemic and build a greener, more digital and more resilient future.

Denmark – which was the leader of the 2022 edition of the ranking – this year dropped to fourth mainly because of declines in the future readiness and technology factors. Future readiness looks at just how well equipped a country is to exploit digital transformation opportunities. Elsewhere in Europe, Spain dropped three spots, France five and the UK four.

Western Europe, together with Eastern Asia and South America have, to varying extents, worsened in their average rankings compared to 2022. Southern Asia & the Pacific, Eastern Europe, and Western Asia & Africa remain relatively stable in their overall average positions. North America and Ex-CIS and Central Asia have slightly improved.

‘Cybersecurity exemplifies need to assess AI’s trade-offs’

Cybersecurity goes hand in hand with AI as the latter can both help feed attacks and defend from them. Of the 4,000 senior executives who responded to the ranking’s survey – which forms one third of the final aggregation of results, hard data making up the rest – only 5% said they had not implemented any new cybersecurity measures in the past year.

“Cybersecurity becomes a clear example of the need to assess AI’s trade-offs and to take a very deliberate approach towards using it optimally. Countries cannot do this in isolation, but need to lean on regional if not global institutions to do so,” says Bris.  In the report, he outlines a potential approach to a global governance system on AI.

“Economies’ capacity to generate value hinges on the resilience of their cybersecurity defenses,” Cabolis added. “This can be realized by acknowledging the interconnected nature of (a) robust cybersecurity measures at the company level and (b) the existence of a protective and proactive regulatory framework at the economy level.”

The ranking this year studied 64 economies – including Kuwait for the first time.

During 2023, the WCC has published the IMD World Competitiveness Ranking, the IMD World Talent Ranking, the IMD Smart City Index, and the Hinrich-IMD Sustainable Trade Index.

It will produce an update of the same rankings in 2024, and is particularly excited to be welcoming several more African economies to its digital, talent and competitiveness rankings thanks to close collaboration with the International Labour Organization.