Germany breaks S Korea's streak as most innovative nation

Singapore

GERMANY took first place in the 2020 Bloomberg Innovation Index, breaking South Korea's six-year winning streak, while the US fell one notch to No. 9.

Singapore's leap into the third-place ranking returns it to its post from two years ago.

The annual Bloomberg Innovation Index, in its eighth year, analyses dozens of criteria using seven metrics, including research and development spending, manufacturing capability and concentration of high-tech public companies.

The ranking shed light on the ability of economies to innovate, a key theme at the annual World Economic Forum in Davos, Switzerland, taking place from Jan 21 to Jan 24.

In the Bloomberg Index, Germany scored three top-five rankings in value-added manufacturing, high-tech density, and patent activity. South Korea lost its crown in part due to a relative slump in productivity, falling to No. 29 from last year's No. 18 ranking in that category.

"The manufacturing sector is still highly competitive and a source for innovation," Carsten Brzeski, chief economist at ING Germany, said in an e-mail. "Germany's performance in such indicators is still strong and much better than the recent economic weakness would suggest."

Still, Mr Brzeski cited several reasons why Germany shouldn't be complacent about its innovation standing. Its services innovation is much less impressive, and about a third of research and development spending is in the car industry, meaning "disruption and longer weakness of this sector could weigh on Germany's innovative strength", he said.

Germany's status as a manufacturing giant has been built on the car-making industry, but pollution concerns, trade conflicts and slowing economies have weighed on demand.

Lack of innovation around tertiary education in Germany is an "increasing worry", Mr Brzeski added, especially as the global economy shifts more towards services and away from manufacturing. "The German government would be well advised to use the ongoing fiscal surplus to invest and safeguard Germany's role as innovator."

South Korea's narrow loss is hardly a reason to anticipate a crumbling in its innovative prowess. R&D spending "determines life or death for South Korean companies", with tech-oriented heavyweights like Samsung Electronics Co, LG Electronics Inc, and Hyundai Motor Co leading the economy, said Chang Suk-gwon, a business management professor at Seoul's Hanyang University.

"We don't have any other natural resources - we only have our brains to turn to," said Prof Chang. "The expression that's often bandied about in South Korea is the 'super gap'. It's about widening whatever lead South Korea has - or else China will catch up."

Singapore's rise to third place overall, from sixth last year, was aided by productivity and value-added manufacturing gains, while it retains a best-in-world ranking for tertiary-education efficiency.

The news is less rosy for the top advanced economies. The US, which was No. 1 when the Bloomberg index debuted in 2013, fell one spot to No. 9 since last year's ranking. Japan dropped to No. 12, down three spots for the same-sized decline in last year's index.

The world's second-biggest economy, China, edged higher by one spot to No. 15. It held onto a second-place ranking on patent activity, and broke into the top five for tertiary efficiency.

China's strong performance probably shows that it was "busy building up and readying for a prolonged trade war and thus urgently needed to do a lot of in-sourcing, and getting up the value chain of manufacturing", said Francis Tan, investment strategist at UOB Private Bank. China has President Donald Trump "to thank for accelerating their plans".

The US can at least celebrate holding onto world-beating performances in two categories: high-tech density and patent activity. BLOOMBERG