EMERGING MARKETS TO GAIN MANUFACTURING EDGE / THE FINANCIAL TIMES ( HIGHLY RECOMMENDED READING )

Emerging markets to gain manufacturing edge

By Hal Weitzman in Chicago

Published: June 23 2010 05:54

A global battle for skilled manufacturing workers will benefit emerging economies at the cost of developed countries, according to a report to be released on Wednesday.

The Global Manufacturing Competitiveness Index – produced by Deloitte, the professional services group, and the US Council on Competitiveness – projects that Brazil will overtake the US in terms of manufacturing competitiveness within five years, while Mexico will overtake Japan, and Poland will move ahead of Singapore.

The survey of more than 400 chief executives and senior manufacturing executives around the world found that access to skilled workers capable of supporting innovation was seen as the most important factor behind global competitiveness at manufacturing companies. Respondents identified the cost of labour, materials and energy as less significant than the need to attract talented staff.

“The top issue is being able to get the right workforce in place,” said Craig Giffi, Deloitte’s US industry leader for consumer and industrial products. “You’re starting to see the developing economies not only performing on low costs for labour and other costs. They’re also spending a lot on developing the talent of in-country workers and on education in science, technology and engineering. That’s what makes them competitive and challenging.”

By contrast, Mr Giffi said the survey had “a very sobering lesson for western Europe” and other traditional manufacturers, indicating that manufacturing industries in developed economies are likely to find it increasingly hard to fill positions as skilled workers retire and younger workers lack the technical education to replace them.

The survey suggests almost all western European countries will slip in global competitiveness over the next five years, with the Netherlands, Switzerland, the UK, Ireland and Belgium all declining in the rankings, while countries such as Thailand, Russia, South Africa, Argentina and Saudi Arabia advance.

China, India and South Korea are projected to remain the world’s most competitive manufacturing countries in the next five years, with the US falling from 4th to 5th place as Brazil moves up.

Deborah Wince-Smith, head of the US Council on Competitiveness, said it was not yet too late for the developed world to recognise that manufacturing was transitioning to high-level design and production that required different talents.

“The challenge for the US is how rapidly we accelerate our migration to this new manufacturing paradigm and do that in parallel with making sure we have the trained workforce to operate in that area,” said Ms Wince-Smith. “China’s doing a lot with getting their workforce aligned with the future and we need to do that too, rather than being concerned with training workers for 20th-century skills.”

Mr Giffi noted that manufacturing tends to be price-sensitive and said the loosening of China’s currency policy could help US manufacturers become more price-competitive.

Copyright The Financial Times Limited 2010