SINGAPORE - Living costs and salaries can play a huge role when it comes to attracting talent, just ask bosses in Singapore and Hong Kong.
A fall in living expenses here and higher pay helped helped make Singapore a more competitive place for recruitment this year but Hong Kong went down in the league table due to its pricier costs and a reduction in remuneration.
Still, while Hong Kong fell three spots to 12th position in rankings compiled by Swiss business school IMD, it still edged out Singapore, which rose two notches to 13th place.
Dr Arturo Bris, the director of the IMD World Competitiveness Center, noted that the movements for both cities are statistically insignificant and could be accounted for by relative shifts in sentiment. "Last year there was quite a lot of negative sentiment in Singapore about its economic outlook, and the mood has improved this year," he noted.
The rankings are based on both historical data as well as surveys with thousands of executives from 63 economies.
Dr Bris also noted that Singapore's score in the "appeal" category improved this year. This factors in things such as cost of living, quality of life, remuneration of management and services professions and personal security.
The rankings also look at two other categories of indicators. One is readiness, which assesses at an economy's ability to nurture skills among its populace that match those needed by its economy.
The other is investment and development, which dives into things such as public spending on education, pupil-teacher ratios and health infrastructure.
The most competitive country in the world for talent this year is Switzerland, followed by Denmark and Belgium; all three retained the same positions as last year.
Still, Dr Bris noted that it is tough to compare economies because each has a different policy towards talent. Denmark, for example, spends heavily on education - 7 per cent of its gross domestic product (GDP) versus Singapore's 2.9 per cent - because it has a deep focus on domestic talent and does not need to rely on foreigners.
Places such as Singapore and Hong Kong spend much less on education but are more open and attractive to foreign talent.
"The problem is when policies become inconsistent with the country's talent management model," he said. "If the government shifts its immigration policies in response to pressure from the local population, it will also need to shift towards more investment in public education."
The country that has a "perfect combination" of the two models is Switzerland, Dr Bris added.
"The education system is extremely focused on readying people for what the economy needs - technical education and innovative skills. But for other jobs such as dentists, nurses and services professionals, they open up their borders to foreign talent."
CIMB Private Bank economist Song Seng Wun noted that striking such a balance will be a challenge that Singapore continues to face in the coming years.
"We have to be mindful that we are a tiny city-state and the local resident population growth is slowing. So the key challenge will be how we continue to nurture local residents while attracting new talent to ensure the overall demographics remain supportive of growth."
Dr Bris also noted that while the economic centre of gravity is shifting from the West to Asia, big challenges remain for the region.
Aside from Hong Kong, Singapore and Taiwan, Asian economies are largely uncompetitive, mainly due to a lack of political cohesion and poor institutional quality, reflected in high levels of corruption and uneven rule of law.
"Now what we see is that Europe and the United States are failing and Asia is taking over. But there are these problems in Asia so it's very uncertain what will happen," he said.