The Strategist

BCG updates Global Manufacturing Cost-Competitiveness Index, USA and Vietnam win

03/02/2020 - 08:45

Boston Consulting Group (BCG)’s 2019 industrial production cost competitiveness rating shows the effects of the trade wars of the last five years: the United States significantly improved its global competitiveness last year mainly due to increased labor productivity. In the trade dispute between the United States and China, Vietnam and other Southeast Asian economies became the winning parties.

Based on the corresponding Global Manufacturing Cost Competitiveness Index, BCG annually calculates the global competitiveness rating of industrial production costs for several dozens of the world's largest exporting countries (90% of world trade in manufactured goods), tied to global industrial chains. This is a rather complex tool that allows quantifying in a single index changes in the exchange rate, the cost of energy and gas used in industrial production, as well as labor.

The BCG index cannot serve as a direct target for a company solving the problem of locating new production in several possible economies (industry differentiation and logistic efficiency may be different). At the same time, a tool that conditionally demonstrates how much more expensive or cheaper (in comparison with the basic economy - the USA, 100 units) a product can be produced in another country is invaluable for explaining global trends and medium-term decisions made by companies where to place or where to move production.

For the most part due to historical reasons, the lists of “most competitive in fact” and “most profitable” countries have little in common: the leader of world competitiveness by BCG index in 2018 is Indonesia (81 points, near the end of the top 35), the largest export volumes (in order) is China (index 95–97), Germany (116) and the USA (100). The dynamics of the index since 2004 are particularly interesting: for example, for the whole of China it has grown from 86 to the current 95, and for the industrial region in the Yangtze Delta - from 86 to 97, that is, almost to parity. The reasons for the changes for all countries are different.

In the ranking, BCG is most interested in the relationship between its dynamics and trade disputes of recent years - this is a fairly rapid decline in the competitiveness of the “old” EU countries, including due to the exchange rate, and the equally rapid gain of Southeast Asian countries, primarily Vietnam, from the trade war of the USA and China. However, the United States has dramatically increased competitiveness in this area, mainly due to the rapid increase in labor productivity per worker. From 2013 to 2018, in Germany, the “money production” for it increased from $ 80 thousand to $ 90 thousand, in Japan - from $ 70 thousand to $ 82 thousand, in South Korea - from $ 93 thousand to $ 98 thousand, in China - from $ 20 thousand to $ 28 thousand, in the USA - from $ 105 thousand to $ 111 thousand.


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