Taiwan is world's No. 2 in IT competitiveness

update SINGAPORE--Taiwan now has the second-most competitive IT industry in the world, according to a new report by the Economist Intelligence Unit (EIU).

The report, How technology sectors grow: Benchmarking IT industry competitiveness 2008 showed the economy jumped four spots from its previous ranking, to trail the United States, which topped the index for the second consecutive year.

Tony Nash, EIU's Asia director for country and economic research, said Tuesday at a briefing in Singapore that Taiwan's strong performance in R&D (research and development) led to its improvement. In particular, it ranked top in the world in the area of patents, generating one patent for every 2,000 persons.

Two other Asian economies--South Korea and Singapore--made it to the top 10. Singapore jumped two spots to No. 9 this year, while South Korea slipped from third position in 2007 to the current No. 8. Japan, which ranked No. 2 last year, suffered a significant dip this year, slipping out of the top 10 to No. 12.

According to Nash, changes in methodology for the patent indicator, which weighted computing-specific patents, resulted in the shifts for markets such as Taiwan, South Korea and Japan.

Now in its second year, the EIU study ranks over 60 countries based on six categories--business environment for the IT industry; IT infrastructure; human capital; legal environment; R&D environment; and government support for IT industry development--which in turn have a number of indicators. Countries are scored on a scale of one to 100 for each category.

Other Asian economies were ranked outside of the top 20, with most experiencing no change in their ranking. Hong Kong retained its No. 21 position, followed by Malaysia--also unchanged--at No. 36. Thailand and China both dropped one spot, to 42 and 50, respectively. The Philippines once again ranked 47th, while India dropped two places to 48 this year. Indonesia and Vietnam were in the bottom 10, at No. 58 and No. 61, respectively.

The Asian markets have progressed in terms of IT competitiveness, Nash told ZDNet Asia. However, given that the IT industry is a dynamic and extremely competitive one, other countries have also grown at a rapid pace.

Nonetheless, countries such as Vietnam are a rising force. "The Vietnamese government is spending a lot of money on connectivity; there are also a number of returnees back in the country and adding to the overall economy," said Nash, adding that a number of IT multinational corporations have established presence there.

Jeffrey Hardee, Asia-Pacific vice president and regional director at Business Software Alliance, pointed out the returnee effect has implications for economies such as the United States, which has been hosting foreign talent from countries such as China and India. BSA, a non-profit body, is the sponsor of the EIU study.

Noting that the message to bring to the U.S. government would be to "be careful", he said the BSA would recommend making work visas less difficult to obtain.

China, said Nash, has also made strides in improving its legal environment, due to government efforts to bring intellectual property legislation in line with international standards. However, the BSA said in May the country was still a significant contributor to software piracy in the region.

Nash also singled out Singapore for its No. 2 ranking globally in the area of human capital. The island-state, he added, also was ranked third in the world for government support in development of the IT industry, and has taken steps to focus on being an IP-producing nation over the last "couple of years". However, Singapore's patent generation ratio is one in 47,600 persons.

According to BSA's Hardee, the IT industry in the Asia-Pacific region is worth about US$230 billion and comprises 348,000 tech businesses that employ 5.5 million people.