BERLIN: Malaysia was ranked 25th among the 138 economies in the latest annual World Economic Forum's Global Competitiveness Report.

The drop by seven places from 18th in 2015 was due to a decline in scores in eight of the indicators in the 12 pillars which measure both macro and micro economic aspects of competitiveness.

The 12 pillars comprise Institutions, Infrastructure, Macroeconomic Environment, Health and Primary Education, Higher Education and Training, Goods Market Efficiency, Labour Market Efficiency, Financial Market Development, Technological Readiness, Market Size, Business Sophistication and Innovation.

While the report is based on statistical data from internationally recognised organisations for 30 per cent of the indicators, the remaining 80 are based on the World Economic Forum's Executive Opinion Survey.

Switzerland was ranked the most competitive economy in the world for the eighth consecutive year, ahead of Singapore and the United States, followed by the Netherlands and Germany.

WEF said Malaysia remains the best ranked emerging economy in Asia, adding that its performance remains strong and remarkably consistent.

International Trade and Industry Minister Datuk Seri Mustapa Mohamed said the global economic uncertainty, the strong US Dollar, the fall in commodity prices and the slowdown in China's economy were partly the reasons.

He said the issue of perception was also due to irresponsible act of certain parties which continue to spread unfounded and baseless allegations about domestic political developments and the state of the economy.

He said although the latest ranking is disappointing, it has strengthened the government's resolve in undertaking necessary measures at a much faster pace to improve the country's competitiveness.

Malaysia is already addressing areas such as improving productivity, enabling innovation especially in SMEs and revolutionising manufacturing services, enhanced automation and digitalisation to increase efficiency, optimisation of logistics and making prices more transparent and competitive taking cognisance of the Fourth Industrial Revolution.

Mustapa also urged the companies to innovate fast given the prospect of being overtaken by the market, saying the private sector will define the competitiveness of Malaysia.

Meanwhile the Global Competitiveness Report 2016-2017 finds declining openness as threatening growth and prosperity.

For emerging markets, updated business practices and investment in innovation are as important as infrastructure, skills and efficient markets.

“Declining openness in the global economy is harming competitiveness and making it harder for leaders to drive sustainable, inclusive growth,” said Klaus Schwab, Founder and Executive Chairman, World Economic Forum.

Thierry Geiger, who is from the global competitiveness and risks, in WEF, however said the drop in rankings should not be overblown.

To fulfil its ambitions of becoming a high income status by the end of the decade, Malaysia needs to develop its innovation ecosystem, and a more widespread diffusion of ICT would contribute to this objective.