As in past years, the United States serves as the baseline with 100 points. The other countries studied either have a cost advantage as a percentage or a cost disadvantage as a percentage of that U.S. baseline. The inclusion of Singapore in the 2006 analysis should be noted in terms of its significant cost advantage over all other countries in all four industry sectors and therefore in the overall results. Overall, Singapore has a 22.3-percent cost advantage over the baseline; coming in second is Canada at 5.5 percent. Of the four broad industry categories, Singapore's cost advantage is most

"The Canadian dollar has seen an increase of 14 percent relative to the U.S. dollar over the last two years. That has cut into Canada's competitive position. But the fact that there is still an advantage there given the high value of the dollar seems very much a good news story." – Glenn Mair, MMK Consulting

pronounced in the software and R&D sectors, at 30.9 percent and 30.8 percent respectively. Canada's second-place finish in three of the four cannot be overlooked. Relative to the United States, Canada comes in second in the software sector (6.7-percent cost advantage), corporate services (5.3 percent) and manufacturing (4.5 percent). The Netherlands comes in second in R&D at 12.8 percent, but Canada is a close third at 10.9 percent.
   "R&D continues to be a strong sector for Canada due to a combination of labor and cost advantages and also tax credits for R&D activities," says Glenn Mair of MMK Consulting. "They are very generous in Canada compared to other countries." Then why did the Netherlands score better in that sector?
   "The Netherlands has a relatively favorable labor cost for R&D professionals taking scientific job positions," says Mair. "They also have an R&D incentive program that many reviews and studies tend not to pick up, because it's not an income tax program the way most countries work. Rather it's a program that lets companies retain a portion of the employee taxes they're withholding for R&D workers, and the government still credits the individual as having paid their standard amount of tax. It's a different structure than what we're used to dealing with the U.S. and Canada. That combination of labor costs and that R&D incentive program put the Netherlands in a very good position for that sector." But the fact remains: Singapore enjoys a 20-percent cost advantage over the Netherlands in the R&D sector and a much larger advantage over Germany and Japan. Most of Singapore's cost advantage lies in lower labor costs and lower taxes.
   As for coverage of Asian markets, Mair says there has been keen interest on the part of corporate investors and market watchers to include numbers from Hong Kong in the 2008 version of the analysis, especially if Singapore participates again, because the two city-states are so competitive.