GENEVA, May 9: Swift gains in competitiveness by emerging nations are challenging the supremacy of industrialised economies and raising the prospect of a protectionist backlash, a leading report said on Thursday.

The United States remained anchored in first place in the IMD business school's 2006 World Competitiveness Yearbook, but 40 of the 55 economies surveyed are closing the gap on the world's biggest economic and corporate power.

They include a traditional array of smaller Asian and European nations, led by Singapore and Hong Kong in second and third place in the IMD competitiveness ranking.

But emerging giants, like mainland China -- which rose from 18th to 15th position in the annual ranking -- and India -- 27th -- are also catching up on the United States at a rate of more than 2.5 per cent a year, the report said.

Although Russia is lower down the ranking in 43rd place, its competitiveness has grown by an average of nearly five per cent a year over the past decade compared to the United States.

The overall trend “could lead to an increase in protectionist measures in Europe and the United States,” Stephane Garelli of the Lausanne-based IMD warned.

“In 2007 and beyond, economic relations will be more tense than ever as emerging markets turn into emerging powers and challenge the established order for competitiveness,” he said.

Garelli said industrialised nations would find it hard to tolerate the loss of some of their “business jewels” to a growing number of new brands and companies from Asia, Russia and the Gulf that are buying up industrial assets.

Takeovers of the kind in recent years have triggered political uproar.

Dubai port operator DP World came under pressure from US lawmakers and was forced to sell operations in the United States last year following a broader takeover. Successful takeovers of European steel firms by Indian groups have also courted controversy.Garelli predicted that a growing number of complaints about unfair practices would be filed with the World Trade Organisation.

“Subtler” protective hurdles, including measures on corporate governance, environmental protection, intellectual property protection, and social rights, would also come into play, he added.

The annual IMD report assesses economic performance, government and business efficiency, and infrastructure -- including factors like education, technology, health and social services -- to establish its annual ranking.

China, Russia, India, the Slovak Republic, Estonia, Sweden, Austria, Denmark, Switzerland and Hong Kong have displayed consistent improvement in their competitiveness in the past decade, according to the IMD.

However, Russia and the Asian powerhouses have the added benefit of more than 1.7 trillion dollars in foreign currency reserves, Garelli underlined.

Some emerging nations and established economies have tended to lag behind the top league in the ranking in recent years because of their patchy competitiveness, the IMD said.

They include Brazil, France, Indonesia, Italy, Mexico, the Philippines and Turkey.

Germany (16) made the biggest gains for 2007 (+ 9) on the back of improved economic performance.

South Africa dropped 12 places to 50th due to high unemployment, societal and legislative problems that hamper efficiency, and poor infrastructure.—AFP