Friday, March 2, 2012

Globalisation index 2011

A piece here talked about the Globalisation Report, 2011 brought out by E&Y ranking 60 countries on the Globalisation index. Bringing out the report in its third year (2010 report is here) the 2011 Report is titled "The world is bumpy:Globalization and new strategies for growth" says,
"The world isn’t flat — it’s curved, bumpy and you can’t see what’s ahead. Even as new markets expand and globalization increases, opportunities are becoming harder to find. Not so long ago, mature-market companies, faced with shrinking prospects at home, looked to rapid-growth economies as their best hope for profitability. And for their part, rapid-growth-market companies, buoyed by robust domestic economies, began to expand into neighboring countries and, increasingly, the developed world.
Now the economic outlook is blurring in many markets, and a looming squeeze — slowing growth, increasing competition, significant operational complexity and shortages of talent in key markets — is diminishing business prospects. Slightly more than half of the senior executives questioned for this report think that the global economy is likely to fall into recession by the end of 2012. Almost two-thirds consider it likely that there will be a new global financial crisis triggered by Eurozone debt defaults. Nearly half of the respondents think that China could suffer a major economic slowdown over the next five years, and one-third expect a similar outcome for Brazil and India."
What is interesting is the Globalization index 2011 which is explained in the report as follows:
" The Globalization Index measures and tracks the performance of the world’s 60 largest economies in relation to 20 separate indicators that capture the key aspects of cross-border integration of business. The indicators fall into five broad categories: openness to trade; capital movements; exchange of technology and ideas; labor movements; and cultural integration. These factors have been weighted based on the significance placed upon each factor by 992 surveyed senior company executives doing international business. Subsidiary indicators are also given sub-weightings within each category. The indicators chosen include both quantitative data and qualitative scores from a range of trusted sources. The performance of countries is measured over time, so that progress toward greater or lesser globalization since 1995 can be observed, with a forecast of likely performance until 2015."
While Hong Kong tops the list of 60 countries, India comes 55th. What is interesting to see is China's position. it is ranked 39th in the list. China while scoring very low on cultural integration scores high in trade openness (Total trade (exports + imports) as % GDP, trade openness, Tariff and non-tariff barriers, ease of trading (cross-border), current-account restrictions). The critics of Chinese trade policy would be surprised at this "high" result since China is accused of being  "protectionist" while taking advantage of the globalized world. Further, one finds the positioning of China 39th in a list of 60 surprising (below even Chile, Poland, Malaysia and South Korea) considering the fact that China is the fastest growing economy in the world and a major player in global trade. Of course the indicators that are considered have an impact on the final result, but one would expect China to be high up in the globalization index after it joined the WTO in 2001.

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