Saturday, February 2, 2013

Of rankings and a globalization index

"Globalization - Looking beyond the obvious" is the new report on the issues in globalization released by Ernst and Young recently. It highlights, inter alia, that for future investments in a globalizing world, companies must look beyond the BRICs to other "hotspots" like Turkey, Mexico and South Africa.
"For many multinational companies Brazil,Russia, India and China were the big bets of the past decade. And there’s no question that these powerhouses will continue to be major players in the world economy. Not only will the BRICs’ gross domestic product (GDP) grow faster than that of the other countries included in the Index (see Figure 3), but the BRICs will also integrate further with the global economy. Yet the challenges of operating in the BRICs are increasing, as their slowing real growth, rising inflation and labor costs, political instability, infrastructure shortfalls, and bureaucratic obstacles chip away at business confidence."
Referring to the other growing, emerging economies, the report states:
"Against this backdrop it is critical for businesses to look for alternatives - and the search may well involve making unconventional choices. Increasingly, non- BRIC rapid-growth markets are emerging as hot spots for global business. These markets are more globally integrated than the BRICs on a range of trade, investment, cultural and technological criteria, and this is set to continue through 2016, as our Index data shows. Many of these markets also show consistently high economic growth close to that of the leading BRICs. For example, Turkey, Mexico and Indonesia closely shadow China and India in terms of GDP growth from 2000 through 2015. Other promising locations include Peru, Colombia, Venezuela, Malaysia and Vietnam, as well as several countries and regions in Africa that are shaping up to be among the most dynamic parts of the world for investment." 
The report also announces the Globalization Index for 2012 which is essentially a ranking of countries in terms of them being "globalized" in terms of their trade volumes and openness to businesses. The main variables of this index are the "share of main trading partners in total trade, as a percentage of GDP (trade in goods and services); trade in information and communications technology (ICT) goods, as a percentage of GDP (technology); foreign direct investment (FDI) stocks, as a percentage of GDP (capital and finance); and total international fixed telephone traffic (culture). The last two of these variables are substitutions for FDI flows as a percentage of GDP (capital and finance) and international outgoing fixed telephone traffic (culture)."
Hong Kong tops the list once again about which I had blogged about last year here! China surprisingly is 44th on the list.

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