- New study says globalization is not as advanced as many believe
- Continued economic integration likely to provide global GDP gains
- Expanding connectedness to enable faster end to economic crisis
Honolulu/Hawaii, 11/11/2011, 10:00 AM CET
GCI ranks 125 countries according to the depth and breadth of integration into the world economy.
DHL today released the first DHL Global Connectedness Index (GCI), a comprehensive study of geo-political trade data. The study indicates that economic globalization is still not as deep as perceived and the potential for continued economic integration could represent global gross domestic product gains of five percent to 10 percent per year. GCI ranks 125 countries according to the depth and breadth of integration into the world economy and examines the connections between global connectedness and welfare. The study documents that global connectedness has enormous room to expand, even among the most “connected” countries.
The GCI study was unveiled against the backdrop of the APEC CEO Summit and Leaders’ Week in Honolulu, a global summit where heads of state and business leaders meet annually to discuss international economic issues. The study was commissioned by DHL and conducted by world-renowned global business strategist and economist, Pankaj Ghemawat, Professor of Global Strategy at the IESE Business School, Barcelona.
“This research provides evidence that a connected world is a better world, in terms of global welfare and individual development. The free trade of products and services contributes significantly to global prosperity,” said Roger Crook, chief executive officer, DHL Global Forwarding, Freight. The data findings of DHL’s study will likely be of benefit to corporate as well as political and economic leaders as they shape business and trade strategies, Crook said. “By calibrating how truly connected we are countries can identify opportunities and the channels through which they can improve their prosperity.”
“Our research shows that global economic integration is not as deep as perceived. Therefore, we see untapped potential for growth for each country and globally. Increasing global connectedness is likely to spur further growth by adding trillions of dollars to the economic turnover,” added Ghemawat.
The DHL Global Connectedness Index 2011 examines data from 125 countries and territories across 10 different types of flows, covering the categories of trade, capital, information and people, and covers the years between 2005 and 2010. Unlike existing indices, the GCI analyzes not only the depth of countries’ cross-border interaction but also their geographic breadth, seeking to quantify the economic impact of connectedness for a country. Additionally, it is based exclusively on quantifiable data. Further information on the methodology of the study can be found at www.dhl.com/gci.
The benefits of connectedness
The 2011 GCI found that the 10 most connected countries are the Netherlands, Singapore, Ireland, Switzerland, Luxembourg, the United Kingdom, Sweden, Belgium, Hong Kong (China) and Malta. The diversity of the leading countries is even greater in the top 50 list, which includes representatives from all six continents. These patterns indicate that the benefits of connectedness are accessible to a broad range of countries, not just trading hubs that lead many other globalization indices.
“The positive impact of global connectedness on world prosperity will continue to be of great importance. The misgivings some political leaders have about increasing global trade are unfounded; its benefits far outweigh any potential downside,” said Ghemawat.
Key takeaways from the index include:
- The actual level of connectedness today is much lower than commonly believed; its potential for positive growth, therefore, is significant.
- The Netherlands rank No. 1 in terms of overall connectedness, Hong Kong scores the highest regarding the depth of its international connections, and the United Kingdom tops the list for the breadth of its connections.
- Despite increasing its trade interaction in recent years, the United States ranks No. 25 overall, relative to the size of its economy.
- The lion’s share of international connections is still concentrated among countries that share borders (such as Northern Europe) as well as cultural and historical ties, which concludes that much of today’s globalization is actually regionalization.
- Larger countries score higher on the global breadth of their connections; smaller countries excel in the depth of their connectedness.
- Countries that pursue public policies that directly encourage greater international flows, as well as policies that improve the domestic business environment, can enhance their global connectedness.
Pankaj Ghemawat, who conducted the study for DHL, is lectured at Havard Business School until 2008, where he was the youngest person in the school’s history to be appointed a full professor. Business Newspaper “The Economist” chose him as the youngest “guru” included in the guide to the greatest management thinkers of all time published in 2008. He has published several leading and bestselling books and over 100 articles and case studies on global economic issues.