Hong Kong clinched the top spot.
According to a release, the Globalization Index is part of Ernst & Young’s annual globalization report, Looking beyond the obvious: globalization and new opportunities for growth, which draws on two sources of original research: Ernst & Young’s Globalization Index, and a survey of 750 senior business executives worldwide, conducted in late 2012.
The Index measures the world’s 60 largest economies according to their degree of globalization relative to their GDP. It is based on a comprehensive understanding of the underlying drivers for globalization across five main pillars: openness to trade, capital flows, exchange of technology and ideas, labor movements and cultural integration. It incorporates a broad range of sub-indicators within these key categories and spans the period from 1995 to 2016.
For 2012, Singapore achieved an overall score of 6.31, with category scores of 8.57 for openness to trade; 6.04 for capital flows; 5.56 for exchange of technology and ideas; 4.8 for labor movements and 6.31 for cultural integration. With the exception of the category for technology and ideas, Singapore saw a slight dip in scores for all the other categories.
Max Loh, Country Managing Partner at Ernst & Young LLP says: “Singapore’s main strength lies in its openness to trade, given its business-friendly environment with low and predictable tax rates, which enables the country to continue to draw in large amounts of foreign direct investments. Having said that, the relatively modest GDP growth in 2012 is a reflection of the negative impact that slackened demand growth in the US and Eurozone has on the country’s trade-dependent economy.”
“The government’s progressive business incentives regime and push to restructure the economy through proliferating productivity and innovation throughout businesses and the workforce will strengthen Singapore’s competitiveness in drawing investment and capital. Together with other positive economic spin-offs, we may expect scores for the categories of trade, capital, and technology to go up in future. However, any upswing is likely to be counterbalanced by a continued dip in score in the category of labor, given the current tightening of labor immigration policies and rising labor pressures,” Loh adds.
Growth in globalization driven by technology and cross-border flow of ideas
Despite weak growth in 2012 and an uncertain economic outlook in many markets for 2013, globalization is still increasing among a majority of the world’s 60 leading economies, according to the globalization report.
The Index suggests that globalization will continue to advance driven primarily by technology and the cross-border flow of ideas. It also highlights the improved globalization scores in the last 12 months for medium-sized rapid growth markets like Vietnam, Malaysia, Thailand and the Philippines as well as smaller European countries including Belgium, Slovakia and Hungary.
Jim Turley, Chairman and CEO of Ernst & Young, comments: “Globalization continues to define our business landscape with increasing levels of cross-border trade, capital and labor integration. Despite the highly volatile economic backdrop, the trend for greater integration and closer co-operation continues to outweigh the threat of protectionism for the majority of the world’s markets.”
However there are real concerns from the survey respondents that continuing weak growth combined with increased global competition could spark more protectionism in the next 12 months. The respondents also specifically pointed to the increasing challenges of operating in some BRIC economies as well as slowing growth in some BRIC markets. As a result nearly half of the survey’s respondents expect an increase in protectionism in the BRIC countries as well as an increase in developed markets. In contrast, respondents see a decline in protectionism as more likely in other smaller rapid growth markets.
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