A new study on global connectedness by DHL indicates that globalization is still not as advanced as most people believe and that continued economic integration could spur global gross domestic product gains of 5 percent or more.
The DHL Global Connectedness Index (GCI) 2011, a detailed country-by-country analysis of the flows that connect the world, ranks 125 countries in six continents according to the depth and breadth of their integration into the world economy and examines the relationship between global connectedness and welfare. The study concludes that global connectedness has enormous room to expand, even among the most “connected” countries.
The study was unveiled against the backdrop of the APEC CEO Summit and Leader`s Week in Honolulu, Hawaii, an annual global summit by heads of state and business leaders who discuss international economic issues.
“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 study findings will likely benefit 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 global gross domestic product,” said Pankaj Ghemawat, global business strategist and economist who was commissioned by DHL to conduct the study.
The index examines data on 10 types of international flows, covering the categories of trade, capital, information and people, from 2005 to 2010.
The GCI analyzes not only the depth of countries’ cross-border interactions but also their geographic breadth, distinguishing countries that are truly connected across the globe from those with deep ties only to a small set of partner countries. Additionally, it is based exclusively on hard quantitative data, DHL said in a statement.
The 2011 GCI found that the 10 most connected countries are the following:
1. The Netherlands
2. Singapore
3. Ireland
4. Switzerland
5. Luxembourg
6. United Kingdom
7. Sweden
8. Belgium
9. Hong Kong
10. Malta
“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 integration are misplaced; its benefits far outweigh the potential downsides,” 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 ranks no. 1 in overall connectedness, Hong Kong scores the highest in 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.
- The United States is a leader in term of breadth (#3), but as is expected for a country with a very large internal market, it lags on depth (#84).
- The lion’s share of international connections is still concentrated among countries that share borders (such as in Northern Europe) as well as cultural and historical ties, which indicates 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.
