Li Keqiang, Executive Vice-Premier, State Council of the People's Republic of China shakes hands as he arrives at the Davos train station for the Annual Meeting 2010 of the World Economic Forum in Davos, Switzerland, January 28, 2010. Li is tipped to be China's next premier. © World Economic Forum, swiss-image.ch/Photo by Michael Wuertenberg

Ernst & Young, the Big 4 accounting firm, in cooperation with the Economist Intelligence Unit (EIU), issued a report late Thursday, at the World Economic Forum in Davos, Switzerland. It highlights how globalisation slowed during the financial crisis and the subsequent downturn. But as the economy recovers in 2010 the growth of globalisation will once again resume, although at a slower pace than in the past decade, the report predicts. Singapore, Hong Kong and Ireland are the top globalised economies.

The report draws on three sources of original research: a Globalisation Index, created by the EIU, that measures 60 countries according to the degree of globalisation relative to GDP; an online survey of 520 senior business executives worldwide and a program of in-depth interviews with senior executives and high-level experts.

The index measures the relative level of global engagement of a country. It does not measure the absolute or relative impact a country has on global commerce or the global economy. This means that countries that have large domestic markets - - such as China, India and the United States - - appear towards the middle of the table. Small countries that rely heavily on exports and world trade - - such as Singapore and Ireland -- appear at the top. More closed countries - - such as Iran and Venezuela – are at the bottom.

Singapore had an export ratio to GDP (gross domestic product) of 200% in 2009 in contrast with Japan's ratio of close to 20%; China's is about 35% and Ireland's is over 90%.

The US Department of Commerce says Ireland is more dependent on US firms than any other country.

SEE Finfacts article, Jan 22, 2010: Foreign-owned firms responsible for 89% of Irish tradable goods and services exports in 2008; Jobs in sector down 44,000 since 2000

John Ferraro, Chief Operating Officer of Ernst & Young said: “Although the index questions whether the degree to which a country is globalised correlates with its subsequent economic growth, it clearly shows all the major emerging economies becoming more globalized. Also, the contrast between 2010 and 1995 is even more significant for certain smaller countries like South Korea and those from Eastern Europe like Romania. Both have seen major advances in the past 15 years.”

“Talk of deglobalisation is exaggerated,”says Geoffrey Underhill, Chair of International Governance at the University of Amsterdam. “The interests of too many states, private interests and consumers are tied into it.”

The report says this view is broadly supported by The Globalization Index, which tracks the international integration of trade, capital, technology, labour and culture. Its average annual overall level of globalisation fell in 2008, by around 0.1 points, followed by a further fall of 0.4 in 2009. But from 2010, the pace of globalisation is expected to resume, albeit more slowly than before the crisis, surpassing the 2007 high in 2011.

That globalization should reverse at all would in itself be highly significant. At no time since 1995, the first year of analysis, has this phenomenon occurred. Even in 2001 - - which saw the “dotcom” crash, corporate governance scandals and terrorist attacks in New York - -  annual globalisation remained positive, slowing from 3.1% in the previous year to 0.2%, before accelerating along with economic recovery.

Most of the top 10 globalised economies have a strong technological component in their external relations.

The report says that in recent years, Ireland has positioned itself as a hub in the global exchange of technology, as a result of its safe operating environment and educated workforce. It may not be the originator of all the innovation that passes through its doors, but the country’s role as a conduit for research and development (R&D) -- through manufacture, packaging and export - -has been an important contributor to its high level of globalisation.

Other countries that have high levels of globalisation are strong performers in key aspects of technology. For example, Sweden has the highest rate of internet subscriptions (45 per 100 people), while Denmark has the most broadband subscribers per capita (38.6 per 100 people). Remarkably, Israel, despite little business interaction with its neighbors -- for reasons of politics and diverging levels of development --has the eighth-highest level of globalisation, largely because of its technological prowess.

Israel has a strong track record in innovation, underpinned by high levels of both military and civilian R&D, as well as a robust education system. It has the highest number of non-US companies listed on the tech-heavy NASDAQ, which allows its firms to reach markets far beyond its immediate borders.

The report says the impact of technology goes far in explaining how all but five countries have increased their Index scores between 1995 and 2009. Conversely, many of the world’s slower-to-develop countries, such as Indonesia, are held back because they have not yet capitalised on technology.

Redrawing the Map: Globalization and the changing world of business (pdf)