Global Economy
Globalization Index: Hong Kong in top place; Ireland overtakes Singapore for second rank
By Michael Hennigan, Founder and Editor of Finfacts
Jan 26, 2011 - 1:01 AM

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The Globalization Index 2010 released this week by Ernst & Young in cooperation with the Economist Intelligence Unit (EIU), shows that Hong Kong embraces the highest level of globalization among 60 largest economies in the world. Singapore, ranked first in 2009 becomes the third this year. Ireland jumps one level, ranking number two this year.

The Globalization Index measures and tracks the performance of the world’s 60 largest economies in relation to separate indicators in five broad categories: openness to trade; capital movements; exchange of technology and ideas; movement of labor; and cultural integration. Hong Kong ranks first in openness to trade, capital movements and cultural integration.

A report, Winning in a polycentric world (pdf) highlights the tension between the flattening effect of globalization and significant variations across international markets. While the former encourages companies to roll out business and operating models globally, differences between markets will demand a more localized approach.

The report draws on two sources of original research: Ernst & Young’s Globalization Index, which measures the world’s 60 largest economies according to their degree of globalization relative to their GDP, and a survey of more than a thousand senior business executives worldwide, conducted in late 2010, canvassing their thoughts on globalization.

After a brief pause in 2009 and a modest rebound in 2010, the world’s largest 60 economies will continue to globalise steadily between now and 2014, driven by the continued global economic recovery, technology innovation and the rise of the emerging markets.

The current top ten most globalised nations now include (1) Hong Kong, (2) Ireland, (3) Singapore, (4) Denmark, (5) Switzerland, (6) Belgium, (7) Sweden, (8) Netherlands, (9) Hungary, (10) Finland. In 60th position, the least globalised nation on the index is Iran, closely followed by Algeria and Venezuela.

The index has five measurements to assess a country’s individual global ranking including: its openness to global trade, global capital movements, global exchange of technology and ideas, global labour movements and cultural integration. Each of the criteria’s weighting was validated by the 1,000 global business leaders surveyed.

The report finds that the increase in Ireland's score between 2009 and 2010 was mainly the result of greater movement of goods and services as a proportion of GDP. Total trade (exports plus imports) was around 197% of Ireland's GDP in 2010, compared with 166% of GDP for trade in 2009. Exports of chemicals have grown particularly strongly.

In addition to improving its overall globalisation ranking, Ireland achieved number one positions in two of the five categories measured; international exchange of technology and ideas - - largely attributed to greater numbers of internet subscribers, and international exchange of labour. It was noted however, that Ireland’s overall labour result fell in the last 12 months as a result of lower net migration (4.2 per 1,000 people in 2010 compared with 9.1 in 2009).

Ireland's overall globalization is forecast to improve steadily between 2010 and 2014 with the country taking the top position as a result of further increased movement of goods and services, with an estimate of trade rising to the equivalent of over 230% of GDP in 2014. Cultural integration will also increase, with total tourism steadily rising from 3,400 per 1,000 of its population in 2010 to 3,600 in 2014.

Speaking on the Irish results, Mike McKerr, managing partner, Ireland, with Ernst & Young comments: “Although domestic economic conditions remain extremely challenging, we must continue to recognise that Ireland retains core strengths which are key to our recovery. Our nation’s globalisation ranking demonstrates how well positioned Ireland is to maximise opportunities within international economies.”

He adds:
“The enormous opportunities for Ireland in emerging markets, the ever increasing power of the technology sector and a gradual international recovery will ensure that globalisation continues to deepen in Ireland over the coming years. It is also interesting to see the role of tourism, a more traditional business sector, helping to further enhance our position.”

Finfacts Comment: Mike McKerr refers to 'enormous opportunities' in emerging markets; true of course and as the old refrain goes, only if we could get a small slice of China's market with its 1bn+ consumers, we would be away in a hack!

However, decisions on the destination of most Irish exports are not made in Ireland and in 2009, exports to China accounted for 2% of total exports (merchandise and services) and of that 2%, foreign firms were responsible for about 95% of it.

As for India, it does not appear in the top 15 for Irish goods or services exports in 2009 (pdf) and Hungary is a bigger market for merchandise from Ireland.

Finfacts article, 2011: Irish Economy 2011: Rising Irish exports, the 'smart economy' and a jobless recovery

Finfacts article, 2010: Foreign-owned firms accounted for 91% of Ireland's tradeable exports in 2009; Food & drink exports fell 15%

Globalization Index- top 10 ranking economies

Rank Country / Territory 2010 Score Trade Capital Technology Culture Labour
1 Hong Kong (SAR) 7.48 9.78 7.91 5.87 9.25 4.57
2 Ireland 7.34 6.66 7.11 9.49 7.20 6.10
3 Singapore 6.78 9.55 6.16 5.58 8.11 4.37
4 Denmark 5.93 5.17 6.05 8.92 4.74 4.41
5 Switzerland 5.86 5.12 5.50 6.20 5.97 6.62
6 Belgium 5.82 6.21 6.44 6.67 4.63 4.81
7 Sweden 5.80 5.32 6.10 8.18 4.70 4.38
8 Netherlands 5.59 6.01 6.09 6.10 4.65 4.85
9 Hungary 5.35 6.06 5.22 5.87 4.92 4.48
10 Finland 5.29 4.93 5.60 7.35 4.31 3.98
11 Slovakia 5.16 6.00 4.83 3.89 6.41 4.83
12 Taiwan 5.15 5.72 5.13 6.04 4.12 4.43
13 Israel 5.11 4.84 5.22 6.38 5.18 3.83
14 Austria 5.10 5.50 5.39 5.56 5.25 3.70
15 United Kingdom 5.00 4.63 5.75 5.78 4.55 4.12

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