Key takeaways from DHL Global Connectedness Index

DHL, the global logistics leader, recently released the third edition of its Global Connectedness Index (GCI), a detailed analysis of the state of globalization around the world. The latest report shows that global connectedness, measured by cross-border flows of trade, capital, information and people, has recovered most of its losses incurred during the financial crisis. Especially the depth of international interactions – the proportion of interactions that cross national borders – gained momentum in 2013 after its recovery had stalled in the previous year. “In the aftermath of the financial crisis, globalization has increasingly come under pressure and international trade negotiations face growing resistance,” said Frank Appel, CEO, Deutsche Post DHL. “In this environment of uncertainty, the index offers a comprehensive, fact-based understanding of globalization and demonstrates the huge potential for countries to further increase their connectedness,” he added. The Netherlands remains the top-ranked country in terms of overall global connectedness, although it tops neither the depth nor the breadth rankings. It is followed, in order, by Ireland, Singapore, Belgium, Luxembourg, Switzerland, the United Kingdom, Denmark, Germany, and Sweden. Nine of the 10 most connected countries are located in Europe, and despite recent setbacks, Europe remains the world’s most globally connected region, averaging the highest scores on the trade and people pillars of the index. North America ranks second overall and is the leading region on the capital and information pillars. India ranks 71st out of 140 countries on its overall level of global connectedness, down from 68th two years ago. The least globally connected regions are Sub-Saharan Africa, South and Central Asia, and South and Central America and the Caribbean - reflecting the fact that emerging economies typically lag advanced economies in this regard. More specifically, emerging economies are about as globally connected as advanced economies in terms of trade flows, but only about one-quarter as deeply integrated into international capital and people flows and one-ninth as globalized in terms of information flows. Here are a few take aways of the Global Connectedness Index: Advanced economies have not kept up with the big shift of economic activity to emerging economies. This leads to declining breadth of global connectedness. Counteracting this trend would require more companies in advanced economies to boost their capacity to tap into faraway growth. Emerging economies are reshaping global connectedness and are now involved in the majority of international interactions. The 10 countries where global connectedness increased the most from 2011 to 2013 are all emerging economies. However, in terms of their integration into international capital, information, and people flows, emerging economies still lag far behind. Southeast Asian economies stand out for their high depth scores relative to what one would expect given structural characteristics such as their size and level of economic development. The top five outperformers were Malaysia, Vietnam, Cambodia, Hong Kong SAR (China), and Singapore. The largest average increases in global connectedness from 2011 to 2013 were observed in countries in South and Central America and the Caribbean. Eight of the countries with the largest increases were in that region or in Sub-Saharan Africa. Middle East and North Africa was the only region to suffer a large drop in its connectedness. Looking ahead, the biggest threats to globalization may come from policy fumbles or protectionist interventions rather than macroeconomic fundamentals. Even after the IMF’s latest downward revision, the world economy is still projected to grow faster from 2014 to 2019 than over any of the past three decades.