DHL has released the second edition of the DHL Global Connectedness Index (GCI), a comprehensive analysis of the state of globalization around the world, which has revealed the UAE to be the most connected country in the Arab World and the only one in the region to make the top 25.
The united Arab Emirates ranks 23rd out the 140 countries covered in this year´s DHL Global Connectedness Index and is the top ranked country among OPEC members. UAE’s highest position is on the trade pillar – on which it ranks 13th globally and first within the middle East & north Africa as well as among OPEC countries. Merchandise exports account for 79% of the UAE´s GDP, the highest share among OPEC Countries covered in the index. One of the most remarkable characteristics of the UAE’s global connectedness is its 4th rank worldwide on inward migration. This reflects the participation of expatriates and migrant labor across the UAE´s economy.
The report, drawing on over one million data points from 2005 to 2011, concludes that the world today is less globally connected than it was in 2007.
It documents how global connectedness, measured by international flows of trade, capital, information and people, grew robustly from the report’s baseline year of 2005 to 2007, and then dropped sharply at the onset of the financial crisis. Despite modest gains since 2009, global connectedness has yet to recapture its pre-crisis peak.
“The GCI 2012 indicates that today’s volatile and uncertain business environment bears the lasting impact of the financial crisis,” remarked Frank Appel, CEO Deutsche Post DHL.
“Especially in this period of slow growth, it’s important to remember the tremendous gains that globalization has brought to the world’s citizens and to recognize it as an engine of economic progress,” he added.
“Above all, governments must resist protectionist measures that hinder cross-border interactions.”
Changes in connectedness: Sub-Saharan Africa improves; Netherlands still on top
While the world as a whole experienced only a very modest increase in global connectedness from 2010 to 2011, some individual countries had large gains. The countries with the largest increases in their global connectedness scores from 2010 to 2011 are Mozambique, Togo, Ghana, Guinea and Zambia – all of which are located in Sub-Saharan Africa. While this region remains the world’s least connected, it averaged the largest connectedness increases from 2010 to 2011.
The Netherlands retained its 2010 position as the world’s most connected country. Of the top ten most connected countries in 2011, nine of them are located in Europe. This is the world’s most connected region.
Connectedness and prosperity strongly linked
The 2012 edition of the GCI also offers recommendations to help countries enhance or expand their connectedness with the rest of the world. This new chapter also highlights evidence that the depth of global connectedness – the proportion of flows that cross national borders – contributes to economic development and prosperity.
“The benefits of expanding merchandise trade are much larger than traditional models indicate,” explains Professor Ghemawat, author of the GCI. “Adding to that the gains from services trade and other kinds of cross-border flows, the estimated economic benefits double to at least 8% of global GDP.”
Industry connectedness impacted by the rise of emerging markets
The GCI concludes that the world’s shifting economic center of gravity is reshaping industry connectedness.
The migration of production and consumption to emerging markets has specific implications for the three industries highlighted in the report: pharmaceuticals, passenger cars and mobile phones.
The report offers lessons on how companies can adapt their strategies to benefit from the changing geography of production and consumption.
Ten Key Take-aways from the DHL Global Connectedness Index report:
1. The world today is less globally connected than it was in 2007. Global connectedness was hit hard at the onset of the financial crisis and despite modest gains since 2009 has yet to recapture its pre-crisis peak.
2. Capital markets are fragmenting and services trade is stagnant. While merchandise trade has recovered robustly since 2009 and information flows continue growing, capital connectedness is on a declining trend and the intensity of services trade has not risen since 2009.
3. Global connectedness is also weaker than is commonly perceived, which softens and even reverses some widespread fears about globalization.
4. Distance and borders still matter – even online. Most international flows take place within rather than between regions. Even online connections are mainly domestic and decline with distance.
5. Europe is the world’s most globally connected region: a reminder of what EU integration has managed to achieve – and what its fragmentation might put at risk. The Netherlands retains the top rank on this year’s DHL Global Connectedness Index, and 9 of the 10 most connected countries are in Europe.
6. Potential gains from boosting global connectedness can reach trillions of dollars. As global growth slows and much of the world struggles with its debts, increasing global connectedness can accelerate growth.
7. Sub-Saharan African countries averaged the largest connectedness increases. Sub-Saharan Africa remains the least connected region, but the top 5 countries in terms of connectedness increases over the past year were all in this region.
8. Every country has untapped possibilities to benefit from more connectedness. Even in the most connected countries, most activities that could take place either within or across borders are domestic, not international.
9. Countries’ domestic and international policies can help them connect more. This report identifies a broad array of policy levers that have been shown to deepen connectedness.
10. The world’s shifting economic center of gravity reshapes industry connectedness, with significant business implications as shown in this report’s analyses of the mobile phone, passenger car, and pharmaceutical industries.