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November 23, 2019
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Southeast Asian nations show marked improvement in Global Connectedness Index

SINGAPORE: 2019 – DHL has released the fifth edition of the DHL Global Connectedness Index (GCI) — a detailed analysis of globalization, measured by international flows of trade, capital, information and people.

The latest edition of the GCI saw Southeast Asian nations Cambodia, Malaysia, Singapore and Vietnam beat expectations by the widest margin, reflecting improved supply chain networks within the region and ASEAN policy initiatives promoting economic integration. Singapore also remains the world’s second most connected country, being the only Asia Pacific country to feature in the Top 10 ranking. Myanmar experienced the biggest improvement, jumping 23 spots to 133rd position. Hong Kong retains its second place behind Singapore on the depth dimension of the Index, which measures the proportion of overall physical, intellectual and human capital that crosses national borders; while Japan and South Korea continue to rank amongst the top 5 in global breadth of the same flows.

“While the results for Singapore, Hong Kong and the North Asian powerhouses of Japan and South Korea bring few surprises, the Index highlights just how rapidly Southeast Asia is plugging into the global economy. The establishment of the ASEAN Economic Community in late 2015 appears to have brought significant improvements to trade flows, particularly with reductions in trade tariffs and better access to ports and logistic hubs,[1]” said Ken Lee, CEO, DHL Express Asia Pacific. “The outperformance of emerging markets like Cambodia and Vietnam, coupled with Malaysia’s outpacing of expectations in the face of local economic uncertainty, suggests that ASEAN will continue to grow even amidst broader global volatility.”

“While business leaders still face hurdles to greater breadth and depth of trade connectivity, some challenges like infrastructure, technology and skills training are already being addressed jointly by governments and industry.”

The 2018 index measures the current state of globalization, as well as individual rankings for each country, based on the depth (intensity of international flows) and breadth (geographical distribution of flows) of countries’ international connections. The world’s top five most globally connected countries in 2017 were the Netherlands, Singapore, Switzerland, Belgium and the United Arab Emirates. Despite Southeast Asia’s rapid advances in trade connectivity, the Asia Pacific region remains less connected to the rest of the world overall than other regions.

The new GCI report represents the first comprehensive assessment of developments in globalization across 169 countries and territories since the Brexit referendum in the United Kingdom and the 2016 presidential election in the United States. In spite of growing anti-globalization tensions in many countries, connectedness reached an all-time high in 2017, as the flows of trade, capital, information and people across national borders all intensified significantly for the first time since 2007. Strong economic growth boosted international flows while key policy changes such as US tariff increases had not yet been implemented.

A central theme of research by GCI co-authors Steven A. Altman and Pankaj Ghemawat is that at the global level, the world is still less connected than most people think it is, even after globalization’s recent gains. For example, just about 20% of economic output around the world is exported, roughly 7% of phone call minutes (including calls over the internet) are international, and only 3% of people live outside the countries where they were born. The report also debunks the belief that distance is becoming irrelevant. Most countries are much more connected to their neighbors than to distant nations.

Emerging economies remain less connected than advanced economies

The GCI continues to reveal vast differences between levels of globalization in advanced versus emerging economies. Emerging economies trade almost as intensively as advanced economies, but advanced economies are more than three times as deeply integrated into international capital flows, five times for people flows, and almost nine times with respect to information flows. Additionally, while leaders from large emerging markets have become major supporters of globalization on the world stage, emerging economies’ progress catching up in terms of global connectedness has stalled.