Singapore most globalized, open to new ideas, but…

If you are in Singapore, you may have already read in the papers that Singapore is the world's most globalized economy and Hong Kong second.

May I draw your attention to something else?

Singapore is more open to new ideas and new technology than any other nation except the Irish and the Scandinavians.

However, Singapore's "level of globalization is likely to remain flat for several years as a result" of last year's recession, says the Globalization Index report. You can download the Economist Intelligence Unit report from Ernst and Young, which commissioned it.

See the chart showing the top 25 countries on the Globalization Index, which measures the world's 60 biggest economies according to their openness to trade, investment, new ideas and technology, labour movement and cultural integration with the rest of the world.

Globalization_index 

Singapore gets the highest marks for trade, second highest for labour and culture, and less than only Ireland, Sweden, Denmark and Finland for  technology.

America, home of Google, Apple and Microsoft, gets lower marks for technology for the same reason it does less well in trade.

The Globalization Index does not rank countries according to their share of the world trade, investment and technology industry.

Countries are ranked instead according to their trade, investment, technology, and labour movement relative to their own GDP.

Singapore's trade-to-GDP ratio was 443.2 in 2006-2008, according to the World Trade Organization. America's, in contrast, was only 28.7. (Hong Kong's was 406.5.)

But Singapore's "level of globalization is likely to remain flat for several years as a result of" last year's recession, says the report.

The report says:

The Index measures “relative” rather than “absolute” globalization. This means that a country’s trade, investment, technology, labor and cultural integration with other countries is measured relative to its GDP rather than by the absolute value of these elements being exchanged. As a result, smaller countries that depend on international integration will tend to have a high level of globalization, while larger countries that can rely on a big domestic market will tend to have a lower level, even though the total amounts exchanged internationally involved may be much greater. The Index, therefore, reflects the degree to which the global integration of a country is observable or experienced from within that country. (My italics.)

The Singapore government subsidized jobs during the recession and is diversifying the economy, says the report. But it points out the dangers of an export-oriented economy. It says:

Smaller countries dominate the top of The Globalization Index, measured by their integration in the global economy, because they generally rely more heavily on international markets for their growth and economic prosperity. Larger states, by contrast, are better able to fall back on their respective domestic markets. Unsurprisingly, the Index is headed by Singapore, which is highly dependent on international trade: aggregated imports and exports equate to over 300% of the city state’s GDP. But this has left the city state highly exposed during a global economic crisis that has disproportionately harmed trade flows. Its GDP suffered a 9.5% year-on-year contraction in the first quarter of 2009, and the country’s level of globalization is likely to remain flat for several years as a result.

Yet although Singapore’s policy choices are limited, the government has been able to lessen the pain by subsidising employment, and over the longer term, by broadening its economy into higher-value pharmaceuticals and medical equipment sectors that are likely to be less punishing in a future global slump. In all, globalization has served the state well, even if bad times are unavoidable, and GDP had already stabilized by the end of 2009.

Hong Kong, a special administrative region (SAR) of China, also has a high trade element in its overall listing. Other highly globalized states have made particularly good use of technology. Meanwhile, no G7 economy appears in the top 10: the UK sits at 15th and Germany at 16th, with the US at 24th. The two largest BRIC economies, China and India, appear 40th and 46th, respectively.

Comments

  1. James Wong says

    Doesn’t the fact that The Economist itself in a recent editorial dismissed this kind of thought leadership as “annoying” mean that this survey is not really going to influence people anyway?

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