Global Dynamism Index

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  • 1. GRANT THORNTON GLOBAL DYNAMISM INDEXGlobal Dynamism Index 2012:business growth fundamentals

2. Contents01 Foreword02 Introducing the GDI 201204 The GDI 2012 results06 Business operating environment08 Science and technology10 Labour and human capital12 Economics and growth14 Financing environment16 Country snapshots18 Methodology20 GDI participants and contacts 3. Foreword ED NUSBAUM CHIEF EXECUTIVE OFFICER GRANT THORNTON INTERNATIONALThe polarised nature of the recovery In the Grant Thornton Global markets, but instinct may valuefrom the 2008-9 financial crisis and Dynamism Index (GDI), we definestronger competition laws in morerecession has had a profound impactdynamism as the changes to the mature markets. The GDI should acton the global economy. Whilsteconomy which have enabled recoveryas a signpost in this process, byeconomic power was steadily flowingfrom the 2008-09 economic recessionassessing the potential benefits andtowards high-growth emerging and are likely to lead to a fast rate of risks of each market for yourmarkets prior to 2008, the weakfuture growth. The model was organisation.performance of mature economies over developed by the Economist IntelligenceFurther, the index was designed tothe past few years has undoubtedly led Unit (EIU), who analysed 50 economiesinfluence public policy debates. In anto an intensification of this trend. The on 22 indicators of dynamism across five ever more globalised and mobilestrength of economies in Asia, Latin categories: business operating world, the ability of economies toAmerica, the Middle East and Africaenvironment, economics & growth, build on their strengths and mitigateis becoming increasingly integral to science & technology, labour & human weaknesses, has become fundamentalthe health of the global and financing environment. Toin terms of attracting investment andDespite recent signs of avalidate and weight the indicators, theboosting growth. In a time ofslowdown in key economies, EIU then conducted a survey of 406 continuing economic turmoil, theemerging markets look set to dictate senior executives from across theGDI highlights the areas in whichthe pace at which the global economy globe, in which respondents were governments should market theirwill expand, at least in the medium- asked to assign an importance to eacheconomies to investors, and in whichterm. However this does notindicator for their organisation.they need to invest if they are tonecessarily mean that they offer the We believe that dynamicattract and grow dynamic environments for dynamicorganisations need to apply both The results are fascinating and,business growth. Despite poorreason and instinct to decisionimportantly, show that there are manyeconomic growth prospects, maturemaking. Deciding which markets yourdifferent paths to dynamism. Pleasemarkets offer a wide range of qualitiesorganisation should operate in is no explore the data for yourself atand assets that remain central todifferent. For example, reason may www.globaldynamismindex.combusiness location decisions. point to the higher-growth emerging Global Dynamism Index 2012 1 4. Introducing the GDI 2012In 2011, Grant Thornton commissioned the EIU toresearch the business growth environments of 50economies chosen on the basis of economicimportance, size and regional diversity1. Five areaswere identified as holding the key drivers to aneconomys dynamism2: business operatingFIGURE 1: OVERALL DYNAMISM BY REGIONenvironment, science and technology, labour andNORMALISED SCORE (MAX=100, MIN=0)human capital, economics and growth and thefinancing environment.Subsequently, 406 senior executives, from abroad range of countries and industries, wereinterviewed to determine which aspects of theseattributes they deemed most important for businessgrowth. This allowed for the weighting of eachaspect according to its perceived relevance. Byanalysing the change in each attribute from 2007-2010, the first iteration of the index, GDI 2011,determined which economies had enjoyed the mostrobust recoveries from the global financial crisis.Using the previous iteration as a baseline, thecurrent iteration of the index, GDI 2012, looks atthe progress of each economy over the past 1262.9 North Americamonths. Rather than provide a measure of aneconomys success during a period of higheconomic turbulence, this iteration provides a trueillustration of the strength of each economy as aplace for dynamic businesses to flourish.12A full list of participating economies is available on p.20For the purposes of this research, economic dynamism refers to the53.8changes to the economy which have enabled recovery from the 2008-09 Latin Americaeconomic recession and are likely to lead to a fast rate of future growth.3A full list of the economies in each region/group is available on p.202 Global Dynamism Index 2012 5. Key findings Country-level highlightsRegional highlights3 Top economies by aspect of dynamism Singapore emerges as the most The Nordic nations are the most business operating environment: dynamic economy in the worlddynamic globally Finland, Ireland, Sweden Finland, Sweden, Israel and North America, the G7, Western science and technology: Israel, Austria complete the top five Europe and Asia Pacific also sit Finland, Sweden The United States ranks 10, and above the global average labour and human capital: Argentina, China ranks 20 Eastern Europe sits just below the Slovak Republic, Uruguay Chile is the top Latin American global average, followed by Latin economics and growth: Argentina, country, ranking 12 America and the Growth-8 China, Uruguay Venezuela, Nigeria and Greece Middle East and Africa comes financing environment: Singapore, sit bottom of the index.bottom of the regional ranking.Finland, France. 55.7 66.1 Eastern Europe Nordic59.2Western Europe51.0Middle East andAfrica59.3Asia PacificGlobal Dynamism Index 2012 3 6. The GDI 2012 resultsThe release of GDI 2012 comes at a time ofcontinuing global economic uncertainty. In Europe,Singapore is perfectly placed to act as athe severe austerity measures being used to reign ingateway between West and East. Business andhuge budget deficits appear to be choking growthprospects. In the United States, growth and job economic growth prospects are supported bycreation remain slow whilst the return of polarisingan open, transparent financing environmentpartisan politics is preventing any meaningfuland a well-educated workforce.discussion of how to tackle the growing mountainof government debt. In Japan, anaemic growth ratesKON YIN TONGwere compounded by the devastating earthquake FOO KON TAN GRANT THORNTONand tsunami of March 2011. Growth prospects are healthier in emergingmarkets. Indeed, over the next five years the IMFbinding them together is that they are regarded asexpects emerging market economies to grow at having industrialised, indicating that a dynamicaround 7.8% per annum, compared with 3.2% perbusiness environment cannot be built overnight.annum in mature economies. However, these Singapore, a small, open economy whichmarkets are now wrestling with their new status. Inindustrialised rapidly in the 1970s and 1980s, sits atIndia, the government is battling corruption the top of the GDI. Singapore appears well-placedscandals, high inflation, a declining rupee and ato act as a gateway for dynamic businesses frommarked slowdown in growth. In Brazil, growth mature markets seeking the greater returns on offertailed off towards the end of 2011, and thein the high-growth markets of Asia. Its economygovernment is now rapidly cutting back interestcomes top for financing environment globally, andrates in a bid to boost industry.sits no lower than 11th in any of the five categories. Turkey is currently running a current accountTwo Scandinavian countries come next, withdeficit of more than 10%, which is being financedFinland slightly ahead of Sweden. The eurozonewith potentially dangerous inflows of hot money4 crisis has clearly hurt the economies of bothfrom abroad. Even in China, the target growth rate nations, but the GDI suggests that longer termhas been cut and the full extent of the level of the bad growth fundamentals are robust. Both economiesdebt taken on by local government as part of the large sit in the top three for both business operating2008 stimulus programme has yet to be determined.environment and science and technology, with The ten economies which sit at the top of the Finland behind only Singapore in terms of itsGDI are varied, showing that there are many pathsfinancing dynamism. There are three economies from AsiaKorea is the highest placed member of thePacific Australia, Singapore and Korea; a furtherGrowth-8, a grouping of the largest high-growthfive are from Europe Austria, Germany, Finland,markets. However, China is the only other memberSweden and Switzerland; the United States from of this group which sits in the top half of the index.North America and Israel from the Middle East. Indeed India, Indonesia and Russia sit in the4Hot money refers toThese ten economies represent a diverse set of bottom ten, emphasising that dynamism is far morespeculative capital flowsthat can move very quicklyeconomic and political conditions but one thingthan just another measure of growth. in and out of markets4 Global Dynamism Index 2012 7. FIGURE 2: OVERALL DYNAMISM BY COUNTRYNORMALISED SCORE (MAX=100, MIN=0)Singapore 72.1Finland 70.5Sweden69.6Israel69.3Austria 66.1Australia 65.6Switzerland 65.1Korea 64.9Germany 64.8United States 64.1New Zealand 63.9Chile 63.8Taiwan63.7Norway62.6Uruguay 62.5France62.2Denmark 61.9Canada61.7Belgium 61.5China 61.4Slovak Republic 59.8Netherlands 59.5Malaysia58.9Luxembourg58.4Slovenia57.9Japan 57.5Ireland 57.3Poland57.2Czech Republic55.7Brazil55.1Hungary 54.7United Kingdom54.5Vietnam 54.5Argentina 54.3UAE 54.3Turkey54.2Mexico53.2Italy 52.3Spain 51.0India 50.7In