26 Jan 2011
World’s Most Globalised Economy
Hong Kong has been ranked the world’s most globalised economy in the latest Globalization Index survey by Ernst & Young
That’s the conclusion of a new study from the global advisory services firm Ernst & Young, in association with the Economist Intelligence Unit. Its findings show that Hong Kong in 2010 embraced the highest level of globalisation among 60 of the world’s largest economies.
“Hong Kong is playing a very significant role in the world,” said Agnes Chan, Ernst & Young’s Regional Managing Partner, Hong Kong and Macau. “China now is the second-largest economy in the world. Investors regard Hong Kong as the gateway to enter and invest in mainland China, while Chinese enterprises view Hong Kong as a springboard to expand into the international market.”
The Globalization Index tracks and measures the performance of the world’s 60 largest economies, based on 20 indicators of cross-border business integration. The indicators fall into five broad categories: openness to trade; capital movements; exchange of technology and ideas; movement of labour; and cultural integration. The Index measures relative rather than absolute globalisation, meaning that the five categories are measured relative to the economy’s GDP.
The 2010 index is based on a survey of 1,050 global senior business executives and in-depth interviews with 20 senior executives and high-level experts.
Hong Kong’s rule of law, transparency and availability of talent make it an especially attractive base
“Significantly, two out of the top three economies are from Asia-Pacific, which shows how the region is embracing globalisation,” Ms Chan said. “It also demonstrates how these economies are willing to stake their economic legacies on creating the right environment to facilitate the freedom of movement of goods, people, capital and ideas.”
According to Ms Chan, Hong Kong ranked top in the areas of openness to trade, movement of capital and finance and cultural integration. But she noted that the city lags behind in the areas of exchange of technology and ideas, and in net labour migration. The group proposed that the Hong Kong Government introduce business tax and financial incentives to encourage investments in innovation. The report also called on the Government to improve the environment and education system in order to attract talent to Hong Kong.
Experts discuss the merits of
As a gateway to China, Mr Tsoi said Hong Kong’s advantage is “indisputable.”
But the challenge, according to Mr Tsoi, is to raise the bar higher. “Hong Kong’s advantage over other economies is that being able to base in Hong Kong is an assurance of quality. So it’s all the more important at this juncture not to be lax in our standards, and to raise the quality even higher,” he said.
International firms are taking heed. According to Invest Hong Kong, 280 regional headquarters set up in the city last year. Hong Kong’s rule of law, transparency and availability of talent make Hong Kong an especially attractive base, according to David Wong, Deputy Chief Executive of the Bank of China Hong Kong. He said that Hong Kong’s role as a renminbi offshore centre will also enable the creation of innovative financial products in the city. But he added that Hong Kong companies must remain responsive to customer needs and stay sensitive to regulatory changes.
The study noted that globalisation is now spread more evenly between developed and emerging economies. But while access to markets, talent and technology is easier thanks to globalisation, the study showed that the pace of recovery and growth, as well as business environments and customers needs, differ.
Those two developments raise the importance of having a globalised team that understands the needs of the local market, according to Ernst & Young. It also advised business from developed countries to pay greater attention to policy issues when expanding into emerging markets, where governments play a prominent role in business.