DHL Global Connectedness Index 2014

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68 4. The Breadth of Global Connectedness Figure 4.11 Merchandise Exports Average Distance Traversed (in kilometers) and % Intra-regional, and Proportion of World GDP Generated by Emerging Economies, 1980–2013 6,000 70% 5,000 60% 4,000 50% 40% 3,000 30% 2,000 20% 1,000 10% 0 0% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Distance (Left Scale) % Intra-regional (Right Scale) Emerging Economies % of World GDP (Right Scale) The regionalization of merchandise exports began falling after 2003, when emerging economies’ shares of world GDP started surging upward. from North America and Europe (even with constant shares) traversed 7% and 5% greater distances respectively in 2013 than in 2005, while exports from advanced economies in Asia traversed shorter distances (Taiwan 11% shorter, Singapore 7%, South Korea 6%, Japan 5%). This distinction provides a valuable reminder that, particularly when undertaking geographic analysis, a shift toward emerging economies in general is often better understood as a shift specifically toward Asia. The earth’s economic center of gravity has shifted from somewhere in the mid- Atlantic in 1980 to somewhere in Turkey today and it will be somewhere more than halfway across Asia (probably somewhere in China or between China and India) by 2050. 10 Distance and regionalization—like breadth and concentration—are measures of countries’ international interactions for which there is neither a general prescription to increase nor decrease. However, the differences among regions described here in the context of merchandise exports do suggest that recommendations would tend to vary by region. In light of Asia’s rising share of economic activity, countries (and firms) in other regions should generally increase their capacity to tap into distant opportunities, while those within Asia may benefit from increasing focus on their neighbors. The Real Distance Between Advanced and Emerging Economies That advanced economies have not been able to redirect their international interactions toward emerging economies on pace with those economies’ growth is not surprising, when one considers the range of cultural, administrative/political, geographic, and economic (“CAGE”) distances and differences between advanced and emerging economies. Selected differences are presented on Figure 4.13. The most obvious differences, of course, are emerging economies’ lower per capita incomes ($6,968 on average in 2013 as compared to $42,925 across advanced economies) and faster real growth rates (4.6% versus 1.8% from 2003 to 2013). 11 And there are also other economic differences. Emerging economies average larger shares of value added coming from agriculture and smaller shares from services, more volatile GDP growth, and higher levels of inequality. Emerging economies also differ from advanced economies culturally, administratively, and geographically. Culturally, people in emerging economies report that they accord work a higher priority in their lives, presumably an advantage for employers. However, generalized levels of trust are lower in emerging economies, which complicates all sorts of business dealings, and societies are typically more hierarchical, implying differences in the styles of leadership that will be most effective. 12 Emerging countries are also, on average,
DHL Global Connectedness Index 2014 69 Figure 4.12 World Merchandise Exports Split by Region and by Intra-regional vs. Inter-regional, 2005 and 2013 % Intra-regional 100% 90% 80% 70% 60% 58% 50% 40% 30% 20% 10% 0% 2005 45% 28% 14% 5% 3% 2% 2% 2013 % Intra-regional 100% Europe 38% Regions’ Share of World Trade East Asia & Pacific 32% North America 13% Middle East & N. Africa 7% S. & C. America Caribbean 4% South & Central Asia 3% Sub-Saharan Africa 2% 90% 80% 70% 60% 50% 55% 40% 30% 20% 10% 0% Intra-regional Inter-regional The declining regionalization of merchandise exports has been driven by the rising share of exports coming from countries that have traditionally had less regionalized export patterns, especially Europe’s falling share of exports and East Asia & Pacific’s rising share. more internally diverse ethnically and culturally, providing a reminder of the importance of not treating large emerging economies as monolithic entities: China and India are, in some ways, as diverse as Europe. 13 Administratively, emerging economies rank significantly worse than advanced economies on standard indicators of rule of law, political stability, and corruption. The latter is of particular importance with respect to international interactions. According to one estimate, an increase in corruption levels from that of Singapore to that of Mexico has the same negative effect on inward foreign investment as raising the tax rate by over 50 percentage points. 14 Emerging economies also tend to pose more challenging geographic conditions. They are more likely to be landlocked, and poor built infrastructure can exacerbate natural geographic barriers. Emerging economies are also less urbanized and have lower population densities, adding to the challenges associated with extending a firm’s reach 15 16 throughout a country.
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Pankaj Ghemawat and Steven A. Altma
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DHL GLOBAL CONNECTEDNESS INDEX 2014
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286 Appendix B - Data Sources, Regr
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288 Appendix B - Data Sources, Regr
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Praise for the DHL Global Connected
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DHL Global Connectedness Index 2014

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