GDI2012 - Final report


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How dynamic is your economy?

The Global Dynamism Index (GDI) is a project conducted in collaboration with the EIU, which ranks 50 economies on 22 indicators of dynamism across five categories: business operating environment, economics & growth, science & technology, labour & human capital and financing environment.

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GDI2012 - Final report

  1. 1. GRANT THORNTON GLOBAL DYNAMISM INDEXGlobal Dynamism Index 2012:business growth fundamentals
  2. 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. 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 define stronger competition laws in morerecession has had a profound impact dynamism as the changes to the mature markets. The GDI should acton the global economy. Whilst economy which have enabled recovery as a signpost in this process, byeconomic power was steadily flowing from the 2008-09 economic recession assessing 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 weak future growth. The model was organisation.performance of mature economies over developed by the Economist Intelligence Further, the index was designed tothe past few years has undoubtedly led Unit (EIU), who analysed 50 economies influence 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 Africa environment, economics & growth, build on their strengths and mitigateis becoming increasingly integral to science & technology, labour & human weaknesses, has become fundamentalthe health of the global economy. capital and financing environment. To in terms of attracting investment and Despite recent signs of a validate and weight the indicators, the boosting 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 the GDI 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 each economies to investors, and in whichterm. However this does not indicator for their organisation. they need to invest if they are tonecessarily mean that they offer the We believe that dynamic attract and grow dynamic environments for dynamic organisations need to apply both The results are fascinating and,business growth. Despite poor reason and instinct to decision importantly, show that there are manyeconomic growth prospects, mature making. Deciding which markets your different paths to dynamism. Pleasemarkets offer a wide range of qualities organisation should operate in is no explore the data for yourself atand assets that remain central to different. For example, reason may www.globaldynamismindex.combusiness location decisions. point to the higher-growth emerging Global Dynamism Index 2012 1
  4. 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 aneconomy’s dynamism2: business operating FIGURE 1: OVERALL DYNAMISM BY REGIONenvironment, science and technology, labour and NORMALISED 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 12 62.9 North Americamonths. Rather than provide a measure of aneconomy’s 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.12 A full list of participating economies is available on p.20 For the purposes of this research, economic dynamism refers to the 53.8 changes to the economy which have enabled recovery from the 2008-09 Latin America economic recession and are likely to lead to a fast rate of future growth.3 A full list of the economies in each region/group is available on p.202 Global Dynamism Index 2012
  5. 5. Key findings Country-level highlights Regional 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 world dynamic 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 Europe 51.0 Middle East and Africa 59.3 Asia Pacific Global Dynamism Index 2012 3
  6. 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 in gateway 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 polarising an open, transparent financing environmentpartisan politics is preventing any meaningful and a well-educated workforce.”discussion of how to tackle the growing mountainof government debt. In Japan, anaemic growth rates KON 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 IMF binding 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% per business environment cannot be built overnight.annum in mature economies. However, these Singapore, a small, open economy whichmarkets are now wrestling with their new status. In industrialised 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 a to 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 the in the high-growth markets of Asia. Its economygovernment is now rapidly cutting back interest comes 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 account Two Scandinavian countries come next, withdeficit of more than 10%, which is being financed Finland 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 paths financing dynamism. There are three economies from Asia Korea is the highest placed member of thePacific – Australia, Singapore and Korea; a further Growth-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 the 4 ‘Hot money’ refers toThese ten economies represent a diverse set of bottom ten, emphasising that dynamism is far more speculative capital flows that can move very quicklyeconomic and political conditions but one thing than just another measure of growth. in and out of markets4 Global Dynamism Index 2012
  7. 7. FIGURE 2: OVERALL DYNAMISM BY COUNTRYNORMALISED SCORE (MAX=100, MIN=0) Singapore 72.1 Finland 70.5 Sweden 69.6 Israel 69.3 Austria 66.1 Australia 65.6 Switzerland 65.1 Korea 64.9 Germany 64.8 United States 64.1 New Zealand 63.9 Chile 63.8 Taiwan 63.7 Norway 62.6 Uruguay 62.5 France 62.2 Denmark 61.9 Canada 61.7 Belgium 61.5 China 61.4 Slovak Republic 59.8 Netherlands 59.5 Malaysia 58.9 Luxembourg 58.4 Slovenia 57.9 Japan 57.5 Ireland 57.3 Poland 57.2 Czech Republic 55.7 Brazil 55.1 Hungary 54.7 United Kingdom 54.5 Vietnam 54.5 Argentina 54.3 UAE 54.3 Turkey 54.2 Mexico 53.2 Italy 52.3 Spain 51.0 India 50.7 Indonesia 50.7 Colombia 50.2 Russia 50.0 South Africa 50.0 Portugal 49.2 Philippines 47.6 Egypt 41.2 Greece 40.2 Nigeria 40.2 Venezuela 37.4 Global Dynamism Index 2012 5
  8. 8. Business operating environment An economy’s business operating environment – trade laws, regulation, “Chile is rapidly becoming more business- legal and political institutions – friendly. In recent years, the government has provides the foundations for business growth. A poor operating taken robust measures to cut the costs and time environment, that fails to offer key involved in starting a business.” safeguards and security, represents a higher risk for business investment. ALFONSO IBAÑEZ GRANT THORNTON CHILE Conversely, those economies with open trade policies and clearly defined competition and legal systems offer a much better platform for dynamic businesses. Business leaders surveyed identified Finland, Ireland, Sweden, the Whilst all the economies of the G7 foreign trade and exchange regimes and Netherlands and Denmark are all very sit in the top 30 on this measure, all controls as the most important aspect open economies with strong, those of the Growth-8 sit in the bottom of an economy’s business operating transparent competition and regulatory 20, suggesting that the business environment, followed by policy systems. Of the five, Ireland has operating environments in these high towards enterprise and competition and suffered most from the eurozone crisis, growth markets remain a key area for legal & regulatory risk. Political but it has managed to hang on to its development. The recent expropriation stability was assigned a lesser low corporation taxes making it an by Argentina of YPF, an oil company importance. attractive location for business formerly run by Spanish firm Repsol, It can take economies many years investment. highlights the risks businesses can face to develop a sound business operating when investing in markets with environment so it is unsurprising to see different regulatory frameworks. the top ten places taken by mature economies. Indeed the top five places are all held by European nations, showing the underlying strength of economies in the region despite the current lack of growth. 5 ‘Ease of doing business index 2012’ – World Bank6 Global Dynamism Index 2012
  9. 9. FIGURE 3A: DYNAMISM OF BUSINESS OPERATING FIGURE 3B: DYNAMISM OF BUSINESS OPERATING ENVIRONMENT: TOP 10 ENVIRONMENT: BOTTOM 10 NORMALISED SCORE (MAX=100, MIN=0) NORMALISED SCORE (MAX=100, MIN=0) Pilippines Finland 94 Chin Irela a5 nd 9 Vie 62.6 tna 9.6 .2 Sw 3.4 Eg m ed yp 59 en t5 9. .3 92 Ne 1 the .8 rla Indo nd nes s9 ia 5 5.7 1. Den 5 India 54.7 mar k9 1.4 .0 Russia 51 Russia and India, two economies Canada 9 4which suffer from high levels of 1.2 48. .7 a 35 entin .9corruption, sit in the bottom five Arg ela 33 zuon this measure. In India, the ne Ve ia 0.7 Australia 9 er Nigreversal of the decision to allow aforeign group to buy up to 51% of 0.7 rg 9 emboulocal retail companies shows how Lux .4 90closed certain sectors are. China, nd alawhere questions are raised around Ze w Ne .1competition due to the volume and 90 iadominance of state-owned enterprises, str Aualso has one of the least dynamicbusiness operating environments. Chile, where huge strides have beenmade over recent years in cutting theprocedures, costs and days taken to FIGURE 4: DYNAMISM OF BUSINESS OPERATING ENVIRONMENT: BY REGION NORMALISED SCORE (MAX=100, MIN=0)start a business5, is the highest rankingemerging market, ranking 14 globally,level with Switzerland and above theUK, France and Spain. TroubledGreece ranks 35, below Korea, Mexicoand Uruguay. 91.4 90.4 Nordic North America 86.8 Western Europe 85.5 75.8 G7 All countries 72.9 Asia Pacific 72.9 63.9 Latin America 62.3 60.3 Eastern Europe Growth – 8 Middle East and Africa Global Dynamism Index 2012 7
  10. 10. Science and technology Science and technology is a measure of the ability of an economy’s “Entrepreneurship is strong in Israel, especially infrastructure to support the growth in hi-tech industries. The economy not only of dynamic businesses. The rise of the internet has steadily eroded the has the largest number of biotech and overall geographical and economic barriers to start-ups in the world per capita, but also the competition, but its ever-increasing third most NASDAQ-listed companies.” importance to the operations of dynamic businesses means poor ILANIT HALPERIN connectivity can also hold economies GRANT THORNTON ISRAEL back. Similarly, significant investment in research and development (R&D) is likely to boost the growth prospects of an economy both by creating new entrepreneurs and attracting businesses. Israel offers the most dynamic In the Nordic region, which is The top ten economies in the GDI science and technology environment by synonymous with innovations such as on this measure come from all over the some distance, due principally to the the mobile telephone, there is also a world. Their economies are of different large proportion of GDP which is long tradition of investing heavily in sizes and are at different stages of spent on R&D (4.3%) – the aspect of R&D, both through businesses and development. However, they share a science and technology business leaders higher education institutions. Finland, common drive to be ahead of the identified as the most important. In the Sweden and Denmark all score well in technological curve. 1990s, Israel welcomed more than a terms of the proportion of GDP million immigrants from the former accounted for by R&D, as well as on Soviet Union into the country, many of the quality of their IT infrastructure. them highly qualified scientists and Elsewhere in Europe, Germany, which engineers. The government capitalised is home to some of the most advanced on this influx of highly-skilled labour engineering firms in the world, and by creating a number of tax incentives Switzerland, both also have much to for venture capital funds and business offer dynamic businesses in this area. incubator programmes, to develop its hi-tech industry.8 Global Dynamism Index 2012
  11. 11. FIGURE 5A: DYNAMISM OF SCIENCE & TECHNOLOGY: FIGURE 5B: DYNAMISM OF SCIENCE & TECHNOLOGY: TOP 10 BOTTOM 10 NORMALISED SCORE (MAX=100, MIN=0) NORMALISED SCORE (MAX=100, MIN=0) Argentina Israel 73.0 Pola Ph ilip 23.2 nd 2 Finla pin es 0.9 nd 6 Ch Sw 20 ile ed .2 5.8 Colu 19 en mbia .3 Ko 64 rea 18. .9 61 7 .0 Nigeria 17 Swit .9 zerla nd 5 .5 9.0 Greece 17 4 Japan 58 .8 16. sia one 5. 7 .3 Korea is the highest ranking Asian Ind t1 10 56.4nation in this area, ahead of Japan and Denmark yp Eg ela zu 3.9 an 5 neTaiwan in the top ten. The structure of Taiw 3. 5 Vebusiness in Korea is unusual in that the y5 an rm .2top ten businesses – the Chaebol – have Ge 53 E UAaround 55% of market capitalisation.These firms, such as Samsung andHyundai, have large, vertically-integrated supply chains which helpthem stay at the forefront oftechnological innovation.Proportionately, Japan has the fourthlargest spend on R&D of the 50 FIGURE 6: DYNAMISM OF SCIENCE & TECHNOLOGY: BY REGION NORMALISED SCORE (MAX=100, MIN=0)economies in the GDI, although clearlythis has failed to translate intoeconomic growth in recent years. Whilst IT infrastructure is generallybetter in mature markets, many 57.3 46.7emerging markets are spending Nordic North America 45.8 44.0aggressively to close the gap. The G7 Western EuropeUnited Arab Emirates, for example,increased spending in this area by more 39.5than 70% between 2010 and 2011, Asia Pacific 37.4ahead of Uruguay (31%), China (23%) All countries 37.3 Middle East andand Nigeria (22%). Similarly, the Africagreatest increases in broadband 31.6 29.2subscribers in 2011 were observed in Growth – 8 23.5 Eastern EuropeEgypt, the Philippines and, again, Latin AmericaUruguay. Global Dynamism Index 2012 9
  12. 12. Labour and human capital Without the right workers to drive a vision forward, an entrepreneur will “In comparison, United States business growth not be able to achieve scalability in his fundamentals are solid. A strong and stable legal or her businesses. The best workers not only increase productivity, but can system, access to capital, credit, and a highly also save a business time and money. skilled, diverse workforce are all key drivers Some of the most dynamic companies of business location decisions.” in the world go to great lengths to ensure they get the best people, and it STEPHEN CHIPMAN works both ways in that the best people GRANT THORNTON US will often be attracted by the most dynamic companies. When surveyed, business leaders assigned the greatest weighting to the reported growth in labour productivity Argentina scores highest for the strongest school life expectancy rates – output per worker. This is followed dynamism of its labour and human in the survey, but experienced mush by school life expectancy (how long the capital, driven by labour productivity slower labour productivity growth in average child spends in education) and growth of 6.3% in 2011. School life 2011. Korea’s position at sixth is the unemployment rate. The expectancy in Argentina of 16.1 years is supported by a low unemployment rate proportion of the population under also above economies such as Canada, (3.4%) and high school life expectancy. 30 was assigned the lowest weight. Germany and Sweden. Labour The highest ranking member of the On the whole, the economies of productivity growth in the Slovak G7 on this measure is Germany at 22. emerging markets score better on this Republic was even more impressive in Many mature market economies are measure that those in mature markets, 2011 (10.3%) helping its economy into already dealing with unfavourable largely because growth in labour second place. Another Latin American demographics with ageing populations productivity favours emerging markets economy, Uruguay, sits in third thanks increasing dependency ratios and as they start from a lower base. Latin to strong labour productivity growth putting pressure on resources. Three America, Asia Pacific, the Growth-8 and a low unemployment rate. such economies – Italy, Japan and and Eastern Europe all score highly in Six of the remaining seven Germany – sit bottom of the rankings this area, although the Nordic region economies in the top ten are from the for the proportion of their population again leads the way. Asia Pacific region. China experienced under 30. And, whilst the G7 the second fastest labour productivity economies all find themselves in the growth (8.3%) in 2011, but is held top 30 for school life expectancy, they back by a school life expectancy in are also all in the bottom 30 in terms the bottom five globally. Conversely, of labour productivity growth rates New Zealand and Australia have the in 2011.10 Global Dynamism Index 2012
  13. 13. FIGURE 7A: DYNAMISM OF LABOUR & HUMAN CAPITAL: FIGURE 7B: DYNAMISM OF LABOUR & HUMAN CAPITAL: TOP 10 BOTTOM 10 NORMALISED SCORE (MAX=100, MIN=0) NORMALISED SCORE (MAX=100, MIN=0) Argentina Portugal 5 Colo Slov mbia Hu ak R ng 72.5 Ur 1.0 ary Sp epu 50. ug ain 50 ua 47 blic 6 Ch y .1 Phil .4 69 ina 72. 67 ippin .0 .4 es 4 4 7.3 New Greece 46 Zea .6 land 65. 7.3 6 Nigeria 3 Korea 64 0 .1 35. pt Egy .6 34 .4 3.9 Australia 6 ica 32 Afr 4 uth E 62. UA way So Nor .1 62 ia es on .6 Ind 61 an iw Ta FIGURE 8: DYNAMISM OF LABOUR & HUMAN CAPITAL: BY REGION NORMALISED SCORE (MAX=100, MIN=0) Excluding Israel, which ranks 18,the economies of the Middle East andAfrica score poorly on this measure, 60.2 59.5with the United Arab Emirates, SouthAfrica, Egypt and Nigeria filling the Nordic 59.8 Asia Pacific Latin Americalast four places. More than half of theirpopulations are under 30, but schoollife expectancy averages below 14 yearsin each and unemployment rates –especially in South Africa and Nigeria 58.5– are high. The key danger in these Growth – 8economies is that if young people lackthe necessary training or employment 56.4 Eastern Europeopportunities, then the benefits of ademographic transition – a boost togrowth prospects as the number of 56.0 North Americaworkers increases relative todependants (children and the retired) 55.7– will be lost. All countries 55.8 Western Europe 54.6 39.6 G7 Middle East and Africa Global Dynamism Index 2012 11
  14. 14. Economics and growth Even before the global financial crisis, governments and business leaders in “Not only is China growing rapidly, but mature markets were talking up the it is also developing. Increases in labour importance of having a presence in the faster growing emerging markets. As productivity and domestic demand point to governments and consumers deleverage a successful rebalancing of the economy.” in mature markets, and growth rates continue to disappoint, these calls have XU HUA GRANT THORNTON CHINA been growing louder. For dynamic businesses, faster growing markets offer the consumer, business and public sector demand to match their ambition. How fast an economy is expanding – growth in real included in the GDI, whilst consumer Elsewhere in Asia Pacific, the GDP – is identified as the key aspect of demand expanded by 23% over the economies of India (5) and Indonesia this area of dynamism according to same period, the highest of all 50 (6) also score well in this category. In business leaders. How fast consumer economies. However, recent effort to India, expansion is expected to slow in demand is growing is also deemed reign in wage growth, cut subsidies and 2012 in the face of strong global important, with the change in the value prop up the trade balance are likely to economic headwinds and persistently of the stock market assigned a lower result in growth rates dropping below high inflation which is constraining weighting. 4% over the next five years. private consumption. Indonesia’s Unsurprisingly given events since Argentina leads a strong showing growth rate will continue to be 2008, emerging markets are well ahead from Latin America, with Uruguay (3), underpinned by strong growth in of mature markets on this measure. The Chile (4) and Colombia (10) all in the top exports and consumer demand. Growth-8 group of countries rank ten. The two regional heavyweights, Brazil The highest ranking mature ahead of Latin America, Asia Pacific, and Mexico, rank 20 and 21 respectively. economy on this measure is Sweden Middle East & Africa and Eastern The rising global superpower, China (14), where growth in GDP and Europe. With an end to its sovereign ranks second on this measure of consumer demand grew steadily in 2011 debt crisis still seemingly a long way dynamism. Its economy posted growth despite the regional slowdown. off, Western Europe sits bottom of the of over 9% in 2011 whilst consumer Germany (25) ranks highest of the G7 regional ranking. demand expanded by 21%. In an effort nations; its economy expanded by 3% Argentina ranks top globally in to cut reliance on exports and in 2011, well ahead of any other terms of the dynamism of its economic investment in favour of domestic eurozone nation, and consumer demand and growth environment. Its economy consumption, China’s economic growth increased by 9%. The Canadian expanded by 9% in 2011, behind only rate target has been dropped from the economy escaped relatively unscathed that of China of the 50 economies 8.0% in place since 2005, to 7.5%. from the financial crisis and ranks 31, ahead of the United States (38).12 Global Dynamism Index 2012
  15. 15. FIGURE 9A: DYNAMISM OF ECONOMICS & GROWTH: FIGURE 9B: DYNAMISM OF ECONOMICS & GROWTH: TOP 10 BOTTOM 10 NORMALISED SCORE (MAX=100, MIN=0) NORMALISED SCORE (MAX=100, MIN=0) UK 52.1 Argentina Den Chin mar Sp a9 ain k5 95.6 Ve 4.6 50 ne 2.0 zu .3 ela Ur Irela 49 ug nd 4 .7 ua 9.5 y Ch 82 ile Italy 49.2 .3 80 .6 6.8 Slovenia 4 India 4 80. 0 an 45. Jap Of the bottom ten economies, .4 .5 39 13seven are from Western Europe. At Indonesia al ce 79.8 g rtu eethe bottom, Greece and Portugal, Po Grwhich have received huge bailouts .4 Nigeria 79but remain at the eye of the eurozonestorm, both saw their economies 8.0 ey 7 Turk .3contract in 2011. Forecasts for 2012 75 re po .8point to further drops in output as ga 73 Sin biaausterity measures bite. Other eurozone 8 73. lomeconomies which look set to contract Co sia Rusthis year, as new governments forcethrough massive fiscal adjustments –namely Italy (46), Ireland (45) andSpain (43) – also rank well down onthis measure. The economies of Japan (48) – FIGURE 10: DYNAMISM OF ECONOMICS & GROWTH: BY REGION NORMALISED SCORE (MAX=100, MIN=0)where GDP contracted by 0.9% in2011 following the devastatingearthquake and tsunami – andVenezuela (44) – where consumer 75.4demand fell by 22% as rampantinflation cut into spending power – Growth – 8 73.4 69.8also offer less opportunity to dynamic Latin America Asia Pacificbusinesses on this measure. 65.2 Middle East and 62.7 62.6 Africa Eastern Europe All countries 60.7 Nordic 55.7 53.4 North America G7 53.0 Western Europe Global Dynamism Index 2012 13
  16. 16. Financing environment Ambitious growth plans are important for dynamic organisations, but without “Despite the slowdown in the eurozone, the finance to bring them to life, they business growth fundamentals in Finland will have little impact on profitability. The global financial crisis that broke remain robust. Investment in R&D remains in 2008 clearly showed that a major high whilst open trade policies and strong contraction in liquidity will result in institutions provide a low risk environment a major contraction in output. The for investment.” billions of euros provided by the European Central Bank to the regions’ JOAKIM REHN banks, which (at least) delayed regional GRANT THORNTON FINLAND meltdown, provide further evidence of the importance of finance to growth. Dynamic organisations need to invest to stay ahead of the curve, and therefore require the financing environment in which they operate to Mature economies tend to perform Finland and France both rank equal first be as agile and fast-moving as they are. more strongly than emerging with Singapore in terms of levels of Business leaders identified a sound economies on this measure. North private sector credit, and sit joint fourth financial regulatory system as the most America emerges as having the best in the rankings for the quality of their important aspect of an economy’s financing environment, followed by financial regulatory systems and access financing environment. This is followed the Nordic region, the G7 and Western to medium-term capital. by measures of credit availability – Europe. Interestingly, the Growth-8 Another European country, namely access to medium-term capital sits at the bottom of the regional Austria, sits fourth on this measure but and the level of private sector credit (as rankings, highlighting it as a key area the overall regional score is dragged a proportion of GDP) – the prevailing of development. down by the UK, Portugal, Spain and corporate tax rate and growth in At the country-level, Singapore Ireland which all sit in the bottom 15. inward direct investment. Growth in, has the most dynamic financing Indeed, despite London being arguably and the value of, inward M&A deals environment, well ahead of second the financial capital of the world, the were given lower weightings. placed Finland and third placed France. UK sits above only Indonesia, Singapore ranks highest in terms of the Venezuela, Russia, Nigeria and quality of its financial regulatory system, Argentina in terms of the dynamism the lightness of its corporate tax burden of its financial environment. and its high level of private sector credit.14 Global Dynamism Index 2012
  17. 17. FIGURE 11A: DYNAMISM OF FINANCING ENVIRONMENT: FIGURE 11B: DYNAMISM OF FINANCING ENVIRONMENT: TOP 10 BOTTOM 10 NORMALISED SCORE (MAX=100, MIN=0) NORMALISED SCORE (MAX=100, MIN=0) Portugal 4 Singapore Ph Egy ilip pin pt 4 es Ind Finla ia 3.3 40 3.4 40 .1 82.2 nd 7 .5 Fra UK 39. nc 2.3 9 e7 Au Indonesia 1. str 39.2 ia 8 71 .4 34.5 Chil Venezuela e7 9 1.4 32. sia .6 Rus 32 .6 Poland 70 ia 31 In North America, both the .4 er Nig naUnited States (8) and Canada (13) nti d 69.8 geperform strongly. Whilst the corporate New Zealan Ar 5tax burden in each is heavier than 69. tes ed Staaverage, their economies rank joint Unit 3first for access to medium-term 8. l6 .6 rae 67capital. Moreover Canada ranks Is nia vethird for the quality of its financial Sloregulatory system and the US ranksfirst for both the value of inward M&Adeals and for private sector credit. Chile is the highest placed emergingmarket, ranking 4= overall on this FIGURE 12: DYNAMISM OF FINANCING ENVIRONMENT: BY REGION NORMALISED SCORE (MAX=100, MIN=0)measure. It ranks joint first for privatesector credit and joint fourth for boththe quality of its financial regulatorysystems and access to medium term 65.7 61.1capital. With its low corporate taxburden and sound financial regulatory North America Nordic 58.6 G7system, Poland is the second highestranked emerging market. Of the 57.1Growth-8 economies, Korea ranks Eastern Europehighest (18) ahead of Brazil (24), with 56.5 55.0India (43) and Russia (48) near the Western Europe All countriesbottom. 54.8 52.6 Asia Pacific Middle East and Africa 48.4 Latin America 47.4 Growth – 8 Global Dynamism Index 2012 15
  18. 18. Country snapshots FIGURE 13: GDI – COUNTRY SNAPSHOTS Country Rank Strongest area (rank) Regional comparison Argentina 34= Economics & growth, labour & human ranks 4 in Latin America, behind Chile, Uruguay and Brazil capital (1) Australia 6 Business operating environment, labour ranks 2 in Asia Pacific, behind Singapore & human capital (7) Austria 5 Financing environment (4) ranks 3 in Europe, behind Finland and Sweden Belgium 19 Business operating environment (14) ranks 9 in Europe, ahead of the Netherlands and Luxembourg Brazil 30 Economics & growth (20) ranks 3 in Latin America; ranks 3 in Growth-8 behind Korea and China Canada 18 Business operating environment (6) ranks 4 in G7 behind United States, Germany and France Chile 12 Financing environment, economics top in Latin America & growth (4) China 20 Economics & growth (2) ranks 2 in Growth-8 behind Korea; ranks 6 in Asia Pacific Colombia 42 Economics & growth (10) ranks 6 in Latin America, ahead of only Venezuela Czech Republic 29 Business operating environment (22) ranks 4 Eastern Europe, behind Slovak Republic, Slovenia and Poland Denmark 17 Business operating environment (5) ranks last of 4 Nordic nations; ranks 8 in Western Europe Egypt 47 Economics & Growth (39) ranks 4 in Middle East & Africa, behind Israel, UAE and South Africa Finland 2 Business operating environment (1) top in Western Europe France 16 Financing environment (3) ranks 7 in Western Europe, behind Germany but ahead of UK ranks 3 in G7 Germany 16 Science & technology (9) ranks 5 in Western Europe; ranks 1 in G7 Greece 48= Financing environment (29) bottom in Western Europe Hungary 31 Financing environment (21) ranks 5 in Eastern Europe India 40= Economics & growth (5) ranks 10 in Asia Pacific; 6 in Growth-8, level with Indonesia and ahead of Russia Indonesia 40= Economics & Growth (6) ranks 10 in Asia Pacific; 6 in Growth-8, level with India and ahead of Russia Ireland 27 Business operating environment (2) ranks 12 in Western Europe, behind Nordic nations but ahead of UK Israel 4 Science & technology (1) ranks 1 in Middle East and Africa Italy 38 Financing environment (28) ranks 14 in Western Europe; bottom in G7 Japan 26 Science & technology (6) ranks 8 in Asia Pacific; ranks 5 in G7 Korea 8 Science & technology (4) ranks 3 in Asia Pacific; top in Growth-8 Luxembourg 24 Business operating environment (7) ranks 11 in Western Europe16 Global Dynamism Index 2012
  19. 19. “The United Kingdom is an open, trade-oriented economy with good global connectivity. However, despite being home to arguably the largest financial centre in the world, much more can be done to foster a financing environment that aids business growth.” SCOTT BARNES GRANT THORNTON UKCountry Rank Strongest area (rank) Regional comparison Malaysia 23 Economics & growth (13) ranks 7 in Asia Pacific Mexico 37 Economics & growth (21) ranks 5 in Latin America; ranks 5 in Growth-8 Netherlands 22 Business operating environment (4) ranks 10 in Western Europe New Zealand 11 Labour & human capital (5) ranks 4 in Asia Pacific, behind Singapore, Australia and Korea Nigeria 48= Economics & growth (7) bottom in Middle East and Africa Norway 14 Labour & human capital (8) ranks 3 in Nordic; ranks 6 in Western Europe Philippines 46 Economics & growth (15) bottom in Asia Pacific Poland 28 Financing environment (6) ranks 3 in Eastern Europe, behind the Slovak Republic and Slovenia Portugal 45 Business operating environment (27) second bottom in Western Europe, ahead of only Greece Russia 43= Economics & growth (10) last in Eastern Europe and Growth-8 Singapore 1 Financing environment (1) top in Asia Pacific Slovak Republic 21 Labour & human capital (2) top in Eastern Europe Slovenia 25 Financing environment (10) ranks 2 in Eastern Europe South Africa 43= Economics & growth (18) ranks 3 in Middle East and Africa, behind Israel and the UAE Spain 39 Business operating environment (21) ranks 15 in Western Europe, ahead of only Portugal and Greece Sweden 3 Business operating environment, ranks 2 in Western Europe and Nordic behind Finland science & technology (3) Switzerland 7 Science & technology (5) ranks 4 in Western Europe behind Finland, Sweden and Austria Taiwan 13 Science & technology (8) ranks 5 in Asia Pacific, behind Singapore and Korea Turkey 36 Economics & growth (8) ranks 6 in Eastern Europe, ahead of Russia; ranks in 4 in Growth-8 United Arab 34= Science & technology (10) ranks 2 Middle East and Africa, behind Israel Emirates United Kingdom 32= Business operating environment (17) ranks 13 in Western Europe; ranks second last in G7, ahead of Italy United States 10 Financing environment (8) ahead of Canada in North America; ranks 2 in G7, behind Germany Uruguay 15 Labour & human capital, ranks 2 in Latin America, behind Chile but ahead of Brazil economics & growth (3) Venezuela 50 Labour & human capital (27) bottom in Latin America Vietnam 32= Economics & growth (12) ranks 9 in Asia Pacific, ahead of the Philippines but behind Malaysia Global Dynamism Index 2012 17
  20. 20. Methodology Indicators Survey Categories and indicators were selected on the basis The survey of 406 senior executives was conducted of expert analysis by the Economist Intelligence by the Thought Leadership team at the EIU. The Unit (EIU). Indicators are drawn from a variety of sample breakdown is shown below: sources, including: the EIU, the World Bank, • 29% of respondents were CEOs, a further 23% Thomson Financial and UNESCO. Please refer to were in other C-Suite or board roles, and the figure 14 for a full list of indicators and sources. remainder occupied other senior decision- making roles Data modelling • 49% of businesses represented in the survey had Modelling the indicators and categories results in global annual revenues exceeding $500m scores of 0-100 for each country, where 100 • 33% of respondents were based in North represents the most dynamic environment and 0 America, followed by Asia-Pacific, Europe the least. The overall score, as well as the category (both 26%), Middle East & Africa (8%) and scores, are averages of the normalised scores for Latin America (7%) each of the indicators. Each economy is then ranked • 19 different sectors were represented in the according to these scores. Indicator scores are survey, led by financial services (14%), normalised and then aggregated across categories to professional services (11%), technology (10%) enable a comparison of broader concepts across and manufacturing (9%). countries. Normalisation rebases the raw indicator to a common unit so that it can be aggregated. Weighting The indicators where a higher value means a Survey respondents were asked to assign an more favourable environment eg. real GDP growth importance to each of the indicators for their have been normalised on the basis of: x = (x-Min(x)) company, translating to the weight seen in figure / (Max(x) – Min(x)), where Min(x) and Max(x) are 14. Each category was weighted evenly. respectively the lowest and highest values in the 50 economies for any given indicator. The normalised More information value is then transformed from 0-1 to a 0-100 score To find out more about the GDI, go to to make it directly comparable with other or contact Dominic King indicators. This in effect means that the country ( To access the results with the highest raw data value will score 100, and directly go to the lowest scores 0. The indicators where a higher value means a less favourable environment eg. unemployment, have been normalised on the basis of: x = (x-Max(x)) / (Max(x) – Min(x)).18 Global Dynamism Index 2012
  21. 21. FIGURE 14: FULL LIST OF INDICATORSCategory Indicator Source Year WeightBusiness operating Foreign trade and exchange regimes and controls EIU Business Environment Rankings 2011 41%environment Policy towards private enterprise and competition EIU Business Environment Rankings 2011 23% Political stability EIU Business Environment Rankings 2011 13% Legal and regulatory risk EIU Risk Briefing 2011 23%Science & technology Broadband subscriber lines per 100 inhabitants EIU Technology Indicators 2011 10% Growth in broadband subscriber lines EIU Technology Indicators 2010-11 10% R&D as % of GDP UNESCO 2008-10 52% Total IT spending growth EIU Technology Indicators 2010-11 28%Labour & human capital Labour productivity growth EIU Country data 2011 47% Unemployment EIU Country data 2010-11 20% School life expectancy UNESCO 2008-10 28% % of population under 30 EIU Demographic Trends 2011 6%Financing environment Quality of overall financial regulatory system EIU Business Environment Rankings 2011 30% Access of firms to medium-term capital EIU Business Environment Rankings 2011 26% Growth in value of inward M&A deals Thomson Financial 2010-11 3% Value of inward M&A deals Thomson Financial 2011 3% Private sector credit as % of GDP World Bank 2010 18% Inward direct investment growth EIU Country data 2010-11 7% Corporate tax burden EIU Country data 2011 14%Economics & growth Real GDP growth EIU Country data 2010-11 67% Private consumption per head EIU Country data 2010-11 28% Change in $ value of stockmarket index EIU Country data 2010-11 5% Global Dynamism Index 2012 19