DHL Global Connectedness Index 2020 signals recovery of globalisation from Covid-19 setback
Trade and capital flows have already started to recover and international data flows surged during the spreading pandemic as in-person contact migrated online, boosting international internet traffic, phone calls and e-commerce.
DHL and the NYU Stern School of Business have released the DHL Global Connectedness Index 2020 (GCI) today. The report, now in its seventh edition, is the first comprehensive assessment of globalisation during the spreading Covid-19 pandemic. It tracks international flows of trade, capital, information and people across 169 countries and territories. After holding steady in 2019, current forecasts imply that the index will fall significantly in 2020 due to the distancing effects of Covid-19 on societies, such as closed borders, travel bans and grounded passenger airlines. Nonetheless, the pandemic is unlikely to send the world's overall level of connectedness below where it stood during the 2008-09 global financial crisis. Trade and capital flows have already started to recover and international data flows surged during the spreading pandemic as in-person contact migrated online, boosting international internet traffic, phone calls and e-commerce.
“The current crisis has shown how indispensable international connections are for maintaining the global economy, securing people's livelihoods and helping companies strengthen their trading levels,” says John Pearson, CEO of DHL Express. He adds, “Connected supply chains and logistics networks play an essential role in keeping the world running and stabilising globalisation especially at a time of a crisis that spans our globe. This reminds us of the need to stay prepared for any challenge. The recent vaccine breakthrough has put a spotlight on the systemic importance of fast and secure medical logistics dependent on a worldwide interconnected network that effectively ensures international distribution.”
While Covid-19 has disrupted business and life around the world, it has not severed the fundamental links that connect nations. “This report shows that globalization did not collapse in 2020, but that the pandemic did transform — at least temporarily — how countries connect. It also demonstrates both the dangers of a world where critical linkages break down and the urgent need for more effective cooperation in the face of global challenges,” comments GCI lead author Steven A. Altman, senior research scholar and director of the DHL Initiative on Globalization at the NYU Stern School of Business. He adds, “Stronger global connectedness could accelerate the world's recovery from the COVID-19 pandemic, as countries that connect more to international flows tend to enjoy faster economic growth.”
Six Asia Pacific countries ranked among top 30, Southeast Asia countries outperform expectations
In the report, six Asia Pacific countries are ranked in the top 30 for overall connectedness — a measure of both their depth and breadth of connectivity — with Singapore ranked second, Malaysia 16th, Taiwan (China) 19th, South Korea 22nd, Hong Kong S.A.R. 25th, and Thailand at 30th. Singapore took the top spot on the depth scale, which measures international flow relative to domestic activity, followed by Hong Kong S.A.R. at a close second. On the breadth dimension, which captures whether a country's international flows are spread out globally or more narrowly focused, Asia Pacific countries also scored well, with South Korea and Japan coming in at fifth and sixth respectively.
Of particular note, the list of economies that have punched well above their weight in terms of international flows are led by Cambodia, Singapore, Vietnam, Malaysia, the Netherlands, Malta, the United Arab Emirates, Mozambique, Hungary, and Thailand. Fully half of these top 10 countries are located in Southeast Asia, a region where countries tend to have unusually high trade depth. The report finds that Southeast Asian countries benefitted from linkages with wider Asian supply chain networks as well as ASEAN policy initiatives promoting regional economic integration.
“Over the years, globalisation and greater international connectedness have not only raised the living standards and income levels of people all over Asia, it has also helped to keep trade and critical supplies moving during challenging times such as during this pandemic. Greater international connectedness drives economic recovery and prosperity, and at DHL Express we have seen how the growth of cross-border e-commerce has built great businesses and improved lives across the region,” said Ken Lee, CEO of DHL Express Asia Pacific. He added, “With the recent signing of the RCEP, we are confident that Asia Pacific countries will bounce back from this pandemic stronger and become even more connected.”
The Covid-19 stress test for globalization: Digital flows surging, trade, capital flows recovering, people flows plummeting
Predictably, lockdowns and travel bans to curb the spread of the virus have led to an unprecedented collapse of people flows in 2020. The number of people traveling to foreign countries is on track to fall 70 per cent in 2020, according to the latest UN forecast. International tourism may not return to its pre-pandemic level until 2023. In contrast, trade, capital, and information flows have held up surprisingly well. International trade has rebounded strongly after a sharp plunge at the onset of the pandemic and remains a vital backbone for economies worldwide.
Capital flows were hit harder. Foreign direct investment (FDI) flows, which reflect companies buying, building or reinvesting in operations abroad, could fall 30-40 per cent this year, as also projected by the UN. However, strong policy responses by governments and central banks have helped to stabilise markets. Digital information flows have surged as the pandemic has sent work, play and education online. People and companies rushed to stay connected digitally, driving double-digit increases in global internet traffic.
The DHL Global Connectedness Index employs more than 3.5 million data points to track the globalisation of 169 countries over the period from 2001 to 2019. It measures each country's global connectedness based both on the size of its international flows relative to the size of its domestic economy ('depth') and the extent to which its international flows are distributed globally or more narrowly focused ('breadth'). This year's GCI report also marks the start of the new DHL Initiative on Globalization at New York University's Stern School of Business. The new research initiative aims to create a leading center of excellence for data-driven globalization research.