Protectionism worries resurface: survey
Concerns about a rise in protectionism in the BRIC economies and developed markets run high; smaller countries are seen as more open
Continuing weak growth combined with rising global competition could spark more protectionism in the next 12 months, a survey of 750 senior business executives worldwide, conducted in late 2012 by Ernst & Young, showed.
The respondents pointed to increasing challenges to operating and slowing growth in some BRIC (Brazil, Russia, India and China) economies, the consultancy firm said in a statement.
"As a result nearly half of the surveys respondents expect an increase in protectionism in the BRIC countries as well as an increase in developed markets. In contrast, respondents see a decline in protectionism as more likely in other smaller rapid growth markets," it said.
The Ernst & Young Globalization Index, which measures the world's 60 largest economies according to their degree of globalization relative to their gross domestic product, shows improved globalization scores for medium-sized, fast-growing countries like Vietnam, Malaysia, Thailand and Philippines as well as for smaller European countries like Belgium, Hungary and Slovakia.
"Despite the highly volatile economic backdrop the trend for greater integration and closer cooperation continues to outweigh the threat of protectionism for the majority of the worlds markets, Jim Turley, Chairman and CEO of Ernst & Young, said in the statement.
Fast-growing emerging markets outside of the BRIC group emerge as "hot spots for global business" due to the perception of being more integrated globally on a range of trade, investment, cultural and technological criteria than the BRICs, the survey showed.
Turkey, Mexico, Indonesia, Peru, Colombia, Venezuela, Malaysia and Vietnam, as well as several countries in Africa, are "all shaping up to be among the most dynamic parts of the world for investment."
'NEAR-SOURCING' ON THE RISE
Among these, South Africa, Indonesia, Mexico and Turkey were reported to be the most competitive locations, with 82% of executives planning to increase investment in these markets, where they see improvements in the ease of doing business, infrastructure, government policies and labour productivity.
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"In the next three years, the number of respondents who expect to outsource more operational functions to providers in mature markets will rise to 36% from 22% today and the number that plan to near-source previously outsourced activities will more than double, from 14% to 35%," the survey said.
The discovery of new shale gas driving costs down for energy, the strong revival of domestic manufacturing and the increasing growth, fuelled by high technology and exports, could make the US "a surprisingly attractive investment destination for the next decade," John Ferraro, global Chief Operating Officer at Ernst & Young, said.
The survey also forecasts a rebalancing between import and export countries, with fast-growing markets emerging as stronger consumer markets and developed countries regaining strength as producers and exporters.