Interconnected world is Changing
Published: 04:08 PM,Aug 07,2023 | EDITED : 08:08 PM,Aug 07,2023
Every region in the world depends on another significant region for at least 25 per cent of a flow it values most. The world remains deeply interconnected, and flows have proved remarkably resilient during the most recent turbulence.
Furthermore, no region is self-sufficient. The challenge therefore is to harness the benefits of interconnection while managing the risks and downsides of dependency — particularly where products are concentrated in their places of origin.
Growth in global flows is now being driven by intangibles, services, and talent. One of the most striking trends is flow representing knowledge and know-how, such as IP and data, and flows of services and international students have accelerated and are now growing faster than the flow of goods. Flow of data grew by more than 40 per cent per annum over the past 10 years.
Professional services, such as engineering services, are among those more traditional trade flows that have been growing fastest, at about 6 per cent a year, versus resources, which have slowed to just around two per cent. Anything that involves real know-how—engineering, but also providing, say, call centre support—is in that category.
The flows of IP are growing even faster. IP also includes movies, streaming platforms, music, and any sort of cultural elements that we consume. It’s also important to consider flows of patents and ideas and the way countries or companies will use ideas or know-how developed in one country to help what they do broadly across the world. Those flows have been growing at roughly 6 per cent per year as well.
Concentration often reflects specialisation that enables efficiency gains. However, interruption of concentrated trade flows can be particularly disruptive when they are harder to replace at short notice. The world remains deeply interconnected, and flows have proved remarkably resilient during the most recent turbulence.
Furthermore, no region is self-sufficient. The challenge therefore is to harness the benefits of interconnection while managing the risks and downsides of dependency—particularly where products are concentrated in their places of origin.
Even the smallest firm can find new opportunities to expand its integration with the world, enabled by technological advances, new forms of cross-border finance, and regulation. Multinational corporations can have disproportionate influence on flows because they are the current centre of the system. They account for about two-thirds of exports, and they are over-represented in sectors where intangibles are the most relevant and where concentration is the most pronounced.
To negotiate an era that may be more complex and challenging requires a deeper understanding of the full picture of global flows, their networks and evolution, and potential scenarios for the future. Looking at the entire range of global flows, the world is not defaulting to deglobalisation, but that global connections are reconfiguring. Firms that reimagine rather than retreat from interconnection can reshape value chains in ways that contribute to both growth and resilience.
Furthermore, no region is self-sufficient. The challenge therefore is to harness the benefits of interconnection while managing the risks and downsides of dependency — particularly where products are concentrated in their places of origin.
Growth in global flows is now being driven by intangibles, services, and talent. One of the most striking trends is flow representing knowledge and know-how, such as IP and data, and flows of services and international students have accelerated and are now growing faster than the flow of goods. Flow of data grew by more than 40 per cent per annum over the past 10 years.
Professional services, such as engineering services, are among those more traditional trade flows that have been growing fastest, at about 6 per cent a year, versus resources, which have slowed to just around two per cent. Anything that involves real know-how—engineering, but also providing, say, call centre support—is in that category.
The flows of IP are growing even faster. IP also includes movies, streaming platforms, music, and any sort of cultural elements that we consume. It’s also important to consider flows of patents and ideas and the way countries or companies will use ideas or know-how developed in one country to help what they do broadly across the world. Those flows have been growing at roughly 6 per cent per year as well.
Concentration often reflects specialisation that enables efficiency gains. However, interruption of concentrated trade flows can be particularly disruptive when they are harder to replace at short notice. The world remains deeply interconnected, and flows have proved remarkably resilient during the most recent turbulence.
Furthermore, no region is self-sufficient. The challenge therefore is to harness the benefits of interconnection while managing the risks and downsides of dependency—particularly where products are concentrated in their places of origin.
Even the smallest firm can find new opportunities to expand its integration with the world, enabled by technological advances, new forms of cross-border finance, and regulation. Multinational corporations can have disproportionate influence on flows because they are the current centre of the system. They account for about two-thirds of exports, and they are over-represented in sectors where intangibles are the most relevant and where concentration is the most pronounced.
To negotiate an era that may be more complex and challenging requires a deeper understanding of the full picture of global flows, their networks and evolution, and potential scenarios for the future. Looking at the entire range of global flows, the world is not defaulting to deglobalisation, but that global connections are reconfiguring. Firms that reimagine rather than retreat from interconnection can reshape value chains in ways that contribute to both growth and resilience.