Internal Environment Trumps Openness Policies in Global Connectivity

In the dynamic landscape of global interconnectedness, nations vie for prominence on the world stage. Traditionally, the pursuit of global connectivity has been associated with policies of openness—embracing international trade, welcoming immigrants, and fostering cross-border interactions. However, a deeper analysis reveals that a country’s internal environment plays a pivotal role in determining its connectedness.

The Singapore Paradigm: A Case Study

Singapore, often lauded as the epitome of global connectivity, exemplifies this phenomenon. DHL’s Global Connectedness Index for 2024 places Singapore at the pinnacle, outperforming 180 other markets. But what sets Singapore apart? Is it solely its openness policies, or is there more to the story?

Dr. Steve Altman, a senior research scholar at NYU Stern School of Business and co-author of the index, asserts that the attractiveness of a country’s internal environment significantly influences its connectedness. While policies related to openness—such as immigration, tariffs, and foreign direct investment—remain crucial, they pale in comparison to the allure of a conducive domestic business ecosystem.

The Power of an Attractive Domestic Environment

1. Business Environment: A nation with a thriving business environment becomes a magnet for companies, investors, and individuals. When the internal landscape fosters innovation, efficiency, and ease of doing business, external players are willing to overcome challenges to engage with that country.
2. Strategic Foundations: Singapore’s ascent to global connectivity supremacy is no accident. It stems from a meticulously laid foundation—a strategy that spans infrastructure development, trade policies, and foreign investment facilitation. The seamless port operations, well-crafted trade policies, and efficient foreign direct investment mechanisms all contribute to Singapore’s allure.
3. Systematic Globalization: Singapore leveraged its structural characteristics—a small yet wealthy and advanced economy—to systematically embrace globalization. Over time, it transformed global connectivity into a cornerstone of economic development. The country’s unwavering commitment to long-term strategies paid off, propelling it to the top spot in the index.

Depth and Breadth of Connectivity

The DHL index evaluates countries based on two critical dimensions: depth and breadth.

1. Depth: This dimension measures a country’s international flows relative to its total economic activity. Singapore excels here, boasting the largest international flows relative to domestic activity. Its score of 99.0 out of 100 reflects the depth of its global connections.
2. Breadth: The breadth dimension considers the distribution of international flows across countries. Singapore ranks 25th overall, with a breadth score of 63.5. While not the highest, it still demonstrates the country’s ability to engage with a diverse set of partners.

Lessons for Aspiring Nations

Singapore’s success holds valuable lessons for other nations aspiring to enhance their global connectivity:

1. Invest in Internal Excellence: Prioritize creating an attractive domestic environment. Encourage innovation, streamline bureaucracy, and foster a business-friendly ecosystem.
2. Strategic Consistency: Develop a comprehensive strategy that aligns with long-term goals. Consistency in policy implementation and infrastructure development pays dividends.
3. Balancing Act: While openness policies matter, they must complement—not overshadow—the internal environment. Strive for equilibrium.

In conclusion, the internal environment trumps openness policies in the race for global connectivity. As nations seek their place in the interconnected world, they must recognize that true strength lies within their borders. Singapore’s ascent serves as a beacon—a testament to the power of cultivating an attractive domestic ecosystem.