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Category : Business

Chile and Kazakhstan named in KPMG report into countries able to grasp opportunities of a changing global economy

They lack the size of China or India. Many have to import natural resources. They have yet to be given a snappy label such as the BRICS. But Chile, Tunisia, Taiwan, Jordan and Kazakhstan have been identified as the possible rising stars in a report that looks at the ability of countries to grasp the opportunities of a rapidly changing global economy.

The study from consultants KPMG and the Overseas Development Institute thinktank looked at the long-term potential of 60 emerging market countries and found some surprising names in its roll call of those deemed most fit to face the future.

After using economic, governance and social measures, the report found to the researchers’ surprise that the five BRICS – Brazil, Russia, India, China and South Africa – were well down the league table.

Instead, it tended to be smaller countries that were seen as best geared up to change, seen as the key factor in determining the capacity for sustained, long-term growth.

Chile came 30 places ahead of its bigger South American neighbour Brazil, while South Africa, in 26th place, was a long way behind two North African nations – Tunisia (2nd) and Morocco (6th).

China, now the world’s second biggest economy after three decades of rapid growth, could manage only 13th place in the list, while India was 23rd and Russia 51st.

The report looked at economic diversification, corruption, entrepreneurship, the relationship between business and government, the health of civil society and the investment climate as some of the indicators. It put Bolivia in last place, just ahead of Mozambique and Zimbabwe.

“You only need to look at the impact of recent food, fuel, and financial crises on countries around the world to see the importance of achieving a greater understanding of a country’s change readiness,” said Timothy A A Stiles, KPMG’s Global Head of International Development Assistance Services. “The results of the index are surprising and, when verified, are expected to provide important new insight for policy development and donor action aimed at strengthening government and national capability.”

The idea of a Change Readiness Index was first floated at the World Economic Forum in Davos in 2011 and over the past few months KPMG and the ODI have been using work by the Economist Intelligence Unit to compile their league table.

“Understanding a country’s capacity to handle new and unexpected developments is critical to advancing effective policy,” said ODI director Dr Alison Evans. “This index begins to paint a new picture and is an exciting starting point. We will be enhancing and refining the index over time to make it an even more reliable measure to help predict a country’s economic prospects.”

The report admitted that the high ranking of Tunisia, one of the countries involved in last year’s Arab Spring, would spark debate, as would Syria’s position at 14th, only one place behind China. Explaining the high rating of Chile over Brazil and Malaysia over Thailand, it said there were often marked differences between the potential of countries within the same continent.

“Chile has made considerable efforts in recent decades to diversify their export structure with noticeable impacts on economic growth. Chile’s competitive position is also supported by high levels of domestic and foreign competition and by an efficient financial market.”

It added: “One significant area of difference is in macroeconomic management, with Brazil demonstrating poorer performance with regard to variables such as the inflation rate and government debt.”

Comparing the two south-east Asian countries, the report said: “The Malaysian government has been working to improve the business environment, fight crime and corruption and enhance infrastructure and transport. In studying Thailand, analysts identify institutions as one of the most important weaknesses of the country’s economy, with recent political instability further undermining the perceived capability of the country to achieve sustained growth.”

The authors of the study said it used evidence from a number of existing indicators with measures identified to capture specific elements of change readiness that were not currently being captured, including risk management capabilities, efforts to promote economic diversification, strong governance and social safety nets.

Top 15 countries in Change readiness index

1 Chile

2 Tunisia

3 Taiwan

4 Jordan

5 Kazakhstan

6 Morocco

7 Malaysia

8 Uruguay

9 Turkey

10 Peru

11 Botswana

12 Costa Rica

13 China

14 Syria

15 Namibia

Source: KPMG

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