Dramatic financial market swings across Asia and the push for Britain to leave the European Union remind investors daily that the modern global economy is inherently volatile. The long-term effects of developments like these are impossible to predict. But what’s clear is that investing is now global – and policy decisions made by individual nations have significant consequences.
As government leaders seek to attract capital, they need to think about themselves in a new way: as brands.
Leading consulting firms are now advising businesses to abandon old, prevailing wisdom when investing abroad. As a recent analysis from Ernst & Young puts it: “Companies need to look beyond the obvious choices and explore dynamic and different investment destinations.”
Though the economies of the BRIC countries – Brazil, Russia, India, and China – are currently out of fashion, there is no shortage of other fast-growth markets offering a wealth of new investment opportunities.
Countries can no longer afford to operate in isolation, unconcerned with establishing and growing international business relations. A recent analysis by McKinsey & Co. finds that acquiring more connections in the global flows of goods and services can add as much as 40 percent to a country’s GDP.
As a result, the perception of a nation outside its borders – that is, its brand – has never been more crucial to its prosperity.
The link between economic success and branding is evident in a recent report published by U.S. News & World Report called “Best Countries.” By surveying more than 16,200 thought leaders in 36 global markets, analysts at BAV Consulting and the Wharton School were able to confirm that the strength and stature of a country’s brand is positively correlated with GDP via foreign investment, export volume, margins on goods sold abroad, and inbound tourism.
Cultivating a strong brand, though, is no simple task. Specifically, perceptions of a country’s labor force and its rates of entrepreneurship and innovation can be decisive factors for investors. Equally important are so-called “softer metrics” like public education, environmental management and the promotion of religious, political, and gender equality.
Consider Canada, which ranked second overall. Surprisingly, Canada didn’t break the top 10 for power, heritage or cultural influence. What it lacked in history and influence, though, it made up for in softer metrics. It was ranked first in quality of life and second in citizenship. No other country in North or South America made the top 10 for either of those categories.
The rankings also reveal broader trends.
For example, successful countries are more likely to have female leaders. Women lead four of the top 20 countries overall. Another example: Ninety percent of the countries which millennials want to live in have high levels of global citizenship – meaning they champion progressive values such as gender equality, religious freedom, and the environmental stewardship.
As the world becomes ever more connected, developing and maintaining a country’s brand will be an essential ingredient to success.
Sir Martin Sorrell is CEO of WPP. Mortimer B. Zuckerman is chairman and editor in chief of U.S. News & World Report and publisher of the New York Daily News.
