As millions of dollars flowed into Haiti after the 2010 earthquake, individuals, organizations and governments that donated cash became concerned about whether the funds would be spent well.
“There was a thought that, regardless the amount of development money being poured into Haiti, they wouldn’t be able to use it as effectively as other nations might. We couldn’t put our finger on exactly why, but that was the general sense from the people who had worked there,” says Timothy Stiles, global chair of international development assistance services at accounting and consulting services firm KPMG.
From this intuition came KPMG’s Change Readiness Index (CRI), a collaboration with Oxford Economics. The Index, now covering 90 countries in its second year of publication, is an attempt to measure the relative ability of nations to not only effectively manage and respond to short-term shocks (like an earthquake or terrorism) and long-term changes (like climate change or emerging technological shifts), but also to “cultivate opportunities” from what these changes present. On the map below, the countries that are green rated highest on the index, and the countries that are red rated lowest.
Already, there are a number of indices that gauge and compare the relative levels of resilience, stability, and economic development across the world, like the U.N. Human Development Index and the World Bank ‘Doing Business’ Index. What’s unique about the CRI, says Stiles, is that it it looks closely at input factors that proactively shape “change readiness”–such as trade and regulatory policies, social safety nets, and R&D investments–rather than simple output indicators like GDP. The idea is to provide a “forward looking” metric that could be useful to aid and economic development organizations, private sector companies making foreign capital investments, and nations themselves as they evaluate their own policies.
Wealth is obviously an important factor in ranking high on the CRI: The top 10 nations are all “high income” nations. But wealth is not everything. Chile, at No. 11, is the top nation that is not defined in the high-income category, and it ranks higher than the United States at No. 12, as well as France, Spain, and Italy, among other nations. Other countries with rankings in the CRI that exceed their relative ranking of GDP per capita include the Philippines, Panama, Cambodia, and Kenya. Beyond financial well-being, says Stiles, some of the most important factors common to the top nations were “strong civil society organizations,” large levels of R&D investments, well-developed financial markets that make it relatively easy to access capital, and a government’s ability to forecast important environmental, economic, and technological trends.
One surprising finding was that the rapidly emerging markets known as the BRICS countries–Brazil (Rank 42), Russia (62), India (65), China (28), and South Africa (46)– performed relatively low on the index. “Yes, you can have some significant GDP growth with a large, cheap labor pool and resources, but that doesn’t necessarily guarantee your ability to respond to long-term change and the ability to capitalize on that change,” says Stiles.
KPMG doesn’t imagine that the rankings will change dramatically year-to-year, aside from major events that narrowly affect a country’s ability to move up or down. The Philippines for example made some changes that improved access to capital and credit ratings scores, giving it the ability to move up the list this year (last year’s list measured 30 fewer countries, so it isn’t directly comparable).
The CRI report looks at a few case studies to illustrate its points. In one, it compares the response of Japan, Chile, and Haiti to the massive disasters that rocked these nations in 2010 and early 2011. Chile’s response to the 8.8 magnitude earthquake was widely praised by international organizations–within 10 days of the disaster, 90% of homes in the area had regained access to electricity and water, and the government was able to coordinate foreign aid with domestic efforts so that funds went to areas most in need. A stimulus package launched that year also helped the economy rebound. “Japan’s response wasn’t that much more extraordinary than Chile’s,” says Stiles–a situation reflected by Chile’s relatively high ranking on the CRI relative to its economic clout.
“It’s not so much my country is doing better than your country,” explains Stiles. “We’re hoping that this will provide a tool within individual countries for dialogue around government and policy.”