The United States continues its dominance of the Brand Finance Nation Brands table just published today, adding US$871 billion following 4% growth; even this modest increase may be under threat however.
However, Luxembourg's elevated position in the table has seen it surge by 43% as this year’s fastest growing nation brand.
In just two weeks the US could be led by Donald Trump, whose xenophobic stance and protectionist rhetoric threatens to antagonize businesses, prospective foreign workers, students and governments. Parallels have been drawn between the unexpected success of Mr Trump’s presidential campaign the UK’s decision to leave the EU. Both are thought to be motivated (at least in part) by a reaction against cosmopolitan internationalism by those who feel that globalization has left them behind. Similar trends have been witnessed across much of the western world, evidenced by the recent success of the Front Nationale in France, the actions of Victor Orban’s government in Hungary and the left-wing or non-aligned populist movements such as Five Star in Italy and Podemos in Spain.
The implications of this (US) trend for those tasked with managing nation brand value are complex and the issue illustrates the tensions between the different pillars of nation brand value. On the one hand, this trend represents a strengthening of the nation state, the reinforcing of a concept that has been eroded for several years, which may make differentiation easier. For example if British agricultural produce is regulated by an entirely independent system it is conceivable that claims about its high-quality, safety or environmental sensitivity would be more believable. However, though distinctiveness is important for a nation brand, openness is perhaps of paramount importance for international audiences. Students, tourists and business travelers look for simple entry procedures and a welcoming local population, recruiters desire highly-educated, outward looking workers and business and investors seek ease of doing business both within the country and across borders. Some ‘Brexiteers’ claim this openness will be better achieved with Britain outside the EU, however the broad consensus of most business bodies and economic forecasters globally is that the opposite is true.
Like the US, the UK has maintained a steady, if modest rate of growth despite Brexit and the depreciation of Sterling against the dollar over the past year. The lack of movement reflects the fact that Brexit’s consequences are as yet unclear. The result of the vote itself is certainly not a positive signal to the rest of the world, particularly in appealing to individuals looking to live, work and study in the UK but the picture for investors, businesses and exporters is less certain. A great deal depends on the nature of the trade arrangement Theresa May is able to form with the EU. The short-term picture for manufacturing exporters is actually somewhat positive as a result of the devaluation of the pound and the continued ability to freely recruit EU workers. However a so called ‘hard-brexit’, leading to the implementation of barriers to capital, trade and migration could have severe consequences across the board for both the manufacturing and service industries. The auto-industry in the North-East, heavily reliant on foreign investment and exporting primarily into the EU, is a frequently cited example. Financial services are not just an essential source of income for Britain’s exchequer, but as one of a vanishingly small number of industries where the UK can still claim to lead the world, are integral to the UK’s international image and nation brand. The loss of passporting rights within the EU would be potentially disastrous for London’s status as a financial hub, damaging both investment and export potential and thus severely depressing the UK’s nation brand value. A deadline of March 2017 has been set for triggering Article 50 so next year’s Brand Finance Nation Brands results should start to provide a clearer picture of the impact of Brexit to brand Britain.
Japan has recorded the most significant growth amongst major economies. Its brand value has risen 18% due to improvements across a variety of key metrics. The first is the appreciation in the value of the Yen, which leads to an increase in the US dollar value of the Japanese Nation Brand compared to last year’s result. Brand Strength has increased from 81 to 85 due to improvements across the board. There has been a particularly marked increase in perceptions of the competitveness and dynamism of its work force. This may suggest that despite the recent slowdown in the economy, Prime Minister Abe’s reforms are affecting international perceptions of Japan’s fundamentals. Japan’s brand value increase has been significant enough to overtake the UK, which has dropped to 5th place in Brand Finance’s table.
Luxembourg is this year’s fastest growing nation brand, having increased 43% to US$85 billion. The Grand Duchy is attempting to rapidly shed its reputation for financial secrecy and more particularly the taint of impropriety left by the LuxLeaks scandal of 2014. Its status as a financial centre is of paramount importance, light touch regulation and privacy have been important factors in Luxembourg’s status. However the perception that Luxembourg is facilitating tax avoidance could potentially start to create tensions with other nations and international regulatory pressure. It also goes against the increasingly prevalent trend across the finance industry for greater transparency and openness, with secrecy and privacy subject to increasing suspicion (whether fair or not). As a result, from 2014 Luxembourg initiated a concerted nation brand campaign to unify its messages and highlight the Grand Duchy’s Strengths. Reliability, Dynamism and Openness are highlighted as the country’s core strengths in a refreshingly low-key campaign that is distinguished by its focus on credible attributes rather than aspirations. Openness is perhaps the only one of these open to question and Luxembourg will need to convince that its openness to the movement of people, capital and ideas can be matched by that of its financial system.
Pakistan is the second fastest riser, with a year on year increase of 41%. Pakistan is implementing a series of economic reforms backed by and necessary for a tranche of payments from the IMF. Lower oil prices also continue to work in the country’s favour, as does an improving security environment, despite the impression that recent escalating tensions in Kashmir might give. Despite this year’s positive change and an optimistic outlook for economic growth, significant risks remain. Though Pakistan’s worsening relationship with India is extremely unlikely to result in conflict, it is still not an encouraging development. A recent OPEC agreement to move to reduce production is also a cause for concern. Most importantly, Pakistan must maintain the discipline it has shown in pursuing its reform program once the structure of IMF targets have been removed.
Ukraine’s economy remains finely balanced as its stand-off with Russia over the Donbas continues and despite the lack of international recognition, Crimea’s status as part of Russia appears to be confirmed. However having already suffered significant damage since the start of the war, the relative stability of this year sees brand value climbing upwards again. Brand strength metrics for security rose 18.2%, with a corresponding 11.4% rise in the quality of life score and a big improvement in the country’s ability to retain its most talented workers. Brand Value is up 39% making Ukraine the third fastest riser this year.
At the other end of the scale, Jordan is this year’s biggest faller as a result of continued conflict in neighbouring Syria. As the World Bank reports, the security situation is deteriorating, affecting tourism, construction and trade. Meanwhile unemployment is rising. With no prospect of the situation in Syria improving, a turnaround in Jordan is unlikely for now.
Turkey is another country that is suffering from the instability of its war torn neighbor. However, more significant is its pursuit of the same introspective and arguably regressive trends seen in other parts of the world. This year’s failed coup attempt has prompted a furious backlash, which in the opinion of many international observers goes beyond a proportionate response. In addition to mass arrests of army offices, 2,700 judges and 40,000 teachers have been removed from their posts. Erdogan has also hinted at the reintroduction of the death penalty. Even before the coup Turkey’s president appeared to be steering the country away from the track it had been taking towards EU membership but the government’s response to the coup and its displeasure at the reactions of western governments have made this trajectory much more overt and concerted. In this context it will come as little surprise that Turkey’s nation brand value has fallen more rapidly than that of any country this year. It is down US$474 million, a 29% drop.
Brazil has dropped even further than Turkey. The Olympic Games did deliver a boost to tourism – Brazil’s brand strength score for tourism rose 12% on 2016. However the ailing economy and declining value of the Real eclipse this, driving Brazil’s nation brand value down 30%. Compounding Brazil’s woes is its unravelling corruption scandal, with money laundering and corporate and even government corruption surrounding Petrobras having been uncovered by Operation Car Wash. Dilma Rousseff’s impeachment potentially provides the opportunity to Brazil to turn a new page however certain key indicators suggest that this downward trend will continue. Perceptions of corruption are up 0.5%, the IMF predicts a further 8% decline in GDF before the end of 2017 while the country’s discount rate has risen from 9.9% to 17.8% reflecting the pessimistic economic outlook.
Singapore last year claimed the title of World’s strongest Nation Brand and has held off close challenges from Hong Kong and Switzerland to do the same again this year. Nation Brand value is reliant upon GDP, (ie, the revenues associated with the brand). Singapore’s small size means it will never be able to challenge for the top spot in brand value terms, because its brand simply cannot be applied extensively enough to generate the same economic uplift as ‘brand USA’ for example. However it terms of its underlying nation brand strength, Singapore comes out on top.
Intolerance of corruption combined with generous wages for public officials to discourage graft make Singapore the ‘cleanest’ country in Asia according to the Corruption Perceptions Index. It has slipped from 7th to 8th globally however this is the result of a significant improvement by the Netherlands, rather than a failure of Singapore. Heavy taxes on cars control congestion and have funded the development of a superb public transportation system. Finally a high quality education system based in English makes Singapore a very easy place for ex-pats to settle. With such governmental competence, Singapore’s international reputation has spread by word of mouth as much as it has by active promotion.
Tourism was identified as Singapore’s only real shortcoming in last year’s report and unfortunately this continues to be the case with Singapore’s brand strength score for Tourism dropping four points. Performance has improved across all other metrics however, particularly investment, highlighting Singapore’s unmatched reputation for business-friendliness.
