Is bigger always better? When you look at how the economies smaller countries have surprisingly outperformed their peers in terms of economic output, productivity and investment favorability, you’ll realize that it’s the complete opposite.
Gone are the days when powerful nations with huge territories top the economic ranks because of their great advantage in numbers through tangible infrastructure. Nowadays, the intangible in the form of skilled workers, industry knowledge, and advanced technologies make it possible for smaller countries to come forward and compete in the global arena.
There is a long list of physically small countries that produce a high GDP, and according to experts, they share two traits in common: the presence of high-net-worth individuals and rich investors, as well as their ability to provide a safe environment for offshore portfolio management, private banking, and other financial services.
Another factor that enables small countries to compete in terms of economy and productivity is their independence from the global stock market. Unlike bigger countries that rely on the performance and patterns of the stock market, smaller ones are shielded from risks as a result of sudden global changes and market shocks.
A study displays the potential of smaller countries with a much-developed economy. According to an analysis conducted on financial assets returns involving large (France, Germany, Italy, Japan) and small countries (Norway, Sweden, Ireland), results show bigger returns for the latter for both short and long-term periods.
Perhaps the most revealing reason is rooted in the larger countries’ stagnation and the inability of advanced economies to improve their productivity and competitiveness. Smaller countries, on the other hand, are more motivated to compete, innovate and adapt to the ever-changing demands of the global market because of their more flexible resources.
Countries like the Bahamas, Singapore, and Bermuda (where leading financial services company LOM Financial is headquartered) are popular jurisdictions for offshore investments. They are among the world’s smallest jurisdictions, but also among the most affluent.