BECH Index
Please observe that the source data for the BECH Index 2007 has been recalculated.
See the CIA Fact Book for more details on the recalculation. >>
The BECH Index for a country is reflecting the industrial and post-industrial demand capacity of the country and thus also reflects the demand for IT related products and services.
The BECH Index for a country is calculated as the Gross Domestic Product (GDP) using the PPP[1] principle multiplied by the GDP per capita ratio.
The GDP is reflecting the economic capacity of a country, but does not reflect the degree of industrialization. The size of the GDP/capita ratio definitely reflects the degree of industrialization and will be higher for countries where the post- industrialization sectors are of significance. An exception is countries with relative substantial oil resources compared to the rest of the economy. The BECH Index thus may overestimate the demand capacity for certain oil producing countries.
Furthermore, the BECH Index only estimates the relative demand capacity, not the absolute capacity.
In order to calculate the absolute size of a specific market one will have to know the absolute size of this particular market in one of the major industrialized nations. The BECH Index can then be used to extrapolate this specific knowledge onto other markets.
The BECH Index uses Switzerland = 100
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[1] Purchasing power parity (PPP) is in economics the method of using the long-run equilibrium exchange rate of two currencies to equalize the currencies' purchasing power. It is based on the law of one price, the idea that, in an efficient market, identical goods must have only one price.
An entertaining example of one measure of PPP is the Big Mac index popularized by The Economist, which looks at the prices of a Big Mac burger in McDonald's restaurants in different countries. If a Big Mac costs US$4 in the U.S. and GBP£3 in Britain, the PPP exchange rate would be £3 for $4. The Big Mac Index is presumably useful because it is based on a well-known good whose final price, easily tracked in many countries, includes input costs from a wide range of sectors in the local economy, such as agricultural commodities (beef, bread, lettuce, tomatoes), labor (blue and white collar), advertising, rent and real estate costs, transportation, etc. (Source: Wikipedia).
