Understanding Emerging Markets

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CAVUMC09_254-283hr 10/15/07 4:16 PM Page 259 TIC OCEAN Y A N O R W S W E D E N FINLAND ESTONIA R U S S I A DENMARK RLANDS POLAND BELARUS GERMANY UM LITHUANIA RUSSIA CZECH MBOURG REP. SLOVAKIA UKRAINE E LIECH. AUSTRIA MOLDOVA HUNGARY KAZAKHSTAN SLOVENIA WITZ. CROATIA ROMANIA BOSNIA- HERZEGOVINA ONACO YUGOSLAVIA BULGARIA A ITALY MACEDONIA GEORGIA ALBANIA ARMENIA AZERBAIJAN UZBEKISTAN KYRGYZSTAN GREECE TURKEY TURKMENISTAN TAJIKISTAN A TUNISIA NIGER IGERIA LIBYA CHAD EGYPT SUDAN CENTRAL AFRICAN REPUBLIC CAMEROON ERITREA ORIAL CONGO UGANDA EA REPUBLIC GABON CONGO KENYA DEMOCRATIC RWANDA REPUBLIC BURUNDI (ZAIRE) TANZANIA ANGOLA NAMIBIA LATVIA ZAMBIA MALAWI BOTSWANA SOUTH AFRICA CYPRUS SYRIA LEBANON IRAQ ISRAEL JORDAN KUWAIT ZIMBABWE DJIBOUTI SOMALIA ETHIOPIA MOZAMBIQUE SWAZILAND LESOTHO ARABIA MADAGASCAR IRAN QATAR UNITED ARAB EMIRATES SAUDI YEMEN OMAN MAURITIUS RÉUNION AFGHANISTAN PAKISTAN INDIAN OCEAN NEPAL INDIA SRI LANKA BHUTAN BANGLADESH MONGOLIA C H I N A MYANMAR (BURMA) LAOS THAILAND CAMBODIA VIETNAM BRUNEI MALAYSIA SINGAPORE TAIWAN PHILIPPINES INDONESIA NORTH KOREA SOUTH KOREA JAPAN AUSTRALIA PAPUA NEW GUINEA PACIFIC OCEAN SOLOMON ISLANDS VANUATU NEW CALEDONIA FIJI NEW ZEALAND Advanced Economies Emerging Markets Developing Economies 259
CAVUMC09_254-283hr 10/15/07 11:23 AM Page 260 260 Chapter 9 Understanding Emerging Markets Advanced Developing Emerging Dimension economies economies markets Representative countries Canada, France, Angola, Bolivia, Brazil, Japan, Nigeria, China, India, United Kingdom, Bangladesh Indonesia, United States Turkey Approximate number of countries 30 150 27 Population (Percentage of world) 14 24 62 Approximate average per capita income (U.S. dollars; PPP basis) 33,750 6,450 13,250 Approximate share of world GDP (PPP basis) 48 9 43 Population (millions) 892 1,877 3,775 Telephone lines per 1,000 people (fixed and mobile) 1,369 355 724 Personal computers per 1,000 people 517 39 191 Internet users per 1,000 people 533 103 240 Exhibit 9.2 Key Differences among the Three Major Country Groups SOURCE: World Bank at www.worldbank.com: International Monetary Fund at www.imf.com Governments in developing economies are often severely indebted. In fact, some countries in Africa, Latin America, and South Asia have debt levels that approach or exceed their annual gross domestic product. This means it would cost a year’s worth of national productive output just to pay off the national debt. Much of Africa’s poverty is the result of government policies that discourage entrepreneurship, trade, and investment. For example, starting a new business in sub-Saharan countries in Africa involves an average of 11 different approvals and takes 62 days to complete. In the advanced economies, by contrast, starting a new business takes an average of six approvals and 17 days to complete. 6 Bureaucracy and red tape in developing economies often hinder the ability of firms from these countries to participate in the global economy. International trade and investment help to stimulate economic growth, create jobs, raise incomes, and lower prices for the products and services demanded by consumers and companies. When countries are cut off from the global economy, the result is increased poverty and unemployment – conditions that can give rise to revolution, terrorism, and war. By contrast, nations that participate actively in the global economy enjoy economic stability and better living standards. As Exhibit 9.3 illustrates, there are substantial differences in critical trade conditions across the three country groups. Emerging Market Economies Emerging markets are found in East and South Asia, Eastern Europe, South Africa, Latin America, and the Middle East. Perhaps the most distinguishing characteristic is that these countries are enjoying rapidly improving living standards and a growing middle class with rising economic aspirations. As a result, their importance in the world economy is increasing as attractive destinations for exports, FDI, and sourcing.
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Understanding Emerging Markets

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