When Islam Karimov suddenly died last September after 25 years at the helm of Uzbekistan, a veteran emerging market expert told anxious portfolio investors that he remained confident about his assets in that small Central Asian economy.
Events since then seem to have vindicated that view – an interesting counterpoint to purveyors of instability scenarios in the region known for “great power games” and, more recently, for “grand chessboard” geopolitical pontifications.
That emerging market expert will probably be also rubbing his hands when he sees that Bangladeshis are now building a 6.15 kilometer (4 mile) “dream bridge” on the Padma River to “Sonar Bangla” – a dream of the country’s strength and prosperity. In a nation of 250 rivers, this bridge will make obsolete, accident-prone ferry transportation (which takes hundreds of lives each year) between the capital Dhaka and the southern regions of Bangladesh.
This $3 billion bridge is part of the Bangladesh- China – India – Myanmar Economic Corridor, and one of the key projects underpinning the country’s ambition to become a middle-income economy by 2021 and a developed economy by 2041. And that is Bangladesh, with a per capita GDP currently estimated at $3,600.00, and a country expected to eradicate extreme poverty by 2030.
Emerging market investors can also think of the rapidly developing Central and East Asian countries such as Kazakhstan, Pakistan , Vietnam , Cambodia, Laos and Mongolia. All these economies are benefiting from trade and investments generated by China’s Belt and Road (B&R) Initiative, and the markets of 625 million people in the Association of South-East Asian Nations (ASEAN) and 182 million people in the Eurasian Economic Union ( Russia , Belarus, Kazakhstan, Armenia and Kyrgyzstan).
Several attempts are currently under way to enlarge and strengthen the flows of trade and finance within that vast economic system that will also include India and Iran .
China is the key mover behind this huge development effort. Beijing is mobilizing its $40 billion Belt and Road Fund, which really looks like “seed money” for many projects currently under way that are financed by state and private funds, as well as by contributions from host countries along the B&R routes.
And then there is a 57-country-strong Asian Infrastructure Investment Bank (AIIB) with a committed capital of $100 billion to fund regional construction and modernization of roads, railroads, seaports, airports, water systems, etc. The bank began operations last January. Working with a very small staff, it has already engaged in investment projects worth nearly $2 billion.
The New Development Bank (aka the BRICS Development Bank), with an authorized capital base of $100 billion, also opened for business a few months ago and, according to the latest news, has initiated investment projects in all its five founding members (China, Russia, India, Brazil and South Africa ). Most of these development projects will probably be in the Eurasian and Asian regions.
Judging by the proceedings of the BRICS summit in Goa, India, on October 16, 2016, it seems that Delhi will be playing an active role in the group’s economic development policies and in a closer coordination of member countries’ political and security issues. The “Incredible!ndia,” a true Asian giant, is stirring up in an apparently full concert with Russia and China, the two veto-wielding powers at the U. N. Security Council.
As a parenthesis, this is an interesting event at a time when the British Prime Minister Theresa May will be bringing a business delegation on a visit to India in early November to develop Britain’s post-Brexit alternatives.
Donald Trump also seemed to be on to something when he pledged on Saturday, as a guest of the Republican Hindu Coalition, that, if elected, the U. S. and India would stand “shoulder to shoulder” as “the best friends. ”
Where does all this leave Japan and South Korea? Honestly, I don’t know, because I just can’t see the economic rationale of these countries’ approach to relationships with their most important business partners in the fastest growing segment of the world economy.
Japan, in particular, is difficult to read. And yet, things should be simple.
The country needs strongly growing exports (nearly one-fifth of GDP), because Japan’s domestic demand is not enough to set in train sustainably rising investments – a key trigger for employment creation, higher incomes and buoyant household consumption needed to support steady economic growth and improving public finances.
Japan’s new best friend Russia is not a substitute for estranged neighbors such as China and South Korea, which take a quarter of Tokyo’s total sales overseas. With only 0.7 percent of Japanese exports going to Russia, Moscow can’t help much even if it allowed Japan’s free reign to business operations in Siberia and the Russian Far East. It makes one wonder: Is this Japan’s wasteful playing for time, or an attempt to use Moscow’s good offices with friends in Beijing? Again, I have no idea.
South Korea is a similar puzzle.
Its president apparently miffed her Russian hosts during the Eastern Economic Forum in Vladivostok last month by ignoring trade and investments and talking about Pyongyang nukes instead.
Relations with Japan and China are even worse. Korean sales to Japan are currently falling at an annual rate of more than 20 percent, and Seoul is also jeopardizing a quarter of its exports going to China, its largest trade partner. At issue is (a) unsettled history and contested territorial claims with Japan, and (b) disagreements about security problems with China.
The developing Asia is all business. Using Washington’s neo-conservative (aka “neocon”) formulas, the emerging Asian economies are from Mercury, the smallest planet of the solar system, symbolizing the Roman god of abundance and commercial success. [“Neocons” are the people who berated European wimps as being from Venus, while the fighting Americans were from Mars.]
Being from Mercury is a great mindset. “Getting rich is glorious” was China’s Paramount Leader Deng Xiaoping’s mirabile dictu, even if “flies will swarm in” as you open the windows.
Large and generously funded development efforts are under way in the Eurasian and Asian regions. That is an excellent fishing ground for knowledgeable emerging market investors.
There is no reason to be anti anything to see that. Just look around. Where else do you see 24/7 hard-working and highly motivated people striving to advance their livelihoods in totally business-friendly and lightly regulated environments?
Call me collect when you find a suitable alternative (or what economic theory calls a perfect substitute).
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