пятница, 8 апреля 2011 г.

Categorizing the Emerging Market Economies - is a new research of SKOLKOVO

While the term “emerging markets” has existed for roughly three decades, it has only been in the past decade that the term has become an almost household name. By some counts the emerging market economies now number at over one hundred, spanning four continents.

The emerging lexicon was first widely referenced to the Newly Industrialized Economies of East Asia during the 1980s but then went on to include China and India as they progressively opened up their economies. After the fall of Communism in the late 1980s and early 1990s, the “transition” economies of Eastern Europe and the former Soviet Union were thrown into the fold. In reality, the term did not become a commonly used name until last decade, when economic growth throughout much of the developing world accelerated, particularly among the large BRIC economies. Equity market returns during this period were also quite spectacular among many of the developing economies, heightening investors’ attention there. Today, many analysts believe there are scores of new Emerging Market Economies (EMEs) in Asia, South America and Africa. With a disproportionate share of the world’s mineral wealth at a time when mineral prices are soaring and a disproportionate share of the world’s young people (by 2040 it will be home to one in four of them), some analysts believe Africa is currently home to the youngest members of the emerging markets club.

The EMEs, moreover, are increasingly being differentiated by more than just per capita income. They are becoming much more diverse in many other respects. Some, for example, are exploiting their mineral resources or large populations while others have been relying on foreign capital and technology to ignite growth. Some have recently liberalized their capital markets while others have kept a tight reign. Some allow enormous economic freedom but stifle basic political rights; for others it is the reverse. In the past few years, some of the poorest nations have “leap-frogged” and become quickly well connected through wireless technology. Of the two fastest growing big emerging markets, one has first-world transportation infrastructure throughout all of its large cities while the other relies on dirt roads for much of its vehicle transportation. In short, the attributes that make these developing economies “emerging” are multidimensional and a sizeable number of variables will be needed to differentiate them and track how each country is progressing or regressing relative to its peer group over time.

The SKOLKOVO Emerging Market Index, in its inaugural release, presents a new methodology for categorizing all the emerging market economies, highlighting which ones are emerging the fastest (and why they are) and which ones remain dormant for now.

The index is composed of five primary components, with each consisting of anywhere between two and five variables (the appendix gives the exact definition of each variable and its source):
1. Macroeconomic Performance – (inflation rate, real GDP growth, fiscal condition)
2. Macroeconomic Conditions – (internet usage, amount of paved roads, mobile phone usage, stock market capitalization, FDI intensity)
3. Health & Human Capital – (life expectancy, adult literacy rate)
4. Degrees of Freedom – (economic and political freedom)
5. Market Size and Intensity – (GDP, urban population, GDP per capita)

The researchers have divided EME into four groups depending on the development stage(The number indicates a general index: the lower the index, the better).


Advanced Stage EMEs
1. Poland
2. Estonia
3. Uruguay
4. Puerto Rico
5. Chile
6. Hungary

Intermediate Stage EMEs
1. China
2. Argentina
3. Bulgaria
4. Serbia
5. Brazil
6. Costa Rica
7. Mexico
8. Romania

14. Russian Federation

Early Stage EMEs
1. Dominican RepublicAlbania
2. India
3. Paraguay
4. Mongolia
5. Ecuador
6. Belarus

1. Venezuela, RB
2. Congo, Rep.
3. Turkmenistan
4. Congo, Dem. Rep.
5. Tajikistan

The question for most businesspeople and investors now is not whether to do business or invest in the emerging markets. In 2011 businesses and investors will increasingly ask which emerging markets? As recently as the middle of last decade, it seemed that the BRIC countries were the only major emerging economies worth mentioning. Today, there is much greater interest by multinationals and global investors in just about every corner of the globe, including many parts of Africa. While it is impossible to predict which ones will emerge the fastest over the next decade, is it likely that the rise of so many emerging economies at once is the making of a brave new world.

Index calculation, country classification principles, a complete list of countries with corresponding index and other details are provided in a full version of SKOLKOVO Issue Report.

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