Emerging Markets; Risks and Challenges
RISKS AND CHALLENGES OF EMERGING MARKETS
The above stated reasons, means and advantages of investing in emerging markets have resulted in the emergence of these economies on the global stage. The BRIC economies, Turkey, Poland, Czech Republic, Tunisia, Republic of South Africa, Chile, Peru, Argentina, and Indonesia are increasing their share of global trade and serving as the main engines of growth in the world economy. Trade among these countries has also grown by a staggering amount in recent years and their multinational companies are now competing with those from the developed economies.
There remain, however, significant risks and challenges to investing in these countries. They are discussed here under these broad headings; Political, Economic, Legal and Socio cultural. They affect the different countries in different ways and sometimes interact in different ways to produce different results. For example, political processes more often than not drive economic, legal and social policies of governments. China and India, two of the largest emerging markets operate very different political processes and therefore have two very different sets of political institutions. Chinese communism and Indian democracy vary significantly, and their political systems ultimately affect the choice of economic, legal and social policies. The first step to emerging market status for most of these countries can be traced to political reforms and/or movements, examples being the transition from authoritarian to democratic governments and economic liberalisation. It can also be argued that social reforms and/or popular movements brought about the downfall of the authoritarian governments in the first place, allowing for reforms in the political and economic systems in place (the political economy), thus paving the way for economic gains witnessed today. Despite the often complex interactions between these factors, we’ve attempted to simplify them by grouping them in broad
The above stated reasons, means and advantages of investing in emerging markets have resulted in the emergence of these economies on the global stage. The BRIC economies, Turkey, Poland, Czech Republic, Tunisia, Republic of South Africa, Chile, Peru, Argentina, and Indonesia are increasing their share of global trade and serving as the main engines of growth in the world economy. Trade among these countries has also grown by a staggering amount in recent years and their multinational companies are now competing with those from the developed economies.
There remain, however, significant risks and challenges to investing in these countries. They are discussed here under these broad headings; Political, Economic, Legal and Socio cultural. They affect the different countries in different ways and sometimes interact in different ways to produce different results. For example, political processes more often than not drive economic, legal and social policies of governments. China and India, two of the largest emerging markets operate very different political processes and therefore have two very different sets of political institutions. Chinese communism and Indian democracy vary significantly, and their political systems ultimately affect the choice of economic, legal and social policies. The first step to emerging market status for most of these countries can be traced to political reforms and/or movements, examples being the transition from authoritarian to democratic governments and economic liberalisation. It can also be argued that social reforms and/or popular movements brought about the downfall of the authoritarian governments in the first place, allowing for reforms in the political and economic systems in place (the political economy), thus paving the way for economic gains witnessed today. Despite the often complex interactions between these factors, we’ve attempted to simplify them by grouping them in broad