In lieu of an abstract, here is a brief excerpt of the content:

HOW EMERGING IS EMERGING? One question to consider in preparation for what lies ahead is how to define what an emerging market really is? How many institutional investment funds use a written policy to determine which countries qualify as emerging markets? How familiar are plan sponsors with their managers’ definition of the term? The World Bank’s International Finance Corporation defines emerging markets to be those with a GDP per capita below $8,625, but it does not indicate a minimum GDP per capita, points out Vladimir L. Kvint, Director, Emerging Markets, at Arthur Andersen Economic Consulting, New York, and Professor of Management Systems and International Business at Fordham University’s Graduate School of Business. Kvint’s approach to the issue, which he outlines in a recent edition of his newsletter, Inside Russia, includes considering the level of development of capitalist institutions, meaning insurance companies, commercial and investment banks, international law firms, and such institutions as exchanges, depositories, and clearing facilities. Additionally , a market needs a transportation and telecommunications infrastructure that can support the business activities of international corporations. ‘‘If these factors are in place, then it does not matter what the GDP per capita is,’’ asserts Kvint. ‘‘If the capitalistic institutions appear, it means there is a business interest in these markets.’’ Some of Kvint’s classifications might take some seasoned global investors by surprise, among them: Chile, long considered a Latin American success story, is better as a pre-emerging market, due to a lack of ‘‘major, recognized international business institutions there, and it is very difficult to obtain insurance against political risk,’’ not to mention ‘‘under-developed telecommunications and transportation services. You cannot go anywhere—the framework is not yet ready.’’ But it is very close to emerging market status, Kvint adds, as is Albania, which in 1994, he points out, became the most rapidly growing economy on a market-oriented platform. Inflation in Albania is just 4.5%, and production is growing about 15% annually. Global Investment, 2, No. 1 (December 1995), 43–44. 46 understanding the global emerging market Other ‘‘pre-emerging markets’’ on Kvint’s list include India, Pakistan , Egypt, and several Newly Independent States in Central Asia. China, by the way, doesn’t even make the pre-emerging market list. ‘‘For me, it is a very simple issue,’’ says Kvint. ‘‘Would a businessman or entrepreneur want to go or not to go? The major issues for him are the business approach, not the financial approach.’’ However one defines emerging markets, the characteristics that they share—higher economic growth rates, evolving legal and physical infrastructures, and a desire for foreign investment—are reason enough to be optimistic about their prudent inclusion in future asset allocation strategies. Throwing good money after bad doesn’t achieve satisfactory returns in any asset class, and emerging markets are no different. The provision of keen global market insights will, therefore, be the basis of investment success stories even more in the year ahead than they are today. ...

Share