The latest issue of Foreign Affairs published by the Council on Foreign Relations (CFR) showcases the new drivers of economic growth for the global economy. They include: Mexico, South Korea, Poland, Turkey, Philippines, and the Mekong region (Brunei, Indonesia, Malaysia, the Philippines, and Singapore).
Mexico makes the list for several reasons and because the new government has embarked on a host of reforms, key amongst them are the opening up of the oil and gas industry to foreign investment. Tax reform has also been proposed – measures that are directed at stimulating the economy to ensure that it achieves strong economic growth. The Foreign Affairs publication highlights Mexico’s fortunate geography noting that it is hooked into the North American “supply chains” ensuring its “global competitiveness. Mexico generates nearly half of Latin America’s manufacturing exports, of which about four-fifths correspond to high-technology goods. Further, it is noted that Mexico is now part of the Trans-Pacific Partnership (TPP) and the Pacific Alliance – two of what are described as the most dynamic free-trade negotiations of this century”.
South Korea’s economy has stood the test of time by growing at 7 percent for 50 years, the Foreign Affairs magazine states that it only contracted in two of those years. South Korea joined the OECD in 1996 and “in 2010 … became the first Asian country and the first non-G7 member to host a G20 summit.” Per capita income also stands at a firm $ 23 000.
Poland has been picked because it also offers a rare statistic as a European country that has posted growth rates of 4 percent for two decades. As a result it is now the sixth largest economy in the EU. It stands as having been particularly successful at attracting foreign investment. Living standards more than doubled between 1989 and 2012. Poland is also striving to join the EU’s monetary union and analysts expect it to meet the criteria by the end of 2015.
While Turkey appears on the list, the current political turmoil certainly does not bode well for the economy. Uncertainty and a lack of political stability make foreign investors jittery and those who have invested in funds more likely to proceed more cautiously. There is no doubt that the country has been registering strong economic growth rates and is certainly regarded as an economic success story.
The Foreign Affairs journal describes Indonesia in very glowing terms: “Giant Indonesia soared during the last half decade, boasting high growth, low inflation, an extremely low debt-to-GDP ratio, strong foreign exchange reserves, and a top-performing stock market”. It adds that the Philippines has been the biggest surprise in the region with its economy increasing by 6, 6 percent in 2012. It was also one of the fastest growing economies in the first half of 2013 with growth rates of 7, 6 percent.
The Mekong region in Southeast Asia has a GDP of over 2 trillion dollars and a labour and consumer market of over 300 million people as highlighted by the Foreign Affairs article.
It is interesting to note that while China stole the headlines as being the global growth pole and the symbol of Asia’s emergence, this new report in Foreign Affairs describes in more emphatic terms Asia’s emergence in terms of a considerably wider grouping of Asian states. The fact that they are proximate to China also augurs well for their economies.
One of the common features of these emergent economies is their proximity to strong economies and economic blocks. They also represent positive examples to their neighbours and have the potential to expand the growth cycle in their respective regions unlocking new trade patterns and the potential for increased cross border movement of labour.
These new emergent actors have unlocked their potential through political stability, shrewd reform programmes, sound management of their economies, attracting foreign investment, diversifying their economies and focusing on high tech manufacturing.
The average growth rate in the emerging world fell back to 4 percent in 2013. So gone is the euphoria that came with the rise of the BRIC economies and enter now a new pedigree of actors that will hopefully represent a more sustained economic growth story expanding their success to their neighbouring regions setting in motion a stronger economic picture in 2014.