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Emerging Markets in Asia

China and Japan dominate Asia’s economy and geopolitics, and most Asian countries have complicated relationships with those two nations. Asian markets also have in common low interest rates, export-driven economies, and an emphasis on high technology.

The Asian financial crisis of 1997 was a big setback for growth in Asia, but it also showed that these countries could recover, and it ultimately made the region stronger.

Indonesia

  • Type of government: Republic

  • Major industries: Apparel, cement, chemical fertilizers, food, mining, petroleum and natural gas, plywood, rubber, textiles, tourism

  • Currency: Indonesian rupiah

  • English-language newspaper: The Jakarta Post

The 17,000 islands of Indonesia form a potential powerhouse. The population is young and literate and it has numerous ports and extensive shipping experience. And the country is rich in natural resources, including oil and trees, which presents a risk: Deforestation from illegal logging contributes to climate change, and the country stands to lose territory if ocean levels rise.

Indonesia has the world’s largest Muslim population, which influences the country’s banking and financial system. The first democratic election in Indonesia took place in 1999 as the people worked to rebuild their economy after the 1997 financial crisis.

As international investors become more comfortable with Indonesia’s new political system, they’ll invest and trade more with the country. That, in turn, will generate economic growth, quite possibly making Indonesia the next major emerging market.

Malaysia

  • Type of government: Constitutional monarchy

  • Major industries: Automation, electronics, machinery, rubber products, telecommunications

  • Currency: Ringgit

  • English-language newspaper: Daily Express

Since its independence in 1957, Malaysia has been stable and working hard to push its trading strength in quality, low-cost manufacturing. The country also has an offshore financial center in the island of Labuan, which attracts bankers and investors looking for a low-tax place to conduct business. That, coupled with an expertise in Islamic finance, has helped bring funding into the nation to drive growth.

One challenge is managing the population’s ethnic diversity. Laws favoring the Malays, the indigenous people who make up about 65 percent of the population, hurts the country’s competitiveness, especially as talented people from other ethnic groups leave Malaysia for better opportunities.

Philippines

  • Type of government: Republic

  • Major industries: Business outsourcing, electronics, food processing, textiles

  • Currency: Philippine peso

  • English-language newspaper: The Manila Times

Filipinos who leave the country to work elsewhere send home about $17 billion every year, which represents about 10 percent of the country’s gross domestic product. That’s the tragedy of the nation, but also the opportunity. As the political situation improves and more foreign countries invest in the Philippines, growth should follow.

The leading export industries in the Philippines are technology and business outsourcing. A comfort with technology, along with the fact that most Filipinos speak English, has made the country a popular location for businesses looking to outsource bank back-office work, customer service, and tech support. These jobs are keeping people at home and may someday bring many of the overseas workers back.

South Korea

  • Type of government: Republic

  • Major industries: Electronics, industrial machinery, motor vehicles, telecommunications

  • Currency: South Korean won

  • English-language newspaper: The Korea Times

South Korea has had great economic growth, so much so that many analysts think it will graduate from emerging-market status soon. The government’s very successful growth strategy has been to establish homegrown businesses that serve the nation’s consumers as well as the export market. However, the Korean strategy has a few drawbacks that investors should be aware of — namely, it places limits on imports through tariffs and currency restrictions.

One of the major questions affecting South Korea is what happens in North Korea, a closed society controlled by a dictator. Many people in South Korea have relatives or family friends in North Korea, making the conflict between the two countries personal. War would be a major setback; so, too, would a massive influx of sickly refugees should the North Korean government fall.

Taiwan

  • Type of government: Multiparty democracy

  • Major industries: Information technology, petrochemicals, textiles

  • Currency: New Taiwan dollar

  • English-language newspaper: Taipei Times

Taiwan has emerging-market status for one reason only: uncertainty over its destiny. In fact, there’s not even agreement on what the country’s name should be. It’s called Taiwan, Taipei, Formosa, The Republic of China, and Chinese Taipei.

Taiwan was under military rule until 1987; its first elections were held in 1991. Since then, the country has had periodic disputes with the People’s Republic of China about who belongs where, but both nations seem to believe that fighting is pointless when there’s so much work to do. In the meantime, Taiwan has an educated population and a sophisticated technology industry.

Thailand

  • Type of government: Constitutional monarchy

  • Major industries: Agriculture, banking, chemical products, electronics, machinery and industrial tools, tourism

  • Currency: Baht

  • English-language newspaper: Bangkok Post

A sense of ingrained neutrality has made Thailand the de facto Asian headquarters for multinational corporations and nongovernmental organizations alike. The people are poor, in part because many live in rural areas and aren’t well educated. A democracy with a much-revered king who serves as head of state, Thailand also has a tradition of military interference with democracy. The most recent clash in the Spring of 2010 left 85 people dead.

Much of the opportunity in Thailand hinges on how the political crisis is resolved. If the people can agree on a government, the country can get back to work. If not, investors should expect a lot of risk.

The tsunami that hit the nation in December 2004 damaged both the fishing and tourist industries.

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