Big Emerging Markets Eye Rapid Growth to Year 2010.

NEW YORK--(BUSINESS WIRE)--Nov. 3, 1998--

New Study Contradicts "Doom & Gloom" Scenarios

And now for something completely different -- good news. While few countries have escaped the current economic turmoil, even fewer will be left behind when the global economy recovers in the first decade of the new century. Leading that charge will be the "Big Emerging Markets" (BEMs), paradoxically those nations that seem most threatened now.

That's the primary finding of a new report authored by Dr. Warren J. Keegan, who expects that the BEMs -- led by China, India, Poland, Korea and Turkey -- will soon resume growth at rates that exceed the world average. The report is the sixth in a series of global income and population forecasts conducted by Dr. Keegan, Director of the Institute for Global Business Strategy at Pace University's Lubin School of Business, a former MIT Fellow in Africa and a former Assistant Secretary of the Economic Development Commission for the government of Tanzania. The report forecasts growth percentages for 209 countries and takes into account the turbulence of the last 15 months.

The 13 countries classified as BEMs all reported a 1997 GNP of at least $100 billion, but otherwise differ widely in terms of geography, political structure and ethnic makeup. According to Dr. Keegan, the BEMs also vary in that they are at various stages of economic development.

"China, India and Indonesia are low income countries. Poland, Turkey and the Russian Federation are lower middle income. South Africa, Argentina, Mexico, Korea and Brazil are upper middle income countries," he explains, adding that Taiwan and Hong Kong are high income countries that are included because they are part of the so-called China Economic Area(a). -0-

        TABLE: Forecasted GNP for Big Emerging Markets

BIG EMERGING  Estimated GNP   Estimated GNP  Estimated GNP   % Change
MARKETS          1997            2000           2010        1997-2010
               (millions)     (millions)      (millions)

BEM (Total)      4,120,219  4,725,590          7,429,362        80
China Economic
 Area (Total)    1,318,031  1,579,833          2,723,907       107
     China         889,882  1,090,144          1,952,282       119
     Taiwan        267,922    314,606            512,459        91
     Hong Kong     160,226    175,083            259,166        62
Brazil             590,270    652,548            876,970        49
Korea, Rep         384,190    425,958            693,841        81
India              352,425    407,976            664,550        89
Mexico             318,146    368,293            545,164        71
Russian Federation 300,846    333,553            465,983        55
Argentina          296,536    338,396            500,909        69
Turkey             183,632    212,577            330,125        80
South Africa       134,344    147,658            208,286        55
Indonesia          133,972    133,972            218,226        63
Poland             107,829    124,826            201,399        87

(a) As defined by the World Bank using per capita GNP, high income countries are those with per capita GNP of at least $9,386. They are followed in descending order by: upper middle income ($3,035 - $9,385); lower middle income ($766 - $3,034); and low income ($765 and below) countries.

The BEMs' forecasted collective growth rate of 80% between now and 2010 compares favorably, Dr. Keegan notes, to an estimated rate of 47% for the entire world and 40% for the United States over the same period. The saving grace for the BEMs, he adds, is that the "talent, energy, physical assets and will to grow are still there. Also, wealthier countries and multinational corporations will continue to invest and operate in these low-cost arenas based on an assumption that, in spite of the current difficulties known as the "Asian flu,' these countries will ultimately return to their high-growth track."

At the same time, warns Dr. Keegan, economic recuperation must be accompanied by political reform. "The world's business and political leaders are just now removing their masks of denial and realizing that rooting out corruption, requiring greater financial transparency and implementing other critical reforms are key to economic healing," he said. "At the same time, countries like Russia and Indonesia remain very high-risk investments in the short-term because of the great potential for civil unrest and economic stagnation. It's no coincidence that those two nations were recently named in an independent survey as being among the world's most corrupt."

It's also no coincidence, he adds, that Indonesia was one of two countries among the 13 BEMs (the other being Korea) whose estimated GNP for 1997 dropped significantly between last year, when he first compiled statistics for that year, and this past August, when he updated the figures. Since mid-1997, Indonesia's estimated 1997 GNP dropped nearly 40%, from $220 billion to nearly $134 billion. "Thus," says Dr. Keegan, "even though Indonesia could have a GNP of more than $218 billion in 2010, the country still won't achieve by then an income level that it was at one time expected to achieve in 1997."

Dr. Keegan concludes that not all of the BEMs are likely to succeed over the next decade and suggests that the risk-averse investor focus on those countries with the best chance for success, including China, Korea, Mexico, Turkey and Poland. "Some countries simply have deeper holes to dig themselves out of than do others," he notes.

Pace University has campuses in New York City and Westchester County. With 5,500 students, its business school offers undergraduate, graduate and post-graduate degree programs, and hosts a number of research centers and institutes that extend its scholarship and teaching to a worldwide audience. The Lubin School of Business is accredited by the AACSB-International Association for Management Education.