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News International Trade Barriers Put Economic Progress at Risk
Barriers holding back
to trade are the global
economic recovery. Many governments are still failing to enact sometimes straightforward reforms that could have a far- reaching effect on growth and social progress, according to The Global Enabling Trade Report 2014, released this month.
The report’s Enabling Trade Index indicates that the world’s large emerging economies face enormous challenges as they seek to enable trade and progress to the next stage of their development. Among the BRICs, China, the world’s largest exporter, ranks 54th out of 138 economies, a few notches ahead of South Africa (59th).
Brazil (86th), India (96th) and the Russian
Federation (105th) appear in the bottom half of the ranking. Turkey (56th) leads the MINT group, ahead of Indonesia (58th) and Mexico (61st). Nigeria (124th) is near the bottom.
Common barriers to trade in the developing and emerging world include red tape at borders, corruption, inadequate infrastructure, and low levels of security. Among advanced economies, most apply low import tariffs, but some, such as Switzerland, Norway and EU members, have complex tariff regimes that are hard to navigate and act as barriers to trade, too.
The good news is that some of these barriers, such as inefficiencies related to border clearance, can be removed relatively quickly,
at a low cost and using limited political capital. The Report points to a number of success stories, including Chile (8th), Malaysia (25th), and Mauritius (29th) that have been able to considerably improve their standing through targeted reforms and investments.
The Global Enabling Trade Report 2014 assesses the performance of 138 economies, in four areas: market access; border administration; infrastructure; and the operating environment. At the top end of the rankings, the Index shows Singapore, Hong Kong SAR, and the Netherlands as the most successful countries in terms of enabling trade.
“After several difficult years trying to advance the Doha Round, the Bali
package, with the Trade Facilitation Agreement at its centre, provides a much- needed window to focus on eliminating the practical obstacles to trade. In this light, we believe the report’s unique measurements will help leaders to
identify
successful policies and areas for improvement,” said Espen Barth Eide, Managing Director, World Economic Forum.
The assessment is based on
the Enabling Trade
Index, a methodology that measures the extent to which economies have in place institutions, policies, infrastructures and services facilitating the free flow of goods over borders and to their destination. These trade-enabling factors are organized in seven pillars: 1) domestic market access; 2) foreign market access; 3)
efficiency and transparency of border administration; 4) availability and quality of transport infrastructure; 5) availability and quality of transport services; 6) availability and use of ICTs; and 7) operating environment. For this fifth edition of the report, the framework has been improved and enriched with a number of new indicators.
To measure these various aspects, a total of 56 individual indicators were sourced from various organizations, including the International Trade Centre, the World Trade Organization, the United Nations Conference on Trade and Development, the World Bank, the Global Express Association, as well as World Economic Forum’s Executive Opinion Survey.
Emerging Markets: A Buying Opportunity or Further to
The emerging markets investment company sectors have had a torrid time over the last year. Meanwhile, developments in Russia and Ukraine have further highlighted the risks of investment in the region (although interestingly, investment companies investing in frontier markets have bucked the trend and have had a good twelve months).
Over the long-term, performance remains strong. The average Global Emerging Markets investment company is up 257% over ten years, making it the third top performing investment company sector after UK Smaller Companies and European Smaller Companies.
Are the tough times going to continue for emerging markets? With the Global Emerging Markets sector currently on an average discount of 9% against a wider industry average of 4%, is this a buying opportunity?
Earlier this month, the
Association of Investment Companies (AIC) hosted a press roundtable lunch on the sector with Matthias Siller, Manager of Baring Emerging Europe and Austin Forey, Manager of JPMorgan Emerging Markets. Their views have been collated along with those of Dr Slim Feriani, Manager of Advance Developing Markets and Advance Frontier Markets.
“A historically cheap zone”
Austin Forey, Investment Manager, JPMorgan Emerging Markets, said:
“For emerging markets in the current environment, it is important for investors to remember the long-term story. When pessimism about an asset class is this strong, usually that is a compelling opportunity to buy at an attractive price if you have a long-term time horizon (5 or more years). While caution is merited - cheap assets can always get cheaper, after all - it is worth remembering that beyond the noise there is a compelling case for higher risk emerging markets. There is always the potential
for downside but we are in a historically cheap zone.”
Emerging Europe - dividend yields now rank amongst highest globally
Matthias Siller, Manager, Baring Emerging Europe, said:
“While Emerging European Equity markets have been negatively impacted by the effects of US liquidity tightening and geopolitical volatility (mainly in Turkey and Russia),
we believe
positive developments on the corporate governance front and in earnings generation have largely gone unnoticed. In
our
opinion, the region is the most attractively valued amongst Global
Equities, after having been consistently de-rated in recent years it now offers good growth opportunities.
“Dividend pay-out ratios have improved over the past couple of years thanks to management teams and majority owners employing more shareholder-friendly policies. While we believe there is room for further improvement, dividend yields now rank amongst the highest globally.”
Tough times or opportunities?
Dr Slim Feriani, CIO of Advance Emerging Capital, manager of Advance Developing Markets and Advance Frontier Markets, said: