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Jan 15, 2017 @ 11:58 AM 6,012 views The Little Black Book of Billionaire Secrets
Bangladesh Won't Be The Next Pakistan, And That's Ok
Panos Mourdoukoutas ,
Contributor
I cover global markets, business and investment strategy
Opinions expressed by Forbes Contributors are their own.
(Photo credit should read MUNIR UZ ZAMAN/AFP/Getty Images)
Bangladesh doesn’t have what it takes to be the next Pakistan. When it comes to its equity market potential, that is. But it is still a good bet for adventurous investors.
Pakistan and Bangladesh's economies have a few good things in common -- like large and young populations, a source of inexpensive labor, entrepreneurial talent, and a potential consumer market. They both also have a large expatriate base, a source of remittances that cushions trade deficits; and fast economic growth rates.
They share a few bad things, too, however. Like a low per capita GDP, low human development rates, the lack of rule of low, high cronyism and corruption rates, and proliferation of terrorism.
Ranking
Bangladesh
Pakistan
Population (millions)
159.90
186.10
Per Capita GDP ($, Dec2016)
$1286.87
$1449.88
Human Development Index (2014)
0.57
0.53
Competiveness Index (2016)
107
126
Entrepreneurship Index (2016)
133
122
Corruption Index (2015)
139
117
Economic Freedom Index (2016)
137
126
Yet Pakistan’s equity markets have been on the mend for fifteen years -- after a sharp brief pause in 2008-9 -- while Bangladesh’s equity markets have been lackluster at best. For a frontier economy, that is. Last year, Pakistan was the top performing frontier market, with Global X Pakistan shares gaining 43.84 percent gain.
Index/Fund
12-month Performance
IShares China (FXI)
13.00%
Global X Pakistan (PAK)
43.84
Bangladesh Stock Market (DSE General)
9.00
iShares S&P India 50 (INDY)
8.49
Source: Finance.yahoo.com and Tradingeconomics.com 1/12/17
Recommended by Forbes
What Pakistan has that Bangladesh is missing? The right geopolitics.
Pakistan benefits from a unique geographic location that has attracted the interest of the world’s two largest economies, America and China. In fact it has been in a sweet geopolitical spot twice. Once back in 2001, when US sought a regional ally for its Afghan operations, and more recently as China has come to see Pakistan as a western route to its Middle East and African interests, also know as China-Pakistan Economic Corridor (CEPC).
Pakistan's American ties brought debt relief and foreign currency stability that ignited a fifteen-year rally, while ties with China brought foreign investments and diplomatic leverage against India's territorial claims, and have kept that rally going.
The trouble is that Pakistan may be running out of luck. It will be increasingly difficult to please both America and China, as tensions between the two in the South China Sea intensifies.
If that happens, Pakistan may end up finding itself in the wrong geopolitical spot. That would put an end to the country’s bull market, and its equity market performance would revert to frontier market levels.
As for Bangladesh, by contrast, it may find its own sweet spot in the global economy, as a low cost manufacturer.
“Foreign direct investment into Bangladesh has picked up in recent years, particularly in the manufacturing sector,” writes Marko Dimitrijevic in Frontier Investor (New York: Columbia Business School, 2017). “As production costs rise in China and India, I believe that Bangladesh, with its young, growing low cost labor force, is ideally positioned to capture a larger share of the next round of outsourcing,” he adds.
While Bangladesh’s sweet spot may never deliver the phenomenal investment returns Pakistan has enjoyed, it will handsomely reward patient – and adventurous -- investors.
http://www.forbes.com/sites/panosmo...-the-next-pakistan-and-thats-ok/#1cc9130ac542
Bangladesh Won't Be The Next Pakistan, And That's Ok
Panos Mourdoukoutas ,
Contributor
I cover global markets, business and investment strategy
Opinions expressed by Forbes Contributors are their own.
(Photo credit should read MUNIR UZ ZAMAN/AFP/Getty Images)
Bangladesh doesn’t have what it takes to be the next Pakistan. When it comes to its equity market potential, that is. But it is still a good bet for adventurous investors.
Pakistan and Bangladesh's economies have a few good things in common -- like large and young populations, a source of inexpensive labor, entrepreneurial talent, and a potential consumer market. They both also have a large expatriate base, a source of remittances that cushions trade deficits; and fast economic growth rates.
They share a few bad things, too, however. Like a low per capita GDP, low human development rates, the lack of rule of low, high cronyism and corruption rates, and proliferation of terrorism.
Ranking
Bangladesh
Pakistan
Population (millions)
159.90
186.10
Per Capita GDP ($, Dec2016)
$1286.87
$1449.88
Human Development Index (2014)
0.57
0.53
Competiveness Index (2016)
107
126
Entrepreneurship Index (2016)
133
122
Corruption Index (2015)
139
117
Economic Freedom Index (2016)
137
126
Yet Pakistan’s equity markets have been on the mend for fifteen years -- after a sharp brief pause in 2008-9 -- while Bangladesh’s equity markets have been lackluster at best. For a frontier economy, that is. Last year, Pakistan was the top performing frontier market, with Global X Pakistan shares gaining 43.84 percent gain.
Index/Fund
12-month Performance
IShares China (FXI)
13.00%
Global X Pakistan (PAK)
43.84
Bangladesh Stock Market (DSE General)
9.00
iShares S&P India 50 (INDY)
8.49
Source: Finance.yahoo.com and Tradingeconomics.com 1/12/17
Recommended by Forbes
What Pakistan has that Bangladesh is missing? The right geopolitics.
Pakistan benefits from a unique geographic location that has attracted the interest of the world’s two largest economies, America and China. In fact it has been in a sweet geopolitical spot twice. Once back in 2001, when US sought a regional ally for its Afghan operations, and more recently as China has come to see Pakistan as a western route to its Middle East and African interests, also know as China-Pakistan Economic Corridor (CEPC).
Pakistan's American ties brought debt relief and foreign currency stability that ignited a fifteen-year rally, while ties with China brought foreign investments and diplomatic leverage against India's territorial claims, and have kept that rally going.
The trouble is that Pakistan may be running out of luck. It will be increasingly difficult to please both America and China, as tensions between the two in the South China Sea intensifies.
If that happens, Pakistan may end up finding itself in the wrong geopolitical spot. That would put an end to the country’s bull market, and its equity market performance would revert to frontier market levels.
As for Bangladesh, by contrast, it may find its own sweet spot in the global economy, as a low cost manufacturer.
“Foreign direct investment into Bangladesh has picked up in recent years, particularly in the manufacturing sector,” writes Marko Dimitrijevic in Frontier Investor (New York: Columbia Business School, 2017). “As production costs rise in China and India, I believe that Bangladesh, with its young, growing low cost labor force, is ideally positioned to capture a larger share of the next round of outsourcing,” he adds.
While Bangladesh’s sweet spot may never deliver the phenomenal investment returns Pakistan has enjoyed, it will handsomely reward patient – and adventurous -- investors.
http://www.forbes.com/sites/panosmo...-the-next-pakistan-and-thats-ok/#1cc9130ac542
