Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Why You Shouldn’t Get Excited About Gold Price Mini-Rally - 26th Jan 21
The Truth About Personal Savings Everybody Should Know and Think About - 26th Jan 21
4 Economic Challenges for 2021 - 26th Jan 21
Scan Computers 2021 "Awaiting Picking" - 5950x RTX 3080 Custom PC Build Stock Status - 26th Jan 21
The End of the World History Stock Market Chart : Big Pattern = Big Move - 26th Jan 21
Stock Market Recent Sector Triggers Suggest Stocks May Enter Rally Phase - 26th Jan 21
3 Top-Performing Tech Stocks for 2021 - 26th Jan 21
5 Tips to Manage Your Debt - 26th Jan 21
Stock Market Intermediate Trend Intact - 25th Jan 21
Precious Metals Could Decline Before their Next Attempt to Rally - 25th Jan 21
Great Ways of Choosing Good CMMS Software for a Business - 25th Jan 21
The Dark Forces behind American Insurrectionists - 25th Jan 21
Economic Stimulus Doesn’t Always Stimulate – Pushing On A String - 25th Jan 21
Can Karcher K7 Pressure Washer Clean a Weed Infested Driveway? Extreme Power Test - 25th Jan 21
Lockdown Sea Shanty Craze - "Drunken Sailor" on the Pirate Falls Crazy Boat Ride - 25th Jan 21
Intel Empire Fights Back with Rocket and Alder Lake! - 24th Jan 21
4 Reasons for Coronavirus 2021 Hope - 24th Jan 21
Apple M1 Chip Another Nail in Intel's Coffin - Top AI Tech Stocks 2021 - 24th Jan 21
Stock Market: Why You Should Prepare for a Jump in Volatility - 24th Jan 21
What’s next for Bitcoin Price – $56k or $16k? - 24th Jan 21
How Does Credit Repair Work? - 24th Jan 21
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Egypt Crisis Driven by Population Growth Impact Other Emerging Markets to Similarly Suffer

Politics / Emerging Markets Feb 03, 2011 - 05:58 AM GMT

By: Money_Morning

Politics

Best Financial Markets Analysis ArticleMartin Hutchinson writes: Seven months ago, global investment bankers had anointed Egypt as the "next big thing" in the world of emerging-markets investing - naming it as one of the exciting "CIVETS" economies that every investor had to consider.

At that time, in a column here in Money Morning, I told you that I had my doubts, and said that "with an 82-year-old dictator and a radical Islamist movement, it doesn't look that attractive to me."


Given Egypt's uprising of the past two weeks, that call must look like it was quite prescient.

But here's a surprise: Egypt's brewing political troubles weren't the reason that I told you to steer clear of that economy. In fact, even with the escalating violence of the past couple of days, there's still another issue that remains Egypt's greatest challenge.

Investors should take heed. The challenge that faces Egypt is the same problem that plagues a number of the world's other emerging-market economies. That challenge will prompt us to question the long-term growth projections "experts" are throwing down for some of these other highly touted investment plays.

Numbers Game
When Egyptian President Hosni Mubarak on Tuesday announced that he would not seek re-election, observers expected the nine-day-old uprising to quickly tail off.

Instead, just the opposite occurred - especially in central Cairo, where CNN.com reported that "a mob-rule mentality was in sharp contrast to the jubilant mood of tens of thousands of anti-Mubarak protesters the day before."

Here's the thing. In the 30 years he's been in office - following the assassination of predecessor Anwar Sadat - President Mubarak has actually done a pretty competent job.

Egypt ranks 98th out of 178 countries on the Transparency International Corruption Perceptions Index. That's not wonderful, but it is equal to Mexico, is better than most of its neighbors and much better than Russia or Venezuela, for example.

Egypt also ranks 96th on the Heritage Foundation's closely watched Index of Economic Freedom, only nine places below Italy and 17 places above the much-admired "BRIC" country, Brazil.

One would have liked to see Egypt rank higher on both lists, but let's be honest: That country doesn't come from a region with a vast tradition of success in those areas.

Overall, President Mubarak has substantially liberalized the economy - especially from dozy socialism practiced under the country's longtime ruler Gamal Abdel Nasser. Yet living standards - which had declined substantially under King Farouk I (1936-52) and catastrophically under Nasser (1956-70) - have recovered only moderately under Mubarak.

At $6,200, Egypt's purchasing power parity gross domestic product (GDP) ranks 137th in the world. And Egypt may well be one of the few countries to have lower living standards than a century ago. For some context, consider this: In 1980, Egyptians were on average almost twice as rich as their counterparts in China; now they are less than half as rich.

The reason for Egypt's unfortunate impoverishment is a simple one. It's the real reason that I seven months ago told investors to steer clear of that country. And it - not the current political unrest - remains the real obstacle that will keep Egypt from becoming the kind of emerging market that we'll want to invest in.

In short, population growth - not politics - remains this CIVETS economy's biggest challenge.

The One Red Flag to Heed
At 2% annually, Egypt's population is growing too rapidly. And at 80 million people, Egypt's population is too big.

The country's fertile land is concentrated in a narrow strip near the Nile, with some broader fertility in the Nile River Delta region. There is little rainfall, so the population must live on the 3% of the land area that is irrigated. In 1911, the country's population was 11.8 million, so the fertile land area was ample. With inexorable population growth, it is thus not surprising that today's 80 million Egyptians suffer lower living standards than 1911's 11.8 million.

You can see the scale of the problem when you realize that at Mubarak's accession to power in 1981, Egypt's population was only 44 million. Just to maintain living standards, President Mubarak's government has had to double the number of houses, double the road and rail networks and more than double the country's irrigation capacity (because new settlements are generally built further from water).

And that's not all. Egypt's government has also had to double spending on security - both physical security, in terms of police and armed forces, and social security, in terms of education especially, as new Egyptians must be readied for the work force. Mubarak's government has managed to achieve growth of more than 5% annually most of the time, but the 2% population growth means that this translates to living-standard improvements of only 3%.

Economists worry about the effect of a very marginally declining population in Japan, as its population ages. Given modern levels of health, most of those problems can be addressed by delaying the retirement age. No such easy adjustment is possible for Egypt's problem; advancing the age at which young people enter the work force merely reduces their already inadequate levels of education and impoverishes the country further.

As prospective emerging-market investors, there's a very clear lesson to be learned from Egypt's woes. And that takeaway is this: Avoid - like the plague - all countries with annual population growth above about 1.5%.

Kenya (2.6% population growth rate), Iraq (2.5%) and Jordan (2.2%) are growing too fast to achieve success - even if, as is true for Jordan, they are generally well-managed and market-oriented.

Despite their slightly lower rates, countries such as Nigeria (2.0%), the Philippines (1.9%), Ghana (1.9%), and even Malaysia (1.6%) all have population growth rates that are still fast enough to pose a serious danger to their people's welfare and to outside investors' wealth.

Even Turkey (1.3%) has population growth rate high enough to be worrisome.

Heed the lessons of Egypt. And don't get taken in by hefty growth rates and gaudy monikers (such as CIVETS) if the population growth rates are warning you to stand clear.

[Editor's Note: Do you like a bargain?

So do we. And we've got a great one for you.

In fact, we believe that our "2011 Investor's Forecast" issue is a bargain at any price.

Right now, however, we're offering it at a 20% discount.

But here's the catch: You only have one more day to act.

Tomorrow (Friday) is the last day you can get this report, published by our monthly affiliate newsletter, The Money Map Report, at that discounted price.

If you are already anMMRsubscriber, you already have this issue in hand, and can access this report by clicking here and then using your password. That will provide MMR subscribers with access to our latest recommendations.

Money Morningreaders who are interested in finding out more about our forecast issue can do so by clicking here.

Look at it this way: When oil reaches our projected price of $150 a barrel and gasoline costs more than $5 a gallon, the economic pain experienced by most consumers will be intense.

But that run-up in price will also create some massive profit opportunities.

And we show you just what to do.

For more information on these and other profit plays available in the New Year, please click here.]

Source : http://moneymorning.com/2011/02/02/...

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules