Whats true for India is also true for Pakistan. And perhaps, many of the worlds other emerging markets. It is, what I call the Emerging Market Paradox: once an emerging market, always an emerging market. It is that rare nation which breaks through. In recent times, the only country that I can think of which has the potential and is doing the right things is South Korea. Most other emerging markets seem to be stuck in place. Two steps forward, one step sideways, and two steps back.
Whether it is India and Pakistan, or the countries in the Middle-East or Africa few get out of this trap. The Emerging Market Room is one with no Exit. Look at the ongoing confrontation between Israel and the Palestinians. At the end of the day, the economic impact is significant on Israelis. Even in our own Gujarat, business has come to a standstill in the past few months as politicians try and score points and use it as a test-bed to see what can win elections. Who cares about foreign investment? Who needs it? Who wants progress? Why do we want better roads, more phones? Why bother about globalization?
In his book, The Lexus and the Olive Tree, Thomas Friedman writes about the impact of globalization:
The driving idea behind globalization is free-market capitalization the more you let market forces rule and the more you open your economy to free trade and competition, the more efficient and flourishing your economy will be. Globalization has its own set of economic rules rules that revolve around opening, deregulating and privatizing your economy, in order to make it more competitive and attractive to foreign investment.Democracies vote for about a governments policies once every two or four years. The Electronic Herd [the millions of investors worldwide] votes every minute of every hour of every day.
The world has already voted and continues to do so everyday. China gets foreign investment of USD 50 billion per annum, 20 times that of India. 20 times. We both started the process of trying to integrate with the world at the same time in 1991. Of course, it was a no-contest. As far as the world is concerned, Indias never really been a player.
The problem is that the decision-makers the politicians and bureaucrats are playing a win-win game for themselves. Who cares if everyone else loses? This is not just limited to our government. Look at Bollywood. After a bad 2001, it has been a worse 2002 with just one film in the first 5 months earnings more than its cost. So, whats the response? Come June, and well have hold your breath FIVE films on Bhagat Singh, made at an aggregate cost of over Rs 50 crores (USD 10 million). Think back to the scorpions in the jar.
Every emerging market of the world has its own set of challenges and these are, amazingly, self-made. On the one hand, television and the Internet deliver the world to the populace in real-time. On the other hand, the leaders and the generals stay rooted in the past, oblivious to technology and the changes that are happening. The only game they know is of musical chairs. Keep playing the music. Keep going around in circles.
Tomorrow: Can We Change?