Emerging Asian Countries to Watch : Cambodia India

Here we list some countries to watch.

Cambodia

The Cambodian economy has seen rapid progress in the last decade. Per capita income, although rapidly increasing, is low compared with most neighboring countries and a large part of the country still relies on agriculture. Manufacturing output is varied but is not very extensive and is mostly conducted on a small-scale and informal basis. The service sector, driven by the country?s fairly large tourism industry based around the UNESCO World Heritage site of Angkor Wat, is heavily concentrated in catering-related services and trading activities.

Cambodia?s GDP grew an estimated 9.6 percent in 2007, about the same rate of growth the economy experienced from 2000 to 2006. Garment exports, by far Cambodia?s biggest industry, rose almost eight percent in 2007, while tourist arrivals, another big industry in the country, jumped nearly 35 percent. Foreign direct investment reached US$600 million, or about seven percent of GDP (slightly more than Cambodia received in official aid). Domestic investment, driven largely by the private sector, accounted for 23.4 percent of the GDP. Approximately 2,860 new businesses registered for operation in 2007, a 71 percent increase over 2006.

Concerned about inflation, the Cambodian government has also recently announced that it will spend more than US$300 million per year to keep gasoline and electricity prices down. “We will continue to support prices until oil drops below US$900 a ton,” Cambodian Minister of Economy and Finance Keat Chhon told the Phnom Penh Post recently.

Economic pressure from the global downturn will see Cambodia?s growth rate drop in 2008 to around 7.5 percent, reflecting a mix of growth in the services and construction industries and a slowdown in garment exports to the United States. Export growth will continue to slow as consumer spending in the United States slows and increased competition from Vietnam and the lifting of tariffs on Chinese textile exports becomes greater.

While exports will slow, Cambodia, like Vietnam and Laos, will continue to remain fertile for foreign investors interested in large infrastructure projects, as well as manufacturers and retailers focused on domestic markets.

India

India, the second most populous country in the world after China with a population at 1.1 billion, is currently the world?s fourth largest economy (based on purchasing power parity) and has achieved on average eight percent growth over the past three years. In the first quarter of this fiscal year, India achieved 7.9 percent growth compared to 9.2 percent the same period last year. India?s Finance Minister P. Chidambaram accrued the drop in growth rate to the overall deteriorating global conditions.

In 2007, the Asian Development Bank (ADB) agreed to provide India with up to US$500 million in loans to promote public-private partnerships to catalyze investments in infrastructure of up to US$3.5 billion.

According to the ADB, the serious lack of infrastructure is India?s Achilles? heel and is estimated to have cost the country three to four percent of the GDP annually. Funds will be channeled to the government-owned India Infrastructure Finance Co. Ltd. (IIFCL), which will provide funds at commercial terms with over 20-year maturity for infrastructure projects. This is creating funding avenues that are currently otherwise available.

The IIFCL had developed a financing plan for fiscal years 2007-2011 of US$6 billion, half of which will come from the Indian domestic market, including insurance, pension funds and the National Savings Scheme. The other half will come from international capital markets and bilateral and multilateral sources which include the ADB.

India Prime Minister Manmohan Singh recently told the Indian parliament that India, like other developing countries, was experiencing a “ripple effect” from the deepening world financial crisis and that the country “must be prepared for a temporary slowdown.” However, the Indian financial sector is tightly regulated and banks and financial institutions in the country remain well capitalized, so the sort of financial meltdowns that American and European banks have experienced is unlikely to happen.
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