The Investment Opportunity of the Century?

Many economists believe that the Far East resembles a speeding train en route to derailment. But, no worries, this article has nothing to do with logistics issues in the East Asian railway industry. Instead, it has everything to do with how emerging economies in the Far East are dealing with their unprecedented growth.

If you recall, about 10 years ago, East Asia barely survived one of the worst financial crises in modern history. It all started after the Thai currency, the baht, spiraled down the toilet, dragging the rest of the region right into a horrible recession. More than half of the region’s population lived on less than two bucks a day. Today, this percentage is significantly down to about 29%, which is still not great, but certainly better than it was.

Why? Well, the region is riddled with contradiction. Most East Asian countries are getting richer and richer, in spite of, or, perhaps, because of, weak investment and even weaker infrastructure. Also, the gap between the poor and rich is widening. Moreover, the pollution situation is getting worse and worse, while, due to explosive economic growth, managing the region’s fiscal and monetary policies is becoming increasingly difficult.

To make matters worse, there is really no economically viable explanation why the investment in the region, except in China, is not booming. It seems that all the investment money is flowing predominantly to China, leaving the rest of the region to make do on its own steam. By the same token, China managed to mishandle quite a chunk of that investment money. As many Canadian entrepreneurs venturing into the region can attest, China has often been an investment deathtrap, in spite of good intentions on both sides.

What the region desperately needs is the removal of decades-old laws and regulations that have proved a severe impediment to new investments. Capital markets also need to expand and liberalize, along with trade agreements.

But, what piqued my interest the most was the recommendation from the World Bank to invest $200.0 billion per year for the next five years into the region’s infrastructure improvements. Getting the “green light” from the World Bank is likely not only going to improve the region’s political and economic situation, but it is also likely to present an investment opportunity of the century.

All investors have to do is follow the money. That is, watch for infrastructure-building companies winning new contracts in the Far East. I’m talking about companies building highways and runways, communication infrastructures, building and construction companies, manufacturers of big ticket items, etc. The recommended aggregate investment of $200.0 billion a year is a large pie; there should be plenty of pieces to go around. The best part is that China appears no longer the main investment target, for, I believe, China is a fad already past its peak.