Emerging Markets of Pakistan and Vietnam - Essay Example

Investors need to constantly monitor markets around the globe to identify a niche for themselves. One avenue which interests every strategic investor is the emerging markets. Emerging markets denote possibilities available for investors in countries that have just begun to get prominence in the investment sector. Countries such as India, Pakistan, Vietnam, Singapore and Malaysia offer lucrative advantages to big business houses. This report aims at studying the economic factors of two emerging markets viz.

Pakistan and Vietnam to identify which market offers better opportunities for an investor. The report studies the prevailing economic conditions in these countries and other non-economic parameters that might affect investment. Foreign Direct Investment (FDI) is an important feature of an increasingly globalized economic system. Direct investments in productive assets by a company incorporated in a foreign company, as opposed to investments in shares of local companies by foreign entities (investorguide.com, 2007).

Gross Domestic Product (GDP) is defined as the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. GDP is usually calculated on an annual basis. GDP is commonly used as an indicator of the economic health of a country, as well as to gauge a country's standard of living (investorwords.com, 2007).Savings and Investment are closely associated with each other.

Savings is treated as a part of the assets possessed by an economy. Savings and saving are different. Saving is computed as Income minus the sum of expenditure and tax payments (Pradeep Agarwal, 2000). Savings in a broader sense refers to an entity that increases Economic growth and therefore it is treated as a stock variable. Investment means diverting capital for acquiring assets usually with an expectation of getting returns.It's a general observation that in developing economies, domestic savings are bound to be minimal for various reasons.

In order to keep up with the pace of international market, foreign capital inflow is encouraged by these countries, in various forms such as loads, Foreign Direct Investment, grants and portfolios (Griffin and Econ, 1970). A research work on foreign capital inflows for developing economies by Ahmad and Ahmed at University of Karachi (Ahmad and Ahmed, 2001) proves that foreign capital inflow and domestic savings are substitutes of each other. This statement was proved theoretically and empirically (Ahmad and Ahmed, 2001).

Per-capita Income is calculated as the yearly income that is generated by a state/Country divided by the total population. It is reported as Currency/year. Mostly it is measured in Euros or Dollars. It is