Abstract
Dear Readers,
Welcome to the January 2015 issue of the Global Journal of Emerging Market Economies, marking six full years of publication of the Journal. Last year, we published articles on topics as varied as international trade, urbanization, regional integration, human capital, natural resources, and agriculture by authors from every continent except, of course, Antarctica. Our articles also covered all the major emerging market regions—Africa, Asia, Greater Eurasia, and Latin America.
Since the Journal’s inception, one of its purposes has been to disseminate to a wider audience the highest-quality articles, including some of the articles prepared for the Emerging Markets Forum. The Emerging Markets Forum was established in 2005 as a venue for discussion and debate between leading policy makers and top business executives committed to creating and shaping policy solutions to the key challenges facing emerging economies. The first issue of the Global Journal of Emerging Market Economies was published in the same month in which the inaugural meeting of the Eurasia Emerging Market Forum was held. The Emerging Markets Forum has held eleven regional meetings in Africa, Asia, Eurasia, and Latin America, nine global meetings, plus the inaugural Forum for Emerging Leaders of Emerging Markets. The latest meeting, the Ninth Global Meeting of the Emerging Markets Forum, held in October, attracted more than 100 participants from throughout the world to discuss issues such as the recent economic slowdown in most large emerging markets, the middle-income trap, the resource curse, global economic governance as well as the long-term prospects for emerging markets.
In the September 2014 issue, Rajat Nag joined our Editorial Board. Mr Nag is the former Managing Director General of the Asian Development Bank (ADB). At ADB, he played a critical role in providing strategic and operational direction to the Bank. His work gave him wide-ranging insight into the full range of issues and challenges relevant to Asia (and, indeed, to emerging market economies around the world). His particular interest is in working to enhance regional cooperation and integration in Asia, bridging the gap between the region’s thriving economies and the millions of poor people who are left behind. We are pleased to welcome Mr Nag to our Editorial Board and know that his vision and knowledge will enhance our journal’s scope and quality.
We take the opportunity in this issue to focus on economic growth in Latin America and human development and social protection in Kazakhstan. As previously outlined in the Journal in “Breaking Away from Mediocre Complacency to a Prosperous Future” (Claudio Loser and Anil Sood, January 2011), Latin America has great potential for growth in the near future. “Kazakhstan 2050: Exploring an Ambitious Vision” (Johannes Linn, September 2014) discussed the prospects for Kazakhstan to join the top 30 developed economies of the world.
In “Earnings Management, Country Governance, and Cross-listing: Evidence from Latin America,” Ana C. Silva, Gonzalo A. Chavez, and Roy A. Wiggins III investigate whether Latin American firms cross-listed in the United States are associated with improved earnings quality and reduced information asymmetry. Firms listed on US exchanges become subject to the oversight and enforcement powers of the Securities and Exchanges Commission, including having to complete financial statements according to the generally accepted accounting principles of the United States. These relatively more stringent financial disclosure requirements, as well as the increased scrutiny by security analysts, rating agencies, and auditors given to firms listed on US exchanges, suggest that cross-listed Latin American firms may provide higher quality accounting information to investors and that this information will benefit local investors by reducing asymmetric information and liquidity costs. Testing this hypothesis is critical because Latin American firms rely on local investment as their primary source of equity capital. The local governance context, the authors found, is the key factor in influencing local investors; cross-listing has little positive effect on information asymmetry or liquidity in local markets.
John C. Edmunds and Fredric Chartier question the wisdom of studies that take Latin America in the aggregate in “Latin American Economic Growth: Disparate Paths, Creditable Accomplishments.” The authors analyzed the link between moderately high rates of economic growth and various indicators of capital market modernization (including export growth) and corruption in Argentina, Brazil, Chile, Peru, Colombia, Venezuela, and Mexico during the period from 2001 to 2012. While many researchers are searching for regional patterns in economic development, the authors reject generalized explanations of recent economic growth, such as rising commodity prices and the adoption of macroeconomic policies that favored stabilization of the business climate. Each country, they argue, has different economic structure, endowments of physical and human resources, and relationships with neighboring countries. Edmunds and Chartier found that, despite these countries being involved in the same economic crisis and the same up and down of trade flows, looking at local institutions and initiatives provides the most accurate insight into the trends driving economic growth in the countries in Latin America.
Michelle Riboud gives a broad overview of human capital development in Kazakhstan in “Inclusive Human Growth.” She looks at recent trends and current conditions for four facets of human development: education, labor, health, and social protection. Of course, prioritizing policies and programs to achieve high levels of human development will improve Kazakhstanis’ quality of life, but improvements in these areas will also contribute to Kazakhstan’s overall economic growth, she argues. Human capital facilitates the transmission of knowledge and will accelerate the rate at which Kazakhstan can take advantage of technology transfers through foreign direct investment. It will also facilitate research and innovation, providing Kazakhstan the flexibility to adapt as its economy grows. However, she suggests, this synergy between human capital development and economic development can only be achieved if the following success factors are given priority: sustained support from political leadership; appropriate incentives matched with responsibility and autonomy; improved capacity to measure outcomes, monitor, and evaluate programs; and scaling up of programs and policies with a measurable track record of success.
Meiram Zhandildin takes a closer look at the Kazakhstani pension system in “Pension System Reform in Emerging Countries: The Case of Kazakhstan.” Since the dissolution of the Soviet Union, Kazakhstan has reformed its pension system twice in search of improvements over the Soviet pay-as-you-go (PAYG) system. The first reform took place in 1998, replacing the PAYG system with a funded scheme. However, poor performance during and following the 2008 global financial crisis, as well as high administrative costs, spurred further reform in 2013. This second reform was two-pronged. First, it raised the retirement age for women from 58 to 63. Second, it created a government-owned single accumulated pension fund (SiAF), which became the only fund that could collect mandatory pension contributions. Non-state accumulated funds’ pension assets were transferred to the SiAF, whose assets are managed by the National Bank of Kazakhstan. The time elapsed since the 2013 reform is too short to do a conclusive analysis of the effects of the reform. Zhandildin, however, warns of new risks introduced including lack of competition, conflict of interest from combining regulator and manager functions, increased possibility (as well as necessity) of political intervention, decrease in the number of institutional investors, elimination of the asset management diversification effect, and heavy investment in the corporate bond market that squeezes out local corporations. Finally, the reform, he notes, needs to be accompanied by a more aggressive investment strategy of the pension fund.
As always, we encourage readers to share their thoughts on these topics, and we look forward to another year of diverse and stimulating articles.