Survey: finance firms worry about emerging market laws

Tim Wallace
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SOUTH ASIA and other fast-growing economies might offer the best opportunities for financial institutions looking to grow, but their legal systems are a major drawback, according to a survey out today from Norton Rose.

Asia won out firmly as the main driver of growth in the survey of over 200 institutions. South and north Asia were revealed as the regions most widely seen as offering the best opportunities for growth in the short, medium and long term.

Sixty-five per cent of respondents see south Asia as offering strong long term opportunities, whilst 48 per cent say the same about north Asia.

Latin America was seen by 40 per cent as offering strong short-term potential, and was viewed favourably by 40 per cent, alongside the middle east, as a good region in the medium term, defined as between three and five years in the future.

Hot on the heels of Asia, Africa came out as the third most popular region for long-term opportunities, with 38 per cent viewing it favourably.

However, behind the enthusiasm for investing in emerging economies lie some doubts.

In terms of legal rights, 62 per cent of those surveyed are concerned about levels of enforcement in Africa. The same is true of 60 per cent in south Asia, despite its popularity, and 56 per cent in eastern Europe.

Restrictions on foreign ownership in south Asia also worry 63 per cent of financial institutions.

And 70 per cent fear political instability in Africa, as well as 62 per cent in the middle east.

“Financial institutions now depend on China and India as sources of business and of capital, and these findings show a shift in the financial landscape – there is a recognition that, in the mid and long term, Latin America and Africa will join Asia as the real drivers of financial activity,” said Norton Rose’s James Bateson.

“However, the findings also highlight the significant hurdles that stand in the way of businesses looking to play a part in the new financial order. The enforcement of legal rights, foreign ownership restrictions, political instability – these all remain challenges for growth economies and businesses.”