Investing in Frontier Markets: Opportunity, Risk and Role in an Investment Portfolio

CHAPTER 2

Frontier Markets by Region

In this chapter, we include all the usual statistics, such as population, the demographic makeup of the population and gross domestic product (GDP), to show the absolute size of the economy. We also include GDP per capita to illustrate how the wealth of the average inhabitant is the trade balance (whether positive or negative), consumer inflation and the structure of the economy with percentages for agriculture, industry and services.

Moreover, we note the political structure of the frontier countries, whether dictatorship, communist, monarchy, autocracy and limited or open democracy. We also introduce some less traditional measures such as the Transparency International Corruption Perceptions Index and the Gini coefficients for the frontier markets. These are included to give investors some indication of the level of corporate and political governance they may anticipate based on the country's track record and the experience of third party investors, and the level of income disparity between the wealthiest and poorest sectors of the population. These two measures may help to give the investor some sense of the likelihood of political unrest and risk associated with potential investments.

While it has become a cliché to say that “demography is destiny,” the structure of a country's population does give some obvious clues as to which sectors or industries are likely to do well or badly. Moreover, when combined with a high level of income disparity ...