When doing business or making an investment in an emerging market, be aware that every country is run by a mix of government officials, rich and powerful individuals, and special interest groups outside the government. How government officials, wealthy families, worker groups, and nongovernmental organizations work together can push a nation’s economy farther along or create uncertainty and instability that causes delays in development.
One source for information about governments around the world is the CIA World Factbook, published by the U.S. Central Intelligence Agency (not all the agency’s work is undercover). It’s a free resource with summary information about the politics, people, geography, and economy of every nation on earth, and it’s really useful if you need a quick overview about a country.
Potential power players to evaluate include:
Elected and appointed officials: The answers to questions about how the people in charge got there and how they may leave, who supports them, who they’re accountable to, and whether the courts and military are independent of the political rulers can tell you a lot about how decisions are made and how work gets done.
Ruling family or dynasty: In many nations, a handful of families — sometimes royal or quasi-royal — control most of the wealth and much of the political power, and their interests trump those of investors in other countries.
People may defer to members of these families and that may affect your status as an outside investor. Financial information may be considered private family business even for stockholders.
The people: The people in a country may be only loosely united; different tribal, ethnic, religious, generational, or class ties may matter as much or more than the country that issues their passports. And people may make decisions for completely different reasons than you would.
A country’s people are ultimately responsible for making the economy succeed. If they’re too busy fighting one another or fighting with their government, they won’t have the energy to make commerce go. Getting a handle on who the people are in a country and what they want and need gives you some good insight into the economy’s stability (or lack thereof) and the country’s growth prospects.
Labor: Trade unions have significant power in many countries. Many governments have laws requiring that companies have employee representatives on the board of directors, for example, or laws that give a labor union authority to negotiate for all employees, which can be helpful if everyone behaves responsibly. Even countries that don’t have labor unions may have laws that protect worker rights and add to operating costs.
Nongovernmental organizations (NGOs): Usually a nonprofit group with an interest in a country’s political and economic structure, influential NGOs in the developing world tend to be major aid organizations. NGOs are active in many emerging markets. Understanding who’s in a country and what their constituencies are can help you better assess the risks and opportunities you may see as an investor.
Friends and enemies from other countries: No country is an island, metaphorically speaking, and all have friendly and not-so-friendly relationships to keep an eye on. An ex-colony may retain the language and legal system of its former colonial master, and migration between the former colony and its former capital may be strong. These ties may be friendly, or they may be bitter and hateful.
Countries often join with others in their region to sign free-trade agreements or to find ways to cooperate in education or common infrastructure. However, countries also engage in ongoing skirmishes, raids, and attacks with a neighbor, which can make life uncertain in border towns and possibly elsewhere in the country.
If a country has problems with its neighbors, it’s likely to have political and defense problems that create economic risk for investors.
Displaced populations: Because emerging countries had few opportunities for their citizens in years past, people left these countries for other nations. These far-flung citizens and their children often form an important source of capital and contacts for businesses back home and play an important role in helping an emerging or frontier market grow and thrive.
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Source:http://www.dummies.com/how-to/content/emerging-markets-and-political-players.html
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