THE SWOOSH INDEX FOR EMERGING MARKETS
WHICH EMERGING NATION'S economy is about to take off? Jardine Fleming Securities has come up with the Nike indicator, which is pointing to Vietnam.
The investment firm has found that once Nike selects a factory site, economic growth and rising stock markets follow. Nike first started using Japanese plants in 1964. When labor costs there climbed in the mid-1970s, it gave South Korea and Taiwan a run. In the 1990s, production jumped to Indonesia and China, which now account for two-thirds of Nike output. Nike pulled back from Thailand recently ahead of a collapse in stock and property prices. Next up: Vietnam. While production there is now only 2% of Nike output, that's expected to double within a year.
When choosing factory sites, Nike looks for cheap labor. However, it also picks countries with stable--usually authoritarian--leadership, decent infrastructure, a pro-business government, and a liberal trade regime.
When it decides to leave, that doesn't signal the end of prosperity. It often means that countries are ready to move on to high-end manufacturing. And democracy.
EDITED BY LARRY LIGHT
Updated June 15, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.