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Look Who's Set To Pounce


Economic Trends

LOOK WHO'S SET TO POUNCE

The world's tiger ranks are shifting

Judging by the unprecedented gains being made by developing nations, the global economy is entering a new era of widespread growth. But that doesn't mean progress will be evenly distributed. In the next decade, only a few countries are likely to become "tigers"--nations demonstrating the capacity for rapid, sustained growth.

According to a scorecard devised by American Express Bank Ltd., the elite club of confirmed tigers now includes a new member, China, which joins the ranks of Hong Kong, Malaysia, Singapore, South Korea, and Thailand. The scoring--based on measures of economic stability, human capital, export outlook, and investment--also shows that Taiwan has slipped back to near-tiger status because of a high budget deficit and slow export growth.

Meanwhile, the bank reports that fast growth has spread beyond Asia: Its list of near-tigers (chart) includes three non-Asian members: Argentina, Chile, and the Czech Republic. What's more, the first two, plus the Philippines and Vietnam, have at least doubled their tiger scores in the past decade--evidence of the rapid economic strides possible in today's integrated global economy.

Looking regionally at the 45 nations surveyed, African countries are the laggards, with scant progress in foreign investment, privatization, and financial-sector reform. Latin America, by contrast, chalked up the most improvement and is moving toward investment- and export-led growth--though hampered by low savings, high payroll taxes, and inefficient government sectors.

At the moment, the most difficult region to assess is Eastern Europe--partly because reforms are so new and macroeconomic instability remains high. Still, the Czech Republic, Poland, and Slovakia show potential tiger capabilities. And the region's well-educated labor force should prove invaluable once market reforms start to pay off.By GENE KORETZReturn to top

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A CLOSER LOOK AT PRODUCTIVITY

Are factory-sector gains overstated?

It's a study in contrasts. While factory productivity has risen at a heady 3.2% a year in the current expansion, productivity in services is reported to have edged higher at a mere 0.2% pace--lowering overall business productivity growth to just 1% a year.

This pattern doesn't seem credible to many who question the anemic gains in services. If growth in manufacturing output per hour, which can be measured rather precisely, is so strong, they ask, how can growth in services output per hour, which is hard to measure, be so weak--especially in light of the service sector's heavy investment in computers?

Stephen S. Roach of Morgan Stanley & Co. has one answer that may not make the skeptics happy: Factory productivity growth is probably overstated.

Roach's focus is the factory sector's increasing reliance on outsourcing in the 1990s--its use of contract workers supplied by the temporary staffing industry, which is counted as a business service. Noting that Manpower Inc., the nation's largest employer, estimates that roughly half of its temporary staffers toil in the factory sector, Roach argues that such work time should be properly allocated to manufacturing. In other words, factory productivity has gotten an unwarranted lift because some of its workers are no longer on its books.

How much of a lift? If half the hours worked in the help-supply industry were added to labor input in manufacturing, Roach figures that annual factory productivity growth in the current expansion would drop to 2.7%. Such growth in the much larger services sector, however, would be raised by a mere 0.1%.By GENE KORETZReturn to top


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