Why Asia Could Be The Best Place To Park Your Money

By Irwin Greenstein

A new labor report by an agency of the United Nations indicates that Asia could be the best place for investors to wait out the global recession. While the report does not indicate abundant opportunities in Asian regions, it does show that Asia could be more resilient and consequentially return potential longer term gains.

For investors in survivor mode, the report may be interpreted as an investment roadmap with a relatively safe course.

The report, titled Global Employment Trends, is an annual survey from the International Labour Office (ILO), arm of the U.N that brings together governments, employers and workers to jointly shape policies and programs for fair and humane employment practices.

Based on new developments in the labor market, the report says global unemployment in 2009 could increase over 2007 by a range of 18 million to 30 million workers, and more than 50 million if the situation continues to deteriorate.

The ILO also said that in this last scenario some 200 million workers, mostly in developing economies, could be pushed into extreme poverty.

The lowest unemployment rate was observed in East Asia at 3.8%, followed by South Asia and South-East Asia & the Pacific where respectively 5.4 and 5.7% of the labor force was unemployed in 2008, according to the ILO.

As per the report, three Asian regions – South Asia, South-East Asia & the Pacific and East Asia – accounted for 57% of global employment creation in 2008. In the Developed Economies and European Union region, 900,000 jobs were lost in 2008.

Compared with 2007, the largest increase in a regional unemployment rate was observed in the Developed Economies and European Union region, from 5.7 to 6.4%. The number of unemployed in the region jumped by 3.5 million in one year, reaching 32.3 million in 2008.

In looking at the breakdown of the Asian regions identified in the report, we see countries where cheap labor abounds. While this may not be the best possible news for the ILO, the lower unemployment rates in Asia could show an acceleration in outsourcing – not just from the industrialized West, but from mature emerging markets such as China and India.

For example, South Asia consists of India, Pakistan, Bangladesh and other countries. Pakistan’s large-scale manufacturing efforts have stumbled over the past few years due to rising commodity costs. Now that commodity prices have plunged, and manufacturers seek out lowest cost providers, Pakistan could see a turning point in this sector.

Bangladesh, meanwhile, has seen exports rise 60% since 2004. It is now the second largest exporter of apparel to the U.S. market after China.

Southeast Asia consists of Cambodia, Laos, Myanmar, Thailand, Vietnam and Malaysia. Given their proximity to China and India, these countries could see trickle-down business as the two emerging-market giants move away from knock-offs to creating original intellectual property.

In East Asia, the countries to watch for growth are Hong Kong, Macau, Japan and South Korea. Although the global recession has certainly put a damper on these fast-growing economies, the investment returns from these regions could outpace industrialized countries based the ILO’s employment numbers.

This could be a prudent time for investors to investigate ETFs and other funds that get you into these markets without the risk of cherry picking stocks.