DEFYING GRAVITY

How Poland rose

from the economic
ashes of its past
-Page 4

pysio20

IN THIS ISSUE: Tourism in Cambodia Chile and Wine Back Home to Sierre Leone What is K-Pop?

Page 2 | Emerging Markets Journal | Spring 2013

A Look Inside

What goes down...also comes up?

Turn to Pages 4 & 5 to read more
about Polands transformation from
an Eastern European economic
pariah in the 1960s and 70s to the
regions powerhouse today.

Is tourism eco-green, or a
threat to the forest? See Page 3
for how the industry has been
affecting the Southeast Asian
nation of Cambodia.

FAST FACTS
Euro zone finance ministers
backed a 10 billion euro
bailout for Cyprus, whose
cost of financial rescue
has jumped to $30 billion with
a $7.9 billion increase in March.
Russias
Ministry
of
Economic Development
recently cut its growth
forecast for this year. It
warned that what had been seen
as short-term weakness is likely to
persist, and this is likely to result in the
slowest growth of any year since 2009.

In Tokyo, jewelers were

inundated with individuals carrying rings,
necklaces, and other
gold trinkets. This was drive in
part by the Bank of Japans monetary stimulus program, which
has led to depreciation of the yen.
The information for these fast
facts was sourced from the Wall
Street Journal, and is accurate as
of our press date, April 15th 2013.

Prepared for an
earthquake? What about
a tsunami? Learn how a
Chilean winemaker survived
and recovered from such
disasters on Page 6.

The Emerging Markets Journal was made possible by the

generosity of our corporate sponsor, Robert Bosch LLC.

Is it a small world after all?

Sophomore Mustapha Baryoh shares
about his personal connection with
the West African country of Sierra
Leone. See Page 7 for details.

Spring 2013 | Emerging Markets Journal | Page 3

Tourism: A Double-Edged SworD

By Christopher Dean

or Kimsath Seng, Manager

of the Ancient Angkor hotel
in Siem Reap, Cambodia,
tourists are the heart of his
business. Seng estimates that about
85 percent of his guests are tourists,
a small slice of the rapidly growing
tourism industry in this beautiful
Asian nation. In 2011, more than 2.8
million tourists visited Cambodia, an
increase of 14.9 percent from 2010.

Cambodia struggles to balance rapid economic

growth with potential environmental concerns

preservation of the unique culture and

past that defines the Cambodian people.
According to the Deputy General
Director of Siem Reaps water supply,
it takes about 20,000 cubic meters
of water a day to satisfy Siem Reaps
water needs, an amount pushed ever
higher by hotel showers and pools.
The citys current water supply plant
can only produce about 9,000 cubic
meters dailyan amount 55 percent
below the requirementforcing the
With a GDP growth rate of 7.3 city to develop alternative methods.
percent, Cambodias economy is A new water purification plant is
booming as it realizes the benefits of an being constructed along the Tonle Sap
expanding manufacturing sector and Lake, the largest lake in Cambodia, in
a thriving tourism industry. Tourists order to provide about 60,000 extra
from around the world now flock to visit cubic meters of water a day. However,
Cambodias ancient temples in Siem according to Cambodias national
Reap, enjoying a captivating country newspaper The Phnom Penh Post,
that was once a hotspot for only the most the plant will not be completed until
adventurous backpacker. As tourism 2018a date that may be too far away
continues to grow, so does the inflow to solve Siem Reapsw short-term
of tourism dollars that has provided a needs. In the meantime, the city will
vital boost to the Cambodian economy. need to balance conservation efforts
A recent World Bank study estimated that limit water usage with sustaining
that more than $1.4 billion were spent in the tourist industry; a balance that
2010 by foreigners on tourism, working becomes more lopsided by the day.
out to a little under 12.5 percent of that
Furthermore, this delicate balance
years total GDP. This surge in tourism, is also being strained elsewhere as
however, is putting an ever increasing Siem Reap moves to begin building
strain on the country and its delicate a new internationwal airport, an
environment. These environmental ambitious billion-dollar project that
issues will require a delicate balance will test Cambodias commitment to
in the future between growth in environmentally friendly policies.
the quickly developing nation and Designed to handle more than 10
million passengers a year, the
GDP Growth Rate, 05-12 project is set to begin construction
in the next few months. Though
progress has been slow since it
began last year, the new airport is
projected to significantly increase
international traffic to Siem Reap
when it is completed, allowing larger
planes and more tourists to visit the
city. This will further stress Siem
WORLD BANK GROUP/ SOURCE
Reaps fragile environment, as new

CHRISTOPHER DEAN /
SUBMITTED PHOTOS
(NOT SO) HIDDEN JEWEL: As
ever more tourists come to visit
Cambodian cultural sites, such as
the ones above, the accompanying
changes have begun to affect the
countrys environment.

land is cleared for development of the

airport and pollution is produced by
the planes engines, and the Cambodian
government must both carefully
consider the implications of the new
airport and work to mitigate the
harm it could do to the rural nation.
Fortunately, Cambodian officials
have begun pushing for stricter
environmental standards. The Phnom
Penh Post reports that the country has
plans to domestically produce green
cars such as Angkor EV 2013, an
entirely electric vehicle being capable
of traveling more than 300 kilometers
on a single charge. This development is
a step in the right direction, and with
the government also having recently
agreed to establish a Global Green
Growth Institution (GGGI) to boost
environmental security and protect
Cambodias forests, there seems to
a growing awareness of ecological
concerns among the countrys leaders.
However, given the significant growth
in tourism that individuals like Kimsath
Seng have witnessed, it is essential that
the Cambodian government continue
taking such progressive steps if it
hopes to preserve the unique culture
of this rapidly globalizing nation.

Page 4 | Emerging Markets Journal | Spring 2013

Comeback Kid

After years of stagnation, Poland is emerging as

one of Eastern Europes strongest economies

By Professor John Karaagac

he Czech-born Realist writer 19th century. Lodz, southwest of an economic time of troubles in
George Liska argued that the Warsaw, was a Polish equivalent of the 1970s and 1980s (relative to the
East-West relation is far more Manchester, England: a town turned prosperous 1960s). This positioned
important than the North- into a 19th century industrial city. them for making tough market choices
South dynamic, if only because the sun The Polish economy, like the country after 1991. It was easier for a state
rises in the east and sets in the west. of Poland itself, has always been a such as Poland that had Martial Law in
Liskas vision certainly holds true in the hybrid between an expanding central 1981 to put the memory of Moscowemerging markets of eastern Europe: European economy in the west and a imposed communism, and the market
the lands east of Germany and west of
deprivations, behind it.
Russia (except for the Baltics).
The nature of the Polish
BEHIND ITS SUCCESS
We instinctively look at the
transition was critical. The
Central European economies
communist party members
in a west-east continuum, not
managed to engage in renta north-south one.
seeking behavior by joining
One
country
interests
the boards of foreign firms,
us here: Poland. This short
in effect, getting co-opted to
Some of Polands biggest economic contributors are
policy sketch will put forth
the new market economy.
agriculture, oil, banking, and most recently, services.
some observations that may
Such insider deals arguably
prove crucial in developing a
constituted the Polish tax on
CIA WORLD FACTBOOK/SOURCE
geo-economic map of Poland,
transition to the market. One
helpful either for political
need only look at Warsaw to
analysts, market watchers or investors.
less industrialized one in the east.
see this at work. The old headquarters of
History is critical. Poland, like the
A more contemporary historical the Polish KGB is now a well-appointed
Czech Republic and Hungary, was issue is how Poland exited communism. office building with trendy bars and
a sovereign state only after World From the perspective of the last forty fashion houses outside.
War I. Before that, they were part of years, some of the economic stars
History explains the development
surrounding empires. Poland proved of the former Soviet system tended but it is not the central question
doubly unique it was partitioned to fade somewhat as post-communist for investors. What makes Poland
into German, Habsburg and Russian emerging markets. Those communist economically unique?
zones. Because it was at the confluence economies that found a secure niche in
Far larger in territory than its Czech,
of three empires, Poland became the 1970s were not always prepared for Slovak or Hungarian neighbors, Poland
a focus of economic development, post-communist realities.
has a market economy of scale, with a
with an extensive rail network in the
Poland, by contrast, went through large population and growing demand

History of Poland
1919

Poland gains
indpendence
after World
War II

1939

1945

Poland
regains
independence
Germany
conquers
Poland

1970s-80s

1989

1991

End of communist
Polish
rule in Poland
recession

2004

Poland joins the

European Union

Poland forced
to make tough
market decisions

Spring 2013 | Emerging Markets Journal | Page 5

MAINTAINING RELATIONSHIPS: Its
economic growth and increasing
geopolitical importance has made
Poland an important partner of the
United States in Eastern Europe,
and the country has hosted leaders
including former Secretary of State
Hillary Clinton, former President
George W. Bush, and President
Barack Obama.

US STATE DEPARTMENT,
WHITE HOUSE/SOURCE

which makes it attractive for investors.

Size matters, to be sure, yet size must
be relative to the level of development
within the borders. Here, Poland is
blessed with space and depth in its
network of commercial cities.
Poland is not one overgrown
market, a satellite of a dominant city.
Instead, Poland offers a cluster of
smaller markets. Poznan, with its huge
annual trade fair, is the commercial
star of the western
zone of Poland. The
beautiful
Renaissance
city of Krakow stands
as the cultural capital of
the southwest, with its
mountains and in other
parts heavy (and dated?)
industry. Bialystok is in
the heavily agrarian east,
but it is also the last zone
of economic rule of law before transit
and transporters enter the wild, wild
east of Belarus.
In the near middle of the country,
Warsaw is at the heart of this network:
it has upscale shopping malls, new
high-rises, commercial office buildings
and, of course, high real estate prices.
An outside investor, in light
manufacturing, in transport, in
agribusiness could find plenty of
areas for exploration. Travel across
Poland and you see Scandinavian
trucking, commercial warehouses,

French big box stores like Carrefour

and Dutch holdings in agribusiness.
On the outskirts of Warsaw, you
find Chinese and Turkish business
complexes. Warsaw has a surprising
number of Vietnamese entrepreneurs,
shopkeepers and sellers of goods
outside the clean and new Warsaw
Metro stations. Poland is thus returning
to what it always was been before it
lost independence: a crossroads of

its renascent KGB and oligarchic mafia

capitalism. No Pole and no European
should rejoice at the sad economic lot
of those two societies. Still, European
and non-European investors can be
grateful that Poland is a safe economic
haven abutting a critical region with
key resources in the energy sector but
with shaky political prospects.
Poland is firmly tethered to the EU
and to the central European economy.
If anything, the European
economy seems to be
evolving in a triangular
way: with a relatively
strong area in the north
from Poland west, a weak
and problematic one east
of Poland, and a troubled
zone from the northern
part of Italy down. For all
its economic challenges,
Poland still seems in the safe zone. It
is critical for the EU that the zone of
safety expands and that the danger
zone is contained.
So unlucky in its past history, Poland
is now occupying the luckiest of real
estate, connected to the stronger west
but also a bulwark against the resourcerich, problem-prone lands to the east.
This makes an extremely promising
area for investors and entrepreneurs
alike to watch the economic sunrise
and sunsets, regardless of the direction
from which they come.

Poland is a safe economic haven

abutting a critical region with key
resources in the energy sector but with
shaky political prospects
intersecting trade routes and a land
highly favorable to commerce, both
Polish and non-Polish.
An investor would notice Poland not
only for what it offers in its own right
but also for the favorable comparisons
with its neighbors. Put simply, Poland
is a safe outlet for those interested in
business in points immediately and
further east but who do not trust the
political climate in Putins Russia.
Belarus and Ukraine might never be
able to escape the long shadow of the
post-communist shadow of Russia, with

Page 6 | Emerging Markets Journal | Spring 2013

Lessons from a Chilean Firms

Rapid Recovery AFTER Disaster

BY RACHEL EDWARDS

From hurricanes to earthquakes to

tidal waves, doing business in any
country involves accounting for and
managing the risk of natural disasters.
For emerging economies in particular,
their comparatively less developed
economic
infrastructure
often
amplifies the destructive effects of such
events, but the experience of Chilean
winemaking group Carolina Wine
Brands is a prime example of how firms
in such countries can adapt and survive
unexpected natural disasters with
minimal damage to their operations.
On February 27, 2010, an
8.8-magnitude earthquake struck in
the Pacific Ocean near Concepcin,
Chile. A 2010 Reuters article described
it as the fifth largest earthquake since
1900, with the resulting tsunami
causing extensive damage as far away
as San Diego and Japan. As a result,
523 people perished, 12,000 people
sustained injuries, and over 800,000
people were displaced in its aftermath.
As one of the most devastating
natural disasters in Chilean history,
the earthquake destroyed the countrys
infrastructure and disrupted everything:
electricity, telecommunications, water
supplies, businessthe United Nation

Environmental Program estimated

total damages to be $15-30 billion, or
6-12 percent of Chilean GDP in 2010.
However, despite these widespread
losses, Carolina Wine Brands physical
and financial soundness led the firm
to encounter minimal damage and
helped it make a quick recovery.
Damage from the earthquake
disrupted both Carolina Wine Brands
supply chain and one of the companys
critical wine producing facilities. In the
fall 2010 edition of its newsletter, the
company noted that commercially,
[the earthquake] produced issues with
delivery and fulfillment of international
commitments, wine spoilage and
low yields. However, because of
its financial stability, Carolina
Wine Brands was able to speedily
rebuild the plant, allowing normal
production operations to resume
within six months after the earthquake.
Besides rebuilding critical facilities,
Carolina Wine Brands also used the
natural disaster as an opportunity
to update and improve its buildings.
After the 2010 earthquake destroyed
a historical church on the property,
the company built an office building
in the same style as the rest of the

Shakin It Up
MORE THAN MOST
OTHER NATURAL
DISASTERS,
EARTHQUAKES CAN
CAUSE EXTENSIVE
DAMAGE AND SERIOUSLY
AFFECT THE LOCAL
ECONOMY. HERE ARE
FIVE OF THE MOST
COSTLY QUAKES TO
HAVE EVER OCCURRED:

1.

Tohoku, Japan (2012)

Losses: Up to $35 billion

2.

Northridge, USA (1994)

Damages: $15 billion
Christchurch, N. Z. (2011)
Losses: $10 billion
Maule, Chile (2010)
Damages: $8 billion

3.
4.
5.

Canterbury, N. Z. (2010)
Damages: $5 billion

CNBC.COM, THE ECONOMIST / SOURCES

complex in its place. Furthermore,

according to vineyard employees
Catalina Garcia and Pilar Moreno, it
also expanded its operations by adding
green space to host weddings and
other outdoor events. Overall, Carolina
Wine Brands invested $5 million in
rebuilding and updating its properties.
Though the firm took a pro-active
approach following the earthquake,
it was fortunate in that the design of
its wine cellar protected much of its
inventory. Unintentionally, the original
builders in the nineteenth century
had built the cellar to withstand
earthquakes, and Garcia explained that
the Roman-style arches in the cellars
structure spread out the force of the
tremors and prevented the ceiling
from collapsing. The design of the wine
cellar prevented more damage from
occurring, minimizing inventory loss
and allowing Carolina Wine Brands
to focus its finances on rebuilding
production facilities and offices.
Looking back on its reaction to the
earthquake, Carolina Wine Brands
responded effectively to the earthquake
and was able to quickly resume normal
operations, and it even took advantage
of the earthquake by rebuilding and
remodeling portions of their property.
Although the earthquake caused
widespread damage throughout the
nation of Chile, the companys strong
supply chain, as well as its behavior,
allowed it to maintain production and
distribution schedules while improving
existing facilities. It may be difficult
if not impossibleto predict natural
disasters such as the 2010 earthquake,
but Carolina Wine Brands has proven
itself to be an excellent example of
how firms operating in high risk areas
can operate a successful business
in an emerging market like Chile.

Spring 2013 | Emerging Markets Journal | Page 7

A Smaller World

Sophomore Mustapha
Baryoh shares about his
personal connection with
Sierra Leone

a major humanitarian organization

ention the words
that works to promote, support and
Sierra Leone to
preserve the culture of Sierra Leone.
someone in passing,
I remember plenty of early mornings
and often times youll and late nights, often on weekends, that
get a blank look in response. The
I would hear my mom and dad talking
Republic of Sierra Leone is not a
on the house phone to someone from
place many Americans know much back-home. They would often speak
in Mende and/or Krioa brokenabout, and many of those who do
down version of the Queens English
are only familiar with it because
during those conversations, and other
of the film Blood Diamond.
than English, these were the main
However, while the
languages I was
movie does
DID YOU KNOW... accustomed to
help explain
...there are 16 ethnic
hearing in my
some aspects
groups in Sierra Leone?
house growing
of Sierra
up. And it was
Leone, there
...Sierra Leone comes more than just
from the Portuguese for the language:
is far more to
Lioness Mountain?
the country of
almost every
single
day
my ancestors
CIA WORLD FACTBOOK / SOURCE
after school,
than only war.
My name, Mustapha, means chief or
leader in my parents native language
of Mende and chosen in Arabic. I was
named after my paternal grandfather,
and though I am a first generation
American, my family made sure that I
grew up knowing all about the country
they had such an unconditional love for.
My parents often refer to Sierra
Leone as Sah-Lone or back home.
They often would tell me and my other
siblings various stories about how life
was therewhether the lessons they
learned or the people they knew. It was
through my parents, immediate family
and the Sierra Leonean community
here that I was able to participate
in various cultural activities, social
gatherings, ceremonies and even
service organizations like Tegloma

my mom would make dishes like

Cassava Leaves, Groundnut (Peanut
Butter) and Pepper Soup. Every now
and then we would even come together
and play music like Emmersons
Tutu Party and just dance to it.
Unfortunately, I have not yet had the
chance to visit Sierra Leone, but I hope
to do so in the near future. I remember
that President Barack Obamas memoir
Dreams from My Father ends with him
making a trip to his fathers village in
Kenya to learn more about the man he
never really knew, and I also want to take
a trip to actually witness the country
that I have always heard about and
had such a connection with. From the
people, the culture and the landscape, it
truly is a nation with as much resilience
and beauty as the best of its diamonds.

About Us

The Emerging Markets Journal

(EMJ) is a publication of the Emerging
Markets Club (EMC) in the Kelley
School of Business. The goal of our club
and journal is to develop students into
successful, global professionals, and in
order to do so, we publish the EMJ once
a semester to facilitate the discussion
of current political, social, economic,
and cultural developments all around
the world. Though it is associated with
the Kelley School of Business, the EMJ
strives to focus on a variety of topics,
and is open to anybody with an interest
in world affairs, business, or journalism.

Contact Us

Email: Emerjournal@gmail.com
Phone: (847) 477-9813
EMC Website: kelley.iu.edu/emerge/

Editorial Staff
Editor-in-Chief:

Henry Zhu

Content Editors:

Michelle Xie
Sara Zhang

Design Editors:


Editorial Assistant:

Nimisha Kumar
Vivian Chen
Jian Ding

Spring 2013 | Emerging Markets Journal | Page 8

PSY: The Next Samsung?

Has pop culture become South Koreas next big export? The map below shows the
number of views of K-Pop videos on YouTube by country:
France

Korea

Japan

US

Taiwan

Saudi Arabia

YOUTUBE.COM / SOURCE

What is K-Pop?
K-Pop, short for
Korean pop music,
is a genre of music
that emerged in the
1990s and gained
more widespread
popularity in the mid2000s.
Musically, the genre can be
considered bubblegum pop, and is
similar to American pop music from
the early 2000s, especially as most
acts are boy bands or girl groups.
PSY is the exception, not the rule
to K-Pop--he does not fit the mold
of typical stars and his music has
been banned and condemned for
inappropriate material before.

Who makes it?

Why is it popular?

Three agencies dominate the K-pop

industry: S.M. Entertainment,
followed by J.Y.P. Entertainment and
Y.G. Entertainment.
These agencies act as the
manager, agent, and promoter
for a pop star, controlling every
aspect of his or her career.

Commercialization - Korean firms

produce pop music like Nissan
makes cars, focused on creating a
product that appeals to the masses.

Dont just listen, watch! - New

songs debuted on Korean national
television, not on the radio, which
helps artists gain a wider audience.

Web-savvy - Korean
music labels learned
to use the internet
to their advantage,
as evidenced by the
number of Youtube
views seen above.

THE NEW YORKER / SOURCE