September 2012

OPINION: The good, the bad and Pussy Riot

prison cellFor developing markets, the summer has been something of a mixed bag. On the one hand, there was Olympic success for many African nations; on the other, there

was the unedifying spectacle of three young women being thrown in jail in Russia because (I’m paraphrasing a little, but so it is said) Vladimir Putin doesn’t like their song lyrics.

First the good news. The US, China and Great Britain may have topped the medals table at the London Olympics, but deeper analysis shows that frontier markets had plenty to shout about too. Perhaps more. Silk Invest, the frontier markets investment specialist, has produced a table that ranks countries by conversion rates – percentage of athletes sent per country who gained a medal. Top of this table are Botswana (25%), Jamaica (24%) and Kenya (23%).

Other Olympic-related activity also underlines the growing importance of frontier and emerging markets on the world stage. Tokyo, Istanbul and Baku are in the running for the 2020 Olympics, so an emerging-markets host is possible. Kenya is preparing to put in a bid for the 2024 Olympics.

It seems the perfect host. Not only did Kenya have an excellent medal conversion rate, it also overperformed on a medals-by-GDP basis, according to research by Meghan Busse of Northwestern University. If it were to succeed in a future Olympic bid the effect on the country and on Africa in general could be enormous. After all, it was in many ways the 2010 South Africa World Cup that provided the final push to change investor perceptions of Africa.

“Sports and financial markets may not be entirely related, but all this goes to show that the frontier markets paradigm now runs through all areas of our reality,” says Silk Invest.

Indubitably, this is true. But away from sport, some of the summer news from developing markets was exceedingly depressing, particularly in the flagship markets that make up Brics. India’s image was tarnished by the world’s biggest ever power cut that left half the country without power. And in China – which came second in the conventional Olympic medals table and a creditable fourth in the Silk Invest table with a medals conversion rate of 23% – there was the one-day show trial of Gu Kailai, who was given life and a suspended death sentence for murdering British businessman Neil Heywood.

But at least Gu may have committed the crime of which she is accused. This is not the case with the women who make up the feminist punk protest band Pussy Riot. They have been hauled before a Russian court accused of “hooliganism” and jailed for two years.

They have not committed hooliganism. What they have done is poke fun at Putin. That they did this in Moscow’s official cathedral does not make it hooliganism or “inciting religious hatred” – the other charge against them.

What does this tell us about developing markets? It tells us that while the development path may contain wonderful progressive moments, it is not smooth. And that, in the absence of very robust institutions, those in power will periodically abuse it. Investors in developing countries have a duty to be alert to these abuses and not tolerate them, however “stable” a disagreeable regime may be.

Jailed tycoon Mikhail Khodorkovsky described Pussy Riot’s trial as mediaeval. There is also something Stalinesque about the situation – he sent his message of support from his cell in a remote penal colony in north Russia.

The difference between Soviet times and now is that Pussy Riot has the oxygen of publicity. As a result, a trickle of international protest has become a flood.

Russia’s conversion rate at the London Olympics was a not-bad 19% – a sign perhaps that the kind of dubious hot-housing of athletes practised in Soviet times is a thing of the past. Now Russia urgently needs to convert three particular female prisoners into members of the public if it is to retain our confidence.

Fiona Rintoul is editorial director at Funds Europe magazine

©2012 funds europe