Somalia/United Arab Emirates - A prolonged Middle East conflict will have a serious security impact on Muslim majority Asian and Saarc countries. Violent mob demonstrations and terrorist attacks may scare off foreign investors in Pakistan, Indonesia and Bangladesh. However, there is no indication that Asia's fastest growing economies in China and India will be affected as long as their traditional energy, labor and trade markets in the wealthy GCC states remain robust.
That is, as long as oil prices rise steadily and the current conflict is limited to Lebanon. They may even gain from the region's instability as numerous foreign businesses could possibly take flight from the Middle East where anger against the west is heating up and head to Asia. India may see an increase of its lucrative outsourcing business. Already, regional countries like Jordan, Syria, Egypt and even Turkey are experiencing an economic windfall from the Lebanese war as a number of businesses have relocated to these countries.
Only poor countries like Sri Lanka and Nepal with a large number of workers in Lebanon will suffer. Their citizens there constituted a major source of foreign exchange. Extended instability in the region will hurt. Sri Lanka, which alone had 93,000 workers in Lebanon at the start of the war was planning to send another 400,000 workers there. So while big economies will remain buoyant, it is the small counties that will receive a double blow by losing their workers' remittances and by the skyrocketing oil prices.
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