(Updated with details throughout, including comments from an MSCI official on Greece during a telephone news conference.)

South Korea and Taiwan, two countries that are part of huge ETFs such as the Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO), will retain their developing market status because they still lack accessibility. But, as MSCI said a year ago, the two countries remain under review for possible reclassification to developed status a year from now.

In its announcement of its annual reclassification review, MSCI also again said further consideration of whether Qatar and the United Arab Emirates ought to be shifted to emerging market status from their current frontier market status will be extended another year. It noted, as it has previously, that it needs more time to assess recent changes to those two markets.

Two new folds this year were that debt-gorged Greece was added to MSCI’s list of possible reclassification to an emerging markets country from its current developed-market status, and that Morocco has been added for potential consideration as a candidate for the MSCI Frontier Markets Index. Both decisions will also be taken up a year from now, MSCI said today in a press release.

MSCI’s annual review is crucial to ETFs such as the $50 billion VWO or its rival fund that uses the same benchmark, the $34 billion iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM). The annual review could have resulted in Korea or Taiwan being dropped from those ETFs, just as it could have meant Qatar and the UAE would have joined them. As it stands, both MSCI’s emerging and frontier market indexes will remain unchanged for now, MSCI said.

MSCI stressed that that operational issues, mission-critical to institutional investors, are behind its decisions, and that making changes to the indexes before those operational shortcomings are rectified would force investors to make case-by-case adjustments they simply aren’t expecting.

The company announces changes or potential changes every June, and any changes it makes aren’t implemented until the following June. Its next classification review is in June 2013.

Deja Vu

The indexing company, widely considered the market leader in international benchmarks, is subjecting the market to a bit of "déjà vu all over again" as it relates to promoting Korea, Taiwan, Qatar and the UAE. Indeed, the promotions for Korea, Qatar and the UAE have been on the table for the past four years, and in the case of Taiwan, for the past three.

In South Korea, perhaps the source of most the head-scratching surrounding MSCI’s ongoing decisions to not promote the hugely successful Asian country to developed-market status, the firm said the issues are a lack of currency convertibility and equity settlement across multiple accounts.

Taiwan still suffers from market accessibility issues, the company said.

Foreign ownership limits remain an ongoing issue in Qatar, and in the UAE, most challenges that stand behind it and emerging market status have been surmounted—save for market accessibility issues related to custody and clearing and settlement.

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