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emerging markets

Page history last edited by Brian D Butler 8 years, 6 months ago

 

 

**NOTE:**

The founder of GloboTrends, Brian Butler, is organizing courses on "Doing Business in Brazil" with Summit Global Education  

 

 

 

 

 

 

Table of Contents:


 

 

 

List of Countries

see GloboTrends page: Country Guides

 

 

 

Why are Emerging Markets important?

 

"Almost half of the revenues of S&P 500 companies now comes from overseas", OpenheimerFunds

 

"In 2050 the world's largest economies in order will be China, US, India, Japan, Brazil and Russia."; Goldman Sachs

 "China and other emerging markets...will account for 75 % of the world's total growth in the next two decades";  The World Bank

 

  • Developing economies "have accounted for nearly 70 percent of world growth over the past five years". (Source: Carnegie, 2010.)
  • The GDP of Emerging and Developing Economies accounted for 20% of world GDP in 2000, 34% in 2010, and an estimated 39% by 2015. (Source: IMF, 2010.)
  • The global emerging middle class now stands at two billion people who spend USD 6.9 trillion a year, a figure which is expected to rise to USD 20 trillion - twice current US consumption - by 2020. (Source: McKinsey, July 2010.)
  • Developing countries will account for two thirds of world trade in 2050. (Source: Carnegie, 2010.)
  • The GDP of emerging markets will grow to be about 1.3 times the size of advanced economies in 2050. China will be approximately twice the size of the United States in purchasing power parity (PPP) terms. (Source: Carnegie, 2010.)
  • India now has more rich households than poor, with 46.7 million high income households as compared to 41 million in the low income category. 62 per cent of Indian households belong to the middle class (Source: National Council of Applied Economic Research, August 2010.)
  • 700 million people will start using the Internet in Asia in the next 5 years (Source: McKinsey; September 2010)
  • Consumer Trends:  read more from Trendwatching.com here 

 

 

 

Emerging Markets

 

Why talk about emerging markets?  Simple.  Growing markets = opportunity to make money.  Both for companies, and for investors.  Any entrepreneur that launches a business that can be successful in emerging markets, stands a chance to capture a massive market.  The emerging markets of China, Brazil and India, for example, have an ever expanding population of consumers with ever changing tastes and demands for goods and services.  As the people in these places become more wealthy, and as they become more exposed to new ideas, new products and new markets, their tastes and preferences for goods and services will change. 

 

 

 

Trends in Emerging Markets

 

Ten years ago emerging economies produced about one-third of global output.  Today they generate about half.   By the end of this decade that may increase to two-thirds.  One reason for this dramatic shift in the global economic balance is the exceptionally rapid growth in emerging countries.  The second, and more important, cause is lack of growth in advanced ones. source: theEconomist.com

 

1.  Transition from state-run (socialist) to market-driven economies

2.  Privatizations of state owned enterprises

3.  Liberalization of trade policies

4.  Liberalization of FDI foreign investment policies

5.  Formation of regional trading blocks and regional integration

 

*  related pages:  Washington consensus , Criticisms of the Washington Consensus,

 

 

 

 

 

 

Market potential index -

which emerging market should you consider for starting a business?

 

"Finding the right emerging market for business may prove to be a difficult task, but luckily globalEDGE provides a resource designed to solve this problem. The Market Potential Index (MPI) ranks 26 emerging countries based on eight market dimensions. These dimensions represent the overall market potential of a country and each emerging market is ranked accordingly. With this in mind, businesses can then determine which international market to enter and users can gain a better understanding of growing economies worldwide.

 

 

"Each year, there are several unique trends within the MPI rankings. However, one trend seems to be prevalent across several years—countries in Asia have been the overall highest rated countries among the field of 26 countries. This year the top four are again Asian countries: Singapore, Hong Kong, China, and South Korea. Large export numbers, a strong manufacturing base, and an emerging middle class have been the main drivers of growth in Asia. This year, Latin American countries showed strong improvement with four major countries moving up several positions. Much of thisimprovement in Latin America can be attributed to infrastructure growth, a declining poverty index, and commodity growth."

 

source: GlobalEdge

 

 

 

see related pages from GloboTrends:  emerging markets  and  marketing opportunities in emerging markets  and Investing in emerging stock markets  and Private equity and venture capital in Emerging Markets  and Rise of purchasing power in emerging markets and International IQ

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More about the MPI

(from GlobalEdge)

 

"You started your business, you exploited the opportunities in your local markets and now, like all entrepreneurs, you are looking for other avenues of growth. In today’s economy, emerging markets are booming and providing many great opportunities for entrepreneurs looking to expand their brand.

 

However, with so many choices which market is right for your business?

MSU-CIBER has created a resource for small to mid-size companies designed to help solve this dilemma called the Market Potential Index (MPI). The MPI scores the market potential of the 26 countries considered emerging markets by The Economist - all of which are experiencing rapid economic growth and positive social change. The Index uses eight dimensions and takes into consideration size, growth, potential capacity and risk. The index has been published annually since 1995 and has been successfully utilized by many companies and investors to identify sustainably fast growing emerging countries. 

 

Two well-represented regions in this year's rankings are Asia and Central Europe. Asia is home to the top three countries: Hong Kong, China, and Singapore. These three countries have held the top spots for five years running and have been fueled by exports to developed markets and an emerging middle class. Central Europe also has three countries in the Top 10 including Czech Republic in fifth, Poland in sixth and Hungary in eighth.  Many Central European countries have recently experienced accelerated growth rates and a rising standard of living through the exportation of goods to established European countries, the privatization of state-owned corporations and the introduction laws that encourage new business development.

 

Egypt has been in the news recently for its government overthrow and is therefore a great case study for the MPI. In this year's rankings, Egypt ranked particularly high in growth (7th) and capacity (6th) and relatively low in risk (21st) and freedom (22nd). Overall, one could interpret this country to have a relatively high market potential, but the index calls into question its risk and freedom. The protests demanding greater democracy could drastically increase their freedom rankings if Egypt is able to translate its new government into a more open economy. Egypt currently ranks 16th overall and would be a great place to research more thoroughly if conditions improve. 

 

If your business is looking to expand abroad, make sure you are well informed and start your learning process with the MPI and globalEDGE’s Diagnostic Tools.

 

Most recent year:  http://globalEDGE.msu.edu/resourceDesk/mpi/

Past years:  20092008, 2007, 2005, 2004, 2003, 2002, 2001, 2000, 1998, 1997, 1996

 

see related pages from GloboTrends:  emerging markets  and  marketing opportunities in emerging markets  and Investing in emerging stock markets  and Private equity and venture capital in Emerging Markets  and Rise of purchasing power in emerging markets and International IQ

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Investing in Emerging Markets

 

 

Investing in emerging stock markets

Portfolio managers around the world have been pouring money into emerging market economies.  This is good in that it helps these countries develop, but bad if the portfolio money is withdrawn suddenly, as we have seen with the crisis after crisis around the globe caused by "fast money".  This trend of hot portfolio money is troubling not only for developing nations but for the US as well as globalization has increasingly meant that what happens in one country is immediately felt in another. 

 

 

 

 

 

Opportunities for Portfolio Investors

 

Emerging markets financial centers grow in importance

Rather than in London or in New York, many companies are listing in emerging markets, and raising domestic money in emerging markets them selves.  This is an interesting trend, as the worlds center of gravity seems to be shifting....

 

Private equity and venture capital in Emerging Markets

Private-equity funds focused on emerging markets raised a record $59 billion in new capital in 2007. This figure represents a 78% jump from the $33 billion raised the prior year. More than $118 billion has been raised in emerging-market funds in the last three years. MarketWatch (02/29)

 

 

microfinance and microcredit: investing in people

The two distinct fields of microcredit and Microfinance are hot right now, as investors seek ways to not only find attractive returns, but to also invest in projects with unique social appeal.  Seeking economic development of some of the poorest regions on earth, this movement was initially brought to the world stage by the incredible efforts of such groups as the Grameen Bank of Bangladesh and Professor Prahalad of the University of Michigan.  Since then, there has been a boom in the credit markets to service the bottom of the pyramid marketing, as banks, individuals and commercial stores have collectively realized the value that can be obtained by extending credit to the emerging consumer classes.  In response, we are seeing how the new opportunities with consumers of low income is transforming commodity markets around the world, as projects such as the Bolsa Familia in Brazil spur a whole generation of buyers to seek new automobiles, washing machines, etc.  See our discussion on the Rise of purchasing power in emerging markets

 

 

 

 

 

Entrepreneurship in Emerging Markets

 

 

1.  Opportunities for entrepreneurs in emerging markets

 

 

 

2.  Challenges

 

3.  How to choose the right location

 

 

 

 

Multinational corporations in emerging markets

 

 

 

 

Emerging markets affect global commodity prices

On a global scale, there are several factors coming together that have driven the oil prices higher.  The main culprit, however, is probably the "twin peg of currencies and commodity prices in emerging markets"...a theory put forth by Merril Lynch economis Francisco Blanch, and published in the Financial Times

 

 

we are all inter-connected. A crisis in one part of the world effects us all !

 

 

 

 

What are the "Emerging Markets"?

 

Economic trading pattern emerging:

 

There are three of four major multinational trading blocs (or regions)

 

                       fully industrialized                 emerging (rapidly)                 developing nations

1.  Europe        Germany, UK, etc..               ex:  Russia, Poland...              Bulgaria, Romania...

2.  Asia             Japan...                                       China...                            Laos, ... 

3.  Americas     USA, Canada...                            Mexico, Brazil...                 Paraguay...

4.  SE. Asia                                                          Indonesia, Thailand....

 

The trouble with this discussion, is "how to group them"?  It is extremely difficult to come up with a right way to group nations.  In the following discussion, we will outline some of the more common ways in which the "experts" have tried

 

The biggest advances in developing nations are yet to come. From 2007 through 2014, an estimated 1 billion people throughout Asia will enter the middle class for the first time, and middle class income levels will rise significantly.  Consider India, China, Russia, Brazil and a host of other Asian, Latin American and Eastern European countries whose economies are developing at a frenetic pace. They're the next wave of growth markets. There's only one issue. Although in the long-run most of these markets will deliver capital gains dwarfing those of more developed economies (while also providing great dividends), in the short-term many will be volatile. In order to profit, you need a guide, someone to help you uncover the big trends while avoiding the pitfalls.

 

 

BRIC's  (Brazil, Russia, India, China)

 

In 2050 the world's largest economies [in order] will be China, US, India, Japan, Brazil and Russia. —Goldman Sachs

 

See our discussion on : BRIC countries : BrazilRussia, India, and China

 

China has passed Germany and Japan to become the world’s second-largest economy, while India is in fourth place, the World Bank confirmed on Friday, as it unveiled a report examining the relative purchasing power of global economies.  The report found that developing economies’ share of total global output had risen significantly in the past decade, as nations such as India and China had grown far faster than their richer counterparts.  As a result, developing nations accounted for 41 per cent of $58,600bn (€37,000bn, £29,600bn) in total global economic output in 2006 – up from 36 per cent in 2000.    source

 

 Real GDP growth in Brazil, Russia, India and China: 2001-2007

 

 

 

 

Beyond the BRIC (Brazil, Russia, India, China):

 

N11 the next 11 emerging economies

 

The N11 countries are Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam. Although varied both geographically and economically, these 11 countries have features in common that are believed to single out their high economic potential:

 

All have large and growing populations. Between 1980 and 2008, population growth was highest in Pakistan at 110.8%, with the lowest being in South Korea, with 28.4% period growth

 

Of the N11 countries, Indonesia had the largest population as of January 2008, with 228.9 million people, while South Korea had the smallest at 47.6 million

 

In 2006, Mexico had the highest sum of private final consumption expenditure, totalling US$567 billion. Vietnam had the lowest, at US$36.8 billion;

 

All 11 countries demonstrate population growth rates above those of Western developed economies, indicating greater consumer market potential over the medium term. Large populations represent a wide potential pool of consumers for businesses to target, while high growth rates mean that this market will expand rapidly, providing proportionally more potential customers.

 

The N11 countries can be categorised in two different ways: developing economies and newly industrialised economies. These are both 'emerging economies', but the latter have greater industrial capacity and are typically beginning to export heavy manufactured or refined products, while the former are still largely reliant on primary exports, with some industrial capacity. Typically, developing economies have lower standards of living than newly industrialised economies;

 

Of the N11 countries, Bangladesh, Iran, Nigeria, Pakistan and Vietnam can be categorised as developing economies, while all the others except South Korea can be categorised as newly industrialised economies. South Korea is the only N11 economy that could be categorised as a developed economy, owing to its high level of industrialisation and relatively stable macroeconomic fundamentals

 

For example, South Korea is a predominantly technological state, exporting manufactured goods and services expertise. By contrast, Bangladesh is an exporter of primary goods while Nigeria is an oil exporter and an exporter of lower-level manufactured goods;

 

In 2007, GDP per capita (purchasing price parity; figures adjusted for currency fluctuations) was the highest in South Korea, which has the most skilled and well-paid population, with the population being significantly smaller than most of those of its N11 peers. Nigeria had the lowest GDP per capita in 2007, at International $1,328, owing in part to a lower skilled but larger population, but also the significantly lower level of development in the country;

 

 

GDP per capita in N11 countries: 2007

 

South Korea was ranked 30th out of 178 countries in the World Bank's 2007 Ease of Doing Business survey, the highest of the N11 countries. This is due to its well-regulated tax and investment code, heavily influenced by the US model, and the adherence of state and financial institutions to this code;

 

Iran is ranked the lowest at 135th. This reflects its authoritarian state-owned business environment, which in many cases actively deters foreign investors. In other cases, the regulatory environment is opaque and arbitrary, offering few incentives for investment;

 

In 2006, Turkey received the greatest amount of foreign direct investment of the N11 countries, at US$20.1 billion. This reflected its unique role as a bridge between Europe and the Middle East, and its consequent position as an export and re-export hub;

 

By contrast, Iran received the least foreign direct investment, at US$901 million, indicating its investor unfriendly business environment and also the economic sanctions imposed on it by the USA.

 

 

Risks

 

Shifts in global commodity prices will affect the N11 producers of these commodities. For example, all except South Korea are oil producers, although only Mexico and Iran are consistent net oil exporters. Accordingly, high oil prices (with oil touching US$100 per barrel in January 2008) will benefit Mexico and Iran in particular, although the other producers will also benefit, since their domestic supply will limit the amount of imported oil required, and hence a higher import cost;

 

Domestic political events may also restrict growth prospects. For example, ongoing political instability in Pakistan and Bangladesh may deter investment, while the activities of terrorist groups in Indonesia, the Philippines, Nigeria and Turkey could also act as a disincentive for growth.

 

 

 

 

 

 

 

Economic Development Issues

 

How to help spur faster development:

 

 

 

 

 

Balancing the need for regulations with innovation (and economic growth)

 

In a macro sense;  too much regulation, and we see a lack of competition, and a lack of Innovation.  But too little regulation, and we see scandals, crises...and later, a call for more regulation.  Think about the results of the credit crisis in the USA (2007), and the resulting calls for more regulations... is that a good thing?  Well, on one hand we can see that wrong things happened, and regulation should be put in place to make sure it doesn't happen again...but, on the other hand... if we look at any developing nation, and in country after country...we see that over regulations cuts off competition, and stymies investment, and with underinvestment comes under performing asset classes.  In each of these emerging markets, we see that "deregulations" is often the key to spurring innovation, competition and economic growth. Think about this before you call for more regulations (and learn these lessons before willingly committing your market to more regulations). read more in our "policy and regulation discussion"

 

 

 

 

KookyPlan Links

At KookyPlan, we are focued on finding opportunities for investors in emerging markets.  We discuss many topics, such as: 

Emerging Markets

 

 

Tech for Emerging Markets:

 

see also: 

 

 

 

 

More From Wikipedia:

 

 

 

Developing Nations

 

A developing country is that country which has relatively low standard of living, an undeveloped industrial base, and a moderate to low Human Development Index (HDI) score and per capita income, but is in a phase of economic development.

 

Development entails a modern infrastructure (both physical and institutional), and a move away from low value added sectors such as agriculture and natural resource extraction. Developed countries, in comparison, usually have economic systems based on continuous, self-sustaining economic growth in the tertiary and quaternary sectors and high standards of living

 

 

Newly Industrialized Nations

 

Countries with more advanced economies than other developing nations, but which have not yet fully demonstrated the signs of a developed country, are grouped under the term newly industrialized countries.

 

nations with economies more advanced and developed than those in the developing world, but not yet with the full signs of a developed country.[1][2][3][4] NIC is a category between developed and developing countries, and it includes South Africa, Argentina, Mexico, China, India, Brazil, Malaysia, Philippines, Thailand and Turkey.

 

Image:Newly Industrialized Country.png

 

 

 

Countries considered NICs as of 2007

 

 

 

Emerging Markets

 

Other developing countries which have maintained sustained economic growth over the years and exhibit good economic potential are termed as emerging markets.

 

 

Least developed nations (failed states)

 

any country which is not developed is inappropriate because a number of poor countries have experienced prolonged periods of economic decline. Such countries are classified as either least developed countries or failed states.

 

To moderate the euphemistic aspect of the word developing, international organizations have started to use the term Less economically developed country (LEDCs) for the poorest nations which can in no sense be regarded as developing. That is, LEDCs are the poorest subset of LDCs. This also moderates the wrong tendency to believe that the standard of living in the entire developing world is the same.

 

Countries with long-term civil war or large-scale breakdown of rule of law or non-development-oriented dictatorship ("failed states") (e.g. Afghanistan, Haiti, Somalia, Myanmar, Iraq, North Korea); they sometimes also have low resources.

 

 

 

 

 

What are "emerging markets"?

 

The term emerging markets is commonly used to describe business and market activity in industrializing or emerging regions of the world. Originally brought into fashion in the 1980s by then World Bank economist Antoine van Agtmael,

 

such countries are considered to be in a transitional phase between developing and developed status. Examples of emerging markets include China,[2]India, Mexico, Brazil, Chile, much of Southeast Asia, countries in Eastern Europe, the Middle East, parts of Africa and Latin America.

 

The research on emerging markets is diffused within management literature. While researchers including C. K. Prahalad, George Haley, Hernando De Soto, Usha Haley, Rajesh K Pillania and several professors from Harvard Business School

 

The term "rapidly developing economies" is now being used to denote emerging markets such as The United Arab Emirates, Chile and Malaysia that are undergoing rapid growth.

 

In recent years, new terms have emerged to describe the largest developing countries such as BRIC and BRIMC. These countries do not share any common agenda, but some experts believe that they are enjoying an increasing role in the world economy and on political platforms.

 

MSCI All Country World Index by Morgan Stanley Capital International 2006     Emerging markets     Developed markets

 
MSCI All Country World Index by Morgan Stanley Capital International 2006     Emerging markets     Developed markets

 

 

 

 

 

 

Top 4 Emerging Markets

According to the latest findings from the Grant Thornton International Business Report (IBR) published on April 19, 2007 Mexico, Indonesia, Pakistan, and Turkey are the emerging markets to watch. They have identified them as the next generation of emerging economies set to have significant impacts on the world economy, although Mexico was already identified as an important economy in studies such as BRIMC (Brazil, Russia, India, Mexico and China), or as part of the G8+5. These countries may match or even overtake some of the commonly identified BRIC economies (Brazil, Russia, India and China) which are expected to join the global economic powers, although these economies are unlikely to match India or China in strength.[4]

 

According to CEO of Grant Thornton, Indonesia and Pakistan, with their large populations, have the potential to grow their labour intensive exports and could capitalize on the process of low-cost production that mainland China and India have so successfully exploited.

 

 

 

 

 

List of countries 

 

It is difficult to make an exact list of emerging (or developed) markets; the best guides tend to be investment information sources like ISI Emerging Markets and The Economist or market index makers (such as Morgan Stanley Capital International). These sources are well-informed, but the nature of investment information sources leads to two potential problems. One is an element of historicity; markets may be maintained in an index for continuity, even if the countries have since developed past the emerging market phase. Possible examples of this are South Korea, Taiwan, Singapore, Israel, and Czech Republic. A second is the simplification inherent in making an index; small countries, or countries with limited market liquidity are often not considered, with their larger neighbours considered an appropriate stand-in.

 

 

As of July 2006, the Morgan Stanley Emerging Markets Index included:

           

The list tracked by The Economist is the same, except with Flag of Hong Kong Hong Kong, Flag of Singapore Singapore and Flag of Saudi Arabia Saudi Arabia included (MSCI classifies the first two as Developed Markets) -- and Flag of Jordan Jordan omitted.

 

 

 

 

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Outsourcing

  • Developing economies "have accounted for nearly 70 percent of world growth over the past five years". (Source: Carnegie, 2010.)
  • The GDP of Emerging and Developing Economies accounted for 20% of world GDP in 2000, 34% in 2010, and an estimated 39% by 2015. (Source: IMF, 2010.)
  • The global emerging middle class now stands at two billion people who spend USD 6.9 trillion a year, a figure which is expected to rise to USD 20 trillion - twice current US consumption - by 2020. (Source: McKinsey, July 2010.)
  • Developing countries will account for two thirds of world trade in 2050. (Source: Carnegie, 2010.)
  • The GDP of emerging markets will grow to be about 1.3 times the size of advanced economies in 2050. China will be approximately twice the size of the United States in purchasing power parity (PPP) terms. (Source: Carnegie, 2010.)
  • India now has more rich households than poor, with 46.7 million high income households as compared to 41 million in the low income category. 62 per cent of Indian households belong to the middle class (Source: National Council of Applied Economic Research, August 2010.)
  • 700 million people will start using the Internet in Asia in the next 5 years (Source: McKinsey; September 2010)

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