Think of major players in the world economy and the US, Europe and Japan are likely to spring to mind. It may therefore be a surprise to learn that the collective economies of some of the world’s lesser known, but emerging, countries are now responsible for over half of the world economy when measured by total output. And that figure is rising. As a group, these countries are growing at a rate of 6% or more per annum. East Asia’s economy now constitutes 8% and Latin America, Southern Africa and the Middle East between 5% and 7%. In actual fact, compared to the US, Europe, and Japan, these newcomers to the scene are growing significantly faster and their grouped contribution rises every year.
Asia was the first of the large markets to begin to recover from the economic crisis. China is currently the largest economy in the region, having now overtaken Japan in GDP; and it’s predicted that it will outdo the US by 2017. But they are not the only ones with gathering momentum. Korea, Malaysia and Taiwan are also rising stars and hosting very favourable economic environments which have led to significant economic growth: namely, high incomes and saving rates alongside well-educated populations.
Many of the large South American economies too are increasing year on year. Brazil is perhaps the best known and most noteworthy forerunner. A country with huge resources and an increasingly large population, it has attracted colossal foreign investment interest and is seen as a key market around the globe.
Both Argentina and Mexico have recovered well after the economic crashes caused by the global recession and continue to show steady progress. But a notable relative newcomer to the world markets is Chile: whilst much smaller than its other Latin counterparts, it is also attracting much foreign interest in investment because of its rock solid economic stability and well-developed infrastructure.
Korea is definitely worth a closer look. As a G-20 country, it sits right in the middle in terms of its per capita income, with growth up to 3.5% every year. But what makes it stand out from other, similar counterparts? Simply put, it has one of the most successful and expanding trade policies in the world. As it continues to develop close links with both China and the US, it is in a key position to achieve sustained accelerated economic growth.
Taiwan, by contrast, is not in the G-20; although it is similar to Korea in that it is a middle class country with a comparable per capita income. Its fast growth continues and its globalization strategy has paid off. A distinguishing feature of this strategy has been a recent trade agreement with China, essentially binding the two nations inextricably together. By investing in Taiwan, there is the significant advantage of all the opportunities China brings, allied with the benefits of Taiwan’s democratic political system and market-focused, rich economy.
Pakistan was, until recently, one of the fastest growing economies in the world. Managing its inflation while producing smart economic policies resulted in a steady 7% growth for a decade. It also benefits from a massive population of over 170 million people. Whilst now obviously threatened by the problems it currently faces, Pakistan has huge potential as it works towards consolidating on its previous momentum, provided it is able to stabilize its security and get political issues under control.
Africa is the lowest economic group in terms of per capita income. However, it also has potential for high growth. Countries like Ghana and Mozambique, for instance, have been consistently growing at a rate of 7% for 15 years! Other countries like Mali and Tanzania show smaller, but still significant, growth of between 5%-6%. While economically small when considered on their own, these countries start to become a force to be reckoned with when grouped together. Africa as a whole has vast and varied natural resources and we’re seeing major foreign investment from countries like China. All that is needed is for Africa as a whole to overcome its political problems and, provided the world economy remains positive, the climate is right for impressive future gains.
Each of the aforementioned countries has status and growing economies with impressive opportunities and potential. Equally, each has its own challenging issues. Countries like China, Brazil and India all have huge populations, for example; but their per capita income is still significantly lower than the average US worker. They also possess an uneven economic layout with high disparity in wealth between city and rural areas: this is often a sign that wealth is not being evenly distributed because of poor domestic infrastructure. Security issues, corruption and different political systems and trade policies also result in varied operational challenges that actively work to discourage foreign investors.
However, there are potentially significant rewards to be had by working with these emerging countries and perhaps an optimistic viewpoint is possible. It is generally accepted that improvements in transparency and legal infrastructure will occur over time. The key to success in developing valuable links with these emerging economies is to work towards an in depth understanding of your desired market. This makes it possible to better overcome the unique challenges each presents. We are in a period of transition, where the US and Europe are now exporting more than ever before to the developing world; and the emerging economies are steadily overtaking many stagnant high performers who have been caught resting on their laurels. The potential for new business opportunities is very real and is growing exponentially.
Dark economic clouds are dissipating into an emerging blue sky of opportunity.
– Rick Perry