Beyond BRICs: Meet the next batch of emerging markets


These likely economic powerhouses have young populations, growing wealth and good trade links

Looking to the emerging world for trade and investment opportunities? Cast your gaze beyond the so-called BRIC markets – Brazil, Russia, India and China – economists say.

Today there are hot new acronyms – as well as soaring expectations – for new groups of industrializing and developing countries. “MINT,” “CIVETS” and “The Next Eleven” economies promise returns for companies that can meet their complex challenges.

“There’s a whole world out there,” says Danielle Goldfarb, associate director of the Conference Board of Canada’s Global Commerce Centre, noting that “competition is intensifying even beyond the BRIC markets.”

Recent Conference Board studies show that Canadian companies are lagging beyond traditional markets.

“Our trade has flatlined,” Goldfarb says. Indeed, export levels are the same as they were a decade ago, with Canadian companies continuing to focus on the slow-growth U.S. market at a time when emerging economies are exploding.

The studies note sectors where Canadian companies can do particularly well in the emerging world, and detail the strategies of those that are successful, Goldfarb says. “There are huge rewards on offer in these markets.”

The MINT countries – Mexico, Indonesia, Nigeria and Turkey – are especially expected to be economic powerhouses, with young populations, growing wealth and beneficial geographical placement. Indonesia is at the heart of Southeast Asia and has close relations with China, while Mexico benefits from proximity to the U.S. and Latin America. Turkey has ties to the East and West, and Nigeria is at the core of the rising African continent.

These markets can help companies diversify and become more nimble, says Alberto Quiroz, vice-president of sales at Consolidated Energy Inc., a Toronto company that makes equipment to control humidity in supermarkets, with sales largely in Canada and the U.S.

The company also plans to enter Mexico, an especially good option for Canadians because of similarities in electrical and safety standards, time zones and business culture, says Quiroz, a Certified International Trade Professional and board member of the Forum for International Trade Training.

“It’s a logical step,” he says, noting that Mexico has had GDP growth of more than 5 per cent in each of the last four years, has a stable exchange rate, relatively low unemployment and free trade with Canada. “Of course there’s risk, but there’s risk everywhere.”

Goldfarb suggests that Southeast Asian countries such as Indonesia, Vietnam, Thailand and Malaysia also “come out strongly as important markets.”

The 10-member Association of Southeast Asian Nations (ASEAN), which comprises those countries as well as Brunei Darussalam, Cambodia, Laos, Myanmar (Burma), Philippines and Singapore, is a region of vast commercial potential, from its soaring economic growth and burgeoning middle class to its ideal geographic position and relative political stability. ASEAN has a youthful population of more than 600 million and GDP of $2.2-trillion (U.S.), and it plans to become a single market by the end of next year.

ASEAN has signed free trade agreements with economically significant neighbours, including China and India, as well as Japan, South Korea, Australia and New Zealand, according to a 2013 report prepared by Intercedent Asia for the Government of Canada, titled ASEAN Commercial Opportunities Study for Canadian Business. It says that six sectors in ASEAN offer the best opportunity for Canadian small and medium-size businesses: aerospace, agrifood, automotive, clean tech, information and communication technology, and oil and gas.

Meanwhile, it notes that doing business there has challenges, from regulatory complexities and a relationship-based culture to fragmented markets and increasing competition.

“These are not easy places to jump into,” says Thomas Boivin, director of international operations for Hatfield Consultants Partnership, an environmental consulting services company in Vancouver that has 150 employees in Western Canada, as well as in Indonesia, Laos and Botswana.

Boivin, who just returned to Canada after spending three years setting up Hatfield’s new Mekong office, which covers Laos, Cambodia, Thailand, Vietnam, Myanmar and southern China, says that having operations in dynamic emerging markets “is fabulous for our company.” Hatfield will celebrate its 25th anniversary in Indonesia next year and has found that such places are good training grounds because staff must “factor in differences in culture and climate and logistics.”

Although the emerging world is booming, there is stiff competition from international as well as local players, he says, noting that Hatfield focuses on quality, blue-chip customers looking for global standards. “We don’t even try to compete on price, to be honest.”

Recruitment is difficult, although several Hatfield senior staff, including the president and two vice-presidents running its Indonesia office, are local hires. Infrastructure is improving, albeit traffic congestion has worsened in places such as Jakarta.

Countries such as Indonesia offer a “mixed picture,” Goldfarb agrees. They rank as “extraordinarily difficult places to do business” according to the World Bank, yet “many companies that have gone there and have had fortitude and persistence have done tremendously,” she says. “The real key is to know the market, to find the right partner and to be constantly innovating and developing your global reputation.”

Businesses that constantly change their products are the most successful, because your offering may be copied. “You don’t have recourse necessarily to intellectual property channels the same way you might in an advanced country market,” Goldfarb explains. “The best defence is a good offence; you have to constantly adapt your product to meet local needs so people can’t steal your ideas.”

Sectors where Canadian companies do well include aerospace, autos and resources, she says, as well as cosmetics, pet food, photonics, computer and IT services.

Companies should do research first, she says, and use “bridging mechanisms” such as the Canadian Trade Commissioner Service.

Quiroz notes that the Forum for International Trade Training has an interactive diagnostic tool to help companies get ready for export.

Fear is the biggest factor keeping Canadian companies from entering the newest emerging markets, he says. Canadian companies “are extremely conservative, extremely risk-averse and extremely comfortable working with the U.S.,” he says, adding that operating in more challenging markets will “add flexibility and agility to your company. If you develop those skills internally you can sell anywhere. If you get a good reputation it’s going to go global.”

Boivin says that working in emerging markets has given Hatfield a vibrant corporate culture.

“We invested a lot of our own time and energy and it paid off,” he remarks. “We’ve been going off the beaten path and working in places that aren’t as fancy and marquee, but at the same time they have less competition and great needs for what we do.”

Canadian companies should plan for the long term when looking at the newest emerging markets, he says. “Be prepared to invest your own time and effort to make it work,” he says. “You have to be on the ground and getting your hands dirty.”

The new club

First there was BRIC, an acronym for Brazil, Russia, India and China, coined in 2001 by economist Jim O’Neill of Goldman Sachs Asset Management to describe the four rapidly developing countries that were shifting global economic power away from the developed G7 economies. As new high-growth markets continue to emerge, economists have found new ways to categorize them.

MINT: Mexico, Indonesia, Nigeria and Turkey. Coined by Fidelity Investments, a Boston asset-management firm.

CIVETS: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. Coined by Robert Ward, global director of the Global Forecasting Team in the Economist Intelligence Unit.

The Next Eleven: Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea and Vietnam. Identified by Goldman Sachs and Jim O’Neill.

E7: China, India, Brazil, Mexico, Russia, Indonesia, Turkey. Coined by PricewaterhouseCoopers, this group of seven emerging countries is expected to have larger economies than the G7 countries by 2020.
 


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