The coining of the acronym BRIC (Brazil, Russia, India, and China) by Goldman Sachs in 2001 has brought considerable prominence to these growing global powerhouses. With the possible exception of Russia, these countries have been extraordinary success stories in global trade over the last decade.
As these countries’ economies mature and become common fixtures in the investment community, investors are eager to uncover the next “diamond in the ruff” to secure double-digit returns for years and decades to come. A recent article in the December issue of Global Finance magazine showed what traits leading financial institutions use to identify the countries they think are poised to become “future-star” economies and what their predictions are for their respective “next big thing” lists.
In an attempt to emulate the success of the BRIC moniker, Goldman Sachs has introduced the Next Eleven (N11), while HSBC’s list uses the acronym CIVETS (Columbia, Indonesia, Vietnam, Egypt, Turkey, and South Africa). Fidelity has chosen a similar acronym MINTs (Mexico, Indonesia, Nigeria, and Turkey), and Citi has created their Global Growth Generators, or 3G countries.
According to the article there are three factors that seem to be the underlying prerequisites for explosive global growth: a stable sociopolitical environment, human capital, and infrastructure.
A stable sociopolitical environment is essential to help create a venue in which companies can invest. Dong-Sinh Ngo, Chief Strategist, Emerging Markets and Asia Pacific, at BNP Paribas IP, says, “Institutions and the rule of law are necessary for growth. At the most basic level, legal institutions are needed to guarantee contracts in order to motivate people to invest.”
Another important factor in a country’s success is human capital. But according to experts interviewed by Global Finance merely having a large population of working age adults is not enough by itself to fuel growth. Nicolas Kwan, Head of Research, Asia at Standard Chartered, explains, “People need to be educated at primary and secondary level for them to achieve their potential—long-term growth can’t be built on cheap labor.”
The third and final factor is infrastructure. Without proper investments in infrastructure like electricity, roads and bridges, and ports, trade on a global scale is not sustainable in the long-term, and those countries that haven’t made adequate investments will likely see slower growth.
So assuming their predictions are correct what are the next big emerging markets?
The only country that was selected by all four institutions was Indonesia, followed by Nigeria, Vietnam, Turkey, and Egypt which were included in three of the four analyses. Other countries mentioned more than once include Bangladesh, Mexico, and the Philippines.
Ultimately, only time will tell which of these economies will prevail, but global trade intelligence from PIERS can help you uncover which markets are growing and which are in decline. To learn more, register for a free market snapshot at www.piers.com.