Emerging Economies

Group Members
Rahool Jindal Rohan Sariya Saransh Pansari Vaibhav Jain Vaibhav Mandhyan B011 B013 B019 B036 B037

Introduction
Confined progress in the 20th century Scenario completely changed in the beginning of the 21st century The combined GDP of the emerging economies accounts for more than half of the total GDP of the world. The impact of the growth of emerging economies is visible on developed countries

Cont
global exports which have doubled to over 45% from 20% in thirty years Emerging economies have more than threefourth of the foreign-exchange reserves consume more than half of the world's energy account for over 80% growth in oil demand for their consumption The high growth of the emerging economies has increased the global GDP by an average of 3.2% a year

Why is BRIC a emerging economy?

BRIC: The fastest growing Nations

Developed countries investing in BRIC

Strong BRIC by bric

BRIC: Investing abroad

Inflation

Policy rates & Exchange rates

Rich Vs Poor

Future of BRIC

BRIC - Countries

Elements that contributed to emergence of these economies

Key elements are
1. 2. 3. 4. Peace and stability Infrastructure investment A functioning financial system Free market policies

Elements that contributed to emergence of these economies

Peace and stability
Businesses feel confident China and India

Sri Lanka and Afghanistan

Ravaged by civil strife Development slow

Elements that contributed to emergence of these economies

Infrastructure Investments
Education and transportation Example: Indian railways

Elements that contributed to emergence of these economies

A functioning financial system
Independent central bank Laws and regulations

Elements that contributed to emergence of these economies

Free market policies
Favor open markets and free trade Example: China, a socialist economy, promoted capitalist principles Example: Economic reforms in India

Brazil

Brazil
Official Language - Portuguese Type of Government - Federal Republic Economic System - Market Economy Currency - Brazilian Real (R$) Conversion Rate - 1 R$ = 28.82INR (02/02/2012) Area - 8,514,877 km2 Population - 190,732,694 (2010) GDP nominal - $2.422 trillion HDI - 0.718

Brazil Statistical Data

Budget expenditure Budget revenue $434.90 billion (2011) $354.80 billion (2011)

Debt External
Import Export GDP growth rate Unemployment rate Labor force Industrial Production growth rate BPL Debt to GDP ratio

N.A.
$127.70 billion (2009) $153.00 billion (2009) 7.5% (2010) 8.1% (2009) 101.70 million (2009) 0.9% (Dec 2011) 26% (2008 ) Negative, currently an international creditor
Source: www.golbaledge.msu.edu

Brazil - Economy
Worlds 8th largest Government-initiated privatization in 1996 Transition from a regional to a global power
Strong and early recovery from the financial crisis Solid performance 7.5% growth in 2010

Surging exports, economic growth and social programs helped lift tens of millions of Brazilians out of poverty. Middle class and domestic consumption

Brazil - Economy
Economic boom and high interest rates
Attracted foreign currency inflows Value of the currency (the real) up by nearly 40% since the start of 2009

Encourages foreign investments

Largest recipient of FDI in Latin America USA top foreign investor

Government plans to invest billions of dollars in off-shore oil, nuclear power, and other infrastructure sectors over the next few years.

Brazil - Economy
Hosting major International athletic competitions every year until 2016 Rio Olympics
Government to investing in roads, airports, sports facilities, and other areas.

Major supplier of commodities and natural resources, with significant operations in lumber, iron ore, tin, other minerals, and petrochemicals.

Brazil - Economy
Trade Policy
Expanded ties with developing countries Strengthening of MERCOSUR custom union Recent FTAs with Israel and Egypt Negotiating with Mexico, Canada and EU Trilateral trade agreements with India and SA China has significantly increased its purchases of Brazilian soy, iron ore, and steel in recent years, becoming Brazil's principal export market and an important source of investment.

Brazil - Economy
Agriculture
Key for economic growth and foreign exchange 6% of GDP (25% including agribusiness) 36% Brazilian Export Largest producer of sugarcane, coffee, tropical fruits, frozen concentrated orange juice Largest commercial cattle herd (50% larger than that of the U.S.) at 170 million head Important producer of soybeans (second to the United States), corn, cotton, cocoa, tobacco, and forest products

Brazil - Government
Head of Government: President Dilma Rousseff Political conditions
Relations are generally difficult between the executive and the legislature, as well as between federal and state governments Switching of parties is high

Brazil - Government
Foreign Relations
High priority to expanding relations with its South American neighbours Contributed troops to UN peacekeeping efforts 2010 2011 served as non-permanent member of UN Security Council Creditor country to the International Monetary Fund (IMF) U.S., Western Europe, and Japan are primary markets for Brazilian exports

Brazil Strengths and Weaknesses

Strengths
Abundant and varied natural resources Significant proportion of manufactured products in total production and exports Policy of maintaining fundamental macroeconomic equilibrium Size and potential of the domestic market Competitive labour costs (R$ 465/month in 2009) Continuation of inflation targeting policy

Weaknesses

Lack of investment in energy, rail, road, port, and airport infrastructure High public debt exposed to domestic interest-rate trends and maturity that is still too short Vulnerability to external shocks Lack of skilled labor

Brazil - Corporations
Industry Sales Profits Assets Name 5 companies (values in $ billion) Top Petrobras Itasa Banco Bradesco Banco do Brasil Vale Energy Financial Services Financial Services Financial Services Mining, Minerals, Metals $104.81 $16.63 $2.25 $4.60 $5.82 $5.88 $198.26 $342.63 $281.40 $406.46 $100.81

Market Value
$190.34 $28.74 $54.50 $42.78 $145.14

$66.36 $59.10 $56.10 $27.82

Source: Forbes 2010

Brazil Various Rankings

Ease of doing business 126 (183) Control of Corruption Indicator 89 (203)

Source: World Bank Report, 2011

Trade agreements with India

Preferential Trade Agreement with Mercosur group
Argentina Brazil Paraguay Uruguay

In effect since June 1, 2009 Agreed to reduce duty by 10 to 100 per cent in 450 products that are traded. Indias major trade items to Mercosur include:
Drugs, pharmaceuticals and fine chemicals

Major imports from the South American trade block:

Edible oils (primarily soya bean), metal scrap and nonelectrical machinery.

MoS for Commerce and Industry estimates

$17 billion by 2012 and $30 billion by 2030

Brazil - Corporations
Industry Sales Profits Assets Name 5 companies (values in $ billion) Top Petrobras Itasa Banco Bradesco Banco do Brasil Vale Energy Financial Services Financial Services Financial Services Mining, Minerals, Metals $104.81 $16.63 $2.25 $4.60 $5.82 $5.88 $198.26 $342.63 $281.40 $406.46 $100.81

Market Value
$190.34 $28.74 $54.50 $42.78 $145.14

$66.36 $59.10 $56.10 $27.82

Source: Forbes 2010

Russia
Capital: Moscow Official language: Russian Type of government: Federation Currency: Rubles(RUB) Area: 1.7 crore sq km(largest country) Population: 140 million G.D.P(PPP): $2.37 trillion H.D.I: 0.755

Statistics
Budget expenditure Budget revenue Debt External Import Export GDP growth rate Unemployment rate Labor force Industrial Production growth rate BPL
15.8% $303.60 billion $231.10 billion $369.2 billion $191.8 billion $303.4 billion 3.8% 8.4% 75.81 million

Debt to GDP ratio

17.5%

 Main exports: Oil and oil products, natural gas, wood ,chemicals,metals, weapons and military equipment Main imports: Passenger vehicles ,Trucks, medicines,communication equipment (phones,fax),heavy equipment

Economy
Has enjoyed 9 yrs of sustained growth(7%) after the 1998 crisis.Key reasons:
Economic reforms Devalued Ruble Favourable commodity prices

Was severely affected by global recession However on path of recovery due to

Govts anti-crisis policies Rise in oil prices

Government
President: Dimitry Medvedev Prime minister: Vladimir Putin Political conditions: Stable
Presidential elections in March 2012 Mr. Putin contesting for third term

Foreign relations:
Agreements with Western countries Troubled relations with neighbours(Georgia conflict in 2008)

RISK
Strengths
Abundant natural resources including oil, gas, and metals Skilled labor force Political stability Lower tax rates Highly dependent on raw material prices(2/3rd export is of oil) Excessive private sector foreign debt Banking sector still very weak Underdeveloped Infrastructure

Weaknesses

Corporations
Company Gazprom Sberbank Lukoil Industry Oil & Gas Operations Banking Oil & Gas Operations Market Cap(2011) $190 billion $77 billion $57 billion

Agreements with India

A MOU for Joint Study Group signed in 2006 to enhance bilateral trade No FTA at present but negotiations are on Indias demands include(till there is no FTA):
Greater access to some sectors, including pharmaceuticals and animal products Simpler visa norms

As per Commerce Ministry,India to push for an early start to discussions on the proposed FTA

India
Capital - New Delhi Official language - Hindi, English Type of government - Federal Currency - Indian Rupee Area - 3,287,263 km2 Population - 1,210,193,422 (census 2011) G.D.P(nominal) - $1.843 trillion (IMF) H.D.I - 0.547

Statistics
Budget expenditure Budget revenue Debt External Import Export
$311.2 billion $218.7 billion $267.1 billion $451 billion $298.2 billion

GDP growth rate

Unemployment rate Labor force Industrial Production growth rate BPL Debt to GDP ratio

8.5% (2010-2011)
9.8% 487.6 million 3.4% (Economic Times) 25% 70%

Economy
India is the 9th largest economy by market exchange rates Averaging an economic growth rate of 7.5% during the last few years The service sector makes up 54% of GDP, the agricultural sector 28%, and the industrial sector 18%. India has fared the global financial crisis remarkably well Widespread poverty, inadequate physical and social infrastructure, limited non-agricultural employment opportunities, insufficient access to quality basic and higher education are the main challenges faced in India. Per capita income is just Rs 53,331 which is ranked 135th in the world.

Import/Export

Government
President - Pratibha Patil Prime minister - Manmohan Singh Type of state - sovereign, socialist, secular, democratic republic Political conditions
Emerging as the nation's single largest party in the May 2009 Lok Sabha election, Congress currently leads a coalition UPA government under Prime Minister Manmohan Singh

The Bharatiya Janata Party (BJP), led by Shri Nitinn Gadkari, holds the secondlargest number of seats in the Lok Sabha Foreign relations
Starting in 2011, India will be a non-permanent member of the Security Council

India's size, population, and strategic location give it a prominent voice in international affairs, and its growing economic strength, military prowess, and scientific and technical capacity give it added weight India is now strengthening its political and commercial ties with the United States, Japan, the European Union, Iran, China. India is an active member of the SAARC

RISK
Strengths
Diversified growth engines Solid fundamentals: high savings and investment rates Good private sector performance in industry and services Moderate foreign debt and large foreign currency reserves

Weaknesses
Lack of infrastructure and weak education system Rise of wages for skilled labor susceptible of eroding the competitive advantage Increase of private corporate debt Fragile public finances Persistent uncertainty over the Kashmir question

corporations
Top 5 industry-market capitalization(Rs cr) 1. Reliance Industries 2,79,242.88 2. ONGC 2,40,795.11 3. TCS 2,40,158.23 4. CIL 2,10,366.37 5. Infosys 1,61,136.15

Indices
Corruption Ease of doing business HDI 87/178 122/181 0.54/0.94

China
Capital - Beijing Official language - Modern Standard Mandarin Type of government - Communist state Currency - Yuan (CNY) Conversion Rate - 1 CNY = 7.83 INR (09/02/12) Area - 9,640,821 km2 Population - 1,338,299,512 (2010) 0.655% GDP(nominal) - $6.988 trillion HDI - 0.687

Statistics
Budget expenditure Budget revenue Debt External Import Export
$1.681 trillion $1.555 trillion $635.5 billion $1.664 trillion $1.897 trillion

GDP growth rate

Unemployment rate Labor force Industrial Production growth rate BPL Debt to GDP ratio

9.1%
6.5% 816.2 million 9.5% 2.8%

Source cia.gov

Economy
China has reformed and opened its economy in 1978. In 2010, China overtook Japan to become the worlds secondlargest economy in terms of gross domestic product, behind the United States. It has sustained average economic growth of over 9.3% since 1989. In the 1980s, China tried to combine central planning with market-oriented reforms to increase productivity, living standards, and technological quality without effecting inflation, unemployment, and budget deficits. China's demand for energy is surging rapidly. China is the world's largest energy consumer and the world's secondlargest net importer of crude oil after the United States.

Import/Export

Government
President - Hu Jintao Head of Government - Premier Wen Jiabao Political conditions Foreign relations
In 1982, emphasized the rule of law Measures has been taken towards Human Rights Practices China has sought a higher profile in the UN through its permanent seat on the United Nations Security Council and other multilateral organizations. China has cultivated a more cooperative relationship with members of the ASEAN taken steps to improve relations with countries in South Asia, including India

Risk Assessment
Strengths
External accounts buoyed by industrial competitiveness and diversification Gradual move upmarket Infrastructure development spurred by the economic stimulus program Very high corporate savings rate that funds most investment Chinas growing influence on the international scene Limited external indebtedness Sovereign risk under control with public sector debt largely domestic and denominated in renminbi Increasing social tensions associated with the growth of inequality Industrial and commercial overcapacity Weakness of Chinese banks considering the dynamism of credit and the uncertainties over the amount of non-performing loans Environmental problems

Weaknesses

Corporations
in Billions USD

Name PetroChina ICBC China Construction Bank Bank of China Financial Services

Industry Energy Financial Services Financial Services Financial Services

Market Share $333.84 $242.23 $184.32 $147.00

Sinopec-China Petroleum

Energy

$130.06

Indices
Corruption 78/178 Ease of doing business 83/181 HDI - 0.687/ o.94

ASEANChina Free Trade Area

The free trade agreement reduced tariffs on 7,881 product categories, or 90% of imported goods, to zero. This reduction took effect in China and the six original members of ASEAN: Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. The average tariff rate on Chinese goods sold in ASEAN countries decreased from 12.8 to 0.6 % on 1 January 2010 pending implementation of the free trade area by the remaining ASEAN members. Meanwhile, the average tariff rate on ASEAN goods sold in China decreased from 9.8 to 0.1 %. The six original ASEAN members also reduced tariffs on 99.11 % of goods traded among them to zero.

Agreements with India

A Joint Study Group was constituted following Prime Ministers visit to Beijing in 2003.
To examine the potential complementarities between the two countries in expanded trade and economic cooperation. The JSG would also draw up a programme for the development of India-China trade and economic cooperation for the next five years,

The JSG in its Report has recommended that the two governments appoint a Joint Task Force to study in detail the feasibility of, and the benefits that may derive from the possible China-India Regional Trading Arrangement At present the trade between the 2 countries results in a trade deficit in Chinas favour Negotiations are on for a Regional Trading Agreement on the lines of an FTA with China India has appealed for China to open up its market to Indian goods and companies India wants China to end restrictions on
Information technology Bollywood films fresh food

South Africa

South Africa
Capital - Cape Town Official language - IsiZulu ,Afrikaans and South African English Type of Government - Constitutional Democracy Currency - Rand Area - 1,221,037 s.q km Population - 5,05,86,757 GDP - $422.037 billion H.D.I - Ranks 123rd

Statistics
Budget expenditure Budget revenue Debt External Import Export
$94.57 billion $77.68 billion $73.84 billion $66.02 billion $66.64 billion

GDP growth rate

Unemployment rate Labor force Industrial Production growth rate BPL Debt to GDP ratio

-1.8%
24% 17.38 million -7.2% 47%

Source cia.gov

ECONOMY
South Africa has a two-tiered economy. commitment to open markets privatization, and a favorable investment climate .( gear ) South Africa's budgetary reforms such as public finance management have been widely appreciated. Active trade liberalisation

Financial policy
sophisticated financial structure Large and active stock exchange South African Reserve Bank (SARB) performs all central banking functions influencing interest rates and controlling liquidity through its interest rates on funds provided to private sector bank Private citizens are now allowed a one-time investment of up to 2,000,000 rand (R) in offshore accounts

Impact of the 2010 FIFA World Cup

The 2010 World Cup was the largest event ever to be held on the African continent. In preparation, South Africa spent over $5 billion on building and improving stadiums and transportation systems, By the end of the competition on July 11, over 3.18 million fans had attended the 64 matches, the thirdhighest turnout in FIFAs history The World Cup was expected to add an additional 0.5% to South Africas 2010 GDP growth, fully an additional $5 billion (R35 billion) to GDP.

Trade and Investment

South Africa has rich mineral resource It is the world's largest producer and exporter of platinum; is a significant producer of gold, manganese, chrome, vanadium, and titanium; and also exports a significant amount of coal. The value-added processing of mineral is a major industry and an important growth area

Cont
Primary agriculture accounts for about 2.5% of the gross domestic product. The domestic telecommunications infrastructure provides modern and efficient service to urban areas, but at comparatively high costs and with limited coverage in rural areas Annual GDP growth between 2004 and 2007 averaged 5.0%, but fell to a rate of 3.7% in 2008

Cont
Exports amounted to 24% of GDP in 2010 South Africa is a member of the Southern African Customs Union (SACU) and the Southern African Development Community (SADC). The agreement was ratified in December 1999, and implementation began in September 2000. It provided duty-free treatment for 85% of trade in 2008 and aims for 100% by 2012.

Cont
South Africa has made great progress in dismantling its old economic system, which was based on import substitution, high tariffs and subsidies, anticompetitive behavior, and extensive government intervention in the economy. The leadership has moved to reduce the government's role in the economy and to promote private sector investment and competition

Government
Head Of State- President Jacob Gedleyihlekisa Zuma Type of state-Multiparty Parliamentary Democracy

Political conditions
South Africa's post-apartheid governments have made remarkable progress in consolidating the nation's peaceful transition to democracy. Programs to improve the delivery of essential social services to the majority of the population are underway. Access to better opportunities in education and business is becoming more widespread. Nevertheless, transforming South Africa's society to remove the legacy of apartheid will be a long-term process requiring the sustained commitment of the leaders and people of the nation's disparate groups.

Foreign Relations
Having emerged from the international isolation of the apartheid era, South Africa has become a leading international actor. Its principal foreign policy objective is to promote the economic, political, and cultural regeneration of Africa, through the New Partnership for African Development (NEPAD); to promote the peaceful resolution of conflict in Africa; and to use multilateral bodies to insure that developing countries' voices are heard on international issues. South Africa has played a key role in seeking an end to various conflicts and political crises on the African continent, including in Burundi, the Democratic Republic of the Congo, Madagascar, Sudan, Comoros, and Zimbabwe.

Risk Assessment
Strengths 33% of sub-Saharan African GDP Extensive natural resources (coal, platinum, diamonds, coal, and so on) Diversified industry, efficient tertiary sector (banks, telecommunications) Public-sector finances and indebtedness under control Business environment among the most efficient in emerging countries Economic and political heavyweight on the continent Good foreign debt profile: essentially medium-long term and rand-denominated

Weaknesses Severe inequality, high unemployment and shortage of skilled manpower Human capital deficit (26% unemployment and 11% AIDS prevalence rates, consequences of the apartheid education policy), the main obstacle to economic development Dependence on foreign capital inflows which are volatile in nature Outlying geographic location Sensitivity to raw material prices Sensitivity to economic conditions in Europe and United States and to Asian competition Deficient transport and energy infrastructure 11% AIDS prevalence rate

TOP 5 Corporations
NAME SASOL SECTOR ENERGY MARKET VALUE(IN BILLION DOLLARS) 23.85

STANDARD BANK GROUP

MTN FIRST RAND IMPLA PLATINUM HOLDINGS

FINANCIAL SERVICES
MEDIA AND COMMUNICATION FINANCIAL SERVICES MINERALS,MINES,ME TALS

22.08
27.31 13.67 15.4

TRADE STATISTICS
SALES %

53%

12% 12% 9% 7%

U.S.A JAPAN GERMANY U.K CHINA OTHER

7%

INDICES
Corruption Perception Index-54 of 178 Ease of doing business-32 out of 181 H.D.I-123 (low) GMCI-22 of 26 (low)

Business Tip Breakfast is considered important for business meetings.

CIVET- The next emerging economies

The CIVET countries are
Colombia, Indonesia, Vietnam, Egypt, Turkey Much smaller than BRIC as in their formative years

Strengths
Diverse economies, Fast growing population, Relatively stable political environments. Relatively sophisticated financial systems Unhampered by high inflation or massive debt

Review
Colombia: History of drug wars, A small market, but a dynamic economy Key industries, include fresh flowers, oil and coffee. Indonesia: The largest of the CIVET Huge population, But political stability is less certain Vietnam: A low-cost alternative to China for manufacturing, Communist government.

Cont
Egypt: Well-educated, prosperous population in cities, High level of debt The political future is cloudy, and could face religious turmoil. Turkey: Relative stability Good ties with the West However not for manufacturing as costs are high

Business opportunities in Emerging markets

Export opportunities
Exponential growth Population hungry for new products and services

Find a local partner

Business opportunities in Emerging markets

Top export niches include: 1. Infrastructure (roads, railways, ports, urban transport and airports) 2. Transport sector (including seaways and cars) 3. Telecommunications 4. Health-related products 5. Business management systems 6. Agribusiness 7. Environmental technologies 8. Power generation to meet an explosive demand for energy 9. Measuring instruments, and machinery and equipment (particularly for the oil, gas and mining sectors) 10. Consumption pattern 11. International marketing book

Thank You