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BRICS in the Global Wall
by Mark Geary

The rapid growth in the BRIC economies has seen multinational companies expand rapidly abroad, attracted by low cost manufacturing and cheap labour. A key question asked was whether the four BRIC nations had decoupled from the rest of the world economy and would continue to grow undisturbed. The financial crisis has shown that they remain closely connected.

The BRIC nations continue to offer excellent opportunities and appear to have successfully weathered the recent economic storms. Economic growth for 2013 is predicted to be – China 8.5%; India 6%; Brazil 4% and Russia 3.8%. There has been major investment in heavy industry and infrastructure in all four BRIC economies. To keep these economies growing, the governments – especially in China – have been trying to stimulate consumer spending, and that will create opportunities for many knowledge-based businesses, including legal, financial and architecture.

In Tomorrow’s Markets, a report published by UK Trade & Investment, 49% of executives surveyed indicated that China would be part of their plans for expansion, 42% named India, 33% Russia and 29% Brazil.

There has been a shift towards higher value-added sector requiring more highly skilled staff. The cost of labour has gone up, so people have started to look further afield where wage costs are still cheap. So China as a cheap production platform has been overtaken by other places, but that is not a measure of China’s failure – that is a measure of its success as it has moved further up the value-added chain and attracted more high-tech companies.

Countries such as India and China have been able to grow because of heavy investment in raising living standards, providing water and housing which has created an affluent middle class of about 400 million people and who desire cars, houses, financial products, healthcare or education.

Vietnam, Mexico and Ukraine are predicted to become more popular. While these countries might not match China or India in terms of population, their progress in market reforms, trade liberalization and governance will assist company investment decisions, especially given competitive wage levels. Recession has forced businesses to move into the emerging markets. Turkey, South Africa, the Baltic states and the Balkans are also seen as potentially rewarding markets for the future.

New Gateways to Growth

Turkey is one of the most exciting and fastest-growing markets and is expected to be among the world’s top ten economies by 2050. Major multinationals – such as GE Healthcare, Ford and Coca-Cola are already in Turkey. A young workforce (50% of its population of 72 million people are under 28 years of age), an ideal geographic location between Europe, Central Asia and the Middle East and special investment zone, including 21 free-trade zones, are all factors that appeal to foreign investors. The environment, water, ports and agriculture are priority sectors where expertise will be needed. Opportunities also exist in financial services and information and communications technology (ICT).

(Source: China Daily)

 

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