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The "next 11" perspective for Canadian investors.

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  • 1. Prospects for Canadian trade and investment with “the next eleven” by Oleksandr Zaviriukha Graduate Student, Centennial College 300686394 Author note prepared for Global Business Research & Analysis course taught by Dr. Nguyen June 10, 2012
  • 2. Prospects for Canadian trade and investment with “the next eleven” Oleksandr Zaviriukha Global Business management, Centennial CollegeAbstract: Considering the situation of the world economy today, I may tell that the need of newtrade connections and investments has doubled in a last time and became a inevitable necessityfor many countries and a big advantage for others. Canada looks for the new markets ofdeveloping countries and there are appearing more and more possible trade-partners on theworld map. This paper will describe the economic situation and positive changes which weremade during the last five years in the “next eleven” countries as well as what opportunities can“the next eleven” bring to the Canadian investors and exporters. Furthermore, I will try toexplain why “the next eleven” choice is better for many than the BRIC choice.Key words: “The next eleven” countries, BRIC countries, Canada, economics, investments,trade.
  • 3. Introduction Nowadays, trade and economics play the main role in the relationships between allnations. After the 2008 crisis the western world suffer the big economic problems. The eurozone faces a crisis with the national debt of Greece, Portugal, Ireland and huge rate ofunemployment in Spain. Though, all countries of Europe except Germany have the GDPgrowth not higher than 2 %, which is remarkably low in compare with the China or India. TheU.S. economy has similar problems with the national debt and low GDP growth and theeconomy is still recovering after the 2008. Meanwhile, the four countries of BRIC (Brazil, Russia, India, China) demonstrate thehuge economic, GDP, production and trade growth, especially China and India with theirs 8,3%and 7,3% GDP growth respectively. The mining and IT industries in India, the nationalresources of Russia and the level of goods production in China help their nations to rise fromthe poverty and develop after the Europe and North America. China overtook the Japaneseeconomy 2 years ago and became the second world economics power. Despite the huge gapwhich is still there between China and U.S. all world-known economists claims that China willovertake U.S. in 25 years approximately. However, it’s not always the best choice to trade or invest into those four economicsbecause of high competition. And if we look at the back we will see 10-15 more countrieswhich are not so huge in their sizes of economy but are really attractive to the new investors andtrade agreements with favorable economic environment and beneficial terms for the investors orcountries who want to trade with them. Jim O’Neil, well-known economist has pointed the termfor these countries - “the next eleven”, including Mexico, Nigeria, Egypt, Turkey, Iran,Pakistan, Vietnam, South Korea, Indonesia, Philippines and Bangladesh. I want to describe theeconomy and business environment of “the next eleven” countries.
  • 4. The economic and business situation of “the next eleven countries”1.Egypt. A country had about 8% GDP growth and developing agriculture and tourismindustries. However, after the 2009 revolution it fell to 4,5% and now they have about 5%annual growth. Egypt has a favorable, developed and highly profitable tourism industry whichrequires more funds and investors as well as agriculture sector. Egypt exports petroleum andnatural gas which are hilariously beneficial industry nowadays.2. Turkey. A “bridge” between Europe and Asia started to develop rapidly after the 2008 crisis.Turkey GDP growth rate is 8,2%, in compare with 1% in 2008. The world 16th economy hasreduces government control in business and opened its markets in order to make a country moreattractive to the investors and create a favorable business climate. The main developingindustries for investors and traders are textile, tourism, construction and oil refining.3. Mexico. Mexico is the second largest economy of the Latin America is rapidly developingwith the 6% GDP growth rate. Mexico is one of the major trade partners of Canada and acountry is greatly welcome our investments in its economy. The most developed industry isauto-producing. Mexico is the biggest auto-producing country in North America, rapid growthand sustainable economy are making investment climate n Mexico extremely favorable.4. South Korea. South Korea is a democracy with the 14th largest economy in the world. Acountry is in the list of leaders in investment attractiveness. South Korea is industrialized nationand the 5th largest exporter in the world. The main industries are technology and innovation.5. Indonesia. Indonesian GDP growth remains high as 6,5%, the economy is the biggest inSoutheast Asia. The main industries which are favorable for investments are textile, electricalappliance, plywood and rubber production.6. Vietnam. Vietnam began to develop rapidly in a last decade, 5% GDP rate growth is theevidence for that. Vietnam started to develop tourism industry and opened a country for foreigninvestments. The most developing industries are manufacturing, information technology andhigh-tech industries. Vietnam welcomes foreign entrepreneurs and managers in developing theirindustries in the country.7. Pakistan. Pakistan is developing country with a high GDP rate growth. Pakistan has a hugelabor market and a big producer of the natural commodities which should be interesting toCanadian importers and investors. However, Pakistani economics is mainly agricalutre whichrequires a lot of investments and Pakistani government created a program to attract foreigninvestments in this industry.8. Iran. Iranian economics have been developing through the last two decades, now most of theinvestors are afraid of Iran because of its political situation and possible conflict. Although, Iran
  • 5. develops its nana- and bio- technologies as well as atomic, Iran has developed manufacturingindustry. Iranian governments have already mentioned about the foreign investments and tradeagreements and how these are welcomed in Iran. What opportunities can Canadian investors and traders find in ‘the next eleven”? The process of shifting the economic centre of the world has begun. However, eventalking about BRIC we cannot call them emerging markets already. A term “emerging market”concerns more the next eleven countries. Within 40 year some of the countries N-11 maysurpass the Canadian economy. The most developed of them with the biggest markets – Turkey,Mexico, Indonesia and South Korea have already attracted attention of Canadian investors, as ithappens with Alliance Grain Traders Inc. which was founded 10 years ago by the Canadianwith Turkish background. The one-time basement company became a world’s largest processorand exporter of lentils. Or Mexico, which already has a Canada as a second largest trade partnerafter U.S. Incredible innovation in technology industry in South Korea and growing hugemarket of Indonesia have attracted Canadian investments as well. Other countries such as Nigeria and Philippines are still behind, they have huge potentialthough. Especially it concerns Nigeria in Africa. The size of its economy may surpass Canadianin the future. Its markets and industries will be developed soon and this is a good goal to invest. Islamic countries of the N-11 – Iran, Pakistan, Egypt faces the political, civil andgovernment problems in the last years, especially Egypt which had a revolution recently.Although, the rates of their economic growth are truly high and besides their problem they docare about main industries and protect foreign investments and trade, as it happened in Egypt,when tourism was working as usual during the revolution and many tourists from the wholeworld were safe in the Egyptian resorts. In general the most investment favorable and attractive countries to Canadian investorsin 2012 are South Korea with its powerful technological and innovation industries, Turkey withits agriculture and tourism industries and Mexico with its automobile industry as well astourism. These countries guarantee and provide with favorable investment climate and stablepolitical situation.
  • 6. If we speak about trade, it’s beneficial for Canadian exporters and importers continue todevelop the trade relationship with Mexico and start to pay attention on growing Indonesian,Nigerian, Pakistani and Philippine markets. What are the benefits of the N-11 before the BRIC countries? It is obvious that the BRIC countries are the rapidest in their development for this point.They are developing their industries, markets and economy in general faster than anyone elsedoes. As a result of this, most of the western companies and multinational corporations investinto them and creating the new trade links with them, especially in concerns China and India.However, there some negative issue except beneficial ones. The main one is the competition.There are truly high rates of competition with the strong domestic companies and other westerncorporations. If a company has not lots of power it’s really risky to enter these markets. In theheat of competition the participants might miss a fact that they lose more than gains in order tobeat their competitors. One more neither issue concerns China and Russia more, whichapparently are not democratic countries with the strong political control of markets andindustries. It makes the investment activity and trade much harder and complicated.Furthermore, Russia and China still face corruption, bribery and criminal in their economy andgovernment. Meanwhile, most of the N-11 economy are open and clear for the foreign investmentsand for the international trade. Some of these countries, which I have mentioned in second partmay be as beneficial as BRIC countries are in economical sense and even more beneficial. Inthe same time it’s much more simple and pleasant to run business there. Others of the N-11 arelooking forward to maintain all benefits of the free market and economy in the nearest future.And meanwhile to control enough to be sure that all investments are protected enough. Conclusion Sometimes, we are focused just on major figures and don’t pay enough attention towhole picture. This is the main mistake in chess. The same principle can occur in internationalbusiness relationships. The N-11 are the best place to invest for the Canadians and some ofthem are the best choice to trade with for our exporters and importers. Canada and itsbusinesses can be much more beneficial from “just in time” investments in the N-11 economy.
  • 7. Bibliography1. Cristopher Jaffrelot (2009), Emerging States : the wellspring of a new world over2. Hall, P. (2011). Don’t Get BRIC’d In. Export Development Canada. Retrieve May 5, 20123. Jim O’Neill,(2001) The Growth Map, Economic opportunities in the BRIC’s and Beyond4. “Emerging markets”, The Economist, May 20125. Mark Thoma, May 2012 “Slow down of the BRIC’s”, The New York Times6. Mexico, Brazil and trade, The Economist, March 10 20127. “Turkey’s economy” , The Economist , April 7 20128. http://www.edc.ca/EN/Knowledge-Centre/Subscriptions/Weekly-Commentary/ Pages/dont-get-BRICd-in.aspx9. http://www2.canada.com/story.html?id=455841710. http://blog.euromonitor.com/2008/02/the-next-11-emerging-economies.html11. http://citywire.co.uk/global/investing-in-the-next-eleven-in-em-goldman-sachs- launches-new-fund/a46676112. http://etfdb.com/2010/etfs-for-the-next-11-economies/13. http://www.thejakartapost.com/news/2012/04/21/opportunities-and-challenges- next-eleven.html14. http://www.forbes.com/2007/03/28/microsoft-intel-citigroup-ent-hr- cx_mc_0328outlookexpat_slide.html