An important economic issue that is affecting several countries is the rising number of shadow businesses: businesses unregistered with their country's government. These businesses exchange goods and services, both legal and illegal, without paying taxes to their government. Typical examples of these include small taxicab services, roadside food stalls, and drug dealing. These businesses are causing concern because of their increasing prevalence in developing countries, which many worry is crippling economic growth and development. Other countries with smaller numbers shadow businesses are looking for ways to try and incorporate the operations of these businesses into their national economies. Here is a closer look.
globalEDGE Blog - By Tag: developing-countries
The World Bank's Development Data Group and the IFC have recently released the new Global Consumption Database, which now stands as the most comprehensive dataset on consumer spending patterns in developing countries. The database's sources include government surveys of more than one million households in 92 countries, and provides thorough information on 4.5 billion potential consumers for global companies. The initiative is aimed at assisting international firms in discovering new sources of demand, as well as providing market research to evaluate business opportunities in emerging markets.
As the world's population continues to grow, more and more countries are beginning to realize the importance of improving infrastructure. The 2012-2013 Global Competitiveness Report repeatedly cites infrastructure as the single biggest hindrance to doing business in India, well ahead of corruption and bureaucracy. To address the needs of urbanization and global business, governments around the world are spending large amounts of money on infrastructure projects.
The evolution of technology has opened the Internet for cross-border collaboration and has enabled a whole new range of economic activity that includes online trades, big data, and online advertising. According to the McKinsey Global Institute, from 2004-2009, the Internet contributed up to 21 percent in GDP growth in the developed world and 11 percent in the BRIC countries (Brazil, Russia, India, China). This blog will discuss the international trade benefits created by the Internet and the risks associated with online cross-border trade.
People’s attention shifted to the U.S. stock market again when stock prices dropped by 10 percent and hit a record low since October 2011. Although the recent ease-money government policies played a role in the price drop, the main reason for the decline was the global growth slowdown.
Latin America is filled with a myriad of natural resources, and for generations many Latin American countries relied on exporting these endowments for their wealth. However, the tides are beginning to change in Latin America. For the first time in history, a large number of Latin Americans are choosing to be entrepreneurs. In 2010, just 2.6% of the world’s applications for patent registration were filed in Latin America. With the new surge of entrepreneurship in the region, expect that number to change.
Forecasts from the World Bank show that the global economy should experience more growth in 2014 than what was expected seven months ago, showing that the world’s economy is finally turning a corner from the recession of recent years. According to a report released on January 14th, the world’s economy should grow by 3.2%, up from the 3% projection made in June. This is good news to many investors and business people around the world, since it is the first time in three years that the World Bank has revised their forecast and predicted improvement.
Eugenio Proto, an Associate Professor at Warwick University, and Aldo Rustichini, an Economics Professor at the University of Minnesota, found that the relationship between national income and national life satisfaction is “hump shaped.” They discovered that there is a clear positive relation in poorer nations, then flattens out at around $30,000-$35,000, and then turns negative. The relationship between national income and life satisfaction are critical to policymakers.
In what is deemed the last continent for major growth in the fast food industry, several chains are finding that expansion into Africa is going to be tougher than what was once expected. Infrastructure costs, food imports, and meat shortages have led to high prices at many quick serve restaurants across Africa. This has lowered optimism among some fast food executives about the prospects of expansion into the vast African continent, though there are others who believe now is the time for growth, even with the early setbacks.
In a world with a clearly-defined gap between developed, larger countries and small countries categorized by political turmoil and radical militant groups, it is difficult to recognize the growth of peace and stability. United States based companies often view currently developing countries as risks due to economic instability. Nevertheless, these low-to-middle income countries are increasingly becoming more stable and present the potential to be beneficial business associates.
When considering Africa, one does not tend of think of it as a region of the world that is doing extremely well. Poverty, disease, and violence all still run rampant throughout the continent. However, when it comes to its business opportunities and its economy, Africa is a powerhouse that is gaining more and more attention by the day from corporations and nations from all around the world. Already, it has the fastest growing economy of any continent in the world, is home to 6 of the 10 fastest-growing economies in the world, and it is expected to undergo an immense GDP growth in the next few decades. While Africa has many challenges to overcome, several sectors of the economy have huge potential for growth and change, and the continent has plenty of promising future economic prospects.
Businessmen go to Africa with hopes of profitable investment opportunities, but often they forget the level of diversity present among African countries. “You can’t treat Africa as one single market. So choosing where to play and where you will get the best return is the critical question,” said Michael Wood, the co-founder and director of consulting firm Aperio.
Many companies target the continent’s biggest economies, such as Nigeria, South Africa and Kenya; because they think these markets have mature economic structures. However, Wood suggests that companies new to the African market should first enter a smaller country. A small market usually provides investors with a lower risk of failure, less competition, and more approachable customers.
As the world continues to integrate the globe becomes more interconnected with complex supply chain systems. This becomes even more important now that countries are becoming evermore specialized in one industry or another. An interesting development where countries are specializing is in the arena of patents.
As the 21st century has trudged on into its second decade, the increasing rate of globalization that has encouraged integrated global markets has also brought emerging markets into the spotlight of international business. Although strong economies like China, India, and Brazil have captured most of the international community’s attention, sub-Saharan African countries are beginning to make their impact on the global economy. Sub-Saharan Africa is now home to 6 of the world’s top 10 fastest growing countries in the world, and these countries have been projected by the IMF to grow between 5 and 6 percent each year over the next two years. Additionally, U.S. exports to the region now exceed $21 billion per year. Clearly, the African continent of over 1 billion people and vast natural resources has tremendous potential for investors in a global economy, but one question remains: How exactly do you approach a market place as, frankly, notorious as sub-Saharan Africa?
While it is no secret that Sub-Saharan Africa has been plagued with poor infrastructure throughout the region’s history, the region’s economic prospects and investment opportunity just took another major hit. On August 7th, a massive fire damaged much of Kenya’s main international airport, Jomo Kenyatta International Airport, causing the airport to close indefinitely with no flights arriving or departing since the blaze was first reported. What made the fire so devastating to the airport was that the Nairobi County fire department did not have a single working fire engine, due to an auction last month where three of their engines were sold in order to pay a $1,000 USD repair bail, which local papers called a “disgrace of biblical proportions.” Despite the physical damage done to Kenya’s major airport, the destruction caused by the flames is unfortunately only the tip of the iceberg when it comes to the economic havoc that this fire most likely will unleash upon developing Sub-Saharan Africa.
International Energy Agency (IEA) reported on Tuesday that the shale oil recently found in the United States will help meet most of the world's oil demand in the next five years. It is significant to the world market as well as to the U.S. itself because it eliminates the threat of future energy shortage and reshapes the U.S energy market and its relationship with other countries.
On April 4th, the Bank of Japan shocked the world by unveiling a stimulus package that plans to inject $1.4 trillion into the Japan economy over the next two years. This large stimulus package is designed to help Japan out of a deflationary cycle and end two years of stagnation.
With underdevelopment and currency volatility in the emerging markets, the biggest players have set out to fix those problems. The BRICS leaders met in late March in South Africa to plan out objectives for a new bank that would help fund infrastructure expansion, which is set to reach $4.5 trillion in the next five years. Talks also included discussing pooling foreign currency reserves to resolve currency volatility.
The theory of a steady state economy and the end of economic growth as we know it has been discussed more frequently today as the world struggles to climb its way out of a recession. Whether or not this theory will become reality is up for debate. However, one specific aspect of this theory is certain. If economic growth continues to diminish and GDP growth rests motionless, the impact on international business will be profound. We will now look at some of the implications this reality would hold for international business, and we will also discuss possible solutions to the problems created by growth in our finite world.
2013 might just be the year emerging markets have been anticipating. Throughout the past year, investors have been pouring money into emerging markets in developing countries. There are other factors that point to success for emerging markets, but are they enough to boost the small businesses to profits and prosperity?
Agriculture has been an essential industry for nearly all major economies in the world. These countries use agriculture to drive international trade and create jobs. In the United States, agriculture is one of the most export dependent sectors of the economy with one-third of US agricultural production exported annually. Developing countries have realized the importance of creating economic growth through agricultural production and exports. With an increasing global population, agriculture has provided emerging economies opportunities for growth and integration into the global economic picture.
There are certain facts of life and globalization is one of them. But with completely integrated social, economic and structural systems comes both a profit and a price. The phenomenon has occurred in three waves across modern human history: beginning around 1870 and ending at the start of World War I, reviving in 1950 due to multiple trade agreements and ending in 1980, and finally establishing permanently at the fall of the Berlin wall in 1989. But as the flow of goods, services, currency, technology, legislation and human capital increase across national boundaries, there have been a number of costs (both apparent and latent) that a variety of stakeholders have had to bare.
Big Data is increasing the amount of information that is collected about a person or demographic and companies have begun to notice. In an ever more competitive global market, companies are looking for any advantage and Big Data is showing big signs of potential. By collecting and connecting big data, companies can identify traits about potential customers that they themselves may not even know. Behavior is much more predictable than you may suspect and this bodes well for companies who lead in collecting such data. Consolidating facts about a person in seemingly unrelated areas paints a remarkably accurate picture of their habits and how they behave. The question for companies is not if they will use this data but how they will use it.
Just as products and companies have brand images associated with them, countries also have built perceptions in the minds of people around the world. A country’s “brand name” can be based on a variety of rankings and its overall perception in the minds of businesses definitely has an impact on its success. If a country’s brand perception is favorable, that can translate into foreign investments alongside commercial and economic development. Businesses are also more likely to conduct operations in a country with a positive brand image. To help us identify the top country brands in today’s globalized economy, FutureBrand has released the Country Brand Index. The results are very interesting and the country at the top of the list might just surprise you.
Since the mid-1980s, emerging markets have grown faster than advanced economies. When you think of how hard it once was for smaller economies to grow and globalize, this is an amazing feat. Looking at the current situation can give many aspiring economies hope to grow successfully.
In economies that are slightly behind their modern industrial counterparts, entrepreneurship is often viewed as an important component in stimulating economic growth, innovation, competitiveness, and even alleviating poverty for these countries. However, before that is accomplished, there are several unique features that affect entrepreneurship in developing countries. While some of the distinct aspects of developing countries inhibit entrepreneurship, others enable entrepreneurial activities and allow start-up businesses to be successful despite great odds.
With poor infrastructure, pervasive corruption, and widespread poverty, being an entrepreneur in a developing country in Africa can be quite a challenge. But to one Rwandan, a problem became an opportunity. Oliver Nizeyimana started a bus transportation company in the year before he graduated with a degree in management. As a student of the National University of Rwanda in Butare, it would take him a very long time to get to class, and he had an idea to start a bus company that stressed punctuality. He saw an opportunity and took advantage, but it wasn’t without many obstacles and problems to overcome.
The widely accepted “BRIC” designation for the world’s largest emerging economies may soon be in need of a revision. In fact, some international business scholars have felt for many years that Jim O’Neill’s term for the developing nations of Brazil, Russia, India, and China should be updated to include at least one additional country. Morgan Stanley publicly stated as early as two years ago that the commonly referenced acronym should be revised to “BRIIC” in order to include the rapidly growing economy of Indonesia.
With the projection of a $150.1 billion cloud computing world market by 2013, what are emerging markets doing to get a piece of this pie? Cloud computing is finally growing in developed nations. Many companies are gradually moving more applications to cloud data centers where they can take advantage of pooling of computing resources, more efficient use of data processing power and increased flexibility. Cloud computing could have a huge impact on societies and economies in developing countries as well.
In chaos theory, the butterfly effect is where a small change in one place can result in large differences to a later state. One application of this theory is determining how policy decisions being made across the globe will affect the world economy. Many are aware of the economic problems in Greece, Ireland, Spain and Portugal, but Europe’s core economies (Germany and France) and now the United States have also seen their GDP growth slow significantly. Leaders have responded to the dangerously high debt-loads in many countries by increasing taxes and cutting spending. This has many, including the International Monetary Fund, worried that decreased world spending could put the economic recovery in jeopardy and possibly cause another recession.
With the goal of becoming a developed nation by 2020, Malaysia has some work ahead but recent predictions by Malaysia’s central bank show that this developing country is definitely on the right track. A predicted economic growth rate between five and six percent puts Malaysia in a much better position than other South East Asia economies in today’s global climate. Over the last decade Malaysia has faced tough competition in exports and production from low wage countries such as China. Now, Malaysia is looking forward to a knowledge-based economy lush with opportunities and potential.
A quick look around the globe can show you that the continued growth in emerging markets have led to rapid changes in many industries. One of the industries that many people seem to overlook is the entertainment industry. Global entertainment is actually in the crosswinds of many trends that have changed (and will continue to change) the face of entertainment.
To most people in the developed world, banks have become an integral part of our lives. For the most part they have operated silently in background just as we would wish. We take out a mortgage (or two), pay our credit cards and deposit any extra money into a savings account. We don’t really think about it – they have always been there and we assume they will always be there to serve us. This lifestyle is in direct contrast with low-income citizens from small towns in developing countries.
Is it possible that corporate social responsibility, one of the most popular trends in modern business, is an irresponsible goal for any profit-driven organization to pursue? Is the pursuit of the triple-bottom-line (people, planet, profit) contrary to the value that corporations provide for society? Ann Bernstein, the leader of the Centre for Development and Enterprise in South Africa argued in her new book that it is more valuable for companies to focus solely on profit while leaving people and planet to fend for themselves, especially in developing nations.
So how exactly to you advance from a frontier market to an emerging market? Some people classify frontier markets as a subset of emerging markets, but there is a clear distinction. We’ve talked in previous posts about systematic risk and political instability as huge factors to impeding growth. Once a country can overcome many of these risks, and grow a more stable infrastructure, it is well on its way to becoming a developed economy.
Africa is the second largest continent in the world by both size and population. The land in Africa is lush with many natural resources and the labor pool is massive. Yet, the economies and governments of most African countries are underdeveloped compared to the rest of the world. How is it that a continent so large and rich in resources is the least industrialized continent on Earth?
Gender equality is certainly a worldwide issue. Gender discrimination has existed for centuries, and rigid gender roles have actually now begun to affect the success of businesses. It is becoming more and more apparent that businesses around the world need to train and educate women to reach their full potential.
We all know that countries like India and China are becoming global giants. In order for India to keep up with countries like the United States and China, it must improve its railroad system. Railroad routes are often severely backed up due to overbooked trains and the fact that railroad travel is the only affordable option for many people in India. In order for India to compete with China for major global economic growth, Indian transportation needs to be improved significantly. The Prime Minister of India recently set a goal of an annual growth rate of 10%, but without a major renovation of India’s transportation system this goal will be unattainable. It looks like India has a lot of work to do to continue to compete globally.
“Feeding the world” has gotten more difficult as world population has risen, but the countries contributing the most to this population growth are also doing their part in making food for it as well. A recent joint study put forth by the United Nations-OECD says that agricultural output in the BRIC countries over the next decade will grow three times as fast as in the major developed countries. The report says a lot about changing diets production, and what and where one can expect to see their food coming from.
This week we will be taking a look into how developing countries around the world are competing in international markets. Many developing countries have expansive natural resources but have not yet reached their full exporting potential. We will discuss how these countries trade and what industries are expanding into these new markets. While some of these countries may be small, they still have huge opportunities for growth.
Kerala is known all over the world for its lush landscapes, sunny beaches, and peaceful and pleasing backwaters. It also defies the stereotypical Indian state. This state has a lot going for it, and the following just touches the surface:
- The highest human development index in India
- The highest literacy rate (more than 90%) and life expectancy, lowest infant mortality and the lowest school drop-out rate in all of India
Last week, the Government of Sierra Leone, together with the Department for International Development, the World Bank and the United Nations got together for an investment conference in London, showcasing the opportunities for doing business in Sierra Leone. Over 500 ruputable companies and 1,000 participants were in attendance.
Many companies consider Africa as a dangerous place to do business. This is mainly because there is a lot of negative publicity that surrounds the place and people tend to hear and remember it better than all the positives in the region. Viewing Africa as an unworthy place to expand a company's market is a huge mistake.
You may be surprised to learn that Brazil produced half of the world's coffee at one point. Although the nation doesn't enjoy this kind of pick-me-up dominance anymore, they still are the key player in the global market, and produce one-third of world's coffee beans. Despite the shear quantity of coffee coming out of Brazil, most consumers are more familiar with Columbian beans, and Asian and African beans seem to be gaining in popularity. It's said that because of Brazil's large-scale production, the quality suffers. Poor quality controls and an economic crisis in the 80's and 90's led to less local consumption in Brazil. Their best beans were exported while they had the leftovers. I can see why coffee didn't appeal very much to Brazilians. In response to this unfavorable trend, the Brazilian Association of the Coffee Industry initiated a "coffee purity" program that was so succesful that it was expanded to 60 countries. That led to a more than doubling of sales in Brazil. Brazilians now consume more than any other nation with the exception of the United States.