Tag Archives: BRICIS
As seasoned readers of this blog will undoubtedly be aware, we at Mediolana firmly believe that in an era when vast swathes of the developed world are, at least from an economic perspective, having great difficulty finding a reason to get out of bed in the morning, the time has arguably never been more apposite for companies and individuals located in Western Europe and North America to ask themselves where exactly their core markets are. The BRICI countries in particular seem to offer incredible opportunities for manufacturers and service providers at every level; reading the China Daily, one would think that there is an inexhaustible supply of previously unheard of cities with populations of over five million people, while the fact that Indonesia has the fourth largest population of any nation on the face of the Earth still causes Mediolana’s CSO to stop typing and look around every time he recollects this.
Yet for the even more adventurous and daring entrepreneur, there are yet more lucrative opportunities than the aforementioned engines of growth. We are thinking in particular of Sub-Saharan Africa, a region which is internationally more famous for famine than finery; in particular, the region of East Africa, which was the subject of an excellent recent (November 2011) supplement published in the Financial Times. Perhaps largely because almost no one from the developed world conceptualises the states of the East African Community or EAC (Tanzania, Kenya, Burundi, Uganda and Rwanda) as anything other than economically insignificant, they ignore the fact that there is a phenomenal consumer boom underway in this region. Consider the following:
- The Sub-Saharan Africa GDP growth rate in 2011 was 5.2%, with all EAC countries bar Burundi (4.2%) exceeding this rate;
- A global consumer culture applies to this part of Africa, too: Tanzania opened its first formal retail outlet in 1999, and shopping malls – like in China and India – are mushrooming region-wide;
- The Rwanda Development Board‘s One Stop Centre enables registration of a new corporation in just 24 hours.
Of course, it is not easy for most East Africans to do business in this part of Africa, let alone outsiders: transport, logistics, entrenched and relatively widespread corruption and other infrastructural issues are only just beginning to be addressed, while purchasing power for most people in this region is still quite limited. That said, relatively low competition and inchoate formal markets signifies that there is almost everything to play for in one of the world’s most underrated economic zones.
As already noted on this blog, in these times of economic contraction in Western Europe, the United States and Japan, it is essential for entrepreneurs to look beyond what have conventionally been regarded as traditional markets and survey the world anew; on doing so, it would be a brave person to discount the potential of doing business in or with Indonesia – and not for the reasons that one might initially think of. While the nation composed of 17,508 islands is notable for its preponderance of export processing zones (‘EPZs’) – areas of lax taxation, loose regulation and eye-watering exploitation – Indonesia is also a burgeoning economy which is rapidly developing middle-class consumer tastes, clearly seen in its population’s remarkably rapid and enthusiastic adoption of smartphones, utilised in a manner more associated with South Korea than a country with a relatively modest GDP per capita (an estimated US$4,657.128 in 2011 PPP terms, IMF).
IKEA – originally a Swedish entity, but now a rather more complex corporate animal with roots straddling Holland, Liechtenstein and the Netherlands Antilles – is the planet’s largest furniture retailer, and their relationship with ASEAN’s largest member is telling. On the one hand, Indonesia is still a low-cost manufacturing hub for them, a fact exemplified by their SPARKA football. The ball of choice for Mediolana’s Creative Director and Chief Strategic Officer (‘CSO’) to bounce around his office, copy of the Financial Times in hand, as he dreams up yet another advertising campaign, the SPARKA, a soft, eminently kickable sphere with polyester, polyester and yet more polyester as its constituent elements, presently retails in the United Kingdom for the princely sum of £2.99; when one factors in the shipping costs from South-East Asia alone, it is difficult not to revere the ball as a miracle of modern globalisation.
Conversely, as the IKEA Expansion to Indonesia – Strategic Marketing Plan 2009 report - a document of significance authored by Herdianti Wisesaputri, an alumnus of the Royal Melbourne Institute of Technology‘s MBA programme – richly illustrates, Indonesia is likely to be a market of growing significance for the company that is already synonymous with home for many citizens in developed countries. Wisesaputri points to the potential for IKEA to capture the imagination of upper-middle class Indonesians, who should be the initial target market in any forthcoming retail venture in the territory; she also notes the phenomenally low capital barriers to entry for IKEA in Indonesia, with an initial five-year investment surge costing an estimated US$31m – peanuts in the context of penetrating a country of nearly 240 million people with probable GDP growth of over 6% in 2011.
The late 2000s and early 2010s are an era in which the world order appears to be transmogrifying by the day, and in this context mediolana.wordpress.com has already posed the question of whether the Shanghai Cooperation Organisation is the new NATO. But amidst all the new acronyms – SCO, BRICS and BRICIS – Mediolana believe that one international institution of potentially vital significance is being overlooked: the Organisation for Islamic Cooperation (‘OIC’).
The OIC – founded as the Organisation of the Islamic Conference on 25th September 1969 at Rabat, Morocco – is an organisation presently consisting of 57 member states. Despite the population of these member states totalling an estimated 1.6bn – greater than China – the OIC has until recently experienced a negligible global profile; its credibility has been strained by many factors, including the pronounced democratic deficit and poor governance that have prevailed within most of its constituent countries during its existence.
However, there are signs that the OIC is getting ready to play a much bigger role in international affairs during the coming decades:
1. Organisational Reform. Under the leadership of its 9th Secretary-General – Prof. Dr. Ekmeleddin İhsanoğlu, an academic who has held posts at the University of Exeter, Istanbul University and Ludwig Maximilians University of Munich, and who was elected to his current position in 2004 – the OIC has implemented substantial reforms under the theme of ‘modernisation and moderation’. Particularly instructive in this regard are two documents: (i) the Ten-Year Programme of Action to Face the Challenges of the Twenty-First Century, a 2005 document which contains numerous objectives relating to economic and social development; and (ii) a new OIC Charter, adopted on 14th March 2008. Additionally, the OIC took on its current, more dynamic name on 28th June 2011.
2. Reform Within Member States. The Arab Spring has led to wildly unpopular dictators being overthrown in Tunisia and Egypt with other OIC member states such as Syria, Libya and Yemen likely to follow suit. However, reformist impulses can be seen elsewhere in the OIC, including in already broadly democratic countries such as Turkey and Indonesia. These processes should have the effect of, in turn, making the OIC stronger insofar as it is the sum of its parts.
3. Energy Abundance. Nine out of the twelve members of OPEC are also in the OIC, giving the latter organisation enormous potential leverage in global affairs. Moreover, many OIC member countries – from Mediterranean nations such as Albania and Algeria to desert-dominated Sudan and Saudi Arabia - are located in warm and sunny climes seemingly made for solar power generation; the headquarters of the International Renewable Energy Agency (‘IRENA’) are located in Masdar City in the United Arab Emirates.
4. Economic Potential. While acres of coverage have been lavished on the so-called BRICS nations, comparatively little has been penned concerning another Goldman Sachs formulation, the Next Eleven (‘N-11′). These are eleven countries which, in addition to the BRICS, have the potential of becoming the world’s largest economies during this century – and seven of the eleven are OIC member states.
5. A Growing International Reputation. Russia became an OIC observer state in 2005, with the United States appointing a Special Envoy to the OIC three years later; India’s membership application is presently being blocked by Pakistan. The present UN Secretary-General Ban Ki Moon has called the OIC ‘a strategic and crucial partner of the United Nations‘ in recognition of its increasing salience.
The recent release of the Q4 growth figures for the United Kingdom, which revealed that an economic contraction took place in what is traditionally by far the most lucrative quarter for a great many UK businesses, should make it fairly clear that any recovery from a recession which many have compared to the Great Depression is not going to be straightforward, with even the tactic of adding a few extra digits to the money supply not proving enough to dispel the clouds of economic gloom. And while the figures for the United Kingdom are particularly sobering, from the United States to Spain large parts of the developed world are facing structural macroeconomic problems that signal the long-awaited return to growth may not occur any time soon.
In times like these, entrepreneurs – particularly those with knowledge and skills in the digital economy – would be well-advised to pore through the illuminating Boston Consulting Group (‘BCG’) report, The Internet’s New Billion: Digital Consumers in Brazil, Russia, India, China and Indonesia. This 2009 publication provides a wealth of information on online activity in a group of countries – termed the ‘BRICIs’ by BCG – that represent scarcely conceivable opportunities for enterprises based in a largely stagnant (post-)industrial world.
The following information is of particular salience:
1. In 2009, the BRICIs represented about 45% of the world’s population and around 15% of the planet’s GDP. 610 million Internet users lived in these territories;
2. By 2015, these countries will possess more than 1.2 billion people utilising the Internet;
3. The number of PCs in the BRICIs is set to more than double in the six years from 2009 to over 880 million;
4. As of 2009, the BRICI countries had about 1.8 billion mobile telephone subscriptions, compared with a combined total of 394 million in Japan and the US;
5. 60% of BRICI digital consumers are under 35 years old and are very quick to adapt to new ways of using technology. Education is especially prized in the BRICI nations, and has helped spur the growth of the Internet in these economies; young people are especially keen on using instant messaging services to discuss homework.
Developed world entrepreneurs take note: the digital markets of tomorrow are here already. And a First World recession is all the more reason to explore them.