Tài chính doanh nghiệp - Chapter 15: Doing business in emerging markets and developing economies (emdes)

Chapter 15Doing business in Emerging Markets and Developing Economies (EMDEs)1Lecture planDefinition of Emerging Markets and Developing Economies (EMDEs)Import markets in EMDEsTrade policy issues in EMDEsExport marketing aspects in EMDEsConsiderations for investing in EMDEs2Definition of EMDEsIn principle, the group of the emerging market and developing economies (EMDEs) includes all countries that are not classified as advanced economies and which are at a lower level of development than the advanced economies. 3General features of developing countriesHigh levels of rural populationRelatively high population growth ratesHigh proportion of population living in absolute povertyNot well developed banking/credit facilities4General features of developing countries cont.Relative lack of financial capital (espec. FX)Relatively low level of infrastructure(roads, telecommunications, education institutions)Low marketing facilities(e.g. storage, distribution)5Government sector in developing countriesBigger size government sector than in ICs(lower tax base)However, more government regulation than in ICs – big concern: control over the national economyMore development planning than in ICs, e.g.– Indonesia: ‘Repellita’ (5-year plans)Malaysia,Taiwan6Trade and developmentTrade as engine of growthImport substitution vs export orientationDevelopment strategiesStage 1: Exports of natural resources/ imports of manufacturesStage 2: Import substitutionStage 3: Export-led growth7The import market of EMDEs in 2003 (total merchandise and services imports) by main groupings (%); Total: US$2260bSource: adapted from WTO, International Trade Statistics 20048Imports of EMDEs by regional groupings by product, 2003, %SourceDevel’g AsiaLatinAmericaC&E EuropeMiddle EastAfricaTotal100100100100100Farm products910101216Minerals171211611Manufact-ured goods7375787971Source: adapted from WTO, International Statistics 2004 and World Bank, World Development Indicators 20049The share of China and Eastern Europe* in world merchandise imports, 1948–2000* Eastern Europe = Former Soviet Union and C. & E. Europe10China’s share of world merchandise imports, by product, 1990, 2000, %%11Trade policy issuesTariffsGenerally higher than in ICs.Lower proportion of tariffs are bound.Regional economic groupings (e.g. AFTA, MERCOSUR) discriminate against non-members. (See impact of AFTA’s intra-regional tariff cuts on next slide.)12Comparison of 1999 MFN simple tariff rates and average CEPT rates in selected AFTA countries 1999, 2003 Source: adapted from World Bank Development Indicators, 2004, table 6.6 and ASEAN Secretariat website 13Trade policy issuesNon-tariff measuresSouth Korea : ‘Pigs is pigs!’Malaysia: import licences (plastics raw materials)Barriers to trade in services14Export marketing issuesCultural differenceslanguage cultural restrictions on consumption/importsPrice strategiesdifferentiated prices (on low side)‘price markets’15Export marketing issues cont.Distributionlonger distribution channels than in ICsPromotionLess spending required compared to ICsHowever, growing promotion expenditure in Asia and Latin America(See Table 15.10 in textbook for data on advertising expenditure.)16Leading EMDEs in developing Asia in terms of trend growth in advertising expenditure, 1998–2003 Source: adapted from Euromonitor, GMID, 200417Australia’s position in the import markets of transition economiesBest position in China: A$6.5 billion in 2000–2001; 2% of China’s imports; 8th rankSmall exports to other markets: the share of Australian exports varies between 0.1% and 0.7% (Romania)Exports include primary products, but also some elaborately transformed manufactures (e.g. telecom equipment, measuring and controlling instruments, medicinal and pharmaceutical goods18Transition economies Current and former centrally planned economies in transition to a market-based economyformer Soviet Union countries; C. & E. Europe; PR China and Vietnam China – the world's 3rd largest economy (PPP method)Government sector – still the leading sector in FSU; however, in 2001 it accounted for less than 50% in most C. & E. European countriesPrivatisation of state enterprises19Trade issues in transition economiesDecentralisation of foreign trade(China since 1985)From central plan to tariff protectionMembers of WTO: Czech Republic, Hungary, Poland, Slovak Rep., Romania, China (November, 2001)8 countries joined the EU in 2004 with 3 more to follow (Bulgaria, Romania and Croatia)Abolition of import licences/quotasOver 1992–2001, China has undertaken a number of 8 reductions of non-tariff measures20FDI inflows into EMDEs by main geographic grouping, 1993–2003, US$bSource: adapted from UNCTAD, World Investment Report, 2004 21Trends and issues in direct investment in EMDEsDeveloping Asia – the largest beneficiary of inward FDI among EMDEs. ( US$68b in 2003). China: top destination 2001–2003.FDI in the service sector growing fast, but manufacturing still takes about 55% of inward FDI.Political stability: key consideration for FDIGovernment controlsGovernment attitude to FDI(the ‘obsolescing bargain’)Joint venture – preferred form of FDI?22Trends and issues in direct investment in EMDEs cont.Government controlsEase to do businessbest performers: Lithuania (ranked 17th), Slovakia (18th), Botswana(19th), and Thailand (20th)Copyright issues (e.g. China)Transfer pricingIncentivesPersonnel23Sectoral trends in FDI inward stock in transition economies, 1999 Leading sector: tertiary (US$49.3b, 50.1% of total)finance; trade; transport, storage and communications Secondary sector: US$43.5b (43.5%)food, beverages; motor vehicles and other transport equipment; machinery and equipmentPrimary: US$2.4b (2.5%) 24