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Welcome to class of Introduction to Emerging Markets by Dr. Satyendra Singh University of Winnipeg Canada. Why Emerging Markets Now?. No fighting! More confidence in governance/people/system Economic reform/free market policies
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Welcome to class ofIntroduction to Emerging MarketsbyDr. Satyendra SinghUniversity of WinnipegCanada
Why Emerging Markets Now? • No fighting! • More confidence in governance/people/system • Economic reform/free market policies • Tariff/quota ↓, FDI ↑, investors as partners, deregulated industry, privatization of state-owned firms • Sense of market development in EMs • Two market segments (Urban and rural) • First mover advantage/educate customers • Change in culture • Social mobility ↑ demand for expensive products • Buy now, pay later
Whys is EM important? • Because • Advances in technology, • Increase in world travel, and • Trend toward globalization • Means, more market
Characteristics of EM • GNI per capita per year < $10,000 • High birth rate • Low education • Undeveloped infra structure • Several languages/dialects • Close family ties • Less women in workforce • Cultural issues • Unstable government
Definitions of EM • ING and Morgan Stanley (EM and developed) • Per capita income < $10000 • Unstable and irresponsible macroeconomic policies • Insufficient shares on the stock exchange • WTO (developed and developing) • Self selection criteria • Out of 149, 50 are designated as least developed • UN and World Bank (EM and developed) • Based on score on Human Development Index • Life expectancy • Adult literacy rate and educational attainment • GDP (better than GNI; it excludes foreign remittances)
Common Traits of Big EM • Physically large • Significant populations • Represent markets for a wide range of products • Strong rate/potential of/for growth • Undertaken programs of economic reform • Major political importance within their regions • Regional economic drivers • Engender neighbouring markets as they grow
Research shows that • If Per capita income/ year > $5000 • people become more brand conscious • forgo many local brands to seek out foreign brands they recognize • At $10,000 • they join those with higher incomes elsewhere who are exposed to the same global information sources. They join the “$10,000 Club” of consumers with homogeneous demands who share a common knowledge of products and brands. • Then, they become global consumers
EM: Eastern Europe • Czech Republic and Poland • Quick to implement free market policies • Hungary and Romania • Slow bureaucrats from communists days • Yugoslavia • Ethnic and religious divisions – Albania, Bosnia • Czech, Hungary, Slovak, Poland OECD • I.e., accept the obligation to modernize the economies • Baltic statesEstonia, Latvia, LithuaniaWTO/EU • Quick to move away from soviet-style economies • Drop Rubal, tariff-free, free-market economy
EM: Asia • 4 tigers/dragons HK, S Korea, Taiwan, S’pore • From assembly line to electronics, machines, ship building • Japan is lagging behind • S Korea links with China, USSR, and influences the region • China dual economy socialism/capitalism • By 2015, GNP of China = USA • China now in WTO should follow the WTO rules • Human rights, legal system, corruptions, protectionism • India • free-market economy, > 51% share, no import restrictions • 400m MIG/HIG, 800m LIG consumers
Canada’s Relations with the EMs • Canada has good relations with • South America, NAFTA, Africa • Canada’s role in E. Europe is limited • Canada is interested in ASEAN • 4 tigers + Indonesia, Malaysia, Philippines, Thailand • Canada is a member of APEC • Apprehensive in pursuing substantial business due to risks
International Agencies… • Organization For Economic Cooperation and Development (OECD) • Group of developed countries dedicated to promoting economic expansion in its member-nations • Organization of Petroleum Exporting Countries (OPEC) • Cartel of 11 petroleum exporting countries • Middle East (6): Iran, Iraq, Kuwait, Qatar, Saudi Arabia and UAE • Africa(3):Algeria, Libya • Other (2): Indonesia and Venezuela Other non OPEC oil exporting countries: UK, Russia, Mexico, Norway
International Agencies • WTO Principles • Trade will be without discrimination • Trade should be freer, with trade barriers negotiated downward • Trade should be predictable • Trade should be more competitive • Trade should be more beneficial for less developed countries, encouraging development and economic reform • protects copyrights, trademarks, trade secrets, and other intellectual property matters • Disagreement on agricultural policies • India, Brazil…