CIVETS: Emerging Economies on the Rise

After BRICs, the emerging economies from the member countries of the CIVETS are poised to take the economic spotlight

It had been over a decade since the BRIC group was constantly in the news. BRIC stands for the economic giants Brazil, Russia, India and China. Their economies have boomed in that span of time and are now showing signs of slowing down. Now there is another group with emerging economies that is set to take center stage. These are the countries of Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa, collective know as CIVETS, coined by Robert Ward, from The Economist Intelligence Unit.

Jim O’Neill, the chief economist of Goldman Sachs was the one who coined the term for BRICs and back in 2005 he had identified a number of countries that he thought have the greatest of potentials to be major economic leaders. He dubbed these countries N-11 or the Next 11. These are, in no particular order, Indonesia, South Korea, Turkey, Mexico, Vietnam, Philippines, Iran, Bangladesh, Nigeria, Egypt and Turkey.

Projections and potentials

It is projected that the next ten years will be owned by CIVETS, where the middle class is rising, with a young population whose average age is 27 and where the growth rate right now is rapid. This is because the BRIC countries could no longer be called emerging economies. China has the second largest economy in the world. Brazil is in 7th place. It is expected that the pace of their economy is bound to slow down. Progress also poses many problems for a country, including issues with currency control, high inflation in wages and immense bubbles in the real estate industry. These hinder investment opportunities as global companies look somewhere else where higher profits could be realized.

While the members of CIVETS are smaller countries compared to the BRICs, the group has more than 5% growth rate, except for South Africa and Egypt. Domestic consumption is high and their business landscape offers diverse opportunities for investor companies that are looking for expansion on an international level.

Colombia’ President Juan Manuel Santos had instituted key government reforms, including a $55-billion 10-year infrastructure development program that will be funded largely by private investors. Many of the reforms are geared toward making the country attractive to investors. Security concerns have been addressed as well as other internal problems. Key growth areas are infrastructure construction, mining, alternative and conventional energy and consumer goods.

The middle class in Indonesia, which is home to about 230 million inhabitants, is rapidly expanding. It is actually predicted to be the Asia’s next boom market after India and China. It has passed the $3,000 GDP per capita benchmark. Foreign investments are coming in, forecast to hit $20 billion in 2013. Regulatory issues, hook up to electricity, infrastructure and lack of skilled workers are hindrances. Luxury goods are in high demand. Mining, telecommunications and transportation are major growth areas.

Security is now barely an issue in Vietnam and it has relaxed its hold on trade and investment after its membership in the World Trade Organization. The middle class in Vietnam is also growing. Wages in the country are 35 to 45 percent lower than in China. Potential industries include healthcare, education and high technology.

Egypt is poised to transition into a democratic government and its youth is being targeted as a huge consumer goods market. Turkey is politically stable. It had taken measures to shorten the length of time to start a business in the country to six working days and started implementing reduced corporate taxes through lowered contributions to social security. It is in a very lucrative position, as it has access to Middle Eastern and European markets. Energy, technology and consumer goods are key areas for business opportunities.

South Africa has a strong civil society. It has robust taxation and legal systems in place, good infrastructure and its macroeconomic policy is very sound. It is ranked 35th in the 2012 World Bank’s Doing Business rankings. It takes 19 working days to process the papers to start a business in South Africa. There is still a 23.9% unemployment rate although the country has one of the more advanced and richer economies than other African countries. It is a good place to start business and penetrate other markets within the African continent. Consumer goods, transportation and construction are key business areas.