Ahead of the game:
Succeeding in emerging markets
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An Economist Intelligence Unit white paper
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
About the research
Ahead of the game: Succeeding in emerging markets aims to provide insights into how companies today are
overcoming key barriers to growth in the world’s major emerging markets.
The insights and conclusions of this study are based on 15 countries, which together represent the
major targets for foreign direct investment (FDI) over the next five years, based on forecast FDI inflows
from the Economist Intelligence Unit. These countries are: China, India and Thailand from Asia-Pacific;
Poland, Russia and Turkey from Eastern Europe; Brazil, Chile and Mexico from Latin America; Egypt, Saudi
Arabia and the United Arab Emirates from the Middle East and North Africa; and Angola, Nigeria and
South Africa from Sub-Saharan Africa.
This study is based on a survey of more than 1,300 executives from within these emerging markets,
making it one of the biggest ever business surveys of these countries. The respondents represented all
major industry segments and were evenly split between domestic firms and multinational companies
operating in these markets. Only relatively large companies were polled: all companies reported annual
revenue of at least US$100m, making them significant players in many of these markets, and one in four
companies had revenue of at least US$10bn. All respondents hold management positions, with over 400
respondents from C-level positions. The survey was conducted by the Economist Intelligence Unit during
June, July and August 2008.
The Economist Intelligence Unit also conducted over 20 in-depth interviews with CEOs and other senior
executives from companies across these markets. Our thanks are due to the following for their time and
insights:
Mahmoud Abdel Latif, chairman, Bank of Alexandria
Barry Swartzberg, group executive director, Discovery Holdings
Flavio Díaz Mirón, chief country representative, Bombardier
Marek Matraszek, founding partner and managing director, CEC Government Relations
Ricardo Claro, head, Claro Group
Clyde Tuggle, former president, Russia, Ukraine and Belarus Business Unit, The Coca-Cola Company
Ralph Nitzgen, senior executive officer and general manager, Commerzbank Dubai
Christoph Remund, CEO, DHL Logistics India
Vinod Nair, managing director for India, Diamond Management & Technology Consultants
Louise Goeser, president, Ford Mexico
Handan Saygin, head of investor relations, Garanti Bank
David Pan, general manager, HR and shared services, Guangdong Dapeng LNG
Graham Briggs, CEO, Harmony Gold
David Brown, CEO, Impala Platinum
Roberto Setubal, CEO, Itaú Financial Holding
Levent Eyuboglu, CEO, Multi Turkmall
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Paulo Zottolo, CEO for Latin America, Philips Brazil
Rui Manuel Dos Santos, chairman and CEO, Sistec
Sanjay Vakharia, director of marketing, Spykar Lifestyles
Aaron Tong, general manager, strategy and investment centre, TCL Corporation
Jean Lebreton, senior vice-president and head of strategy and business development, ThaiBev
The author of the report is James Watson. Alasdair Ross is the author of the chapter on risk. Additional
interviews were conducted by Andrew Bossone, Mimi Cauley, Aviva Freudmann, Edward George, Luis
Kaffman, Paulius Kuncinas, Thierry Ogier, Matthew Shinkman and Pamela Whitby.
Country profiles were contributed by Justin Alexander, Anjalika Bardalai, Erica Fraga, Edward George,
Ann-Louise Hagger, Duncan Innes-Ker, Bernard Kennedy, Jane Kinninmont, James Owen, Martin
Pickering, Danny Richards, Pat Thaker, Ania Thiemann, Justine Thody and Philip Walker.
September 2008
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Executive summary
L
ooking to emerging markets as a source of corporate growth is not a new story. But since the wave of
reforms and geopolitical changes during the 1990s, emerging markets have moved more clearly onto
the radar of executives around the world. These countries grapple with a range of legacies—communism,
colonialism to war, to name a few—as they embrace globalisation. But as economic progress has taken
hold in these countries, the business environment that companies encounter within these markets has
been rapidly changing. Alongside this, many of the formerly slow and often state-owned companies have
emerged as fierce competitors, both locally and abroad.
This report seeks to provide a better understanding of how firms are entering these countries, what risks
and operational barriers they face there and what the key factors are for succeeding in these markets. It
also aims to provide some clues as to how domestic firms are competing against their foreign rivals. Above
all, it explores whether or not the emerging-market success story is likely to continue in the years to come.
A single study cannot hope to be comprehensive with regard to insights on every country or industry,
so this report aims to provide a broad view of the major operational issues that executives from various
sectors face in these markets. Some of the key findings emerging from this study include the following:
l Executives are bullish about the growth prospects of these countries. The emerging markets
reviewed within this study have delivered strong economic growth during the last decade, a trend that is
forecast to continue. According to the executives polled for this report, and despite current gloominess in
the developed world, confidence within the countries being polled could barely be higher: nearly nine out
of ten (87%) are optimistic about their company’s revenue growth over the next two years (just 3% are
pessimistic). Similarly, about eight out of ten (79%) are optimistic about profitability (just 6% are not).
l The number one rationale for operating in these markets is to tap into domestic demand. Years
of economic growth has created an extraordinarily large pool of active consumers to target. More
broadly, average individual incomes are likely to nearly double between 2000 and 2012 within many
of these countries. Tapping into this potential consumer demand is now the number one reason for
companies to enter these markets, far ahead of simply wanting to cut production costs or gain access
to natural resources. Seven out of ten executives from foreign multinationals state that accessing the
domestic market is one of the primary reasons for being there—the second-highest reason is as a base
for expansion into surrounding countries, selected by five in ten executives. This holds true across nearly
all industry sectors, from manufacturing to services, with the only obvious exceptions being energy and
natural resource firms.
l Succeeding in these markets requires a focus on quality, ahead of cost. The top success factor noted by
executives across all regions and most industries is the need to focus on product quality. Nearly six out of ten
firms (56%) cite this as the key driver for their success in these markets. Competitive prices (41%) and strong
brand appeal (24%) are important too, but lag behind quality. Christoph Remund, CEO of DHL Logistics India,
says quality is “critical” to his company’s business in the country. TCL, a Chinese television maker, is another
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
example: it is rapidly evolving from its former low-cost focus to emerge as a provider of high-quality goods.
Other firms, such as South Africa-based Discovery Holdings, are even seeking to introduce product innovations
into developed markets, such as the UK.
l A shortage of skills is the number one barrier to growth. Political instability and macroeconomic
fundamentals, bad roads and congested ports are all concerns that firms grapple with, but the main
barrier to growth in emerging markets is a shortage of skills. Nearly one in four executives (23%) rates
this as a major barrier—and for about three-quarters of companies it is at least a moderate barrier. Other
labour-related concerns, such as rising labour costs and high rates of staff turnover as a result of a highly
competitive job market, add to the challenge for HR departments. About one in five companies (18%)
have to replace between one-quarter and one-half of all their staff every year.
l Key risks are on the decline across every region. Barring individual exceptions (Thailand and the
United Arab Emirates), the overall risk level is falling in every country under review in this report. Most
of the decline is explained by falling macroeconomic risk. Given the tough economic conditions currently
being experienced within developed markets, this decline in risk highlights the stable growth that has
been achieved within these emerging markets over this decade.
l Partnering with other firms is important, especially in riskier markets. About six out of ten executives
(58%) feel that it is important or very important for them to collaborate with other firms in order to succeed in
that market. This is also true, to an extent, with market entry. Although acquisitions and greenfield investments
are the most popular forms of entry, some form of partnership is widely used as a means of entry, especially when
going into riskier countries.
l Domestic firms are confident that they can compete with their foreign rivals. Although global
brand surveys are still dominated by developed-country companies, a growing number of nimble
competitors are rapidly expanding within (and beyond) these emerging markets. They bring with them
much confidence in their ability to take on their multinational rivals: eight in ten domestic firms polled
for this report feel they are somewhat well positioned or well positioned to compete with foreign rivals
on their home turf. Just 4% say they are not.
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Key points
n All 15 markets under review in this study have reported strong average real GDP growth over this decade, with
soaring per capita incomes across many of these countries
n Nearly all companies have reported strong success in these markets in recent years, both in terms of revenue
growth and profitability
Introduction
S
ince the start of this decade, the countries selected in this sample have delivered substantial rates
of economic growth. Eight of the 15 countries delivered average real GDP growth rates of more than
5% between 2000 and 2007, with the lowest delivering a healthy 3% average over that period. Of course,
within this sample, different countries are at very different stages of development. Angola only recently
emerged from civil war, but has grown rapidly since then, with GDP growth peaking at 21% in 2005. Other
economies, such as Brazil and Mexico, are already substantial and continue to deliver solid growth.
Russia, India and China, all already large economies, are still expanding quickly. China’s GDP growth rate
alone has averaged about 10% since 2000.
Accordingly, income per head within many of these countries is likely to nearly double between 2000
and 2012. In Chile, for example, this is forecast to expand from less than US$10,000 per year (measured
at purchasing power parity, PPP) to more than US$18,000 by 2012. Since 2000, per head income in China,
despite its enormous population, has increased by about 50% from below US$4,000 to nearly US$6,000
this year—and is forecast to exceed US$7,000 by 2012. Average incomes for Russians have already more
than doubled since 2000, reaching around US$16,000 this year and on track to surpass US$20,000 by
2011. At the top end of the scale, per head income in the United Arab Emirates (UAE) is expected to pass
US$35,000 by 2012. Even the poorest of the sample, Nigeria, will nearly double between 2000 and 2012,
albeit from a very low base of just US$1,000.
Given this story of rising prosperity, it is unsurprising that these 15 countries have each had an
impressive track record of attracting inflows of foreign direct investment (FDI) over the past five years—
and are all forecast to be the biggest recipients of FDI inflows within their respective regions between now
and 2012 (see table).
All of this economic success underpins a fundamental point emerging from this survey, which is that
the vast majority of executives polled for this report have been succeeding in emerging markets in recent
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
years. About nine out of ten executives say that their company has been either very or somewhat successful
in these markets, in terms of revenue growth. This is true of both domestic firms and foreign multinationals
operating in these markets—and broadly holds true across all regions and industry segments.
GDP growth rates
(Real GDP growth, %)
Country
2008
2009
2010
2011
2012
Angola
15.1
9.8
9.3
9.8
10.1
China
9.8
8.5
9.1
9.1
8.4
India
7.5
6.8
7.5
7.6
8.1
United Arab Emirates
8.4
7.6
7.2
6.6
6.1
Nigeria
6.5
6.7
6.9
6.7
7.1
Egypt
7.1
6.7
6.3
5.6
5.8
Saudi Arabia
7.2
6.7
5.9
5.4
6.0
Russia
7.5
6.8
6.1
5.5
5.0
Turkey
4.5
3.7
5.1
5.0
5.0
Poland
5.3
4.2
4.0
4.4
4.3
Thailand
4.8
4.5
4.6
4.2
4.4
South Africa
3.5
2.8
5.0
4.6
3.7
Chile
3.6
3.6
4.3
4.4
4.3
Brazil
4.6
3.4
4.0
4.0
4.0
Mexico
2.3
1.6
3.4
3.8
3.6
Source: Economist Intelligence Unit.
Has this growth delivered profitability? Here the story is one of success too, although not as
unqualified. Globally, 14% of executives gave either a neutral or negative response when asked about
their success in growing profits over the past few years. The situation seems toughest in Eastern Europe
(20% of responses were negative or neutral) and best in the Middle East (8%). Overall, however, more
than eight out of ten executives (83%) from across these emerging markets have been somewhat or
very successful with regard to profitability. This does not mean that competition is not tough. When
asked about expansion of market share, the story remains bullish, but less strikingly so. About 23% of
respondents were either neutral or negative on this point.
How successful has your company been in this market over the past two years, in terms of each of the following?
(% respondents)
Very successful
Somewhat unsuccessful
Somewhat successful
Very unsuccessful
Neither successful nor unsuccessful
Don't know/Not applicable
Revenue growth
58
32
6 11 2
Profitability
46
37
10
31 2
Growth in market share
35
Source: Economist Intelligence Unit survey; June-August 2008.
39
17
4 2
3
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
The rest of this report seeks to explore what the key factors are for succeeding in these markets, based
on the experience of executives operating there. It looks at why firms are in these countries in the first
place, what advice they offer for entering these territories and how they deal with major operational
barriers, such as poor infrastructure or corruption. It will also review how domestic firms are fighting
back, providing insights into what sort of competitors foreign rivals face in tomorrow’s primary
growth markets.
Booming investment in emerging markets
(Inward direct investment, US$ bn)
2008
2009
2010
2011
2012
China
95.4
81.6
80.9
82.9
95.3
Russia
48.0
42.0
40.5
39.5
40.0
India
37.7
35.0
40.0
50.0
60.0
Brazil
34.0
28.5
30.0
31.0
32.0
Turkey
15.0
16.0
28.0
32.0
35.0
Mexico
18.0
16.0
24.0
25.0
26.5
Poland
21.0
19.0
15.5
14.5
14.8
Chile
18.5
15.6
16.6
17.7
19.0
UAE
11.2
11.8
10.1
9.3
8.8
Thailand
9.5
9.9
10.1
10.5
10.5
Egypt
9.6
8.0
7.2
6.4
5.8
South Africa
6.1
3.5
3.7
4.5
5.0
Saudi Arabia
1.9
2.3
2.5
2.6
2.7
Angola
2.3
2.6
1.9
2.3
2.0
Nigeria
2.1
2.1
2.1
2.3
2.1
Source: Economist Intelligence Unit.
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Key points
n Companies are primarily in these countries in order to tap into the domestic market and rapidly expanding
consumer class n These markets are also seen as a major source of skills
Why go there?
E
merging markets are not a new phenomenon. Of the foreign companies polled for this report, over
80% had been operating in these markets for at least five years, with nearly two-thirds having racked
up ten years or more. Just one in ten had been in these markets for less than three years. Regionally,
multinationals are most entrenched in Latin America, whereas Eastern Europe has the most recent
entrants. However, the motive for being in these markets has been changing steadily.
“[Egypt has] a
wealth of people and
they can be used like
in India on the IT
sectors and servicerelated sectors.”
Mahmoud Abdel Latif,
chairman, Bank of Alexandria
Domestic demand
Whereas in the past, third world countries or developing markets were seen primarily as a source of
natural resources and low-cost labour, today they are first and foremost a new source of demand for all
kinds of businesses. Seven out of ten executives (71%) polled state that one of their company’s main
reasons for operating in that market is to gain access to the domestic market. The second-highest reason
(52%) is to act as a base for expansion into surrounding countries. “It is easier to open doors when doing
business in the region from Mexico. We view great potential demand in the future for airplanes in the
region and Mexico is an important springboard to exploit these opportunities,” says Flavio Díaz Mirón,
the chief country representative for Bombardier, a Canadian aeroplane and train manufacturer, in Mexico.
In Brazil, Roberto Setubal, CEO of Itaú Financial Holding, a local bank, says the country now has a
growing set of consumers wanting financial services. In response, his bank has developed consumer
finance and credit cards. “This is a great novelty, because this would not have been possible ten years ago
because of economic uncertainty and volatility,” he says. “For instance, car financing boomed and helped
the local output to grow from 1m vehicles to 3m vehicles within a few years.”
In India alone, the number of active consumers is nearly as large as the population of Europe. Of
course, per head incomes remain much lower, but their purchasing power is growing rapidly. According
to Christoph Remund, CEO of DHL Logistics India, growth in the country remains very strong, which in
turn bolsters domestic demand. “India has a middle class of 150m-200m who are buying computers and
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Which of the following represent your company’s main reasons for operating in this country? Select all that apply
(% respondents)
Access to the domestic market (eg, sell goods/services)
71
Using this market as a base for regional expansion
52
Ability to reduce manufacturing/production costs (eg, low labour costs)
28
Access to skills/talent (eg, to conduct R&D, business process outsourcing)
28
Access to other resources (eg, minerals, oil)
13
Source: Economist Intelligence Unit survey; June-August 2008.
taking holidays,” he says. Even in Africa, domestic consumers are the number one target, according to
executives, although access to natural resources remains a key reason.
A source of skills
Asia, unsurprisingly, remains both the world’s biggest workshop and the biggest source of skills and
talent: about four out of ten firms say their main reason for being there is to lower manufacturing costs
(44%) or get access to skills (41%)—far higher than any other region on both counts.
Of course, cheap skills are only part of the equation. A US carmaker, Ford, has established a significant
operation in Mexico, on the back of a highly developed local supplier base, good infrastructure links
and strong local skills. “As with any large production facility, having a local supplier base to support
that manufacturing is crucial. You can’t just go to the country with the lowest labour costs,” says Louise
Goeser, president of Ford Mexico. Regardless, parts and materials represent a much bigger part of Ford’s
overall costs than labour. And as Mexico has evolved, the company has been developing its design and
engineering operations in the country. “The next wave of Mexico’s labour force will see a need to develop
these higher value-added skills. Manufacturing and supply base operations are important here but the
next step is to add higher-value engineering skills to the workforce,” says Ms Goeser.
From an industry perspective, IT firms, healthcare firms and professional services companies are most
interested in accessing the developing world’s brains—a much higher proportion of those firms say they
are in these markets for that reason. Energy companies, naturally, are there for the resources rather than
the domestic market; and manufacturers for the low cost of labour.
And although countries like India have become famous for their rich source of skills, particularly with
regard to IT outsourcing and call centres, other emerging-market countries are jostling to provide similar
services. South Africa, for example, has sought to exploit its time-zone proximity and English-language
skills to tap into the European market. Egypt, Nigeria and others have similar aims. “We have a wealth of
people and they can be used, like in India, in the IT sectors and service-related sectors,” says Mahmoud
Abdel Latif, chairman of the Bank of Alexandria in Egypt. “A lot of companies started to use Egypt as a call
centre actually. [Many] moved their activities from India to Cairo’s Smart Village.”
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Risk trends in emerging markets
For decades, countries from outside the so-called developed world
have been synonymous with risk—political coups, poor economic
fundamentals, crime and so on. But just as these countries have
delivered impressive growth results and received soaring FDI inflows,
so have their risk fundamentals steadily improved. The Economist
Intelligence Unit’s operational risk model, which tracks ten categories
of risk within all key economies, highlights the gains that have been
made over the past six years (see tables 1 and 2). The model rates a
series of key indicators within each of the 15 countries under review in
this report on a scale from 0 (no risk) to 100 (extreme risk). A detailed
breakdown of the full methodology and country scores is available in
appendices 1 and 2.
The first thing to note is that the level of risk has declined in
every case, except Thailand and the UAE. The second point is that the
improving trend is explained mostly by declining macroeconomic risk;
on average, this has fallen by 16 points, and the gain is observed in
all countries except India (unchanged at a low-risk 30) and the UAE
(up to a low-risk 20 from a very-low risk 10). Given the economic
storm gathering over the main developed economies, this result
is testament to the remarkable progress made in achieving stable
growth in emerging markets. Even if, as most respondents to the
survey consider likely, the slowdown in the developed world dents
growth prospects in the developing economies, the relative gains in
terms of macroeconomic risk are likely to endure. Investors clearly
share this perception: most survey respondents cite local market
opportunities as the main reason for investing, in contrast with the
widespread perception of emerging markets as sources of cheap
labour and other inputs.
Similarly, the next most notable trend, a generalised decline in
levels of financial risk, is evidence of more open, better-regulated
economies with deeper capital markets. The only areas in which the
sample countries show a significant deterioration since 2002 are
security risk and labour market risk; in both cases the average score
has increased by 3 points. But the averages hide a nuanced picture.
In the case of security risk, scores have increased in only five of the 15
countries. Removing the worst case (Thailand, with an increase of 46
points) brings the average change to zero. The rise in labour market
risk is more evenly spread, with 13 countries worse or unchanged
and only two showing improvement. However, in all cases the score
changes are modest. The main factors explaining the decline are
a slight increase in the frequency of strike action and a tightening
skills market. These declines are offset by a tendency towards greater
freedom of association.
In all other areas average scores have improved, albeit not on
the dramatic scale of macroeconomic risk. This secular decline in
emerging-market risk corresponds to a period (up until late 2006) of
almost unprecedented global stability and growth, and this in itself is
sufficient to reduce the risk of investing. But many emerging markets
have exploited these benign external circumstances to address the
shortcomings that perennially led to instability in the past. Debt
burdens have been restructured, budget deficits wrestled down
or eliminated and current-account gaps erased or brought within
comfortable limits. Many of the policies giving rise to these gains have
become a matter of political and social consensus, helping to lock
them in for years to come and suggesting that the decline in risk levels
is a durable one.
Security risk shows the greatest regional diversity, with Asia-Pacific
once again the under-performer (again, Thailand explains most of the
rise in risk). There are also notable differences in macroeconomic risk;
while the rising tide in the global economy during most of the decade
raised all boats, Asia-Pacific and the Middle East saw less benefit than
the other regions. India’s stable low-risk status explains the former,
and the slippage in the UAE’s very-low risk rating the latter.
Table 1: Declining country risk
Overall risk scores across ten categories of risk, July 2002 and July 2008; Countries are scored on a scale from 0 (no risk) to 100 (extreme risk).
Saudi
Russia Arabia
South
Africa
Thailand
United
Arab
Turkey Emirates
Angola
Brazil
Chile
China
Egypt
India
Mexico
Nigeria
Poland
July 2008
54
46
21
47
41
50
42
65
30
57
47
43
52
49
33
July 2002
61
50
23
51
50
53
43
69
35
59
48
46
45
56
29
Change
-7
-4
-2
-4
-9
-3
-1
-4
-5
-2
-1
-3
7
-7
4
Source: Economist Intelligence Unit Risk Briefing.
10
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
The final regional variation worthy of note comes in the political
stability category, where Africa sees its second-biggest gain,
overshadowing the more modest improvements elsewhere. Again,
despite cases of internal conflict and persistent ethnic rivalries, the
gains made over the past decade in African democracy appear to
have been consolidated. Among the country selection, Egypt’s score
has fallen the most; to 41 today from 50 in 2002. The gains here are
virtually across the board, although the biggest improvements have
come in foreign trade and payments risk (-21 points) and financial risk
(also -21 points). Lower tariff barriers and improved current-account
convertibility explain the former, a steadier currency and a more liquid
stockmarket the latter.
By contrast, Thailand and the UAE show an increase in risk.
However, the reasons are very different. Between 2002 and 2008,
Thailand has seen a rapid decline in governability followed by a
military coup, and the subsequent transition from an ill-starred
military-backed government to an inherently unstable civilian one-all amid unremitting political polarisation. The deterioration in the
risk score, from 45 to 52, is hardly a surprise. The increase in UAE risk
is from an extremely low base relative to the countries in this study.
The deterioration reflects a modest worsening on most indicators. The
biggest of these, security risk, reflects in part the growing terrorism
threat in the region as a whole. Despite the slide, the UAE remains
third in the overall ranking, behind Chile and Poland.
A final note: although emerging markets are increasingly taking
their place as global players, their very success can give rise to
new risks. Rising investment levels test infrastructure and social
capital, as witnessed by the rising impact of skills shortages on the
labour risk scores. This resonates with the findings of the survey,
which show that the availability and cost of labour are considered
important operational barriers by most companies investing
in emerging markets. The boom in commody prices replenishes
international reserves and provides revenue for social spending,
but can encourage resource nationalism and growing internal
competition over access to the revenue windfall. Among this sample
of countries these are isolated problems, however, and the overall
expectation is for improved conditions for investors over the
coming years.
Table 2: A regional perspective of risk
Regional risk scores across ten categories; average change between July 2002 and July 2008
Sub-Saharan
Africa1
Asia-Pacific2
Eastern Europe3
Latin America4
Middle East and
North Africa5
Overall evaluation
-4.7
0.0
-4.7
-3.1
-2.0
Security risk
-5.0
15.3
-7.3
1.0
7.3
-15.0
0.0
-5.0
-6.7
0.0
Government effectiveness risk
-3.7
8.7
1.0
2.0
-1.3
Legal & regulatory risk
-1.7
-1.0
-1.0
-1.2
-2.7
-21.7
-8.3
-20.0
-16.7
-8.3
Foreign trade & payments risk
-1.0
1.3
4.0
1.4
-4.7
Financial risk
-4.0
-8.3
-7.3
-6.6
-5.7
Tax policy risk
-2.3
2.3
-3.7
-1.2
-2.3
3.7
1.3
5.0
3.3
1.3
5.3
-9.7
-11.3
-5.2
-3.0
Political stability risk
Macroeconomic risk
Labour market risk
Infrastructure risk
Source: Economist Intelligence Unit Risk Briefing. Based on scores for Angola, Nigeria, South Africa; Based on scores for China, India, Thailand;
3
Based on scores for Poland, Russia, Turkey; 4Based on scores for Brazil, Chile, Mexico; 5Based on scores for Egypt, Saudi Arabia, United Arab
Emirates.
1
11
2
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Key points
n Decisions on how to enter new markets vary by industry, risk profile and a range of other variables
n The majority of firms pursue either an acquisition or a greenfield investment, although most agree that it is
important to collaborate with local firms
Entering the market
O
n the question of how best to enter a new market, there is no one-size-fits-all approach. The rationale
for a particular market entry approach depends on a range of factors, including the industry in
question, a firm’s risk profile (and the risk profile of the country), the scope of activities planned for that
market and also the level of development in the country.
The majority of respondents from foreign multinationals say that their firm entered these markets
via either a greenfield investment (29%) or else an acquisition of a local company (23%)—a decision
that most feel was successful. The rest either partnered with a local player or set up a joint venture or
franchise. From an industry perspective, consumer goods companies and IT firms tend to follow the
acquisition route, while construction and energy firms prefer to set up from scratch. Regionally, firms
were far more likely to take an acquisition route in Latin America (41%), whereas franchising or licensing
a local company was more typical in the Middle East (21%).
Which of the following best describes how your company entered this market?
(% respondents)
Set up a greenfield investment
29
Acquired a local company
23
Established a joint venture with local company
15
Licensed a local company or set up a local franchise system
11
Established a partnership or alliance with local company
10
Set up a contracting/sub-contracting arrangement
3
Other, please specify
10
Source: Economist Intelligence Unit survey; June-August 2008.
12
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
When seeking to choose an organisation to partner with in this
market, which of the following criteria do you believe are most
important to ensuring a good strategic fit? Select up to three
(% respondents)
How important has it been for your company to collaborate
with other companies in this market in order to succeed here
(eg, for product development, sales)? Rate on a scale of 1 to 5,
where 1=Very important and 5=Not at all important
Good cultural compatibility between our organisations
1 (Very important)
(% respondents)
40
Financial strength
39
Relationships with local business/government contacts
39
Brand/reputation
35
Customer network/reputation for customer service
25
31
3
21
4
13
5 (Not at all important)
34
Reputation for sustainability and/or ethical behaviour
28
2
8
Source: Economist Intelligence Unit survey; June-August 2008.
Sales and marketing resources
18
R&D and technology resources
16
Logistics/distribution network
16
Production/manufacturing resources
11
Risk analysis capability
9
Source: Economist Intelligence Unit survey; June-August 2008.
“It’s not easy to
start a business
from scratch. Most
sectors have active
players, so it is
advisable to find a
local partner.”
Levent Eyuboglu, CEO, Multi
Turkmall
13
Of course, much depends on the sector a firm is entering. “Greenfield investments are for companies
that have experience in the country,” says Mr Díaz Mirón of Bombardier. This is not always a rapid process:
Bombardier’s decision to set up aerospace operations in Mexico took the company at least two years to
make, despite its knowledge of the market.
Naturally, experiences vary according to each country’s conditions. In riskier countries, however,
the recommended approach often relies on partnership. “Nobody comes to Russia on their own. Even
if you are thinking of entering alone, you will end up partnering with a number of stakeholders: local
authorities, suppliers, and so on,” says Clyde Tuggle, president for The Coca-Cola Company’s Russia,
Ukraine and Belarus business unit. “We built a greenfield operation just after perestroika [the economic
reforms introduced in 1987 by Mikhail Gorbachev], but we relied heavily on local suppliers such as
bottling partners, who in turn depended on local municipalities.” In his view, a company’s entry strategy
depends on its risk profile. Levent Eyuboglu, CEO of Multi Turkmall, the Turkish subsidiary of the Dutchbased Multi Corporation, a shopping mall company, agrees. “It’s not easy to start a business from scratch.
Most sectors have active players, so it is advisable to find a local partner.”
Some firms wishing to buy their way into a new market can find that the most promising acquisition
targets have already been snapped up. Poland is one example. “The main wave of privatisation is
over and there are few attractive assets left on the market, which is why most foreign companies go
greenfield,” says Marek Matraszek, founding partner and managing director of CEC Government Relations,
a consulting firm based in Poland. In other markets, local bureaucracy can be the obstacle preventing an
easy entry. In Chile, for example, local executives warn that red tape has worsened in recent years, and
getting the necessary permits to start a business has become more cumbersome. “New foreign investors
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
probably need expert advice to navigate through these obstacles,” says Ricardo Claro, head of the Claro
Group in Chile, a diversified conglomerate.
Regardless of entry strategy, about six out of ten companies (58%) within emerging markets feel
that it is important or very important for them to collaborate with other firms in order to succeed in
that market. Just two out of ten feel it is somewhat unimportant or not at all important. This holds true
for both domestic firms and foreign firms, although the latter are slightly more reliant on partnerships
or collaboration with others. What matters most when partnering with others? Financial strength,
good cultural compatibility and relationships with local business or government contacts are all crucial
(selected by at least 39% of respondents). Brand and reputation (35%) and a good customer network
(34%) were also important. Unsurprisingly, foreign firms have a greater need to tap into partners’
distribution networks, while domestic firms are interested in others’ research and development (R&D)
capabilities and brand.
14
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Key points
n A shortage of skills is seen as the number one barrier to growth. Typically high rates of staff turnover don’t
help the situation
n The state is the next major obstacle. Red tape, tax and regulatory pressures all hit firms hard
n Rising energy and raw material costs, along with shortages of electricity, provide further headaches
The major barriers to growth
D
espite the impressive improvements that many of these emerging markets have made over the past
decade in terms of economic fundamentals, political stability and infrastructure, companies—both
domestic and foreign firms—still face a range of challenges.
“Not a week passes
without people
trying to acquire our
talent.”
Clyde Tuggle, former president,
Russia, Ukraine and Belarus
Business Unit, The Coca-Cola
Company
15
l A shortage of skills
The first challenge for companies seeking to use emerging markets as a source of skills is actually finding
(and keeping) such talent. Indeed, the number one barrier to growth in these countries is the general
lack of sufficiently skilled or experienced labour that firms operating in these markets have encountered.
Nearly one in four companies (23%) rate this as a major barrier—and, overall, three in four executives
rate it as at least a moderate barrier. Just one in ten (11%) say that a shortage of skills is no barrier to
growth. This is particularly true in the Middle East (35% report this as a major barrier) and Africa (31%).
By comparison, the cost of labour is seen as far less of a concern, with just 7% of respondents seeing that
as a major barrier globally.
Another common concern is the high rate of staff turnover. Companies in India, in particular, complain
of significant rates of turnover in the scramble for talent. The vast majority of firms (76%) deal with an
annual turnover rate of between 5% and 20%—not small, but not unmanageable either. However, about
one in five companies (18%) have to replace between one-quarter and one-half of all their staff every
year, no mean feat for any HR department.
Coca-Cola in Russia is one firm that battles with this problem. The company employs about 12,000
people, but experiences a high rate of staff turnover owing to constant competition for its skills. “Not a
week passes without people trying to acquire our talent,” reports Mr Tuggle. He notes that English-speaking
executives are in particularly high demand. In response, the company invests heavily in training as an
incentive for people to stay on board. “We are currently partnering with Georgia State University to put
some of our high-performing, high-potential associates through these programmes,” explains Mr Tuggle.
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
How much of a barrier to growth to your business are the following operational and state-related issues in this market?
(% respondents)
Lack of sufficiently skilled/experienced labour
23
Rising energy and raw material prices
17
Tax and regulatory pressures
15
Price competition from local firms
14
High levels of bureaucracy/red tape
13
Political uncertainty/instability
10
Poor and/or expensive electricity supply
10
Poor physical infrastructure (eg, roads, rail)
9
Poor rule of law / weak regulatory regime
9
High levels of corruption/bribery
8
Cost of available labour
8
Poor security/threat of crime
7
Restrictive business policies (eg, economic empowerment)
7
High rates of staff turnover
7
Poor and/or expensive communications infrastructure
6
Limited access to capital
6
Trade and investment barriers
5
Local cartels/monopolists
4
Required social commitments in market (eg, provision of medical care, etc)
3
Strong local trade unions
2
Source: Economist Intelligence Unit survey; June-August 2008.
Russia is not alone in this; even countries known for their vast output of university graduates struggle.
“Corporate India is in the unique position of being surrounded by one of the world’s largest populations
but still desperately lacks quality talent,” says Vinod Nair, managing director for India at Diamond
Management & Technology Consultants. In his view, this is largely a result of the country’s educational
system, which has emphasised quantity over quality. As a result, companies such as Infosys and Wipro
have been taking on a larger portion of the educational challenge themselves.
A further challenge for businesses, given the paucity of skilled people, is that promising graduates
expect rapid career development once they are on board. “Building a career takes 20 years in Europe, but
here in India people expect it in half the time,” says Mr Remund of DHL. Elsewhere, such as the Middle
East, the high cost of local labour is the problem. “There is a lot of growth and a lot of demand for people,
and that of course drives up salaries,” says Ralph Nitzgen, senior executive officer and general manager at
Commerzbank in Dubai.
Relative to other regions, Latin America fares better on the availability of skills. Ms Goeser of Ford,
16
Ahead of the game:
Succeeding in emerging markets
Hanging on to key talent
In all markets, the availability of people with suitable skills and
experience is a major factor in a company’s success. So what do
companies do to attract and hang on to their top people? Across
all emerging markets, association with a top brand (45%) and a
clear career development path (43%) are the two key points. The
next three points all broadly fall into third place: clear decisionmaking powers (27%), international training and development
(31%, and far ahead of local training at 19%) and higher salaries
than rivals (30%, ahead of bonus schemes at 24%). Other factors—
ranging from competitive pension schemes, housing allowances,
healthcare, a company car, a free or cheap canteen—feature low on
the list.
Many of the executives interviewed for this report cite training,
especially abroad, as a key factor. Take Guangdong Dapeng LNG, for
example, a joint venture between a Chinese state-owned company and
BP that supplies liquid natural gas. It invests about Rmb3m (£235,000)
annually on training for its 350 employees, or about Rmb8,570 per
© Economist Intelligence Unit Limited 2008
employee, excluding specific technical training. David Pan, the
company’s general manager for HR and shared services, believes this is
crucial to the company’s success and ability to hang on to staff. “People
say that life at state-owned companies is ‘soft’ and uncompetitive,
but we find that taking care of our employees more or less supports us
being productive and profitable during working hours.”
Of course, incentives vary by region and market. In Eastern
Europe, a top brand to work for was rated far above anything else,
while a company car allowance was noticeably more important than
in other regions. In Latin America, the potential for overseas travel
was more highly rated as a secondary reason than elsewhere, while
Asians prized a clear career path far above all else. In the Middle
East, decision-making power lay far down the list, while salary
concerns were more important than elsewhere. In Africa, share
options, while still some way down the list, appear more important
to executives than elsewhere. In the energy sector, international
training is rated as the top consideration, while overseas job
rotations are much more important than elsewhere. Unsurprisingly,
for foreign executives based in these markets, the potential for
international rotation is the major concern—even subsidised or
Key means of attracting and retaining top talent, by region
Eastern
Latin
Middle East and
Sub-Saharan
Total
Europe
America
Asia-Pacific
North Africa
Africa
Association with our brand/reputation in the market
45%
51%
40%
42%
48%
48%
Clear career development path
43%
32%
36%
50%
49%
50%
International training and development
31%
34%
27%
28%
34%
34%
Higher salaries than rivals
30%
27%
23%
32%
37%
30%
Clear autonomy/decision-making powers
27%
22%
26%
38%
20%
23%
Bonus scheme
24%
27%
30%
20%
20%
21%
Local training and development
19%
18%
23%
18%
19%
16%
Potential for overseas travel/job rotation
15%
14%
19%
16%
12%
15%
Share options/share incentive scheme
12%
6%
12%
13%
11%
17%
Healthcare insurance/benefits
8%
11%
12%
5%
7%
5%
Benefits for person’s family
(eg, free/subsidised education)
5%
5%
6%
4%
7%
5%
Company car or allowance
5%
10%
6%
3%
2%
2%
Competitive pension scheme
4%
5%
6%
2%
3%
2%
Housing or allowance
3%
2%
1%
2%
8%
2%
Free or subsidised canteen
1%
2%
1%
0%
0%
1%
Source: Economist Intelligence Unit survey, June-August 2008.
17
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
free education for children, the staple of many an expat
package, remains far down the list.
In South Africa, companies such as Impala Platinum recognise the
need to pay more for workers to cope with a skills shortage. However, it
also invests in a range of other initiatives, such as a share option scheme
for workers and a R2bn (£140m) housing development scheme. “We want
to try to encourage home ownership but instil pride among our workforce
as well,” says David Brown, the company’s CEO. “If we can improve living
conditions and the environment, then this results in a better, healthier
workforce. It’s a good trade-off and is sensible business.”
for example, has a high regard for Mexico’s labour force. She finds no problem in securing engineers to
fill positions, although she concedes that the company invests reasonably heavily in training. A similar
view is found in Turkey. “There is no problem in finding talented people especially for [firms] with a good
brand,” confirms Handan Saygin, head of investor relations at Garanti Bank, a major Turkish bank. “The
main challenge is in training graduate-level employees, incentivising and retaining them.” However, she
notes a concern about high inflation, which requires the bank to adjust salaries regularly.
l Regulation, red tape and the state
Following skills, the next biggest barriers to growth originate from the state. While political instability is
much less of a concern for businesses than it used to be, red tape and tax and regulatory pressures are the
key concerns: 68% and 66% respectively of executives globally cite these issues as at least moderate barriers
to growth. This hits local firms and foreign firms alike, with Latin American firms battling most with tax and
regulatory pressures, while African firms struggle the most with bureaucracy. From a sector perspective,
energy and construction firms are hardest hit by red tape, as both are often required to deal with both local
and national levels of government in their operations. “It depends on your sector, but my advice is to avoid
the central government as much as possible,” warns Mr Matraszek of CEC Government Relations in Poland.
When it comes to the rule of law, Africa performs relatively weakly (14% say that poor rule of law,
a weak regulatory regime and restrictive business policies are major barriers to growth). In part, this
Which of the following are your company’s key means of attracting and retaining executives and other top talent (eg, specialist
engineers) in this market? Select up to three
(% respondents; Top 10 of 16 options shown)
Association with our brand/reputation in the market (ie, prestige of working for highly rate firm)
45
Clear career development path
43
International training and development
31
Higher salaries than rivals
30
Clear autonomy/decision-making powers
27
Bonus scheme
24
Local training and development
19
Potential for overseas travel/job rotation
15
Share options/share incentive scheme
12
Healthcare insurance/benefits
8
Source: Economist Intelligence Unit survey; June-August 2008.
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Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
reflects the countries within the sample, of which only South Africa has a relatively long-established
regulatory environment. And even there, specific policies, such as black economic empowerment
initiatives and mining reforms, have met with much criticism from the private sector. Both Nigeria and
Angola have only relatively recently stabilised from civil strife and war.
And despite the widely publicised collapse of the Doha talks, trade and investment barriers do not
loom as a major issue. It was a low single-digit issue for the majority of respondents.
l Rising energy and raw material costs
Another major issue, perhaps unsurprisingly in the current climate, is that of rising energy and
raw material prices. In all, 17% of firms believe this is a major barrier to growth. Obviously this hits
manufacturers hardest (40% rate it as major), followed by construction firms (21%).
Rising costs worry executives across all regions, although especially within Africa (24% of firms there
think it is a major barrier). “Rising costs are probably one of the most worrying things as it is becoming
increasingly difficult to manage these,” says Graham Briggs, CEO of Harmony Gold, a mining firm. “Costs
are coming from all quarters. Cost increases in steel, power, water and labour.”
For companies like TCL, a Chinese television maker, this concern is especially strong, as it faces a
limited ability to raise prices, given the sector’s intensely competitive pricing. This, in turn, highlights
another key pressure felt by companies across the sample: two-thirds of executives rated price
competition from local firms as, at the very least, a moderate barrier to growth.
“It depends on
your sector but
my advice is to
avoid the central
government as
much as possible.”
Marek Matraszek, founding
partner & managing director,
CEC Government Relations
l Infrastructure shortages
One possible surprise among the list of barriers is that of physical infrastructure, which is relatively low
on the list of concerns. Just 9% see this as a major barrier, while 30% think it is not at all an issue. Across
Africa, Latin America and Asia, businesses identify road and rail infrastructure as something of a concern,
especially within manufacturing, energy and natural resource firms, all of which rely on logistics. “The big
theme that comes up time and again is the general infrastructure, specifically airports, roads and rail. It is
a huge problem when it comes to locating investment,” says Mr Matraszek. A further issue raised by many
executives is the challenge of dealing with an inadequate supply of electricity (see box). Globally, 40% of
respondents rated this as at least a moderate barrier.
Nevertheless, the general picture for infrastructure is that of improvement. The situation is most
optimistic in Eastern Europe, where rapid development has boosted infrastructure, and the Middle East,
with oil money funding grand infrastructure expansion plans. India has seen definite infrastructure
improvement in recent years, with both its railways and telecommunications infrastructure becoming
significantly more reliable. But major problems persist. “India has grown faster than just about anyone
would have predicted, [with the consequence that] some areas are falling behind fast,” says Mr Nair of
Diamond Management & Technology Consultants. “Air traffic has grown so fast that airports have become
a major transport bottleneck.” Likewise, road infrastructure remains inadequate—Mumbai and Bangalore
are classic examples of cities approaching gridlock.
l Corruption and crime
For many Western executives, corruption is synonymous with emerging markets. Although just 8% regard
this as a major problem, nearly one-half of all respondents (44%) cite it as at least a moderate barrier to
19
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
growth. Foreign companies appear to suffer slightly more, perhaps because of their need to comply with
home country regulations.
Overall, just one in four companies cite corruption as no barrier at all, far below the proportion for issues
such as access to capital, infrastructure concerns and crime. Asia and Africa are hardest hit here, while
the Middle East does best. In interviews, few executives, unsurprisingly, admit to any kind of backhanded
affairs to getting business done. Nevertheless, kickbacks and bribes remain relatively prevalent. One
businessman notes that within his industry it is simply referred to as “olive oil” and is a standard part of
securing deals. Another consultant notes that although corruption has been reduced at higher levels in his
country, it is still prevalent at the local level, affecting zoning and licensing, for example.
Overall, nearly three in ten executives—or over 350 businesses in total—agree that for many firms,
paying bribes is a standard part of doing business. This ratio remains consistent across all regions
and within both domestic and foreign firms. All industries appear to be affected, with more obvious
capital-intensive sectors, such as construction and energy, slightly worse. Encouragingly, however,
a higher proportion of respondents—four in ten—disagree that bribes are the norm in their industry.
Perhaps linked to this is the relative use of informal “social” contracts, made outside of a formal legal
arrangement. In all markets polled, more executives disagree than agree that this is widely used to get
business done.
Aside from corruption, Africa is also hard hit by crime—nearly one-quarter (23%) of respondents in
the region say that it is a major barrier to growth, whereas just 10% of executives in Latin America, the
second-worst continent, agree.
Power cuts ahead
In January this year, South African businesses were suddenly forced
to grapple with a nationwide shortage of electricity. The problem
resulted from rapidly increasing demand for power across the
country, combined with a long-running lack of investment in energy
infrastructure. As a result, firms have had to adjust to power rationing
and a major nationwide campaign to reduce demand for energy. The
dip in production during the first quarter has already caused a spike in
commodity prices, such as platinum.
David Brown, the CEO of Impala Platinum, says his firm has
responded by investing R100m (£7.4m) in generators, to ensure that
in the event of a blackout workers can still be safely evacuated from
its mines. It has also embarked on a range of power-saving initiatives,
enabling it to squeeze close to 100% production on just 90% power
utilisation. But the real challenge is that new energy supply is unlikely
to come online before 2012. The company even considered building its
own power station, but ruled that out, in part owing to the country’s
20
shortage of skills.
South Africa is not alone in this problem. The US Central
Intelligence Agency (CIA) reported in July 2008 that at least 90
countries or dependent areas—accounting for over one-half of
the world’s population—are suffering serious energy shortages.
Guangdong province, China’s manufacturing hub, has had to deal
with an estimated 10 gw shortfall at the peak of its crisis earlier
this year, which was exacerbated by record snowfalls. Chile has
been dealing with reduced natural gas supply from Argentina and
a lower than average rainfall, which has pushed up electricity spot
prices. “Generation capacity is now dangerously low as a result
of populist regulatory changes enacted in 1999 that discouraged
new investment in electricity generation for five years,” says
Richard Claro, head of Chile’s Claro Group, a conglomerate. Many
hydroelectric and coal-fuelled plants are now being built to alleviate
the problem, but this will take time. “Meanwhile, electricity has
become awfully expensive, and the country’s energy security
position is precarious and will remain so for two or three more
years,” notes Mr Claro.
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Key points
n Providing high quality goods and/or services is seen as the number one factor for success in these markets, a
view held across all industry segments
n More generally, a broad local engagement – good local contacts, hiring the best local talent and
understanding local business and consumer norms – is important
Succeeding in emerging markets
O
nce the necessary obstacles have been overcome, the next key question is what it takes to actually
succeed in these markets. Although different industries and markets necessarily vary, two broad
points emerge from this survey. One is the need to deliver strong product or service quality, ahead of price
In your view, which of the following factors are most important to your company’s success in this market? Select up to three
(% respondents)
High quality products/services
56
Competitively priced products/services
41
Ability to move and adapt rapidly
32
Good local contacts and relationships
26
Ability to attract and retain the best local talent
24
Strong brand appeal
24
Appreciation of local consumer culture/values
17
Flexibility and innovation in structuring deals/offers
16
Appreciation of local business/regulatory norms
14
Selling through appropriate sales channels
11
Good appetite for risk
11
Highly efficient supply chain
10
Willingness to share knowledge with local partners
3
Source: Economist Intelligence Unit survey; June-August 2008.
21
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
or branding (although the latter is often closely related). Another is the need for a deep local engagement:
establishing good contacts, appreciating local culture and business norms, and engaging with local talent.
“The quality of
brand image is the
most important
element when a
customer decides
to buy a product,
especially if it is in
the higher price
range.”
Paulo Zottolo, CEO for Latin
America, Philips Brazil
A focus on product quality
Just a decade ago, it was easy to find examples of firms simply shipping off any end-of-line or obsolete
goods, such as computers or television sets, for sale in emerging markets. Today, the number one success
factor selected by executives responding to this survey, by some margin, is high-quality products/
services. Nearly six out of ten firms (56%, rising to 74% for professional services firms) cite this as the key
driver for their success in these markets. “Quality is critical to our business and our business is driven by
the quality of the products and services we offer,” says Mr Remund of DHL.”
Of course, price does matter, and many consumers in these markets are highly price-sensitive, but
this is secondary to quality (41% selected this), followed by a strong brand (24% on average, but much
higher for consumer goods firms). This picture broadly holds out across all industry segments. Price
is particularly important for manufacturers, construction firms and IT or technology providers. Brand
appeal obviously mattered most to consumer good firms. More generally, the ability to move quickly was
also seen as important across all industries.
Of course, for many consumers high quality is directly linked to brand strength, a key point that foreign
companies seek to exploit when entering new markets. This is a major challenge for domestic firms,
such as Spykar Lifestyles, an Indian jeans producer. “As a local brand, we face an inherent problem that
in India anything foreign is automatically seen as better than anything local,” says Sanjay Vakharia,
the company’s director of marketing. At its inception in the early 1990s, the company competed with
numerous domestic rivals, but just two foreign brands: Wrangler and Pepe jeans. Since then, reports Mr
Vakharia, almost all of these domestic brands have disappeared. In his view, they lost out because of their
Key success factors, by major industry
Financial
IT and
Consumer
Energy & natural
technology
goods
resources
Healthcare
services
Manufacturing
High-quality products/services
53%
64%
59%
52%
36%
64%
Competitively priced products/services
36%
48%
54%
42%
35%
34%
Ability to move and adapt rapidly
36%
34%
31%
21%
28%
36%
Good local contacts and relationships
28%
22%
15%
7%
35%
26%
Ability to attract and retain the best local talent
29%
20%
27%
18%
29%
23%
Strong brand appeal
24%
22%
25%
41%
11%
30%
Appreciation of local consumer culture/values
16%
16%
19%
31%
11%
11%
Flexibility and innovation in structuring deals/offers
20%
12%
18%
10%
12%
19%
Appreciation of local business/regulatory norms
14%
7%
14%
9%
25%
15%
9%
14%
14%
25%
10%
13%
Selling through appropriate sales channels
Good appetite for risk
19%
9%
7%
5%
11%
4%
Highly efficient supply chain
3%
18%
5%
22%
23%
4%
Willingness to share knowledge with local partners
3%
2%
4%
4%
7%
2%
Source: Economist Intelligence Unit survey; June-August 2008
22
Ahead of the game:
Succeeding in emerging markets
“As a local brand,
we face an
inherent problem
that in India,
anything foreign
is automatically
seen as better than
anything local.”
Sanjay Vakharia, director of
marketing, Spykar Lifestyles
© Economist Intelligence Unit Limited 2008
failure to build a strong brand and retain customers for repeat sales. “Over the last five years we haven’t
seen any Indian brands really coming up in the market,” he says.
Some executives even argue that brands have become even more important in these markets than in
mature countries. Paulo Zottolo, the CEO for Latin America at Philips in Brazil, argues that brand loyalty is
greater in emerging markets than in mature countries. “The quality of brand image is the most important
element when a customer decides to buy a product, especially if it is in the higher price range.”
In Thailand, a major local brewer, ThaiBev, has even adopted a strategy of developing products with
similar brand attributes to foreign competitors—but with a distinctly “Thai” feel—to go after the market
space they occupy today. ThaiBev recently launched its “Federbräu” beer, which has been positioned
to compete with the “old world” and “master brewer” branding of the high-end European beers in the
market. “We used international branding and packaging consultants to help us develop a look and feel
that would be of international standard,” says Jean Lebreton, a senior vice-president at the company and
head of strategy and business development.
Also gone are the days when firms expected their products to sell in other markets without any
localisation. Although a fair proportion (16%) of firms polled do not customise their offering at all for
these markets, 18% now customise them heavily—and the majority (60%) do at least some modification
of the product, even if it is only an update of the packaging. IT companies have introduced advanced
dust protection for the PCs they sell in India, as one example. “The challenge not only for Philips but for
all multinationals in emerging markets is the change of mentality in order to sell existing products that
are adapted to local consumer taste with minor changes,” says Mr Zottolo. “These may be aimed at more
affluent consumers, while also meeting specific needs and latent aspirations of a broader, less affluent
range of consumers.”
What of profit margins in these countries? This presents another surprise: emerging markets are seen
as sources of low-cost wares, from consumer durables to business process outsourcing, thus suggesting
razor-thin margins for most firms. Not so. The majority of executives consider margins of between 10%
and 40% to be the level they aim for in these emerging markets—about two-thirds of all respondents
selected a value within this range. A lucky minority (5%) seek margins of 60% or more, whereas a larger
minority (10%) aim for single-digit margins. None of this implies that profits are easy to come by. About
two-thirds of respondents noted price competition from local firms as a barrier to growth.
Deep local engagement
Beyond product and brand-related issues, key success factors involve a localisation element. A major one
is establishing good local contacts and relationships (26%), followed by the ability to attract and retain
the best local talent (24%) and an appreciation of local consumer culture and norms (17%). Naturally,
consumer goods firms were far more interested in the latter point, whereas good local contacts matter
most for professional services firms, along with natural resource and construction firms.
Indeed, cultural understanding is something repeated by many executives in interviews, despite
the fact that the majority of the respondents to this survey agree that these emerging markets are
becoming increasingly “Westernised” in how they conduct business, especially within Eastern Europe
and the Middle East.
Nevertheless, foreign firms fail to grapple with local cultural norms at their peril. “The biggest barrier
23
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
is the cultural difference,” says Mr Nitzgen of Commerzbank. In his experience, business in the Middle
East requires a change of behaviour and lifestyle. “There is for example a different perception of time. You
need to invest more time in a relationship. Some people try to come here and just sell a product. That is
the wrong approach; things do not work like that here.”
From an industry perspective, this affects companies across the sample. When operating in these
markets, executives agree that management and leadership style changes most of all (27% say this has
changed significantly, although 28% say it did not change at all), followed by product pricing (26% say
this has changed significantly) and the approach to HR (24%). This is not just a foreign company issue.
Cultural concerns also apply to domestic companies, especially as they adapt to a globalised marketplace.
In Brazil, for example, Itaú Financial Holding has had to adapt to a new era of increased competition,
open markets and deregulation. “We had to introduce new elements in the corporate culture to adapt to
the new reality,” says Mr Setubal, the bank’s CEO. “The [corporate culture] used to be strongly structured
and organised, but it was very bureaucratic and not really dynamic.” In his view, this change in culture has
helped to improve the company’s competitiveness with foreign banks entering Brazil. “When they come
to Brazil, foreign banks have a lot of difficulty to compete with local institutions that know the country
well.” Of course, foreign banks do have advantages, he concedes, especially with regard to their risk
diversification and their international experience.
Evolving from low cost to high quality
China is well known as the world’s workshop, a seemingly endless
source of low-cost goods. But there are two key pressures being
applied to this position: one is the country’s steadily rising average
incomes, which is changing the nature of domestic demand; the other
is the growing prominence of foreign competitors that are better able
to cater to the high-quality niche. “In China and the richer developing
countries, companies such as LG and Samsung are taking up more
market share, since consumers are upgrading their products and are
unable to find higher-quality goods with local producers,” explains
Aaron Tong, general manager for TCL Corporation’s strategy and
investment centre in Shenzhen, China.
In Mr Tong’s view, many Chinese white goods and electronics
companies grew by chasing low-cost production for the local and
global markets. They thrived as original equipment manufacturers
(OEMs), but failed to invest early on in R&D development. “As markets
mature, these producers now need to learn how to manage skilfully
research, product development and information. In market-oriented
developing countries, foreign brands already make up the majority of
market share,” he argues. “But there will definitely be a shake-out as
global brands gain more market share and local brands either upgrade
to compete head to head, or exit because they can’t keep up.”
But this is not just a manufacturing story—and emerging-market
24
firms are not always playing catch-up. Some are actively leading
the way. Take Discovery Holdings, a South African healthcare and
insurance firm. Over a decade ago, the company decided to turn the
typical approach to healthcare on its head, by providing incentives
to its members to ditch unhealthy habits and start spending more
time exercising, eating healthily and getting regular check-ups. In its
Vitality wellness programme, members accrue points for engaging in
healthy activities (for example, each time they go to the gym). In turn,
these points can be traded for a wide range of rewards, such as free
gym membership, flight discounts and cinema vouchers. “We provide
massive incentives for people to get into better shape,” says Barry
Swartzberg, a group executive director at the company.
Today, 60-70% of the company’s members participate in the
scheme. In turn, they make far fewer healthcare claims, which
is the key incentive for Discovery. This kind of thinking has been
adapted across all of the company’s product lines, including life
insurance. Its policies allow for dynamic pricing, so that people
making healthier choices in their day-to-day life are able to lower
their premiums—throughout the life of their policy. “It’s put us
in a different realm,” says Mr Swartzberg. This is not only true in
South Africa’s healthcare market, where the company has grabbed
healthy double-digit market shares, but it is now actively making
forays abroad. It already offers products in both the US and the UK
and is now eyeing out territories in India, China and other emerging
markets. Domestic insurers beware.
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Key points
n Most domestic firms feel well positioned to take on the competitive threat of foreign rivals
n Domestic firms feel strong on most aspects of their business, but access to capital is a weak point. Familyowned corporate structures can also bring mixed blessings
Defending their turf:
adapting to the challenge of foreign rivals
B
arring market entry, the issues addressed within much of this report apply equally to both foreign
and domestic firms—dealing with risks, overcoming barriers and winning new customers. But how
do the domestic firms feel about the competitive challenge from their foreign rivals? Of course, as noted
earlier, foreign firms are far from new within most of these markets. But as these countries continue to
stabilise and grow, they will become natural targets for yet more foreign entrants. As it happens, the
majority of domestic firms polled for this report feel they are well positioned to overcome such a threat.
Eight in ten say they are somewhat well positioned or well positioned to do so. Just 4% say they are not.
Specifically, the advantages are most keenly felt in brand strength (35% say this is a strong advantage)
and distribution channels (30%), as well as the depth of skills and experience (29%) and management
expertise (30%). So far, no surprise—indeed, foreigners feel much the same about their advantages
over domestic firms, along with an edge in access to capital and product development. However, a key
weakness for foreign firms is that local firms hold stronger local contacts (48% of domestic firms feel this
to be a strong advantage). This benefits local firms in a variety of ways. For example, Spykar Lifestyles,
an Indian jeans producer, has a network of about 200 retail outlets, giving it an in-built advantage over
any new rival. “Our deals were struck yesterday, at yesterday’s prices, so our network is much cheaper
to maintain than it would be if we had to go out now and build it up from scratch,” says Mr Vakharia, the
company’s director of marketing.
One of the key weaknesses for domestic firms is access to capital, which over 40% of respondents say is
either a disadvantage for their firm or no advantage at all. In part, this is being addressed by increasing
stockmarket participation across emerging markets. Across this sample, nearly one-half (45%) of the
domestic firms polled are publicly listed, either at home or abroad. Much of the rest are privately owned
(38%), of which a significant minority (10%) are family-owned. Family-dominated businesses face other
challenges. “One negative trait in many Indian corporates is a decision-making process that goes all
25
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
How much advantage or disadvantage does your company hold over foreign rivals in this market?
(% respondents)
Local contacts/relationships
48
Brand strength
35
Management experience/expertise
30
Distribution channels
30
Depth of skills/ experience
28
Customer service
23
Access to capital
23
Labour costs
16
Access to natural resources
16
Product development
15
Intellectual property/patent stock
10
Source: Economist Intelligence Unit survey; June-August 2008.
the way to the top—to the family—which means senior and middle-level management can be hesitant
to take bold decisions because of the dominating presence of the family,” says Mr Nair of Diamond
Management & Technology Consultants. On the flip side, many Indian companies have broken out of the
family-owned legacy, and are now run as professional companies with local Indian talent. In those cases,
argues Mr Nair, Indian managers are often more willing to take risks and think outside the box than their
Competing with foreign rivals: an Indian perspective
capabilities in R&D and strengthen internal processes—financial,
accounting, performance monitoring, and the like.”
According to Vinod Nair, managing director at Diamond Management
& Technology Consultants, Indian companies have adapted four key
parts of their business in order to compete better with their foreign
rivals. These include improved product quality, better processes, an
increased global presence and a renewed focus on people.
Going global: “For leading Indian corporates this is no longer a
“nice to have”, but is now essential for them to compete against
multinational firms in their home market,” argues Mr Nair. These
companies are starting to realise the benefits of being a global
company: operating across markets and having access to global
consumers and global talent. ICICI Bank, for example, is learning from
the experience of serving both Indian expatriates and customers in
Western markets.
Higher product and service quality: Indian firms have had to step up
to match international quality standards. Consumers are increasingly
exposed to high-quality products from abroad, which pushes
local firms to keep up. Nevertheless, in some sectors, local quality
standards have always been high. Jet Airways and Kingfisher Airlines,
for example, match international standards on their flights.
Better processes and systems: This is particularly important as
growth starts to slow. “It was easy when the market was booming to
rely on a few smart people to drive growth,” says Mr Nair. “Now we see
our clients becoming more willing to invest heavily in IT, build their
26
People development: Indian companies are starting to realise that
multinationals have had many more years of experience in recruiting,
training, coaching and promoting people, and from which lessons
can be learned. Hindustan Unilever, Proctor & Gamble and Nestle are
rightly seen as model companies from which the basics of marketing,
branding and distribution can be harnessed. In the IT market, firms
such as Accenture and IBM provide up and coming local companies
with benchmarks on how to develop talent.
Ahead of the game:
Succeeding in emerging markets
“One negative trait
in many Indian
corporates is a
decision making
process that goes
all the way to the
top—to the family—
which means senior
and middle level
management can be
hesitant to take bold
decisions because
of the dominating
presence of the
family.”
Vinod Nair, managing
director for India, Diamond
Management & Technology
Consultants
international counterparts.
Despite the competitive threat that foreign firms bring, collaboration with them is high on the
agenda for domestic firms. More than one-half (55%) of all local companies polled already do so.
Most of the balance would consider it, or currently are putting such a collaboration in place. Just 11%
are against the idea. The rationale behind this is primarily to gain access to management expertise,
despite the fact that many local firms feel that to be an advantage, which is possibly a nod to the
talent shortages noted earlier. Beyond this, being able to grow faster in international markets, along
with access to R&D and technology, are key reasons for linking up. Such motives have been witnessed
in major acquisitions over the past few years: the Tata Group’s purchase of Jaguar and Land Rover,
Lenovo’s acquisition of IBM’s PC business and Haier’s attempted purchase of Maytag are all examples of
these desires in action.
Despite their confidence about outdoing their international rivals, local firms have clearly changed
the way they work in order to compete better. In particular, branding and management style have been
changed—at least one in five firms reckon that significant changes have been made. In some regions,
foreigners themselves are the ones leading such changes, along with returning expatriates who are asked
to head up local firms. The Middle East is most striking for its reliance on foreign workers. For example,
28% of firms in that region say their CEO is a foreign worker, while 44% say the same for their CFO. There is
also a high reliance on repatriated employees in both the Middle East and Eastern Europe, where at least
one in ten firms is run by a repatriated employee.
Doing business in Angola
The Angolan economy has undergone a significant transformation
in recent years, recovering from its debilitating civil war to become
one of the fastest-growing economies in the world—expanding by
nearly 17% in 2007 alone. Although this is primarily a result of its
significant oil reserves, which made it the largest oil producer in
Sub-Saharan Africa this year, business is booming across just about
every sector.
Refriango, an Angolan soft drinks manufacturer, is one example.
The company has grown from nothing to a dominant market position
in just four years. Perhaps surprisingly, executives say the key to its
success has been product quality. As there is no history of domestic
production of soft drinks, the company has had to work to build
confidence in its products, for example by running Angola’s firstever national marketing campaign for a local product. Of course, the
firm faces many challenges, not least the country’s infrastructure
restraints. Port blockages mean delays in the import of key
ingredients, while night-time deliveries are not possible, owing to a
lack of adequate street lighting, security and warehousing facilities.
All this adds to operating and financing costs. Despite these setbacks,
27
© Economist Intelligence Unit Limited 2008
however, the firm continues to expand rapidly.
Another example is Sistec, an IT firm. Around 80% of its business
comes from the government, reflecting the reality for most of Angola’s
private companies. It is an official business partner for IBM, one of
several lines of business, and already faces competition from the likes
of Dell, an indication of the country’s rapid competitive development.
In fact, Rui Manuel Dos Santos, the company’s chairman and CEO,
rejects many of the criticisms made of Angola’s business environment,
in particular the complaint that it is difficult for foreign companies to
establish a foothold.
Of course, plenty of barriers do exist. In Mr Dos Santos’s view, one
of the key ones relates to import delays. Acute congestion at Luanda’s
port is what he terms “the crisis of growth”, resulting in an average
three-month delay to import goods from Europe. Another concern
is the competition for skills. Many foreign companies implementing
mega-contracts plan to hire foreign experts, but once they set up
in Angola they struggle to get work permits so they instead recruit
the best Angolans, at the expense of local firms. This is not to say
that there is a lack of skills. A job advert for an IT engineer in a local
newspaper generated dozens of applications, says Mr Dos Santos,
a direct result of heavy training during the Communist era. The key
problem is simply a lack of experience and track record.
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Key points
n Nearly nine out of ten executives in these emerging markets feel that revenue growth is set to remain strong,
most of them also feel the same about profits
n Many of characteristic weaknesses of these markets are slowly being addressed, but global economic pressures
remain a major concern
Is the emerging-market growth story set to
continue?
A
s described at the beginning of this report, companies have been cashing in on the boom in emerging
markets over the past decade. The question is whether this growth will last, as countries grapple with
rising energy and commodity costs, along with a slowdown in the West, among other challenges.
Right now, the response from executives in these markets is absolutely clear: 87% of firms polled are
optimistic about revenue growth over the next two years (just 3% are pessimistic); and 79% are optimistic
about profitability (6% are not). Clearly there will be losers too, but few firms appear to feel much concern
today. In the Middle East, for example, Mr Nitzgen of Commerzbank highlights the enormous potential:
“There are trillions of dollars worth of new projects coming up.” These projects are also aimed at reducing
the Gulf economies’ dependence on oil, by expanding into manufacturing and services.
Of course, not everything is rosy. About six in ten executives agree that an economic slowdown across
developed markets will have a major impact on business, as these countries still account for the lion’s
share of global demand. Asian and Latin American businesses feel particularly exposed. “The crisis is
challenging for all countries, and Mexico is no exception,” says Ms Goeser of Ford. “Yet the Mexican
economy is far more insulated from the US than in the past, as exemplified by its stronger financial
management, and the country has come a long way from previous crises.”
How optimistic are you about your company’s prospects within this market over the next two years, in terms of each of the
following?
(% respondents)
Very optimistic
Somewhat pessimistic
Somewhat optimistic
Very pessimistic
Neither optimistic nor pessimistic
Don't know/Not applicable
Revenue growth
46
41
9
31
Profitability
34
44
14
5 11
Market share growth
32
Source: Economist Intelligence Unit survey; June-August 2008.
28
41
19
41 2
Ahead of the game:
Succeeding in emerging markets
“[The economic
slowdown] is
going to have an
indirect impact on
emerging markets,
but I believe
emerging countries
will continue to
experience robust
growth.”
Roberto Setubal, CEO, Itaú
Financial Holding
29
© Economist Intelligence Unit Limited 2008
Others agree. “[The economic slowdown] is going to have an indirect impact on emerging markets, but
I believe emerging countries will continue to experience robust growth,” says Mr Setubal of Itaú. What is
common across many of these countries is the ongoing emergence of a new middle class, which has never
before been adequately catered for. Mr Latif of the Bank of Alexandria, for example, says growth will come
from the simple fact that few Egyptian citizens have any banking products today: just 7m-8m out of a total
population of 78m hold any kind of account. This provides an array of opportunities for financial services
firms like his. The bank launched a microfinance programme in January 2008, which has since acquired
more than 30,000 customers, an indication of the country’s pent-up demand.
Another benefit stems from these countries’ ongoing efforts to improve their business environment.
At one extreme is Angola, where businesses are scrambling to fill the void left by years of civil war (see
box). At another end, established markets such as India are slowly but surely improving their business
environment. “Corporate India in general is fairly bullish about India’s growth prospects in the long term,
and this is a reflection of a broader sense of optimism across Indian society as a whole,” notes Mr Nair.
“If you look at the historical reasons why growth in India has been constrained–lack of access to capital,
onerous red tape, infrastructure weaknesses–most are now largely being addressed.”
This broadly summarises the view held by nearly all executives interviewed for this report. Despite
ongoing and inevitable setbacks in individual markets and industries – and a general cooling of the global
economy – the overall outlook amongst business leaders within emerging markets remains bright.
Appendix
Methodologies
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Appendix 1: Methodologies
1. Business environment rankings overview
The business rankings model measures the quality or attractiveness of the business environment in
the 82 countries covered by Country Forecasts using a standard analytical framework. It is designed
to reflect the main criteria used by companies to formulate their global business strategies, and is
based not only on historical conditions but also on expectations about conditions prevailing over the
next five years. This allows the Economist Intelligence Unit to use the regularity, depth and detail of
its forecasting work to generate a unique set of forward-looking business environment rankings on a
regional and global basis.
The business rankings model examines ten separate criteria or categories. Each category contains a
number of indicators that are assessed by the Economist Intelligence Unit for the last five years (historical
period) and the next five years (forecast period). The number of indicators in each category varies from
five (foreign trade and exchange regimes) to 16 (infrastructure), and there are 91 indicators in total.
Overall position
Political environment
Political stability
Political effectiveness
Macroeconomic environment
Market opportunities
Policy towards private enterprise & competition
Policy towards foreign investment
Foreign trade & exchange controls
Taxes
Financing
The labour market
Infrastructure
Almost half of the indicators are based on quantitative data (for example, GDP growth), and are mostly
drawn from national and international statistical sources for the historical period (2003-07). Scores for
the forecast period (2008-12) are based on Economist Intelligence Unit forecasts. The other indicators
are qualitative in nature (for example, quality of the financial regulatory system), and are drawn from
a range of data sources and business surveys, frequently adjusted by the Economist Intelligence Unit,
for 2003-07. All forecasts for the qualitative indicators covering 2008-12 are based on Economist
Intelligence Unit assessments.
30
Appendix
Methodologies
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Business environment rankings
Value of index1
2003-07
Global rank2
2008-12
2003-07
Regional rank3
2008-12
2003-07
2008-12
1. Value of index is out of 10. 2. Global ranking is out of 82 countries. 3. Regional rank varies by region, as follows:
Middle East and Africa (17 countries): Algeria, Bahrain, Egypt, Iran, Israel, Jordan, Kuwait, Libya,
Morocco, Qatar, Saudi Arabia, Tunisia, UAE, Angola, Kenya, Nigeria and South Africa.
Latin America (12 countries): Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic,
Ecuador, El Salvador, Mexico, Peru and Venezuela.
Eastern Europe and the former Soviet Union (16 countries): Azerbaijan, Bulgaria, Croatia, Czech
Republic, Estonia, Hungary, Kazakhstan, Latvia, Lithuania, Poland, Romania, Russia, Serbia, Slovakia,
Slovenia and Ukraine.
Asia-Pacific (17 countries): Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia,
New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam.
2. Operational risk model
The operational risk model provides a standard framework for the analysis contained in the Economist
Intelligence Unit’s Risk Briefing. It quantifies the risks to business profitability in each of the countries
covered by the service. In these assessments, we take into account current conditions and our
expectations for the coming two years. The model considers ten separate risk criteria, which encompass a
total of 66 specific indicators:
l security
l political stability
l government effectiveness
l the legal and regulatory environment
l macroeconomic risks
l foreign trade and payments issues
l labour markets
l financial risks
l tax policy
l the standard of local infrastructure
The ten criteria are assessed on a scale of 0-100, with 0 indicating very little risk to business profitability
and 100 indicating very high risk. All of the 66 indicators are scored on a scale from 0 (very little risk) to
4 (very high risk). Every indicator is given the same weight within its category. The overall assessment is
a simple average of the scores for the ten categories. None of the countries assessed earns a score of 0 or
100. This reflects the fact that risks are present even in the least risky countries and that even at the other
end of the scale the risks could yet increase.
Ultimately, the ratings and scores for the operational risk model rely on the expert opinion of the
Economist Intelligence Unit’s analysts working in regional teams. These analysts have a wide range of
31
Appendix
Methodologies
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
open and closed sources at their disposal. One of the main closed sources is our network of in-country
experts, who provide detailed, regular information on conditions within a country. The business
operating risk model also draws on the existing analytic work already developed at the Economist
Intelligence Unit through its Country Risk Model and business environment rankings. The use of open
sources is extensive and includes country-specific sources such as central bank reports, statistical
yearbooks and country websites. International open sources include publications from the UN, CIA, IMF,
World Bank, Heritage Foundation, International Institute for Management Development, International
Labour Organisation, US Social Security Administration, World Economic Forum, Interpol and the US
Commerce Department.
Overview of risk categories
Security risk: Is the physical environment physically secure?
This category asks: Is this country presently subject to armed conflict or is there at least a moderate
risk of such conflict in the forecast period? Is armed conflict likely to be contained? Are violent
demonstrations or violent civil/labour unrest likely to pose a threat? Has one of the parties in the armed
conflict or demonstrations/civil unrest shown hostility to foreigners or private ownership? Is violent
crime or organised crime likely to be a problem? What is the risk of kidnapping and/or extortion?
Political stability risk: Are political institutions sufficiently stable to support the needs of businesses and
investors?
This category asks: What is the risk of significant social unrest during the next two years? How clear,
established and accepted are constitutional mechanisms for the orderly transfer of power from one
government to another? How likely is it that an opposition party or group will come to power and cause
a significant deterioration in business operating conditions? Is excessive power overly concentrated, or
likely to be concentrated? Will international disputes/tensions have a negative effect on the economy
and/or polity.
Government effectiveness risk: Does the political culture foster the ability of business to operate effectively?
This category asks: Is the present/prospective government likely to espouse and implement open, liberal and
pro-business policies for nationals and foreigners? What is the quality of the bureaucracy in terms of overall
competency, morale, status and so on? How pervasive is red tape? To what degree do vested interests/
cronyism distort decision-making in the public and/or private sectors? How pervasive is corruption?
Legal and regulatory environment risk: Will the legal system safeguard investment?
This category asks: How vulnerable is the legal process to interference or distortion to serve particular
interests? What is the risk that contract rights will not be enforced? To what extent is the judicial process
speedy and efficient? To what extent do the authorities favour domestic interest over foreign companies?
How much risk is there of expropriation of foreign assets? How reliable is the protection of intellectual
property? To what degree are private property rights guaranteed and protected?
Macroeconomic risk: Is the economy stable and predictable?
This category asks: What is the risk of exchange-rate volatility? What is the risk that the economy will
32
Appendix
Methodologies
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
experience a recession or price instability during the next two years? What is the risk of crowding out as
indicated by the domestic public debt/M2 ratio? What is the risk of interest rate volatility in the domestic
financial markets?
Foreign trade and payments risk: Can inputs/money get into or out of the country?
This category asks: What is the risk that the country will be subject to a trade embargo? What is the risk
that a financial crisis could curtail access to foreign exchange for direct investors? What is the risk of
discriminatory tariffs? What is the risk of excessive protection in the next two years? Can investors move
money in and out of the country, make payments for goods and services and access foreign exchange
without restriction?
Financial risk: What is the risk of a major devaluation?
This category asks: What is the availability and depth of financing in the local market? Is there a liquid,
deep local-currency-denominated fixed-rate medium-term bond market in marketable debt? What is the
risk of a systemic crisis in the banking sector? How liquid is the stockmarket?
Tax policy risk: Are taxes low, predictable and transparent?
This category asks: Is the tax regime clear and predictable? What is the risk that corporations will face
discriminatory taxes? Is the corporate tax rate low (or is the prevailing rate of corporate tax actually paid
low)? What is the risk from retroactive taxation?
Labour market risk: Are labour market factors likely to disrupt business operations?
This category asks: How much power do trade unions wield? How common are labour strikes? How
restrictive will labour laws be in the next two years? What is the risk that finding skilled labour will be a
problem? To what extent are increases in wages directly related to productivity increases?
Infrastructure risk: Will infrastructure deficiencies cause a loss of income?
This category asks: What is the risk that port facilities, air transport, the retail and wholesale distribution
networks, the telephone network and the ground transport network will prove inadequate to business
needs? What is the risk that power shortages will disrupt business activities? What is the risk that the
information technology infrastructure will prove inadequate to business needs?
33
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Appendix 2: Overview of business environments
Angola
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
3.54
4.23
82
82
17
17
Political environment
2.0
2.6
82
82
17
17
Political stability
2.9
3.3
81
80
16
16
Political effectiveness
1.3
2.0
82
82
17
17
Macroeconomic environment
6.3
6.9
70
59
14
13
Market opportunities
5.1
6.1
70
47
14
11
Policy towards private enterprise
& competition
2.0
2.5
81
80
17
16
Policy towards foreign investment
2.8
4.2
80
75
16
15
Foreign trade & exchange controls
3.7
4.6
76
78
13
14
Taxes
5.0
5.7
68
64
13
11
Financing
2.5
3.6
76
80
15
16
The labour market
3.4
3.4
82
82
17
17
Infrastructure
2.7
2.8
79
80
15
16
Overall position
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to Angola’s
environment is detailed below.
Infrastructure
Massive investment is set to transform Angola’s infrastructure. The first phase of reconstruction,
involving rehabilitation of the three main railway lines, the north-south motorway, and the water and
electricity networks, is due for completion by 2010. This will be followed by a more ambitious second
phase, including construction of a new railway line from Namibe to the enclave of Cabinda, the creation
of a dozen new cities and the construction of 1m new houses. This should reduce transport costs and
delays, and create new opportunities for investment in the Angolan interior. However, given the acute
bottlenecks at Angola’s ports and the government’s weak capacity to execute capital expenditure, it will
take decades before a fully functioning infrastructure is in place.
Labour force and immigration procedures
Shortages of experienced professionals and skilled manual labour are set to continue, given the poor
34
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
quality of education and the high labour demand of the national reconstruction programme. Although
the government is investing heavily in improving education, it will be many years before this feeds
through into the workforce. Reform of the emigration directorate, Direção de Emigração e Fronteiras de
Angola (DEFA), should make it easier for firms to secure visas and work permits for foreign professionals,
although it is expected to be some time before improvements are noticeable.
Privatisation and competition
The government is set to revive its privatisation programme with the creation of Luanda’s stock exchange,
Bolsa de Valores de Angola (BVA), which is due to start trading in late 2008. Parts of the state-owned
oil and diamond companies, Sonangol and Endiama respectively, are expected to be floated on the
exchange, along with the national telecoms company, Angola Telecom. The banking sector, which has
expanded dramatically in recent years, could undergo major consolidation.
Key indicators
2008
2009
2010
2011
2012
Population (m)
17.5
18.0
18.5
19.0
19.5
Real GDP growth (%)
15.1
9.8
9.3
9.8
10.1
Consumer price inflation (av; %)
12.5
12.3
11.8
11.3
12.2
Exchange rate Kz:US$ (av)
75.7
76.4
78.7
81.7
83.3
2.3
2.6
1.9
2.3
2.0
Inward direct investment (US$ bn)
Risk rating
July 2008 score and change from 2002
Categories
35
2008 score
Change from 2002
Overall evaluation
54
-7
Security risk
21
-11
Political stability risk
55
-15
Government effectiveness risk
89
-4
Legal & regulatory risk
80
0
Macroeconomic risk
35
-30
Foreign trade & payments risk
29
-7
Financial risk
50
-8
Tax policy risk
44
0
Labour market risk
57
0
Infrastructure risk
81
3
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Brazil
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
6.52
6.88
42
42
3
3
Political environment
6.2
6.2
40
41
3
4
Political stability
8.1
8.1
20
18
3
2
Political effectiveness
4.5
4.5
52
59
4
8
Macroeconomic environment
7.5
8.0
47
22
5
2
Market opportunities
7.6
7.4
13
12
2
1
Policy towards private enterprise
& competition
6.5
6.8
31
37
2
3
Policy towards foreign investment
7.3
7.3
32
40
3
5
Foreign trade & exchange controls
6.9
7.8
49
51
5
7
Taxes
4.7
5.0
71
74
11
10
Financing
7.0
7.8
27
29
3
2
The labour market
6.3
6.5
43
45
5
7
Infrastructure
5.4
6.2
48
47
4
2
Overall position
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to Brazil’s
environment is detailed below.
Infrastructure
Improving Brazil’s physical infrastructure is one of the government’s main goals. Road concessions
resumed in 2007 and more auctions are planned. In telecommunications, advances in regulation and
private investment will continue to drive improvements. Ongoing public and private investment will
increase energy supply in the medium term, but a small risk of power-rationing measures remains in
the short term. Bottlenecks in air traffic will ease, but at a slow pace. New investment in private port
terminals is expected to boost capacity and reduce delays.
Tax and labour
The tax system will remain the major weakness of Brazil’s business environment. A tax reform bill sent to
Congress in February 2008 aims to simplify Brazil’s burdensome tax regime and is likely to be approved by
end-2009. But businesses will continue to face a high tax burden. Taxation on oil and mining operations
are due to increase. Political will to reform the labour market, in order to ease cumbersome hiring and
firing procedures, will remain weak. The education level of the workforce continues to rise but skills
shortages persist.
36
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Privatisation and competition
Public concessions in infrastructure have been awarded to companies that are committed to charging
the lowest rates to end users, as opposed to the highest bidders as in the past. This model is likely to be
maintained. Following the recent discoveries of large offshore oil reserves, the government may move
from a model of concessions to the private sector to a production-sharing framework. A new model to
attract private investment to port terminals is due to be unveiled. The Empresa Brasileira de Infraestrutura
Aeroportuária (Infraero, the state-owned company in charge of airport infrastructure) is likely to be at
least part-privatised in the next two years, but airport privatisation is also being considered.
Key indicators
2008
2009
2010
2011
2012
Population (m)
191.9
194.4
196.8
199.4
202.1
Real GDP growth (%)
4.6
3.4
4.0
4.0
4.0
Consumer price inflation (%; av)
6.0
5.6
4.3
4.0
3.7
Exchange rate R:US$ (av)
1.7
1.8
1.9
2.0
2.0
34.0
28.5
30.0
31.0
32.0
Inward direct investment (US$ bn)
Risk rating
July 2008 score and change from 2002
Categories
37
2008 score
Change from 2002
Overall evaluation
46
-4
Security risk
39
-4
Political stability risk
25
-10
Government effectiveness risk
68
0
Legal & regulatory risk
45
-3
Macroeconomic risk
40
-30
Foreign trade & payments risk
32
0
Financial risk
42
-8
Tax policy risk
63
7
Labour market risk
50
-7
Infrastructure risk
59
15
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Chile
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
7.83
7.97
19
20
1
1
Political environment
7.8
7.8
19
20
1
1
Political stability
8.5
8.1
16
18
1
2
Political effectiveness
7.1
7.4
20
19
1
1
Macroeconomic environment
8.9
8.6
7
10
1
1
Market opportunities
6.0
5.9
50
51
6
4
Policy towards private enterprise
& competition
8.8
8.8
7
9
1
1
Policy towards foreign investment
9.1
9.6
6
3
1
1
Foreign trade & exchange controls
9.1
9.6
9
4
1
1
Taxes
7.4
6.9
13
24
1
1
Financing
8.5
8.5
19
22
1
1
The labour market
6.7
6.9
30
32
3
4
Infrastructure
6.1
7.3
41
32
1
1
Overall position
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to Chile’s
environment is detailed below.
Foreign investment
A third capital market reform, known as MK3, was sent to Congress in August 2008. It includes
administrative and legislative measures designed to facilitate foreign investment in the local financial
market and position Chile as an exporter of financial services. This will help to achieve a more liquid and
deeper capital market and widen access for small and medium-sized companies. An institutional change
will involve transforming the securities and insurance watchdog, the Superintendencia de Valores y
Seguros (SVS), into a more powerful and independent national commission, the Comisión Nacional de
Valores y Seguros (CNVS). But it does not eliminate the stamp duty (Ley de Timbres y Estampillas) on
financial transactions, which will be charged at 1.2% from 2009.
Labour
Despite some increased rigidity in the labour regime under the current government—in 2006 a law was
introduced that restricts indirect employment through subcontractors by making the subcontracting
company responsible for the subcontractor’s obligations—there are signs that some liberalising steps
might be taken. For example, the government talks of the need for more flexible working arrangements to
enable unemployed mothers to work.
38
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Energy infrastructure
Concern over Chile’s energy security will continue until 2011. Cuts in gas exports from Argentina since 2004
exposed Chile’s dependence on imported natural gas, together with a drought that lasted from 2007 until
mid-2008, which reduced hydroelectric capacity. Moreover, Chile was forced to import fuel for alternative
diesel-powered plants at a time of soaring oil prices, heightening energy costs. Following a drive for new
projects in 2005-06, significant new power capacity is due to be installed by 2011. Nevertheless, concerns
remain for the medium term, particularly in the event of another period of low rainfall.
Chile
2008
2009
2010
2011
2012
16.8
16.9
17.1
17.2
17.4
Real GDP growth (%)
3.6
3.6
4.3
4.4
4.3
Consumer price inflation (av; %)
8.6
6.4
3.7
3.1
3.0
495.2
571.2
598.8
613.5
628.4
18.5
15.6
16.6
17.7
19.0
Population (m)
Exchange rate Ps:US$ (av)
Inward direct investment (US$ bn)
Risk rating
July 2008 score and change from 2002
Categories
2008 score
Change from 2002
Overall evaluation
21
-2
Security risk
21
3
Political stability risk
20
-5
Government effectiveness risk
18
0
Legal & regulatory risk
15
0
Macroeconomic risk
25
-15
7
-7
Financial risk
13
-8
Tax policy risk
31
6
Labour market risk
36
7
Infrastructure risk
28
0
Foreign trade & payments risk
39
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
China
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
5.66
6.46
58
53
11
10
Political environment
4.5
4.8
64
62
14
12
Political stability
5.1
5.1
59
63
13
14
Political effectiveness
3.9
4.5
60
59
13
12
Macroeconomic environment
8.0
7.8
29
32
7
9
Market opportunities
8.7
8.5
1
1
1
1
Policy towards private enterprise
& competition
3.8
5.0
67
65
15
15
Policy towards foreign investment
6.4
6.9
52
51
10
8
Foreign trade & exchange controls
6.0
7.8
62
51
13
12
Taxes
5.3
6.0
54
59
13
13
Financing
3.6
5.9
71
60
15
13
The labour market
5.8
6.2
52
54
12
13
Infrastructure
4.7
5.9
57
53
10
9
Overall position
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to China’s
environment is detailed below.
Infrastructure
New infrastructure continues to be rolled out at an extraordinary rate, ranging from ports to refineries,
from high-speed rail links to power plants. Energy fuel and distribution systems are also being upgraded,
but bottlenecks will continue. Overcapacity in ports and power generation could emerge if growth slows.
The local logistics sector is underdeveloped, causing problems in distribution for companies with chains,
but it is improving rapidly. A major system to transport water from the wetter south to the arid north will
be built over the next few years, but water shortages will persist.
Tax and labour
Tax rates are unlikely to increase, but tax allowances for low-income earners are likely to rise in the
period to 2012 on the back of soaring revenue. In general, the tax system will be increasingly used to
redistribute funds towards the less affluent. Labour issues will remain one of the biggest challenges for
business. The government has a clear policy of enhancing labour rights (recent moves include a statebacked unionisation drive and a regulation-tightening labour contract law). Shortages of highly skilled
workers will become increasingly acute. Although the quality of graduates should improve steadily,
demand for qualified staff will outstrip supply. The number of foreigners working in China is likely to rise
40
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
as companies seek skilled staff abroad.
Privatisation and competition
The government recognises the private sector’s role in driving economic growth, and will continue to
allow the sale of smaller state-owned firms. However, the government still sees a central role for the
state-owned sector, especially in the “commanding heights” of the economy, such as aerospace and
telecommunications. Competition is intense in China, even among state-owned firms, and this situation
will continue. Nevertheless, the competition regime is likely to remain beset by problems. Regulators may
continue to favour domestic firms; there are worries that a new anti-monopoly law may be used to hamper
takeovers of Chinese enterprises by foreign competitors.
Key indicators
2008
2009
2010
2011
2012
Population (m)
1,331.1
1,336.7
1,342.5
1,351.0
1,359.6
Real GDP growth (%)
9.8
8.5
9.1
9.1
8.4
Consumer price inflation (av; %)
6.7
4.5
4.0
4.2
4.1
Exchange rate Rmb:US$ (av)
6.9
6.7
6.5
6.3
6.1
95.4
81.6
80.9
82.9
95.3
Inward direct investment (US$ bn)
Risk rating
July 2008 score and change from 2002
Categories
41
2008 score
Change from 2002
Overall evaluation
47
-4
Security risk
29
0
Political stability risk
55
-10
Government effectiveness risk
79
8
Legal & regulatory risk
63
-10
Macroeconomic risk
25
-5
Foreign trade & payments risk
32
-7
Financial risk
25
-13
Tax policy risk
38
0
Labour market risk
64
3
Infrastructure risk
59
-7
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Egypt
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
Overall position
5.26
6.41
64
56
10
8
Political environment
4.98
5.50
57
54
9
8
Political stability
5.13
5.13
59
63
6
8
Political effectiveness
4.86
5.82
45
40
8
6
Macroeconomic environment
4.66
6.34
82
72
17
15
Market opportunities
5.77
6.72
54
26
9
7
Policy towards private enterprise
& competition
5.00
6.50
54
44
7
5
Policy towards foreign investment
6.85
7.30
41
40
5
6
Foreign trade & exchange controls
5.05
7.30
66
61
9
8
Taxes
5.59
6.94
45
23
8
7
Financing
4.75
6.25
59
55
10
8
The labour market
5.61
5.86
60
62
7
7
Infrastructure
4.38
5.36
63
58
11
9
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to Egypt’s
environment is detailed below.
Institutions and policy trends
There are significant constraints on Egypt’s institutional and political effectiveness. Legislative
improvements are being made to the business environment, but enforcement is poor. Within a generally
risk-averse framework, the political set-up remains a barrier to fundamental reform. However, steady, if
unspectacular, progress is likely over the next five years.
Policy towards foreign investment
The government will maintain its strongly pro-business policies over the forecast period. Inward foreign
direct investment (FDI) has increased eightfold in three years. The government has removed most
barriers to entry for foreign investors, streamlined the tax system, simplified customs procedures and,
in 2004, established a one-stop shop (the General Authority for Investment and Free Zones) specifically
to promote and manage inward FDI. The procedures involved in establishing a business and registering
property have been greatly simplified.
Taxation
Tax reform will remain a crucial element of the government’s economic strategy. Tax administration has
been improved and tax and customs procedures have been simplified. The government also plans to
42
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
reform the sales tax by moving towards a comprehensive VAT system. However, there is uncertainty to
what extent this will be an improvement from a commercial perspective, given the government’s need
for more tax revenue. In fact, in May 2008 the government withdrew the tax-exempt status of 39 energyintensive firms.
Infrastructure
Egypt’s physical and communications infrastructure will continue to improve on the back of a long-term
government programme to expand airports and upgrade the road and rail network. However, progress has
been slow in some areas, given years of underinvestment. In addition, the quality of basic infrastructure,
such as water treatment, electricity supply and the communications technology network, remains
inadequate. The state-owned monopoly on fixed-line phone services is due to end, with the National
Telecommunication Regulatory Authority planning to offer a second fixed-line licence through a public
auction in 2009.
Key indicators
2008
2009
2010
2011
2012
Population (m)
77.1
78.6
80.1
81.6
83.2
7.1
6.7
6.3
5.6
5.8
Consumer price inflation (av; %)
17.1
9.7
5.9
5.4
4.7
Exchange rate E£:US$ (av)
5.3
5.4
5.5
5.6
5.7
Inward direct investment (US$ bn)
9.6
8.0
7.2
6.4
5.8
Real GDP growth (%)
Risk rating
July 2008 score and change from 2002
Categories
43
2008 score
Change from 2002
Overall evaluation
41
-9
Security risk
29
0
Political stability risk
50
-5
Government effectiveness risk
64
-4
Legal & regulatory risk
43
-5
Macroeconomic risk
45
-10
Foreign trade & payments risk
25
-21
Financial risk
33
-21
Tax policy risk
31
-7
Labour market risk
43
0
Infrastructure risk
44
-19
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
India
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
5.40
6.37
61
57
13
11
Political environment
5.3
5.7
50
51
10
9
Political stability
5.9
6.3
52
50
11
9
Political effectiveness
4.9
5.2
45
47
10
9
Macroeconomic environment
7.5
7.5
47
39
11
11
Market opportunities
7.6
7.5
11
10
3
3
Policy towards private enterprise
& competition
5.3
5.8
49
57
10
11
Policy towards foreign investment
5.5
6.9
62
51
14
8
Foreign trade & exchange controls
3.7
6.4
76
69
17
15
Taxes
5.1
6.3
62
44
15
10
Financing
4.8
6.6
59
50
12
10
The labour market
5.8
6.6
51
44
11
10
Infrastructure
3.4
4.5
76
71
15
13
Overall position
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to India’s
environment is detailed below.
Infrastructure
One of the government’s main priorities is to improve the state of India’s infrastructure. Although
significant progress has been made in some areas (notably telecoms, roads and ports) in recent years, the
scale of investment required means that the average state of infrastructure will be poor for many years.
Infrastructure is improving most rapidly in sectors where the private sector believes it can make a profit
(such as telecoms and ports) and lags in areas where the ability to generate revenue is less evident (such
as water and rural roads).
Tax and labour
India’s taxation system will be substantially modernised during the forecast period, but will still perform
poorly in international comparisons. The main problem is the small size of the formal sector (coupled by
low rates of compliance), which makes direct tax revenue a much smaller proportion of revenue than in
other countries. Value-added tax (VAT) is growing in importance, but the government remains reliant
on taxes on trade, so further reductions in tariffs will proceed only slowly. Out of a total labour force of
over 500m, India’s entire formal sector employs only around 40m people, of whom 25m or so work in the
private sector. Although informal sector employment is growing, low average standards of education
44
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
mean that there is often a mismatch between the skills available and the demands of employers.
Privatisation and competition
There is little difference between the main political parties towards economic liberalisation. Both believe
that the gradual but steady reforms made since the early 1990s are vindicated by India’s economic boom
since 2003. However, there is widespread public indifference towards structural economic reform, with a
much greater interest in day-to-day issues such as rising prices and poor infrastructure. It is unlikely that
reforms will speed up dramatically over the next five years.
Key indicators
2008
2009
2010
2011
2012
Population (m)
1,125.4
1,140.2
1,155.0
1,169.7
1,187.0
Real GDP growth (%)
7.5
6.8
7.5
7.6
8.1
Consumer price inflation (av; %)
7.1
6.2
5.3
5.0
5.2
Exchange rate Rs:US$ (av)
41.0
40.0
39.0
38.0
37.0
Inward direct investment (US$ bn)
37.7
35.0
40.0
50.0
60.0
Risk rating
July 2008 score and change from 2002
Categories
45
2008 score
Change from 2002
Overall evaluation
50
-3
Security risk
46
0
Political stability risk
25
-5
Government effectiveness risk
68
0
Legal & regulatory risk
60
-3
Macroeconomic risk
30
0
Foreign trade & payments risk
50
4
Financial risk
42
-8
Tax policy risk
63
7
Labour market risk
61
-3
Infrastructure risk
53
-22
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Mexico
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
6.83
7.18
32
34
2
2
Political environment
5.7
6.2
45
42
4
4
Political stability
7.0
7.4
37
33
4
5
Political effectiveness
4.5
5.2
52
47
4
4
Macroeconomic environment
8.3
8.0
24
21
3
2
Market opportunities
7.7
7.2
9
15
1
2
Policy towards private enterprise
& competition
5.5
6.0
46
52
6
6
Policy towards foreign investment
7.8
7.8
25
27
2
3
Foreign trade & exchange controls
8.7
9.6
15
4
2
1
Taxes
5.7
6.3
43
46
5
4
Financing
7.8
7.8
21
29
2
2
The labour market
6.1
6.9
47
32
7
4
Infrastructure
5.2
6.2
50
47
5
2
Overall position
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to Mexico’s
environment is detailed below.
Taxation
A corporate flat tax (called the IETU) was introduced at the start of 2008. It is levied at 16.5%, rising to
17.5% in 2010. Businesses face some short-term costs in adapting to the new system, which in the early
stages will run in parallel with the existing 28% corporate income tax minus exemptions (businesses pay
the higher of the two taxes).
Policy towards private enterprise and foreign investment
The passage of a watered-down hydrocarbons reform is expected in September 2008, but it is unlikely
significantly to widen opportunities for private investment in the oil sector. However, even a mild reform
will set an important precedent that should pave the way for a more ambitious reform in the medium
term.
Infrastructure
The IETU and other tax reforms, along with above-budget fiscal oil revenue, will underpin increased
investment expenditure in the remainder of 2008-09. Investment will also be boosted by a fund to
support a National Infrastructure Plan for 2007-12 and corporate tax breaks for investment. These trends
will help advance the upgrade of the physical infrastructure. However, for the next few years Mexico
46
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
will remain burdened by relatively high-cost logistics. Improvements will require progress on politically
sensitive reforms affecting utilities. Even assuming a good performance for the government in mid-term
legislative elections in July 2009, this may be difficult to achieve before its term ends.
Key indicators
2008
2009
2010
2011
2012
Population (m)
110.0
111.2
112.5
113.8
115.0
Real GDP growth (%)
2.3
1.6
3.4
3.8
3.6
Consumer price inflation (av; %)
5.2
5.2
3.6
3.4
3.3
Exchange rate Ps:US$ (av)
11.3
11.6
11.9
12.0
12.1
Inward direct investment (US$ bn)
18.0
16.0
24.0
25.0
26.5
Risk rating
July 2008 score and change from 2002
Categories
47
2008 score
Change from 2002
Overall evaluation
42
-1
Security risk
61
18
Political stability risk
35
5
Government effectiveness risk
54
-7
Legal & regulatory risk
40
5
Macroeconomic risk
40
-20
Foreign trade & payments risk
21
-4
Financial risk
42
-12
Tax policy risk
25
0
Labour market risk
61
7
Infrastructure risk
41
-6
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Nigeria
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
4.48
4.92
76
75
12
13
3.1
3.1
80
78
15
15
Political stability
4.0
3.6
75
79
13
15
Political effectiveness
2.3
2.6
80
79
15
15
Macroeconomic environment
7.5
7.8
47
32
9
7
Market opportunities
6.7
6.5
30
37
5
9
Policy towards private enterprise
& competition
2.8
2.8
77
78
14
15
Policy towards foreign investment
5.1
5.5
66
70
11
13
Foreign trade & exchange controls
3.3
4.6
78
78
14
14
Taxes
5.6
5.2
45
71
8
13
Financing
4.0
5.9
66
60
11
9
The labour market
4.9
4.8
74
77
10
14
Infrastructure
2.0
3.1
81
79
17
15
Overall position
Political environment
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to Nigeria’s
environment is detailed below.
Infrastructure
Improving Nigeria’s dire infrastructure is at the centre of the government’s plans. Largely financed
by surging revenue from the oil sector, these planned improvements mean that infrastructure should
benefit noticeably during 2008-12. In spite of the failure of the preceding administration to increase
power supplies after spending billions of dollars building new plants, improvements are expected on
the current deplorably low level of electricity supply. However, the extent of improvement in services
during the forecast period will depend on whether the government is able to push ahead with the
stalled privatisation of the power sector against opposition from the unions. Also crucial will be the
establishment of a viable regulatory framework for the smooth operation of private power providers.
Tax regime
On paper, Nigeria’s tax regime will continue to compare favourably with that of other countries. This
partly reflects the fact that general taxation is not a particularly important source of income for the
government, which is over­whelmingly dependent on oil revenue. As such, it has historically set low tax
rates. However, in practice there is still a huge range of problems. In particular, corruption within the tax
authorities, coupled with ineffective policing and enforcement, means that tax compliance rates remain
48
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
low. Given these problems, Nigeria’s global position is expected to deteriorate, particularly as other
countries aggressively push ahead with tax reform.
Foreign direct investment
Although the government will continue to welcome FDI, the overall level of investment outside the oil and
gas sector will remain low compared with the potential size of the market. This reflects the complexities
of the local business environment, combined with bureaucracy, corruption, low productivity, poor
infrastructure and the low income levels restricting the potential market. The majority of investment has
been made by multinationals with existing operations in the country, but potential remains in sectors as
diverse as tobacco, telephone services, the national airline, retailing and financial services.
Key indicators
2008
2009
2010
2011
2012
Population
149.5
152.2
155.4
158.4
160.3
Real GDP growth (%)
6.5
6.7
6.9
6.7
7.1
Consumer price inflation (av; %)
9.0
8.6
8.0
7.2
6.4
117.8
121.0
124.0
126.5
128.0
2.1
2.1
2.1
2.3
2.1
Exchange rate N:US$ (av)
Inward direct investment (US$ bn)
Risk rating
July 2008 score and change from 2002
Categories
49
2008 score
Change from 2002
Overall evaluation
65
-4
Security risk
75
-4
Political stability risk
50
-15
Government effectiveness risk
82
-7
Legal & regulatory risk
83
0
Macroeconomic risk
40
-20
Foreign trade & payments risk
68
11
Financial risk
54
0
Tax policy risk
44
0
Labour market risk
68
4
Infrastructure risk
88
-3
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Poland
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
6.74
7.11
35
35
5
5
Political environment
6.5
6.5
37
39
7
8
Political stability
7.8
7.4
26
32
5
7
Political effectiveness
5.5
5.8
40
40
7
7
Macroeconomic environment
6.9
6.9
63
59
11
10
Market opportunities
7.7
7.3
7
14
2
2
Policy towards private enterprise
& competition
6.3
7.0
35
34
7
7
Policy towards foreign investment
7.8
7.8
25
27
5
5
Foreign trade & exchange controls
7.8
8.2
33
41
7
8
Taxes
5.5
6.1
48
52
8
12
Financing
7.0
7.4
27
36
2
4
The labour market
6.3
6.9
36
31
6
5
Infrastructure
5.6
7.0
43
36
9
6
Overall position
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to Poland’s
environment is detailed below.
Infrastructure
The current poor quality of Poland’s road network should finally begin to improve as EU funding starts
to flow in significant amounts and the need to complete key projects before hosting the Euro 2012
football tournament injects some urgency. These factors will also lead to faster rail links and improved
service at Poland’s congested airports. Rising energy demand will gradually absorb some of the current
surplus in electricity-generating capacity, increasing the need for investment in new power stations.
The EU’s limits on CO2 emissions will lead to an increase in energy prices. More effective competition in
telecommunications will lead to improved services and bring down costs.
Tax and labour
The overall burden of taxation is set to fall gradually. The system of personal income tax will shift from
the current three-rate system (19%, 30% and 40%) to a two-rate structure (18% and 32%) in 2009. The
government hopes to move to a single (“flat”) tax system, but this is unlikely before 2011. Sharp cuts in
corporate taxes or in social security contributions are unlikely. There may be some moves to liberalise
the labour code but opposition from the president means that these are likely to be limited. The gradual
return of Poles who have been working abroad will help to ease some skills shortages, but shortages in
50
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
some sectors are likely to continue.
Privatisation and competition
The recently formed integrated electricity groups are likely to be privatised, but this will be a gradual
process and the role of foreign strategic investors will initially be limited. The state is likely to reduce its
holdings in a bank, PKO BP, and an insurance firm, PZU, but it is likely to retain significant influence in PKO
for the next few years. Further consolidation of the mostly foreign-owned banking system is likely but will
depend on the strategies adopted by the banks’ west European parents.
Key indicators
2008
2009
2010
2011
2012
Population (m)
38.1
38.1
38.1
38.1
38.1
Real GDP growth (%)
5.3
4.2
4.0
4.4
4.3
Consumer price inflation (av; %)
4.4
4.0
2.9
2.5
2.4
Exchange rate Zl:US$ (av)
2.2
2.3
2.5
2.6
2.7
21.0
19.0
15.5
14.5
14.8
Inward direct investment (US$ bn)
Risk rating
July 2008 score and change from 2002
Categories
51
2008 score
Change from 2002
Overall evaluation
30
-5
Security risk
14
0
Political stability risk
25
-10
Government effectiveness risk
43
0
Legal & regulatory risk
35
-3
Macroeconomic risk
40
-10
Foreign trade & payments risk
18
-3
Financial risk
33
-5
Tax policy risk
19
-6
Labour market risk
39
0
Infrastructure risk
34
-13
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Russia
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
5.55
6.18
59
61
12
12
Political environment
4.1
4.5
69
70
14
13
Political stability
5.1
5.1
59
63
14
14
Political effectiveness
3.3
3.9
74
68
15
13
Macroeconomic environment
8.0
8.0
29
22
2
1
Market opportunities
8.6
8.4
2
2
1
1
Policy towards private enterprise
& competition
3.3
4.5
73
70
13
13
Policy towards foreign investment
3.3
3.7
79
76
16
15
Foreign trade & exchange controls
6.9
7.8
49
51
11
11
Taxes
5.3
6.2
54
50
11
10
Financing
4.4
5.9
64
60
12
12
The labour market
6.4
6.9
37
32
7
6
Infrastructure
5.2
6.1
50
51
11
12
Overall position
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to Russia’s
environment is detailed below.
Infrastructure
Although the government has started to spend a significant part of the oil windfall on infrastructure,
improvements will be slow, given prolonged underinvestment. One area where important progress
will continue to be made is the power sector, which has undergone extensive reforms to put it on a
market footing through the separation of the sector into generation, distribution and supply assets,
with only distribution to stay under state control. An estimated US$40bn needs to be invested in the
telecoms network over a decade to remedy past deficiencies and meet new subscriber needs. However,
the fragmentation of the sector, price caps on local calls and poor regulation will continue to deter
investment.
Tax and labour
The introduction of a lower rate of VAT is under discussion. Many politicians have advocated a sharp cut
in the VAT rate, currently set at 18%. The Ministry of Finance has expressed its willingness to consider
a delayed cut in VAT to 16%, at most. There are also moves to cut the tax burden on oil producers, amid
fears about declining oil output. Overall, Russia’s labour market will remain an attraction for investors.
However, labour shortages will become an increasingly significant problem. Demographic developments
52
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
will have a negative impact on the labour market, as the size of the labour force starts shrinking and the
average age of workers rises.
Privatisation and competition
The president, Dmitry Medvedev, is believed to hold market-friendly views and has pledged to reduce
state interference in the economy and business. But it is unclear to what extent he is willing or able
to achieve this. Having assumed control of more than 40% of energy output, the state will continue to
assert itself in other strategic sectors. In telecommunications, the state will continue to play a significant
role through Svyazinvest, the state holding company. The company has undergone consolidation and
restructuring, but further privatisation continues to be postponed.
Key indicators
2008
2009
2010
2011
2012
Population (m)
141.8
141.4
141.0
140.5
140.0
7.5
6.8
6.1
5.5
5.0
Consumer price inflation (av; %)
14.0
11.0
9.2
7.6
7.1
Exchange rate Rb:US$ (av)
24.0
24.5
25.5
26.2
26.5
Inward direct investment (US$ bn)
48.0
42.0
40.5
39.5
40.0
Real GDP growth (%)
Risk rating
July 2008 score and change from 2002
Categories
53
2008 score
Change from 2002
Overall evaluation
57
-2
Security risk
50
-14
Political stability risk
50
-5
Government effectiveness risk
82
3
Legal & regulatory risk
70
0
Macroeconomic risk
40
-20
Foreign trade & payments risk
54
15
Financial risk
58
-9
Tax policy risk
63
13
Labour market risk
54
11
Infrastructure risk
50
-9
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Saudi Arabia
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
5.89
6.54
52
52
7
7
Political environment
4.3
4.3
65
72
11
12
Political stability
4.8
4.4
66
71
8
11
Political effectiveness
3.9
4.2
60
65
11
12
Macroeconomic environment
8.6
8.3
17
15
4
1
Market opportunities
7.7
7.9
7
6
1
2
Policy towards private enterprise
& competition
4.3
5.3
64
60
11
9
Policy towards foreign investment
5.1
6
66
66
11
10
Foreign trade & exchange
controls
6.4
8.2
54
41
5
4
Taxes
6.9
7.9
20
12
4
4
Financing
5.5
5.9
51
60
8
9
The labour market
4.7
5.2
76
73
12
11
Infrastructure
5.5
6.5
47
44
7
6
Overall position
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to Saudi
Arabia’s environment is detailed below.
Taxation
Economic growth is forecast to remain robust, with high oil prices expected to keep the current account
and government budget in surplus. As a result, no changes in tax policy are expected. There may be some
debate about introducing a sales tax or increasing water or power tariffs, but the government will probably
avoid taking any of these politically sensitive actions while high oil prices ensure large fiscal surpluses.
Labour
Inflationary expectations have risen and will lead to higher wage demands throughout the forecast
period. The labour market is one of the weakest elements of the business environment, partly reflecting
severe skills mismatches, which mean that wage pressures will be particularly intense in skilled jobs in
fast-growing sectors (such as finance and construction). More generally, wages for expatriates are likely
to rise gradually as demand booms and as leading supplier countries (such as the Philippines, India and
Bangladesh) push for minimum wages and better treatment for their nationals. An increasing number of
women will enter the workforce, but will remain a small minority. Expatriates will continue to make up
most of the private-sector workforce, although the government will maintain its “Saudiisation” policy of
54
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
setting quotas for employing nationals.
Infrastructure
The government will support large-scale investments in infrastructure, some of which will be carried
out by the private sector, although all projects will be subject to delays and cost overruns given strong
demand combined with supply bottlenecks. The Shuaibah-3 independent water and power project will
improve water supply to Jeddah from 2009. Internet penetration is forecast to rise from 26.3% of the
population in 2007 to 46% by 2009. New entrants to the landline market are likely to reduce tariffs in the
underdeveloped broadband subsector and invest in better broadband infrastructure.
Key indicators
2008
2009
2010
2011
2012
Population (m)
25.0
25.8
26.6
27.4
28.2
7.2
6.7
5.9
5.4
6.0
11.7
10.8
10.0
9.8
9.5
Exchange rate SR:US$ (av)
3.8
3.8
3.8
3.8
3.8
Inward direct investment (US$ bn)
1.9
2.3
2.5
2.6
2.7
Real GDP growth (%)
Consumer price inflation (av; %)
Risk rating
July 2008 score and change from 2002
Categories
55
2008 score
Change from 2002
Overall evaluation
47
-1
Security risk
50
11
Political stability risk
60
0
Government effectiveness risk
79
0
Legal & regulatory risk
60
-3
Macroeconomic risk
25
-25
Foreign trade & payments risk
21
3
Financial risk
38
0
Tax policy risk
44
-6
Labour market risk
54
0
Infrastructure risk
41
10
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
South Africa
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
6.13
6.96
46
42
6
5
Political environment
5.0
5.8
56
50
8
7
Political stability
5.1
6.6
59
46
5
2
Political effectiveness
4.9
5.2
45
48
8
10
Macroeconomic environment
7.5
7.5
44
41
8
9
Market opportunities
7.1
7.3
19
14
3
3
Policy towards private enterprise
& competition
5.8
6.5
43
41
4
5
Policy towards foreign investment
6.0
6.0
57
66
8
10
Foreign trade & exchange controls
6.4
7.8
54
53
5
6
Taxes
6.4
7.0
28
26
6
6
Financing
6.6
8.1
31
27
3
3
The labour market
4.0
5.6
81
64
16
8
Infrastructure
6.6
8.0
31
24
2
2
Overall position
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to South
Africa’s environment is detailed below.
Infrastructure
Eskom, the parastatal power generator (and monopoly buyer), is investing a massive US$45.1bn over five
years to boost power capacity, but shortages are likely to persist until new coal-fired base-load capacity
starts in 2012. Telecommunications will continue to benefit from rising demand, liberalisation and
investment in new submarine fibre-optic cables, opening in 2009-10, which will potentially reduce high
charges. The build-up to the 2010 World Cup will be a particular spur to development, which will leave a
permanent legacy. Heavy investment in the development of roads, rail and ports will dramatically improve
current infrastructure constraints.
Tax and labour
Modest reductions in corporate tax rates are expected to continue, with the intention of stimulating
business at a time of weaker growth. However, the top rate of income tax is likely to remain unchanged, at
40%. Labour market reform will be slow and skills shortages will persist. Strike action is likely to decline,
as pay deals negotiated in 2007 typically covered two to three years in advance, although high inflation
could spark some protests. Another key challenge for firms will be to meet employment equity legislation
(the labour side of black economic empowerment, BEE), which will be exacerbated by the HIV/AIDS
56
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Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
epidemic and skills shortages.
Privatisation and competition
Policy will remain supportive of private enterprise and free markets. However, the state’s dominant
role in infrastructure projects will restrict opportunities for private business, although public-private
partnerships and independent operators will be sought in some cases. Private business is dominant in
most other sectors, but the entrenched position of some long-established players will pose a challenge to
new entrants. The private sector will need to meet the requirements of BEE in recruitment, training and
ownership (although multinationals will remain exempt from equity transfer). A new companies law will
ease business start-up and improve corporate governance, while competition policy will become stricter
in order to tackle cartels.
Key indicators
2008
2009
2010
2011
2012
Total population (m)
47.8
48.0
48.2
48.3
48.4
Real GDP growth (%)
3.5
2.8
5.0
4.6
3.7
11.6
8.4
6.0
5.0
4.5
Exchange rate R:US$ (av)
7.8
8.2
8.5
8.8
9.0
Inward direct investment (US$ bn)
6.1
3.5
3.7
4.5
5.0
Consumer price inflation (av; %)
Risk rating
July 2008 score and change from 2002
Categories
57
2008 score
Change from 2002
Overall evaluation
43
-3
Security risk
46
0
Political stability risk
40
-15
Government effectiveness risk
50
0
Legal & regulatory risk
40
-5
Macroeconomic risk
45
-15
Foreign trade & payments risk
32
-7
Financial risk
25
-4
Tax policy risk
31
-7
Labour market risk
57
7
Infrastructure risk
63
16
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Thailand
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
6.67
6.93
40
39
9
9
Political environment
6.4
5.5
39
54
9
10
Political stability
7.8
5.9
26
55
4
11
Political effectiveness
5.2
5.2
42
47
9
9
Macroeconomic environment
8.3
7.8
24
33
6
9
Market opportunities
6.4
6.4
38
41
11
10
Policy towards private enterprise
& competition
5.5
6.8
46
37
9
8
Policy towards foreign investment
7.3
6.9
32
51
6
8
Foreign trade & exchange controls
7.8
8.7
33
27
6
6
Taxes
7.5
7.5
12
16
6
7
Financing
6.3
7.4
41
35
8
7
The labour market
6.5
6.9
34
29
8
8
Infrastructure
4.9
5.6
54
55
9
10
Overall position
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to Thailand’s
environment is detailed below.
Infrastructure
The government is keen to move ahead with several large rail projects, but these are still at the planning
stage and will not be completed for another few years. Suvarnabhumi Airport, the new international
facility serving the capital, Bangkok, commenced operations in September 2006, in a much-welcomed
development. However, there are fears that capacity constraints at the airport will become evident sooner
than expected. The quality and availability of telecoms services will improve, but the issuance of new
licences will remain slow. Energy supplies continue to cause concern. Despite increasing supplies, the
potential for energy shortages remains, as demand could easily outstrip supply in the next few years.
Tax and labour
The tax regime is not expected to change much over the next few years as it is not overly complex, and
remains reasonably consistent and fair. Any adjustments to the country’s tax structure are likely to
be implemented with the aim of boosting the competitiveness of the private sector. Labour market
conditions in Thailand are more than adequate in terms of supporting the operations of foreign-invested
enterprises. Labour costs adjusted for productivity are low, but the availability of skilled labour is poor,
reflecting the relatively ineffective education system. Strikes are uncommon.
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Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Privatisation and competition
No significant progress will be made on the privatisation front over the next few years, owing to the fact
that such moves would attract intense opposition from labour organisations and consumer-advocacy
groups. Neither will there be any major improvement for foreign investors in terms of investment
protection schemes, as the government will now find it tougher (under the 2007 constitution) to conclude
new trade and investment pacts with other countries.
Key indicators
2008
2009
2010
2011
2012
Population (m)
67
67.5
67.9
68.4
68.8
Real GDP growth (%)
4.8
4.5
4.6
4.2
4.4
Consumer price inflation (av; %)
8.1
6.5
3.6
2.9
2.4
32.9
33.4
33.2
33.2
33.1
9.5
9.9
10.1
10.5
10.5
Exchange rate Bt:US$ (av)
Inward direct investment (US$ bn)
Risk rating
July 2008 score and change from 2002
Categories
59
2008 score
Change from 2002
Overall evaluation
52
7
Security risk
57
46
Political stability risk
65
15
Government effectiveness risk
75
18
Legal & regulatory risk
58
10
Macroeconomic risk
35
-20
Foreign trade & payments risk
43
7
Financial risk
42
-4
Tax policy risk
31
0
Labour market risk
50
4
Infrastructure risk
66
0
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Turkey
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
5.87
6.43
54
54
18
18
5.3
5.5
50
54
18
18
Political stability
5.9
5.9
52
55
18
18
Political effectiveness
4.9
5.2
45
47
17
17
Macroeconomic environment
6.1
6.9
72
58
17
15
Market opportunities
7.4
6.5
16
36
4
10
Policy towards private enterprise
& competition
5.8
6.5
43
44
18
18
Policy towards foreign investment
6.4
6.9
52
52
18
18
Foreign trade & exchange controls
6.4
7.8
54
51
18
17
Taxes
5.2
6.1
58
54
14
14
Financing
5.5
6.6
51
50
18
18
The labour market
5.7
5.5
57
67
15
18
Infrastructure
4.9
6.1
54
51
18
18
Overall position
Political environment
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to Turkey’s
environment is detailed below.
Infrastructure
The problem of occasional power black-outs and brown-outs is likely to become more acute, owing to an
overall shortage of generating capacity and insufficient improvement in transmission and distribution. In
telecommunications, ongoing liberalisation will contribute to a noticeable improvement in the services
available, and to lower prices. In transport, there will be only piecemeal improvements: the Bosphorus
rail crossing may be completed and some roads will be improved. Ports, airports and customs facilities will
in general continue to improve, owing to private management and/or recent/ongoing investments.
Tax and labour
No major change is expected in the overall level or pattern of taxation, or in most tax rates. However,
there may be some improvements in tax collection and a modest reduction in evasion and avoidance,
which would be positive for existing taxpayers. Legislation on strikes and lock-outs and the severance
pay system may be approved. Any such legislation will involve a compromise between broader rights
for workers and employers’ demands for lower costs. The education level of the workforce will rise but
shortages of skills will persist. Flexible working practices may start to become more commonplace.
60
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Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Privatisation and competition
Power distribution networks, the national lottery and rights to operate toll roads and bridges are likely
to be privatised. Sugar refineries, some power generation plants and some or all of the state’s remaining
shares in Turk Telekom, the former telecommunications monopoly, may also be sold off. A new round of
consolidation may commence in the banking sector, where foreign ownership may rise above 50%—the
privatisation of state banks could be the trigger.
Key indicators
2008
2009
2010
2011
2012
Population (m)
76.2
77.2
78.1
79.1
79.9
4.5
3.7
5.1
5.0
5.0
10.5
9.6
7.1
6.7
5.3
1.236
1.371
1.372
1.372
1.372
15.0
16.0
28.0
32.0
35.0
Real GDP growth (%)
Consumer price inflation (av; %)
Exchange rate YTL:US$ (av)
Inward direct investment (US$ bn)
Risk rating
July 2008 score and change from 2002
Categories
61
2008 score
Change from 2002
Overall evaluation
49
-7
Security risk
46
-8
Political stability risk
60
0
Government effectiveness risk
64
0
Legal & regulatory risk
45
0
Macroeconomic risk
60
-30
Foreign trade & payments risk
29
0
Financial risk
46
-8
Tax policy risk
38
-18
Labour market risk
54
4
Infrastructure risk
47
-12
Appendix
Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
United Arab Emirates
Business environment rankings
Value of index
Global rank
Regional rank
2003-07
2008-12
2003-07
2008-12
2003-07
2008-12
Overall position
7.3
7.62
24
24
1
2
Political environment
6.2
6.7
40
37
2
2
Political stability
6.3
6.3
49
50
4
5
Political effectiveness
6.1
7.1
31
24
3
2
Macroeconomic environment
8.6
7.8
17
33
4
7
Market opportunities
7.7
8.2
10
3
2
1
Policy towards private enterprise
& competition
5.3
6
49
52
6
7
Policy towards foreign investment
7.8
7.8
25
27
2
2
Foreign trade & exchange controls
8.7
9.1
15
17
1
2
Taxes
9.1
9
2
2
1
1
Financing
6.6
7.4
31
35
3
4
The labour market
6.5
6.9
33
29
2
2
Infrastructure
6.6
7.3
31
32
2
3
The Economist Intelligence Unit’s Country Analysis team provides ongoing updates on the state of the
business environment within all major economies. A brief summary of key anticipated changes to the United
Arab Emirates’ environment is detailed below.
Policy towards private enterprise and foreign investment
The UAE has created an enabling environment to encourage foreign investment, although restrictions
have remained to give preference to domestic firms. The companies law is likely to be amended to permit
majority foreign ownership in sectors where domestic firms are deemed to lack sufficient expertise, and
there will be an expansion in the number of free zones. The pressure of compliance with World Trade
Organisation (WTO) requirements, along with ongoing negotiations on free-trade agreements with the
US and EU, will promote further liberalisation in the economy. Opportunities for financing will increase
as the UAE’s stockmarkets improve their infrastructure, the bond market deepens and the banking sector
matures.
Infrastructure
The petrodollar surplus will fuel investment in infrastructure to meet the needs of a rapidly growing
population. There will be significant expansion in power generation and water-desalination capacity, as
well as in transport such as the Dubai Metro and the giant new Al Maktoum International Airport. There
will also be an ongoing effort at diversification away from hydrocarbons, for example through Masdar, a
carbon-neutral city that is designed to become a global hub for environmentally sustainable technology.
62
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Overview of business
environments
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
On the taxation front, indirect revenue-raising measures such as road tolls and property levies will be
extended and a VAT rate of 3-5% will be phased in during 2009 to replace the current import duty.
Key indicators
2008
2009
2010
2011
2012
Population (m)
5.5
5.8
6.2
6.6
7.0
Real GDP growth (%)
8.4
7.6
7.2
6.6
6.1
16.0
13.0
9.0
6.0
5.5
3.7
3.7
3.7
3.7
3.7
11.2
11.8
10.1
9.3
8.8
Consumer price inflation (av; %)
Exchange rate Dh:US$ (av)
Inward direct investment (US$ bn)
Risk rating
July 2008 score and change from 2002
Categories
2008 score
Change from 2002
33
4
Security risk
18
11
Political stability risk
55
5
Government effectiveness risk
50
0
Legal & regulatory risk
58
0
Macroeconomic risk
20
10
Foreign trade & payments risk
11
4
Financial risk
46
4
Tax policy risk
19
6
Labour market risk
36
4
Infrastructure risk
19
0
Overall evaluation
63
Appendix
Survey results
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Appendix 3: Survey results
The Economist Intelligence Unit conducted a survey of 1,323 senior executives around the world during June,
July and August of 2008. Our sincere thanks go to all those who took part in the survey.
Please note that not all answers add up to 100%, because of rounding or because respondents were able to
provide multiple answers to some questions.
In which country are you personally located?
Which of the following best describes your company’s status in
that country?
(% respondents)
India
209
Domestic organisation
50
Brazil
156
Foreign organisation with operations there
50
Turkey
98
United Arab Emirates
96
Russia
95
China
94
South Africa
84
How would you rate your company’s financial performance over
the past two years compared to that of your peers?
Mexico
81
(% respondents)
Nigeria
73
Ahead of its peers
Egypt
46
64
On par with its peers
Chile
41
58
Behind its peers
Poland
9
58
Don’t know/Not applicable
Saudi Arabia
4
56
Thailand
53
Angola
48
How successful has your company been in this market over the past two years, in terms of each of the following?
(% respondents)
Very successful
Somewhat unsuccessful
Somewhat successful
Very unsuccessful
Neither successful nor unsuccessful
Don't know/Not applicable
Revenue growth
58
32
6 11 2
Profitability
46
37
10
31 2
Growth in market share
35
Source: Economist Intelligence Unit survey; June-August 2008.
64
39
17
4 2
3
Appendix
Survey results
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
How optimistic are you about your company’s prospects within this market over the next two years, in terms of each of the
following?
(% respondents)
Very optimistic
Somewhat pessimistic
Somewhat optimistic
Very pessimistic
Neither optimistic nor pessimistic
Don't know/Not applicable
Revenue growth
46
41
9
31
Profitability
34
44
14
5 11
Market share growth
32
41
19
41 2
Source: Economist Intelligence Unit survey; June-August 2008.
In your view, which of the following factors are most important to your company’s success in this market? Select up to three
(% respondents)
High quality products/services
56
Competitively priced products/services
41
Ability to move and adapt rapidly
32
Good local contacts and relationships
26
Ability to attract and retain the best local talent
24
Strong brand appeal
24
Appreciation of local consumer culture/values
17
Flexibility and innovation in structuring deals/offers
16
Appreciation of local business/regulatory norms
14
Selling through appropriate sales channels
11
Good appetite for risk
11
Highly efficient supply chain
10
Willingness to share knowledge with local partners
3
Source: Economist Intelligence Unit survey; June-August 2008.
65
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Survey results
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
How important has it been for your company to collaborate
with other companies in this market in order to succeed here
(eg, for product development, sales)? Rate on a scale of 1 to 5,
where 1=Very important and 5=Not at all important
When seeking to choose an organisation to partner with in this
market, which of the following criteria do you believe are most
important to ensuring a good strategic fit? Select up to three
(% respondents)
(% respondents)
Good cultural compatibility between our organisations
1 (Very important)
40
28
Financial strength
2
39
31
Relationships with local business/government contacts
3
39
21
Brand/reputation
4
35
13
Customer network/reputation for customer service
5 (Not at all important)
34
8
Reputation for sustainability and/or ethical behaviour
Source: Economist Intelligence Unit survey; June-August 2008.
25
Sales and marketing resources
18
R&D and technology resources
16
Logistics/distribution network
16
Production/manufacturing resources
11
Risk analysis capability
9
Source: Economist Intelligence Unit survey; June-August 2008.
Which of the following are your company’s key means of attracting and retaining executives and other top talent (eg, specialist
engineers) in this market? Select up to three
(% respondents; Top 10 of 16 options shown)
Association with our brand/reputation in the market (ie, prestige of working for highly rate firm)
45
Clear career development path
43
International training and development
31
Higher salaries than rivals
30
Clear autonomy/decision-making powers
27
Bonus scheme
24
Local training and development
19
Potential for overseas travel/job rotation
15
Share options/share incentive scheme
12
Healthcare insurance/benefits
8
Source: Economist Intelligence Unit survey; June-August 2008.
66
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Survey results
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Which of the following best describes the kinds of consumers your company primarily targets within this market? Who did it
target five years ago?
Select all that apply
(% respondents)
The wealthy elite
The middle class
The mass market
Not applicable
Don't know
Today
29
40
38
26 1
5 years ago
26
32
32
28 2
What does your company consider to be an acceptable level of
gross margin on the products/services it sells in this market?
What is the annual rate of staff turnover your firm is currently
dealing with in this market?
(% respondents)
(% respondents)
Less than 10%
0%
10
3
10%
5%
8
25
11-15%
10%
9
22
16-20%
15%
11
21-25%
15
20%
14
10
26-30%
25%-50%
10
31-35%
9
36-40%
8
41-50%
9
51-100%
9
Margins in excess of 100%
1
Margins in this industry are pre-defined by the country’s government
3
Not applicable, as we don’t seek to sell to local consumers
5
67
18
More than 50%
3
Appendix
Survey results
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
How much of a barrier to growth to your business are the following operational issues in this market?
Rate from 1 to 5, where 1=Major barrier and 5=No barrier
(% respondents)
Major barrier 1
2
Moderate barrier 3
4
No barrier 5
Don't know/Not applicable
Lack of sufficiently skilled/experienced labour
23
23
30
11
11
2
Rising energy and raw material prices
17
17
23
18
18
7
Price competition from local firms
14
20
30
15
17
4
Poor and/or expensive electricity supply
10
11
19
19
34
6
30
6
Poor physical infrastructure (eg, roads, rail)
9
12
23
19
Cost of available labour
8
16
36
19
19
2
High levels of corruption/bribery
8
11
25
23
25
8
High rates of staff turnover
7
17
30
23
19
4
Poor security/threat of crime
7
10
19
22
34
7
Poor and/or expensive communications infrastructure
6
11
21
24
34
4
Limited access to capital
6
11
21
19
35
7
Local cartels/monopolists
4
7
18
23
36
12
40
12
Strong local trade unions
2
6
17
23
How much of a barrier to growth to your business are the following state-related issues?
Rate from 1 to 5, where 1=Major barrier and 5=No barrier
(% respondents)
Major barrier 1
2
Moderate barrier 3
4
No barrier 5
Don't know/Not applicable
Tax and regulatory pressures
15
21
30
15
16
3
High levels of bureaucracy/red tape
13
23
31
19
10
3
Political uncertainty/instability
10
17
26
25
19
3
Poor rule of law / weak regulatory regime
9
18
29
22
18
4
Restrictive business policies (eg, economic empowerment)
7
16
28
25
19
5
Trade and investment barriers
5
12
30
27
22
4
Required social commitments in market (eg, provision of medical care, etc)
3
68
7
22
29
33
6
Appendix
Survey results
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
To what extent do you agree or disagree with the following statements?
(% respondents)
Strongly agree
Agree
Neither agree nor disagree
Disagree
Strongly disagree
Don't know
An economic slowdown across developed markets will have a major impact on our business in this market
19
41
19
17
31
Difficulties in enforcing legal contracts is a significant problem we are forced to deal with in this market
8
26
26
28
9
2
This country has become significantly more “Westernised” over the past two to three years, in terms of how business is conducted
16
45
26
10
2 2
We tend to use informal “social” contracts in this market (eg, one-to-one agreements made outside of a formal legal structure)
5
21
25
31
15
3
For many businesses, paying bribes is a standard part of doing business in this market
6
22
24
26
17
5
We tend to achieve better margins in home market than in other markets
11
30
24
21
7
8
Responses from foreign multinationals only
Which of the following represent your company’s main reasons for operating in this country? Select all that apply
(% respondents)
Access to the domestic market (eg, sell goods/services)
71
Using this market as a base for regional expansion
52
Ability to reduce manufacturing/production costs (eg, low labour costs)
28
Access to skills/talent (eg, to conduct R&D, business process outsourcing)
28
Access to other resources (eg, minerals, oil)
13
Source: Economist Intelligence Unit survey; June-August 2008.
For how long has your company been operating in this market?
(% respondents)
Less than one year
1
1 to 3 years
9
3 to 5 years
8
5 to 10 years
18
More than 10 years
64
69
Appendix
Survey results
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Which of the following best describes how your company entered this market?
(% respondents)
Set up a greenfield investment
29
Acquired a local company
23
Established a joint venture with local company
15
Licensed a local company or set up a local franchise system
11
Established a partnership or alliance with local company
10
Set up a contracting/sub-contracting arrangement
3
Other, please specify
10
Source: Economist Intelligence Unit survey; June-August 2008.
Do you feel that this entry approach was largely successful or
unsuccessful?
In which country is your company headquartered?
(% respondents)
(% respondents)
United States of America
34
Very successful
54
United Kingdom
14
Somewhat successful
37
France
5
Neither successful nor unsuccessful
6
Germany
5
Somewhat unsuccessful
2
Netherlands
5
Very unsuccessful
1
Switzerland
4
Italy
2
Spain
2
Belgium
2
Japan
2
India
2
United Arab Emirates
2
Rest of world
13
70
Appendix
Survey results
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Has your company had to change its operating strategy to adapt to working in your market, compared with how it operates in its
home market?
(% respondents)
Significant changes
Some changes
Little or no change
Don’t know/Not applicable
Branding and marketing
14
40
39
7
Approach to HR
24
48
23
4
Management and leadership style
27
43
28 2
Product R&D
11
32
36
20
Product pricing
26
43
20
10
Channels to market
20
45
How well positioned do you believe your company is to
overcome competitive threats from domestic firms in this
market (ie, the market where you are personally based)?
(% respondents)
Very well positioned
40
Somewhat well positioned
43
Neither well positioned nor poorly positioned
10
Somewhat poorly positioned
5
Very poorly positioned
1
Not applicable, we don’t face any local rivals
2
71
26
9
Appendix
Survey results
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
How much advantage or disadvantage does your company hold over domestic rivals in this market?
(% respondents)
Strong advantage
Some disadvantage
Some advantage
Strong disadvantage
No advantage
Don't know/Not applicable
Depth of skills/experience
48
38
9 2 2
Brand strength
47
32
11
4 2
4
Management experience/expertise
44
39
12
3 2
Access to capital
40
33
14
31
8
Product development
34
38
16
5
7
Customer service
28
43
20
41
4
Intellectual property/patent stock
20
30
24
4 1
22
Local contacts/relationships
15
29
31
17
4
4
Distribution channels
12
25
33
9
4
17
Labour costs
7
18
50
18
4
4
Access to natural resources
7
8
35
6 2
42
To what degree has your company customised the products/services that it provides in this market?
(% respondents)
Heavily customised (eg, redesign products/services, extensive product modifications)
18
Partly customised (eg, language localised, some product modifications)
47
Superficial customisation (eg, different packaging)
13
No customisation at all (identical product/service is as sold in other markets)
16
Not applicable, we don’t sell products/services into this market
5
In the market where you are based, are these roles within your company’s management team held by local employees
or expatriates?
(% respondents)
Local employee
CEO
Expatriate worker
Don't know/Not applicable
43
53
4
CFO
52
39
9
Head of marketing
59
28
13
Primary technical role (eg, head engineer)
55
29
17
Head of HR
74
18
8
Head of IT
69
19
12
Head of procurement
64
16
20
Head of R&D
40
72
21
39
Appendix
Survey results
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Responses from domestic firms only
How well positioned do you believe your company is to
overcome competitive threats from foreign companies in this
market?
Which of the following best describes your company?
(% respondents)
(% respondents)
Privately-held company (owner/managed)
28
Very well positioned
Privately-held company (family owned)
41
10
Somewhat well positioned
Publicly-listed company (on local stock exchange)
40
34
Neither well positioned nor poorly positioned
Publicly-listed company (on international stock exchange)
11
11
Somewhat poorly positioned
State-owned company
3
12
Very poorly positioned
Other, please specify
1
5
Not applicable, we don’t face foreign rivals in our market
4
How much advantage or disadvantage does your company hold over foreign rivals in this market?
(% respondents)
Strong advantage
Some disadvantage
Some advantage
Strong disadvantage
No advantage
Don't know/Not applicable
Local contacts/relationships
48
38
10 2
3
3
4
6 2
4
Brand strength
35
34
18
6
Management experience/expertise
30
45
15
Distribution channels
30
39
17
41
9
Depth of skills/ experience
28
39
17
10
3
3
Customer service
23
42
23
71
4
Access to capital
23
30
27
10
6
5
34
6 2
3
Labour costs
16
39
Access to natural resources
16
19
34
31
26
Product development
15
33
29
12
3
7
Intellectual property/patent stock
10
73
23
40
7 2
19
Appendix
Survey results
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
What are, or would be, your company’s main motives in
collaborating with a foreign firm in this market?
Select up to two
Does your company see benefit in collaborating with foreign
companies in this market?
(% respondents)
(% respondents)
Yes, we already do collaborate with foreign companies
55
Access to management skills/experience
Yes, we might consider collaborating in the future
32
18
Ability to grow business faster in international markets
Yes, we are now considering collaborating
31
13
Access to R&D and technology
No
30
11
Access to products/services
Don’t know
28
3
Access to capital
23
Ability to grow business faster in local market
17
Ability to leverage their brand
13
Other, please specify
2
Not applicable—we would not consider collaborating with a foreign firm
6
As foreign rivals have entered into this market, has your company had to change any aspects of its operating strategy in order
to compete?
(% respondents)
Significant changes
Some changes
Little or no change
Don't know/Not applicable
Branding and marketing
22
39
29
10
Approach to HR
17
41
34
9
Management and leadership style
20
42
30
8
Product R&D
17
36
32
15
Product pricing
15
43
32
10
Channels to market
14
40
33
12
Which of the following roles within your management team are currently handled by local employees, repatriated employees
(ie, local citizens who’ve worked abroad but returned to this market), or foreign workers?
(% respondents)
Local employee
Repatriated employee
Foreign worker
Don't know/Not applicable
CEO
78
8
12 2
CFO
78
8
11
4
Head of marketing
75
8
11
6
Primary technical role (eg, head engineer)
67
9
14
10
Head of HR
85
4
6
4
Head of IT
77
9
9
5
Head of procurement
79
4
7
10
Head of R&D
66
74
7
7
20
Appendix
Survey results
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
Demographic data
What is your primary industry?
Approximately what proportion of your company’s annual
revenues is generated in markets outside of its home market?
(% respondents)
(% respondents)
Financial services — Banking
18
0%
Manufacturing
15
10
10%
Energy and natural resources
17
8
20%
Financial services — Other
9
7
30%
7
40%
Professional services
9
Consumer goods
7
6
50%
6
60%
IT and technology
9
Construction and real estate
5
10
70%
Transportation, travel and tourism
8
5
80%
5
90%
Telecoms
6
Chemicals
8
4
100%
Healthcare, pharmaceuticals and biotechnology
2
4
Automotive
3
Retailing
2
What is your title?
(% respondents)
Financial services — Insurance
2
Government/Public sector
2
Agriculture and agribusiness
2
Entertainment, media and publishing
2
Logistics and distribution
2
Education
2
Manager
21
SVP/VP/Director
15
CEO/President/Managing director
13
Head of Department
13
Other
12
CFO/Treasurer/Comptroller
8
Head of Business Unit
8
Other C-level executive
6
Board member
3
CIO/Technology director
2
75
Appendix
Survey results
Ahead of the game:
Succeeding in emerging markets
© Economist Intelligence Unit Limited 2008
What are your company's annual global revenues in US dollars?
(% respondents)
$100 to $500m
76
28
$500m to $1bn
16
$1bn to $5bn
21
$5bn to $10bn
10
$10bn or more
26
Whilst every effort has been taken to verify the
accuracy of this information, neither The Economist
Intelligence Unit Ltd. nor the sponsor of this report can
accept any responsibility or liability for reliance by any
person on this white paper or any of the information,
opinions or conclusions set out in the white paper.
Cover image - © Blend Images/Getty Images
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