Emerging economies have had a rough time of it recently, what with Brazilian corruption scandals, slowing Chinese growth and Russian imperial overstretch, all while international investors are buying up dollars like there’s no tomorrow as the American economy steams ahead.
But there’s plenty of interesting opportunities still out there for the enterprising investor – they don’t call those countries ‘emerging’ for nothing after all. Several countries from MT’s top 10 emerging economies list last year still look worth a punt – particularly Ethiopia, Panama and Rwanda (although Iraq not so much…).
And here are five more for those of you with a strong stomach and a taste for something a bit more unusual. In no particular order:
1. Sri Lanka
Population: 21.3 million
Literacy rate*: 91.2%
GDP per capita (all 2013): $3,280 (£2,169)
Projected GDP growth for 2015*: 7.5%
Major foreign corporate investors: Marks & Spencer, De La Rue, London Stock Exchange Group, Coca-Cola
Transparency International Corruptions Perceptions Index: 85th (out of 175)
It's not hard to see why Sri Lanka is popular with tourists. Credit: Iris Liu/Flickr
The tropical island of Sri Lanka is doing a pretty good job at rebuilding itself after the 26-year civil war against the Tamil Tigers came to a brutal end in 2009. Economic growth this year will probably be a touch lower than 2014, when its teeny-tiny stock market rose 24%, but is still forecast to be a healthy 7.5%.
The highly literate country is also climbing slowly but surely up the World Bank’s Ease of Doing Business rankings, now in 99th place out of 189 – although it’s still the 158th worst place to pay your corporate taxes.
New president Maithripala Sirisena, who surprised everyone by beating erstwhile strongman Mahinda Rajapaksa in an election on January 8th, has promised to clamp down on corruption and wean it off billions of dollars of soft loans from China.
The Government has now said it’s reviewing all Chinese infrastructure projects – including a yet-to-be-built $1.4bn ‘port city’ off the coast of capital Colombo. India hadn’t been best pleased when Sino submarines paid a couple of visits to Sri Lanka, so should make up any investment slack.
Tourism is increasingly big business on the island, which is blessed with stunning beaches, plentiful wildlife and ancient monuments. Visitor numbers were up almost 20% last year to more than 1.5 million, as the war fades into distant memory. It also wants to establish itself as a regional services hub and a more ethical alternative to Bangladesh’s garment sweat shops (Marks & Spencer buys clothes from an ‘eco-factory). As the new Sri Lankan foreign minister told the Economist recently, ‘Sri Lanka is again open for business.’
2. Papua New Guinea
Population: 7.5 million
Literacy rate*: 63%
GDP per capita: $2,088
Projected GDP growth for 2015*: 16%
Major foreign corporate investors: ExxonMobil, Rio Tinto, Sime Darby
Corruptions Perceptions Index: 145th
Papua New Guinea's growth will be, er, explosive this year. Credit: Taro Taylor/Flickr
Papua New Guinea (or PNG as those in the know call it) is experiencing a resources boom, with economic growth predicted to more than double this year from 7.5% to 16%. That’s mainly down to an enormous ExxonMobil joint venture exploiting some nine trillion cubic feet of natural gas in the highlands of PNG’s half of Papua island – investment in the initial phase alone is estimated to be $19bn.
The Pacific island nation has also has deep-sea copper and gold reserves, as well as agricultural exports like palm oil, coffee and cocoa. But Rio Tinto’s experience on the now semi-autonomous island of Bougainville serves as a warning. The commodities giant is still trying to reopen a copper mine shut down in 1989 before a civil war – partially fuelled by grievances against said mine – raged for most of the 90s, killing as many as 20,000 people.
PNG is certainly not an easy place to do business (the 133rd worst place in the world – so says the World Bank). English is a national language, but there are some 850 different ethno-linguistic groups and the main native language, Tok Piksin, is the mother tongue of just 120,000 people.
Corruption is also widespread and PNG’s democratic politics fractured – Prime Minister Peter O’Neill had been due in court in January, accused of misconduct relating to a $1.3bn government loan, although the tribunal has now been posptponed.
Moreover, the explosive economic growth this year could well be a one-off from the natural gas bounty. And did MT mention PNG also runs an asylum seekers detention centre for Australia? This is definitely a market for the brave.
Population: 26.5 million
Literacy rate**: 56.1%
GDP per capita: $605
Projected GDP growth for 2015*: 8%
Major foreign corporate investors: Atlas Mara, Vale, Eni, BHP Billiton, SAB Miller
Corruptions Perceptions Index: 119th
Mozambique's booming but still incredibly poor capital Maputo. Credit: Hansueli Krapf/Wikimedia Commons
You may think of the Bob Dylan song when you think of Mozambique, but the east African nation is on many emerging market radars, having grown at an average of 7% a year for the last two decades (albeit from an extremely low base). While agriculture still employs some 80% of the population, it makes up only 30% of GDP. Natural resources is now the name of the game.
There could be as much as 150 trillion cubic feet of natural gas under the Indian Ocean (more than 10 times PNG’s estimated reserves), which need an estimated $50bn of investment, both on and offshore, to exploit. Even with tumbling oil and gas prices, the Government hopes exports will start in 2019 and thinks it will be raking in $5bn-$6bn a year by the mid 2020s.
The former Portuguese colony is also Africa’s second-largest aluminium producer, thanks to a BHP Billiton smelter near capital Maputo that currently accounts for 30% of the country’s exports (although NGOs have argued it has enriched foreign investors more than Mozambicans). Meanwhile, Brazilian commodities giant Vale is investing more than $4bn in upgrading colonial-era infrastructure in the coal-rich north.
It’s a risky business though – Rio Tinto sold off its coal assets there for just $50m last summer, having bought them as part of a $3.7bn acquisition in 2011. Corruption is also rife. In September 2013, Credit Suisse and BNP Paribas helped sell a $850m Eurobond for a state-owned tuna fishing company that had come into being just a few weeks earlier. Much of the cash was used to buy patrol boats instead and hundreds of millions are apparently still missing.
Politics, meanwhile, has been reasonably stable since a 16-year civil war ended in 1992. The nominally Marxist party Frelimo has ruled Mozambique since independence in 1975 and won elections in October. The results were, surprise surprise, disputed by the former rebel opposition, but haven’t provoked full-out violence. That’s something given the country’s blood-soaked past.
Population: 30.8 million
Literacy rate*: 94%
GDP per capita: $6,662
Projected GDP growth for 2015*: 4.8%
Major foreign corporate investors: Chinalco, Southern Copper, Rio Tinto
Corruptions Perceptions Index: 85th
There's a whole lotta mineral wealth under the Andes mountains. Credit: Marturius
Like most of the countries on this list, Peru has ridden a natural resources wave that is ebbing as the Chinese economy slows. It’s the world’s second-largest copper producer and sixth-biggest gold digger, with minerals accounting for 60% of its exports. The price of what’s hidden beneath the Andes matters.
Unlike many resource-rich economies, Peru’s is relatively well-run, having saved and invested sensibly in the fat years, rather than splurging on left-wing vanity projects a la Venezuela. It unveiled a series of stimulus packages last year, including tax cuts, infrastructure spending and cutting red tape. Construction has started on a second $6bn metro line in the capital Lima and a new $4bn gas pipeline is being built in the south. The World Bank thinks it’s the 35th best country to do business.
But growth slowed to around 2.7% in 2014, having averaged 6.4% for the previous decade. The Government has insisted it can get back to 5% this year, but that’s looking like an increasingly uphill task. Peru could also use some serious labour market reforms: some 70% of Peruvians work in the informal economy, according to the Economist.
It also has something of a fishier problem: an anchovy shortage. Peru catches more than half of the world’s anchovies, which are used to make fishmeal, but the Pacific Ocean is decidedly overfished. At least middle class western demand for quinoa is high – Peru’s exports rose 750% between 2007 and 2013.
Population: 26.4 million
Literacy rate*: 71.5%
GDP per capita: $1,858
Projected GDP growth for 2015: 3.9%
Major foreign corporate investors: Tullow Oil, Barclays, Prudential
Corruptions Perceptions Index: 61st
Fishermen still do it the traditional way on Ghana's Cape Coast. Credit: Erik Kristensen
Ghana is a stable, vibrant democracy – and has been mercifully Ebola-free. It is seen as less corrupt than South Africa and is a solid 70th in the World Bank’s Doing Business rankings, above China and similarly-stable Botswana.
It is the world’s second-largest cocoa producer and Africa’s second-biggest gold exporter. These, along with sizable oil reserves that came on tap in the late noughties, have fuelled Ghana’s march towards middle-income status.
And therein lies the problem for the west African nation: oil and gold prices have plunged of late. The Government is currently in negotiations with the IMF for an $800m soft loan after the cedi fell 37% against the dollar last year, the worst performance of any African currency. In November, the finance minister predicted GDP growth of just 3.9% this year (the IMF forecast 4.7% back in October), compared to an estimated 6.9% in 2014. Annual inflation reached 17% in December.
Ghanaian politicians have made IMF-friendly noises about bringing down the budget deficit from around 10% of GDP, to 6.5% this year and 3.5% by 2017. Public sector hiring has been frozen (although civil servants’ bloated salaries could also use trimming), VAT raised and a new petrol tax imposed.
Ghana is no longer the glittering prize foreign investors were making it out to be a couple of years ago, but as sub-Saharan Africa goes it’s still a pretty safe bet.
* World Bank
** CIA World Factbook