The Big Scramble

The scramble for the emerging world is upon us. With the recent surge of wealth in many countries outside the West, companies and individuals are increasingly reallocating their resources and interests to a growing stock of opportunity. Like the European expedition and eventual partitioning of Africa and Asia in the late 19th and early 20th Century, Western focus is on valuable assets abroad—or at least it should be. This time, however, it’s a race to snatch-up a share of two billion consumers expected to emerge over the next twenty years. Moreover, this huge surge of wealth appears to have sidestepped Europe’s current economic stagnation and political tension.

This is a pinnacle moment in history, where leaders—especially entrepreneurs—should positively embrace change and capitalise on a seismic shift in power, wealth and consumer demand.

The World In 2050 

Emerging regions are generally considered as those economies and markets that are industrialising and growing rapidly. However, as I shall discuss below, the term “emerging” is increasingly becoming out-dated. Many of the countries considered troubled and weak not so long ago, have quickly gained power and significance in the global arena.

  Country                        GDP ($Billions)

1.China	24617
2. US	22270
3. India	8165
4. Japan	6429
5. Germany	3714
6. UK	3576
7.Brazil	2960
8. Mexico	2810
9. France	2750
10. Canada	2287
11. Italy	2194
12. Turkey	2149
13. South Korea	2056
14. Spain	1954
15. Russia	1878
16. Indonesia	1502
17. Australia	1480
18. Argentina	1477
19. Egypt	1165
20. Malaysia	1160
21. Saudi Arabia	1128
22. Thailand	856
23. Netherlands	798
24. Poland	786
25.Iran	732
26. Columbia	725
27. Switzerland	711
28. Hong Kong	657
29. Venezuela	558
30. South Africa	529

 (*HSBC Global Research, The World in 2050, 2011)

Predictions like that of the Global Research Team at HSBC have monumental implications on the world, as we know it today. Findings show that 19 of the 30 countries on the list, currently termed “emerging”, will make up a combined GDP five times what it is today. Those 19 economies will contribute twice as much to global growth than the entire developed world (the other 11 economies on the list), which will eventually overtake the current developed world, in terms of overall GDP.

This is precisely why Jim O’Neil, Chairman of Goldman Sachs Asset Management argues that at least eight of these economies should be called “growth”, not “emerging” markets. These are commonly known as the BRIC (Brazil, Russia, India and China) and MIST (Mexico, Indonesia, South Korea and Turkey) consortia. In his book, Growth Map, O’Neil writes that approximately “two billion people are going to be brought into the global middle class between now and 2030”. It’s not entirely clear what “global middle class” means, but The Economist published a report in 2009 which characterises the group as “having a reasonable amount of discretionary income, so that they do not live from hand to mouth as the poor do… where people have roughly a third of their income left for discretionary spending after paying for basic food and shelter”.

This information suggests that a rare convergence of opinion, between humanitarians and capitalists, is taking place. Globalization and the free market appear, as far as the facts show, to be distributing wealth across the globe. With billions of people leaving poverty and per capita income rising, fairness and equality is slowly being restored. Or is it? On the flip side, the UN predicts that if population growth-rates remain, on average the same over the next 40 years, there could be over 10 billion people alive in 2050. Countries with the highest growth rates are predominately found in Africa and Asia. Therefore, It’s not certain whether global economic-growth will offset the influx of billions (potentially) entering into poverty over the coming years.

One thing is clear, however, the scramble for the emerging world is underway. Entrepreneurial interest, investment and changes in policies are taking place. Platforms are popping up that are changing the infrastructure of business. More and more minds are focusing their ideas and ambitions in these parts of the world, to create new profitable enterprises and the chance to lay a path for a new world, with less poverty, more education and less inequality.

The Scramble: Entrepreneurship

As the landscape of the planet is changing, entrepreneurs are “copycatting” existing business models in the West. Successful products and services are being reinvented and adapted to different parts of the world to suit their own market demands and cultural needs. This way there is room for the enterprising spirits to remake the old as well as invent the new. Entrepreneurs provide jobs and attract interest and investment in these countries boosting the countries competiveness and conducing social development through knowledge dissemination.

Russia, for example has its own spin on social networking with VK.com, which has attracted over 130million users over six years. It has established itself as the second most visited site in Russia fending off Facebook’s overwhelming growth and market dominance. The founder, Pavel Durov launched the website after graduating from St Petersburg State University in 2006—two years after Facebook’s launch. Whilst it’s a copycat, which essentially performs the same functions as Facebook, VK developed a distinctive user-interface preferred by users—receiving over 35million users a day.

Africa is also fast becoming a hotspot for business. Fred Swaniker, CEO and co-founder of African Leadership Network (ALN) said recently at an annual gathering in Ghana “If we adopt an entrepreneurial mindset, then we can really change the game and create magic out of ashes”. He also mentions that the current 5% growth rate is not enough and should be “10-12%”. Africa has the youngest population in the world and should be better prepared to take risk. The “Accelerating Entrepreneurship in Africa” scheme, which includes Ethiopia, Ghana, Kenya, Nigeria, South Africa, and Tanzania, found that 57% of people are now interested in entrepreneurship as a career. However, there is still a clear need for advice on investment policies and regulations. Basic fundamentals, such as access to capital and business-friendly infrastructure for young wealth creators remain insurmountable. Governments aren’t making it any easier with high taxes and complicated administrative procedures taking months to register a company.

Without a doubt the potential for business success in Africa is growing. According to a recent study done by Ernst and Young, FDI (foreign direct investment) projects grew by 27% in 2011, boosting Africa's share of the world's investment to almost a quarter. Also FDI inflows should reach $150bn by 2015—double its current value.

This unearths another unfolding of events happening on the planet, namely the growing integration between emerging countries. There is an increase in investment between African nations as well larger emerging regions, such as Turkey, China and Brazil investing in African resources and raw materials to satisfy their demand for industrialisation. These emerging regions do not only share interest in Africa. For instance, relations between Turkey and China are growing. In a recent conference they announced a plan to grow bilateral trade by fourfold to $100Billion over the next eight years. It was only last month where Turkey’s Akbank and The Bank of China launched a “China desk” in Istanbul in a bid to provide services to both Chinese and Turkish firms and enterprises.

Europe should be looking at these activities as opportunities to climb its way out of a manic cycle of recession and austerity. Germany is leading the way in Europe in adapting to this change. China is already its largest non-European importer. The Economist predicts that China will become the world’s largest importer by 2014. Yet, many sceptics still doubt China’s potential to be a stronghold of the world economy. Bilateral trade between Germany and China stood at €144Billion last year and at this year’s Hannover Trade Fair, Chancellor Merkel said, "we're working on making this even more”.

The UK can only try to keep up. David Cameron’s recent, yet delayed, Asian tour marks strong interest in the scramble, forming important trade alliances with countries such as Japan, Malaysia and Indonesia in April this year. Britain certainly needs to refocus foreign efforts to boost trade and growth if it wants to avoid prolonged recession. As a leading financial services’ provider is not unreasonable to start focusing their consulting expertise in countries (such as those in Africa) in need of institutional restructuring for long term growth.

The world is changing dramatically and the time to get involved is now. Interest in entrepreneurship is growing and its importance in the integrated development of the globe cannot be ignored. The opportunities are out there, it’s simply a matter of taking the first step into the unknown to achieve tomorrow’s dreams.

By Gence Emek