A quarter decade old terminology is coming of age. Though it has witnessed the rise and fall of some nations like Argentina, Venezuela, East-Asia etc. but there have also been those which have shown promise. The famous Goldman Sachs report coining the term BRIC is now used interchangeably with emerging economies even though there are some more notable countries which I shall be describing later on. The emerging economies have suddenly become more prominent because of the global downturn and the US financial crisis similar to the post dot-com bubble times. But, a lot has changed since then and the picture that was being painted is now becoming more picturesque. The world has closely monitored BRIC’s and other possible emerging economies and tried to relate to them to gain the maximum out of the situation.
All four nations have grown in their own goods ways, trying to capitalize on their strong points or at least the world focusing on certain things making them core to the countries growth. ITeS in India, Manufacturing in China, Commodities in Brazil and Energy in Russia can be the major distinct realities that have come across. Even during the recent global crisis, these have been inherently sustainable and look to be growing even more. The fact that all are consumer driven economies makes them sustainable.
But, together the BRIC nations are facing the same common problems –
- Mobile telephony - increased in numbers but not coverage
- Electricity, health and sanitation and potable water provision
- Women empowerment for tapping the complete growth potential
- Environmental concerns even though they are not a high contributors
- Financial inclusion
- Development of the Banking sector
- Regulatory measures are needed
The economic muscle is truly visible in China’s perspective having a more than sound GDP(≈USD 3.45trillion) and largest foreign reserves. Even though China’s trade exposure to US is very high, still its growth is stable on the face of a downturn. Its industry is ≈50% contributor to its GDP with strong private enterprises fuelling ≈70% of its national output. Its low English speaking population is the only bone of contention to an even larger growth in its service sector which it can capture due to its provision of cheap labour.
The political inclination of the world towards India is striking from the fact that the NSG waiver was swift on the backdrop of US’s inclination to enter into a contract with India. Also the internal political is passing a relatively stable phase with two governments completing nearly full terms in office. Though there are internal disputes but on a macro level, the political position of the country looks stable especially with strong young leaders. But a striking paradox in the agriculture sector nullifies a greater growth of the country which is ≈60% of the population accounts for ≈25% of the GDP mainly due to poor agrarian practises and non-consolidation of holdings.
From a wholly socialistic to a semi-capitalistic economy, Russia has come of age in the recent years. High crude prices, increased consumption and investments have fuelled growth to a large extent. With ≈99.5% literacy, its boasts of highest amongst its peer BRIC’s, its education sector is quite robust. Huge possibilities lie ahead in the investment areas post the 1998 financial crisis. Its high oil and gas reserves put it in a formidable position for future earnings. But it faces an aging population with a declining growth posing a serious question on the future consumption levels and the human asset availability.
I think Brazil, in comparison, is quite suited to be a future leader, maybe not in terms for highest GDP, but an overall inclusion. It has a diverse population with strong demographic components in working population percentage ≈68%, youth literacy ≈93% (15-19years), a robust service sector ≈65%, high agricultural growth ≈8% (vis-à-vis GDP growth of ≈5%) on the back of exploding commodity demands throughout the world, the inflation has decreased to acceptable limits in the decade from a high of ≈12%. The reforms have allowed decrease of overall debt. Even though the GDP growth rate of the country is slow, yet it has a benefit that its economy is quite decoupled to US and more spread out in terms of export with only ≈5% total trade. There are positive steps being taken to ensure a total growth of the country and more so can be taken by promoting higher savings, reduction in social benefits which will increase the working population, higher trade liberalization for higher gains in the both the commodity market and services sector, privatization of energy sector etc.
Beside these there are many emerging points to ponder from the rise or BRIC’s. Some of them which catch the eye are: -
- Momentum to outsourcing outside the developed world
- Increasing demand and thus prices of steel and cement
- Increased oil guzzling esp. by India and China
- Focus on Bio-fuels esp. Ethanol
- Importance of banks outside US/Europe like CITIC
- Growth of retail sector outside US and Europe
- Increased focus on savings
- Higher focus on agri-yield improvement due to lack of tillable land
BRIC's may be the Fab-4 of the emerging economies but there is anther term gaining momentum among the nations – the N-11 or the NEXT-11 comprising Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam. Together they are a formidable bunch with high growth prospects, comprising ≈7% of the world’s economy and ≈9% of energy consumption. They are the gen-X for urbanization and human assets and envy to BRIC’s combined in per capita healthcare expenditure ($152 vs $117, Source:World Bank) and technological adaption. Mexico and Korea can be the countries to watch in the next 10-15years among the lot and can boast of joining the niche club of the BRIC’s.
