Breakout nations

15/04/2023

Excerpts - Breakout Nations

Automotive and Farm Equipment Sectors

- Definition of a Breakout Nation(BON)- Criteria for Breakout Nation- Factors Analysed- Country facts- Summary- BON/Non-BON

Contents :

Countries beating Growth Expectations Best for Investors with 3-5 yrs of Investment horizon

Definition of a Breakout Nation:

• GDP Growth• Political Environment• Govt. Investments & Infrastructure spending• Development of Tier-II Cities• FDI & Exports• Innovation (R&D Expenditure)• No of billionaires

Criteria for Breakout Nation:

Trends analyzed by Touchy-feel Stuff

Macro-Economic Indicators

Indicators Analyzed :

GDP Growth

• Per Capita income- 1.5K India – 5 % Growth Very Poor- 11K Brazil – 5 % Growth Good- 50 K US – 3% Growth Spectacular

• ‘Cheap’ In-Country prices is good

• Low prices Indicative of Competition

$ 4000-$ 5000 Growth rate slows down e.g. China ($ 6000)


Political Environment

• Regardless of regime , Quality of Leadership matters (50 % Democratic & 50 % Autocratic among nations analyzed )

• Govt. spending in Infrastructure as % of GDP- Brazil- Low % Stability at any Cost- China-High % Growth at any Cost

Govt. Investments & Infrastructure Spending


Development of Tier II cities

• Economic output should not be focused in one Central Hub

(Thailand Bangkok problematic..)

• Local Companies Expanding / Investing Abroad :- India- S. Africa- Malaysia

FDI & Exports

Troubling sign!!


No of Billionaires

• More no of New Billionaires in a Nation

• From Govt. Patronage Sectors

• Different Production Groups

• India Billionaire Club : Same faces every year

Country Facts..

• S. Korea - Continuous R&D investment & Growth- Among Top 5 in terms of winning International Patents- Always at the centre of Boom- Quick to Release Export Economic Data

• Taiwan - More dependant on Ingenuity “ more open to outsiders”

S. Korea & Taiwan : 5 Decades of Consistent Growth

Country Facts..

• Indonesia - Attracting FDI investment : $10 Bn/year- Heavy Govt. Spend on Infrastructure (32% of GDP)- Labor cheapest in ASEAN (1/4th of China)- Fast development of Tier-II cities - 4th most populous country- Tourism Revenue - Reserves of Crude oil , Coal, Palm oil and Nickel

On the Tiger Road : Indonesia

Country Facts..

• Advantage: - Poland

- Czech Rep

Currency is not “Euro”But part of “EU”

The Sweet Spot Of EU..

Country Facts..

• Russia/Brazil High Dependence on Commodity Exports

• Turkey No Commodity export

Commodity export..

• Central Bank tries to control 3 major factors : Inflation Exchange Rate Capital Flows

• Interest rate Controlled inflation

• Interest rate Exchange rate goes up..

• Controlling all 3 “ Whack -a -mole”

Trilemma in Emerging nations!!!

Which country will flourish?

• Long –Term Economic Forecasts are futile

• Every decade has been defined by some idea

• Winners of one decade are often not the winners of next

• Generally countries with lower base rate of per capita have potential to grow fast

• But may not grow at the same rate in decades…

Summary

Which country will flourish?

• R&D Spending High , Innovation USA, S. Korea , Taiwan

• Former Economic leaders slowing down (China, Japan)

• All time Winner S. Korea & Taiwan

Summary

BRICS will be replaced by CIP …

Summary

Czech Republic

Indonesia

Poland & Philippines

Non-BON

Less potential to become Breakout Nations

Thailand- Polarization in Bangkok S. Africa- Oligopolies Domination/Stagnant Economy Malaysia- Labor import/ Brain drain Vietnam- Poor Infrastructure & lack of skilled labor Russia- Negative FDI/Corruption/ Commodity Export Mexico - Social Inequality/ US Proximity Brazil- Commodity Export

China- 6000 $ per capita Growth likely to slow down India- Corruption/ High Context Society

50 % Chance

BON

Breakout Nations

S. Korea - R&D investments Czech Rep. & Poland- Sweet spot of EU Indonesia- High FDI investments Philippines- Young population / Govt. Investments in

Infrastructure Turkey- Govt. Investments in Infrastructure/Lower exposure to

commodity

15/04/2023

Worlds 4th Most Populous Nation–245 Million

Reserves of Crude oil,Coal,Palm oil and Nickel

Attracting FDI investment of $10 Bn/year

55% of Earnings from Commodities Exports account 25% of Economy

Economy Dependent on revenue from Crude oil

Industries other than Commodities less developed

Banking system dependent on external borrowing

Ease of doing business better than India due to efficient corruption

Govt. spending heavily on Infrastructure (32% of GDP)

Labor cheapest in ASEAN (1/4th of China)

2nd cities developing faster Economic growth (6% of GDP) Revenue from Tourism (Bali)

Strength

Weakness

Opportunity

Threat

SWOT Analysis: Indonesia

BREAKOUT NATION

15/04/2023

7th Largest economy in the world Highly skilled workforce (3rd highest in

Higher education in world) 8% of Global Car market share Most dense robot population in the

world Global leaders in construction of oil

facilities

Service sector stagnant Banking and Telecommunication not

successful in Korea House hold debt , Credit card debt

(146% of GDP)

Most of business are family owned – not attractive for investors as they are less likely to pay dividends (Korean stocks available at discounted rates)

Germany of Asia in Mfg sector Samsung, LG, Hyundai account for 16%

of GDP Among top 5 nations in winning

International patents Ship building industry growing fast High investment in R&D

Strength

Weakness

Opportunity

Threat

SWOT Analysis: South Korea

BREAKOUT NATION

15/04/2023

No Govt. debt Small and Medium sized competitive

companies Well managed govt.& good Local

Banks Only nation in Eastern Europe to have

preserved their brand Skoda (Arm of VW, but independent in design and Engg.)

Not willing to joint EU due to Euro-zone crisis

Dependent on Germany for Exports Economy vulnerable to EU crisis

Czech currency Koruna is stable and inexpensive (Good for exports)

Labor cost is 27% cheaper than Western Europe

Productivity cost is 40% lower than Western Europe

Strength

Weakness

Opportunity

Threat

SWOT Analysis: Czech Republic

BREAKOUT NATION

15/04/2023

Current GDP growth of 11% Stable govt. Govt. debt 40% of GDP (EU norm <60%

of GDP) Population – 79 Million (Avg age 29

yrs) 2nd largest construction industry after

China

80% Govt. Revenue comes from Tax on industries like Telecom, Automobile& Gasoline.

Cars more expensive in Turkey than Europe ( for Automobile imports)

Economy vulnerable to EU crisis Economy vulnerable to Middle east

political instability

Turkish Lira stable due to less interest rates

Exports competitive due to stable Lira Govt. investing heavily in

Infrastructure FORD,FIAT to move European

operations to Turkey due to inexpensive labor (labor 75% cheaper than W Europe)

Strength

Weakness

Opportunity

Threat

SWOT Analysis: Turkey

BREAKOUT NATION

15/04/2023

Debt free country Small and Medium sized competitive

companies Talented workforce Good banking system Central bank is independent of Political

interference Quality consumer brands presence

Not willing to joint EU due to Euro-zone crisis

Dependent on Western Europe for Exports

Poland currency Zloty is stable and inexpensive

Labor cost is 27% cheaper than Western Europe

Strength

Weakness

Opportunity

Threat

SWOT Analysis: Poland

BREAKOUT NATION

15/04/2023

Highly literate population Key Shipping route pass through

Colombo Revenue from Tourism Crude oil reserves

High Govt. debt (80% of GDP) Business climate rank by World Bank

102nd /180

Post war instability China investing in Infrastructure (ports)

can act as trade barrier for India

Govt. spend rising in infrastructure post war

MNC interested in IT outsourcing, Back office

Banking and Retail MNC Increase in Cargo traffic at Colombo

port Oil exploration off west coast by

Reliance – Revenue from Crude oil

Strength

Weakness

Opportunity

Threat

SWOT Analysis: Sri Lanka

VERY LIKELY TO BE A BREAKOUT NATION

15/04/2023

Highly Skilled Population Thai corporations not dependent on

external borrowing 40% workforce working in Agriculture

(out ot 60 million population)

High dependence on Exports (30% of GDP)

2nd cities not developed

Political Instability.

Biggest exporter of Cars (1 Million/year) after Japan and S Korea in Asia

Good Infrasturture Revenue from Tourism

Strength

Weakness

Opportunity

Threat

SWOT Analysis: Thailand

NOT A BREAKOUT NATION

15/04/2023

Young Population (60% of population under 25)

Good per capita income $8000 Rich in Natural resources like Rubber &

Palm oil

Delay in Execution of projects Less skilled workforce Less attractive to investors

Mfg exports decreasing as Malaysia has to import labor

Brain Drain of Skilled population

Govt. spend rising in infrastructure (28% of GDP)

Rubber and Commodity exports Less govt. debt (50% of GDP)

Strength

Weakness

Opportunity

Threat

SWOT Analysis: Malaysia


15/04/2023

Top exporter of iron ore, Sugar, Coffee, Soybeans, poultry.

2 Mn barrels/year oil production Brazilian stocks are one of the hottestRose 300 % in $ terms in the last decade

Slow Growth Rate since 1980’s One of the closed economies till date Total imports and exports account for

only 15 % of the GDP Trade as a share of GDP one of the

lowest among emerging Nations(only 20 %)

One of the most costliest and overhyped economies

Poor productivity growth rate (0.2 % btw 1980-2008)

Poor New Infrastructure investment imports growing more than exports

recently. Struggling to grow even 4% a year

Recently recognized as World’s tenth largest oil reserves.

Huge foreign currency flowing in. Rising Stock markets

Strength

Weakness

Opportunity

Threat

SWOT Analysis: Brazil

15/04/2023

One of the hottest Stock Markets Becoming Multinationals by making

huge profits at home Avg Per Capita Income( $11000)

Concentration of Business in Top Families

Stagnant Economy-Power of Oligopolies

Local economy not listed in Stock Market

High Corruption Poor Security System

One Party Rule & capture of important positions by the same

Labor Laws very Pro worker Social Inequality High Drug trafficking & kidnapping Heavily dependent on US Economy Highest Migration Rate since 2006

Competitive labor rates & in proximity to US – Ray of Hope for Manufacturing Sector

Strength

Weakness

Opportunity

Threat

SWOT Analysis: Mexico

15/04/2023

Young Population–90 Million (50% below 21 yrs

5th largest Reserves of Crude oil, Copper, Nickel, Gold & Silver

$9 Bn BPO industry (Good English speaking population)

Consumption 80% of GDP (Higher than USA)

Poor Infrastructure High dependence on NRI income (10%

of GDP)

Unstable Govt. High Emigration.

Revenue from Tourism Increasing Per capita income $2500 Govt. spending increasing in

Infrastructure and Industries

Strength

Weakness

Opportunity

Threat

SWOT Analysis: Philippines


15/04/2023

Abundance of Crude Oil & Natural Gas Stable Government Ranked 3rd in world for no of

Billionaires(100)

Poor Infrastructure High Inflation Poor Growth of Auto, Real Estate &

Consumer Industries Weak Banking System

Ageing population Corruption in Public sectors Govt. Income Highly dependent on oil No Small & Medium Enterprises No Global Presence of Russian Brands Net FDI is negative

Good R&D and Innovation capabilities No Govt. Restrictions in Retail ,

Internet & Media investments Reduction in Govt. Stakes in

companies Increase in immigrants from Eastern

Europe

Strength

Weakness

Opportunity

Threat

SWOT Analysis: Russia

15/04/2023

Good per capita income $8000 Worlds largest reserves of Platinum,

Manganese,Gold,Iron ore and Coal

Unemployment (25% of Population) Frequent Labor strikes Wages Increasing higher than Inflation Economy stagnant (3% of GDP) Oligopolies dominate Industry

High Govt.debt.($750 Bn for Insurance , pension)

Productivity in Mfg decreasing

Exports of Gold and Platinum Growth in Mining and Mfg Demand for Automobiles

Strength

Weakness

Opportunity

Threat

SWOT Analysis: South Africa


15/04/2023

Crude oil reserves 54 Sea ports Population – 90 million

Very poor Infrastructure Lack of skilled labor High interest rates (24%) High Inflation (20%) Sea Ports underdeveloped

Vietnamese Dong highly unstable Political inclination towards

communism

Revenue from Oil exploration Govt. spend rising in infrastructure Revenue from Shipping (54 ports) Low cost Mfg hub for electronic

products (Intel plant)

Strength

Weakness

OpportunityThreat

SWOT Analysis: Vietnam
