Emerging nations lead the way to recovery

 

Kuala Lumpur, 24 May 2010 - The future looks bright for emerging economies according to the Grant Thornton International Business Report 2010. A balance of +57% of Medium to Large Enterprises (MLEs) in 14 of the world's leading emerging markets indicated that they were optimistic about the prospects for their country's economy in the year ahead. At the same time, a balance of just +2 per cent of businesses in mature economies indicated that they were optimistic. These figures compare with a global average of +24 per cent (see figure 1).

 

 

 

 

 

 

 

 

 

 

 

At an individual country level, emerging economies occupy four of the top five places in terms of optimism for the year ahead. Chile (+85% per cent), India (+84 per cent), Vietnam (+72 per cent) and Brazil (+71 per cent) are only separated by Australia (+79 per cent). Of the other emerging economies, Botswana, mainland China, South Africa, Malaysia and Poland all boast optimism balances of more than 40 per cent.

In the Grant Thornton emerging markets opportunity index (see figure 2) the top five countries this year remain the same as in the 2008. The Grant Thornton emerging markets opportunity index ranks the level of opportunity for investors in 27 emerging economies across the globe. Taking account of key factors such as size, wealth, involvement in world trade, growth potential and levels of human development, it highlights these markets as investment prospects with their large, rapidly expanding and increasingly affluent economies.

China leads the way thanks to its huge consumer market, increasingly open economy and trade growth, followed by the other developing Asian powerhouse, India. Russia, thanks to its wealth of natural resources, is third, followed by the two largest economies in Latin America - Mexico and Brazil.

 

Thriving Malaysia

Malaysia offers the eighth greatest level of opportunity to investors according to the Grant Thornton emerging markets opportunity index. Malaysia has risen one place since the index was compiled in 2008 and has one of Southeast Asia’s strongest healthcare systems. Its FDI inflows increased continuously by 18 per cent per year on average from 1991-2000; and by 2008 these had risen to US$8 billion, up from US$4 billion in 2005 (UNCTAD, 2009).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dato’ N.K. Jasani, Managing Partner of SJ Grant Thornton said, “Malaysia has large natural resources including oil, petroleum, rubber and timber and also a resilient, hard working population. Located strategically, Malaysia has been a strong exporting and importing nation and its location makes it ideally placed for conducting business with the other Asia Pacific nations. These factors have contributed to the positive positioning on the Emerging Markets Opportunity Index 2010.”

Malaysian businesses are amongst the most active in taking action in preparation for an upturn in the global economy. 69 per cent of businesses have put an increased focus on targeting new markets, 64 per cent are targeting new products/services whilst 63 per cent are focusing on the skills of their current workforce; this compares to global averages of 51 per cent, 46 per cent and 47 per cent respectively.

 

 

 

Other economic indicators show that businesses in Malaysia are among the most optimistic with regards to expectations for revenue over the coming year (+60 per cent). This is considerably higher than the global average (+40 per cent) and in line with the emerging markets average (+59 per cent). Expectations around exports and profitability are also positively strong for the coming year (balance of +37 per cent and +41 per cent respectively).

Dato’ Jasani said, “The importance of the emerging markets to the world economy has been brought into sharper focus as the world emerges from recession. Not only have these economies been less severely hit, but they are also recovering more quickly, with growth rates over the next two years forecast to be double that of mature economies." However, the survey also reports that businesses in emerging markets fear their growth prospects are being hampered by poor access to finance and a lack of highly-skilled workers to a much larger extent than their counterparts in mature economies. The importance of skilled workers and professionals is all the more critical to Malaysia for it to achieve the goals envisaged under the New Economic Model (NEM).

Dato’ NK Jasani Managing Partner, SJ Grant Thornton (pic attached)

 

"The opportunity for investors from both mature and emerging markets to feed off this optimism and help these businesses to overcome the barriers they face regarding expansion are enormous. Indeed, these markets and their businesses are developing so rapidly and powerfully that ignoring them could represent a risk to long term profitability,” he explains.

“Investors that are looking into investing in emerging markets must produce effective strategies in determining the market and not rush into making quick decisions. They should make the most of incentives such as tax incentives, tax holidays and import duty waivers and choosing the right partners. Investors need to be aware of different and higher levels of bureaucracy,” he added.

 

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Further enquiries, please contact:

Sharon Sung
Technical and Corporate Affairs Director
T +03 2692 4022
E sharonsung@gt.com.my

Notes to editors:

About the Grant Thornton International Business Report (IBR)
Grant Thornton IBR surveyed a sample of over 7,400 chief executive officers, managing directors, chariment or other senior executives in medium to large MLEs across 36 economies. The sample was randomly selected by number of employees or revenue of the businesses. A minimum sample size of 100 per country was surveyed in order to guarantee statistical reliability, although this number was higher in larger economies. The survey was commissioned by Grant Thornton International and conducted by an independent market research agency, Experian Business Strategies. Further details about the IBR methodology are available at: www.internationalbusinessreport.com.

About the Grant Thortnon emerging markets opportunity index
The Grant Thornton emerging markets opportunity index ranks the level of opportunity for invsetors in 27 emerging economies across the globe. Taking accountof key fasctors such as size, wealth, involvement in world trade, growth potential and levels of human development, it highlightes these markets as investment prospects with their large, rapidly expanding and increasingly affluent economies.

About SJ Grant Thornton:
SJ Grant Thornton is a member firm within Grant Thornton International Ltd and provides assurance, tax, corporate finance, corporate restructuring and management consulting services. The firm operates from its main office in Kuala Lumpur and its other offices in Penang, Johor and Kuantan.

About Grant Thornton International:
Grant Thornton International is one of the world's leading organisations of independently owned and managed accounting and consulting firms providing assurance, tax and specialist advisory services to privately held businesses and public interest entities. Clients of member and correspondent firms can access the knowledge and experience of more than 2400 partners in over 100 countries and receive the same distinctive, high quality and personalised service wherever they choose to do business.

Grant Thornton International strives to speak out on issues that matter to business and which are in the wider public interest and to be a bold and positive leader in its chosen markets and within the global accounting profession.

SJ Grant Thornton is a member firm within Grant Thornton International Ltd (Grant Thornton International). Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered independently by the member firms.