Throughout 2011, the financial world has focused a lot on the potential of investment funds for investors wishing to take an interest in CIVETS nations. In-depth analysis and commentary was provided on the growth and development of the economic landscape in Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.
A multitude of investments have been launched over the past 12 months and activity within these countries has continued to grow as bold investors seek to target the world’s fastest growing economies.
The reasons for this increased activity are varied.
For example, the CIVETS nations have a collective population of around 600 million, representing around 8% of the world’s population, a population characterized by its youth and ambition. Therefore, the growing consumption of these countries means that the market demand is strong for the commodities, which is further reinforced by the demographic dynamics which seem fixed on growth in all aspects of life.
In this regard, the CIVETS nations reflect many of the social and industrial qualities inherent in large developing markets such as the BRIC economies – Brazil, Russia, India and China. In fact, in some cases, the growth rates of CIVETS countries are now exceeding those of established BRIC countries.
Another crucial feature is that, taken as a whole, CIVETS nations do not have the chronic debt problems that developed countries currently experience. This is a major plus for investors looking for short and long term returns.
Here we take a closer look at the main characteristics of CIVETS nations and their influence on the potential of investment funds. Remember that the value of investments can go down as well as up and you can get back less than what you invested.
The current Colombian government has devoted a great deal of time and effort to stabilizing the security situation across the country and developing the national infrastructure.
It has been very keen to increase trade and business activity in all of its industrial regions and has successfully reinvested part of the oil revenues to dramatically improve the business and social environment.
An often unknown fact is that Colombia is the third largest exporter of oil to the United States and therefore has a very solid development base thanks to this constant income stream.
Besides petroleum, the country’s main industries are coal, gold, textiles, food processing, clothing and footwear, beverages, chemicals and cement, giving it a strong position in the major commodity markets in the United States.
According to a report published on the Guardian online, its economy grew 4.3% in 2010, compared to 2.8% for the United States, which is a clear draw for the foreign investor. Only time will tell if this growth will continue and if the relative political and social harmony can be maintained or not.
With an estimated population of 245.6 million, Indonesia is the fourth most populous country in the world. Almost half of the economy is industrial.
The Indonesian government has also declared its wish to see Indonesia grow into one of the 10 largest economies in the world by 2025. If this goal is successfully achieved, early investment in Indonesian assets could generate significant returns. strong returns.
Like other CIVETS countries, Indonesia can be seen as a positive investment destination due to positive demographics such as a young and ambitious population with increasing levels of disposable income and therefore market demand is strong and is getting stronger. Its position as a manufacturing hub also contributes to a positive long-term outlook.
According to the Wall Street Journal, some fund managers see better exposure through local subsidiaries of multinationals because of the strength of their existing structures.
As a result, the long-term outlook looks healthy for investors.
The low cost of labor and the further development of manufacturing infrastructure mean that Vietnam has gained in attractiveness to foreign investors despite its economic problems over the past 5 years.
Its economy is 41% industrial and the World Bank is forecasting growth of 6% this year to reach 7.2% in 2013 – according to the Wall Street Journal Online – which is a good prospect.
The potential for lower taxes for fund management companies is also an interesting development in this particular market.
Concerns persist, however, about Vietnam’s uncertain outlook for interest rates and inflationary pressures, as well as the country’s continuing to pursue a policy of rapid growth. Standard & Poor downgraded Vietnam’s rating in 2011 amid warnings that the banking system was vulnerable to shocks and raised concerns about bad debts.
Egypt’s main strengths include fast-growing ports on the Mediterranean and Red Sea, connected by the Suez Canal, which are seen as potentially important trading centers for connecting Europe and Africa, as well as vast untapped natural resources.
Egypt also benefits from strong trade and investment relations with the EU. In 2010, agriculture represented around 10% of the economy, industry 27% and services 64%.
Agreements have also been signed by Egypt and China that will see the two countries collaborate on the production and distribution of automobiles across North Africa. This is positive news for Egyptian businesses and also indicates China’s commitment to the North African market.
Chinese automaker Zhejiang Geely Holding Group and Egyptian automobile assembler GB Auto SAE plan to produce up to 30,000 cars per year in a few years, and aim to increase that figure to 50,000 per year, a Geely source said. at the Wall Street Journal.
It should be remembered, however, that the prospects for continued and solid investment in Egypt are, however, seriously hampered by an unstable political situation.
The Turkish economy has proven to be resilient to the global slowdown, and the Turkish government’s public and fiscal debt position is arguably significantly better than that of many eurozone countries.
The growing influence of the private sector in recent years, coupled with higher levels of efficiency and resilience within the financial sector, has had positive results. A stronger social security system has also helped create a stable investment environment.
Turkey also has the experience of recovering from economic difficulties, as it did successfully after its own banking crisis in 2001.
Turkey has also apparently profited from the economic difficulties of neighboring Greece. For example, Turkish imports from Greece jumped almost 40% and the number of Greek companies registered to do business in Turkey increased by 10.4% in 2011 according to the Turkish news site. Hurriyet Daily News.
This would seem to suggest that Turkey offers solid investment prospects. However, according to a Financial Times blog, Turkey’s “huge” current account deficit, which now accounts for around 10% of gross domestic product, is a concern, but they also say Turkey’s economic performance looks extremely healthy compared to its European neighbors. Its GDP grew by 8.9% in 2011
South Africa is a country that has the qualities of emerging and developed markets. Historically, foreign investors have been drawn to South Africa’s rich and abundant natural resources, particularly gold. Foreign direct investment is also steadily increasing as the government encourages more international companies to locate there. But it is the mining sector that remains dominant in South Africa due to the large reserve of natural resources and the stability of the mining infrastructure already in place.
Rising commodity prices are bolstered by renewed demand in its automotive and chemical industries, as well as the 2010 FIFA World Cup, helped South Africa resume growth after slipping into recession during the downturn global economy.
It should be noted, however, that South Africa experienced the slowest growth of all civets last year and suffered 25% unemployment. The International Monetary Fund’s World Economic Outlook noted: “Rising unemployment, high household indebtedness, low capacity utilization, slowing advanced economies and substantial real exchange rate appreciation are leading to hesitant recovery “.
It is clear that there is significant potential for investment fund growth in all CIVETS nations. The demographic makeup and industrial structures mean that the financial outlook is positive for hungry investors.
However, optimism needs to be tempered for a number of reasons and some analysts warn of rushing into some potentially unpredictable and volatile markets.
Political and social upheavals, as well as ineffective and ineffective corporate governance standards, lead to an uncertain economic environment and deep currency fluctuations. CIVETS Nations are currently well behind the major recognized emerging markets of the BRIC countries and the most savvy investors will only allocate a manageable amount of their investment portfolio to the CIVETS Nations markets.