Top 5 frontier markets to invest in

[Mage]

Top 5 frontier markets to invest in

The impressive growth rates exhibited by frontier markets are attracting an increasing number of ambitious investors, but the economic and political fragility of these countries brings unequivocal risks

With frontier markets representing 19 of the top 25 fastest-growing economies, it is hardly surprising that investors are starting to take notice
Markets

Author: Barclay Ballard

January 26, 2018
Emerging markets offer investors greater rewards if they are willing to put up with a heightened level of risk, but for some, this is not enough. Instead, aggressive investors often turn to frontier markets – countries that are not developed enough to enter the ’emerging’ stage, but are certainly growing rapidly.
With frontier markets representing 19 of the top 25 fastest-growing economies, it is hardly surprising that investors are starting to take notice. It is, however, important to carefully assess the risks surrounding businesses in these countries, particularly with regards to economic or political volatility. The being said, if investors are willing to conduct due diligence, frontier markets can provide significant returns. Here, we take a look at the top five frontier markets that are worth investing in.

frontier markets are countries that are not developed enough to enter the ’emerging’ stage, but are growing rapidly​

Bangladesh
The economy of Bangladesh has grown by an average of more than six percent over the past decade, making it an attractive investment destination. Infrastructure firms in particular are providing significant returns and have benefitted from sustained public sector support. Under the premiership of Sheikh Hasina, the country is experiencing a period of relative political stability, and the economic success stories of its neighbours, India and China, are having a beneficial knock-on effect.
Vietnam
With stable GDP growth, a young and rapidly growing population and a strategic location, Vietnam’s economic situation has improved markedly in recent times. The country has also made huge strides in terms of accessing credit and contract enforcement, meaning that doing business in the country is easier than ever. Vietnam’s increasing openness towards foreign investment, which reached record levels last year, provides further encouragement to investors.
Sri Lanka
The Sri Lankan Civil War may have ended less than 10 years ago, but the country has transformed significantly since, particularly in terms of its economic situation. The tourism industry is now booming, while efforts to improve the country’s port facilities could turn Sri Lanka into a regional hub for maritime trade. There is also an expectation that Sri Lanka will become a middle-income country within the next few years, significantly increasing the purchasing power of its people.
Kenya
As the largest and most advanced economy in East and Central Africa, Kenya is proving increasingly popular with investors. The technology sector is growing quickly, with the domestic IT market now estimated to be worth approximately $500m. There is also a thriving start-up scene, boosted by the fact that 67 percent of the population now has internet access. The country is quickly cementing itself as a growth centre for the region, and investors are unsurprisingly keen to play a role in future developments.
Romania
The announcement that Romania was the EU’s fastest-growing economy last year may have come as a shock to some, but not to the well-informed investor. With 72 industrial parks spread across the country, a talented workforce and a competitive tax policy, the country has boasted a favourable business climate for a number of years now. With strong growth also being shown across the EU as a whole, Romania’s upward momentum looks set to continue for the foreseeable future.

 

[Lieutenant]

Political stability is the key to investment. All of the countries in the list are not except Romania.

 

[Joe Shearer]

Political stability is the key to investment. All of the countries in the list are not except Romania.

That is true, to some extent, @WebMaster; however, the more the political stability, the lower the rate of return. Switzerland is one of the most stable countries; it will give you a negative rate of return on your investment. As we move out, you will find most European countries, starting from the Scandinavians, but generally true of the northern states, and then to a lesser degree, the southern states and finally the east Europeans (such as Romania) to be stable. We have exceptions, the PIGS, for instance, Portugal-Italy-Greece-Spain, all, unfortunately, southern European, which seems almost offensive, but Europe is by and large stable. So, too, are the US and Canada, and Australia, New Zealand and Japan. None of their return on investment rates are high; they tend to be low, as they are also the most developed states, and have both political and economic stability.

It is those of us who have a lot of catching up to do, and who have to move as quickly as we can, who offer high rates of return. There is an element of risk, ranging from moderate risk (compared to the stable states listed above) to high risk; the rate of return tends to be inversely linked. The more the risk, the more the return; if you gamble, and you win your gamble, you get a packet. If you lose, you eat at a soup kitchen.

Now, take a look at the list that we have with us.

Bangladesh' growth is truly astonishing. It has marched on steadily (@Nilgiri has his concerns about their reporting integrity and the validity of their data) and it seems from the surface that investing there, given that they are still growing and have the capacity, apparently, to grow more, may be a rewarding proposition. Cons: availability of trained human resources, as distinct from unskilled workers; as the economy grows, it will suck up more and more educated workers and tighten the job market. Two, ability to move up the food chain, from doing the simplest tasks and exporting the simplest products; have they got it? Can they train their young men (and women) to take up more and more complex jobs, presumably jobs that will pay more? Three, their inherent fundamentalism. Some of the biggest fundamentalist religious organised movements are located in Bangladesh; will they allow modern education, and the education of women free play? If not, that will cap the country's growth to the lowest value addition jobs in the world economy.

It is true that they have had a binary, or rather, a bipolar political system, but that seems broken now, as the BNP has missed its expected alternate victory slot; they failed to get elected, and allowed the Awamis to win out of turn. To that extent, they are a disgruntled lot, and the country has to work out a way to allow the opposition freedom of expression without suppressing them; even, perhaps, ensure that others besides the Awami party can win once in a way, even if not in regular alternation.

Unfortunately, going through the rest of the list will drive members to sleep in the middle of the day, so I will stop here. I have to make a list of the best Iranian movie-makers, anyway, so will spare you all now.

 

[Hithchiker]

Top 5 frontier markets to invest in

The impressive growth rates exhibited by frontier markets are attracting an increasing number of ambitious investors, but the economic and political fragility of these countries brings unequivocal risks

With frontier markets representing 19 of the top 25 fastest-growing economies, it is hardly surprising that investors are starting to take notice
Markets

Author: Barclay Ballard

January 26, 2018
Emerging markets offer investors greater rewards if they are willing to put up with a heightened level of risk, but for some, this is not enough. Instead, aggressive investors often turn to frontier markets – countries that are not developed enough to enter the ’emerging’ stage, but are certainly growing rapidly.
With frontier markets representing 19 of the top 25 fastest-growing economies, it is hardly surprising that investors are starting to take notice. It is, however, important to carefully assess the risks surrounding businesses in these countries, particularly with regards to economic or political volatility. The being said, if investors are willing to conduct due diligence, frontier markets can provide significant returns. Here, we take a look at the top five frontier markets that are worth investing in.

frontier markets are countries that are not developed enough to enter the ’emerging’ stage, but are growing rapidly​

Bangladesh
The economy of Bangladesh has grown by an average of more than six percent over the past decade, making it an attractive investment destination. Infrastructure firms in particular are providing significant returns and have benefitted from sustained public sector support. Under the premiership of Sheikh Hasina, the country is experiencing a period of relative political stability, and the economic success stories of its neighbours, India and China, are having a beneficial knock-on effect.
Vietnam
With stable GDP growth, a young and rapidly growing population and a strategic location, Vietnam’s economic situation has improved markedly in recent times. The country has also made huge strides in terms of accessing credit and contract enforcement, meaning that doing business in the country is easier than ever. Vietnam’s increasing openness towards foreign investment, which reached record levels last year, provides further encouragement to investors.
Sri Lanka
The Sri Lankan Civil War may have ended less than 10 years ago, but the country has transformed significantly since, particularly in terms of its economic situation. The tourism industry is now booming, while efforts to improve the country’s port facilities could turn Sri Lanka into a regional hub for maritime trade. There is also an expectation that Sri Lanka will become a middle-income country within the next few years, significantly increasing the purchasing power of its people.
Kenya
As the largest and most advanced economy in East and Central Africa, Kenya is proving increasingly popular with investors. The technology sector is growing quickly, with the domestic IT market now estimated to be worth approximately $500m. There is also a thriving start-up scene, boosted by the fact that 67 percent of the population now has internet access. The country is quickly cementing itself as a growth centre for the region, and investors are unsurprisingly keen to play a role in future developments.
Romania
The announcement that Romania was the EU’s fastest-growing economy last year may have come as a shock to some, but not to the well-informed investor. With 72 industrial parks spread across the country, a talented workforce and a competitive tax policy, the country has boasted a favourable business climate for a number of years now. With strong growth also being shown across the EU as a whole, Romania’s upward momentum looks set to continue for the foreseeable future.

Invest in volatile market and generate in year what other takes 5-10 years..

 

[Mage]

That is true, to some extent, @WebMaster; however, the more the political stability, the lower the rate of return. Switzerland is one of the most stable countries; it will give you a negative rate of return on your investment. As we move out, you will find most European countries, starting from the Scandinavians, but generally true of the northern states, and then to a lesser degree, the southern states and finally the east Europeans (such as Romania) to be stable. We have exceptions, the PIGS, for instance, Portugal-Italy-Greece-Spain, all, unfortunately, southern European, which seems almost offensive, but Europe is by and large stable. So, too, are the US and Canada, and Australia, New Zealand and Japan. None of their return on investment rates are high; they tend to be low, as they are also the most developed states, and have both political and economic stability.

It is those of us who have a lot of catching up to do, and who have to move as quickly as we can, who offer high rates of return. There is an element of risk, ranging from moderate risk (compared to the stable states listed above) to high risk; the rate of return tends to be inversely linked. The more the risk, the more the return; if you gamble, and you win your gamble, you get a packet. If you lose, you eat at a soup kitchen.

Now, take a look at the list that we have with us.

Bangladesh' growth is truly astonishing. It has marched on steadily (@Nilgiri has his concerns about their reporting integrity and the validity of their data) and it seems from the surface that investing there, given that they are still growing and have the capacity, apparently, to grow more, may be a rewarding proposition. Cons: availability of trained human resources, as distinct from unskilled workers; as the economy grows, it will suck up more and more educated workers and tighten the job market. Two, ability to move up the food chain, from doing the simplest tasks and exporting the simplest products; have they got it? Can they train their young men (and women) to take up more and more complex jobs, presumably jobs that will pay more? Three, their inherent fundamentalism. Some of the biggest fundamentalist religious organised movements are located in Bangladesh; will they allow modern education, and the education of women free play? If not, that will cap the country's growth to the lowest value addition jobs in the world economy.

It is true that they have had a binary, or rather, a bipolar political system, but that seems broken now, as the BNP has missed its expected alternate victory slot; they failed to get elected, and allowed the Awamis to win out of turn. To that extent, they are a disgruntled lot, and the country has to work out a way to allow the opposition freedom of expression without suppressing them; even, perhaps, ensure that others besides the Awami party can win once in a way, even if not in regular alternation.

Unfortunately, going through the rest of the list will drive members to sleep in the middle of the day, so I will stop here. I have to make a list of the best Iranian movie-makers, anyway, so will spare you all now.

I don't think fundamentalism is that much of a problem for Bangladesh. It is a relatively homogeneous society. There isn't that much element that can make people feel alien in their own society. We have our nutjobs who cause huge damage. But they get no sympathy from any faction. Even their parents don't take back their bodies. Charitable organizations have to perform their last rituals. As of now the biggest challenge for Bangladesh is to diversify it's economy. Apparels can only carry the economy so far. Other industries have to pop up and push the economy further. Whether the skill is available to the workforce to do so or not is questionable. It needs to be seen how they cope up when LDC facilities are gone. If they do well, then the optimism is justified if not then Go back being the bottomless basket.

 

[Joe Shearer]

I don't think fundamentalism is that much of a problem for Bangladesh. It is a relatively homogeneous society. There isn't that much element that can make people feel alien in their own society. We have our nutjobs who cause huge damage. But they get no sympathy from any faction. Even their parents don't take back their bodies. Charitable organizations have to perform their last rituals. As of now the biggest challenge for Bangladesh is to diversify it's economy. Apparels can only carry the economy so far. Other industries have to pop up and push the economy further. Whether the skill is available to the workforce to do so or not is questionable. It needs to be seen how they cope up when LDC facilities are gone. If they do well, then the optimism is justified if not then Go back being the bottomless basket.

Good points.

I did mention some of those growth-related points; shows you didn't read my post, you little *******!

 

[Mage]

Smh....my English is still bad even though I have been using it for basic means of communication for a quite some time...

I did mention some of those growth-related points; shows you didn't read my post, you little *******!

I read your post and did it very carefully as well. I disagreed with your fundamentalism point and gave shared my thoughts. Also agreed with your growth-skill relation point and expressed exactly what you wrote with different wording.

Btw you are quite knowledgeable about BD politics...I wonder how?..RAW Agent?

 

[Joe Shearer]

Smh....my English is still bad even though I have been using it for basic means of communication for a quite some time...


I read your post and did it very carefully as well. I disagreed with your fundamentalism point and gave shared my thoughts. Also agreed with your growth-skill relation point and expressed exactly what you wrote with different wording.

Btw you are quite knowledgeable about BD politics...I wonder how?..RAW Agent?

Hoi!

I am a Dhaka person on my father's side (Bikrampur), Barisal on my mother's side (Kulokathi, near Jhalukathi). My father grew up in Dhaka, and studied in Pogose School; they lived in Ganderia. My grandfather was a well-known professor of history at Jagannath College. Khwaja Mohammed Kaisar chacha was my father's dearest friend; other friends included Taslimuddin Ahmed, his batch-mate and first IG of independent Bangladesh, Iqbal Athar Ali, and Suhrawardi. I have been to Dhaka frequently, and the first time, was stunned to hear the whole city speaking the dialect I had only heard at home, when my father and his brothers spoke to one another. I used to go and use my friends, Reza urRahman and Mizan urRahman, of Shaw Wallace Bangladesh, as bases for meeting people with whom to do business in Bangladesh.

Knowledgeable about BD politics, 'e sez.

 

[Nilgiri]

Bangladesh' growth is truly astonishing. It has marched on steadily (@Nilgiri has his concerns about their reporting integrity and the validity of their data) and it seems from the surface that investing there, given that they are still growing and have the capacity, apparently, to grow more, may be a rewarding proposition. Cons: availability of trained human resources, as distinct from unskilled workers; as the economy grows, it will suck up more and more educated workers and tighten the job market. Two, ability to move up the food chain, from doing the simplest tasks and exporting the simplest products; have they got it? Can they train their young men (and women) to take up more and more complex jobs, presumably jobs that will pay more? Three, their inherent fundamentalism. Some of the biggest fundamentalist religious organised movements are located in Bangladesh; will they allow modern education, and the education of women free play? If not, that will cap the country's growth to the lowest value addition jobs in the world economy.

The good + more credible (as far as standardisation + high frequency) data will come in the next cpl decades. Right now BD is in roughly the 90's (political + institutional) environment India saw....they need to put better floorboards and references with IMF world standards (took India nearly 20 years to do so and its still ongoing)....its not really bang for the buck politically for Awami League or BNP to really start that at this juncture (esp given market cap + foreign equity is not significant driver) esp considering the scarcity of quality bureaucrats (which I have not looked into at all as to where they are deployed anyway). The main crucial important issue in comparison would be the upcoming LDC graduation + re-organising how to deal with the loss of the favourable tarrif structure in esp Europe from that....given thats really 75%+ of their export basket/forex earning and is largely stagnant with regards to that dominance.

Hence BD really should be compared to itself for time being, given that way at least there is some assumed consistency in the (internalised) reference markers. They are not doing terribly at all (plodding along, not rocking the boat, letting the fundamentals ride themselves out + low intervention in the current buffer afforded by LDC status), but the lack of at least some risk taking in the economic goals (to start big time diversification with future in mind) will likely cost them.

They also atrociously tax their industrial MSME in critical growth sectors....which makes me think there are rotten politics at work (i.e keep workers/households dependent on RMG + emigration for better political streamlining)....rather than dealing with new political parley groups that may spring up from newer industries....and likely having to deploy smoke and mirrors bureaucrats over there.