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Doing business with BRICs

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Emergence of the BRIC (Brazil, Russia, India and China) economies will be one of the greatest influences and opportunities for business and investment in the next decade. Just as Britain grew to dominance during the industrial revolution of the 1800s and the US during the 1900s, this century will, and is already seeing, the emergence of the BRIC countries as dominant economic players. Most economists agree that during the next 20 years, China will overtake America to become the largest economy in the world, with India, Russia and Brazil not far behind. It will become increasingly important for entrepreneurs, businesses and investors to properly understand and gain experience in the new BRIC economies, so that deciding to invest or do business (or not) in these markets is a considered, rational progression - not a blind leap of faith! While the four BRIC countries exhibit many differences, in terms of their local culture, society, language, history and politics, they all exhibit a number of common characteristics, which make them important for business and investment, for example: They all have large populations(four of the six largest populations in the world).

  • China: 1.3 billion
  • India: 1.2 billion
  • Brazil: 191 million
  • Russia: 141 million

They have large areas of land available for farming and mining.

  • Russia: 17.1 million sq km
  • China: 9.6 million sq km
  • Brazil: 8.5 million sq km
  • India: 3.3 million sq km

They are already some of the largest economies in the world, and growing faster than developed countries.

  • China: US$4,909 billion, growing by 10.3 percent per annum
  • Brazil: US$1,574 billion, growing by 3.5 percent per annum
  • India: US$1,236 billion, growing by 7.4 percent per annum
  • Russia: US$1,229 billion, growing by 5.5 percent per annum

When you combine the three traditional economic forces of big populations, large areas of land and the availability of capital and wealth, an interesting picture emerges: The four BRIC countries, together with the US, represent the five most influential and dominant economies in the world today for business and investment. And, unlike the US and other developed economies, the BRICs are growing rapidly, applying their available capital into long term growth assets, for example infrastructure, construction and to raise lower incomes, and building new wealth among their emerging middle classes.

This is where it all gets interesting. It’s the emergence of these new middle class consumers, and their substantial buying power, that should cause every Australian company, big or small, to start developing a BRIC strategy to tap into these new markets. Consider some of the following:

  • There are more cars sold in China today than in America. Experts predict that there will be 50 million cars sold every year in China by 2030.
  • In India, more than 240 million will enter the workforce in the next 20 years, and more than 24 million people will become 'affluent' (i.e. earn more than 1 million rupees per annum, the top two percent of the Indian population).
  • In Russia, retail sales in Moscow now exceed Paris and London.
  • In Brazil, 32 million people have moved into the 'middle' and 'high' income bracket in the last five years, a figure that is expected to double in the next five years.

An army of 2 billion middle class consumers in the BRIC and other emerging countries, are currently spending US$6.9 trillion per annum and, according to McKinsey, this figure will rise to US$20 trillion in the next decade, a figure which represents about double the current consumption of the USA! So what does this all mean for us in Australia? Develop a strategy to engage with these new emerging countries. You can’t sit back and allow this once-in-a-generation opportunity pass without at least giving some thought to how it could affect your business as an opportunity or a threat. Don’t forget that Chinese and Indian companies also have a vision to go global and Australia is a country that interests them greatly. Opportunities exist across the board for Australian companies, particularly in some of our more progressive and innovative industries such as technology, design, high value manufacturing, and environmental protection, and also some of our more traditional areas like education, tourism, finance and professional services. Remember that while these countries are building the first class hardware of roads, railways, airports, buildings, waterways, bridges, tunnels etc to support their rapidly industrialising economies, what they also need is the software, the professional services, training, education, technology, creativity, design and leadership that makes the difference between 'third world' and 'world class'. It’s in these areas that Australian businesses of all sizes can derive the most opportunities. Do some research. How could your business or ideas thrive in an emerging country like China, a country on our doorstep with whom we have enjoyed close ties and strong relationships for over 30 years, whose economy is growing by more than 10 percent per annum and, by the year 2025, will overtake the US to become the largest economy in the world? Is there something that you do, or offer, which could be attractive to a small segment of a country with over 1.3 billion people? If so, what are you waiting for? Start familiarising yourself with these countries now. Read a book, take a holiday, search the internet, join a delegation and immerse yourself in everything you can find on these new economic powerhouses! Imagine living in the USA in the 1930s and witnessing all of the technological and economic advances that took place over the next 50 years. You now have the chance to do that in China, or India, or by saturating yourself in everything you can find on BRIC! Don’t take too long to think about this. Do it now! -David Thomas an experienced business consultant specialising in investment relationships between developed and emerging countries. He is CEO of Think Global Consulting (www.thinkglobal.com.au)

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