Blog: Deloitte on the "new" emerging markets
Dean Best | 7 April 2011
The CIVETS group of emerging markets - Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa - are attracting increasing attention from business commentators and analysts, not least in the food and retail sectors. In London this week, Deloitte set out a review of the group of countries seen as the next batch of key emerging markets, beyond the BRICs.
Joe Ayling, editor at just-food.com sister site just-style, attended the Retail London Conference and heard Ira Kalish, director of global economics at Deloitte Research, give his views on the potential of the CIVETS.
With developed retail markets reaching a point of saturation, global fashion retailers are looking at ways to expand. Ira Kalish, director of global economics at Deloitte Research, reviewed the key emerging retail markets at the Retail London Conference this week. Here is a summary of his comments on the 'CIVETS' markets of Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.
Kalish says: "This is the one country in South America that hasn't had a lot of attention in the past decade. Colombia didn't get the attention that Brazil, Argentina and Chile got because there was a drug war going on and it was a dangerous place to go.
"Now that has changed, the drug war has largely been defeated and its now safe to go to major cities. Foreign retailers are now looking at Colombia as a new frontier. It is a place that's relatively young, economic growth is picking up and there are a lot of low-hanging fruits. There is a very large population and rise of the middle class is expected to be significant."
Kalish: "Indonesia is often called the fifth BRIC [Brazil, China, India and China] and is doing reasonably well with over 200m people and a relatively young population.
"There is a lot of low-hanging fruit here too, but it is not a very modern retail industry yet. It was on the verge of that in the late 90s before a big financial crisis hit and key retailers including Wal-Mart Stores pulled out. But Carrefour stayed there.
"The country looks to be more stable than it was now. It is a democracy and the economy is doing well. It is dependent in part on oil but also has manufacturing so the economic outlook for Indonesia is quite good."
Kalish: "This market is often compared with where China was 20 or 25 years ago, and is growing very rapidly.
"It is formerly communist but rapidly becoming more market orientated, but there is some question about how fast the authorities are willing to make that move towards more market orientation.
"Already in the past year there have been price controls that are very anti-market, but still the economy growth is attracting a lot of foreign investment in both manufacturing and retailing.
"The country has a very fragmented retail industry. In the city of Saigon, for instance, there are 2,000 wet markets and 6,000 independent chains and yet the largest chain in Vietnam has only 70 stores.
"So there's clearly a lot of fragmentation but the possibility for foreign retailers to come in there and do something very interesting.”
Kalish: "We were talking about this one quite a while before the revolution took place there because for quite a few years the country has had very good economic performance.
"Egypt didn't have a recession when the rest of the world did and economic policy implemented by President Mubarak's son.
"But one of the problems was that all this economic growth accumulated to the upper strata of society, as it often does, creating resentment.
"Now after the revolution there's some uncertainty about where Egypt will go from here. It could be a stable democracy with strong economic growth or it could move in the direction Iran did after its revolution.
"That uncertainty will probably pull back foreign investments but Egypt has the potential to be a very attractive retail market and the possibility of fairly strong economic growth."
Kalish: "This economy has done very well. Obviously it has close links to Europe although it probably won't be a member of the European Union for a very long time.
"It does have relatively free access to that market though, which gives it an advantage.
"Istanbul has also become a centre of business for Central Asia and The Middle East, and economic policy has been very good.
"Turkey has suppressed inflation, has good fiscal policy and is open to foreign investors. The country has a very modern and indigenous retail industry – so this is clearly a very attractive market going forward."
Kalish: "South Africa has attracted a lot of attention lately because Wal-Mart is going in there. It is going in because Africa overall is starting to attract investors for the first time in 50 years.
"Much of Sub-Saharan Africa has seen almost no economic growth over the last half century.
"It's notable to consider the fact that 50 years ago Kenya had a per capita income about the same as South Korea. Today, South Korea is a very rich country and Kenya's a very poor country, so Africa simply didn't grow.
"However, that's starting to change and in the past five years we've seen significant economic growth throughout Sub-Saharan Africa. I believe we are going to see more foreign investment in the South African retail market."
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