After BRIC – CIVETS the new buzzword…

There are six countries  in CIVETS club — Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.These are marketed as the next happening emerging economies after BRICs.

K@W has an article covering CIVETS.

According to Wharton management professor Witold Henisz, while there are a total of 150 emerging markets worldwide, a catchy name and new focus may give multinationals and investors more incentive to look toward these lesser-known countries. “An acronym is a simplification, but it calls attention to growth opportunities in rapidly growing markets abroad that managers need to come to understand,” he says.

When compared to the BRICs, the CIVETS are much smaller. Indonesia is, by far, the largest with 242.9 million people, followed by Vietnam with 89.5 million, Egypt (80 million), Turkey (77 million) and Colombia (44 million). By contrast, Russia has a population of 139 million, Brazil has 201 million, India 1.2 billion and China 1.3 billion.

Henisz says size is one reason the decision to invest in the CIVETS countries is not as clear-cut as it is with the BRICs. A Western company might be willing to accept some missteps in China because the rewards would be so great given China’s size. Entering a CIVETS country, however, is a more complicated strategic decision, he notes, and will probably come with added pressure for short-term results, compared to larger countries where companies might be willing to stay the course. “China is so critical that if you mess up the first year, you can stay around. That’s not so clear about, say, Colombia — it’s not seen as mission critical.”

Wharton management professor Mauro Guillen points to another important difference between the two blocs. Unlike China, Brazil, India and other emerging markets like Mexico, the CIVETS lack established multinational corporations to act as platforms for further economic development, although that could happen in the future. “What makes the BRIC group unique is that not only are they big, but they have their own companies that are destined to be very important outside their own countries,” says Guillen.

Each of the CIVETS has risks and benefits:

Colombia: Following years of high-profile drug wars, Colombia remains a small market, but has always been a dynamic economy with some key industries, including fresh flowers, oil and coffee.

Indonesia: The largest of the CIVETS, Indonesia has a huge, sprawling population and has already benefited from investment by the U.S., China and Japan, but political and social stability is never certain.

Vietnam: A low-cost alternative to China for manufacturing, Vietnam has ambitious plans to grow its economy despite a Communist government.

Egypt: Although Egypt has a well-educated, prosperous population in its Nile Valley cities, much of the country remains poor and the country has a high level of debt (80% of GDP). The political future beyond the rule of President Hosni Mubarek is cloudy, and the country could face religious turmoil.

Turkey: Not a destination for manufacturing because costs are already high, Turkey remains a promising regional center which has benefited from relative stability and ties to the West in a volatile part of the world. Membership in the European Union would be a plus, experts note, but religious turmoil might hurt its economic prospects.

South Africa: Although it faces problems with unemployment and HIV/AIDS, South Africa has strong companies, a well-developed business infrastructure and can serve as a gateway to southern Africa.

In the end, there is a nice discussion on various such brand names. Goldman has Next-11 or N-11 and EIU has further narrrowed this N-11 list.

It is ok to brand all this for simplification but mostly just becomes a hype. Take BRIC. Brazil is perhaps the only one in the Bric club which does not have much problems. Russia is still recovering from the global crisis, China is facing inflationary and asset price pressures and India is facing governance and corruption pressures.

Making these attractive names is one thing and delivering consistent economic performance completely another thing.


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