Automotive and Farm Equipment Sectors
- Definition of a Breakout Nation(BON)- Criteria for Breakout Nation- Factors Analysed- Country facts- Summary- BON/Non-BON
Contents :
Countries beating Growth Expectations Best for Investors with 3-5 yrs of Investment horizon
Definition of a Breakout Nation:
• GDP Growth• Political Environment• Govt. Investments & Infrastructure spending• Development of Tier-II Cities• FDI & Exports• Innovation (R&D Expenditure)• No of billionaires
Criteria for Breakout Nation:
Trends analyzed by Touchy-feel Stuff
Macro-Economic Indicators
Indicators Analyzed :
GDP Growth
• Per Capita income- 1.5K India – 5 % Growth Very Poor- 11K Brazil – 5 % Growth Good- 50 K US – 3% Growth Spectacular
• ‘Cheap’ In-Country prices is good
• Low prices Indicative of Competition
$ 4000-$ 5000 Growth rate slows down e.g. China ($ 6000)
Indicators Analyzed :
Political Environment
• Regardless of regime , Quality of Leadership matters (50 % Democratic & 50 % Autocratic among nations analyzed )
• Govt. spending in Infrastructure as % of GDP- Brazil- Low % Stability at any Cost- China-High % Growth at any Cost
Govt. Investments & Infrastructure Spending
Indicators Analyzed :
Development of Tier II cities
• Economic output should not be focused in one Central Hub
(Thailand Bangkok problematic..)
• Local Companies Expanding / Investing Abroad :- India- S. Africa- Malaysia
FDI & Exports
Troubling sign!!
Indicators Analyzed :
No of Billionaires
• More no of New Billionaires in a Nation
• From Govt. Patronage Sectors
• Different Production Groups
• India Billionaire Club : Same faces every year
Country Facts..
• S. Korea - Continuous R&D investment & Growth- Among Top 5 in terms of winning International Patents- Always at the centre of Boom- Quick to Release Export Economic Data
• Taiwan - More dependant on Ingenuity “ more open to outsiders”
S. Korea & Taiwan : 5 Decades of Consistent Growth
Country Facts..
• Indonesia - Attracting FDI investment : $10 Bn/year- Heavy Govt. Spend on Infrastructure (32% of GDP)- Labor cheapest in ASEAN (1/4th of China)- Fast development of Tier-II cities - 4th most populous country- Tourism Revenue - Reserves of Crude oil , Coal, Palm oil and Nickel
On the Tiger Road : Indonesia
Country Facts..
• Advantage: - Poland
- Czech Rep
Currency is not “Euro”But part of “EU”
The Sweet Spot Of EU..
Country Facts..
• Russia/Brazil High Dependence on Commodity Exports
• Turkey No Commodity export
Commodity export..
• Central Bank tries to control 3 major factors : Inflation Exchange Rate Capital Flows
• Interest rate Controlled inflation
• Interest rate Exchange rate goes up..
• Controlling all 3 “ Whack -a -mole”
Trilemma in Emerging nations!!!
Which country will flourish?
• Long –Term Economic Forecasts are futile
• Every decade has been defined by some idea
• Winners of one decade are often not the winners of next
• Generally countries with lower base rate of per capita have potential to grow fast
• But may not grow at the same rate in decades…
Summary
Which country will flourish?
• R&D Spending High , Innovation USA, S. Korea , Taiwan
• Former Economic leaders slowing down (China, Japan)
• All time Winner S. Korea & Taiwan
Summary
Non-BON
Less potential to become Breakout Nations
Thailand- Polarization in Bangkok S. Africa- Oligopolies Domination/Stagnant Economy Malaysia- Labor import/ Brain drain Vietnam- Poor Infrastructure & lack of skilled labor Russia- Negative FDI/Corruption/ Commodity Export Mexico - Social Inequality/ US Proximity Brazil- Commodity Export
China- 6000 $ per capita Growth likely to slow down India- Corruption/ High Context Society
50 % Chance
BON
Breakout Nations
S. Korea - R&D investments Czech Rep. & Poland- Sweet spot of EU Indonesia- High FDI investments Philippines- Young population / Govt. Investments in
Infrastructure Turkey- Govt. Investments in Infrastructure/Lower exposure to
commodity
15/04/2023
Worlds 4th Most Populous Nation–245 Million
Reserves of Crude oil,Coal,Palm oil and Nickel
Attracting FDI investment of $10 Bn/year
55% of Earnings from Commodities Exports account 25% of Economy
Economy Dependent on revenue from Crude oil
Industries other than Commodities less developed
Banking system dependent on external borrowing
Ease of doing business better than India due to efficient corruption
Govt. spending heavily on Infrastructure (32% of GDP)
Labor cheapest in ASEAN (1/4th of China)
2nd cities developing faster Economic growth (6% of GDP) Revenue from Tourism (Bali)
Strength
Weakness
Opportunity
Threat
SWOT Analysis: Indonesia
BREAKOUT NATION
15/04/2023
7th Largest economy in the world Highly skilled workforce (3rd highest in
Higher education in world) 8% of Global Car market share Most dense robot population in the
world Global leaders in construction of oil
facilities
Service sector stagnant Banking and Telecommunication not
successful in Korea House hold debt , Credit card debt
(146% of GDP)
Most of business are family owned – not attractive for investors as they are less likely to pay dividends (Korean stocks available at discounted rates)
Germany of Asia in Mfg sector Samsung, LG, Hyundai account for 16%
of GDP Among top 5 nations in winning
International patents Ship building industry growing fast High investment in R&D
Strength
Weakness
Opportunity
Threat
SWOT Analysis: South Korea
BREAKOUT NATION
15/04/2023
No Govt. debt Small and Medium sized competitive
companies Well managed govt.& good Local
Banks Only nation in Eastern Europe to have
preserved their brand Skoda (Arm of VW, but independent in design and Engg.)
Not willing to joint EU due to Euro-zone crisis
Dependent on Germany for Exports Economy vulnerable to EU crisis
Czech currency Koruna is stable and inexpensive (Good for exports)
Labor cost is 27% cheaper than Western Europe
Productivity cost is 40% lower than Western Europe
Strength
Weakness
Opportunity
Threat
SWOT Analysis: Czech Republic
BREAKOUT NATION
15/04/2023
Current GDP growth of 11% Stable govt. Govt. debt 40% of GDP (EU norm <60%
of GDP) Population – 79 Million (Avg age 29
yrs) 2nd largest construction industry after
China
80% Govt. Revenue comes from Tax on industries like Telecom, Automobile& Gasoline.
Cars more expensive in Turkey than Europe ( for Automobile imports)
Economy vulnerable to EU crisis Economy vulnerable to Middle east
political instability
Turkish Lira stable due to less interest rates
Exports competitive due to stable Lira Govt. investing heavily in
Infrastructure FORD,FIAT to move European
operations to Turkey due to inexpensive labor (labor 75% cheaper than W Europe)
Strength
Weakness
Opportunity
Threat
SWOT Analysis: Turkey
BREAKOUT NATION
15/04/2023
Debt free country Small and Medium sized competitive
companies Talented workforce Good banking system Central bank is independent of Political
interference Quality consumer brands presence
Not willing to joint EU due to Euro-zone crisis
Dependent on Western Europe for Exports
Poland currency Zloty is stable and inexpensive
Labor cost is 27% cheaper than Western Europe
Strength
Weakness
Opportunity
Threat
SWOT Analysis: Poland
BREAKOUT NATION
15/04/2023
Highly literate population Key Shipping route pass through
Colombo Revenue from Tourism Crude oil reserves
High Govt. debt (80% of GDP) Business climate rank by World Bank
102nd /180
Post war instability China investing in Infrastructure (ports)
can act as trade barrier for India
Govt. spend rising in infrastructure post war
MNC interested in IT outsourcing, Back office
Banking and Retail MNC Increase in Cargo traffic at Colombo
port Oil exploration off west coast by
Reliance – Revenue from Crude oil
Strength
Weakness
Opportunity
Threat
SWOT Analysis: Sri Lanka
VERY LIKELY TO BE A BREAKOUT NATION
15/04/2023
Highly Skilled Population Thai corporations not dependent on
external borrowing 40% workforce working in Agriculture
(out ot 60 million population)
High dependence on Exports (30% of GDP)
2nd cities not developed
Political Instability.
Biggest exporter of Cars (1 Million/year) after Japan and S Korea in Asia
Good Infrasturture Revenue from Tourism
Strength
Weakness
Opportunity
Threat
SWOT Analysis: Thailand
NOT A BREAKOUT NATION
15/04/2023
Young Population (60% of population under 25)
Good per capita income $8000 Rich in Natural resources like Rubber &
Palm oil
Delay in Execution of projects Less skilled workforce Less attractive to investors
Mfg exports decreasing as Malaysia has to import labor
Brain Drain of Skilled population
Govt. spend rising in infrastructure (28% of GDP)
Rubber and Commodity exports Less govt. debt (50% of GDP)
Strength
Weakness
Opportunity
Threat
SWOT Analysis: Malaysia
NOT A BREAKOUT NATION
15/04/2023
Top exporter of iron ore, Sugar, Coffee, Soybeans, poultry.
2 Mn barrels/year oil production Brazilian stocks are one of the hottestRose 300 % in $ terms in the last decade
Slow Growth Rate since 1980’s One of the closed economies till date Total imports and exports account for
only 15 % of the GDP Trade as a share of GDP one of the
lowest among emerging Nations(only 20 %)
One of the most costliest and overhyped economies
Poor productivity growth rate (0.2 % btw 1980-2008)
Poor New Infrastructure investment imports growing more than exports
recently. Struggling to grow even 4% a year
Recently recognized as World’s tenth largest oil reserves.
Huge foreign currency flowing in. Rising Stock markets
Strength
Weakness
Opportunity
Threat
SWOT Analysis: Brazil
15/04/2023
One of the hottest Stock Markets Becoming Multinationals by making
huge profits at home Avg Per Capita Income( $11000)
Concentration of Business in Top Families
Stagnant Economy-Power of Oligopolies
Local economy not listed in Stock Market
High Corruption Poor Security System
One Party Rule & capture of important positions by the same
Labor Laws very Pro worker Social Inequality High Drug trafficking & kidnapping Heavily dependent on US Economy Highest Migration Rate since 2006
Competitive labor rates & in proximity to US – Ray of Hope for Manufacturing Sector
Strength
Weakness
Opportunity
Threat
SWOT Analysis: Mexico
15/04/2023
Young Population–90 Million (50% below 21 yrs
5th largest Reserves of Crude oil, Copper, Nickel, Gold & Silver
$9 Bn BPO industry (Good English speaking population)
Consumption 80% of GDP (Higher than USA)
Poor Infrastructure High dependence on NRI income (10%
of GDP)
Unstable Govt. High Emigration.
Revenue from Tourism Increasing Per capita income $2500 Govt. spending increasing in
Infrastructure and Industries
Strength
Weakness
Opportunity
Threat
SWOT Analysis: Philippines
NOT A BREAKOUT NATION
15/04/2023
Abundance of Crude Oil & Natural Gas Stable Government Ranked 3rd in world for no of
Billionaires(100)
Poor Infrastructure High Inflation Poor Growth of Auto, Real Estate &
Consumer Industries Weak Banking System
Ageing population Corruption in Public sectors Govt. Income Highly dependent on oil No Small & Medium Enterprises No Global Presence of Russian Brands Net FDI is negative
Good R&D and Innovation capabilities No Govt. Restrictions in Retail ,
Internet & Media investments Reduction in Govt. Stakes in
companies Increase in immigrants from Eastern
Europe
Strength
Weakness
Opportunity
Threat
SWOT Analysis: Russia
15/04/2023
Good per capita income $8000 Worlds largest reserves of Platinum,
Manganese,Gold,Iron ore and Coal
Unemployment (25% of Population) Frequent Labor strikes Wages Increasing higher than Inflation Economy stagnant (3% of GDP) Oligopolies dominate Industry
High Govt.debt.($750 Bn for Insurance , pension)
Productivity in Mfg decreasing
Exports of Gold and Platinum Growth in Mining and Mfg Demand for Automobiles
Strength
Weakness
Opportunity
Threat
SWOT Analysis: South Africa
NOT A BREAKOUT NATION
15/04/2023
Crude oil reserves 54 Sea ports Population – 90 million
Very poor Infrastructure Lack of skilled labor High interest rates (24%) High Inflation (20%) Sea Ports underdeveloped
Vietnamese Dong highly unstable Political inclination towards
communism
Revenue from Oil exploration Govt. spend rising in infrastructure Revenue from Shipping (54 ports) Low cost Mfg hub for electronic
products (Intel plant)
Strength
Weakness
OpportunityThreat
SWOT Analysis: Vietnam
NOT A BREAKOUT NATION
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