VIPE’s: the next BRIC’s

VIPE’s: the next BRIC’s

In 2005 Goldman Sachs posed the question: “Which countries will be the next BRIC’s?” Their Global Economics Paper No. 153, identified 11 countries that could rival the G7 over time, even if they lack the scale to become the next BRICs. The countries they identified included Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam. These N11 countries all share the characteristics of rapidly growing populations combined with significant industrial capacity or potential. Together, these factors indicate a growing consumer market with increased earning potential, creating business opportunities for both local and international firms.

As strategic advisor I have taken a closer look at these countries in terms of their competitiveness for attracting investments. Using ICA’s proprietary software LocationSelector.com I benchmarked the N11 countries on several factors like accessibility, business environment, business risks, education and foreign direct investment. Below are the findings:

N11_graph

Based on the competitiveness scores of the N11 countries resulting from the benchmark study in LocationSelector.com, 3 groups can be distinguished:

Group 1: South Korea, Mexico and Turkey.

Group 2: Vietnam, Indonesia, Egypt and the Philippines

Group 3: Nigeria, Pakistan, Bangladesh and Iran

Assessing all groups’ average GDP per capita and average GDP growth from 2006-2009 (at market prices based on constant local currency) from the World Bank, we find the following results:

CriterionGroup 1Group 2Group 3
Average GDP per capita 2009 in current US$
1114518711791
Average GDP growth in %2,05,95,3

From the data provided by the World Bank we observe 2 important aspects:

  1. A large difference is observed in average GDP per capita in 2009 between Group 1, i.e. $11145, and Groups 2 and 3, i.e. $1871 and $1791 respectively
  2. The average GDP growth from 2006-2009 of Group 2, i.e. 5,9%, outperforms Group 1 and 3, i.e. 2,0% and 5,3% respectively

Combining the competitiveness, strong growth figures, and the large growth potential in GDP per capita of Group 2, I want to introduce the VIPE’s as the next BRIC’s. The VIPE’s, consisting of Vietnam, Indonesia, Philippines and Egypt (despite its recent political turmoil), are in the best position to generate significant above average returns in Foreign Direct Investments (FDI) and portfolio investments in the next 5 years. Interestingly, in my daily profession as corporate site selection advisor at ICA, I also see a continuing trend in corporate site selection projects shifting towards the VIPE’s. The combination of low labor costs with a relative stable and competitive investment climate contributes to these trends.

Forecasting is always difficult, but the VIPE’s will play an increasingly significant role on the international investment podium for the next 5 years.

Frank Peterse

Senior Consultant – ICA