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Three emerging economies identified as ‘pockets of opportunity’ for UK businesses

Companies that want to increase their international footprint should look to mid-size economies such as Colombia, Poland and Vietnam, according to a report from PricewaterhouseCoopers (PwC).

24 FEB 2017 | CHRIS SEEKINGS
Vietnam could develop into a manufacturing hub ©Shutterstock
Vietnam could develop into a manufacturing hub ©Shutterstock

Its Global Economy Watch suggests that these countries offer some of the best medium-to-long term prospects for companies looking to grow in their respective regions.

Previous research has shown that the UK could be the fastest growing G7 economy for the next 30 years, with average annual growth of 1.9%, however this is projected to be significantly outpaced by the three identified economies.

PwC senior economist, Barret Kupelian, said: “When businesses think about which emerging economies to expand their activities into, the natural conclusion is to focus on the large emerging economies of the world.

“However, we think that there are other smaller but equally appealing economies – what we call the ‘pockets of opportunity’ – businesses should consider when thinking of expanding their international footprints.

“In addition to having strong growth potential, the three countries we’ve identified have all shown themselves to be open to foreign businesses and investors through a range of trade agreements, liberal FDI regimes, tax reforms and government initiatives to reform aspects of their economy.”

Vietnam is seeking to replicate the growth models that led to the rise of China and South Korea and has negotiated a trade deal with the EU that could see it develop into a manufacturing hub, according to the report.

Poland has a more liberal FDI regime than other large economies such as the US and Canada, with relatively low labour costs, while the Colombian government’s ambition to spend £55.8bn on infrastructure up to 2035 and its favourable tax reforms provide a significant opportunity for investors.

In addition, flexible exchange rate regimes and rising commodity prices put emerging economies in a better position to deal with tighter US monetary policy than previously, with the Federal Reserve’s signal of a slow interest rate rise giving businesses more time to plan their foreign-debt management strategy.

“UK businesses have a lot to gain from engaging with fast-growing emerging economies,” Kupelian continued.

“While converting trust and reputation into revenue in a new market takes time, mid-size economies can be quicker to crack than their larger counterparts.

“Even though we think that some markets may be overly exposed to dollar- denominated debt, most are in a position to deal with tighter US monetary policy.”