Strategically located in the prosperous Gulf region, the United Arab Emirates is the heart of one of the world’s richest emerging markets. As a leading destination for international business, trade and tourism in the Middle East, the UAE attracts nearly 15 million visitors annually. A federation of seven small emirates, it has an equally tiny population of some 9 million people – with most of these being foreign residents.
The UAE’s ideal placement as a hub between the East and West trade routes provides easy access to some of the world’s fastest growing economies and markets in India, Africa, and South Asia. As the US’s largest export market in the Middle East for seven consecutive years, trading with all 50 states, the UAE supports hundreds of thousands of American jobs each year. With more than 1,500 U.S. companies having a presence in the UAE, it also is a key starting point for firms conducting business throughout the Middle East, Africa and South Asia. And with the recent advent of the Gulf Cooperation Council’s customs union, the UAE is now an excellent gateway to growing consumer markets in Saudi Arabia, Kuwait, Qatar and Oman.
The UAE enjoys a high standard of living, with a per-capita GDP rate on par with major European countries. English is widely used as the language for business dealings, and in its latest Ease of Doing Business index, the World Bank ranks the UAE as 18th among 189 countries in terms of contract enforcement – by comparison, the U.S. is ranked 21st. Once known for its petroleum-heavy economy, the UAE has moved aggressively to develop new industrial and commercial sectors, such as aviation, health care and tourism, and is actively pursuing trade liberalization policies.
The United States has one of the world’s fastest-growing trade relationships with the UAE – trade levels have almost doubled since 2010 – and California is one of the top U.S. exporting states to the country. Leading U.S. exports include aircraft and commercial-aviation equipment; power generation equipment; defense goods; computers and electrical products; precious stones and metal; and transportation and infrastructure-related goods and services. Indeed, infrastructure-development projects across the UAE are generating billions of dollars in new U.S. exports.
Through Abu Dhabi’s Economic Vision 2030 and in advance of Dubai Expo 2020, the UAE is strategically aligned to increase diversification and investment in sectors including education, tourism, heath care, IT, transportation and defense.
India’s business environment is a superlative conundrum, with monumental opportunities alongside towering challenges. The country is on pace to overtake China in terms of population size and it recently surpassed China as the world’s hottest major economy. Nomura, the Japanese financial group, expects the Indian economy to expand at a 7.8-percent clip in 2016-2017, while Dun & Bradstreet expects 9-percent average annual growth over the coming decade. According to one analysis, the size of the Indian economy will be larger than the United Kingdom’s in 2019 and Japan’s in 2020.
The Economist Intelligence Unit’s chief economist sums things up this way: “India is the only country that has the potential to change the world in the 2020s in the way that China changed it in the 2000s. It will probably take a little longer than that before India really takes off but, even so, it is going to be a global growth powerhouse of the 2020s.”
The country’s growth potential, driven by a rising middle class and the world’s largest population of millennials, has increasingly drawn the attention of foreign companies, not just from the West but also from Japan, China and Korea. As Apple’s CEO puts it: “The population in India is in some ways some of the best in the world. There’s a huge amount of young people moving up the ranks and the consumer will rise up there.”
According to Euromonitor International, India is second only to China over the 2015-2030 period in terms of the consumption potential of its middle class. And Morgan Stanley forecasts that “Per capita incomes are likely to double by 2025 and this should drive higher the aspirations of the Indian consumer.”
One result of this development is a staggering increase in the size of the Indian retail market in the coming years. The Boston Consulting Group, for example, reports that the retail sector has the potential to expand from $630 billion in 2015 to $1.2 trillion in 2020, on the back of higher income levels and increased urbanization.
Another consequence is the world’s fast-growing e-commerce sector. Some 50 million Indians are currently regular users of online shopping websites and smartphone apps, and this number is expected to expand over six-fold, to 320 million, by 2020. Already thousands of foreign businesses have capitalized on the booming e-commerce sector in order to establish a presence in the country. According to Amazon’s international chief, “The size of the opportunity is so large it will be measured in trillions, not billion, trillions of dollars.” And E-Bay’s chief financial officer states that the sector “is a growing market, it is exciting, and there will be multiple winners.”
Renewables is another sector that is ripe for foreign companies. The Indian government is aiming for a twenty-fold jump in solar power generation, from about 5 gigawatts now to 100 gigawatts by 2022 – a target that is more than the present solar capacity of China and Germany, currently the two biggest solar countries. In the words of one industry observer, “India is executing one of the most radical energy sector transformations ever undertaken.” Indeed, in 2015 the country accounted for more than half of the global venture capital investments for wind energy projects.
Yet running alongside India’s great business potential is a welter of deep challenges. These include antiquated labor laws; an ambiguous, complex and even contradictory legal and regulatory environment; and a maddeningly-inadequate infrastructure system that imposes inefficiencies and other costs.
In short, the country is an exasperating place to do business but also a potentially rewarding one if you are prepared to put in the effort. An executive at the Indian subsidiary of a French technology consulting company puts it this way: Although the challenges are bigger than in Europe, so too are the opportunities – “You always have this feeling that everything is possible.”
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The city-state of Singapore plays a gargantuan-sized role in Southeast Asia. One of the world’s most open economies, it is a financial, trade, logistics and educational hub for the area – functions that will become even more significant as the just-launched ASEAN Economic Community and the pending Trans-Pacific Partnership trade agreement tighten regional business integration in the years ahead.
The country’s excellent infrastructure and transportation linkages to the rest of the world, high concentration of highly-skilled and English-speaking professionals, as well as sterling reputation for efficient and transparent business regulation, all combine to make it a natural starting point into the ASEAN region. According to government statistics, there are more than 37,000 international companies with headquarters in Singapore, which include 7000 multinational corporations. More than half of these companies use Singapore as the regional headquarters for their Asia-Pacific business.
The world’s fourth largest economy, Japan features the world’s second-largest retail market and is the fourth largest buyer of California-produced goods and services, including in the aerospace and agricultural sectors. It has a large middle class with high levels of disposable income that provide solid opportunities for consumer-facing foreign businesses.
Australia, the fifth-largest economy in the Asia-Pacific region, is a familiar market for U.S. companies given the similar language, culture, business practices and legal frameworks; ease of doing business; and a strong consumer base receptive to American products and services. This is especially true for Southern California, since the Los Angeles area by itself accounted for a quarter of bilateral trade flows in 2014. Australia’s extensive engagement with the rest of Asia – seven out of its top 10 trading partners are in the area – can also help U.S. companies looking to expand into the region.
Vietnam is one of the world’s most dynamic markets and a rising economic star in Asia. Consistently strong economic growth, along with the fastest-growing middle class in Southeast Asia and an increasingly open, market-oriented trade policy, are fueling major opportunities for U.S. companies. This is all the more so because the Vietnamese population is decidedly youthful – the median age is 29 – with a strong preference for American goods and services. Business opportunities will also grow due to the recently-launched ASEAN Economic Community and the just-concluded Trans-Pacific Partnership and EU-Vietnam free trade agreement.
The economic relationship between the United States and the European Union is easily the largest and most complex in the world, generating goods and services trade flows of about $2.7 billion a day. In all, the relationship accounts for nearly half of all global economic output and a third of total goods and services trade. Taken together, the EU’s 28 countries would rank as the second-largest market for U.S. exporters and the fifth-largest market for agricultural exports. Of these, the top three largest country export markets are Germany, the United Kingdom and the Netherlands.
Germany
United Kingdom
The Netherlands
Canada is the Los Angeles area’s largest export market, the second largest for California overall, and the single largest for U.S. goods. Indeed, no other country has such a high degree of economic integration. Geographic proximity, the ease of doing business, a common language and business culture, a stable legal and regulatory environment, high consumer receptivity for U.S.-made goods and services, and a dense network of bilateral trade agreements all make Canada a highly accessible market for U.S. companies, including small and medium-sized firms.
Mexico does not receive much media attention compared to China and India, but smart companies, entrepreneurs and investors are looking anew at the country to the south. Once known for an oil-dominated economy and low-wage assembly work, the country now has a diversified economy and the largest and most sophisticated manufacturing sector in Latin America. With a growing middle class and a government enacting major reforms in the business environment, Mexico has emerged as the region’s economic star.
In terms of population size, Korea (with 50 million people) is the 28th-largest country in the world. But viewed according to the overall size of its economy, it is the world’s 14th-largest country and the fourth largest in Asia. In short, Korea punches well above its weight in the global economy, a high-income country with a GDP-per-capita level three times that of China and almost equal to Japan’s.
From consumer electronics to autos, it is home to some of the most competitive and famous companies in the world. A shaper of global pop culture, it is also heavily engaged in the international trade system. Korea, for example, is the fifth-largest U.S. trade partner and the third-largest partner for the Los Angeles area.
One of the world’s great economic success stories, Hong Kong has made a name for itself as East Asia’s services and trade hub. With world-class infrastructure and financial services, it is the world’s eighth-largest trading economy and an ideal platform for doing business in Asia, especially for mainland China.
Famous too for its business-friendly regulatory environment and efficient legal system, Hong Kong is ranked fifth in the World Bank’s 2016 “Ease of Doing Business” index.
The headlines coming out of China speak of slowing growth as the country transitions from the old economic model based on channeling domestic savings to export-focused manufacturing. But delve more deeply and a different picture comes into focus: a new consumer-oriented economy is emerging. The bottom line, as BCG advises, is this: “Companies will need a new playbook to capture the coming wave of growth. The strategies of the past will no longer be relevant.”
“We looked at China too much like a developing market as opposed to the most discerning market in the world.”
Given the gargantuan size of China and India, it’s easy to lose sight of Southeast Asia and Indonesia, its largest economy and most populous country. But you owe it to your business to take a closer look at a region that is one of the most robust growth areas in the world and a country that PricewaterhouseCoopers expects to be the world’s fifth-largest by 2030.
Given the gargantuan size of China and India, it’s easy to lose sight of Southeast Asia and Indonesia, its largest economy and most populous country. But you owe it to your business to take a closer look at a region that is one of the most robust growth areas in the world and a country that PricewaterhouseCoopers expects to be the world’s fifth-largest by 2030.
The current headlines about economic backsliding and political instability in Brazil mask some underlying factors that make the country attractive for global business: It is the largest country and economy in Latin America, and the world’s seventh-largest economy overall. It has a large middle class and is the world’s eighth-largest retail market.
Brazil also leads the major developing countries in terms of per-capita income, featuring a level far higher than in China, Russia or India. As it borders with nearly every other country in South America, it serves as the region’s business gateway.
Colombia is often overlooked by U.S. exporters, even though the United States is its largest trade partner and the country is the closest U.S. ally in the region. Colombia is also the third largest economy in South America and the second largest regional market for U.S. agricultural goods.
As the U.S. Commerce Department notes:
“Due to Colombia’s close ties to the United States and Colombians’ appreciation for the quality and reliability of U.S products, consumers in Colombia often favor U.S. products and services over those of our foreign competitors.”
The bilateral free trade agreement that went into effect in May 2012 immediately dropped tariffs on over 80 percent of U.S. exports of consumer and industrial products. One result has been a 15-percent increase in overall U.S. exports, especially in farm goods and agri-products. Tariffs on other U.S. exports are scheduled to be phased out entirely in the coming years. The agreement also includes strong legal protections for intellectual property, improved dispute settlement mechanisms, and expanded access to Colombia’s services sector.