1. Welcome to class of Introduction to Emerging Markets by Dr. Satyendra Singh University of Winnipeg Canada

2. Why Emerging Markets Now? No fighting! More confidence in governance/people/system Economic reform/free market policies –Tariff/quota ↓, FDI ↑, investors as partners, deregulated industry, privatization of state-owned firms Sense of market development in EMs –Two market segments (Urban and rural) –First mover advantage/educate customers Change in culture –Social mobility ↑  demand for expensive products –Buy now, pay later

3. Whys is EM important? Because Advances in technology, Increase in world travel, and Trend toward globalization –Means, more market

4. Characteristics of EM GNI per capita per year < $10,000 High birth rate Low education Undeveloped infra structure Several languages/dialects Close family ties Less women in workforce Cultural issues Unstable government

5. Definitions of EM ING and Morgan Stanley (EM and developed) –Per capita income < $10000 –Unstable and irresponsible macroeconomic policies –Insufficient shares on the stock exchange WTO (developed and developing) –Self selection criteria –Out of 149, 50 are designated as least developed UN and World Bank (EM and developed) –Based on score on Human Development Index Life expectancy Adult literacy rate and educational attainment GDP (better than GNI; it excludes foreign remittances)

6. Common Traits of Big EM Physically large Significant populations Represent markets for a wide range of products Strong rate/potential of/for growth Undertaken programs of economic reform Major political importance within their regions Regional economic drivers Engender neighbouring markets as they grow

7. Research shows that If Per capita income/ year > $5000 –people become more brand conscious –forgo many local brands to seek out foreign brands they recognize At $10,000 –they join those with higher incomes elsewhere who are exposed to the same global information sources. They join the “$10,000 Club” of consumers with homogeneous demands who share a common knowledge of products and brands. Then, they become global consumers

8. EM: Eastern Europe Czech Republic and Poland –Quick to implement free market policies Hungary and Romania –Slow  bureaucrats from communists days Yugoslavia –Ethnic and religious divisions – Albania, Bosnia Czech, Hungary, Slovak, Poland  OECD –I.e., accept the obligation to modernize the economies Baltic states  Estonia, Latvia, Lithuania  WTO/EU –Quick to move away from soviet-style economies –Drop Rubal, tariff-free, free-market economy

9. EM: Asia 4 tigers/dragons  HK, S Korea, Taiwan, S’pore –From assembly line to electronics, machines, ship building Japan is lagging behind –S Korea links with China, USSR, and influences the region China  dual economy  socialism/capitalism –By 2015, GNP of China = USA –China now in WTO  should follow the WTO rules –Human rights, legal system, corruptions, protectionism India –free-market economy, > 51% share, no import restrictions –400m MIG/HIG, 800m LIG consumers

10. Canada’s Relations with the EMs Canada has good relations with –South America, NAFTA, Africa Canada’s role in E. Europe is limited Canada is interested in ASEAN –4 tigers + Indonesia, Malaysia, Philippines, Thailand Canada is a member of APEC –Apprehensive in pursuing substantial business due to risks

11. International Agencies… Organization For Economic Cooperation and Development (OECD) –Group of developed countries dedicated to promoting economic expansion in its member- nations Organization of Petroleum Exporting Countries (OPEC) –Cartel of 11 petroleum exporting countries Middle East (6): Iran, Iraq, Kuwait, Qatar, Saudi Arabia and UAE Africa(3):Algeria, Libya Other (2): Indonesia and Venezuela Other non OPEC oil exporting countries: UK, Russia, Mexico, Norway

12. International Agencies WTO Principles –Trade will be without discrimination –Trade should be freer, with trade barriers negotiated downward –Trade should be predictable –Trade should be more competitive –Trade should be more beneficial for less developed countries, encouraging development and economic reform –protects copyrights, trademarks, trade secrets, and other intellectual property matters –Disagreement on agricultural policies India, Brazil…