FDI in Emerging Markets

Program & Batch:PGDM 2014-2016

Term:III

Course Name:International trade & finance

Name of the faculty:Dr. Ratna Vadra

Topic/ Title :FDI in Emerging Markets

Original or Revised Write-up:Original

Group Number:02

Contact No. and email of Group Coordinator:9643587821ft14dharnachauhan@imt.ac.in

Group Members:Sl.Roll No.Name

1140103059Dharna Chauhan

2140101068Isha Dwivedi

3140101094Manoj Kumar

4140102038Bohra Arihanth Jain

5140102137Tuhin Anand

6140103030Apoorv Misra

7140103127Pratyush Banka

Contents: Page no

Abstract-3 Acknowledgements-4List of Abbreviations-5List of Tables-6List of Figures-7

1. Introduction-82. Emerging Markets -93. Country Wise Analysis-144. Major findings-295. Recommendations-31

References-32

Abstract:

The report is on the FDI in emerging markets, the emerging markets play a very crucial role in the global FDI with most of the Inflows going into the Emerging markets. More than 55% of the $1.6 trillion FDI flows into the emerging markets which constitute the 23 nations index as defined by the MSCI emerging markets index. During the formulation of the report it was observed that the nations which have better governance and have stable government attract more investments. In fact the GDP to FDI ratio of the South American nations is way higher than the Asian economies which constantly face political instability and civil insurgences.The FDI inflows over the years has the trend of upward growth in the Emerging Markets even when the global economy faces the business cycles of recession and crisis that arise from time to time. During the Tech Bubble burst of the early 2000s and the 2008 global recession did not affect the growth.The major reasons why the FDI is mainly allocated to the Emerging Markets is because they offer high growth and many markets have huge potential with untapped markets.

Acknowledgement:

We are using this opportunity to express our gratitude to everyone who supported us throughout the course of ITF. I am thankful for their aspiring guidance, invaluably constructive criticism and friendly advice during the project work. We are sincerely grateful to Dr. Ratna Vadra for sharing her truthful and illuminating views on a number of issues related to the project.We express our warm thanks to Dr. Ratna Vadra for your support and guidance throughout the report on FDI in Emerging Markets.Thank you

List of Abbreviations

FDI- Foreign Direct Investment MSCI-Morgan Stanley Capital InternationalBRICS-Brazil, Russia, India, China, South AfricaCAD-Current account deficit PPP-Purchasing Power parityHDI-Human Development Index (2014)UN-United Nations BPO-Business Process OutsourcingNAFTA-North American Free Trade AgreementEU-European UnionECB-European Central BankG20-international union of central banks & governmentUNCTAD-UN Conference on Trade and DevelopmentEME-Emerging Market economies

Per-capita income figures taken are on the basis of PPP and not the nominal figures The Public Debt figures for many nations is not available Qatar has no system of displaying the records for GDP components so the data regarding that is not available

List of Tables

1. List of constituents of MSCI emerging markets index2. List of Nations which attract highest FDI inflows3. List of Nations which attract highest FDI outflows4. Composition of FDI inflows and outflows

List of Figures

1. FDI inflows in 20132. FDI outflows in 20133. Percentage of FDI inflows4. The effect of Political stability and absence of violence5. Allocation of FDI among the Developed & Emerging Markets

FDI in Emerging Markets:

IntroductionForeign Direct Investment is one of the indicators of the countrys growth potential and the economic health of the country. This is no new phenomenon, its been there for a long time. The early investments were during the early 19th century, large industrial era organisations started looking for growth which was already saturated in the local markets, so this is the time when they started looking into transnational countries. The FDI in the crude form can be explained as a company looking for investment opportunities in foreign countries, which is not their home market.The growth story of china cannot find references in the mankind history, the worlds second largest economy has grown in sub double digit growth rates for more than 2 decades, to sustain this kind of growth is unprecedented. This is the one of the major reasons why the west started looking towards the east for better value for their bucks. The reason that china dominated the emerging markets rooster is the size of the population and under the leadership of the Chinese leader Deng Xiaoping the nation welcomed the west to come invest with structural changes and crucial reforms. Many South East Asian economies are today adapting those policies. Apart from the Asian market countries from the Middle East like Qatar, UAE, and Turkey are also on the rise, many African countries and the South American nation have joined the wave.According to the International Monetary Fund FDI refers to an investment made to acquire lasting or long term interest in enterprises operating outside of the economy of the investor.According to World Bank, it is defined as net inflows of investment to acquire a lasting management interest (10% of voting stock) in an enterprise in an economy other than that of the investor.Globally the FDI inflows to the countries is classified as the 3 types Horizontal FDI Platform FDI Vertical FDIHorizontal FDI: it is when the company replicates the similar operations and the business model in the host natione.g.: Walmart, star bucks across the globe Platform FDI: it is made in the host nation only to facilitate the export of goods to third countrye.g.: Apple in Ireland, Google in Cayman IslandsVertical FDI: when the company is making the investment in the host nation to move upstream or downstream in different value chains.e.g.: ONGC Videsh

Emerging Markets

It is very important to define the emerging markets before understanding the FDI inflows into these markets, as for the report purposes Emerging Markets as defined the MSCI emerging markets index which is widely followed across the industry is been considered. The index has 23 member nations that are classified as emerging markets, the 23rd nation Greece was removed in 2013 and Morocco was included in the list. The nations are as follows.BrazilChile

ChinaColombia

Czech RepublicEgypt

HungaryIndia

IndonesiaMalaysia

MexicoMorocco

PeruPhilippines

PolandQatar

RussiaSouth Africa

South KoreaTaiwan

ThailandTurkey

UAE

Source: MSCI.orgBefore going into the details about every nation individually, the factors that affect the Investments globally should be studied those include the economic policies of major institutions and economic cycle the nations are in, the active participants in the FDI inflows or outflows are China (inflows- $358 billion, outflows- $ 73 billion) followed by USA (inflows- $235 billion, outflows- $360 billion) and the next by Luxembourg (inflows- $30 billion, outflows- $37 billion) there are many countries on the list for the outflows which are very small in terms of GDP like Luxembourg has outflows of 448% of their GDP and Mauritius 660%. One important thing to notice is that these nations are tax havens, so they act as a channel for routing the money to various countries. These nations also have tax treaties with many other nations to avoid double taxation like Mauritius has a tax treaty with India and this results in Mauritius being the major contributor to the India FDI of $22 billion in FY14 with 36%, the factors are:1. Economic cycles: This plays a crucial role in determining the global FDI flows, because the business cycles results in the organisations having massive surpluses and deficits.

2. Policy stance of large monetary institutions: The policy rates set by the major financial institutions across the globe determine the flows like the Federal reserve of USA is very important the period in which the rates were as low as zero the FDI flows into the developing nations were skyrocketing.

3. Country risk: The country risk attached to any country is determined by many factors and is calculated by the rating agencies, the three big rating agencies determine the risk. The risk premium of any nation rises with the lower credit rating for that nation.

4. Political risk: The political situation in any country determines the future of any investment, so the political situation in the nation should be stable which is not the case with many developing nations.

5. Infrastructure: The infrastructure that is present in the country determines the efficiency with which the investment can be utilised because a nation with good infra already in place facilitates the organisations to come set up shop directly without having to start right from the basic infra like roads, power, and water.

6. Ease of doing business: Every nation has different regulatory hurdles, the ease of doing business is a ranking given by the World Bank which measures how easy it is to come and start a business in any country across the world. It has been historically seen that the developing nations and that too the BRICS always have ranked lower on this scale as compared to the developed nations.

7. Growth: The countrys GDP growth is principal factor that determines how the returns will be from the investment made in that country. That is the reason the developing nations have seen larger chunk of FDI inflows coming their way.8. Tax: The tax policies in the host nation showcase the nations stance towards the foreign players, the higher the taxes on the corporate profits simply shows that the government is not pro-industries.

9. Market size: The potential market that the business can find when entering the nation is very important because when the company is committing billions of dollars then there should be a market large enough that it can cater to, the market doesnt necessarily mean large population, and it means the target market or the potential market. This is one of the many reasons why the companies world over are changing their approach to India specially, which has the huge demographic dividend with the westernization of the culture and half the populations within the age group of 15-40 years of age.

10. Labour & productivity: Out of all the above mentioned factors this is the very crucial and strategic factor this can be seen in the fact that the nation like china which is predominantly labour driven and is widely believed to be most efficient labour productivity across the globe. The labour that organisations look when investing in a host nation should be costing less than the home country like the services industry of India & China.

The following is the list of the nations that attract the highest FDI inflows globally this includes all the nations including the developed ones

CountryFDI inflows(Figures in $ billions in 2013)

1. China 347.25

2. USA235.87

3. Brazil80.52

4. Hong Kong SAR china 76.64

5. Russia 70.42

6. Canada67.31

7. Singapore 63.5

8. Ireland 49.96

9. Australia49.76

10. UK48.31

Source: Worldbank.orgAs we can see the above list has 5 emerging markets and 5 developed markets with the majority of the share coming towards the emerging markets, out of the total of $1.089 trillion almost 60% contribution is to the emerging markets and out of this China alone including Hong Kong which is an integral part of it contributes more than 66%.

Now we have look at the other side of the coin which is major contributors to the FDI outflows, this list has majority of developed nations, this is because these are the capital surplus nations with limited opportunities in the home country and are looking for investment opportunities in the host nations.

Country nameFDI outflows(Figures in $ billions in 2013)

1. USA360.82

2. Japan138.23

3. China 73.26

4. Russia 70.45

5. Switzerland60.0

6. Germany 58.36

7. Canada42.63

8. Netherlands37.12

9. Sweden33.3

10. Italy31.06

Source: Worldbank.org

The above list it can be seen that only 2 countries out of the 10 are from the emerging markets and that too China and Russia are the only ones the reason being they have huge cash surpluses, China has immense forex reserves from the merchandise exports and Russia with the export of natural resources.

5 Emerging economies5 Developed economies

8 Developed economies 2 Emerging economies

Now every emerging nation can be looked into individually, the factors that will be used while evaluating the nation are factors ranging from the GDP size, GDP growth, Per-capita (PPP), Ease of doing business ranking, CAD, Public Debt.Brazil: Inflows $80.26 billion outflows -$2.5 billion

GDP : $2.2 trillion GDP growth : 2.49%Per- capita : $ 15,203Ease of doing : 120Current account : - $ 54 billion, 2.45% of GDPPublic Debt : NALabour participation rate : 59.7%Emerging market rank :

The economy has seen substantial improvement in the standards of living and the HDI of the country is 79 which is very good compared to others from the emerging markets the FDI inflows into Brazil are at $80.26 billion which is only after China in the emerging market front, this is because of the better infrastructure it offers.A surge in the repayment of loans by Brazilian affiliates abroad to their parent companies pushed intracompany loans has led to the unique negative outflows. This has been the trend in the Caribbean nations in the recent years because of the regions offshore financial centres Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 62.969

Agriculture14.56

Industries22.625

Source: ilo.orgThis shows the economy is mostly based as a service driven economy both the factors like the employment and GDP contribution are from service sector and thus the FDI inflows are mostly been into service sector historically. The US contributes to the Brazils mammoth FDI it contributes 81% of FDI flowing into Brazil which is more than $65 billion.Comparison of Brazil with India:Brazil even after having huge CAD and without having growth rates that India has maintained it attracts more investment than India because of the proximity of USA and Brazil not just geographically but also politically. The policies and the government of Brazil are more stable.Chile: Inflows $20.26 billion Outflows Negligible

GDP : $220 billion GDP growth : 4.07%Per- capita : $ 21,911Ease of doing : 41Current account : - $9.4 billion, 4.2% of GDPPublic Debt : NALabour participation rate : 59.5%Emerging market rank :

The South American nation has very positive factors except for the growth rate which is although better than many nations during the post-recession era but given the size of the GDP it can better the growth rate. The CAD is very high this might hamper the future flows. The nation is considered to be very open to foreign investment and the government has made FDI as part of their national development plan and this resulted in the Q1 of FY14 see a staggering 82% growth in FDI inflows yoy. Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 66.361

Agriculture9.84

Industries23.935

Source: ilo.orgThe biggest advantages for Chilean economy apart from the proximity to the worlds largest economy is that the economy is very transparent and straight forward. The FDI as a percentage to GDP is more than 10% which cannot be seen in any other emerging economies and the nation scores high on the HDI at 42.Comparison of Chile with India:The striking difference in the two nations is that the Chilean economy gives equal treatment to the foreign investments with the local investments in almost all fronts and there are no cap on the investments which attracts a large chunk of the FDI flowing from many developed nations and this year the country for the first ever Chinese FDI flew into the economy the sector in line with the nations strength services.China: Inflows $347.85 billion Outflows $73.2 billion

GDP : $9.24 trillion GDP growth : 7.67%Per- capita : $ 11,903Ease of doing : 90Current account : $193 billion, 2.08% of GDPPublic Debt : NALabour participation rate : 70.07%Emerging market rank :

The worlds powerhouse which manufactures varied range of products that every man on the planet consumes at least once, there is no comparison to this with any other emerging market or any developed economy. If we compare it even with the developed nations there is no close competition to this mammoth Dragon in the East. The nation has to attract the major portion of the FDI inflows which is the highest in the world the next is USA which is only 2/3rd of it. In the recent report of the UN China has thrashed USA as the worlds largest economy in PPP terms at $16.4 trillion. Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 36.146

Agriculture33.610

Industries30.344

Source: ilo.orgThere is no nation in the world which is so large and has almost equal contribution to employment from all the 3 sectors, the industrial era nations on an average have 20% of their GDP coming from the Industries but China has 44% of the $9.2 trillion which accounts to more than $4 trillion of goods manufactured in China. USA contribution to China FDI inflow is $54.2 billion, which is 15%. The bilateral relations between them is although only limited to trade & finance this could be an example to other nations across the globe.Comparison of Chile with India, it is not a fair comparison on any front except for the growth rate which is the only front where India is close & of course the populationColombia: Inflows $16.7 billion Outflows negligible

GDP : $378 billion GDP growth : 4.25%Per- capita : $ 12,370Ease of doing : 34Current account : -$12.2 billion, 3.22% GDPPublic Debt : $63 billionLabour participation rate : 64.9%Emerging market rank :

The South American nation has seen healthy growth rates in the recent years and the ease of doing business rank is very healthy at 34 ahead of all the emerging markets rooster. The high public debt is one of the concerns for the nation, the CAD on the other end is on the higher side. USA works very closely with the nation not just on the economic front but also on the political stability. The country was independent from Spain in 1822 and one of the oldest democracies in Latin America. Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 63.757

Agriculture16.96

Industries19.437

Source: ilo.orgUnlike many other emerging economies this Latin American nation has very less contribution coming from the Agricultural sector this could be one of the reasons for the high CAD, due to large food imports. Again due its presence in the South American continent and early independence it has gained a lot and has seen good flows and growth rates but the HDI standing is at 98 which is because of the regular insurgencies from the local population, but the per-capita is healthy at $12k.

Comparison of Colombia with India:The nations are quite contrast in almost every aspect the cultural differences are pretty obvious but the way the employment comes it is from services & industries unlike Indias agrarian economy. Colombia is rich with Oil reserves and is a net exporter of the fossil fuel.India: Inflows $28.5 billion Outflows $1.8 billion

GDP : $1.87 trillion GDP growth : 5.01%Per- capita : $ 5,140Ease of doing : 142Current account : -$92.2 billion, 4.9% GDPPublic Debt : $49 billionLabour participation rate : 52%Emerging market rank :

The nation which was once considered to be a sub-continent in itself, the seventh largest nation in area and the second largest in population. It has the potential to do a lot than what it is today but it faces many challenges in this venture, the country in the past decade from the 2010 has seen growth rates of 7-8% which is only next to China when comparing nations which are equal or above $2 trillion GDP sizes. Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 28.757

Agriculture49.718

Industries21.525

Source: ilo.org

The nation has the potential to become the powerhouse of the 21st century with the largest pool of young population moving into this century when many nations like Japan & Australia are getting old, but at the same time it faces many structural problems like the political instability, high dependence on agriculture making it an Agrarian economy with the third largest economy in terms of PPP, and high CAD which has hurt the currency in FY13 which depreciated by 30%.Although the situation has changed drastically on the economic front and political front in the last 7 months per se, with the mandate to the Modi government and in control CAD of yearlong target at 1.9%, falling crude which is blessing in disguise for the fiscal trouble for the newly formed government. Without these 5 year low crude prices it would have been impossible to achieve the 4.1% fiscal deficit target. High fiscal deficit effect the credit rating of the nation and India couldnt have afforded a downgrade.Indonesia: Inflows $18.44 billion Outflows Negligible

GDP : $868 billion GDP growth : 5.78%Per- capita : $ 9,558Ease of doing : 114Current account : -$24.2 billion, 4.9% GDPPublic Debt : $28 billionLabour participation rate : 63.9%Emerging market rank :

The South East Asian nation which has huge population and is an Island nation but has seen an unprecedented growth in the recent years, its pretty much on its way to become a trillion dollar economy. Like many other emerging nations it is primarily a service driven nation. Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 44.740

Agriculture34.714

Industries20.646

Source: ilo.org

India is losing the BPO sector to Indonesia because of rising employee costs and this is a gain to Indonesia which has comparatively lower labour costs.The largest contributor to the FDI inflows is Japan which has replaced China with Indonesia as the top priority FDI destination, with cheap and large labour population many Japanese, Korean and American companies have lined up to invest heavily in this nation in the coming years.Comparison of Indonesia with India:India attracts a large portion of FDI from Mauritius which is a tax haven but Indonesia has renowned investors who have committed for more, but at the same time the nation is enjoying the positive outlook from many nations on the FDI front whereas India is considered to be a difficult place.Malaysia: Inflows $11.58 billion Outflows $6.2 billion

GDP : $312 billion GDP growth : 4.68%Per- capita : $32,324 Ease of doing : 18Current account : $18.6 billion, 5.7% GDPPublic Debt : $53 billionLabour participation rate : 65.4%Emerging market rank :

It is the size of Uttar Pradesh and has a population less than that of U.P & Rajasthan combined at 280 million but attracts 4% of their GDP as FDI inflows and this is after a significant correction in the recent years. This is the only emerging market which has an outflow that is more than half of its inflows. Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 59.450

Agriculture12.79

Industries27.941

Source: ilo.org

The major sources were Singapore, Mauritius, Cayman Islands again one important observation is that all the major contributors are tax havens which again raises the question on the authencity of those ventures. The investments have slowed drastically in the last nine months.Comparison of Malaysia with India: Mauritius which is the largest contributors to both India & Malaysia is widely considered to be a laundering destination for organisations who are trying to evade taxes in the home country. Although the nation is no comparison to the size and population but it has overtaken India in many fronts like the Current account surplus which is a very rare thing that can be observed in emerging economies and the ease of doing business standing is at 18 which explains the large inflows into the nation.Mexico: Inflows $35 billion Outflows $10 billion

GDP : $1.26 trillion GDP growth : 1.1%Per- capita : $16,463Ease of doing : 53Current account : -$22.6 billion, 1.8% GDPPublic Debt : NALabour participation rate : 59.1%Emerging market rank :

5 of the 23 nations on the list are from the South American continent which has many added advantages like the proximity with the worlds most powerful country and early independence from the colonization which has hindered the growth in the Asian economies widely. Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 62.062

Agriculture13.73

Industries23.835

Source: ilo.orgPre-recession era Mexico was growing at healthy rates of 5-6% and has slowed down in the last 2 years from 5.6% in 2011 to 1.1% in 2013. But the country has the biggest advantage of being the USAs neighbour and it shares a 2000 mile boundary, this not facilitates the cross- border trade which was $550 billion with Mexico being its second largest export market and the USA is the largest export market for Mexico more than 80% of exports from Mexico are channelled into the USA and the rest to Canada again the part of economic conclave NAFTA.Comparison of Mexico with India:The differences are very clear the nation is more matured market in terms of ease of doing business which is 142 for India and 53 for Mexico and almost $17.1 billion of FDI flowing into Mexico is from USA which again India has in form of Mauritius. Thats the reason the flows for both the countries is very close and the on the outflows front Mexico is ahead in 2013 but the reason being Indian investments has slowed down during the year which was at $12.1 billion in 2011.Peru: Inflows $10.2 billion Outflows Negligible

GDP : $202 billion GDP growth : 5.82%Per- capita : $11,175Ease of doing : 35Current account : -$6.7 billion, 3.3% GDPPublic Debt : $19 billionLabour participation rate : 73.2%Emerging market rank :

The employment population ratio for the nation is at 70.03% which signifies that most of the population is young and of working age now. The nation again has healthy inflows at 5% of the GDP and it has been able to sustain the growth rates at a time when its neighbouring Latin American nations have seen decreasing growth rates. Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 57.456

Agriculture24.67

Industries18.037

Source: ilo.org

Philippines: Inflows $3.15 billion

GDP : $272 billion GDP growth : 7.18%Per- capita : $6,532Ease of doing : 95Current account : $7.1 billion, 2.6% GDPPublic Debt : $51 billionLabour participation rate : 63.9%Emerging market rank :

This is clear contrast between the two nations in the different parts of the globe one which is very close to developed economies and has been independent for almost 200 years now and on the other side the rising Asian economy which has seen independence from the colonization only 50 years ago. The American counterpart has better business environment which is friendly for the foreign organisations and at the same time has small population and has better HDI ranking at 52 when compared to the 117 for the Asian.This is again one important reason why the Latin American nations are worst hit post-recession era and not the Asian economies as much, that the over dependence of these economies on the developed world has repercussions that are inevitable and even in the case of Peru it can be seen whose growth for 2014 is recorded at 1.3% and 6.75% for the Asian counterpart. Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 53.457

Agriculture31.012

Industries15.631

Source: ilo.org

Poland: Inflows -$6.2 billion Outflows -$4.9 billion

GDP : $517 billion GDP growth : 1.57%Per- capita : $23,274Ease of doing : 32Current account : -$18.2 billion, 3.5% GDPPublic Debt : NALabour participation rate : 55.9%Emerging market rank :

This is another classic example of how over the course of the history the geographical location of the nation and the trade blocks it is part of determine the nations economic cycles in the short run. There are very few countries that are part of EU that are underdeveloped or developing and Poland is one among them.The FDI inflows and outflows have been dredging due to the slowdown that the EU is facing since the 2008 recession there is no sign of relief for the smaller nations because the ECB has turned down the possibility of stimulus packages similar to the QE to stimulate growth.Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 57.465

Agriculture12.04

Industries30.632

Source: ilo.org

The country has no reason to be facing these consequences because it has good business environment and has controllable CAD but only the fear of EU further sliding into recession has led to this kind of money going out of the economy. But the year 2014 has brought luck to Poland from the dragon, that is China which has invested for the first time and the rising trade with the Middle East is helping it revive the economy.

Qatar: Inflows -$0.84 billion Outflows $8.20 billion

GDP : $202 billion GDP growth : 5.57%Per- capita : $131,735Ease of doing : 50Current account : $61 billion, 30% GDPPublic Debt : NALabour participation rate : 87.2%Emerging market rank :

The oil rich Middle East nations are completely different in every way from the rest of the world maybe it be the extreme Islamic culture and the widespread deserts and the sheiks are all but for these countries. The growth rates are wholly fuelled by the increase in the oil production and has nothing to do with any other sector contributing towards it, oil production contributes to 55% of the GDP.The other factors like the per-capita and HDI are all high because there are few residents and majority of the expatriates in the country who are not included in the calculation of the per-capita income. It has been seen that the inflows into these nations have been dud, but at the same time they are always high on the outflows front, with investments across the globe.Figures in % as on 2013SectorEmployment contribution

Services 46.8

Agriculture1.4

Industries51.6

Source: ilo.org

Comparison of Qatar with India:There are hardly any factors that these two nations are on the same front, Qatar is oil rich nation and whereas even after having fair amount of oil reserves in India, due to the unprecedented demand for the fossil fuel country has always been starving for oil and major portion of the oil has been sourced from the Middle East. With an annual import bill of $110 billion in 2013.Russia: Inflows $ 70.65 billion Outflows $54.5 billion

GDP : $2.09 trillion GDP growth : 1.31%Per- capita : $24,120Ease of doing : 62Current account : $71 billion, 3.39% GDPPublic Debt : $9.4 billionLabour participation rate : 64.8%Emerging market rank : The once super power USSR has now the legacy left in ruins of Russia the cold nation during the cold war era in the late 1980s was on the track to become a superpower threatening the dominance of USA but all that is past. But recently when the Crimea annexation was written in the history books, Russia is that angry child who is acting rebel against the western world.Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 65.360

Agriculture7.04

Industries27.736

Source: ilo.orgThe recent call by the G20 nations to impose sanctions against Russia to stop it from further destabilising the eastern Ukraine has led the country into turmoil but this was not sufficient to stop the Putin on fire, but now that the Oil prices have crashed and the sub 60s is bad news for the Russian Budget which needs the price to be at $120 per barrel for breakeven. The economy is now experiencing negative growth in the 9 months of FY14.Comparison of Russia with India:The Russian Indian connection is nothing new, right from strategic defence deals to many financial aid during the crisis of the 1990s. Russia has a Communist government and has a lot of land in fact the largest country on the planet but it is not widely habitable across the region. But India is the worlds largest democracy with a large land that has ideal climate for inhabitants. The recent INS Vikramaditya in the Indian navys fleet is again from Russia with love, this has made India joining the elite club of Nuclear Submarines in its fleet.South Africa: Inflows $8.2 billion Outflows $5.2 billion

GDP : $350 billion GDP growth : 1.39%Per- capita : $12,503Ease of doing : 43Current account : -$20 billion, 5.7% GDPPublic Debt : NALabour participation rate : 55.8%Emerging market rank :

The African nation which is part of the BRICS the growth story of the developing world, the economy has been facing the consequences of having large CAD which is highest among the BRICS, India had it at 4.9% but has managed to lower it in 2014 but it is not the case with South Africa even in 2014 it is as high as 3.6%. Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 71.370

Agriculture5.12

Industries23.628

Source: ilo.org

Among the BRICS, South Africa has the highest contribution to its employment from services which is again dependent on the developed world and this is quite evident in the slower growth as compare to early years.China has been strategically investing in South Africa over the years and it is largest contributor to the inflows into the country. It is to be noted that none of the BRICS contribute to even more than 1% of FDI inflows into India.Comparison of South Africa with India:India and South Africa are similar in many aspects maybe it the late reforms that were kicked in these economies when the rest of the world is on the fast track, massive population of both the country are in poverty and there are chronic infrastructure problems like water, sanitation, power, roads in both the nations

South Korea: Inflows $12.22 billion

GDP : $1.35 trillion GDP growth : 2.97%Per- capita : $33,139Ease of doing : 5Current account : $43 billion, 3.19% GDPPublic Debt : NALabour participation rate : 61.5%Emerging market rank :

The nation which is the half the size of the vibrant Gujarat and is situated on the borders of the North Korea which is ruled by modern day Hitler, Kim Yun Gong. There is enormous potential in the way this nation has been growing in the last decade, the growth houses are mainly the South Korean Chaebol, and these are business conglomerates which owns multiple businesses. Figures in % as on 2013SectorEmployment contributionGDP contribution

Services 69.559

Agriculture6.12

Industries24.439

Source: ilo.org

The renowned Chaebol from South Korea which dominate their own space globally are Samsung, LG and Hyundai, these companies are classic examples of covering the upstream and downstream of the value chain in the true form like for example Hyundai, is known by the world as car manufacturer has Hyundai oil bank, Hyundai Steel, Hyundai motor parts, Hyundai Motors.Comparison of South Korea with India:Unlike the problems that India face in terms poor infrastructure resulting in Unemployment & poverty. South Korea is well placed and ranks 15th on HDI this is better than France ranking of 17th. It is also not well placed in the geographical politics the trade between the neighbouring Japan and North Korea is negligible, this is a result of political tensions that are prevailing in that region.

Major Findings

On an average during the 2006-2012 period the inflows to the developing world have grown by more than 60% on the other hand the share of the developed world have come down by 47% which is facing the decline. The UNCTAD global investment report of 2013 featured top 5 investment safe havens which is led by USA and then four emerging markets China, India, Indonesia, Brazil. This shows that the relevance of these economies cannot be ignored by investors.

Source: Euromonitor International from UNCTAD

Political Stability and Absence of Violence 2013 Index and Ease of Doing Business 2013 rankings show a direct correlation in the emerging market economies.

Source: Euromonitor International from UNCTADThe slowdown in the global flows hasnt affected the emerging markets very much this can be seen in the graph below that explains how these economies have been the sweet spot for the global investors even in the case of falling FDI flows Recommendations:

The emerging markets led by the mighty China have entered into the 21st century that is said to be the century for the developing nations to lead the global economy. The many hurdles that these economies face are political instability, economic reforms in some nations like India, South Africa should be on the fast track so that the momentum can be maintained.The MSCI emerging markets are very crucial to the global FDI flows as well and structurally they are always on the receiving end and the developed world on the other. The total inflows in the 23 nations is $695 billion which is 43% of the global FDI flows which stands at $1.6 trillion for 2013, but it is also to be noted that 22% is China alone and 31% contribution is by the top three nations China, Brazil and Russia. In the coming there is lot of opportunities for investment avenues from countries like India, South Africa, and Indonesia which have a lot of natural resources and huge unemployed population, the advantage these nations have is large areas of habitable land.

MarketsInflows% of totalOutflows% of total

Emerging markets 6954329519

Developed markets5253385053

Rest of the world3802445528

Global16001001600100

Figures in USD billion

References:

1. http://www.ilo.org/ilostat/faces/home/statisticaldata/ContryProfileId?_afrLoop=410524902517503#%40%3F_afrLoop%3D410524902517503%26_adf.ctrl-state%3Dbhx4daw08_42. http://data.worldbank.org/indicator/NV.IND.TOTL.ZS3. http://www.portal.euromonitor.com/portal4. http://data.worldbank.org/indicator/NV.SRV.TETC.ZS5. http://en.wikipedia.org/wiki/Chaebol6. http://hdr.undp.org/en/content/table-1-human-development-index-and-its-components7. http://www.state.gov/r/pa/ei/bgn/2898.htm

All the data recorded is till 2013 and the source for the GDP, growth rate, per-capita etc. have been http://data.worldbank.org/indicator/NY.GDP.MKTP.CD

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