MIST- The latest BRICS?

BY: Arunima Sodhani

Since Jim O’Neill of Goldman Sachs coined the acronym BRIC (now BRICS) the focus of international trade discussions and debates has shifted towards these countries, touted to be the most promising markets of the future. And they have delivered, in terms of GDP growth, workforce development, trade improvements and crisis resistance. But recently, another acronym MIST (standing for Mexico, Indonesia, South Korea and Turkey) has also been coined with the same principle bringing the 4 countries together- economic potential. The countries are part of the Goldman Sachs N-11 Equity Fund- a fund for investments in emerging but propitious markets. Each of these countries has shown strong growth potential in the recent past due to growing purchasing power and robust investment.

Here’s a mini SWOT analysis of the 4 economies in question.

Mexico: The country is equipped with a strong labour force, which is conducive to the growth of manufacturing sector and retail sector, due to the growing number to consumers. The average wage for workers in China is now higher than that in Mexico. It is an attractive destination for FDI due to cost and demographic advantages, and the retail sector growth has been forecasted at 4 percent for the coming 2-3 years. Mexico, being an energy hub, also aims to increase oil production by 32 percent and gas by 94 percent till the year 2026. But the country is reeling under corruption and has high organized crime rates, along with a raging drug war, which pose a threat to its future.

Indonesia:  This country shares its demographic and geographical advantages with Mexico in the sense that it has a population which not only constitutes a strong workforce, but also consumers willing to spend on domestically manufactured products. Its location in Southeast Asia makes it a core economy participating in intra ASEAN trade activities. Also, with an investment grade rating from Moody and Fitch, it is attracting a number of banks and financial consulting firms such as Goldman Sachs, Morgan Stanley etc. It also has potential for geothermal power, which the Indonesian government is eager to promote. But the country is also reeling under corruption, and faces infrastructural challenges.

South Korea: Most recently in news for its ‘in-house production’ Gangnam Style, South Korea is the only country in the group which boasts the reputation, keeping in mind most economic indicators, of a developed country. The country is a good manufacturing location due to its skilled workforce and tax incentives, even though the labour is somewhat inflexible. Despite the small population, the retail sector shows increasing growth year by year, in particular the luxury retail sector. Investments in energy research and development are also promoted by the government. The country also has strong exports, though this may pose a challenge in times of global financial crises.

Turkey: The country’s sizeable population accounts for a strong domestic market with high retail sector growth, surpassing the European Union average. The ‘Istanbul Financial Center Project’ intends to turn Istanbul to one of the world’s most powerful financial districts in the coming decade. The government has also taken steps to promote the tourism industry, striving to double arrivals by 2025. But in spite of a low Debt-GDP ratio, the country suffers from a high current account deficit along with high inflation. The employment rate also needs to grow to help Turkey live up to the expectations of Jim O’Neill’s believers.