18 December 2018

Opportunities beyond Europe

While Europe will remain a key fixture of most firms’ expansion strategies, UK-based companies are also looking to the emerging markets of Latin America, Asia and beyond to capture significant growth. Here are four markets worth considering.

1 Vietnam

Home to nearly 100 million consumers, the Vietnamese market is undergoing a period of accelerated liberalisation. Through ASEAN (Association of South East Asian Nations), the country has trade pacts with Australia, New Zealand, China, India, Japan and South Korea. It also signed the Trans-Pacific Partnership, as well as separate agreements with Russia and the European Union1.

Underlining this increasing presence within the global market, the level of imports into Vietnam is expected to be around US$227bn in 20202.

Since 2010, Vietnam’s GDP growth has been at least 5 per cent a year and, in 2017, it peaked at 6.8 per cent. With such rapid economic growth, the country has grown from one of the poorest countries in the world to a comfortably middle-income one3. With the third largest population in South East Asia, after Indonesia and the Philippines, and more than half of the population below the age of 30, Vietnam is a dynamic country with a developing culture of entrepreneurship, technological awareness and openness to new ideas4.

The UK currently exports around £0.75bn worth of goods and services to Vietnam. The country’s biggest imports include electrical equipment, computers, plastics, fuels and iron and steel. The level of imports of optical, technical and medical apparatus has increased by 98.4 per cent between 2016 and 20175.

The UK is the third largest EU investor in Vietnam – and the largest investor in its education sector6. Interestingly, education and healthcare improvements are amongst the government’s highest priorities.

Infrastructure is also developing. Hanoi and Ho Chi Minh City are constructing new metro rail networks, and a new international hub airport has been approved for HCMC.

To attract foreign investment, a host of reforms have been introduced, including a new PPP (public private partnership) legal framework, developed with funding from DFID and the liberalisation of the retail sector.

2 Mexico

Trade liberalisation has transformed and modernised Mexico’s economy by successfully boosting trade and investment flows. Within just a few years, Mexico’s exports have diversified from primarily oil to an array of manufactured products. The country is now one of the largest exporters in the world. With a population of around 131 million and a per capita GDP of US$9,946.16, Mexico recorded GDP growth of 2.6 per cent in 20187.

Projected to be the world's fifth largest economy by 2050, Mexico has signed more trade agreements than any other nation, giving it potential access to 60 per cent of global GDP8. The upgrade of the EU-Mexico trade agreement in early 2018 opened up the service sector – an important change for the UK service industry, which will now be able to operate more easily in Mexico’s fast-growing market9.

Mexico is quickly becoming an emerging market heavyweight. In 2017, its GDP was $2.4tn. This was much less than its primary trading partner, the United States, with a GDP of $17.9tn. But it was larger than its other North American Free Trade Agreement partner, Canada10.

Mexico offers many opportunities to UK firms, such as free trade to the US and Canada under NAFTA, affordable labour and access to a skilled workforce. Top import sectors include machinery for metalworking and agriculture, electrical equipment, automobile and aircraft parts, and steel mill products.

The country is already the UK’s second-largest trading partner in the region, after Brazil, with companies such as Petrofac and Premier Oil involved in the energy sector, a new international airport designed by Norman Foster, the opening of Hamley’s in Mexico City and even the prospect of state-of-the-art British double-decker buses on the roads. BP recently became the first foreign oil company to open petrol stations in Mexico, with Shell following soon after11.

3 South Korea

With a focus on world-class electronic goods and a world-leading 4G infrastructure, the high-growth market of South Korea is a prime target for UK firms active in the ICT and consumer technology industries.

The nation's increasingly wealthy consumer base of over 50 million people is strongly receptive to both British culture and produce – across fashion, cosmetics, food and drink and other product types12. In 2017, South Korea imported US$7.5bn worth of British goods and services, an increase of 25.8 per cent.

While this receptiveness to inward trade bodes well for UK business, South Korea continually takes steps to become one of the world's top business-friendly economies – ranking fourth out of 190 in 201713. Foreign firms can find additional support, such as eased regulations, tax incentives and cash grants, in several Free Economic Zones.

It is not uncommon for British brands to use South Korea as a stepping stone to ASEAN markets by working alongside domestic partners and using their market expertise to establish a foothold.

4 Bangladesh

British goods and brands are widely recognised and perceived as reliable in Bangladesh.

In terms of infrastructure, the Bangladeshi government's Vision 2021 reforms aim to achieve new economic growth by investing in ICT. And a 20-year plan will see a four-lane Dhaka-Chittagong highway, an elevated expressway from Shahjalal International airport to Kutubkhali and a metro rail project14.

Bangladesh is a challenge, however, when it comes to the ease of doing business. In 2017, the country was ranked 174th out of 190. Yet, the country’s appetite for growth has resulted in new opportunities for UK firms, with around 100 UK brands operating in Bangladesh today. English is widely spoken while conducting business, which helps facilitate negotiations with international companies.

The UK currently exports a high volume of goods to Bangladesh each year, worth around US$280m in 201615. Key exports that year included scrap iron and electrical components16.

Electricity demand is estimated to outstrip supply across Bangladesh, presenting new opportunities for British companies in energy construction, machinery, planning and consultancy. Bangladeshi projects across environmental reform, water supply, ICT automation, pharmaceuticals and biotech also present potential for UK firms.

US$227bn

Projected value of imports into Vietnam in 2020

2.1%

Mexico's GDP growth in 2017

US$7.5bn

Value of UK goods and services exports to South Korea in 2017

US$280m

Value of UK exports to Bangladesh in 2016

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