By Anders Heede of BDO
Many emerging markets, especially in sub-Saharan Africa, have seen solid GDP growth in the past decade driven mainly by natural resources. But with falling commodity prices and Chinese demand dwindling, those with overly resource-dependent economies are being caught. Companies seeking to invest in emerging markets should be on the lookout for those countries that have invested in diversifying their economies. That will often mean having Ethiopia on their shortlist. Read more
By Kavaljit Singh of Madhyam
It’s official: India and the US will resume negotiations on a high-standard bilateral investment treaty (BIT). In a joint statement on Sunday by Prime Minister Narendra Modi and President Barack Obama, the leaders affirmed their “shared commitment to facilitating increased bilateral investment flows and fostering an open and predictable climate for investment.”
Since 2008, the two countries have been engaged in sporadic discussions to arrive at such a treaty. In the coming days, negotiations will begin on its wording, based on each country’s revised model treaty texts. Read more
By Kavaljit Singh of Madhyam
President Barack Obama’s upcoming visit to India is likely to kick-start stalled negotiations on a bilateral investment treaty (BIT) between the US and India that has been under sporadic discussion since 2008, aimed at facilitating greater cross-border investment flows.
Negotiations will resume based on model treaty texts prepared by each side. In April 2012, the US released a new version of its model BIT. New Delhi launched a review of its investment treaties in mid-2012 in the wake of public outcry over arbitration notices served by 17 foreign companies (including Vodafone and Sistema) challenging various policy measures and demanding billions of dollars in compensation for the alleged violation of India’s BITs. Read more
As if to add substance to complaints from emerging market policymakers about being ignored, a matter mainly affecting middle-income countries became the subject of close global attention only when it emerged as a bone of contention between the US and Europe.
The snappily-titled “investor-state dispute settlement” (ISDS) process, where companies have the right to sue governments for disadvantaging their businesses, has been the subject of deep controversy for years. But since the most vocal discontents were nations like Argentina and Venezuela that complain about more or less everything, it took well-organised campaigning and official German opposition to an ISDS chapter in the US-EU Transatlantic Trade and Investment Partnership (TTIP) to make it a central concern. Read more
Votes will be counted in India next week, bringing the world’s largest democratic exercise to a close.
With great hopes that a strong government will lead Asia’s third largest economy along a new path to growth, equity markets have rallied to a series of record highs and vast amounts of foreign institutional investment have streamed in ahead of the results. But will investors get the result they want? Read more
At a time when everyone is nervous about emerging markets, Henry Kravis, a well-recognised pioneer in the private equity industry, is optimistic about India.
And given his New York-based company, KKR, made a return on equity of 27 per cent last year, it’s worth hearing why. Read more
The Indian government is keen to draw investors to the country, easing FDI caps in a range of sectors over the last year and a half. But you might think recent financial instability and political uncertainty ahead of this year’s general elections would hurt enthusiasm.
However, an Ernst & Young survey of 500 international investors has found some optimism about Asia’s third largest economy. Read more
If investing is all about value creation, the latest batch of figures from Brazil’s central bank make for sobering reading. They show the rich returns you can make when investing in Brazil goes right – and the huge losses that result when it goes wrong. Over the past three years, foreign direct investors and buyers of Brazilian portfolio assets have suffered value destruction on a colossal scale.
An analysis of central bank figures by beyondbrics shows that ,taken together, flows of foreign direct investment to Brazil and foreign investment in Brazilian portfolio assets were worth more than $260bn between January 2011 and November 2013. Over the same period, in spite of those inflows, the value of such assets held by foreigners fell from $1,351bn to $1,327bn, a loss of $24bn, implying value destruction of more than $284bn in less than three years. Read more
Forget the domestic market – look overseas. That seems to be the message from Larsen and Toubro (L&T), India’s largest infrastructure company by sales.
And the slowdown in the domestic economy is not only pushing business abroad but also putting pressure on L&T, as management cut its target for the current fiscal year. Read more
China’s competitive advantage is not what it used to be as its development drives up labour costs. Diana Choyleva, head of macroeconomics at Lombard Street Research, discusses with John Authers how the rebalancing of economic power could occur.
By Raffaello Pantucci of the Royal United Services Institute
A gentle rapprochement is under way between China and the United Kingdom. After almost two years in a diplomatic freeze, David Cameron visited Beijing last month and made an effective play for more trade. For the UK, this is a moment to recalibrate its relationship and play a role in coaxing China towards becoming a responsible international stakeholder. One route to that end is through understanding and working with China’s ‘march westward’ strategy, which has at its heart the re-activation of the ancient Silk Road linking China to Europe. Read more
By Richard Dobbs and Fraser Thompson of the McKinsey Global Institute
By 2030, nearly half of the world’s economies could be resource rich countries. It is vital for the future economic prospects of these countries – and to satisfy the world’s need for their resources – that they do better than many have done in the past in translating their sub-soil wealth into long-term prosperity. Read more
For much of their history, the economies of Latin America have been isolated not only from the rest of the world but also form each other. Over the past quarter century, this has changed and the region now has the opportunity to embark on a virtual circle of development. But to realise this potential, governments must still deal with daunting challenges, writes Juan Carlos Echeverry of the Inter-American Development Bank. Read more
The FT today publishes a special report, Investing in Turkey, on the challenges facing the country’s government and private sector as it struggles to gain competitiveness and deal with one of the most daunting current account deficits in the developing world. At 13.00 GMT, Daniel Dombey, Turkey correspondent, and freelance writer Andrew Finkel will host a live discussion on Twitter on the country’s economic and political future. Here, Dombey outlines the difficulties Turkey faces in delivering the investment needed for growth. Read more
The Middle-Eastern Gulf states have had a huge swing towards Asia in trade but investment dinars have not followed to the same degree. Ahmad Al-Hamad is looking to change that.
Asiya Investments is part of the listed Kuwait China Investment Company and already runs about $450m in assets, more than 10 per cent of which comes from the Kuwait Investment Authority, the sovereign wealth fund. Read more
By Andrew Lloyd of Ellis Munro
Asia is often considered a region where investors should focus the “growth” part of their portfolios. One attraction cited is the rise of the middle class and its impact on demand for consumer goods and services, and on the supply chain feeding the system. But a narrow focus on consumer-led growth in Asia overshadows the opportunities to find solid businesses in the region at bargain valuations. Read more
Cadbury India, part of the $35bn Mondelez International group, is setting up its biggest plant in the Asia Pacific region. And it has chosen the south eastern state of Andhra Pradesh for it. That’s a huge chunk of investment – especially since the plant appears to be real this time. Read more
By Fernando Losada of AllianceBernstein
Since May, over a quarter of the past five months’ foreign portfolio investment into emerging markets has been withdrawn, according to the latest available data from EPFR. For the Latin American economies, this is likely to result in slower growth, but the impact may be milder this time around. Read more
India’s policy makers have dealt a surprise one-two, as they attempt to stem the depreciation of the rupee, finance the country’s unsustainable current account deficit and prop up the economy all at once.
The Reserve Bank of India announced a slew of monetary tightening measures on Monday that immediately propped up the rupee but raised concerns around their impact on India’s already slowing economy. Another announcement late on Tuesday provided a counterweight, as limits on foreign direct investment were further relaxed.
But are these reforms all they’re cracked up to be? Read more
Speak to people in Mumbai’s business community and it sounds like it’s about to go into pause mode, as investors wait for the general elections to bring some clarity before shelling out any cash.
PwC seems to think otherwise. In a new report, the consultancy says there are several business reasons for private equity funds to invest in India in the coming months. Read more