Category: Emerging Markets

A n article by Charles Cooper on News.com — Brazil’s dance with the Internet — has a comment which captures the essence of the challenge faced by emerging markets when it comes to buying dollar-denominated technology:

“The problem is money,” said one teacher. “It’s not like in America where computers and Internet access is relatively cheap. For most people, these are still expensive items. I was only able to buy a computer for my home last year. Until then, I had to use my school’s PC.”

This is the problem we are trying to solve with our set of ideas in Emergic. Make technology affordable to the bottom of the pyramid. Not by trying to create new technology, but using old technology and building new business models around it.

Surveys in the Economist are a must-read. They provide excellent, in-depth perspectives. The latest issue carries a survey on China. Writes the Economist:

China seems set to become more unstable. It will face growing unrest as unemployment mounts. And if growth were to slow significantly, public confidence could collapse, triggering a run on banks that would undermine China’s financial stability.

As long as the leadership can avoid the kind of vicious internal struggles that prompted the 1989 unrest, the party will probably remain in power. But it will be a weakened, inward-looking organisation, vulnerable to crises. If this forecast proves correct, that is bad news for China and could be bad news for countries dealing with it. A weakly led and politically insecure China, roiled by unfulfilled nationalist aspirations, might prove an unpredictable actor on the world stage.

What happens in China is going to be important to all of us. I was telling a friend recently that when we were in school, we’d have the option of learning French or German as the third language. In years to come, don’t be surprised to expect Chinese added. It is after all the biggest market of them all.

I had visited Shanghai for a couple days in early March. Had written my impressions as part of a Tech Talk series.

South Korea is rising — fast. Turning around countries is not easy. But South Korea seems to have done it. The Cool Korea story in Business Week talks of the change, and how South Korea can serve as a model for other emerging economies:

The changes have been pretty much nonstop since the economic trauma of 1998, when gross domestic product contracted 6.7%. Today, Korea is back with a vengeance. Its economy grew 5.7% in the first quarter. Its phones, cars, and movies are hot around the world. Its citizens are riding a high verging on cockiness.

This country of 48 million has become a model for developing nations everywhere. Nowhere is this more true than in its home region, where Japan is a waning force and much of Southeast Asia continues to struggle with sick banking systems and dwindling foreign investment. The commentators may be right that the future belongs to China–and that Korea itself still needs to keep reforming. But Korea has already made the transition from authoritarianism to democracy and from a low-end, exporting economy sealed off from the world to one that is plugged-in, dynamic, and increasingly high-tech. It will be some time before China gets there.

South Korea has momentum. How did it do it? Answers Business Week:

First, President Kim Dae Jung and his advisers managed to cut the connection between Korea’s banks and the chaebol, the conglomerates that once ruled Korea. Second, the Koreans created an economy that did not depend exclusively on exports to survive. They fashioned a full-fledged domestic economy, a rare thing in Asia. Third, the trauma of crisis and change unleashed a wave of innovation in business and culture that is still in effect.

Vision combined with Will. Most emerging markets lack both, and its no wonder then that they stay where they are. It is not just managing the short-term or the long-term, but both.

A WSJ article on South Korea using the World Cup to showcase its high-tech prowess mentions some impressive stats: “It surpassed Japan in producing computer memory chips in the late 1990s, and is now the world’s No. 1 producer. It is also the leading manufacturer of flat-panel display screens. A total of 54% of Korean households have broadband Internet access, compared with just 13% in the U.S. and 6.3% in Japan, according to the Ministry of Information and Communication. Its information-technology industry now accounts for more than a quarter of export volume.”

Helping the Poor, Phone by Phone in the New York Times:

At the end of last year, Mr. Quadir showed how third-world ventures can be profitable %u2014 and provide a useful service %u2014 when GrameenPhone, the cellphone company he founded in Bangladesh, made $27 million in pretax profits. It turned that profit after just five years — far sooner than many first-world start-ups.

To Mr. Quadir, the two approaches are not mutually exclusive. He says the poor will improve their own health as they become richer, and he sees cellphones as tools of production, not consumption.

The same thinking also applies to computers. We need to get 100 million computers in India, not the 6-odd million which exist today. Like what GrameenPhone has done, the innovation has to be in the way we think of ownership and financing.

Karun Philip: “My projects are aimed more at making Indians (and other developing countries) richer rather than technology cheaper. In short, imagine if the rupee reached 10 rupees to the dollar…India-domiciled wealth would be 5 times more valuable and technology would be affordable by a huge number of people. In the book , I show how to potentially do this while increasing jobs at the same time.”

Karun’s an old friend…good to get back in touch with him. The theories should be interesting to read, especially for those of us who can remember the USD dollar at Rs 8 or so (vs its Rs 50 now)! Personally, I know more about technology than finance. The end-objectives are the same: how can emerging markets and their people grow, afford new technology and enrich their quality of lives. Either their purchasing power becomes greater (Karun’s viewpoint in K-Capital) or lower-cost technology needs to be developed (what Emergic is about). A mix of both is perhaps what’s needed.

Mexico Embraces Microsoft, Stirring a Debate in the New York Times:

When he learned that President Vicente Fox had announced a nationwide plan to make millions of Mexicans computer-literate, Mr. de Icaza [of Ximian] saw a great opportunity to promote his software at home. But he has since found that Mexico is eager to develop its technology market only with companies that offer millions of dollars to take part.

And that is how Microsoft, which up north has faced years of regulatory battles over what critics call its monopolistic practices, came to be handed what could fast become a monopoly here.

One Nation, Overseas: An article in Wired on the export of people by Philippines.

Having discovered its prowess as an outsourcer of labor, the Philippines is now pursuing the opportunity with fervor. Whereas the US has spent decades bemoaning the export of its jobs (to Mexico, to China), the Philippine government revels in the export of its people. Using technology to stay involved in family life back home, Filipino global commuters constitute one of the biggest sources of stability for the economy of a country perennially known as the Sick Man of Asia. Remittances, the money they electronically send back to their families, account for 8.2 percent of the nation’s gross national product, stabilizing its peso, improving foreign currency reserves, shoring up consumption, and making more than a dent in the unemployment rate (now 11.1 percent). Last year, overseas Filipino workers sent home $6.2 billion. Indians sent home twice the amount – with 13 times the general population.

Note the last two statements above (emphasis mine).

India’s model seems to be to focus on becoming the back-office to the world.

For China’s Wealthy, All but Fruited Plain — An article on China’s Rich in The New York Times.

While the Communist Party publicly embraces capitalists these days, inviting them in a controversial decision last July to join the party, it is still trying to restrain the emergence of a wealthy class.

The party worries that the disparity between rich and poor is potentially dangerous in a country where, according to Lu Zhiqiang, a senior government official addressing the Asian Development Bank recently, 70 percent of citizens feel that the fast-growing gap threatens social stability. Bold displays of riches are rare.

Yet, try as the government might to keep capitalists from amassing huge amounts of capital, people like Mr. Li, whose money comes from printing and garment manufacturing joint ventures with a Japanese company, are beginning to blip onto the world’s wealth radar screens.