More than a decade ago Jim O’Neill was working with Goldman Sachs and coined the term BRIC; an acronym for Brazil; Russia; India and China – countries characterised by high growth. South Africa was added in 2010 to give us BRICS. All five are now G20 members. There followed a focus on the next eleven – based on population size. Over the next few years, this second string was refined to focus on the MINTs (Mexico; Indonesia; Nigeria and Turkey) – countries which look set to join the world’s economic A-list. Places like Pakistan passed over because of the huge problems to solve and South Korea because it has arrived. In fact, Jim O’Neill sees South Korea as a template for the MINTs.
This last week, Jim O’Neill presented a series of programmes on the MINTs on BBC Radio 4. Hugely informative, I was struck by a number of insights on key drivers from demographics (a young population relative to a dependent population) and productivity to the need for governance and above all energy. One word kept cropping up – transformation. Of this more later!
The WOW factor plays a big role for O’Neill – the can-do mentality; entrepreneurial zeal and sheer drive and youthful energy. Nigeria has this in spades (it is about to overtake South Africa in GDP); Indonesia less so – in fact, O’Neill has concerns that Indonesia can meet the challenges it faces and was disappointed with this visit. Indonesia had a spurt of growth that seemed to lull government into inertia; Mexico is suffering from a bout of pessimism as dealing with constraints slow things down and Turkey, like Nigeria, displays boundless energy and adaptability. For years, Turkey was pushing for more trade with the EU but with the Euro crisis has diversified.
These programmes give a useful insight into emerging markets but demonstrate what the developed world has to contend with. Look in the rear view mirror and they are closing fast. Let’s look at some of the key messages from the programmes.
Political instability and corruption are key constraints. However, according to O’Neill, corruption needs to be put into perspective. Better and shared growth will solve these tensions and corruption itself differs in scope and scale. I have experienced corruption in India at the lowest level – where a local bureaucrat slows down service for a few rupees. This is different from a rake off so that a project can go ahead or, worst of all, all of the cash.
Politics is another matter and we need to beware that good times can make for bad policy. Take Indonesia – the commodity boom and easy money before the global financial crash in 2008 papered over the cracks and government stalled and put off essential reforms. Russia disappoints in a similar way – huge oil and gas revenues postpones much needed diversification; energy prices catch a cold and all Russia stalls. Acronyms matter – it is worth mentioning that after the BRICs took root in the business world they formed a political club and meet regularly on common interests. Tentative discussions are taking place with the MINTs it seems.
Each one of the MINTs has to focus energy and skills. These are the two key building blocks.
Across the BRICs and MINTs the issue of energy shortages is a real issue and many key companies and sectors depend on their own generator power – that is costly with a negative impact on the bottom line. A place like Chennai in India can lose up to 24 hours every week of grid capacity and, MTN Nigeria’s biggest Telco has two generators for every one of their towers.
The Global Skills gap is a significant problem worldwide in developed as well as developing markets. Across the EU there is a significant youth unemployment issue compounded by a looming succession crisis – the north sea oil and gas sector workforce is over 50; UK trucks; crane and construction equipment operators are all over 50 as are the workers laying broadband connections across the UK! We deal with skills elsewhere but this is a major transformative agenda that cannot be ignored.
Education needs to be inclusive and there has to be a dual focus on vocational skills as well as university level education. Each country has to deliver on this AND ensure that retention is part of the approach. The skills gap is a global issue and no country should ignore the fact that ALL countries are now looking for the best talent to guarantee sustainable growth.
Another key driver is innovation. Back in the 1980s South Korea had the growth pattern (and prospects) of African countries. These days, South Korea is the role model for developed countries as well as BRICs and MINTs. What has happened in education and skills is the key. South Korea has companies like Samsung – more influential globally than Apple; Turkey has companies like Lippo a white goods powerhouse that competes in Germany with German technology.
Another point emerging from any analysis of BRICs and MINTs is the fact that each country breaks down into widely different regions. Take China and the contrast between the prosperous coastal cities and, the less developed western provinces. In Turkey, J O’N saw huge differences between Istanbul (and what looks like a property bubble) and the impressive work ethic of Kayseri in Central Anatolia. There are clear regional imbalances across all countries – take the South East of England and the North; North and Southern Italy. Let’s not forget that Germany has had all sorts of problems reconciling West and Eastern Germany since unification. Across what was once the Eastern block in Europe, the similarities between the capitals is clear but each one differs greatly from their own hinterland!
The role of logistics and supply chain effectiveness and efficiency applies across all of these countries and it is worth nothing that all four of the MINTs sit well in the middle of major global trade routes. Turkey, for example, was trading heavily with Europe but, as the Euro crisis kicked in Turkey has diversified significantly north to Russia; east into Iraq and Iran and south to North Africa. There is a clear lesson in this – countries have to be wary of placing all their eggs in one basket. Trading with the world – and not just the USA – has been a huge fillip for South Korean growth.
One word that cropped up in each one of these informative programmes is transformation. There is a transformational agenda common to each one of the MINTs (and beyond). There has to be a focus on energy; education and entrepreneurial spirit. The country has to be adaptable and, innovation is key. As Einstein once said: to do the same things and expect a different result is a form of madness.
Go to BBC I player and seek out the programmes. Jim O’Neill and the MINT economies.