Easy Does It

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By Peter G Hall
Vice-President and Chief Economist Export Development Canada

Crack open a newspaper, business journal or newsmagazine, scan TV business news, or surf the biz-net, and you’ll hear a message over and over: diversify. More and more, this message is aimed at foreign business. If you’re not in fast-growing emerging markets, you’re falling behind. It hasn’t always been a message that has played well in Canada, but it sure seems to have taken hold.

More businesses are venturing into non-traditional markets, a trend that is only likely to increase as the success stories mount. As you’re enjoying the summer, and maybe thinking about those strategy meetings that will kick off the fall season, considering new markets is not a bad idea. So, where in this big, wide world should you go?

The answer obviously depends on a number of factors. Demand conditions in potential markets. Their need for your product. The size and scale of operation you would require to support expected production. Legal requirements. Contacts. The list can be endless, and there is a whole advisory industry built around providing critical answers. One of the many factors is ease of doing business. This used to be pretty hard to get a handle on, absent large consulting and legal budgets. For large companies, not as much of a problem, but for small and medium-sized firms, prohibitive. The internet and other recent communication media have lowered the cost significantly. So have surveys, conducted regularly by multinational institutions.

The World Bank’s Ease of Doing Business Rank is a good first stop. OECD nations dominate the top rankings, but there are a few emerging market surprises. Taiwan, a more developed market, ranks well, but it is actually topped by Georgia (which at 15th, ranks just ahead of Canada), Estonia and Malaysia. Not surprisingly, the UAE do well at 22nd rank, but right behind them are Latvia, Lithuania and Thailand – which incidentally are ahead of the Netherlands. A number of Latin American and East European nations make it into the top 40. What are some of the factors that produce these surprising results?

Many of these countries distinguish themselves by making it easy to start a business. On this score, Georgia ranks 5th, Lithuania is 11th, and Estonia is 17th. Canada compares relatively well, at 16th. Another measure is dealing with construction permits. Georgia is 3rd in the world, The UAE 4th, Lithuania 11th and Malaysia 13th. Lots of other nations are ahead of Canada, which ranks 118th. It turns out that getting credit is also important. Canada scores well here, at 7th spot, but getting credit in Georgia is just as easy. Estonia, Lithuania, Latvia and Malaysia share 23rd rank with Germany and Ireland.

Trading across borders is another element of the index that bears noticing. Here again there are certain key emerging market stars. Estonia ranks 6th in the world. Less surprising are the UAE at 8th, and Israel at 12. Mauritius is also ahead of a lot of OECD nations, at 17th place. Where certain emerging markets also do well is in registering property.

Among the remaining criteria, getting electricityis one in which emerging markets underperform  compared with developed markets. Resolving insolvency can also be tricky in emerging markets; scores tend to be much less favourable. Other factors that figure into the ranking include things like protecting minority investors, paying taxes and enforcing contracts. These factors are a mixed bag, with higher and lower rankings shared among the developed and emerging markets.

This quick overview might be enough to whet the appetite. Much more information on this is just a simple click away, and a very easy one-page read. It’s certainly not enough to build an entire case on, but should be earmarked as one of a number of tools that can add significantly to the due diligence that Canadian companies of all description are doing prior to engaging with new and unfamiliar foreign markets.

The bottom line? Diversification is taking Canadian exporting by storm, and the number of success stories in non-traditional markets is building up quickly. As you consider joining the fray, or expanding on the markets you are already active in, know that there are simple tools that are affirming - and eye-opening!

© EDC

JULY 2017

Vol. 11 - No. 12










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