March 30, 2007

So opening that local coffee shop or taking over the family business just won't cut it? You're craving adventure and eye-popping growth?

Sure, there is plenty of action in India and China, where big boys like Microsoft, Citigroup and Intel have made deep inroads. But for entrepreneurs with vision, patience, an appetite for risk and command of a second language (or two), there are plenty of opportunities in even more exotic locales.

Indeed, emerging economies--defined here as those not included in the 30 members of the Organization for Economic Cooperation and Development--now make up more than half of the world's economic horsepower. By 2050, they will account for nearly 78% of total output, estimates a 2007 report by business services firm Grant Thornton.

"In general, you make money in countries [that] are currently not doing that well . . . but over the next five or 10 years, they'll grow," says Simeon Djankov, chief economist at the World Bank and co-author of the World Bank's Doing Business series on business environments in emerging markets.

While the outsourcing trend has grabbed headlines in recent years, a small cadre of U.S. entrepreneurs is setting up shop abroad--mostly in the real estate, architecture, education, information technology and medical device fields, according to the U.S. & Foreign Commercial Service.

Of course, some countries are more hospitable to business than others. Ocean views don't mean much if you can't enforce a contract or fire incompetent employees. In India, for example, enforcing a simple commercial contract takes 56 procedures and nearly four years, notes the World Bank, while in Venezuela, workers who earn less than 1.5 times the minimum wage can't be fired. Meanwhile, in Brazil, it takes an average of 152 days to start a business, compared with just five days in the U.S.

Another other huge hassle: corruption. Take Africa. On top of the devastation wrought by the HIV/AIDS epidemic, corruption devours $148 billion per year--25% of Africa's gross domestic product--and increases the cost of goods by as much as 20%, estimates the African Union.

So where are the most promising locales? Eastern Europe's Georgia was last year's top reformer, according to the World Bank's 2007 Doing Business report, which ranks countries based on regulatory reforms that enhance business activity. Georgia made strides in six of 10 categories, including the time it takes to start a business, dealing with licenses, employing workers, getting credit, cross-border trade and enforcing contracts.

Policy makers hope regulatory reform and a crackdown on corruption will buy Georgia a ticket into the European Union and NATO. Last year, the minimum capital needed to start a new business in Georgia fell 90%, to 200 lari ($79), and the average number of days to resolve commercial disputes fell from 375 to 285.

Georgia isn't the only serious reformer in Eastern Europe. Neighbors Lithuania, Estonia and Latvia get high pro-business marks for their post-Soviet reforms. Latvia, in particular, is clocking double-digit growth rates in real gross domestic product as it continues to open its markets, privatize businesses and reform courts.

Another up-and-coming region is Latin America. Safer and more stable these days, Chile has emerged as one of South America's strongest and freest economies. Over the years, it has signed 57 free-trade agreements, including one with the U.S. (The downside: rampant poverty.)

As for the Far East, Singapore is the easiest country in the world in which to start and run a business, says the World Bank. The city-state boasts low corruption and one of the world's busiest ports. It is also one of the most expensive emerging markets, ranking 14th on this year's Economist Intelligence Unit's Worldwide Cost of Living Survey of 130 cities worldwide.

A country's overall political stability is still another big issue when considering where to set up shop. Thanks to government incentives, Malaysia has become a good place to start a manufacturing plant. However, beware the tensions among the hodgepodge of Malay, Chinese, Indian and other ethnic groups.

Post-Soviet Armenia has embraced trade, made legal reforms, privatized state-owned enterprises and slashed inflation to 2.9% since joining the World Trade Organization in 2003. Too bad an ongoing conflict with neighboring Azerbaijan over the primarily Armenian region of Nagorno-Karabakh has turned off a big trade partner, Turkey.

Fiji is the largest and most developed economy in the South Pacific, with relatively low inflation (3%) and low interest rates. But don't let the ocean views fool you: The country has suffered four military coups in 20 years, the most recent in 2006.

Clearly, adventure-seeking entrepreneurs shouldn't make a move on a whim. First, get a feel for your country of choice by meeting with other entrepreneurs already doing business there. It's also worth taking a few business trips overseas to find a local business partner. (In some countries, many in the Middle East, it's a legal necessity.)

Some resources to help drum up reliable partners and navigate local business rules include the Department of Commerce's U.S. Commercial Service, which has trade offices in over 80 countries, and one of the 104 U.S. Chambers of Commerce in 91 countries.

And if you still want to do business with customers back home, be sure your country of choice has bilateral or regional trade agreements with the U.S.

Bon voyage!
 

Source: http://inhome.rediff.com/money/2007/mar/30forbes1.htm