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REASSESSING THE PARADIGMS FOR EMERGING MARKETS

April 23, 2014

The second Emerging Markets Summit (EMS) on April 12 marked yet another milestone in Booth’s efforts to establish itself as a center for promoting business opportunities in emerging markets. More than 500 attended to hear 80 speakers from around the globe in keynote speeches and panel discussions. Last year, two second-year students, Brian P. Sabina, MBA ’13, MPP ’13, and Andrew Leventhal, ’13, brought together five Full-Time student groups to produce the first Emerging Markets Summit. This year, the program was organized by second-year students Lillian Connett, AB ’07; Ying Liu; and Talena Qing Liu. Here, Leventhal and two students offer their takeaways.

Down With Buzzwords

Many themes continually resurfaced throughout the day of the summit. One of the most interesting—and I would argue most refreshing—was a rejection of older pan-emerging market paradigms.

This year’s summit included no shortage of the usual, oft-repeated, buzz-worthy terms, such as the BRICs [Brazil-China-India-Russia], MINTs [Mexico-Indonesia-Nigeria-Turkey], CIVETS [Colombia-Indonesia-Vietnam-Egypt-Turkey-South Africa], or just The Next Eleven. Yet unlike their normal usage, these acronyms were mostly used at the summit with some degree of condescension. 

Woven throughout the day was a broad and repeated recognition that, despite how nice it might sound, the countries that make up the MINTs really have very little to do with each other beyond the fact they are not members of the G8, errr G7 (so long Russia!).

The tone was set early at the summit, when opening speaker, H. Odein Ajumogobia, a prominent attorney and Nigeria’s former minister of foreign affairs articulated the need for tearing apart these incoherent assemblages of letter/nations. 

The point was more emphatically reiterated in the afternoon by Chicago attorney Jacob Sitati, on the Africa Business Symposium panel, Selling to Consumers. “Show me someone who says they know Africa,” Sitati proclaimed, “and I will show you a liar. The [countries are] not the same. It’s too big to know everything; you can’t do it.”

This theme of recognizing and addressing micro-level differences and avoiding flawed generalities was taken even further in one of the keynote addresses. Pradeep Ramamurthy, a private equity investor, rejected the notion that it’s even appropriate to talk generally in terms of countries (the exception being if you’re trading sovereign debt spreads). Cities, he suggested, are the appropriate unit of economic measure. 

To his point, Ramamurthy offered a comparison of murder rates in Pakistan and the United States (Pakistan is multitudes higher) contrasted with a comparison of murder rates in Detroit and Islamabad (Detroit is about five times higher). “You have to get the right frame of reference,” Ramamurthy explained. 

If looking at investments on a country level can lead to seriously distorted data and unfounded conclusions, looking regionally is even worse. And slapping a bunch of countries together that have virtually no relationship whatsoever is probably the worst idea of all.

While many new ideas and connections surfaced throughout the day, the most refreshing trend appeared to be an enlightened perspective on the nature of doing business in less developed parts of the world: a perspective in which investors and business leaders put away oversimplified notions of political and economic order and focus on how to identify and expand on great opportunities at the lowest possible level, where they can achieve the greatest economic returns and create the most benefit for all parties involved.—Andrew Leventhal, ’13

The Social Impact

In most developing and frontier countries, entrepreneurship has a social impact as it creates jobs, value, and opportunity for individuals who would otherwise be struggling to survive. This was one of several interesting messages that came out of the Social Entrepreneurship in Emerging Markets panel that was held after lunch on Saturday and included four knowledgeable speakers: Femi Akinde, ’08, founder and CEO of SlimTrader; Joe Dougherty, partner at Dalberg Global Development Advisors; Lucy Jodlowska, director of partnerships at Chicago-based venture philanthropy nonprofit Spark Ventures; and Genzo Yamamoto, director of knowledge management at microfinance company Opportunity International. 

Dougherty proposed that we should view developing market entrepreneurship on a spectrum, which ranges from entrepreneurs “by necessity,” such as the chapatti seller who is forced into the role to make ends meet and for lack of alternative work—and extends all the way to “political” entrepreneurs, those who abuse government connections solely to extract value out the economy and into their own pockets. 

Somewhere in the middle of the spectrum are the type of individuals who we would typically associate with entrepreneurship—people who are taking risks, trying new things, and creating value both for their own account and for the economy. 

Yamamoto highlighted that it is exactly this type of entrepreneur that developing countries need to empower in order to develop the “missing middle” (a term that academics use to describe the absence of medium-sized businesses in many developing economies due to costly business environments) and encourage more micro firms to grow into successful small- and medium-sized enterprises that will facilitate job creation and stimulate economic activity. 

The panelists agreed strong governance, accountability, and a business-friendly environment are necessary to enable entrepreneurs to succeed and foster a country’s economic development. There was less consensus, however, on how these conditions can be achieved in countries where barriers to business remain high. That said, if we can draw any conclusion from the day’s panels overall, it is that these barriers are slowly falling throughout emerging markets.—Jennifer Phillips

A Boost from Energy

Energy will be a key driver for a number of African nations, speakers at the summit agreed. 

Olanrewaju Adegbite Falade, COO of Oando Energy Resources, showed how the Lagos, Nigeria producer has grown from a small downstream operation to become the largest oil and gas company on the continent. Oando earlier this year agreed to buy the energy assets of ConocoPhillips in Nigeria for about $1.65 billion.

Baafour Asiamah-Adjei, president of Genser Energy, discussed his experiences growing Genser Energy, an Independent Power Producer (IPP), in his home country of Ghana. Genser Energy builds, owns, and operates power plants that deliver reliable electricity to large private companies in West Africa, such as gold mines.

Genser does not build one standard power plant but instead tailors the design of each plant to the needs of its clients. Asiamah-Adjei said that as a result of Genser’s success in Ghana, he hopes to reach out to public and private entities in other West African countries.—Frances Rogoz