Budget boost for business with emerging markets

The ongoing European debt crisis and sluggish US outlook mean western economies are still offering lower returns, prompting business leaders in mature economies such as Ireland to seek international expansion opportunities in higher-growth emerging economies, according to the latest Grant Thornton International Business Report (IBR).

For developing Asian economies, forecasts are for annual GDP growth of 10 per cent between 2013 and 2017, while in the euro zone economies the forecast over the same period is for less than 3 per cent expansion.

Targeting emerging economies remains a key focus for Irish exporters, and was given a boost in Budget 2013 by the extension of the Foreign Earnings Deduction for employment-related travel to several new countries.

According to the Grant Thornton report, 57 per cent of those business leaders who are considering international expansion are looking at the five biggest emerging economies – China, India, Russia, Brazil and Mexico – compared with 38 per cent looking at western Europe and 33 per cent at North America.

The research shows a further 19 per cent of business leaders are looking at opportunities in Africa.

“Irish businesses are no exception in relation to this global trend, with Irish exporters constantly looking for growth opportunities, particularly in China and India,” said Grant Thornton partner Patrick Burke.

“Emerging economies traditionally offer low-cost inputs such as labour and land, and also vast consumer markets. The extension in the budget of the Foreign Earnings Deduction to new countries adds to the pool of emerging markets that the Government is incentivising Irish businesses to access,” said Burke.

In its third Emerging Markets Opportunity Index, China was top, followed by India and Russia. Brazil has moved above Mexico into fourth place, while the biggest movers include the “frontier economies” of Indonesia (up two places), Chile (up two), Nigeria (up nine) and Peru (up five).

Also significant is the way international expansion is coming “the other way”– from cash-rich businesses in emerging economies.

Businesses in Turkey (59 per cent), Russia (37 per cent), India (33 per cent) and China (27 per cent) are looking at opportunities in western Europe. And 33 per cent of Latin American businesses, rising to 58 per cent in Mexico, are looking at North America.

“ We should not be surprised if investors from China, India and other emerging economies start to look much more closely at possible opportunities to make acquisitions and invest in Ireland,” said Burke.