I saw Agtmael give a presentation in Washington, D.C., one evening. I’ve also since read his new book. Agtmael spent 30 years in these kinds of markets. “I have helped IranAir lease airplanes and hire crews in Ethiopia, was involved in financing Ghana’s cocoa exports,” he writes, “and grew wise to the ways — many of them laughably one-sided — that developed nations interacted with what were in many cases recent European colonies.”

Agtmael selected 25 companies to profile in his book. All of them exemplify best practices and are widely recognized as leaders in their industries. All of them call an emerging market home.

Agtmael writes about spending time in High Tech Computer Corp.’s research lab in Taiwan in 2005 and how “Suddenly, my BlackBerry looked like a Model T.” He writes about how the regional jets we fly are made in Brazil (by Embraer). How computers are now not just made in China, but designed there. How Indian and Slovenian labs produce proprietary new drugs. And on and on it goes.

The world has changed in a profound way, but the typical investor probably doesn’t appreciate this fully. One more nugget from Agtmael: In 1988, when he started his fund, there were only 20 emerging market companies with sales of more than $1 billion. Most of these were banks or commodity companies. (Overwhelmingly, they were located in Taiwan.) Today, there are over 270 companies with over $1 billion in sales, and 38 with more than $10 billion.

Many of them are high-tech companies or provide consumer products and services. This bolsters Agtmael’s point that many of today’s emerging market stars do not rely on cheap labor, abundant natural resources or protective government policies. Instead, they have developed competitive advantages in technology, design, logistics and other areas.

Agtmael also gives his tips for investing in emerging markets. The most important of these may simply be this: “Don’t be afraid to invest in them.”

Regards,
Chris Mayer

Source: China’s Emergence

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