In another article to mark Export Week, we look at five countries that exporters should consider doing business with.
The final few weeks of 2015 are upon us, and with the warmer weather and longer days comes a necessity to build a strategy for the upcoming 12 months. For most businesses this will be about acquiring new customers; some will be looking to expand, some to consolidate, some to dip their toe in a new market for the first time. Much like you would not launch a new product without the necessary research into costings, distribution and competitors, opening your business to international expansion needs an exceptional amount of planning.
Here are five countries that could do better than most in 2016 – places where a business looking to expand abroad may find some real joy in the new year.
China
The world’s second largest economy is going through the most ambitious change in economic history since the 1950s and the emergence of the ‘American Dream’. The Chinese economy is in the midst of change, retooling its economy away from low-cost, high-supply manufacturing to a more specialised sector with the slack taken up by a services industry powered by an emboldened and growing middle class. At least, that’s the plan.
China’s trade visit that took place recently was touted as the beginning of a ‘Golden Decade’ for relations between the two countries but it needs to improve trade figures first and foremost. According to the IMF, only 5% of the UK’s exports go to China – less than go to Ireland and only slightly more than end up in Belgium. For context, 65% of our exports end up in the EU or the US.
The Chinese economy is slowing to a more sustainable level of growth and opportunities abound for both etailers and more traditional corporate customers if they are able to serve this generation of Chinese consumers and high-tech manufacturers. Previous heavyweights such as power generation, automobile and steel production may fade with semiconductor, communications and medical sectors taking the baton.
The U.S.
It has long been said that the most powerful economic force in the world is the US consumer. A US economy that is finally starting to reach full employment means a demand dynamic that businesses exporting to the United States won’t have seen for almost 10 years.
The belief that the Federal Reserve is close to raising interest rates may also prove to strengthen the US dollar, making UK exports that much more attractive.
Singapore
Like most emerging market economies, Singapore is in the midst of a China and commodity driven slump. Pressure had been building on the Monetary Authority of Singapore to acknowledge these pressures and do something to weaken the SGD below its trading band that keeps it as stable as it can be against the dollar at its meeting on October 14th. Currency war speculation has seen a marked increase since the Yuan devaluation in August and regional currencies that have high trade coefficients and competitiveness with Singapore (Malaysia, Indonesia, South Korea, Australia) have all benefited from loosening of monetary policy locally.
As much as the political situation is in hand in Singapore, made all the more so by the resounding win of the People’s Action Party in September’s elections, the political scandal rocking the Malaysian PM at the moment has had a strongly negative effect on trade between the two countries.
The country, however, is part of the TPP trade deal as well and the signatories represent a large market for Singapore, accounting for 30 per cent of its total trade in goods in 2013 and 30 per cent of foreign direct investment into the country.
Although Singapore is already an open economy, the trade pact is still expected to boost trade and investment links between Singapore and key markets in the region and elsewhere in the world, including in fast-growing Latin America.
Australia
The Australian economy has had a pretty poor 2014 – as the Chinese economy has slowed, the Australian economy has been dragged back with it. ‘Terms of trade’ is a lofty economic phrase for a very simple concept – if digging stuff out of the ground forms a sizeable portion of your economy’s output then changes in the market value of that stuff will impact your country’s economy.
The Reserve Bank of Australia has cut interest rates twice this year and is expected to cut further as we move into 2016 – and it is still our belief that further weakening of the AUD is due as it remains the Reserve Bank of Australia’s favourite way of loosening financial conditions within the country. We are still yet to see whether the Turnbull leadership will allow for the kind of changes and reforms that the Australian government needs in the longer term.
Iran
If the TPP deal is the biggest trade deal of the year, then the deal struck between the US and Iran over the latter’s nuclear program must be the political deal of 2015. Under the terms of the agreement, once Iran delivers on its commitments the European Union and the US will end sanctions on Iran’s trade, financial and energy sectors. It is expected that this will happen sometime early next year.
Once those barrels and barrels of Iranian light and heavy hit the markets then the revenues that Iran will begin to reap are not going to be sat around idle. Iran needs agriculture, electricity, transport and construction expertise as its economy opens up.
If there is a new market opening that everyone will be clamouring for in 2015 it will be Iran, but for now, sanctions remain.
What next?
International trade is not for everyone. Expansion abroad brings risks as well as opportunities and having the expertise of a currency specialist like World First on your side is vital. We take pride in helping you find the best solution for you – there’s nothing standardised about either our approach or our assistance. Whatever your business and wherever your strategy takes you, we can help.
For help and assistance in dealing with the countries listed above – or indeed, anywhere else – contact us on (02) 8298 4966