What do countries like Argentina, Bangladesh, Egypt, Iran, Kenya, Morocco, Nigeria, Pakistan, Romania and Vietnam have in common? An answer to this question can be found in the “The Next Frontier” report published by the Credit Suisse Research Institute (CSRI): Its authors classify the ten countries mentioned, as well as twenty others, as “frontier markets”.
These are countries with low to average per capita income, which are characterized among other things by strong economic momentum and high population growth, but which, in contrast to classic emerging markets, have an underdeveloped capital market.
These framework conditions make frontier markets predominately attractive to investors in search of higher returns. However, tapping into frontier markets could also be worthwhile for export-focused Swiss companies. The CSRI study shows that the export share of GDP is higher overall for frontier markets than for classic emerging markets.
In other words, frontier markets are already more open to international trade than classic emerging markets.
Attractive yet challenging
With a combined output of $3.7 trillion US dollars, should Swiss exporters be looking more closely at frontier markets as potential new sales markets?
Angela Di Rosa is Southeast Asia Consultant for Switzerland Global Enterprise (S-GE). She sees the frontier markets in this region as having varying degrees of potential: “Many Southeast Asian countries, such as Vietnam, display impressively high economic growth. Swiss exporters from various industries can profit from this boom. However, one should be aware that in most Southeast Asian countries there are obstacles such as market entry barriers, bureaucracy, language and even cultural factors to overcome. This is time-consuming and uses a lot of resources.”
Suhail el Obeid, Senior Consultant for African and Middle Eastern countries at S-GE, has reached a similar conclusion: “In recent years, we’ve seen considerable economic and trade momentum in frontier markets such as Nigeria, Kenya and Iran from which Swiss exporters can benefit even more. However, it must be said that the business potential is less pronounced in some countries classified as frontier markets than in others. It is important, therefore, to thoroughly sound out any potential before entering the market.
This is a perception shared by Alberto Silini, Head of Consultation at S-GE: “Our experience shows that frontier markets are not the easiest markets in which to expand a business, even if the economic conditions are favorable. The ultimate success of any export project always depends on several factors. In frontier markets, for example, it is essential to get a very clear picture of the framework conditions, to engage with the right local partners and get familiar with the local business culture at an early stage.”
Conclusion: Early clarifications are essential
The assessments of S-GE’s export experts show that frontier markets can offer interesting new sales perspectives and should by no means be ignored by Swiss exporters. However, interested Swiss companies are well advised to seriously prepare before attempting market entry and to make the necessary clarifications at an early stage.
Swiss exporters can always count on the expert support of S-GE. Our export consultancy helps SMEs to identify and unlock new business opportunities, provides local legal and cultural information and helps to make contact with trusted local business and distribution partners.
Find the complete study "The Next Frontier" of the Credit Suisse Research Institute in the PDF document below.