Havana’s Restaurant Boom Augers in New Age of Entrepreneurs

Cuba, the Caribbean island nation known for its 1959 revolution and its tourism industry, is undergoing a shift in its economic strategy. The country has had heavy state control of its industries and business activities since the country adopted the official policy of state socialism and joined the Communist economic sphere headed by the Soviet Union.

When the Soviet Union fell apart in 1991, Cuba was pitched into an economic crisis as it lost access to preferential trade subsidies. This period is known as the ‘Special Period’ (http://en.wikipedia.org/wiki/Special_Period) and was marked by a severe reduction in access to fuel as supplies and subsidies from the Soviet Union disappeared. Some of the iconic images of the time include people abandoning their cars and turning to bicycles to get around, or using make-shift truck-buses packed with workers. Exports collapsed and slashed the size of the economy by a third.

Fast-forward to today, and tourism is booming. A record 2.7 million tourists went to Cuba in 2011, earning the country US $2.3 billion. And it is catering to this tourism market that probably offers the best near-term opportunities. With wages still just 50 per cent of what they were in 1989 many are taking up this new opportunity to become entrepreneurs.

To become an entrepreneur, Cubans need to apply for a pink identification card with their name and photo and the words “Autorizacion Para Ejercer el Trabajo por Cuenta Propria.” This gives authority “to work for your own account.” With the card, a person can start a business, hire staff and pay them what they like.

Cuba’s economy has been through many phases since the revolution, swinging between loosening up the ability of people to establish private businesses – and pulling back, restricting private enterprise. But since 2008, there has been a significant shift to encouraging greater private enterprise, entrepreneurship and the ownership of private property – once banned – to stimulate the economy.

“This is the most important thing to happen in Cuba since the revolution in 1959,” Juan Triana, senior fellow at the Centre for the Study of the Cuban Economy at Havana University, told The Sunday Times Magazine.

One visible sign of this change is the flourishing of what is called locally ‘paladar’ (http://en.wikipedia.org/wiki/Paladar), or privately run restaurants.

Paladares are usually located in a person’s home and staffed by family members. Their customers are a mix of tourists, expatriates living in Cuba, and Cubans with a high enough income to be able to afford restaurant meals.

The cost of a meal in these restaurants can run from US $40 to US $60 for two people.

Stocking the kitchen is not easy. Cuba experiences food shortages and there is still rationing for many. Basics like eggs can be hard to find. As for exotic, imported ingredients, many chefs rely on visitors to stock their larders.

Cuba will have to re-build its food sector to make this a lasting improvement.

The agriculture sector has declined and, where Cuba once provided a third of the world’s sugar harvest, the country now has to import half of its food supply. Measures are in the works to change this, with smallholder farmers now able to own 165 acres of land and sell their produce to private customers and hotels.

One restaurant owner, Héctor Higuera Martinez, told The New York Times:“You dream up a recipe that you’d like to make but then you can’t find the ingredients.

“One day you go out to get salt and there’s no salt. And I mean no salt,Anywhere.”

Martinez trained with a well-known Cuban chef and did a stint in Paris before returning to Havana. He has turned a 19th-century mansion into the restaurant Le Chansonnier (http://www.cubajunky. com/havana/restaurant_le_chansonnier.html) and decorated the walls with the work of local artists.

Martinez sees the paladares as a turning point in changing Cuba’s reputation for having boring food. “I believe we can play an important role in revolutionizing Cuban cuisine.”

Cuba is making the difficult shift from having an economy where 80 per cent of activity is in the state sector, to a mixed model balanced between private and public ownership.

Havana’s historic district offers tourists renovated colonial architecture mixed with shops, restaurants and bars. As a tourist strolls from the renovated district, they quickly come across the rest of Havana, which has beautiful buildings from the colonial period, 1950s American-influenced architecture with its fading retro signage, and more utilitarian Soviet-era architecture.

While charming and home to most of the city’s residents, much of it is rundown and crowded and in need of investment and renovation.

But things are changing fast. Oyaki Curbelo and Cedric Fernando use spices brought in by visitors for Bollywood, their restaurant in the Nuevo Vedado area (http://cubantripadvisor.com/destinations/havana-cityoutskirts/bollywood-paladar/). It has a small menu of Indian and Sri Lankan dishes, including shrimp curry with ginger and tamarind. The restaurant sources its curry leaves from a tree located in the Sri Lankan Embassy.

Another restaurant, Atelier (http://www.cubaabsolutely.com/articles/travel/article_travel.php?landa=70),located in a mansion in the Vedado neighbourhood, serves European Continental food and has a roof terrace letting diners enjoy the a view of the Havana skyline.

The restaurant Doña Eutimia (https://www.facebook.com/paladardona.eutimia) serves up Cuban favourites off the Cathedral Square. Specialties include a dish made of shredded beef with garlic, tomato, oregano and bay leaves.

At Vistamer (http://www.stay.com/havana/restaurant/4249/paladar-vistamar/),diners can enjoy garlic-laden lobster tails and lemon meringue pie. At the paladar Café Laurent (http://www.cubaabsolutely.com/articles/travel/article_travel.php?landa=71), the menu includes meatballs with sesame seeds and mustard in red-wine and tarragon sauce, according to The New York Times.

Habana Chef in the Vedado district (http://cubantripadvisor.com/destinations/havana-city-outskirts/habana-chefpaladar/) was started by Joel Begue and chef Ivan Rodriguez. Begue gained his experience in the state restaurant sector and took the opportunity to get a licence when the government offered them in 2011. He borrowed US $25,000 to start the restaurant and has been able to pay back half so far. His current success is prompting him to look into opening a second restaurant in the capital.

An enthusiastic Andrew Macdonald, who is looking for investment opportunities for a half a billion dollar fund held by the Escencia Anglo-Cuban firm, told The Sunday Times magazine, “Cuba is the top emerging tourism market in the Caribbean by a mile, and it’s in the top five emerging markets globally.”

By David South, Development Challenges, South-South Solutions

Published: May 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Global South’s Rising Megacities Challenge Idea of Urban Living

 

The world crossed the threshold from being a majority rural world to a majority urban one at the end of the first decade of the 21st century. The reason for this is the fast-growing urban areas of the global South. And this is having a profound affect on how the world’s people live.

Across the global South, there are many examples of unchecked growth leading to squalor and poor housing conditions, and in turn to poor health and high rates of crime and disorder. Yet, the urbanization happening today across the global South is unprecedented for both its speed and its scale.

And, unlike previous surges in urbanization, it is this quality that is far more challenging for governments and policymakers.

Many countries and regions are experiencing highly stressed environmental conditions, with poor access to water and rising air pollution damaging human health, for example. But on the other side, there is also unprecedented change in technology and communications taking place. Every year, more and more of the world’s population gain access to 21st century communications such as smart phones and the Internet or ‘apps’ (applications), allowing the exchange of solutions and ideas at a rapid pace.

Many are weighing up the benefits and downsides of such an urban, dense world. Denser cities make it easier and more efficient to deliver services, and proponents see a rapid rise in living standards in these megacities. Others see wide-scale poverty and vicious fights over resources in crime-ridden, unhealthy packed megacities. These pessimists point to current conditions in many megacities across the global South.

No matter what perspective, many agree there has to be a cultural change in how people live and behave to make the megacities work.

The contrasting approaches taken by two giants of the global South – India and China – provides lessons and ideas.

The first big push from rural to urban took place in Europe in the 19th century. In 1800, just three per cent of the world’s population lived in cities. All the cities now seen as cosmopolitan hubs of economic and creative energy were just shadows of themselves prior to the 19th-century industrial revolution.

Lessons were learned from hard experience and one of the most important lessons was this: if a city is to grow – and grow quickly – then it must plan for this growth and put the well-being of people at the centre of this plan. This is critical to ensure public health is improved and that the transition to more dense living conditions improves human well-being, rather than making it worse.

A megacity is a city with a population greater than 10 million people (http://en.wikipedia.org/wiki/Megacity). The number of such cities will double over the next 10 to 20 years and many of these cities are in south and east Asia. By 2025, seven of the world’s top 10 megacities will be in Asia. Whole new cities are rising up that most people across the world have never heard about – yet.

One of the most rapidly urbanizing countries in the world is China. At the beginning of 2012, Chinese authorities announced the country was now a majority urban place, with most citizens living in cities. This population of 690.79 million people outpaced the rural population of 656.56 million people.

China is exploring a variety of solutions to making high-density city living work. Some of these solutions include creating multiplexes containing modern shopping, leisure, recreational and housing in one location. One example of this is The New Century Global Centre (http://cd.qq.com/a/20101018/000099.htm) in Chengdu, the capital of Sichuan. It is being called the world’s largest standalone complex. Chengdu is now a city of 14 million people and projected to be heading to 20 million people.

It includes design by noted Iraqi architect Zaha Hadid (zaha-hadid.com).

There are 1.5 million square metres of floor plans, two 1,000-room five-star hotels, an ice-skating rink, a 20,000 capacity marine park with 400 meters of artificial coastline and 5,000 square metres of artificial beach, including hot springs.

In contrast, the more chaotic and unplanned approach taken in India – also a country experiencing rapid growth in its cities – has come under intense criticism. Dr Rumi Aijaz of the Delhi-based Observer Research Foundation (observerindia.com) told The Guardian that Indian infrastructure improvements will be difficult to achieve: “Our urban areas are in a raw form.

All the basics are at a very low level. And the Indian state has been trying for a very long time to address this but a lack of capacity and endemic corruption has meant not much success.”

In 2001, India had 290 million people living in cities. By 2008, this reached 340 million. It is predicted this will reach 590 million people – 40 per cent of the population – by 2030. McKinsey and Company (mckinsey.com) believe by 2030 India will have 68 cities of more than one million people, 13 will have four million people and six megacities will be greater than 10 million people.

India faces an urban infrastructure crisis of epic proportions, McKinsey believes. Many millions will not have access to clean drinking water, adequate sewage, and will have to cope with poor transport.

China, on the other hand, has invested seven times more in urban infrastructure than India. And one example of how this investment pays off is Chengdu.

The fast-growing city of Chengdu’s mayor is trying to manage growth directly through the city’s policies. This involves managing the push and pull incentives driving people to cities and lifting the standard of living in the surrounding countryside.

Chengdu’s mayor Ge Honglin told The Guardian: “The first thing I did was to improve the conditions – schools, shops, garbage collection, the sewage system. We had to cut the gap between rural and urban areas. If people could have a brighter future in the countryside, they’d stay there. So we’re not seeing people swarm into the city= Instead there are people in the city considering moving to the country.”

“Chengdu is the only super-large central city that has narrowed the urbanrural income gap alongside rapid economic growth in China,” Ge said.

Hundreds of schools have been built surrounding Chengdu and partnerships made between rural and urban schools to help raise standards.

Chengdu is also pioneering new ways to address urban squalor with new information technologies. Patrols use mobile phones and cameras to document broken infrastructure and health and safety problems, and to locate and assist the homeless.

“You can barely see a begger in Chengdu,” said Gu. “We have a special system for monitoring them, and it works. Beggars are taken to the assistance centre, where they are given food and shelter and money to take them back to their home. If I say there are no more than 10 beggars on the street you will think there’s some sort of tyranny, but there isn’t. We’re trying to solve their problems.”

By David South, Development Challenges, South-South Solutions

Published: May 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

Follow @SouthSouth1

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Frugal Innovation Trend Meets Global South’s Innovation Culture

There is a trend occurring across the global South that some are calling the next great wave of innovation. It has different names but many are dubbing it ‘frugal innovation’. Frugal innovation is basically innovation done with limited resources and investment. In short, innovation on the cheap but packing a big punch.

The phenomenon has several strands. One involves innovators and companies from the developed world setting up in the developing world and beta testing their inventions and innovations there. Another strand involves innovators in companies and governments in the global South increasingly targeting the so-called ‘BOP’ – bottom of the pyramid – market of the poor.

Another strand is focused on capitalizing on innovations for tackling the problems of the poor that are coming from the poor. Many of these innovations are improvised solutions. They may not be slick but they solve a problem.

And finally, there are companies and entrepreneurs in the global South taking their innovations to the markets of the wealthy, developed countries and finding a welcome reception from price-savvy consumers.

In the global South, frugal innovation is transforming lives – and it is finding its way into developed, wealthy countries too. It has been celebrated in the new book Jugaad Innovation: A Frugal and Flexible Approach to Innovation for the 21st Century (http://jugaadinnovation.com/) by Navi Radjou, Jaideep Prabhu and Simone Ahuja. The authors are innovation experts with a wide mix of backgrounds, from an academic to a Silicon Valley “thought leader and strategic consultant” to the founder of a marketing and strategy consultancy specialising in emerging markets innovation.

The authors propose “jugaad innovation” as a solution to the urgent need to innovate quickly and efficiently in a fast-changing world where little can be taken for granted. This breed of frugal innovation comes from India. Jugaad is a Hindi word (http://en.wikipedia.org/wiki/Jugaad) and basically means a work-around, improvised solution to a problem because it is cheaper. This is commonly used to describe makeshift vehicles people construct in India (http://wheels.blogs.nytimes.com/2011/03/25/jugaad-cheaper-than-a-nanobut-watch-for-splinters/).

As champions of the jugaad philosophy, the authors proclaim the old innovation paradigm is obsolete. The idea that throwing more capital and more resources at a problem will boost innovation, no longer works, they contend. Better results can come from being frugal and flexible. Being more creative allows for a fluid and improvised innovation culture to develop.

“In today’s interconnected world powered by social media, top-down R&D (research and development) systems struggle to open up and integrate the bottom-up input from employees and customers,” the authors say on their website.

“Jugaad on the other hand is flexible, frugal and democratic: it is often bottomup rather than top-down and involves a much larger number of people beyond those who are typically tasked with doing innovation in corporations. The strength of jugaad innovators lies in their ability to get more from less,experiment continually, and creatively engage people who are typically left out of the innovation process.”

And they have a message for the Western, developed nations. They must look to “places like India, China, and Africa for a new, bottom-up approach to frugal and flexible innovation,” if they want to experience continuing prosperity in the 21st century.

For global South inventors, entrepreneurs and manufacturers, this will prove a great opportunity. As debt-laden Western consumers deal with their lower spending power and incomes, they will be looking for products that cost less and yet tackle problems and improve their standard of living with minimal expenditure.

The Indian company Mahindra and Mahindra (http://www.mahindra.com/What-We-Do/automotive) sells its small tractors to American hobby farmers. The Chinese company Haier (http://www.haier.net/en/about_haier/haier_global/china/) has a range of frugal products that have become popular sellers. They include air conditioners, washing machines and wine coolers. Haier is so successful with these products it has been able to capture 60 per cent of the market in these categories in the United States.

Some of the hallmarks of frugal products are their efficient production, rapid development cycle, lower price point, and appeal to poorer customers.

The book argues that adopting a “jugaad” mindset will enable people and companies to innovate “faster, better and cheaper,” “generate breakthrough growth” and “outperform competition.”

“Jugaad innovation has three major benefits. First, it is frugal: it enables innovators to get more with less. Second, it is flexible: it enables innovators to keep experimenting and rapidly change course when needed. Third: it is democratic: it can therefore tap into the wisdom of otherwise marginalized customers and employees.”

“In contrast to the traditional structured approach to innovation, jugaad is inherently more customer-centric rather than technology or product centric.

Because jugaad innovators seek to solve a customer problem first and then develop a suitable solution, jugaad is more market-based than more structured approaches (that may be driven by the motivation to develop technology for technology’s sake) are.”

There are so many of these innovations and inventions happening, a culture has emerged to gather and document them and share them with others.

A good advocate of jugaad innovators in India is the Honey Bee Network (http://www.sristi.org/hbnew/). It has been building a database of grassroots innovation and knowledge (http://www.sristi.org/hbnew/augment_innovation.php).

But this dynamic innovators culture is not limited to India. Across Africa,information technology hubs and start-ups have been sprouting up. One of the more well-known is the iHub in Nairobi, Kenya (http://ihub.co.ke/pages/home.php) but there are centres of information technology innovation in Ghana, South Africa, Uganda and Nigeria.

One of the more outstanding and pioneering chroniclers of this frugal innovation culture in Africa has been the Afrigadget website (afrigadget.com).

It is packed with home-grown inventions. These include a young Kenyan boy using a rigged network of light bulbs to ward of lions from the cattle herd, a mobile phone security system for cars, and a home-made remote control toy car for children. Another great way to see this movement in action is at the Maker Faire Africa (http://makerfaireafrica.com/) which has been bringing together every year “handcrafters from Africa’s tiniest villages to her most expansive urban burgs”.

By David South, Development Challenges, South-South Solutions

Published: May 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

Follow @SouthSouth1

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Battery Business Brings Tanzanians Cheap Electricity

Access to electricity is critical for making substantial development gains. With steady supplies of electricity, it is possible to read and study at night, to run modern appliances, to better use the latest information technologies and to work using time- and labour-saving devices. A home with electricity literally switches the light on modern life and gives a family huge advantages compared to those without electricity.

But there are two potential obstacles to providing electricity for the poor: one is just getting access to a steady supply; the other is paying for it.

In Africa, much of the population suffers from an electricity famine. The situation is worse than on any other continent: the proportion of people in Africa still without electricity is higher – and the rate of urban electrification is lower – than anywhere else. Four out of five rural residents in Africa live without electricity. The rate of rural electrification is also lower than on any other continent and the proportion of Africans who depend on inefficient traditional energy sources is higher than elsewhere (Desertec-Africa).

EGG-energy (http://egg-energy.com) is a Tanzanian company using an innovative business model to bring affordable electricity to rural communities.

Its co-founder, Jamie Yang, said Tanzania has a huge potential market for offgrid energy services. About 85 per cent of the population lacks access to electricity, a figure that rises to 98 per cent of the rural population.

EGG-energy says it is “dedicated to helping low-income consumers in sub-Saharan Africa gain access to clean, affordable energy, using a unique strategy based around portable rechargeable batteries.” The company has eight full-time staff based in their Makumbusho office, 6 kilometres north of Dar es Salaam, the capital.

It calls its system the “portable grid,” and it works like this: customers have a power system installed in their home that runs on brick-sized, re-chargeable batteries. The batteries are re-charged at a central charging station using power from the Tanzanian power grid, and sent to local distribution centres where customers can pick them up. Customers rent the batteries for a subscription fee, and they last about five nights in a home. When the battery is empty, the customer returns it, swaps for a fresh battery and pays a small swapping fee.

It is a brilliant solution to the problem of getting power from the main Tanzanian power grid to people’s homes. According to EGG-energy, most Tanzanians live within 5 kilometres from a power grid line. Yet the majority of the population lack access to electricity.

“After researching the energy situation in Tanzania and other countries with similar electricity access problems, it became clear that one of the primary problems was a lack of last-mile distribution,” explained Yang. “The only way to get power from the source into homes and businesses were power lines, and for the vast majority of rural Tanzanians, this was very much out of reach.

We saw situations in which power lines would pass right over large populations that were still using kerosene for lighting. We also saw that distributed generation like solar was finding only very limited markets because there was no share or sell power from that source without an affordable way to distribute the electricity.”

While EGG-energy is based in Tanzania, it hopes hope to expand across the developing world.

In order to develop an effective distribution network, EGG-energy partners with local store owners and delivery businesses to help with distributing the batteries. The batteries are based on those used in the airline industry and are light enough to be held in one hand.

Yang believes marketing is critical to the success of the technology.

“Don’t underestimate the cost of sales, marketing, and distribution,” he said.

“Many companies focus on the technology and in lowering the cost of the technology, while not paying enough attention to the gaps in the distribution channels.

“We have a sales team that communicates what we do through a variety of methods, including door-to-door sales, road shows and village meetings. We also make contact with the local political leaders and offer referral awards to our existing customers. Potential customers come to our charging stations to purchase the system and to connect to EGG.”

When a customer signs up with EGG-energy, a technician is dispatched to their home to make sure the electricity system is sound and effective. The company also sells energy-efficient lights, radios and mobile phone chargers to complement the electricity system. It’s a wise business model, since having a steady and reliable supply of electricity is a great motivator for customers to purchase other electric-powered appliances.

“We have technicians that have received vocational training through the Tanzanian system and technicians that we train ourselves,” Yang said. “We have very standardized electricity installations that are easy to teach, and have more experienced technicians that we rely on for troubleshooting and support.”

EGG-energy also makes the claim it can reduce a household’s energy expenses by 50 per cent as they make the switch from traditional batteries for radios and kerosene lamps for light.

EGG-energy calls itself a “for-profit company with a social mission.” It sees the provision of affordable electricity and energy as a spur for small entrepreneurs to build their businesses, boost educational opportunities through longer study time, and help with connecting families with the outside world.

It uses regular feedback with customers to make sure their service is actually cheaper than other options – a good habit for any business looking to build a lasting customer relationship.

“One of the key deficiencies in the energy supply chain is customer support,” said Yang. “We have seen multiple solar installations given by NGOs to community organizations that are no longer functioning because the user doesn’t have someone reliable to call or hasn’t allotted a budget to maintain the system.

“Customer support is a key component of last mile distribution, and something that EGG-energy is focusing on as an energy services company with a local, physical presence.”

By David South, Development Challenges, South-South Solutions

Published: April 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

Follow @SouthSouth1

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Southern Innovator Issue 5: https://books.google.co.uk/books?id=6ILdAgAAQBAJ&dq=southern+innovator&source=gbs_navlinks_s

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Global South’s Rising Economies Gain Investor Spotlight

A new book is arguing that the world’s attention should switch away from BRICS countries – Brazil, Russia, India, China and South Africa – and take another look at nations and regions elsewhere across the global South. It argues many are lodestones of future growth and prosperity in the making and will see dramatic changes over the next decade.

The story of the BRIC and BRICS countries is an impressive one. In just eight years from 2000 to 2008, the BRIC countries’ combined share of total world economic output rose from 16 to 22 per cent. This led to a 30 per cent increase in global output during the period, showing how key these countries were to global prosperity in the 2000s. BRIC countries make up nearly half the world’s population and are regional leaders. Taken together, their gross domestic products (GDPs) are not far behind the United States.

Ruchir Sharma’s Breakout Nations: In Pursuit of the Next Economic Miracles (http://www.amazon.com/Breakout-Nations-Pursuit-Economic-Miracles/dp/0393080269) argues that the BRICS are now entering a more stable growth path and thus will not see the rapid-fire expansion and quick profits investors have become used to in the past decade.

“The BRICs,” Sharma told Forbes magazine, “were last decade’s team.”

The BRIC acronym (http://en.wikipedia.org/wiki/BRIC) was coined in 2001 by Goldman Sachs managing director Jim O’Neill, in a 2001 paper titled “Building Better Global Economic BRICs” (http://www.goldmansachs.com/ourthinking/brics/building-better.html). O’Neill predicted that this handful of countries would dominate the growth and economic development story for the years 2000 to 2010. This was because they all shared a similar stage of advanced economic development.

The BRIC states first began meeting together in 2006. South Africa was added in 2010 to form the BRICS acronym.

The buzz surrounding the BRICS countries over the past decade has been justified by their impressive growth rates, declining poverty levels,modernizing economies and societies and growing middle class populations.

China alone had seen its gross domestic product grow by US $5 trillion between 2001 and 2011.

Now, Sharma argues, it is someone else’s turn.

Sharma is head of emerging markets with Morgan Stanley Investment Management in New York, and Breakout Nations looks at where the next economic surprise stories will take place.

“A breakout nation is a nation that will grow above expectations, and will grow more than nations with similar per capita income,” Sharma told Forbes. “You can’t bunch all of the emerging markets together anymore. The last decade saw these countries behaving the same economically, but I think that is behind us now. Investors today will really have to pick their spots.”

He points out that Indonesia was the best performing emerging market in 2011 and has an economy that will surpass a trillion dollars in the coming years.

He also believes Sri Lanka and Nigeria are economies to watch.

Sharma says funds flowing into emerging market stocks grew by 478 per cent from 2005 to 2010, a massive jump compared to 2000 to 2005, when they grew by 92 per cent.

As he sees it, China has now reached middle-income status and its growth rates will not be as high as they have been for the past two decades. In his research, he found that countries like Japan, South Korea and Taiwan all slowed down once their per capita income went past US $5,000.

Investors who watch the emerging markets predict the hot growth areas for the next decade will be around energy, technology, and agricultural resources.

Sharma picks out Indonesia, Turkey, the Philippines, Poland and the Czech Republic for future investment interest, but urges caution with thinking all emerging economies are on course to boom.

“You’ve got to pick your spots, rather than just assume that because you put a tag of emerging on a particular nation, it’s going to boom,” Sharma told The Globe and Mail newspaper.

To make sense of the complexity of fast-emerging economies, a flurry of new investor acronyms has popped up. One of the country clusters is called the CIVETS: Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa (http://en.wikipedia.org/wiki/CIVETS).

The MINTS (Mexico, Indonesia, Nigeria and Turkey) are also set for great growth in the next decade, many investors believe.

Then there is the N-11 or Next 11. This is the MINTS plus Bangladesh, Egypt,Iran, Pakistan, the Philippines, South Korea and Vietnam.

And after that there is VISTA (Vietnam, Indonesia, South Africa, Turkey and Argentina). While clearly the creative juices are flowing at investment houses as they come up with ever-catchier acronyms, a more serious point is being made: many countries in the global South, for the first time in history, are no longer solely dependent on the Western economic system for demand.

These countries, investors note, now have an unprecedented range of options uncoupled from the political, financial and economic legacy of Western developed nations. They say that many nations in the global South are set for a runaway investment boom because they are making changes and modernizing their economies faster than many expect.

As the BRICS economies mature and slow down and take on different priorities based around improving the quality of life of their citizens, those seeking faster profits will look elsewhere. This trend is even happening within the BRICS, as Chinese and Brazilian companies offshore work to Vietnam and Colombia.

There are many new centres of economic activity and rising prosperity across the emerging markets that often fail to gain wider attention. Few would probably know that the Northeast Asian nation of Mongolia – mired in the 1990s in the worst peacetime economic collapse in half a century (http://www.scribd.com/doc/20864541/Mongolia-Update-1998-Book) – is now the world’s fastest-growing economy (http://www.worldbank.org/en/news/2012/02/28/what-behind-mongoliaeconomic-boom) and one of the top places for mobile phone usage and penetration (http://www.businessmongolia.com/mongolia/2012/03/19/mongolia-ringing-the-changes/).

Then there is Myanmar (formerly Burma), where many are hoping recent moves toward democracy and improvements in diplomatic relations will lead to an economic boon for the region. Investors are also targeting Kazakhstan in Central Asia.

Reflecting these changing realities, Standard Bank, Africa’s largest bank, has been documenting the rising role played by the Chinese currency in international trade. A recent report forecast US $100 billion (R768 billion) in Sino-African trade would be settled in the Chinese currency, the renminbi, by 2015. This would be double the trade between China and Africa in 2010. It also found 70,000 Chinese companies are using the renminbi in international trade transactions.

By David South, Development Challenges, South-South Solutions

Published: April 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Google Books: https://books.google.co.uk/books?id=6U6eBgAAQBAJ&dq=development+challenges+april+2012&source=gbs_navlinks_s

Southern Innovator Issue 1: https://books.google.co.uk/books?id=Q1O54YSE2BgC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 2: https://books.google.co.uk/books?id=Ty0N969dcssC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 3: https://books.google.co.uk/books?id=AQNt4YmhZagC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 4: https://books.google.co.uk/books?id=9T_n2tA7l4EC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 5: https://books.google.co.uk/books?id=6ILdAgAAQBAJ&dq=southern+innovator&source=gbs_navlinks_s

This work is licensed under a
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