What a year we’ve had! And what a year for emerging markets.
On Saturday, I had the honor of sharing my thoughts on the Panel titled “The Day After: View from Emerging Markets and Beyond” at The 2020 Annual Emerging Markets Institute Conference by Cornell University. The following are my key takeaways from the panel:
There is reason for hope. In the 1920s, the world had just experienced double whammy of WWI and the Spanish Flu of 1918. Once the US was relieved of those calamities, there was widespread adoption of new technologies (refrigerators, washing machines, radio, phonograph, automotive, etc) that propelled the US economy to prosperity. At the cusp of large scale 5G adoption and application of artificial intelligence, we can expect a similar “golden age” once the dampening effects of the pandemic on the economy fades. (Timothy Heyman, President of Franklin Templeton Mexico)
Africa, especially the two local dominant economies - Nigeria and South Africa - has so much potential, but a clean and fair political environment is the prerequisite for strong economic growth for the continent. (Oby Ezekwesili, Federal Minister Education and Presidential Candidate of Nigeria)
Traditional companies would do well by continuing their digital transformation and using that as a competitive advantage in the COVID era. Partnerships are key to this digital transformation process. We are also seeing innovation coming out of Asia that could be used in the West as well (e.g., contact tracing apps). (Anindo Dutta, Partner at EY)
As a part of Asia, Europe, and Africa at the same time, Egypt has potential to leverage its unique confluence of people and access to these markets. (Hashem El-Dandarawy, Founder of Team 4)
Africa and Latin America have strong potential for economic growth that we shouldn’t overlook (Yuqiang Xiao, US Management Committee of ICBC)
Despite the great divides (digital, income inequality, Sino-US), emerging markets have strong growth fundamentals given their population size, consumer class, and level of digitization. We can investigate and find out where the opportunities are on the ground, find ways to innovate for the local markets, invest in tech startups in the region, and make an impact. (Johnson Cheng, Founder of Chi Fan Group)
It was an exceptional panel since we all came from different parts of the world. It felt like an IMF meeting. I’m so proud of the team at my alma mater in pulling this conference off. Cornell EMI has established itself as the intellectual powerhouse for emerging markets. I highly recommend this conference to anyone who’s interested to work or invest in emerging markets.
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For those who missed the panel, I’ve included below the speech I gave at the panel.
My Speech
Thank you, Tim. This is Johnson, I’m a double Cornellian, CALS ’09 and MBA ’14. I’m the founder of Chi Fan Group, a venture investment firm, and Voyager Capital, a private equity firm that primarily invests in AI and enterprise SaaS startups.
First, I want to thank Professor Lourdes Casanova and the Cornell Emerging Markets Institute for including me on this panel.
Today I’ll share about three things:
1) The challenges in Emerging Markets during COVID
2) Reasons for Hope
3) What you can do
1) Challenges
To quote Professor Lourdes and my friend Bernard Yee, an IT executive and my mentor, this is the best of times and this is the worst of times for emerging markets. Emerging markets have taken a huge hit to their economies and public health due to COVID-19. Some are struggling to contain the rise in confirmed cases while trying to keep the economy afloat.
Undoubtedly, COVID-19 has exacerbated the three “Divides”, chasms that left unfixed could wreak havoc to the very fabric of international and societal order
1) The Divide between the Rich and the Poor. Even if we ignore the fact that billionaires see fortunes rise by 27% during the pandemic (as reported by the BBC), we’ve seen students from poor families falling behind in schoolwork just because they don’t have wifi at home or appropriate internet setup for Zoom. It’s so easy for us to use Zoom and we take it for granted yet we forget how fortunate we are compared to those without regular, high speed internet access. Front-line staff in retail, hospitality, and restaurant businesses can’t really work remotely and many emerging markets rely heavily on tourism, which is decimated during COVID.
2) The Divide between Trump-led Western liberal democracies and China. The political rhetoric and actual animosity and suspicion between the two “spheres” if you will stand in the way of forming a global coordinated response to the pandemic.
3) The Divide between traditional and the digital economy. Traditional businesses that relied on natural resources and manufacturing plants suffered tremendously during COVID while companies that are digital native, such as Zoom and Slack, have soared in revenue and stock performance. Digitization will be very disruptive to the traditional economy
Nonetheless, there is reason for hope. And here’s why:
2) Reason for Hope
Emerging economies have accounted for almost two-thirds of the world’s GDP growth and more than half of new consumption over the past 15 years.
Key Drivers of Emerging-Market Growth:
1. Population Growth. The combined population of emerging markets is projected to swell by about 1 billion over the coming decade, and in many countries these populations remain relatively young. Roughly half of India’s nearly 1.4 billion people are younger than age 25, for example.
2. The Rise of the Consumer Class. Annual household private spending in emerging markets is rising nearly three times faster than in advanced markets as hundreds of millions of households enter the middle and affluent classes.
3. Rapid Urbanization. More than 500 million people have moved from the countryside to urban areas in emerging markets since 2007, and this trend is continuing. This shift is fueling surging demand for services and housing, and trillions of dollars in infrastructure investment.
4. Digital Leapfrogging. More than 2.6 billion people in emerging markets use the internet, and consumers in many emerging markets are among the world’s most digitally savvy. Smartphone penetration is soaring, and many consumers are leaping directly from cash to digital payment.
5. China’s Growth. This year, the Chinese economy is steadily picking up, as evidenced by the positive overall growth in the first three quarters, including a 0.7% growth in foreign trade and a 5.2% rise in paid-in foreign investment. This is a major contribution to economic recovery amongst emerging markets and in the world. President Xi mentioned recently that China will stay committed to openness, cooperation and unity for win-win results. President Xi’s aim is to turn the China market into a market for the world, a market shared by all, and a market accessible to all. He raises the prospect of doubling China's GDP by 2035. By collaborating with China, emerging markets can have quick access to 5G infrastructure, the trillion-dollar China market, and much needed investment capital.
3) What you can do:
So here’s what you can do (4 “I’s”):
§ Investigate. In general, traditional newspapers are too slow, biased, and overly general. Ignore the noise. Gather intelligence yourself. Talk to people on the ground and in the industry and see for yourself first-hand what’s happening. Where are the customer pain points and inefficiencies?
§ Innovate. It’s always prime time for innovation, especially when the going gets tough. It’s a lot easier for smaller companies to experiment with new products, adopt new cloud and collaborative technologies, and innovate. Make sure you have a strategy to collect, analyze, and act on data. Emerging markets are full of energetic, aspirational, and industrious entrepreneurs. The Pitch Competition we just saw is a testament to the innovative and entrepreneurial talent in emerging markets. Governments and companies would benefit from leveraging and empowering this valuable asset.
§ Invest. Invest in tech companies. We invested in FiscalNote, the largest legaltech startup in the States that aggregates global bills and legislations on one platform and provides analytics using AI. Essentially, it’s the “Bloomberg for Legislations”. The company is expanding rapidly in South Korea, Japan, Indonesia, India, and greater China. We’ve also invested in Green Monday, a plant-based food tech giant in Asia, pushing the adoption of alternative protein. VCs are also looking for local startups that would likely to become unicorns, following the example of their equivalents in China. An example of this would be Grab. We see AI, EdTech, Foodtech, and Smart Healthcare to be interesting sectors to look at.
§ Impact. Use this opportunity to make an impact on the community around you. I’ve learned that a family business in Colombia offered underprivileged kids lunches for 1 euro and kept alive people, restaurants, and hotels. This is the time to make a tangible impact on people’s lives and they need you.
4) Conclusion
In conclusion, COVID has been tough on emerging markets but we remain bullish on the potential of emerging markets in a post-COVID world. We can all investigate, innovate, invest, and impact.
Last but not least, I always cherish my Cornell connection and I think Cornellians would do well in emerging markets by connecting and collaborating with each other. Thank you.