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By: Sarah Boumphrey

Data in Euromonitor’s recently released Markets of the Future reports reveal that the five markets of Bangladesh, Cambodia, Laos, Myanmar and Sri Lanka are home to a combined 253 million people, representing a total consumer market of US$213 billion. These economies represent some of the best potential growth markets for consumer goods companies in the region. Knowledge – of the market, consumers, business environment partners and suppliers – is key to success in these lesser-known and frontier economies. Optimism abounds, but challenges are also apparent.

Between 2014 and 2030 real GDP growth in these economies is expected to average 7.0% per annum – compared to 6.1% in emerging Asia as a whole. Total consumer expenditure will triple in Laos in real terms between 2014 and 2030. In Sri Lanka, per capita consumer expenditure will approach US$6,000 (in 2013 prices) in 2030 – way above the average for emerging Asia and higher than that of established emerging markets in the region such as Indonesia and India.  Consumer market growth in these five economies will be driven by a combination of factors including population growth, urbanisation, prudent fiscal policies, tourism, increasing global trade linkages and natural resources.

Real Growth of Consumer Expenditure: 2014-2030

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Source: Euromonitor International from national statistics/IMF/UN

Note: Data are forecast

 

Bangladesh: Asia-Pacific’s 8th largest consumer market by 2030

Bangladesh is by far the largest of these five economies. Real GDP will grow by 6.0% between 2014 and 2030. Economic growth and stability has been boosted by government policies aimed at containing government borrowing, reducing inflation, strengthening the banking sector and boosting foreign reserves. Natural gas may become a significant driver of growth in the future – although the exact scale of its reserves, and government policy towards gas exports, are uncertain at the current time. The ready-made garment and textile industry has been a key driver of growth – and an important earner of foreign currency. Although long-term competitiveness in the sector is a concern, due to higher costs as a result of an increased minimum wage and tougher labour and safety standards, these higher wages will boost consumer expenditure.

By 2030 Bangladesh will be the eighth largest consumer market in Asia, and the 36th globally – above Belgium, Norway and Austria.

Total GDP in 2030

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Source: Euromonitor International from national statistics/UN/IMF

Note: Data are in 2013 prices and are forecast

 

Cambodia: Urban areas drive growth

Cambodia has experienced rates of economic growth above 7% since 2011 and is forecast to continue to do so in the medium term. As is the case in Bangladesh, the garment industry is an important contributor to the economy with the US and European Union its chief export destinations. An expanding service sector has also been a key driver of growth – this sector is dominated by tourism. Cambodia receives more than double the receipts of Sri Lanka, the second highest ranking tourism market of the five economies.

Urban areas in particular have benefitted from economic growth and the urban population will expand by 58% between 2014 and 2030, driving consumer expenditure. Phnom Penh, Siem Reap and Sihanoukville have all emerged as key cities for retailers – unsurprising as average incomes in Phnom Penh were 58% higher than in Cambodia as a whole in 2012. In 2012, Cambodians devoted 51% of their budgets to food and non-alcoholic beverages, but discretionary spending on categories such as communications and consumer electronics is gaining pace.

Tourism Receipts: 2013

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Source: Euromonitor International from WTO/national statistics/IMF/UN

 

Laos: Small but fast-growing

Laos is the smallest of the five markets, with consumer expenditure of US$6.5 billion in 2013 – on a par with Malta. But it is also the fastest-growing, with expenditure expected to triple between 2014 and 2030. To some extent its strong growth has come at the expense of its fiscal stance with the deficit widening partly as a result of the large increase in civil service wages. Yet this increase in wages has also driven up consumer spending which is helping drive the service sector.

Laos has the highest proportion of urban population of these five markets and by 2030 will be the only one of the five which has more urban than rural inhabitants. Continuing urbanisation in the coming years will also support consumer expenditure.

Population by Urban/Rural Split: 2030

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Source: Euromonitor International from national statistics/UN

Note: Data are forecast

 

Myanmar: The final frontier

Myanmar’s economy is experiencing strong growth as a result of its democratisation process and gradual opening up to global markets, which are boosting business confidence and foreign investment. Growth is from a narrow base, leaving Myanmar vulnerable to economic downturns in its chief trade partners (China, Thailand and India) and also on commodity prices.

Myanmar is experiencing the strongest growth in both Internet users and the number of mobile telephone subscriptions of the five markets. This is from an extremely low base however, due to previous restrictions, and in 2030 just 8.3% of the population will be Internet users. Traditional markets still dominate retailing, accounting for 90% of retail sales, paving the way for modern retailers to gain first-mover advantage. Challenges remain immense however – Myanmar is one of the most difficult countries in which to do business in the world. In 2014 the World Bank placed it at 182nd position out of 189 economies.

Growth in Internet Users and Mobile Telephone Subscriptions: 2014-2030

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Source: Euromonitor International from International Telecommunications Union/national statistics

Note: Data are forecast

 

Sri Lanka: Post-war reconstruction boosts growth

The end of Sri Lanka’s civil war has created significant opportunities for growth. The economy is driven by exports, post-war reconstruction and the service sector; consumer expenditure is set to increase by 183% between 2014 and 2030 in real terms. Of these five markets, Sri Lanka is the easiest in which to do business – coming 85th out of 189 economies in the World Bank’s Doing Business 2014 report which places it above more established emerging markets in the region such as the Philippines and China. Economic output and consumer expenditure are overwhelmingly concentrated in the west of the country, centred around the capital, Colombo. In fact, the five largest cities of the country are all part of the Colombo Metropolitan Region. Demographic trends in Sri Lanka are less favourable than in the other four markets, with population growth expected to plateau by the late 2020s. Despite being the least urbanised amongst these economies, it is also urbanising at the slowest rate. Nevertheless, Sri Lanka has the highest per capita consumer expenditure of the five markets – at US$2,129 in 2013 and is set to reach US$5,965 in 2030 – above Thailand, Philippines and Indonesia.

Per Capita Consumer Expenditure: 2030

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Source: Euromonitor International from national statistics/IMF/UN

Note: Data are in 2013 prices and are forecast

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