Growing Business During a Slowdown

How to keep your Business growing during a Slowdown?
Make the Leap overseas. Here are 10 countries for expansion - and why they’re the places to be

While the U.S. Economy has slowed, demand for foreign business investment is still on the rise in Asia, Eastern Europe, and Latin America. Extending your reach outside U.S. Borders is a risk, but it can also provide new revenue and profit streams that help companies ride out the recession. It works for the big dogs: General Electric, IBM, and General Motors now make more than half of their revenue offshore.

So how can you make it work for your company? We’ve staked out 10 countries that are ripe for investment-including the best small mid-size, and large markets. Read on to find out which foreign markets are strongest for your product or industry-and where new policies and reforms are creating the best incentives to move your operations overseas.

The Best Small Markets

Thanks to job growth and newfound political stability, these smaller markets present a big opportunity for U.S. and other western companies to expand.

VIETNAM

GDP : $66.4 billion
Population : 85.2 million
GDP growth rate : 8.5 percent
Why it’s hot: Since the U.S. trade embargo was lifted 14 years ago, the country’s young, literate workforce has helped Vietnam capture the outsourcing business that China and India once commanded. Poverty was cut in half and per capita income more than tripled between 1993 and 2004. In the past year, $10 billion in investments has poured in from foreign firms, says Khoa Do, a Vietnam venture capital specialist and partner at DLA Piper US, a Los Angeles law firms.

At the time the embargo ended, people shopped at open-air markets. Today, groceries, clothing stores, and restaurants cater to a more sophisticated population. Key ports, communication systems, and roads are improving, and even outlying villagers are becoming more entrepreneurial by repairing cars and making furniture. "Vietnam is the next China," says Thomas Lairson, international business professor at Rollins College in Winter Park, Fla. "The economy has been growing 8 & 9 percent a year."

Sectors in demand:
Job growth has created a middle class with an appetite for computers, cameras, and cell phones. "There's and impressive high rate of technology growth and adoption. As of 2006, Internet penetration was 20 percent of the population, and cell phone penetration was 14 percent," Do Says. Yahoo, Sun Microsystems, and Intel are here; Intel has begun constructing a $1 billion semiconductor facility.

Cost of doing business:
Low. The average Vietnamese wage of about $528 a year is lower than basic wage levels in much of China. About 70 percent of the population is under age 35, and English is a common second language, providing a rich talent pool for American employers. In the last year, Vietnam has also made important probusiness regulatory changes -- including one that established a securities exchange and trading center, according to a new report by IFC and the World Bank.

Risk assessment:
Vietnam is still a Third World country in many ways, and a communist regime still governs, maintaining tight control over commerce, banking, and capital markets. A weak legal system creates opportunities for corruption and provides little protection of investors against directors' misuse of corporate assets. Vietnam remains among the countries that protect investors least, despite adopting new securities laws, according to the World Bank. Paying business taxes is cumbersome, taking a company an average of 130 days.

Kazakhstan

Gdp :$102.5 billion
Population :15.2 million (2006)
GDP growth rate : 8.7 percent

Why it's hot:
Located northwest of China, this former Soviet Republic is almost the size of Western Europe, and it's the fastest-growing economy in the region. In 2000, the world's largest oil discovery in the past decade, 9 billion barrels, was found in the Caspian Sea in Kazakhstani territory. American business took note and began an expansion in the country. In the capital city of Astana, a building boom is bringing fine restaurants, luxury apartment buildings, and high-end hotels to serve business travelers and tourists. American companies have invested about $11.8 billion since 1993, according to the U.S. State Department, helping to make the country the most dynamic of the former soviet republics.

Sectors in demand:
Oil, gas, business services, telecom, electrical, energy, real estate, and tourism sectors are flourishing. A new class of wealthy consumers is snapping up designer clothes, cell phones, and luxury cars. More than a hundred American companies and service entities have expanded here, including international law firms and the Big Four accounting firms. New financial sector reforms are drawing foreign banks. Including ABN-AMRO, Citibank, and SHBC, says Greg Vojack, who lives in Kazakhstan and is managing partner of the law firm Bracewell & Giuliani. There's also demand for environmental services firms to clean up nuclear testing sites left over from the Soviet days, and to protect the Caspian ecosystem.

Cost of doing business:
Medium. The housing market is getting more expensive every day, and bureaucracy still slows deals. According the U.S. State Department, Kazakhstani businesspeople are less direct than Americans and can take several meetings to accomplish what U.S. Businesspeople achieve in one. Kazakhstan recently modernized its currently control laws to allow limitless flows of capital into the country.

Risk assessment.
Corruption is widespread. Although the political and regulatory infrastructure is open to foreign investment. The government sparked concern among foreign oil companies when it signed legislation that gives the government the right to cancel oil production sharing agreements "to protect the national interests" But, according to Charles M. Becker. An economics professor at Duke University and a former senior labor advisor for the kazakhstani government. "The key economic ministries and regulatory agencies are all highly professional and competent and appear to be uncorrupted."

Peru

GDP : $101.5 billion
Population : 28.6 million
GDP growth rate : 7.5 percent

Why it's hot:
In the past five years, Peru has been growing faster than most other Latin American countries, thanks to a more stable political climate and a boon in mining and agricultural exports. Peruvian incomes are rising (hitting a gross national income of $2,980, according to the World Bank), and unemployment is dropping. Citibank, McDonald's, Motorola, Clorox, Proctor & Grill, Domino's Pizza, and Marriott Hotels all have moved into the country. Peru's fruit, vegetable, coffee, and chocolate industries are fledgling and in need of investment. Green technologies, too, may be in demand if the United States approves a free-trade agreement with Peru and asks the country to raise its environmental standards, as is expected, according to Roy Nelson, professor of international studies at Thunderbird School of Global Management in Glendale, Ariz. The country's environmental woes include deforestation, overgrazing, air pollution, and pollution of rivers and coastal water from mining waste.

Sectors in demand:
The country's growth has created an emerging middle class with a demand for TVs, refrigerators, stereos, and other consumer goods. Shopping malls are going up, replete with Starbucks and other American retailers in major cities. Thanks to Incan ruins, Peru's tourism industry is blossoming, so tourism services -- from high-end to economy-travel - are in high demand.

Cost of doing business:
Medium: Wages and rent can be lower in Peru than in other South American countries, but real estate prices are quickly rising. Because the country is less efficient and less developed, lost time remains a high cost of doing business. For instance, it can take up to 72 days to start a business, according to the World Bank's "Doing Business" report. Getting goods in and out of Peru takes longer than in many countries and costs more in fees. Businesses also cite tax administration and access to finance as top barriers to investing in Peru, according to the World Bank report.

Risk Assessment:
After years of fighting terrorist groups such as the Shining Path, Peru finally appears to be more stable, and the current government is business-friendly, lowering taxes and cracking down on corruption under a new corruption chief. Concerns remain, however, about how things will go under the country's new president. Alan Garcia, who in the late 1980s was also the nations's chief executive. Garcia's government has market-friendly economic policies, a plan to boost private investments, and a plan to create 1.5 million new jobs.

Rwanda

GDP : $2.6 billion
Population : 9.5 million
GDP growth rate : 6.3 percent

Why it's hot:
Rwanda has made significant strides since wars and genocide killed hundreds of thousands in 1994. Capital is flowing into the country. And American business are opening operations here - including an off-road vehicle-assembly plant, a high-tech outsourcing operation, and a local high-speed Internet and phone company. Qualcomm. The cell-equipment giant, plans to open its first African training center in Rwanda, and last spring Google executives scouted the country to open a computer center there. "Yes, part of the interest stems from pangs of conscience," Google CEO Eric Schmidt told Business 2.0 magazine. "But there's genuine opportunity for business, and the draw (is) an African government that is treating foreign investors friendly, "the country still needs foreign investments in farming and in mining for gold and sapphires.

Sectors in demand:
Tourism is an unexpioited opportunity in Rwanda. a country known for its scenic beauty, mild climates, and wildlife, most notably its gorilla population. Cell phone services also are growing.

Cost of doing business:
Low. The densely populated country of 8 million offers less competition and a reform minded government . Real estate prices are low. (A 3- to 4-bedroom home in Kigali can be bought for $13.000 to $64.000) But costs of manufacturing exports are high. Be prepared to take care of employee families' needs. as is customary in African nations.

Risk assessment:
The African continent's volatility and tribal rivalries make it difficult terrain for outsiders to navigate Rwanda is not only poor but land locked, and consequently the country is economically dependent on its neighbors. Kenya's recent chaos caused the price of oil and electricity to jump dramatically, says Josh Ruxin, founder of Access Project in Rwanda, which helps develop and implement public-health programs.

The Best Mid-Size Markets
Relatively stable and foreigner friendly, these growing mid-size markets offer expansion opportunities in regions less vulnerable to the current global economic slowdown.

Chile

GDP : $160.8 billion
Population : 16 million
(2006)
GDP growth rate : 5.2 percent

What it's hot:
Twenty years ago the country moved away from socialistic-style Latin American politics and embraced privatization of airlines, hotels, and other businesses. With many of its 16 million residents of English, Dutch, German, and European descent, "doing business in Chile seems more like doing business in Munich of Brussels," says Christopher Robertson. international business professor at Northeastern University in Boston. Between 2004 and 2006, Chile's economy grew about 6 percent per year. Since it signed a free-trade agreement with the United States in 2003, American exports to Chile have more than doubled.

Sectors in Demand:
Chileans' standard of living has benefited from rising commodities prices (the country is a leading producer of copper) and from exports to the United States like farmed fish and agricultural products, says Alvaro Cuervo-Cazurra, an international business professor at the University of South Carolina. As a result, Chilean salaries are higher than those in most of Latin America (the gross national income hit $6,810 in 2006), so consumers favor highpriced products. The market is primed for electronics like pods, Blackberries, and cell phones. Internet use is widespread with 4.2 million users. Because Chile boasts the best telecommunications system in Latin America, American companies also are opening technical support and call centers there. AT&T and Citibank have moved in, and U.S. winemakers including Robert Mondavi have invested in Chilean vineyards.

Cost of doing business:
Low. "It's probably one of the easiest places to do business in Latin America," says Roy Nelson, professor of international studies at Thunderbird School of Global Management in Glendale. Ariz. A lot of companies use Chile as a headquarters for their Latin America operations, or as a test market for the region, Nelson says. The country ranks high in a survey by the World Bank for the ease of doing business. Chilean companies end to have better access to credit. Executives spend less time dealing with regulations and customs, and companies suffer fewer losses from crime and power outages than those in the rest of the region.

Risk assessment:
Relations between the United States and Chile are better now than at any other time in history, and from a business climate standpoint, Chile is one of the least risky Latin American markets. Corruption is minimal (Chile ranked 20th out of 163 countries in Transparency International's Corruption Perceptions Index for 2006). Corporate tax rates are low (the standard rate is 17 percent). The most problematic factors are restrictive labor regulations and an inadequately educated workforce, according to the World Economic Forum's Global Competitiveness Report for 2007-08.

Singapore

GDP :$153.5 billion
Population :4.59 million
GDP growth rate : 7.5 percent

Why it's hot:
If you want to get into Asian markets, especially China, setting up shop in Singapore can give you powerful connections elsewhere in the region. The country may be tiny --its main island is just 26 miles -but impressive amounts of capital and myriad products pass through its ports. Most businesspeople speak English, and the country boasts a high literacy rate, a skilled work force, a mature banking system, efficient transportation systems, and advanced Internet and telecom infrastructure. Singapore already has attracted investments from more than 7,000 multinational corporations, including international banks, ship operators, and professional consulting firms, according to the U.S. State Department.

Sectors in demand:
Pick Singapore if you're a hightech company testing out new applications, or if you're moving products -especially food, electronics, and petro-chemicals- through Asia. The country also provides safe and sophisticated financial markets, and it has a good location to set up distribution centers or establish Asian headquarters. Singapore promotes itself as the financial and business center of Southeast Asia, but it's also a top global meeting place and home to a bustling petroleum-refining industry and to chemical and technology manufacturing operations.

Cost of doing business:
High. Higher salaries, rents, and housing costs make Singapore an expensive place to operate. Compare it to any major U.S. city rather than its Southeast Asian counterparts. In 2006, a three-bedroom apartment in Singapore fetched an average of $1,851.51, according to the International Civil service Commission, However, a foreignerfriendly business culture does help ease the financial pain. Last year, Singapore claimed the title of most business-friendly economy in its region, according the annual "Doing Business" report by the World Bank and the International Finance Corporation. The government has a strong and stable currency, no exchange control restrictions, low in flation, and low interest rates. Fund management, venture capital, and the debt securities markets benefit from various tax incentives, and the national trade organization, the IE Singapore, helps foreigners set up distribution operations and offers introductions to local suppliers.

Risk assessment:
Though a democracy, the country is highly regulated and totalitarian in its social policies. The government imposes harsh penalties and fines for such infractions as eating on a train, crossing the street on a red light, and not flushing a toilet. Don't expect to buy an apartment; for the most part, they are owned and doled out selectively by the government. Even driving is hyper costly: A permit to own a car can cost several thousand dollars, says the university of South Carolina's Cuervo-Cazurra. Tracking devices inside the vehicles impose charges on drivers based on where the car goes and at what time of day it is driven.

United Arab Emirates

GDP : $189.6 billion
Population :4.4 million
GDP growth rate : 8.5 percent

Why it's hot:
Driven by massive oil wealth, the UAE's growth has drawn capital and service workers of all stripes to its major city, Dubai. The fastest-growing city in the world, dubai is a metropolis in the desert where skyscrapers, shopping malls, and man-made five-star resorts rise and open in a matter of months. Multilingual and multi-cultural, the desert city has attracted Microsoft, Cisco, Sun Microsystems, Virgin Airways, and Donald Trump, who will build the Palm Trump International Hotel and Tower there. Harvard Medical School partnered with the Dubai Healthcare City to create a center for advanced medical care, research, and education. Its government is pro-business and levels low taxes, but Dubai's biggest attraction is its location. "It's equidistant between London and Beijing, nearby India, and at the center of the Gulf region," says Bruce Fenton, who specializes in the area as founder and president of Atlantic financial Inc.

Sectors in Demand:
The population of Dubai is expected to reach 1.9 million by 2010, according to AME Info, an online business news site for the Middle East. The growing population-and tourism-means more people will have money to spend. Dubai will soon to be home to a $4.2 billion airport expansion, the largest shopping mall in the world, the tallest building in the world, and Dubailand, a $69 billion theme park that will include a 55-million-square-foot polo and equestrian club. Such growth means increased demand for housing, cars, hotels,, air service, shops, cafes, bars, Internet services, financial services, and cell-phone services. UAE's government also is aggressively recruiting IT developers, IT support centers, and Internet companies to its Ajman Free Zone, a free-trade information technology park that attracted 632 new companies in 2005. Meanwhile, the saadiyat Free Zone has attracted attention from regional and global investment and banking institutions. It has lured agriculture, real estate, construction, banking, brokerage, insurance, hotels, and the tourism and entertainment businesses.

Cost of doing business:
Low. Labor is cheap. Many construction workers, for example, earn less then $200 a month. (Although more than a thousand workers staged a violent protest for higher wages in March.) The cost of living is low, and consumer goods such as cars are far cheaper relative to other growth markets, because some income is tax exempt Free zones for manufacturing and distribution allow foreign ownership of business, no corporate taxes for 15 years, no personal income taxes, full repatriation of capital and profits, and no import or export duties payable within the zone. More than 6,000 companies from more than 120 countries operate at the Jebel Ali complex in Dubai, a free trade zone for manufacturing and distribution in which all goods are duty exempt, according to the U.S. State Department. A computerized system in both Arabic and English can help foreigners get easy access to visa documents.

Risk assessment:
Hyper investment in real estate and other areas has created a "bubble mentality" that could pose risk if the bubble bursts. Outside of free trade zones, businesses must have 51 percent local citizen ownership. And how quickly business moves depends on where you're located. If you're in the Dubai Emirate, expect a Western-style environment. In Abu Dhabi, expect a more measured pace and more traditional, Middle eastern atmosphere.

The Best Large Markets:
The world's largest foreign markets are all growing - and making it easier for western companies to join their economies.

India

GDP : $1 trillion
Population : 1.12 billion
GDP growth rate : 9.4 percent

Why it's hot:
Driven by a rising middle class, India is on track to become the world's fifth-largest consumer economy by the year 2025. With a median age of 25, the country's population is young. These consumers speak English, and they have an appetite for consumer goods and the money to buy them.

Sectors in demand:
The target here is India's middle class. This is especially true for wireless companies - India's cell phone market grew 91 percent from 2000 to 2005 - and any company in fashion, retail, cable, computers, cars, and tourism. Samsung has opened an R&D facility here; Google started testing cell phone ads in the country; and Dell soon will sell PCs in Indian retail outlets. India also is witnessing growth in the aviation, energy, biotech, hospitality, and retail sectors, In Delhi alone, 22 million square feet of shopping malls will be built in the next two years, and thousands of hotel rooms are under construction.

Cost of doing business:
Low. Though wages are climbing fast, India boasts an educated, low-cost, and skilled workforce. (A senior software manager in India with over ten years of experience makes around $40,000 a year, compared to $120,000 in the United States, according to payscale. com.) The country also offers transparent, investment-friendly economic policies. But because Indians may live with extended families even into their 30s and defer to their elders when it comes to career choices, be prepared to woo not only young workers but also their parents, and to extend employee parks, loans, or health benefits to some or all of them. India also is creating special enterprise zones, including biotechnology zones in Tamil Nadu in southeast India, in which foreign investors and operations receive tax exemption status for the first five years.

Risk assessment:
About 70 percent of the population lives in far-flung villages, not in the country's major cities. That's a significant barrier-to-entry issue because rural India remains woefully behind many developing markets in basic infrastructure, including road works and electrification. Also expect trouble with the country's cumbersome bureaucracy and some local control over businesses. Recruitment costs can be higher than those in North America, because attrition is high and the labor market is tight. On the plus side: Changes are under way to make business ownership easier. The country now allows foreign firms to own retail stores; historically, it required an Indian joint venture in the retail sector.

Russia

GDP : $1.286 trillion
Population : 140.7 million
GDP growth rate : 8.1 percent

Why it's hot:
Russia's economy is one of the fastest growing in the world, thanks to its oil and natural gas production. The GDP growth rate of 8.1 percent is nearly double the United States' GDP. The rise of the New Russians - status-conscious consumers who want luxury name brands- have driven European brands like Louis Vuitton into high-end Moscow shopping malls. Meanwhile, the rest of the country slowly is becoming westernized, as chains like Starbucks, McDonald's, Subway, and Ritz-Carlton set up shop. Lured by an educated, literate, and low-cost workforce (average per-capita income was $7,000 in 2006), big U.S. companies including General Motors, Coca-Cola, Gillette, Proctor & Gamble, Microsoft, and Intel have operations there as well.

Sectors in demand:
Russians are demanding furniture, fast food, high-end clothing and jewelry, and home-improvement products. One of the fastest-growing sectors is retail, which attracts 24 percent of Russia's foreign investments, according to Pricewaterhouse Coopers' report "Doing Business in the Russian Federation 2006." "This is a country starved for consumer goods." Says Sheila Puffer, professor of international business at Northeastern University. The Russian government has offered tax breaks to companies that start major assembly lines in the country. Ford, general Motors, and most major auto manufacturers now operate there, as do Microsoft, Intel, and IBM Commercial banking also is big and growing faster than the country's overall economy, according to Pricewaterhouse Coopers.

Cost of doing business:
Medium. The ruble is strong compared to both the U.S. Dollar and the Euro, but the per capita GDP is three times that of China: Wages climbed 17.5 percent in the past year. New tax reforms created a 13 percent flat-rate personal income tax and decreased corporate taxes to 24 percent from 35 percent.

Risk assessment:
Russia's political elite has created an energy oligarchy, and other industries also are controlled by a very few politically connected business barons. Bribery and corruption in the country should not be under estimated by companies looking expand here. In addition, rapidly changing laws and unclear limits on foreign investments make business unpredicatable, and contract negotiations can be arduous and compoex. Retail and consumer businesses face a lack of space and insufficient infrastructure in major cities.

China

GDP : $3.25 trillion
Population : 1.3 billion
GDP growth rate : 11.4 percent

Why it's hot:
With a rising middle class about the size of the entire U.S. Population, China, the world's most populated country, has seen a tenfold in crease in its GDP since 1978, something no other modern economy can claim. As tourists flock to the country for the 2008 summer Olympic games, the Chinese undoubtedly will be introduced to even more Western ideas and customs.

Sectors in demand:
Much of China's growth obviously has been driven by its low-cost outsourced manufacturing capabilities; hourly wages cost $1.41 per hour, compared to $24.48 in the United State. But with 1.3 billion people and a growing middle class, there's potential to bring expertise and products to the food, clothing, real estate, cell phone, computer, and automotive sectors. The Chinese bought 4.7 million cars last year, with the Chinese auto market growing by 500 percent in the last ten years. Best Buy opened its first store in China after the country allowed foreigners to own retail operations and distribute both imported and locally made products. The Chinese government also is promising environmental changes - such as replacing old coal-fired power stations with cleaner versions - which represents a $300 billion business opportunity according to Chinese trade officials. In that same vein, Chinese are turning to battery-powered "e-bikes" as fuel prices and environmental concerns grow. If you're in the water-delivery technology business, then take a look at China, because 100 of its major cities have damaged and old pipes that will lead to water shortages in the near future.

Cost of doing business:
Medium. Though labor costs are climbing fast in China, they're still expected to be 10 times lower than in the U.S. by 2010, according to PricewaterhouseCoopers' report "Establishing a Business Presence in China." Complex rules governing bank accounts and foreign currency loans can make moving money in and out of the country difficult, accordion to the report. Success in China depends heavily upon partners and relationships with local business interests. Foreign companies must spend time - sometimes years- developing these personal relationships.