By Claire West

Vietnam has held its place for the third year running at the top of a list of emerging markets, outside of the BRICs, where UK firms should be looking to do business, according to global investors surveyed by UK Trade & Investment (UKTI) and the Economist Intelligence Unit.
The ‘Great Expectations: Doing business in emerging markets’ report offers new insights from international investors about which markets they see as being the global growth engines of the future.

The report is based on a survey of more than 520 global executives from every sector. All respondents are already doing business in emerging markets or plan to do so in the next two years.

Launching the new research this morning, UK Business Secretary Vince Cable said:

“By 2030, 93 per cent of the world’s middle class will live in what is currently termed emerging markets. The global economy is being hugely altered and British business has to adapt.

“The phenomenon of emerging markets isn’t just isolated to one region. British companies should look further afield to diversify their export base. As UK Trade & Investment’s research shows, markets in Asia, Africa, the Middle East and Latin American can offer new business opportunities for UK firms.”

Key findings include:

Emerging markets are now viewed as sources of new consumer demand, ahead of simply being low-cost production hubs. 76 per cent of investors see emerging markets as a source of new business growth. This is compared with just 23 per cent looking for a low-cost manufacturing base.

Only one quarter of companies intend to rely on their existing products and services in emerging markets. Most companies intend to customise their offerings for new markets.

Vietnam has been selected as the number one investment destination, beyond the BRICs, for the third consecutive year.

The top three markets for investors in the next two years are China (20%), Vietnam (19%), India (18%).

71% of respondents agreed that emerging markets beyond the BRIC countries collectively offer an opportunity too big to ignore.

Companies are now prioritising a range of "second-tier” countries alongside their well-established operations in the BRIC countries.

For many, emerging markets are increasingly familiar places. Nearly half of the respondents have been operating in one or more emerging markets for at least a decade and two-thirds have been there for six years or more. Institutional knowledge of these countries is far higher than it was at the turn of the century.

Far more executives believe that the potential rewards far outstrip the risks within both the BRIC countries and other emerging markets. 52% expect growth prospects for their once-risky emerging markets business to be "significantly better" over the next two years.

Local companies in emerging markets are sought after for partnerships and alliances. Despite a greater ease with the risks of new places, the need to tap into local knowledge and contacts quickly remains strong.

Emerging markets are not just for big business. One in three SMEs polled plan to expand into one new emerging market over the next two years through joint ventures or partnerships with local companies.