InvestmentsSep 25 2014

Tehnology will create ‘profound’ growth in emerging markets

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Emerging markets specialist Mark Mobius has claimed technological advancements are likely to create “profound” growth rates in emerging markets previously thought “impossible”.

The manager of the £2.1bn Templeton Emerging Markets Investment Trust said technology is allowing businesses in developing economies to expand at a pace unseen in the developed world.

He said the internet had created the opportunity for businesses in emerging markets to quickly target new audiences without the capital-intensive process of creating a larger sales team and building shops.

Mr Mobius cited the M-Pesa money transfer system launched by one of Kenya’s mobile network operators, which allowed Kenyans without bank accounts to transfer money securely.

He said “unexpectedly, the service grew like wildfire”, and the transfers as at March 2012 represented 25 per cent of Kenyan GDP.

He added that India had not created supermarkets or store chains and was now “well on the way to avoiding the need for costly store construction in the first place”.

Mr Mobius said internet retailers were “making rapid strides in India’s retail markets”.

He said: “When we meet with the managements of such companies, we are struck by a regular anecdotal theme that sales models set up to meet an assumed dominance of tech-savvy urban customers have, in fact, experienced dramatic levels of demand from rural areas.”

Mr Mobius said such businesses can open up “completely new customer bases” efficiently and effectively.

“In these circumstances, the ease and cost of customer acquisitions are likely to be far lower than that seen decades ago when similar businesses were set up physically in developed markets,” he said.

“With technology, we believe the implications for growth rates are profound.”

Mr Mobius said investment and infrastructure remained “vital for many important activities in emerging markets”.

He added that levels of power provision and transport links were necessary to enable the economies to function effectively.

“We believe many industrial activities will continue to require heavy initial capital investment,” he said.

“However, across a wide range of consumer activities in particular, technology and the internet are linking potential customers to markets at a rate that would have seemed impossible, even a decade ago.

“This is to the potential benefit of both the populations of emerging markets and the businesses set up to serve them.”