Whilst many see the BRICS dominating our global economic future, there is a growing band of dissenting voices; in the search for profits investors seem willing to ignore the threats posed by bribery and corruption.
Think of the Brics – Brazil, Russia, India, China, and, arguably, South Africa and investment success plus economic growth come straight to mind. All the more so because North America and Europe have had such a miserable time over the past decade or so.
But a new book - Breakout Nations, - from the pen of Morgan Stanley head of Emerging Markets Ruchir Sharma, suggests that their rise over the past decade could be a blip rather than a permanent trend. While there will be rewards from emerging markets, taking uncritical positions could be impoverishing.
For most, however, it’s taken as axiomatic that these nations – and some others – will rule the economic roost for the next few generations, with most commentators expecting China to overtake the United States as the world’s number one economy within a few years.
But besides growth, what else has characterised these economies some degree or other?
Bribery and corruption
They all share bribery, corruption, lax labour laws and often non-existent healthcare – let alone health and safety legislation.
Investors have a choice. They can hold their collective noses and shun emerging markets investment. Or they can turn a blind eye to the human rights and financial violations that would be prosecuted in the advanced economies. Or they can accept that corruption, low wages and Victorian labour conditions are an essential both to current success and to future growth. Where would nineteenth century Britain have been without those dark satanic mills? Or where would the United States of the same period have been without slavery, indentured labour and railroad barons who saw the workers as expendable as the bison they slaughtered or the trees they chopped down?
This is not a pleasant choice to have to make either for individuals buying into emerging markets via funds or for firms looking for joint venture and other arrangements to grab a slice of Brics emergence.
As international fraud and security consultants Kroll put it, bribery and corruption risks should be a paramount focus when expanding or investing into these and other emerging economies.