What is a Frontier Market?
We at InvestAsian often say that we focus on frontier markets and believe them to be the best countries in the world for investment. But some might be wondering: what are frontier markets?
For investors and economists, a country can be broken down into one of three categories based on their stage of development.
Developed markets, such as the United Kingdom and Singapore, can be among the slowest growing. Population growth is usually tepid – or even negative. Markets are strongly regulated and there are already large international firms, such as Nike or Burger King, in any sector you could possibly think of.
Emerging markets, like Thailand and Malaysia, are undergoing change at a faster pace. Manufacturing is often a big part of these economies. Foreign investment is peaking and local businesses are just starting to expand internationally to find their own opportunities abroad.
Beyond these are frontier markets. Places like Myanmar and Cambodia.
These are the countries where rapid growth and high potential for returns are just beginning – perfect for long term investors. The types of businesses which you may take for granted in your home country, such as convenience store chains and drive-thru restaurants, might not even exist yet. This makes frontier markets an entrepreneur’s paradise.
Cambodia doesn’t yet have any large convenience store chains. But they have a Kiwi Mart.
Why Should I Invest in Frontier Markets?
As a result, frontier markets are less correlated with the global economy. Cambodia, for example, hasn’t had a recession in over 20 years. It skipped the Asian Financial Crisis of the 1990s, missed the tech-bubble of the early 2000s, and outgrew the more recent Global Financial Crisis of 2008.
Most of the world is dependent on each other. McDonalds, 7-Eleven and Walmart can be found almost anywhere on the planet. Because of this, all the developed and emerging markets get sick – sometimes even sicker – when the United States, EU, China, or any other large economy does.
Frontier markets can be exceptions to this rule. There’s no such thing as a “recession proof” economy, but a good frontier market is as close as it gets to one.
In short, these places have a very rare combination of growth and safety. Not only are they likely growing three times faster than your country is, but they probably won’t be included in the next global recession. There’s only one downside…
It’s not easy to invest in frontier markets.
There’s barriers to entry. These can be language barriers, cultural barriers, or ones set up by the government. It’s often not easy to do things like set up a brokerage account in Vietnam, find an honest realtor in Cambodia, or even buy groceries in some frontier markets.
Plus, a lot of people simply don’t want to live in Myanmar and spend valuable time figuring things out on their own.
This is the reason why InvestAsian exists. We see the immense potential in Asia’s emerging economies – and we know how to invest in them. We speak the languages and are able to make high returns in the most effective way possible.