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2050 Hindsight

2050 Hindsight

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2050 Hindsight

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  1. Trends, like horses, are easier to ride in the direction they are going” - John Naisbitt, Megatrends, 1982 2050 Hindsight Lawrence Speidell Chief Investment Officer, CEO Frontier Market Asset Management October, 2014

  2. 2050 Hindsight

  3. 2050 Hindsight

  4. Dhaka, Bangladesh

  5. It’s about people

  6. Erbil, Iraq

  7. Today’s World?

  8. Today’s World Source: databank.worldbank.org, world-development-indicators, WDI1205, WDI Ranks 130724 9

  9. A Short History of 36 Years 1993 DVD 1994 Sony Playstation 1994 GPS 1998 Viagra 2001 iPod 2001 9/11 Attacks 2001 TSA introduced 2001 Polaroid bankrupt 2002 PowerPoint 2003 Prius 2004 Facebook 2005 YouTube 2007 iPhone 2008 Personal DNA kit 2012 Kodak bankrupt 1976 VHS 1976 “Breakout” video game 1977 MRI 1978 VisiCalc spreadsheet 1979 Cellphone 1979 Walkman 1979 Rollerblades 1981 IBM PC 1981 MTV 1984 Apple Macintosh 1985 Microsoft Windows 1985 CDs 1987 Disposable contacts 1988 Prozac 1989 Iron Curtain Falls 1990 Internet 1991 Digital camera Source: FMAM 2014

  10. Economic Growth in Developing Economies is High 12

  11. 2050 Hindsight Growth Drivers • Human Capital • Demographics • Education, Innovation, Wages • Middle Class • Investment • Government • Economic Freedom & Rule of Law • Governability and Veto Points • Culture • Trust & Behavior

  12. Demographics Bangladesh: Population 150 million 81,508 primary schools 16.5 million students 361,000 teachers (43% female) student teacher ratio of 46. Photo: Frontier Market Asset Management, 2010

  13. Demographics .

  14. Demographics - Favor Developing Countries .

  15. Demographics – China versus India Today Source: United Nations Population Prospects, 2009

  16. Demographics – China versus India in 2050 Source: United Nations Population Prospects, 2009

  17. Demographics: Japan – Now & 2050

  18. Demographics: U.S. – Now & 2050

  19. Demographics: Nigeria – Now & 2050

  20. Demographic Destiny – Productivity, Dependency & Maturity

  21. Demographic Destiny – Productivity, Dependency & Maturity

  22. Productivity

  23. Productivity

  24. Productivity

  25. Productivity

  26. Productivity

  27. Opportunity in EducationStrathmore University, Nairobi

  28. Education – 1900 Consequences in 2000 (Oil) Source: New York Times, 2009

  29. Education – 1909 Consequences in 2000 Source: New York Times, 2009

  30. Opportunity in Education Scholastica in Dhaka

  31. Human Capital Source: BP Statistical Review of World Energy, Frontier Market Asset Management, 2009

  32. Capital Formation Source: WDI Database 2012

  33. Investment Source: McKinsey

  34. Electric Power Production

  35. Electricity Losses Source: WDI Database 2014

  36. Investment Source: Frontier Market Asset Management, WDI Database, 2014

  37. Government

  38. Government Veto Points Source: Veto Players, Tsebelis, 2001

  39. Government:Red TapeArgentina:26 days to start a businessBrazil:119 days to start a business 2007 2012

  40. Heritage Foundation – Economic Freedom Ranks BUSINESS FREEDOM • Starting a business—procedures (number), time (days), cost (% of income per capita), minimum capital (% of income per capita) • Obtaining a license—procedures (number), time (days), cost (% of income per capita) • Closing a business—time (years), cost (% of estate), recovery rate (cents on the dollar) TRADE FREEDOM • The trade-weighted average tariff rate • Non-tariff barriers: quantity restrictions, price restrictions, regulatory restrictions, investment restrictions, customs restrictions, and direct government intervention FISCAL FREEDOM • The top tax rate on individual income and on corporate income • Total tax revenue as a percentage of GDP GOVERNMENT SIZE • Government spending % of GDP MONETARY FREEDOM • The weighted average inflation rate for the most recent three years • Price controls INVESTMENT FREEDOM • Restrictions in sectors related to national security or real estate • Expropriation risk • Access to foreign exchange • Restrictions on transfers or capital transactions http://www.heritage.org/index/Explore.aspx

  41. Heritage Foundation – Economic Freedom Ranks FINANCIAL FREEDOM • Central Bank Independence • Freedom of credit allocation • Contract enforcement • Presence of private financial institutions • Foreign financial institutions not restricted PROPERTY RIGHTS • Private property guaranteed by the government • There is no corruption or expropriation • The court system enforces contracts efficiently and quickly. • The justice system punishes those who unlawfully confiscate private property CORRUPTION • Transparency International’s Corruption Perceptions Index (CPI) LABOR FREEDOM • Ratio of minimum wage to the average value added per worker • Hindrance to hiring additional workers • Rigidity of hours • Difficulty of firing redundant employees • Legally mandated notice period http://www.heritage.org/index/Explore.aspx

  42. Economic Freedom - The Heritage Foundation Emerging: Frontier: Key Select Markets: The Heritage Foundation 2014 FrontierCountries140210.xls

  43. Press Freedom – Freedom House 2014 Not Free Free Partly Free

  44. Journalists Killed 1993-2014 – The Committee to Protect Journalists

  45. Government Source: Frontier Market Asset Management, WDI Database, 2014

  46. Total Scores

  47. Growth Estimates in 2014 for Poorer Countries have Dropped 2012 Source: Frontier Market Asset Management, WDI Database, 2014

  48. 2050 (New Estimates in 2014) Source: Frontier Market Asset Management, WDI Database, 2014