In our recent article “The Indo-Pacific Tilt: What Is It and Why Do You Care?” we explained how the world has undergone a tectonic geopolitical shift since mid-2021, and one that is already affecting you and your investments. We also touched on the investment opportunities that this new geopolitical era now offers to those who, with our help, know where to look. Here, we explore this new world of opportunity in more depth.
The Indo-Pacific Tilt
To briefly recap on the prior article; in mid-2021 the world fundamentally changed as a long-building geopolitical shift finally culminated - the re-orienting of the USA and friends towards countering the rise of China. This made solid what had been coalescing already - a hardening East vs West divergence, sprinkled with a few nations either making their minds up, or in some cases determined to sit on the fence and extract advantage from all sides. This change brought about uncertainty and instability as every side sought advantage, and groped about in the opaque fog, occasionally finding a red line. All of the conflict we have seen since mid-2021 is directly attributable to this geopolitical shift; Ukraine-Russia, Israel-Hamas-Iran et al, and so on.
East vs West … and the Fence Sitters
Broadly, the world now breaks down into three distinct camps. The West comprises the US and friends, essentially any nation that benefits from continued US hegemony and the enduring legacies of the Bretton Woods system. The East is a somewhat loser coalition. It includes China at its centre, who has a wary relationship with Russia brought about mainly by a shared desire to undermine US hegemony and Bretton Woods legacies. There are a variety of pariah and non-pariah states also loosely included in this coalition; China prefers to keep wildcard nations like Iran, Venezuela and North Korea at arms length, but has been making significant inroads with the likes of Indonesia and Solomon Islands (to Australia’s chagrin), El Salvador, and various others. More nations may yet lean toward China et al as she exerts influence through trade, debt, and investment. Lastly, there are the fence-sitters; this comprises two groups at present. First, there are those, like Saudi Arabia and the United Arab Emirates, that have firmly decided not to side with either East or West but to grow their power in their own right. Second, there are those that have not yet fully decided which side to go with and/ or are courting all sides - the Pakistans and Timor L’estes of this world.
Opportunity
As these camps become more established, both the East and West are avidly attempting to better insulate themselves from the consequences of conflict, if/when it breaks out over … say … Taiwan, for example. Developed Western nations are busy re-shoring those capabilities that they cannot afford to be compromised come what may. And they are also near-shoring or friend-shoring those capabilities that are important enough that they are keen to better insulate them from deteriorating relations fostered by the East-West divide, and from vulnerabilities associated with supply chain pinch points.
So, if you are a Western corporation or investor, the way forward is clear. First, reduce your exposure to the “East” so that if/when cold, or indeed hot, war breaks out you won’t find yourself in the unenviable position of those investors and corporations that had assets in Russia after she invaded Ukraine. Second, as we explained in the referenced article, reduce your exposure to supply chain risks brought about by this new geopolitical era. And third, capitalise on the West’s re-, near-, and friend-shoring focus, and invest in those Emerging and Frontier markets that are set to receive a tremendous boost as manufacturing and services are relocated into them.
Ok, but where?
Naturally, we cannot show you all of our cards, but here are a few examples to consider:
Vietnam. Already this country, who is at odds with China for various reasons, has benefited enormously from manufacturing that has been relocated into it from China. As a result, this country has been the darling of many Frontier Markets investors for several years. There’s still time and opportunity here. You have not yet missed the boat.
Mexico. If the USA or Canada want to avoid manufacturing sitting on the other side of the East-West divide, or vulnerability to supply chain pinch points that could be blocked or constrained by geopolitical tensions, then Mexico is a no-brainer. Already the vast majority of cars destined for North America are manufactured there, and an increasing range of industries, from pharmaceuticals to IT services, are building capacity there. Despite her security and political troubles, Mexico has a well-educated labour force and low cost of living – so cheap, high-quality labour, with a geopolitically uncomplicated route to major developed markets.
Morocco. Just a short hop across the Mediterranean from Spain and all of Europe’s hungry markets, Morocco is garnering considerable, and deserved attention. Again, like Mexico, a low cost of living combined with an increasingly educated workforce, but add to this a stable political scene that is increasingly liberalising, good security, and rail transport that puts much of Europe to shame.
But, and you know this all too well, it is not as easy as just deciding “let’s invest in [insert market]”. First, you need to have confidence to do so - and that only comes with a deep and consistent understanding built on local context. Second, you need laser focus onto the specific sectors that interest you - and that kind of information is not readily available, nor is most of what is out there sufficiently detailed, reliable and accurate. Thirdly, if you read it on the mainstream, you’re already too late and you’ll be paying over the odds. You need to be ahead of your competitors.
This is where we can help
We provide bespoke, unique, expert, ahead-of-the-rest intelligence reporting on our clients' target markets. Armed with Tact's intelligence, our clients realise opportunity, optimise value, and mitigate exposure to risk. We enable investment confidence, helping clients unlock vast and untapped potential in Frontier and Emerging markets.
Through our network of in-country analysts we provide local context to opaque challenges. This routinely allows us to identify coming events as they build, advising our clients well ahead of the competition. Our analysts are physically located in your markets, so we know what to look for as we understand the unique drivers of each country.
Investors can seldom maintain an enduring in-country presence; immersed in domestic politics, economics, or security issues, developing expert local insight. Regular visits provide a snapshot, not a deep, consistent understanding. To truly understand a market, you need a presence in it. Via Tact’s local presence our clients gain that deep, consistent context, enabling them to navigate volatility, instability, and complexity, filtering out sensationalism, and building confidence.
We build our reporting around our clients’ investment focuses, targeting our analysts directly onto their preferred sectors in-country. Our reporting is bespoke, not generalistic, amplifying client advantage by providing intelligence that is unique to each client's foci.
We provide bespoke, unique, expert, ahead-of-the-rest intelligence reporting on our clients' target markets. We are your solution to the risks of investing in Frontier and Emerging markets.