(The following press release from Mark Mobius, executive chairman, 
Templeton Emerging Markets Group, was received by e-mail. It was not confirmed 
by the sender.) 
Q&A on the BRIC and African Economies
Mark Mobius, executive chairman, Templeton Emerging Markets Group
15 May 2013 
Growth in BRIC economies has slowed down in 2012 and early 2013. They are now 
facing major problems. How do you perceive the macroeconomic situation in each 
country?  What are their major risks?  
It is a bit of an exaggeration to say that the BRIC countries are “facing major 
problems”. The BRIC countries’ GDP growth  rates have slowed, but apart from 
Brazil, the other three economies are still growing much, much faster than most 
developed countries. Investors are concerned that China’s growth rate has 
slowed to 7.7%, but when was the last time the US, Japan, Germany or  the UK 
saw that pace of GDP growth? One should also keep in mind that as these 
countries grow rapidly, the base gets bigger and it is therefore much harder to 
maintain the double-digit growth rates seen previously. China is now a US$6 
trillion economy, second  only to the US. The fact that an economy that size 
can grow at close to 8% is in itself an amazing feat.  
On a country by country basis:  
Brazil continues to show tremendous potential. It has a young and large 
consumer population and vast mineral and farming resources. With rising income 
levels, Brazil is  likely to become an important market for consumer goods. 
President Rousseff’s government is very focused on eradicating poverty and 
expanding the middle class. Some of the changes have created short-term 
problems for a few companies,  but we think they will make the necessary 
adjustments and eventually get it right. Inflation and low growth could be of 
concern in the short term. There is also a need to remove some of the 
bureaucracy and free up the economy. In our opinion, the complex tax  code 
clearly needs revision, and acceleration in the granting of concessions by the 
government to improve infrastructure is also vital to support stronger growth 
for the country. The quality of investment in education is another area that 
could benefit from  improvement. 
The Russian economy is very dependent on the price of oil, and if oil prices 
stay high, Russia’s economy is likely to  continue to hum. Like China, it is 
facing an aging population problem. However, the middle class should continue 
to swell as wealth from commodity exports filter down into the economy. 
Businesses supplying consumer goods and services to this burgeoning market  
appear to have the potential to benefit. Russia’s financial structures are 
underdeveloped and consumer debt levels are generally low. The Central Bank 
left its benchmark interest rate unchanged at 8.25% thus far this year in view 
of rising inflationary pressures.  Russia suffers from an investor-confidence 
issue, demonstrated by the persistent outflow of capital from this market. If 
the government can instill good governance in corporate giants like Gazprom and 
Rosneft, we think the situation could change quickly.  
In our view, bureaucracy is the biggest problem in India, the world’s 
second-most populous country, and Indians themselves  often joke that the 
country grows in spite of government policy, not because of it. One should note 
that there is a huge disjoint between what the elected government wants to 
achieve and what the bureaucrats are willing to do to help the government 
achieve  its goals. India’s Prime Minister and Finance Minister have been very 
active in encouraging more foreign investment into the country, but when 
investors try to bring capital into the country, they are often overwhelmed by 
red tape. There have been significant  improvements in corporate governance, 
including the launch of an electronic voting system that could help raise the 
voice of minority shareholders. However, we think there is more to be done in 
terms of minority shareholder protection, especially from related-party  
transactions. India has a vibrant stock market with thousands of listed 
companies and a strong culture of entrepreneurship and investment. 
Chinese equity markets have been volatile, as bouts of enthusiasm have often 
been followed by fears of government tightening  measures. The property market 
has presented the Chinese government with a great challenge. It needs to 
maintain prices at affordable levels but must also ensure that its price 
control mechanisms do not cause a crash in property price. China’s economic 
data  has generally remained positive. As we said more than a year ago when 
there were questions as to whether China was going to have a “soft or hard 
landing”, we did not think that China was going to “land” at all but that it 
would keep on growing at a robust  pace. Exports have remained resilient while 
domestic consumption is picking up rapidly as wages rise and disposable income 
increases. The Chinese government has over US$3 trillion in reserves, and thus 
its ability to stimulate the economy when needed cannot  be questioned.  
Outperformers in the past, the BRIC markets have been underperforming in recent 
years. The BRIC asset class has also been recording outflows. Do you expect 
these trends  to continue? 
No single market will outperform others on a consistent basis. If we look at 
historical returns, the best performing  market in one year is seldom the best 
performing market the following year. Hence, it is important to be properly 
diversified, investing across all markets. There have been some outflows from 
BRICs as the so-called “hot money” goes in search of short-term  gains, but 
this is usually a good sign that a market has hit a bottom or is close to the 
bottom. While we cannot predict what will happen to stock markets, we can 
confidently say that (1) emerging economies, driven by the BRIC countries, have 
been growing  much faster than developed countries like the US and are likely 
to continue to do so for many more years; and (2) most investors today are 
chronically underweight emerging-market equities. While emerging markets now 
represent about 35% of global market capitalization,  most investors have less 
than 8% invested in this area.  
One of the themes discussed at the BRICs Summit was infrastructure in Africa. 
What is the current involvement of the BRIC countries in Africa infrastructure 
and how  it will shape the markets there? 
The BRIC nations have pulled together combinations of economic development and 
investments to propel rapid economic growth  to a cohort of new economies, 
especially several in Africa, including Egypt and Nigeria, as well as others 
such as Indonesia, Vietnam and Turkey. Opportunities continue to beckon 
particularly as BRICs nations’ growth rate influences many frontier markets,  
considered a subset of emerging markets. 
Emerging economies in Africa could not only help offset any growth shortfall 
that might occur as the BRICs mature, but  by supplying resources and markets, 
they may also help to insulate more established emerging economies from the 
impact of sclerotic growth and slowing demand in developed countries. Newer 
markets typically have more room to grow, and the search for growth  potential 
amid acute global volatility has been encouraging many investors to expand 
their horizons. Africa is also well known for its wealth of natural resources, 
much of it barely developed, which includes oil and gas, a variety of metals 
and minerals, as  well as huge tracts of agricultural land. 
What is the role of China in Africa now? How did China and Africa’s economic 
ties evolve from trade and project contracting  to investment and finance, and 
how will they advance further?  
We believe that China plays a role in the development of African countries. For 
example in Ghana, during our visit to the Central Bank, we  met a very 
competent group of executives eager to promote Ghana as an investment 
destination. Their current focus was on containing inflation and creating a 
stable business environment. Credit in recent years has been tight, but the 
Chinese government has  continued to provide loans. Since 2007, all university 
and college institutions in Ghana provided Chinese language courses. This 
initiative reflected China’s growing role as a superpower and Ghana’s close 
ties with China. Chinese involvement in the country  goes far back and has been 
close since the 1960s, when President Kwame Nkrumah lobbied for China’s 
reinstatement in the United Nations.  
Another example is Kenya, which we think has an attractive position as a centre 
for India’s and China’s investments and interests in Africa.  We have seen many 
companies setting up their operations in Nairobi, Kenya’s capital city. The 
United Nations also has a large base there that it uses for its operations on 
the rest of the continent.  
Before arriving for the BRICs Summit in South Africa, Chinese President Xi 
Jinping visited the United Republic of Tanzania and Congo Republic.  What could 
the visit bring to the table in term of boosting the local economy? What is the 
role of South Africa in particular?  
These countries could benefit from Chinese investments in Africa alongside 
countries like Nigeria and Kenya. The Chinese have been very focused  on 
investing primarily in infrastructure in Africa – building roads, railway 
tracks, power plants, and so on. Such investments provide the backbone for 
economic activity and growth.  
South Africa is the largest economy in Africa, and it is the only country on 
the continent where we think the “frontier” market label doesn’t  apply. South 
Africa stands out among its African peers with a large, wide, deep and liquid 
equity market. Moreover, a number of South African companies provide exposure 
to markets further north that might be difficult to secure locally. South 
Africa’s corporate  governance is held in high esteem by many in the global 
investment community, and it is also a country that has proven able to reinvent 
itself politically and economically. We believe South Africa and its people 
appear well positioned for greater long-term  prosperity.  
Could you name some frontier countries that have significant growth potential 
and explain why?  
Individual countries such as Nigeria and Kenya are projected to continue 
growing faster than other economies globally. Growth on this scale  has created 
burgeoning middle-class populations and dynamic domestic economies that can 
provide opportunities for consumer companies as well as a degree of insulation 
from problems in developed markets. 
Nigeria is the second-biggest sub-Saharan African country with plentiful 
natural resources, but at present it is held back by a critical  lack of 
infrastructure, notably power. The country’s reformed banking system has 
provided an attractive means to invest in a fast-growing domestic economy, in 
our view, and we will look to invest in other areas as regulatory reform 
Kenya, with a new constitution following serious political disturbances in 
2007, is attractive to us both for its significant natural assets,  notably in 
agriculture, and as an entry point for much of the investment into the rest of 
Africa. A well-regulated telecommunications market provides opportunities to 
invest in mobile telephony, in our view, while investment opportunities in 
retail and banking  are also available. 
Myanmar is also another country where we see opportunities. Firstly, our hopes 
are high that Ms. Aung San Suu Kyi will nurture this historically troubled  
nation into a new era of democracy and personal freedom. We had already 
witnessed an improvement in Myanmar’s relations with the rest of the world, 
signaled by a visit from US Secretary of State Hillary Clinton, an exchange of 
ambassadors with the US, and  collaboration with the International Monetary 
Fund (IMF) on currency reforms. As we see it, for Myanmar to realize its full 
potential, it must work to convince Western countries to ease or eliminate 
sanctions, bring in foreign direct investment and develop  its infrastructure. 
We believe investment is essential to the reform process, and successful 
reforms generally raise economic productivity, which in turn could help bring 
more goods and services to the public.
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