Tuesday, 27 March 2012

Emerging Markets Key to Future Scottish Growth

Scotland has not had a huge problem with attracting foreign inward investment, even in the downturn. Indeed, it couldn't be further to the contrary - according to Ernst and Young, in 2011 Scotland was the most attractive place to invest in Europe.

However, a healthy economy relies just as heavily on its exports as investment. At risk of stating the well-known and obvious, the key global sectors of growth right now lie primarily to the East, and for America, a wee bit to the South. I speak of the BRICs - Brazil, Russia, India and China.

The fastest growing base of consumers ever seen is emerging in these countries, therefore it is neither justifiable nor sustainable that two-thirds of Scottish exports go to a single market - the rest of the United Kingdom. These figures are of course rarely counted as Scottish exports - rather, they are considered part of intra-UK trade. In the event of independence, I logically assume our International and r/UK exports figures would be added up, showing the true value of Scottish exports to be just under a healthy £70 billion, which compares very favourably with other similar-sized, prosperous nations.

This is primarily a point for another upcoming post, intended to be part of a series laying out the Economic Case for Scottish Independence. I'll save the relentless positivity for that piece, and highlight the fact that no matter who it is, it is not a particularly viable position to have two-thirds of an economy rely on a single market.

There are good reasons why it is the case, and why the process of diversifying our export markets remains a rather slow and gradual one. For one thing, it was not until 1991 that Scottish Enterprise came into being, and it wasn't until 2007 that their remit for maintaining and safeguarding employment among Scots was transferred elsewhere, enabling them to fully focus on economic growth. For another, it wasn't until 1999 that Scotland had her own Parliament, creating the first opportunity on a governmental level to pursue a Scotland-specific international growth strategy, following which, two years on, the Scottish Executive duly established the SDI (Scottish Development International), whose achievements are marked, and whose assiduous work has contributed substantially to our top showing in Europe's inward investment league.

But on exports, we're still not where we could or should be. A large part of this is of course due to the Great Recession. But the Recession isn't proving quite so great for the BRIC nations. Their exponential growth largely remains unchanged, and presents an enormous and continuing opportunity for Scotland's diverse range of exports.

In today's Times, Peter Jones (no, not that one) has penned an interesting piece on the potential for Scottish export growth among the BRICs. It had a handy chart which I can't find, but I've got something similar (thank you, Australian Government).

Projected Growth of Middle Classes

By 2020, the Asia-Pacific middle class is set to treble to 1.7 billion people, and within another decade, have almost doubled again.

By 2020, their share of world spending power is predicted to have doubled. The share of spending power attributable to Europe and North America by then is to have halved.

The BRICs are set to account for half of world economic growth between now and 2020. By contrast, the UK is set to account for 2.6%, the Eurozone a disastrous 0.3%.

For a population of its size, Scotland has an incredibly large and diverse range of exports whose opportunities we have not fully exploited over the past decades, and perhaps more importantly, huge export potential in dynamic and developing new sectors, Renewables springing most readily to mind.

There have been some serious successes already, of course, particularly in Food and Drink.

Here is the First Minister, fittingly and a tad amusingly dubbed "Alex Salmon" on this news programme, laying out at the end of last year the details of soaring Whisky and Salmon sales to China.

But the success story of whisky in China is more remarkable still. Since 2001, whisky exports to China have exploded from £1 million to today's reported figure of £92 million - an increase of 9100%. This is frankly phenomenal growth, tapped into by the combined efforts of the SDI, Scottish Food and Drink and the Scottish Government.

Such a dramatic example shows the path that could be trod with other high-quality Scottish goods and services. India is apparently a big target market this year. Brazil and other South American countries remain largely untapped. The government's goal is to have upped exports by 50% come 2017. I think we can, must and will do better than that.

In the words of Anne McColl, chief executive at the SDI:

"There is an over-estimation of risk and an under-estimation of opportunity."

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