That depends. these four factors must be considered:
1. Key managers. Investors should identify proven managers from their originating headquarters to send to the CLMV countries. this is preferable to recruiting someone new, even though they may be local. if local managers are recruited, they should be required to spend some time at headquarters for internalisation of business practices and monitoring before reposting to manage the CLMV offices.
One of my roles is as an export coach and my first task is to assess the ‘export-readiness’ of companies. investor companies should have committed and proven managers who are willing to spend some months or even years to manage the new foreign CLMV offices.
2. Political risk. Investors’ risk appetite must be strong to balance the risks of non-guaranteed investment protection, both from national and provincial government levels.
Borderlands tend to be much less decentralised due to the power of local elites and drug lords, who may not always respect the rule of law. investors must be prepared to engage in direct negotiation with these private parties and get to know them and their terms of trade. licence and permit-holders may only be puppets of actual low-key powermongers.
3. Sector growth. Though the CLMV regions may not have good economic growth, some sectors may be growing. investors should scrutinise both country and sector growth to avoid missing opportunities.
4. Strategic intent . Local market size and spending power alone may be too small to justify a market entry. However, the relative affordable business costs may justify in-market investments for the purpose of re-exports.
Lawrence Yeo is CEO of AsiaBIZ Strategy, a Singapore-based consultancy that provides Asia market research and investment/trade promotion services.