The ‘Next Eleven’ and the world economy

On a recent holiday in Vietnam, Cambodia, and Laos, I couldn’t resistthinking about these countries’ economic potential and ongoing policychallenges. After all, in 2005, my Goldman Sachs colleagues and I hadlisted Vietnam as one of the Next Eleven (N-11) – all countries with thepotential to become important economies during this century.Vietnam reported that its real (inflation-adjusted) GDP growth was 7.4%in the latest quarter, outpacing China. And, according to the WorldBank’s forecast, Vietnam, along with Cambodia and Laos, is on track tomaintain a similar level of growth for the year.The N-11 never acquired the cachet of the BRIC acronym, which I coinedin 2001 to describe a bloc of emerging economies (Brazil, Russia, India,and China) that stood to have a significant impact on the world economyin the future. The N-11 countries weren’t at the level of the BRICs,but nor was either acronym intended to be an investment theme. Rather,N-11 was simply a label we applied to the next 11 most populous,highest-potential emerging economies after the BRICs.Around the time that we published the 2005 paper “How Solid are theBrics?”, in which we first identified the N-11, I often joked that wechose 11 simply because it was the number of players on a soccer team.When others would point out that we had excluded more populous countriessuch as Congo and Ethiopia, I would muse that Ethiopia could be theN-11’s Ole Gunnar Solskjaer, in reference to Manchester United’sbrilliant sub-in scorer during the 1990s.Then as now, the N-11 comprised a mixed bag: South Korea, Mexico,Indonesia, Turkey, Iran, Egypt, Nigeria, the Philippines, Pakistan,Bangladesh, and Vietnam. These countries have extremely diverse economicand social conditions, and very different levels of wealth. Forexample, South Koreans now enjoy a standard of living similar to that inthe European Union, which makes many analysts’ persistentcategorisation of South Korea as an “emerging economy” all the morebaffling.Meanwhile, Mexico’s and Turkey’s levels of wealth haven’t come anywherenear that of South Korea, and yet they are considerably wealthier thanthe rest of the N-11, some of which remain among the poorest countriesin the world. At the same time, Asian N-11 countries such as thePhilippines and Vietnam have grown significantly since 2005, whileMexico’s performance has been somewhat disappointing, and Egypt’s evenmore so.Collectively, the N-11 comprises some 1.5bn people, and its currentnominal GDP is around $6.5tn. In other words, while its population isslightly larger than that of China or India, its economy is about halfthe size of China’s, but larger than Japan’s and more than twice thesize of India’s.These divergences help to explain why a number of new acronymicgroupings have since been carved out of the N-11, including the MINT(Mexico, Indonesia, Nigeria, Turkey) and the MIST (swapping in SouthKorea for Nigeria). I didn’t devise these groupings, but I have come tobe associated with them, having produced a BBC radio documentary on theMINT countries in 2014. At any rate, they were in keeping with earlierpoints I had raised; namely, that by 2010, Mexico, Indonesia, SouthKorea, and Turkey would each account for more than 1% of global GDP.Eight years later, the MIST economies still have a chance to account foraround 2-3% of world GDP in the future. None is likely to reach thesize of any of the BRIC economies, except, perhaps, Russia. Owing to itscurrent problems, Russia’s GDP is now around the same size as SouthKorea’s. If it doesn’t sort itself out soon, its GDP could fall belowthat of Mexico, or even Indonesia.Of the other seven N-11 economies, Nigeria, Vietnam, and perhaps Iranstand out for having the most potential. Still, each faces seriousobstacles to becoming a $1tn economy, never mind accounting for 2-3% ofworld GDP.Looking beyond each of these countries’ individual prospects, what isimportant for economic observers and investment professionals tounderstand is that the N-11 as a bloc has grown by around 4.5% so farthis decade, after growing by almost 4% in the previous decade. Giventhe size of its output, the N-11’s growth is contributing significantlyto the world economy, alongside the primary drivers of China and India.I kept reminding myself of this fact while travelling around Vietnam,where my tranquility was repeatedly interrupted by blaring headlinesabout US President Donald Trump’s tweets and escalating violence in theMiddle East.Before heading to Vietnam, I had the privilege of writing a review forNature of Factfulness: Ten Reasons We’re Wrong About the World – and WhyThings Are Better Than You Think, a brilliant book by the latephysician Hans Rosling, which his daughter published posthumously thisyear. Factfulness is one of just a few recent works to focus on theremarkably positive things happening in the world. Rosling, along withHarvard University’s Steven Pinker, was right to be optimistic. Anunblinkered view of the world reveals many promising signs, especiallyfor the global economy. – Project Syndicate* Jim O’Neill, a former chairman of Goldman Sachs Asset Management and aformer UK Treasury Minister, is Honorary Professor of Economics atManchester University and former Chairman of the British government’sReview on Antimicrobial Resistance.