I have a number of friends and associates in the finance business. Recently one of my friends was on Bloomberg TV discussing new markets and described that beyond emerging markets were ‘frontier markets’. I honestly had never heard the term used before. One description I read was that frontier markets are ‘investable’ but have lower market capitalization and liquidity than the more developed emerging markets http://bit.ly/KVByeO (source Wikipedia). The idea is that over time the market will become more liquid and exhibit characteristics of larger more liquid developed emerging markets.
When I asked him about it after the segment he offered some more interesting detail on what is and what is not a frontier market. For instance most people are aware of Vietnam rising as a manufacturing option to China. This initially would make it a frontier market before moving into being called an emerging market. However, Vietnam has quickly become a bit of a manufacturing hub and accordingly is no longer seen (by financial analysts) as a frontier market. Pay attention people, things change day by day as today’s frontier markets are tomorrow’s emerging markets.
Yet a list published by Standard and Poor’s in April 2011 listed Vietnam and 36 other countries as being frontier markets: Argentina, Bahrain, Bangladesh, Botswana, Bulgaria, Colombia, Côte d’Ivoire, Croatia, Cyprus, Ecuador, Estonia, Ghana, Jamaica, Jordan, Kazakhstan, Kenya, Kuwait, Latvia, Lebanon, Lithuania, Mauritius, Namibia, Nigeria, Oman, Pakistan, Panama, Qatar, Romania, Slovakia, Slovenia, Sri Lanka, Trinidad and Tobago, Tunisia, Ukraine, United Arab Emirates, Vietnam, Zambia
My friend had mentioned Chile which is not on the above list while Vietnam by his estimation is now off the above list. It surprises me that there are only seven African nations listed (you can determine which). The African continent has many problems stemming from tribal issues, poor healthcare and infrastructure. But Africa also has mass quantities of natural resources, something the Chinese are very aware of and hard at work ‘partnering’ with African countries to unearth and exploit those resources. Other countries in the east and west are also following suit.
In my travels to Asia I’ve also learned that places like Myanmar (which is finally being noted for a few positive things but still has a long way to go) and Indonesia are also new frontiers for manufacturing (start with cheap labor and real estate). While those are not on the above list new frontier markets are popping up all over the globe.
How long will the explosion in frontier markets last? It’s anybody’s guess but with slightly less than 200 countries on the planet the number is finite. It makes me wonder what the world will look like when the term ‘frontier markets’ becomes irrelevant.
Do you have any other ideas on where frontier markets might exist that I have not mentioned?
The Way I See It - Mark Kolier 
From the perspective of a PE Fund,I would consider a Frontier market as one hat is open but lacks such elements as rule of law, currency convertibility, etc., that makes investing, and more importantly exits, problematic while offering the possibility of eye-popping returns. Certainly Myanmar quailifies (significant natural resources, 60 million population, central location in SE Asia), and Mongolia wavers in the category. But I would not include Indonesia, as people have been making (and losing) money in that market way before the ’97 crisis. So, if you can get from the airport to checking into a reasonable western hotel by only using English, its probably not a “Frontier” market (but all the more interesting).
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Thanks for the clarification and interesting perspective. Bangladesh would probably fit that description as well. But I am no hurry to go there.
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