We've all heard the term "emerging markets" thrown out before to describe nations that are in a rapid state of growth. Countries like China and India epitomize the very definition of an emerging market, with industrialization picking up and vast infrastructure projects filling in the void to support ongoing economic expansion and provide wealth to a growing middle class.
U.S. businesses have been fighting tooth-and-nail to get their hands into these markets as developed regions like Western Europe and the U.S. struggle under austerity measures designed to reduce government spending. Without emerging markets, there'd likely be little growth at all to report for many U.S. businesses.
But what about countries that are truly in uncharted territory? I'm not talking about China, India, Brazil, or Russia, or any other well-known emerging-market opportunity. Instead, I'm focused solely on countries where little to no U.S. business currently sets up shop because they are, essentially, the most dangerous countries in the world.
The list of countries where U.S. businesses are often frowned upon is actually a lot longer than you think. We may be an economic superpower along with a handful of other nations, but that doesn't mean we as a nation are well perceived in other countries. Regardless, a select group of U.S. businesses are chancing fate and expanding into these hot spots in the hope of finding the next great emerging market. Obviously, expanding into war-torn regions isn't without its fair share of risks, but here are five companies willing to take that gamble.
Iraq-U.S. relations have been a hotly contested back-and-forth game for upward of three decades now. After two wars, the last of which led to the ousting of leader Saddam Hussein and the installation of American troops to help oversee the transition to a democratic government, the U.S. is still perceived very poorly by Iraq's citizens. But soon a common bond may exist between Iraqi and U.S. citizens -- a mutual dislike of U.S. banks!
In June, Citigroup received permission from Iraq's central bank to open a representative office in Baghdad, the country's most populous city. Baghdad is also the anointed "most dangerous city in the world" based on violence, according to a 2011 study by research consulting firm Mercer. Despite these concerns, Citigroup hopes to support its corporate customers in Iraq, help facilitate business loans, and potentially even open self-named branches in the country.
Just two weeks after Citigroup's intentions were made public, JPMorgan Chase announced a deal with the Trade Bank of Iraq to facilitate the importation of goods into the country. The big opportunity here is the lifting of UN Chapter 7 sanctions, which will allow $82 billion to rework its way back into the economy. As you can see, it's also attractive to very large U.S. businesses.
There are still a lot of questions left to be answered here. First, many of Iraq's financial institutions are state-run, and they may not be so keen to give up their stranglehold on Iraqis' bank accounts. Also, there's the American stereotype Citi and JPMorgan will need to overcome. Still, this could represent an intriguing opportunity for both banks.
Proclaimed to be the "most dangerous nation [in the world]" in a documentary by Ted Koppel in 2006, Iran is always near the top of the list of countries we as a nation have the most strife with -- and ironically, it's also Iraq's neighbor. Specifically, fears of Iran's nuclear capabilities echo strongly with many developed nations and throw up countless caution flags about dealing with the country on a business level.
Yet one company looks poised to benefit in a big way from Iran. That company, the former largest company in the world by market value, is none other than Apple (NASDAQ: AAPL ) . Don't get too ambitious here, because Apple isn't planning to open an Apple store in Iran anytime soon. However, in late May the U.S. Treasury Department lifted certain sanctions on Iran which would allow Apple to sell its iDevices, including the iPhone, in Iran.
There will still be restrictions, of course, with no products allowed to be exported to Iran that are headed to organizations on its Specially Designated Nationals list. In addition, there could be some anti-Apple sentiment in the country with backlash against the company for a few negative sales relations with Farsi-speaking individuals over the past couple of years. In spite of this, it could be another step toward Apple regaining its former glory, and it should be monitored closely as it could serve as a stepping stone into other uncharted regions for Apple.
Myanmar (also known as Burma)
Known less for its country-to-country violence and more for its civil wars and human rights violations, Myanmar has been off-limits to much of the Western hemisphere for decades. That could be about to change, though, with ongoing tolerance talks between Muslim and Buddhist religious groups in the country coercing two U.S. multinationals to recently take the plunge.
Beverage giant Coca-Cola (NYSE: KO ) announced in June that its first bottling plant opened in Myanmar amid its plans to spend $200 million in the war-torn nation over the next five years. This marks the first time that Coke has produced its product in Myanmar in 60 years, and pushes along plans to open a second bottling plant in a month's time. Coke is truly the most global of all companies, operating in all but two countries worldwide. Myanmar simply adds another chapter to Coke's already impressive and diverse global drink portfolio.
Another player looking to drive over the competition in Myanmar is Ford Motor (NYSE: F ) , which opened up its first full-service dealership in late April in partnership with Myanmar's Capital Automotive. If Ford can do in Myanmar what it's done in China, then the sky could be the limit throughout Southeast Asia. Ford plans to introduce a full lineup of fuel-efficient cars and trucks to the region by the end of the year.
Will these five global players lead the way into war-torn regions of the world or flop trying? A lot of that remains to be seen, but we could nonetheless be seeing a new strategy employed by multinational companies struggling to find growth domestically and being forced to really branch out to generate top-line growth. Don't be surprised if we see more instances of U.S. companies expanding into questionable overseas markets in the coming years, and certainly keep your eyes peeled for intriguing new overseas opportunities.
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