"Flat" world is starting to tilt By Brian Moss Sat May 26, 12:00 AM ET
NEW YORK (Reuters) - Antoine van Agtmael was ahead of the curve in 1981, when he saw the potential rewards of investing in the Third World countries. He also was clever enough to rename those places "emerging markets."
In his new book, "The Emerging Markets Century" (Free Press, $28), van Agtmael predicts companies from emerging markets will replace familiar names like IBM (NYSE:IBM - news), Ford (NYSE:F - news), Wal- Mart (NYSE:WMT - news), Japan's Honda (7267.T) and Switzerland's Nestle (NESN.VX) as the world's most influential companies.
Van Agtmael writes that if "the world is flat" -- as Thomas Friedman argued in 2005 in his best-selling book of that name -- now it is "tilting away from its former owners."
"The Emerging Markets Century" profiles 25 companies that are either the leader in their industries or well on their way there. Among them, Hyundai (005380.KS), Lenovo (0992.HK), and Samsung (005930.KS) are well known.
Less familiar ones on his list include Taiwanese-owned Yue Yen Industrial Holdings (0551.HK), which makes athletic shoes in China for companies like Nike and Adidas; Taiwan's Hon Hai Precision Industry Co. (2317.TW), which designs and builds electronics for big Western brands; and Brazil's Aracruz Celulose (ARCZ6.SA), which produces pulp from eucalyptus trees for the paper industry.
Van Agtmael says that even some sophisticated investors are unaware of how advanced these world-beating companies are. It's not only that they are located where labor is cheaper. They have genuine technological, manufacturing and marketing prowess that has led to consistent growth and profits.
How successful are these companies? The Samsung brand, he says, is "better recognized than Sony's, its research and development budget is larger than Intel's and its 2005 profits were higher than those of Dell, Nokia, Motorola, Philips or Matsushita."
Mexico's Cemex (CMXCPO.MX) (which has offered to buy Australia's Rinker Group Ltd. (RIN.AX) for $14 billion) "has become the largest cement company doing business in the United States, the second- largest in Britain, the third-largest globally and the leader in many other markets."
His analysis of the 25 companies finds their success is no accident. "The secrets of becoming world class," he writes, "boil down to bold ambition, discipline, adopting a global mind-set, and making adaptability a core capability."
The growth of these companies presents challenges and opportunities, van Agtmael says. The challenges will be faced by corporate competitors and the people who work for them.
They also will be faced by governments, whose policies can be tailored to help its nation's companies compete better, or can be designed so poorly and with such unintended consequences that they end up working to the advantage of competitors.
The opportunities fall to investors, even small investors, who van Agtmael says can judge whether an emerging market contender will end up as a strong player on the world stage or as a faded company that never realizes its potential.
"Those who do their homework, dig deep, don't jump to conclusions, are not easily scared or overenthusiastic but keep a cool head, read everything ... with interest but healthy skepticism, diversify their choices, have patience and learn from their mistakes can't go far wrong and have a chance to do better than the 'market' or the average investor," he writes.