A PROJECT ON BRICS VS MIST

In The Subject International Finance

Submitted By Sonali Malhotra A019 M.Com Part II (Banking & Finance)

Under The Guidance Of Prof. Harminder Singh Oberoi

To University Of Mumbai For Master of Commerce Programme (Semester - III) In Banking & Finance Year: 2015-16

SVKMS NARSEE MONJEE COLLEGE OF COMMERCE &ECONOMICS VILE PARLE (W), MUMBAI 400056.

EVALUATION CERTIFICATE

This is to certify that the undersigned have assessed and evaluated the project on BRICS Vs MIST submitted by Sonali Malhotra student of M.Com. Part - II (Semester III) In Banking & Finance for the academic year 2015-16.This project is original to the best of our knowledge and has been accepted for Internal Assessment.

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Principal

DECLARATION BY THE STUDENT

I, Sonali Malhotra student of M.Com. (Part II) In Banking & Finance , Roll No.: A019, hereby declare that the project titled BRICS Vs MIST for the subject International Finance submitted by me for Semester III of the academic year 2015-16, is based on actual work carried out by me under the guidance and supervision of Prof. Harminder Singh Oberoi . I further state that this work is original and not submitted anywhere else for any examination.

Place: Mumbai

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Name & Signature of Student

Name: Sonali Malhotra

Signature: _________________

ACKNOWLEDGEMENT

Projects have always been fun Learning experience, but with growing age, at this Masters Level, it surely demands Corporate and Depth Approach.

This project was a great learning experience and I take this opportunity to acknowledge all those who gave me their invaluable guidance and inspiration provided to me during the course of this project by my guide.

I would like to thank Mr. Harminder Singh Oberoi - Professor of International Finance I would also thank the M.Com Department of Narsee Monjee College of Commerce & Economics who gave me this opportunity to work on this project which provided me with a lot of insight and knowledge of my current curriculum and industry as well as practical knowledge.

Would sincerely thank our coordinator Mr. Harish Sharma for constant guidance over the projects and curriculums.

I would also like to thank the library staff of Narsee Monjee College of Commerce & Economics for equipping me with the books, journals and magazines for this project.

I would also like to thank my friends and fellow students who helped me in the cause of the project.

INDEX

Sr. No. Particulars

Page No.

Chapter I- Introduction

1.1Introduction of BRICS

Pg 6

1.2Importance and Disparity with BRICS

Pg 7

1.3

National Development Banks

Pg 13

1.4

Introduction of MISTPg 15

Chapter II- Conceptual Data

2.1

BRICS VS MIST Pg 20

2.2

Economic Analysis Pg 26

Chapter III- Collection of Data Analysis

Chapter IV-Conclusion

4.1

Conclusion Pg 30

Chapter VI-Appendix

5.1

Bibliography Pg 31

Introduction of BRICS

About BRICS

BRICS is a acronym for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa Originally called as BRIC as South Africa was not included till 2010. The term "BRICS" was coined in 2001 by then-chairman of Goldman Sachs Asset Management, Jim O'Neill Common characteristics are large, fast-growing economies all developing or newly industrialized countries.

Importance of BRICS

As of 2014, the five BRICS countries represent almost 3 billion people, or approximately 40% of the world population. The five nations have a combined nominal GDP of US$16.039 trillion, equivalent to approximately 20% of the gross world product, They have an estimated US$4 trillion in combined foreign reserves.

Summits:

1. Yekaterinburg Summit (2009)

Consensus on improving the global economic situation and reforming financial institutions. BRIC nations announced the need for a new global reserve currency, which would have to be "diversified, stable and predictable"

2. Brasilia Summit (2010)

South Africa officially became a member nation. Iran and nuclear weapons, development, the furtherance of the BRIC as an international body, the global economic situation at the time, reform of financial institutions, the financial G20, and cooperation and issues related to global governance.

3. Sanya Summit (2011)

Economics, anti-terror law under UN auspices,United Nations Security Council reform,decision to cease mutual trade payments in U.S. dollars and instead henceforth give credits to one another in their national currencies alone.

4. New Delhi summit (2012)

A proposal to create a joint BRICS development bank that would finance investments in developing nations

5. Durban Summit (2013)

Negotiations for setting up the bank.

6. Fortaleza Summit (2014)

Creation of two financial institutions: the New Development Bank (NDB) to finance infrastructure and sustainable development projects, with $50 billion in capital to start with, and the $100 billion Contingent Reserve Arrangement (CRA), to tide over members in financial difficulties.

7. Ufa Summit (2015)The first SCO and BRICS Youth Forum opened in Ufa. The Forum gathered over one hundred young leaders from Russia, Brazil, China, India, South Africa, Uzbekistan, Tajikistan, Kazakhstan, Kyrgyzstan and Uzbekistan who are engaged in social activities, business, politics and diplomacy.The Youth Forum is a part of SCO and BRICS major events that take place in Ufa after the international summits.

"Russia is currently presiding in BRICS and we need to take maximum advantage of it to create as many joint projects as possible" - said Pavel Krasnorutskiy, Chairman of the Russian Union of Youth. "Our main objective is to create space for the Forum participants wh ere they could communicate, share experience, identify ways of cooperation in various fields. It is the first time when the Forum to be held in a new format, involving young leaders of the both organizations into the one platform."

Forum objectives: promoting objective perception of todays socio-economic, socio-political, scientific and cultural changes, as well as formation of a common information space in the sphere of youth activity of the Commonwealth member states.

The first day agenda included discussion of such issues as establishment of visa-free regime for the youth in the area of the BRICS countries, youth exchange program between India and Russia till 2018, establishment of an international center of expertise of the SCO and BRICS countries. Two agreements between the Russian Union of Youth and the largest youth organizations of South Africa and Brazil were signed within frameworks of the Forum.

The Forum to be held from 26 to 29 July. The participants are proposed to take part in five pillars which names correspond to the capital letters of the BRICS abbreviation: B - Business, R - Responsibility, I - Innovation, C - Cooperation, S - Science.

Similar objectives shared by BRICS

1. The BRICS countries act as one to promote a more legitimate international system, including advocating reform of the UN Security Council.

2. The BRICS group is a South-South framework for cooperation.

3. The BRICS group also acts as a bridge between developed and developing countries. For example, in the WTO, the BRICS countries are trying to promote a fair order regarding agricultural policies. They are attempting to promote the liberalization of the international economic order to diminish agricultural subsidies in the United States and the European Union, which would make developing countries agricultural products more competitive.

4. The BRICS group will also play an increasingly important role in assisting developing countries in gaining an advantage in trade and climate change negotiations, as well as on issues related to the export of manufacturing products.

5. Developing countries on the periphery of the group will be able to leverage the NDB and the CRA to increase their bargaining power.

6. The group established the BRICS Business Council, made up of 25 prominent entrepreneurs from the five countries and representing many industries and economic sectors.

7. The BRICS also formed an information-sharing and exchange platform that expands beyond economic cooperation to also involve educational, cultural, and environmental engagement.

8. They have a shared interest in challenging the current governance of Western financial institutions like the International Monetary Fund and the World Bank for that they have announced the establishment of the bank

9. They will advocate for the interests of middle powers on global forum.

Disparities with BRICS

1. The dominance of China in BRICS is problem for others. The Chinese economy is now not only the second largest in the world but also larger than the economies of all the BRICS together.

2. China's political aspiration creates a challenges that has made it difficult for it to make consensus.

3. Chinas manipulation of its currency has resulted in significant problems for the manufacturing sectors of other emerging powers. Central banks of other countries have registered protest against undervalued yuan

4. There is doubt if BRICS can emerge as a unified political force.

5. BRICS is a loose grouping of countries that share interests in particular areas but that play by different rules. It is not a formal international alliance.

6. It maintains a low profile on security issues. BRICS will never attempt to make the group into a traditional security framework.

7. With the exception of the NDB and the CRA, the BRICS framework has not proven very efficient or substantive.

8. The BRICS have little in common. The Chinese economy is 28 times the size of South Africas. Income per person in India is one-tenth that in Russia.

9. Brazil, India, South Africa are democratic countries while Russia, China are authoritarian regimes

10. Russia, Brazil and South Africa export different commodities, while China exports manufactured goods and India exports services.

BRICS Bank

Structure

- New Development Bank will have an initial subscribed capital of $50 billion which will be raised to $100 billion.- The five members will have an equal share for each in the bank, so no one member dominates the institution.- Headquarters Shanghai- Bank will have African Regional Center in South Africa- India will assume the first presidency of the bank.- Chairman of Board of governance will be Russian- The emergency reserve fund - which was announced as a "Contingency Reserve Arrangement" will also have $100bn and will help developing nations avoid short-term liquidity pressures.- It will have $41 billion from China, $5 billion from South Africa and $ 18 billion from remaining nations.

Need of a BRICS bank

1. Global financial institutions like IMF and world bank are dominated by U.S and western countries

2. IMF and world bank follows different voting power based on quota system. Though China is second largest economy after U.S it has fewer voting rights.

3. The financial institution created by BRICS will reduce the importance of US dollar as a global currency and eventually it will increase importance of Yuan

4. IMF cash assistance program is conditional. If a country's foreign policy clashes with US then it will be difficult to obtain a loan.

5. It will provide resources for infrastructure development of developing countries.

National Development Bank

The New Development Bank BRICS (NDB BRICS), formerly referred to as the BRICS Development Bank, is multilateral development bank operated by the BRICS states (Brazil, Russia, India, China and South Africa) as an alternative to the existing US-dominated World Bank and International Monetary Fund. The Bank is set up to foster greater financial and development cooperation among the five emerging markets. Together, the four original BRIC countries comprise in 2014 more than 3 billion people or 41.4 percent of the worlds population, cover more than a quarter of the worlds land area over three continents, and account for more than 25 percent of global GDP. It will be headquartered in Shanghai, China. Unlike the World Bank, which assigns votes based on capital share, in the New Development Bank each participant country will be assigned one vote and none of the countries will have veto power.

HistoryThe idea for setting up the bank was proposed byIndiaat the4th BRICS summitin 2012 held in Delhi. The creation of a new development bank was the main theme on the agenda for the summit.BRICS leaders agreed to set up a Development bank at the5th BRICS summitheld in Durban, South Africa on 27 March 2013.On 15 July 2014, the first day of the6th BRICS summitheld inFortaleza, Brazil, the BRICS states signed theAgreement on the New Development Bank, which is after its entry into force to form the legal basis for the bank.The Agreement contains the Articles of Agreement of the Bank, and stipulates the total capital of $100 billion BRICS Development Bank, 12.5% of which is to be paid in by the members in the first 7 years. In a separate agreement, a reserve currency pool worth over another $100 billion was setup. Both are partly motivated by the desire to counter the influence of Western-based lending institutions. Documents on cooperation between BRICS export credit agencies and an agreement of cooperation on innovation were also signed.Shanghai was selected as the headquarters after competition fromNew DelhiandJohannesburg. An African regional center will be set up in Johannesburg.The first president will be from India,the inaugural Chairman of the Board of directors will come from Braziland the inaugural chairman of the Board of Governors will be Russian. The7th BRICS summitin July 2015 marked the entry into force of the Agreement. On 11 May 2015,K. V. Kamathwas appointed as President of the Bank.

Introduction of MIST

As far as new emerging economies are concerned, the first name that today comes to our mind is MIST. MIST is an acronym coined by Jim ONeill from the Goldman Sachs, that refers to the large and surprisingly growing economies of Mexico, Indonesia, South Korea and Turkey.

The relevance of these countries is underlined by many relevant economic operators who strongly considers them as the new BRIC (acronym that stands for Brazil, Russia, India and China): in fact, in the last twelve months the MISTs stock markets widely beat the BRICs, the related investment demand have hugely grown and now the above mentioned nations are expected from the principal economic indicators to represent a very interesting investment, especially over the next 20-30 years.

What makes these countries so attractive and tempting for the foreign investments today is their common points of excellence. First of all the MISTs are members of the G-20 group and have been favorably considered in the last N-11 Equity Found as the four major next emerging markets. Also thanks to their good strategic geographical positions they would make easy to enter some important markets such U.S. or Europe ones and are powered by a growing young population and an emerging middle class with solid consumption levels. In addition their purchasing power is quickly growing and balanced by a relatively well-controlled inflation and a constantly stable economic growth.

Comparisons are easily done: are MIST countries are able to face the BRICs? In this view it must to be said that at the present time MIST countries are not capturing the same attention that the BRICs did when being coined back in 2001; this probably it is due to the fact that MISTs are not, generally speaking, expected to become great economic powers. On the other hand many economists believe that MIST countries have got what it takes to close the gap: among others, MISTs markets have an high degree of openness in the view of a new economic era and overall MIST countries provide more favorable business environments thanks to their current sustainable economic prosperity.

Secondly, even if the MISTs are growing fast, they still dont approach the BRICs in economic output or population (it is compulsory to consider that only BRICs China is the most populated country in the world); indeed, MISTs long-term growth rate will surpass most of the current largest economies, in this way the chances are that they will closely approach the BRICs and will gain economic power also in view to the fact that developed countries are facing problems such as the debt crisis, the recession and the unemployment threats, so that MIST countries will become forsure a real complementary investment option. As a result, the strategy for investments is paying off, and trusting these emerging countries. Now, turn to introduce every country belonging to MISTs (common in some fields and heterogeneous in others), in order to better understand why economists strongly believe in their growth.

Mexico is of course one of the most surprising country in this period because while facing the political instability is being at the same time able to carry its growth out. It is widely known that conducting business in Mexico could be a challenge because of the rates of corruption and organized crime, but beyond this it has to be taken into consideration that the manufacturing sector is becoming more competitive thanks to the low labor cost (even if the labor market is still quite rigid) and the dynamic and young population living in the country. Do not forget Mexico can boast to be the worlds 11th largest economy, and the inflation is normal and stable at the moment. Mexican stock exchange (increased of the 18,8% in the last year) suggests investing in the media and telecommunications markets but also the retail industry, the energy and the chemical sectors, travel and tourism are the points that offers more opportunities.

Everybody knows Indonesia is the worlds bigger archipelago, with richness in natural resources such as petroleum, natural gas, bauxite and many others that makes it a rising star in the economy market. This endowment of natural resources and its geographic position leads Indonesia to be a key market for the consumption and production, and it is confirmed by the attention that global investment banks is turning to the country, since in the last year Indonesia has registered strong economic growth with the increase of the 6,4% in GDP. In addition, thanks both to the ASEAN

Economic Integration (AEC) and to its natural and human resources (Indonesia boasts a population of 250 million), the country will become for sure in 2015 one of the most important regional mega market. While having plenty of economic positives, also Indonesia has to face corruption struggle and a too complex regulatory environment that both inevitably influence business conduction in negative: in fact, starting a business or dealing with construction permits and registering property is consider to be much harder than in the others MIST countries, and for this reason the investors are still hesitant in betting on this country. Anyway, apart from the natural resources, the field of energy and the retail industry are considered points of excellence.

Three words seem sufficient to describe South Korea: the new Japan or, if we prefer using ONeill words it is the model for everybody to aspire to. The country is of course the one which increase the growths averages of the MISTs, their economic powerhouse, firstly due to the fact that it seems incorrect to define it as an emerging country because of its high industrialization (e.g. the presence of industries of multinational corporations such as Samsung). Moreover the retail market, due to its in depth manufacturing knowledge, is expected to grow significantly, consider that the luxury goods market alone is showing a 12% annual growth every year since 2006, and also the medical services and the huge investments in renewable energy are helping to this amazing growth. The governmental long-term support in foreign direct investment helps the country to remain a well-developed centre for international business operation, being a strategic point of reference for the U.S. and European business, even if the political stability is still unknown. But unfortunately all that glitters is not gold since South Korea has to face to a rapidly aging population (the 11.4% of the population are over 65) so it lacks the youth that is the power of the other MISTs, and also the labor market is fairly inflexible: actually, it must be said that the unemployment is the lowest in the G-20 (only 3.3%) but the strict regulation in the field could make really challengeable starting a business in the country. Last but not least, is overall strongly recommended buying stocks in South Korea as the country will benefit from rising exports thanks to its powerful industries.

What the last T stands for is Turkey. This countrys location gives it the possibility of being the bridge between Europe and Asia that of course influences its political and economical ambitions: first of all the application to join the EU seems arrived to an acceptance and of course a future admission will help the economy of the country. But there is much more to say about the Turkey, in fact the GDP growth is stated to be above the 8%, ahead of most emerging market, including the BRICs (with the exception of the Russia). As well, the tourism industry is quickly growing and the governments investments in the tourism promotion expect to double it by 2023, reflecting at the same time positive effects to the retail and hospitality industries too; also the field of energy is robust since the government is incentivizing renewable energy projects. In terms of manpower, Turkey has a population of 75 million people, the majorities are young and one key factor is the unemployments rate that is under the 11%: but, on the other hand, labor cost are excessive and it could affect the intention of doing business of the foreign investors as well as a long history of high inflation rates. This brief overview of the MIST countries leads us to quickly analyze the relationships between the MISTs and the other Continents: as said above, Mexicos proximity to the US market as a link between Central and South America markets and its Hispanic culture too, these all prompt the investors and multinational corporations to choose Mexico as investment location, and the same argument is for Turkey that, after the liberalization of the trade terms with USA and Europe, will be a point of reference for the global market. Indeed South Korea, with its own aging and labor regulation problems, maintains its importance thanks to the high level of exportation that makes the country one of the top ten exporters in the word and additionally will soon meet the European demand for commodities exports due to the new governments plan meant to build railways, airports and seaports to bind the islands of the Southeast Asia closer together. Finally, as far as Indonesia (but broadly speaking, all the MIST countries) is concerned, Australia may be the most significant partner for the MISTs, especially due to the long history of political, trade and social relationships between the two countries; moreover also South Korea has strong impact on Australian investments, being the third largest export market for Australia (this connection hopefully will also influence the political relationship between Australia and North Korea). To sum up and giving all above, at this stage it is still difficult to state if MIST countries will be as successful as BRIC countries are, or if they even will surpass their growth in the future. It is undeniable that the MISTs have a great potential especially in the long-term economic growth but by the same token is important to calibrate expectations as MIST countries are still emerging and maintaining several significant differences between each other, they show very good new energy but, at the present time, fewer financial credentials. Time will tell if this long-term economy prediction is right or not, of course it mostly depends on the investors planning for market entry and expansion.

BRICS VS MIST

Aug. 7 (Bloomberg) -- Jim ONeill ushered in a decade-long investment boom in 2001 when he coined the term BRICs for the largest emerging markets. This year, a lesser-known acronym that the Goldman Sachs Asset Management chairman is helping to popularize has taken over for many investors.The so-called MIST nations -- Mexico, Indonesia, South Korea and Turkey -- are the four biggest markets in the Goldman Sachs N-11 Equity Fund. Opened in February, 2011 to invest in what ONeill considers the next big 11 emerging markets, the fund has climbed 12 percent this year, compared with a 1.5 percent gain in Goldman Sachss fund for Brazil, Russia, India and China.We see steady inflows into the Next 11 fund each week, ONeill, 55, said in a phone interview from London. It hasnt been affected by the disappointment in the U.S. and obviously the European markets especially, and all the disappointment in some of the BRIC markets.ONeill said he came up with the idea for an N-11 fund on a trip to China and South Korea two years ago as a way to help investors benefit from growth beyond the BRIC nations that had dominated emerging markets investing. With populations that for the most part are younger than the U.S. and Europe and have higher birth rates, fueling economic expansion, the N-11 nations are emerging from the shadow of the BRICs, where growth is slowing and investors are pulling out funds.Outpacing BRICThe MIST economies more than doubled in size in the past decade, topping Germany last year. In Mexico, Latin Americas second-biggest economy, record auto exports are helping growth outpace Brazils for a second year amid waning Chinese demand for the South American nations commodities. Indonesias domestic spending and investment helped the nations economic growth accelerate to 6.37 percent in the second quarter, surprising economists who forecast a slowdown.Besides the MIST nations, the N-11 countries include Bangladesh, Egypt, Nigeria, Pakistan, the Philippines and Vietnam. Iran is also a member, though Goldman Sachs says its fund doesnt invest in Iran because it isnt an open market for foreign investors. The nation is subject to sanctions imposed by the U.S. and European Union over its nuclear program.Goldman Sachss N-11 fund has beaten 93 percent of U.S.- based emerging-market equity funds this year, while the BRIC fund has lagged 89 percent of them, according to data compiled by Bloomberg. The N-11 fund has still trailed its benchmark, the MSCI GDP Weighted Next 11 ex-Iran Index, which has climbed 17 percent this year. The MSCI BRIC Index has risen 1.7 percent this year, more than the 1.5 percent gain for the Goldman Sachs BRIC fund.Fuelling GrowthWhile outperforming them in growth this year, the MIST nations dont approach the BRICs in economic output or population. Total GDP for the MIST nations was $3.9 trillion last year, less than one third of the $13.5 trillion BRIC economies and compared with $7.3 trillion for China alone, according to data compiled by Bloomberg. In population, the MIST nations have fewer than 500 million people, compared with about 2.9 billion in the BRIC nations.Goldman Sachss N-11 fund had $113 million in assets and was invested in 73 stocks at the end of the second quarter, while the New York-based banks BRIC fund had $410 million in assets and held 72 stocks.While ONeill isnt involved in either funds management, they were built to capture economic growth in the nations he identified as likely to make the greatest increased contribution to global GDP. The MIST nations accounted for about 73 percent of N-11 GDP last year, according to data compiled by Bloomberg.Paying OffThe investment strategy is paying off. Mexicos benchmark IPC Index has climbed 11 percent this year, compared with a 2.8 percent gain in Brazils Bovespa. Turkeys ISE National 100 Index has surged 28 percent and Indonesias Jakarta Composite Index has gained 7.4 percent, while South Koreas Kospi has increased 3.3 percent.The BSE India Sensitive Index is the best-performing among BRICs equity benchmarks, increasing 13 percent, compared with a 2.6 percent gain in Russias Micex Index and a 2 percent drop in the Shanghai Composite Index. By comparison, the Standard & Poors 500 Index is up 11 percent this year, while the Stoxx Europe 600 Index has climbed 9.1 percent.Youve seen a rotation in the leadership based on rate of economic growth, said Paul Christopher, the St. Louis-based chief international strategist at Wells Fargo Advisors, the third-largest U.S. brokerage with $1.2 trillion in client assets. If you go back as far as just 2009, youll find people buying the BRIC story in a big way, and probably over-buying the BRIC story.Pouring in MoneyInvestors poured about $67 billion into BRIC stocks from 2001 to 2010 as they beat the S&P 500 by 281 percentage points. They withdrew about $15 billion last year, the most on an annual basis since at least 1996, according to Cambridge, Massachusetts-based research firm EPFR Global.Still, equity funds investing in the MIST nations havent been immune from global growth concern. While investors added a net $104 million to funds focused on Turkey and $123 million to Indonesian funds this year through Aug. 1, they withdrew $1.33 billion from South Korea and $115 million from Mexico, EPFR says.The MIST nations each account for at least 1 percent of global GDP and are likely to see that share increase this decade, ONeill said. Of the four countries, ONeill said Mexico and Turkey are the most attractive at the moment.Low-CostMexico is increasingly competing with China for manufacturing as costs climb in the Asian nation, ONeill said. Mexicos economy grew 4.6 percent in the first three months of 2012, the fastest pace in six quarters, on increased shipments to the U.S. America Movil SAB, the wireless carrier controlled by billionaire Carlos Slim, the worlds richest person according to the Bloomberg Billionaires Index, was the top holding in the N-11 fund at 7.9 percent at the end of June.Brazil, which grew at an average 3.7 percent annual rate from 2000 through 2010, trumping Mexicos 2.1 percent expansion, is forecast to grow less than 3 percent for a second straight year in 2012, according to the median estimate of analysts surveyed by Bloomberg.Wells Fargos Christopher advised investors to sell stocks in the BRIC nations at points in the first half of the year and recommends buying equities in Indonesia, where economic growth has exceeded 6 percent for seven quarters. Plans by the government in Southeast Asias largest economy to build railways, airports and seaports to bind its islands closer together are helping to counter a slowdown in European demand for commodities exports.Christopher also recommends buying stocks in South Korea, which he says will benefit from rising exports as Chinas domestic spending climbs.Credit RatingFitch Ratings and Moodys Investors Service have raised Indonesias debt to investment grade in the past eight months, with Fitch increasing it to BBB- in December and Moodys lifting it to Baa3 in January.The credit outlook in India is moving in the opposite direction. Indias economy grew 5.3 percent in the first quarter, the least in nine years, and S&P warns that the country may be downgraded unless growth picks up and political roadblocks to decision-making are overcome. A blackout left 640 million people in India without light on July 31, a day after a separate power cut left 360 million people without electricity.India is suffering from an absence of effective leadership, ONeill said. India always is very proud of the fact its the biggest democracy in the world, but as I frequently joke with them, Indias democracy is so good that it doesnt work.A phone call to the Indian embassy in Washington seeking comment wasnt immediately returned.Open EconomiesWith the exception of China, all the MIST nations ranked higher on the Geneva-based World Economic Forums 2012 trade openness index than the BRIC countries. While South Korea was ranked 34 out of 132 and Indonesia 58th, Russia trailed in position 112 and India at 100.Turkish stocks have rallied after the government cut its fiscal deficit to 1.3 percent of GDP last year from 3.6 percent in 2010, garnering a credit rating upgrade by Moodys on June 20 to Ba1, one level below investment grade.Russias $1.8 trillion economy, after unexpectedly accelerating in the first quarter, is feeling the squeeze from oil prices that plunged as much as 22 percent this year. The price of crude pared its losses in July and is now down 6.7 percent since the end of December. Russia relies on oil and gas exports for half of its budget revenue.Russias EconomyFormer finance minister Alexei Kudrin said on May 24 that Russias economy has a 50 percent chance of slipping into recession due to the crisis in Europe, the buyer of more than half its exports. Russias gross domestic product may grow as much as 4 percent this year, more than the governments previous projection of 3.4 percent, Economy Minister Andrei Belousov said on July 20.While ONeill includes South Korea in the MIST grouping, the nation differs from the other three in demographics, development and wealth. Known as one of the Asian Tigers as it grew an average 9 percent from the 1970s until the Asian financial crisis in 1997, South Korea will expand 2.9 percent this year, according to the median estimate of analysts surveyed by Bloomberg.Aging SocietySouth Korea lacks the youth that ONeill says will help drive growth in the other MIST nations. Only about 16 percent of South Koreas population is under the age of 15, compared with at least 25 percent in Mexico, Indonesia and Turkey, according to estimates by the New York-based United Nations.South Korea happens to be the only populated country that in my lifetime has transformed its income from that of an African country to being that of a G-7 country, ONeill said. Its an example that all these other countries can learn from.The MIST nations may not outperform the BRICs for long, especially now that Chinas government is stepping in to prime the economy, ONeill said. Moreover, the Shanghai Composites decline has left it valued at 9.6 times estimated profit, compared with the three-year average of 14.7. The MSCI BRIC Index trades for about 9 times estimated profit, compared with 13.5 times for the S&P 500, data compiled by Bloomberg show.Economic WeightThe recent underperformance in BRIC equities isnt reason to give up on the long-term potential of economies that grew at an average pace four times faster than the U.S. from 2001 through 2010, ONeill said. He forecasts that the BRIC nations will grow an average of about 6.5 percent a year through 2020, compared with 5.5 percent for the N-11 group.ONeill says he has three times turned down requests from Goldman Sachs salespeople to start a fund focused only on the MIST countries, and not only for economic reasons.You get very large exposure to them in the N-11 fund, ONeill said. Im also quite cognizant of not going down in history as being the guy that just constantly created acronyms. Economic Analysis of BRICS and MIST

At present, the five economies of BRICS encompass over 40 per cent of the worlds population and account for nearly 25 per cent of total global GDP in terms of PPP. If one compares the GDP in PPP terms, four economies figure among the top ten, with China, India, Russia, Brazil, and South Africa in 2nd, 3rd, 6th, 7th, and 25th places, respectivelySecondly, the per capita GDP of BRICS (mainly BRIC) showed many folds rise from 1990 to 2011. It was mainly because of the liberalization of economy that happened at the same time in most of these countries.

Similarly, on analyzing the MIST countries using the same parameters we see that countries like South Korea and Turkey displayed spectacular growth in per capita GDP. The interesting point to note over here is the share of MIST countries in worlds GDP, which increased by huge margin between 1990 and 2011. Now if we exclude China from the BRIC countries we get to know that the share of BRICS in the Worlds GDP during the same period remained almost stagnant (or in some cases reduced).

In the year 2011, the BRICS GDP was $13.7 trillion, while MISTs GDP was almost 30 percent of BRICS GDP at $3.9 trillion, though the MIST countries displayed a higher overall growth when compared to BRICS.The MIST economies have more than doubled in size in the past decade. On exploring the countries individually we get to know the reason behind this.Mexicos proximity with the US, its ease of access to the US markets and its own Hispanic culture helped making it international investors' strategic investment location. This also helped Mexico in becoming one of the last decades fastest growing nations. For Indonesia, it was the presence of ample natural resources and an expanding middle class that laid the foundation for continued growth. South Korea, often referred as the new Japan, has the highest purchasing power per capita in Asia and the world ($30,000) mainly attributed to the governmental long-term support in FDI. The huge presence of young manpower helped Turkey in showcasing an exciting growth of 11% in 2011 at the time of ongoing global economic crisis.

TheDoing Business2012 reported better rankings in terms of ease of doing business for MIST when compared to the BRICS thereby depicting the difference in the governmental support for enterprises and entrepreneurs in the two groups

Concluding Segment of the MIST

Uncertainty still exists in whether the MIST can be the new BRIC and exhibit the same success as the BRIC had for a decade. The MIST shows great extraordinary good potential considering the growth, demography and opportunities. Mexico having lower cost of labor increases their manufacturing competitiveness whereas China loses competitiveness. This has made the U.S. and other countries transferring their companies operations to Mexico. Indonesia with their remarkable growth highly populated and favorable demographic distribution could as well become the new powerhouse of Southeast Asia.

South Korea, the only country described as being a developed country, rather than emerging, shows potential, despite the slower growth and aging population. South Korea has an advanced economy and is likely to surpass their rivals. Given their historical economical background, one cannot disagree with the fact that South Korea, can overcome and grow with an exceptional rate even in the worst circumstances. Turkey is also exhibiting major growth and advantageous demographic distribution. They are attracting significant amount of FDI inflow and they could as well as the other MIST countries, become one of the strongest economies in the world. With the amount of uncertainties and volatility, it is hard to predict whether the MIST will sustain their growth. Nonetheless, the grouping of the MISTs long term potential cannot be ignored, as they combined, at this pace, will surpass most of the current large economies. Hence, narrowing down the gap they have behind BRIC. Given the facts, the authors believe that the MIST countries have the potential to show similar results to BRIC and those investors should consider this market as a potential new entry.

CONCLUSION

The BRICS economies have played the key role in the world economy as producers of goods and services, importers and exporters of capital, and as consumer markets with huge potential. Given their large population (more than 40 per cent of world population), resurgent middle class and huge share of land area and natural resources, the BRICS form a significant part of the world economy. The major obstacle in their path is the dependence on US and Europe economies, which can be negated by the increase in domestic consumption. The BRICS is not famous as a group but because of the individual stars like India and China. The internal conflicts (between India and China, for ex.) are not beneficial for anyone of them. In case BRICS wants to grow with the same rate as was predicted originally, it has to work together as a single entity.The MIST economies are equally capable to progress with same or even better than the BRICS economies. There is no doubt that the rate at which the MIST is growing is spectacular. But there are some concerns that need to focus upon if it really wants to continue progressing with the same rate. Issues like the internal crime in Mexico, Indonesias proneness to natural disasters and poor infrastructure in Turkey warrant serious consideration. They have the potential to consistently grow at a better rate than BRICS.

BIBLIOGRAPHY

http://www.zagamilaw.com/downloads/Articles/mist-countries-the-new-emerging-markets.pdf http://www.careerride.com/view.aspx?id=19744 http://world-economic.com/articles_wej-328.html http://www.mbaskool.com/business-articles/finance/5502-mist-vs-brics-an-economic-analysis.html http://www.arubachamber.com/newsletter/trends/46-after-the-brics-is-mist-the-next-big-thing http://ufa2015.com/media/news/2310/ http://ndbbrics.org/ http://www.bloomberg.com/news/articles/2012-08-07/goldman-sachs-s-mist-topping-brics-as-smaller-markets-outperform http://www.mbaskool.com/business-articles/finance/5502-mist-vs-brics-an-economic-analysis.html

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