From Moroccan Ports to Indonesian EVs, High-Quality Growth Turns Up in Furthest Reaches of Markets

Here are five companies in frontier emerging markets that are prospering as regulatory reform and industrial and technological development alter the trajectory of economic growth in their respective countries.

Key Takeaways

  • Vietcombank holds the leading position in import/export financing and processing of foreign direct investment flowing into Vietnam.
  • Marsa Maroc operates critical ports in Morocco, a growing industrial and automotive manufacturing hub.
  • Astra International is the local partner for the most popular automotive brands in Indonesia, where the government’s push for electric vehicles is boosting car ownership.
  • Kenya’s Safaricom and Kazakhstan’s are innovating to enable greater access to financial services through digital technology.

In Vietnam, foreign investment is pouring into sectors such as manufacturing and retail, as business-friendly policies around taxes, trade, and infrastructure development—along with an abundant and well-educated labor force—entice foreign companies to set up shop there. As the coastal nation tries to lure big businesses, its government is pursuing a hugely ambitious goal: Vietnam aims to become a high-income developed country by 2045.

With billions in international trade and foreign direct investment (FDI) rippling through Vietnam’s economy, one company serves as a toll operator of sorts. Vietcombank is one of the country’s designated foreign exchange clearing centers, which means that a large chunk of that inbound FDI must flow through its currency desk.

As the volume of international trade in Vietnam more than quadrupled over the past decade, from US$31.5 billion to US$135 billion, so did Vietcombank’s corresponding fee income, which rose from US$56 million in 2012 to US$254 million in 2022. The rising wealth of Vietnamese consumers is also fueling growth for the 60-year-old institution, with loans to consumers now accounting for nearly half its lending business, up from 12% a decade ago.

Vietcombank is just one example of how shifting policies and attitudes toward industry, trade, and technology are bolstering the long-term prospects for some companies listed in frontier emerging markets (FEMs). These markets are located in countries with newly emerging economies that have been difficult for many investors to understand, let alone find solidly profitable and growing businesses in. FEMs comprise an especially diverse array of cultures, industry conditions, political environments, and even geographies. (Indeed, these idiosyncrasies are responsible for the low correlations FEMs have with developed markets and with one another, which can be part of their investment appeal.)

Lately, however, regulatory reforms and technological change have been a common theme across several of these markets, creating opportunities for select companies like Vietcombank that are forming enduring competitive advantages in the growing niches created by these shifts.

Vietcombank is just one example of how shifting policies and attitudes toward industry, trade, and technology are bolstering the long-term prospects for some companies listed in frontier emerging markets (FEMs).

Halfway across the world, in Africa, Marsa Maroc, Morocco’s largest commercial port operator, is also benefiting from rising trade and investment. Marsa Maroc has historically operated “gateway” port terminals, handling domestically bound cargo. Its ports are situated near highly populated areas along the Casablanca-Safi-Agadir corridor, a critical route given that ground transportation costs are too high to move large shipments long distances by truck. This is why businesses wishing to haul cargo from ports to commerce centers are likely to have to go through Marsa Maroc.

Two decades ago, Morocco set out to promote its manufacturing sector as a source of economic growth and employment, and to attract foreign investment through development of a world-class port and industrial zone. Because of that effort, along with an advantageous geographic position at the intersection of global maritime routes, as well as membership in various multilateral free-trade agreements between the European Union and Arab and African nations, Morocco has become an ideal manufacturing location for European companies, particularly car manufacturers. It has overtaken South Africa as the top car-producing country on the continent, assembling over 470,000 passenger vehicles per year, more than half of which are exported.

Infrastructure investments such as ports are crucial to large-scale production of goods and integration of economies into global supply chains, which can increase a nation’s overall economic competitiveness. Since opening in 2007, the Tanger Med port, located on the Strait of Gibraltar, has grown to become the largest transshipment port in Africa, shipping to 186 ports around the world and capable of handling nine million containers and one million vehicles per year. To meet increasing demand, Marsa Maroc added a new terminal there in 2021 through a joint venture with Eurogate Terminals and Contship Italia. This terminal can handle the equivalent of 1.5 million shipping containers per year.

Since opening in 2007, the Tanger Med port, located on the Strait of Gibraltar, has grown to become the largest transshipment port in Africa, shipping to 186 ports around the world and capable of handling nine million containers and one million vehicles per year.

Just as Morocco has become the leading car producer and exporter in Africa, Indonesia has the potential to emerge as the production hub for electric vehicles (EVs) in Southeast Asia.

But Indonesia’s combination of dense city streets and unpaved terrain in the countryside makes driving a car a challenge. It’s why car ownership in the world’s fourth-most populous country stands at just 87 vehicles per thousand residents—significantly below 837 in the US, 591 in Japan and 173 in China. Motorcycles—smaller, cheaper, and more fuel efficient—are much more common.

Astra International is a key player in both markets: Through its partnerships with Toyota, Daihatsu, and Isuzu, Astra has a 53% share of Indonesia’s automotive market. The company also has a 79% share of the local motorcycle market through a partnership with Honda.

Despite the country’s history of low levels of car ownership, the Indonesian government is eager to boost the sales of EVs, with a goal for them to comprise 20% of the national fleet by 2025. In addition to banning exports of raw nickel, a key ingredient used in most EV batteries, to try to compete with China on the battery-production side, the country is offering financial incentives to promote EV purchases among consumers. For example, it plans to offer a subsidy of more than US$5,000 on every battery-powered electric car, as well as savings for hybrid vehicles and electric motorbikes.

As EVs come to present a larger challenge to traditional cars, it appears Astra will remain a formidable competitor, given its portfolio of leading car and motorcycle brands, unrivaled distribution network, and ability to offer financing to customers. With 70% of car and motorcycle purchases in Indonesia requiring credit, convenient financing is an important tool to support sales. Astra also manufactures and distributes automotive components and spare parts that are supplied to its service stations and third parties, further differentiating the company from its competitors, and limiting the ability of new entrants to replicate its success. Lastly, Astra, which also operates coal and gold mines, plans to enter the nickel market and recently purchased a stake in one of the country’s lowest-cost producers of the mineral.

At the same time as the transition from internal combustion engines to electric reshapes the automotive industry globally and in FEMs, the proliferation of mobile phones and cheaper data connectivity is upending banking by ushering the new age of mobile money and digital financial services.

Across Africa, traditional bank accounts and credit cards remain out of reach for large swaths of the population due to a lack of branches outside of urban locations and banks’ reluctance to bother with small transactions and customers with low or volatile incomes. But much of the unbanked population has been brought into the formal financial system by platforms that make it possible for them to transact digitally rather than default to the use of cash. Mobile money was pioneered by Kenyan telecom operator Safaricom, which in 2007 began offering text message-based money-transfer capabilities through its M-Pesa service.

While the individual transactions made on M-Pesa are often small, they add up. The service now has 51 million customers across Kenya, the Democratic Republic of the Congo, Egypt, Ghana, Lesotho, Mozambique, and Tanzania conducting over US$300 billion of transactions each year. Over time, Safaricom has also been able to monetize customers through additional M-Pesa offerings such as merchant payments, microloans, savings accounts, and specialized products like insurance against crop failures for farmers.

Source: IMF

With nearly three-quarters of the population possessing bank accounts, Kazakhstan is far ahead of African countries in terms of banking penetration. Nonetheless over the last decade the country witnessed an unprecedented digital transformation, led by Kaspi, which evolved from a retail lender into an integrated digital super-app that leads the market across payments, e-commerce, and consumer lending. In a country of 19 million people, over 13 million Kazakhs use the Kaspi app every month, conducting an average of two transactions per day—among the highest levels of user engagement globally. Kaspi also has approximately 600,000 merchants on its e-commerce platform, offering 4.5 million items—a breadth of product selection unrivaled in the country. High levels of user engagement decrease customer acquisition costs, while its ubiquitous app with constantly evolving functionality encourages adoption and transaction activity among both consumers and merchants, propelling revenue growth for Kaspi.

On the lending side, Kaspi has implemented robust risk-management systems. When a consumer uses the app’s e-commerce marketplace, Kaspi collects large amounts of proprietary data, which it pairs with traditional credit-bureau information to assess a prospective borrower’s creditworthiness. The short maturities on Kaspi’s consumers loans—six months, on average—also help keep credit risk in check.

Kaspi’s earnings increased at a compound annual rate of 44% (in US dollars) over the past five years. We expect the strong growth to continue as the number of merchants and transactions on its app rises, and as the company ramps up new services such as travel bookings and online grocery shopping.

We continue to scour frontier emerging markets to uncover compelling companies in some of the world’s fastest growing economies. In doing so, we stay true to our philosophy of trying to identify high-quality, growing and financially strong businesses, which have, time and again, proven their resiliency to multiple shocks, internal or exogenous. When we identify such companies, we seek to ensure that we’re not overpaying for its stock; currently, valuations are near historical lows in many FEMs, which offers exciting opportunities for us.

For more fundamental analysis in frontier emerging markets, see our video “The Last Great Malls on Earth.”

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Portfolio Manager Sergey Dubin, CFA, contributed research and viewpoints to this piece.


The “Fundamental Thinking” series presents the perspectives of Harding Loevner’s analysts on a range of investment topics, highlighting our fundamental research and providing insight into how we approach quality growth investing. For more detailed information regarding particular investment strategies, please visit our website, Any statements made by employees of Harding Loevner are solely their own and do not necessarily express or relate to the views or opinions of Harding Loevner.

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