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Tread Carefully: Some Emerging Markets Are High-Growth And High-Risk

Across Asia and the Middle East, rising incomes and accelerating investment in infrastructure have attracted multinationals eager to expand their global presence. But success in these high-growth emerging markets (HGEMs) often proves elusive.

Several recent reports and surveys suggest why: Many HGEMs rate poorly on the World Bank’s “Ease of Doing Business” index, on Transparency International’s “Corruption Perceptions Index,” and on the Economist’s “Crony-Capitalist” index. These rankings make clear that strategies and business models tailored to the regulations and laws of mature markets may not translate well into HGEMs, many of which are characterized by opaque regulatory climates, weak institutions and invisible influence networks that may expose companies to unacceptable legal and reputational risks.

Meanwhile, regulations on international practices in many companies’ home countries are getting stricter. The 34 Organisation for Economic Co-operation and Development (OECD) members and six other nations that are signatories to the OECD Anti-Bribery Convention are increasingly enacting laws criminalizing the bribery of foreign officials.

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