EMERGING MARKETS
The Growth Proposition
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“Growth,” a word that appears often in business forecasts, is a frequently miscalculated element. Not every economy fills out its perceived optimum space, the hype over technology and innovation notwithstanding. In an environment where markets are buffeted by recessions and austerity measures, gritty survival is the new success. Yet, surprisingly, some regions have not only weathered the storm but grown despite challenging financial environments.
Rising from the once insignificant corners of the globe are 42 economically energized pockets of growth that we call “emerging markets.” In a business and economic milieu that is quickly becoming saturated, and as the thirst for more options increases, these emerging markets provide a haven for those who dare to venture.
These countries harbour the majority of the world’s working age population and are rich with minerals and resources. Despite underlying challenges such as corruption and inflation, they are making their ways to sustainable and innovative ecosystems.
The BRIC nations, which are at the top of the list of emerging nations, are templates for countries that hope to harness their domestic resources and compete head-to-head with the developed nations. Mega projects such as the National Rural Employment program (NREGA) in India and the Sakhalin’s Diversified Energy Complex in Russia showcase the capabilities of these countries and mark their entry into the big leagues. International events such as the 2016 Olympics in Brazil and the 2022 FIFA World Cup in Qatar, as well as the smart grids in China and the large consumer markets in Poland will further alert the international community to the potential of emerging markets.
“These markets grow at least three times faster than developed markets and 75 percent of them have twice the GDP growth of leading developed markets,” says Frost & Sullivan Global President and Managing Partner Aroop Zutshi. “In 2010, 88 out of the Fortune Global 500 companies were from emerging markets.”
According to Zutshi, emerging markets are all about international and domestic commerce. The ability of these markets to be flexible and open to change is driving growth and providing a platform for global integration and collaboration. “I believe these are the next countries on the horizon with incredible possibilities,” he opines.
Closely following the BRIC countries are the MAVINS and the N7. These GDP-based country groupings are the next up-and-coming hot spots for investments and, more importantly, growth—both internal and external. Indonesia has emerged as the world’s second biggest user of Facebook. In terms of minerals, Chile is the world’s largest copper producer. The pre-salt fields in Brazil could make it one of the top ten oil producing countries in the world. And, South Africa has the best infrastructure and banking system in Africa. These countries also hold strong in various global rankings such as the Global Competitiveness Index and in ease of doing business.
The opportunities, in terms of industries, vary from country to country. The oil and gas rich countries such as Qatar and Brazil will excel in the energy industry. Environmentally conscious countries such as Poland and South Korea find investments in renewable industry. The presence of lower cost working environments will spur growth in the offshoring industry in Chile and Poland. The development of the finance industries will strengthen inflows for greenfield projects in South Korea. This mixed portfolio provides an option in the competitive, mature red ocean.
Some may question the success of these markets due to the varying political scenarios in regions like Africa and the Middle East. However, these issues can be resolved with the governments in most of these regions willing to adapt to change, introducing the initiatives to provide pro-investment policies to encourage substantial growth prospects (for example, the free trade zones in the GCC region).
“We believe that the African economies, which are also growing quite aggressively, offer very good opportunities in the long term. Growth rates have been between 7 to 8 percent during the last five years. I expect growth will continue over the next five to 10 years. It is important that companies start looking at these markets and evaluating them now, so they are positioned appropriately when these economies take off," commented Zutshi.
Moving into the future, a key to growth will be to actively understand the potential in emerging markets, and to collaborate internally and externally to create optimal opportunities. Emerging markets not only grow internally but will also contribute to globalization and a more connected world.
About the author
Sonia Francisco is a Frost & Sullivan research associate in the Industrial Automation & Process Control group. Her expertise includes market research and analysis in international logistics as well as product development and launch. Francisco has a BS in Physics and an MBA from the University of Applied Sciences in Wuerzburg, Germany.
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