In the last couple of years, many investors have been focusing on emerging markets. Developing countries are perceived by business people as a valuable source of profit and opportunities. Still, not all emerging economies are created equal. According to Bloomberg Market Magazine, some of them provide a lot more benefits than others.
In their analysis, several criteria were considered, such as the level of corruption, economic freedom, and others. Moreover, emerging countries are currently growing more than three times faster than already developed states. In this article, we will discuss what an emerging economy is, and the best choices to pick from when you want to expand your business.
What Are Emerging Economies?
The concept of emerging market economies (EME) refers to those countries that have a low or middle per capita income rate. Approximately 80 percent of the global population lives in developing states. Factors such as reforms and developments contribute to creating these emerging economies. On the other hand, elements like size or population do not affect a country’s potential of being a developing market.
For example, both China and Tunisia are considered emerging economies due to their reform programs as well as their economic development. Usually, EMEs are fast-growing economies. When it comes to investing in an emerging country, you should consider things like economic transparency and capital market efficiency. In the following section, we detailed the characteristics and potential of each of the best emerging states a business owner should consider.
6 Emerging Economies & Their Investment Potential
Economists state that China will remain the largest developing country in the world, at least until 2030. One might say that in the last couple of years, China’s economy has slowed down. Still, it remains a highly popular opportunity for many multinational companies around the globe. This emerging economy’s middle class is constantly growing. Moreover, its purchasing power is also on an ascending trend.
Some forecasts made by the Euromonitor International show that by 2030 China’s household income will steadily grow by approximately 89 percent. This translates into a higher discretionary spending capacity. As you can see, China is definitely one of the most powerful emerging economies in the world, and its potential is worth exploiting.
Like China, India is also an excellent choice when it comes to expanding your business in emerging countries. It is characterized by a solid and significant income gain and a robust middle-class expansion. Although economic reforms were slowed down a little bit by opposing politic forces, authorities state that this issue will not stop the growth boost that has started years ago.
Factors like environmental regulations and labor liberalization are only a small part of all the benefits that attract more and more investor to India. Moreover, India’s representatives encourage foreign investors to bring their businesses in this country, luring them with generous financial incentives. Some of the best sectors to invest in right now are insurance, railways, hydrocarbons, manufacturing, and defense.
Statistics show that by 2030, India’s middle-class households number will increase, exceeding 90 million. Therefore, we can say that India will remain the second’s biggest middle class emerging country on the globe.
Indonesia’s authorities have already cut fuel subsidies which were pretty costly. The entire administration has implemented business-friendly changes in the gas and oil sector. Furthermore, they have ambitious plans regarding infrastructure developments and other commercial opportunities. Indonesia’s middle class is continuously expanding which is a good thing if you’re thinking about expanding your business in emerging economies such as this one.
This country is the fourth largest one when it comes to its middle-class expansion. This population sector’s purchasing power will significantly increase in the next couple of years. By 2030, Indonesia’s middle class will reach up to 20 million different households. The greatest opportunities will appear in fields such as medical services, leisure, and recreation, hotel and catering, etc.
Lately, Philippines has gained a lot of popularity among business people due to its improved income distribution and stable economic growth. It is one of the fastest growing developing countries when it comes to its number of middle-class households. Specialists estimate that this number will reach a peak of 8.4 million by 3020. This will also lead to a higher power of discretionary spending which is a great profit opportunity for foreign companies.
Once the purchasing power increases significantly, Filipino people will be more willing to spend their income on education, medical services, health goods, and leisure and recreation.
In Malaysia is an increased demand for improvement and change from the population. The government is working on implementing some beneficial reforms such as improving its fiscal position. These attempts and projects were all gathered under the name of the Economic Transformation Program. This concept promises encouraging and generous tax incentives to all foreign investors.
Both financial services and manufacturing sectors will be likely liberalized in the next few years. In order to compete with other emerging economies like China, Malaysia’s government will focus on investing more in education, infrastructure, and even health care. Their primary focus is to create a broad fiscal reform agenda. Moreover, their main goal is to achieve a more balanced public budget by 2020.
Surprisingly or not, Nigeria is the second most rapid growing middle class developing the country in the world. Nigeria has the largest population in a rising Africa. Also, its consumer market and economy are currently growing. More and more business people are trying to penetrate this market due to the imminent boom in the country’s consumer spending. The number of middle-class households is expecting to increase and reach 15 million by 2030.
The most vibrant economic sector will the that of the communications. Most middle-class Nigerians will spend their money on telecom services. Moreover, 3G and 4G mobile features will become a lot more popular. The most profitable fields will be the following ones: medical services, health goods, leisure, and recreation.
To Conclude With
Emerging markets significantly influence and affect the overall global growth. You should invest in the above-presented countries if you want to benefit from their current growth as well as their foreseeable future. Expanding your company in developing countries is quite rewarding, despite the risks or obstacles you might meet. If you have a high tolerance for risk, you should definitely consider penetrating these countries’ markets.