Challenges
From Promising Export Location to Innovative Competitor
In the early days the countries of the emerging markets were especially favored as promising outsourcing locations, and they developed profiles as export economies. In the interim they have since grown out this role.
The markets of the future are developing into competitive-competent movers and shakers on every level of economic and corporate relations. An army of engineers is battling for market shares and success-hungry researchers are enthusiastically seeking out innovative new product concepts.
With this shift analysts believe globalization has now entered a new phase. Driven by growth and acquisitions, more and more companies from the emerging markets are stepping up to the global stage. Corporations like Lenovo, Tata, Lukoil or Petrobras operate as global players on a par with established multinational corporations.
The emerging markets profit from these developments:
China
Since China opened up its markets to foreign investment in 1978, internationally active corporations have invested over 500 billion US dollar in the country. China has since overtaken France and the UK and is now the fourth biggest economy and the country with the third highest trade figures in the world.
India
With R&D investment of 21 billion US dollar India has moved up into the top ten countries for research, with its pharmaceutical and bio-technology sectors ranking among the best around the globe.
Russia
Russia continues to strengthen its position in the strategically important raw materials and energy sectors.
Brazil
With its product exports in 2005, Brazil passed the 100 billion US dollar threshold for the first time and is now considered Latin America's guiding light. Thanks to increased foreign exchange reserves, Brazil has paid off all of its IMF debts totalling some 15 billion US dollar - and ahead of time.
Korea
In Korea 97 percent of the working population possess college education or vocational training backgrounds. Thanks to its vast R&D capacity of more then ten billion US dollar Korea ranks sixth in the world.
Turkey
In Turkey foreign direct investment has reached a new record of 9.6 billion US dollar. Strategically well positioned at the crossroads between Europe and the Middle East, since 1980 this dynamic country has increased its exports 22-fold.
Vietnam
In January 2007 Vietnam entered the World Trade Organization as its 150th registered member. Since 1990 the economic growth rate averaged some seven percent - with a year-high of 8.4 percent in 2005. Vietnam's GDP doubled during the last eight years to roughly 55 billion US dollar in 2006.
South Africa
Located at the southernmost tip of the African continent, South Africa offers access to a developing market of some 180 million people and a combined gross domestic product in the region of 160 billion US dollar.
Mexico
With a gross domestic product of more than 850 billion US dollar Mexico is the largest economic power in Latin America and twelfth-largest national economy and trading nation globally. In 2007 the per-capita income has reached almost 8,000 US dollar.
Opportunities and challenges for investors
For investors the big domestic markets are increasingly the center of focus of their economic activities. Approx. 2.7 billion people, more than 40 percent of the world's population, are united in the top five emerging markets, and a dynamic growing middle class is establishing itself in these countries. Several hundred million Chinese and Indians, for example, already have an income that can be compared with Western standards.
With the increasing complexity of their domestic economy systems, at the same time these countries are, however, presented with the growing challenges of successfully managing the speed and impact of this economic development. Only then will it be clear if the path of the "three billion new capitalists" in the emerging markets expected by economic researchers will be permanently paved with success.
Find out how KPMG's country specialists can support you with your commitment in a foreign country.
The Current Affairs Magazine of KPMG's High Growth Markets Practices
Keep up with new developments added to this site by subscribing to our High Growth Markets News feed (German & English articles).
