Emerging Markets
Emerging markets refer to the economies of low- or moderate-income countries that are experiencing rapid economic growth. These nations often benefit from a large, low-cost labor force that is becoming increasingly educated, along with an influx of foreign capital and technology. Countries such as Peru, Chile, Argentina, Colombia, and Saudi Arabia have been classified under this category, which also includes the well-known BRIC nations—Brazil, Russia, India, and China. The term "emerging markets" was first used in 1981 and has evolved to encompass various economies over the years, indicating a transitional stage towards becoming developed or industrialized.
While emerging markets present significant investment opportunities due to their growth potential, they also come with challenges. Issues such as underdeveloped infrastructure, bureaucratic hurdles, corruption, and unreliable information can complicate business operations. Furthermore, these markets may lack adequate protection for intellectual property rights, making it essential for investors and companies to navigate carefully these diverse environments. Overall, understanding the dynamics of emerging markets is crucial for those looking to engage with these developing economies.
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Subject Terms
Emerging Markets
The term emerging markets generally refers to the economies of low- or moderate-income countries that have recently enjoyed rapid economic growth, fueled by the comparative advantage of a large pool of low-cost but increasingly educated labor and the infusion of foreign capital and technology. According to the World Population Review in 2024, emerging markets included Peru, Chile, Argentina, Columbia, and Saudi Arabia, collectively known as the BRIC countries. Because of their potential for rapid growth, emerging markets may offer excellent opportunities for investment, but they often also pose challenges, including underdeveloped infrastructure, difficulties in obtaining reliable information, corruption, and the need to navigate government bureaucracies.
Overview
The term emerging markets was coined in 1981 by Antoine van Agtmael to describe the rapidly expanding economies of many countries in what was then called the Third World. These developing countries, often former colonies, were neither part of the First World of capitalist economies (e.g., the United States and the countries of Western Europe) nor the communist bloc (e.g., Russia, China, Cuba, and the countries of Eastern Europe).
At different periods in history, different national economies have been described as emerging, perhaps not surprising as the term suggests a stage an economy would expect to move through on the way to becoming a developed or industrialized economy. For instance, the rapidly developing economies of Hong Kong, Singapore, South Korea, and Taiwan were often cited as emerging economies in the 1980s (sometimes under the rubric of the “Asian Tigers”). In 1997, economist Jeffrey E. Garten described ten countries he felt were major emerging markets: Mexico, Brazil, Argentina, South Africa, Turkey, Poland, South Korea, China, Indonesia, and India.
More recently, the acronym BRIC was coined in 2001 by economist Jim O’Neill to refer jointly to the emerging markets of Brazil, Russia, India, and China, and the acronym MIKT to refer to the emerging markets of Mexico, Indonesia, Korea (South), and Turkey. In 2009, economist Robert Ward coined the acronym CIVETS to refer to the emerging markets of Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa.
Thus, there is no universal definition of an emerging market, and there are major differences between some of the markets so identified. Still, certain characteristics are shared among the economies of many countries commonly classified as emerging. They are generally low- to middle-income countries that have recently experienced rapid economic growth, fueled by relatively recent changes in the business environment, including greater openness to foreign capital and technology and also greater openness in the political sphere. Emerging markets tend to have a large, low-cost labor force, whose level of education is improving, resulting in a competitive advantage due to relatively low labor costs compared to more developed economies.
While companies in emerging markets can offer valuable investment and expansion opportunities due to their high rate of growth, they can also pose challenges. These may include the need to navigate government bureaucracies; government and private corruption; lack of reliable information about the real conditions in the country or within a particular company; less-developed systems of transportation and communication; and a lack of protection for intellectual property rights.
Bibliography
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