Emerging Markets

What Are Emerging Markets?

What are they?

Emerging markets are countries that are restructuring their economies along market-oriented lines and offer a wealth of opportunities in trade, technology transfers, and foreign direct investment. According to the World Bank, the five biggest emerging markets are China, India, Indonesia, Brazil and Russia. Other countries that are also considered as emerging markets include Mexico, Argentina, South Africa, Poland, Turkey, and South Korea. These countries made a critical transition from a developing country to an emerging market. Each of them is important as an individual market and the combined effect of the group as a whole will change the face of global economics and politics.

What makes them different?

Emerging markets stand out due to four major characteristics.

· First, they are regional economic powerhouses with large populations, large resource bases, and large markets. Their economic success will spur development in the countries around them; but if they experience an economic crisis, they can bring their neighbors down with them.

· Second, they are transitional societies that are undertaking domestic economic and political reforms. They adopt open door policies to replace their traditional state interventionist policies that failed to produce sustainable economic growth.

· Third, they are the world’s fastest growing economies, contributing to a great deal of the world’s explosive growth of trade. By 2020, the five biggest emerging markets’ share of world output will double to 16.1 percent from 7.8 percent in 1992. They will also become more significant buyers of goods and services than industrialized countries.

· Fourth, they are critical participants in the world’s major political, economic, and social affairs. They are seeking a larger voice in international politics and a bigger slice of the global economic pie.