Emerging Markets - Markets In The Transition Phase Between Developing And Developed Countries

Economies differ in many respects, not only in cultural and social terms, but also, to a large extent, in economic terms, and thus the difference in development.

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Definition

Emerging markets - in other words, emerging economies, this name appeared in the early 1980s. It refers to financial and export markets, and was intended to replace the old term "Third World". The adoption of the new name ushered in the end of the era when the global economy was divided into three parts, including developing countries. Emerging markets include: China, India and countries of Central and Eastern Europe.

Emerging markets and investments

Companies that have their roots in emerging markets have cheaper resources and increased competitiveness, which has its source in a much smaller technical and organizational distance between them and less developed markets. Thanks to this, it is possible to efficiently assimilate organizations and techniques from emerging market countries. Of particular importance here is the much lower differentiation of human capital in both countries. This is a significant source of competitive advantage based on lower labor costs and expert research. However, technology also plays an important role here, which significantly limits the possibilities, because this type of advantage is possible only when high technology is not required, including in industries such as:

• agri-food industry
• mining industry
• processing industry.

The attractiveness of emerging markets as an importer and exporter of FDI (Foreign Direct Investment) is determined by: lower level of debt, greater fiscal discipline, higher rates of return on securities, higher interest rates than in developed countries, GDP growth rate, lower level of debt.

Emerging markets and the financial crisis

China and other countries pursued a growth strategy based on exports or pursued a macroeconomic policy focused on accumulating foreign exchange reserves. This resulted in a strong increase in the current account surplus, which, given the clearly slower growth in domestic demand than in income, meant a strong increase in savings. These, in turn, were then transferred to highly developed countries. The above correlations led to a drop in world real interest rates, which resulted in a decline in the propensity to save in highly developed countries and fueled consumerism in the real estate market. The financial crisis has significantly weakened growth in developed countries in favor of emerging and developing economies. Capital has flowed partly from developed countries, both in the form of direct and portfolio investments, while at the same time flowing into emerging countries (especially in Asia).

High tech industries in emerging markets

Currently, the development of high-tech industries in emerging markets is proceeding much faster. Of particular importance here is the globalization of the economy, which has created new development opportunities. The accompanying processes, which include the intensive flow of services, capital and goods, as well as the development of modern means of communication, played a special role in the changes in the structures of the industry. Thanks to globalization, a new organization of production activities has been launched, and traditional production paths such as vertical production or separation of individual production stages have receded into the background. Thanks to this, each country has the opportunity to specialize in a selected, narrow part of the manufacturing process and draw huge benefits from it.

The absorption of new technologies in emerging markets depends on factors such as:

• the level of education of the society and cultural factors,
• investment policy (e.g. clustering, etc.),
• mechanism of development and support (e.g. financial, legal, etc.) of domestic companies operating in high-tech industries,
• the potential of a given market (expressed by reported demand), as well as locational advantages (owned natural resources, existing infrastructure).

Source: Piasecki R. (2015).Determinanty bezpoÅ›rednich inwestycji zagranicznych przedsiÄ™biorstw pochodzÄ…cych z rynków wschodzÄ…cych, Łasak P.(2016).Rola rodzimych korporacji wielonarodowych w rozwoju przemysÅ‚u wysokich technologii na rynkach wschodzÄ…cych