Many countries in Asia, Africa and other developing regions are undergoing a technological renaissance unlike anything we have ever seen in living memory. A recent report from the World Economic Forum shows that countries around the world will benefit from their rapidly growing technology sectors. Marjo Koivisto, a Programme Lead for Economics and Finance at the World Economic Forum writes that many investors remain reluctant about tackling some of the challenges, but are starting to realize that the opportunities outweigh the risks.
“More than half of the world’s internet users are now in Asia. The majority of the global middle class is in emerging markets (EM), and nearly 90% of the next billion entrants will come from Asia, according to the Brookings Institute. Instead of paying with cash or credit cards, EM consumers use mobile wallets to get lunch or pay for utilities, making the most of swift modern digital infrastructure especially in buzzing urban hubs. There are many reasons for public markets investors to be excited about emerging markets today after a long lull. Yet it remains true that these markets can be difficult to enter as an investor, returns on investment are more volatile than in developed markets, and understanding market fundamentals is challenging due to faster shifts in consumer preferences, and in regulatory and policy patterns,” Koivisto writes.
The dawn of the Information Age propelled the United States and European economies in the late 20th century. The new World Economic Forum report shows that these countries will grow even faster than their Western neighbors as a result of the technological boom.
Why are technology companies booming in emerging markets?
There are a number of reasons that the technology sectors in many emerging markets are growing rapidly. Here are some of the key factors.
Large population base
Approximately 82% of the world’s population is located in emerging markets. Since many of the citizens now have access to the Internet, they currently make up for the majority of the global base of online users. Asia alone accounts for over 50% of all Internet users and over 90% of all global Internet users will travel to Asia at some point in their life.
This has created a massive market for online consumers. Savvy brands are establishing a presence in emerging markets to capitalize off the rapidly growing consumer base.
Access to Global educational opportunities
A growing number of countries are benefiting from the educational systems in United States and Europe. The number of promising students from emerging markets seeking educational opportunities in other countries has risen significantly over the past few years. The trend is likely to hold as more universities accept global applicants and cater to their needs.
Need for a greater efficiency in brick-and-mortar businesses
At the beginning of the emerging market renaissance, the most robust growth was seen in e-commerce and online technology businesses. Growth in that sector has begun to decelerate, while other technology businesses are growing stronger than ever.
Rising demand in other technology sectors is being driven by a need for greater efficiency in traditional businesses. The existing infrastructure has been too costly for many brick-and-mortar companies in emerging markets. Digital Technology is streamlining these businesses and making them more cost-efficient.
Traditionally, many countries have been led by isolationist dictators. Wang Wen of Financial Times writes that these countries are starting to take a more liberal view of the global economy.
“In this light, the current anti-globalisation wave is more like a regional and cyclical relapse at this particular phase among western countries. Though the West has great influence on the world, rising powers seem to perceive globalisation quite differently. In addition, from a mid and long-term point of view, data indicate that the influence of the West might be impaired. Trade, as a percentage of GDP, in the world remained steady from 2011 to 2015.”
Impact on other economies
Professor Phuong T. Duong and many of his colleagues with the Master of IT Management Program at Southern Cross University have discussed the effects that emerging markets and more developed economies have had on each other. While the effects our mixed, the growth of emerging markets has been beneficial overall for all global market players. The rapid growth of technology companies in developing regions has yielded the following benefits for the United States and Europe:
- Offering a larger base of customers, which translates into greater scalability.
- Creating new investment opportunities.
- Providing access to a larger pool of talented technology professionals.
The benefits of globalization are leading to a technological revolution around the world and emerging markets are now driving it.