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The emerging middle

December 12, 2016

Vinod Kumar   

Blog contributor

The digital, borderless economy is levelling the playing field between emerging and developed markets, accelerating innovation across industries and businesses of all sizes. The numbers speak for themselves: in the past 20 years, global trade has quadrupled, and emerging economies’ share in global foreign direct investment has increased by 25 per cent.

While we once worked in a business landscape that had a ‘rich North/poor South’ divide, international cooperation has been transformed, helping to bridge this gap. The dramatic surge and importance of emerging market multinationals is reinforcing this geopolitical shift even further, and certain markets have seen real rewards for it: China now dominates the top three spots of the Forbes 2000 list – a phenomenon that was almost unthinkable in 2003 when the first list was put together.

Importantly, emerging market multinationals have had to manoeuvre a very coloured business landscape, and drive growth in spite of an uneven policy roadmap. Their ambition and willingness to experiment with their customers and business models, create new economy frameworks and to discard when something doesn’t quite work, has proven to be a recipe for success.

These promising companies hold their origins in many different emerging markets, spanning many different industries. While the products and services on offer and the countries involved are diverse, they have the potential to take advantage of a unique opportunity, thanks to the rapid pace of technology innovation. Companies in China, India and many others have the chance to be the first to develop a host of emerging technologies. New infrastructure opportunities include distributed electrical power generation, development of clean water sources, and smart cities, facilitated by advancements in the Internet of Things. The ambitions for these markets are high, but early adoption of technology could help bring about competitive and economic advantages.

To help bring about these advantages faster, we are seeing initiatives such as Digital India introduced by governments in emerging markets. To illustrate, according to the World Bank, a 10% increase in mobile and broadband penetration increases GDP by 0.81% and 1.38% respectively in emerging markets. If Digital India succeeds in improving broadband penetration in the country (from around 7% today) by 50%, and mobile penetration in rural areas (currently at around 45%) by 30% in the next two years, this would increase India’s GDP by 9% – or $180 billion. The private sector clearly plays a central role in making this happen, so it’s encouraging to see Facebook launch its Express Wi-Fi scheme in India to bring internet access to underserved locations in the country.

According to the OECD, the number of people considered to be in the “global middle class” will increase from 1.8 billion back in 2009, to 3.2 billion by 2020, and 4.9 billion by 2030. It’s clear that ubiquitous connectivity and digital technologies are crucial for boosting the economic prospects of individuals, businesses, and entire communities, driving the growth of emerging economies in the global marketplace. For the “global middle class” to become a reality, it’s important that all emerging markets are nurtured and their ability to innovate and change is harboured.

With the help of advanced technology and infrastructure, policy makers and people’s innovative spirit, I have no doubt that emerging markets will rise to the challenge.

How do you see the digital revolution affecting emerging markets? Let us know in the comments below.