By John F. Robinson and Gary D. Mizel
In doing research for this article regarding emerging markets, we came across an article by Chuan Li from The University of Iowa Center for International Finance and Development. We are using a portion of Mr. Li’s article for which we want to give credit at the outset.
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 economies and politics. We want to make sure that we include Botswana (just above South Africa) as an essential part of our group of emerging market countries. We also wanted to include in the emerging market menu of countries Peru, Uruguay, Ghana, South Africa and Tanzania – we are additionally including the Asian countries of Taiwan and Malaysia.
Taiwan is in the process of creating its own emerging market by promoting the free thinking ideals that led to their move from mainland China. These principles are being prepared within the Taiwanese media to offer full and fair reporting plus accurate and reliable data within the programming scheme from Taiwan and its like-minded allies. For geological greatness, Taiwan is an island that is sequestered – providing privacy from any nearby islands or any giant land masses such as Asia and China particularly. Not to be misunderstood, Taiwan is developing trade relations with China and considers that country to be a vital emerging market.
According to the authors, the leading emerging market countries are from South America, Africa, the Caribbean, Eastern Europe and Latin America; to name a few places. We feel it is crucial to look at either the public or private sector of the mentioned countries for new business opportunities. These countries represent a new frontier of business opportunities for minority and women
owned businesses based in the United States of America. Understanding that the US economy is in the process of a transitioning that is emphasizing global trade by the business community, for both small and large businesses alike. If M/WBEs do not seek out global business opportunities that are needed to survive as business owners in America, they will be very hard pressed to survive in a rapidly changing American economy where opportunities are shrinking for small, minority and women owned businesses as well as large enterprises alike.
Background on Emerging Markets
There are two critical reasons for the importance of emerging markets in this new decade; the failure of state-led economic development and the need for capital investment by emerging market countries. First, state-led economic development has failed to produce sustainable growth in the traditional developing countries. This failure and its tremendous negative impact pushed those countries to adopt open market policies and to change from the state’s being in charge of the economy to facilitating economic growth along market-driven lines. Second, the developing countries desperately needed capital to finance their development, but the traditional government borrowing failed to fuel the development process. In the past, the government of an emerging market country borrowed either from commercial banks or from foreign governments and multilateral lenders like the IMF and the World Bank. This often resulted in heavy debt overload and led to a severe economic imbalance. The past track record of many developing countries also demonstrates their inability to well manage and efficiently operate the borrowed funds to support economic growth. In light of the unsatisfactory results of government borrowing, developing countries began to rely on equity investment as a means of financing their economic growth. They sought to attract equity investment from private investors who would become their partners in development. To attract equity financing, a developing country has to establish the preconditions of a market economy and create a business climate that meets the expectations of foreign investors. This change in financial structuring thus became another factor leading to the rise of emerging markets.
As a precursor to engaging in emerging markets, we want to state emphatically that the worldwide emergence of entrepreneurship is the key element or trait necessary to succeed within this market environment. Minority business enterprises based in the United States of America may find that they have a competitive advantage in doing business in countries that share their roots of origin. That competitive advantage will only make it perhaps a little easier to do business in an emerging market country, but if your product, service, or price is not what a country is looking to obtain from your business your ethnic roots to that country will not help you “close the deal”. Like any other place in the world that a business owner wishes to do business, he or she must be competitive and superior in its business transaction, whether with a country or a private enterprise within an emerging market country.
The rise of emerging markets is changing the traditional view of development as follows: First, foreign “investment” is replacing foreign “assistance.” Investing or doing business in emerging markets is no longer associated with the traditional notion of providing development assistance to poorer nations. Second, emerging markets are rationalizing their trade relations and capital investment with industrialized countries. Trade and capital flows are directed more toward new market opportunities, and less by political consideration. Third, the increasing two-way trade and capital flows between emerging markets and industrialized countries reflect the transition from dependency to global interdependency. The accelerated information exchange, especially with the aid of the Internet, is integrating emerging markets into the global market at a faster pace.
What are the challenges for companies interfacing within emerging market countries? In their effort to create a market economy and to ensure sustainable development, emerging market countries still face big challenges that come from fundamental problems associated with their traditional economic and political systems. A market economy requires those countries to redefine the role of the government in the development process and to reduce the government’s undue intervention. Another serious problem that those countries have to confront is controlling corruption, which distorts the business environment and impedes the development process. An even more challenging task for those countries is to undertake structural reforms with a disciplined and stable economy that is relatively free of political disturbances and interference.
The growth of emerging market countries will be determined by such key factors as the successful growth of world trade markets and global financial stability, emerging market countries will become critical players in the global economy based on their success of integration into the whole global marketplace. Emerging markets countries have a huge untapped potential if they are determined to undertake domestic reforms to support sustainable economic growth. If they can maintain political stability and succeed with their structural reforms, their future is promising and will provide great business opportunities for small, minority and women owned enterprises based in the United States of America and other countries around the world over the next decade.
If any of our M/WBE readers have comments about the above article, please communicate with us through our blog at NMBC.org.
National Minority Business Council, Inc.