As little as two decades ago the label “Made in China” was no guarantee of quality. More than anything, it reflected mass production and cheap labour, enabling Western consumers to buy brand products at affordable prices. Today, emerging market countries like China and India boast annual growth rates that make leading Western economies pale by comparison. Some people believe we are well and truly entering the decade of emerging markets, but what is an emerging market?
There is no standard definition of the term, but generally speaking it denotes low and middle-income countries that cannot be compared with the developed economies, but which are ahead of the poorest economies. Despite substantial differences, emerging market countries have one thing in common: high growth – making them attractive tonational and international companies.
Even though the term ‘emerging market’ does not say a lot about a country’s economy, it has experienced something of a revival in the last decade, with double-digit growth becoming a buzzword in the world of finance. In fact, the emerging market countries performed best during the financial crisis of 2008/2009 – the biggest countries riding out the storm with positive growth rates. Several economic analyses have shown that these countries also helped to turn the wheels of the global economy. In other words, had it not been for the stellar performance of the emerging market countries, the financial repercussions of the economic crisis would probably have been far greater.
The biggest emerging markets are the so-called BRIC countries, an abbreviation for Brazil, Russia, India and China; four large countries with high growth rates and stable, long-term growth and development potential. Their population size alone is a key factor. In China, the affluent middle class currently numbers around 300 million or roughly 25% of the population. And if forecasts hold true, this group will double to 600 million by 2025. Most global companies have long since read the writing on the wall and established footholds in these markets, where billions of new consumers long for the benefits enjoyed by the middle classes in the West since the 1950s – goods and services.
One of the sectors experiencing explosive growth in the new markets is the pharma- ceutical industry. There is even talk of 17 ‘pharmerging markets’, which in addition to the four BRICs include countries such as Mexico, Egypt, Argentina, South Africa, Turkey and Poland. In 2011, global turnover in the pharmaceutical industry is expected to rise by 5 to 7%, corresponding to USD 880 billion, with a large part of this increase coming from the 17 pharmerging markets. Here, growth is set to reach 15-17%, representing sales of approx. USD 170-180 billion according to the “Pharmaceutical & Biotech Industry Global Report 2011” published by the consultancy firm IMAP.
And according to projections, the trend is destined to continue – despite a somewhat bleak summer in purely financial terms. The global pharmaceutical market is expected to grow to the tune of USD 1.1 trillion in 2014. During the same period, the pharmaceutical industry will grow at an annual rate of 13 to 16% in the 17 pharmerging markets. China in particular has helped to boost these positive statistics, with an estimated annual growth of 20% over the next five years. With their huge growth over the last decade, the big emerging market economies have not only become active players in the global economy but are well on the way to becoming economic superpowers, with combined growth exceeding that of the G6 countries within the next 10 to 20 years.
Multinational companies expect about 70% of world growth over the next five years to come from emerging markets. China and India alone will account for 40%. According to researchers and financial observers, the development and key financial indicators of the emerging market countries will secure them a seat and influence at the global economic table, which up till now has been the preserve of countries in the West. Soon it will no doubt be passé to talk about the G6, G7, G8 and G10 versus the emerging markets. Instead it will be a question of looking at which countries and economies act responsibly, and whether they are in Europe, North America, Africa or Asia will have no bearing on the issue.
“These countries have a lot to offer the global economy, also intellectually. The time has come for them to play a greater role and thus accept joint responsibility for the global economy,” says Eswar Prasad, Professor of Economics at Cornell University in the USA and Senior Fellow at the International Monetary Fund’s Research Division.
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