Several world economies have witnessed a steep decline in FDI in the recent years. However, other sources of investments have sprung up, cushioning the blow of low FDI flows. On the bright side, developing countries focused on small and medium enterprises (SMEs), which played a crucial role in their economic growth.
SMEs contribute up to 60 per cent of total employment and up to 40 per cent of gross domestic product (GDP) in emerging countries. According to a World Bank study there are around 445million SMEs in the emerging markets; 25-30 million are formal SMEs, 55-70 million are formal microenterprises, and 285-345 million are informal enterprises. These local SMEs can be brought to international markets with the help of technology in the digital age.
Startups can play a crucial role in driving innovation, exploring the gaps in the world of SMEs as new industries are expected to ensure economic growth and sustainability to support 9.7 billion population by 2050.
On the up side, among developing countries – where manufacturing investment is critical for industrial development – the growth was mostly concentrated in Asia and pulled up by high-value projects in natural resource processing industries.