Top 5 Advanced Industries in Emerging Markets

Advanced Industries in Emerging Markets

The global economy is dependent on emerging markets since 34 percent of the global GDP is contributed by 20 emerging markets. 

According to Nasdaq, the six emerging markets to watch out for are China, India, South Korea, Taiwan, Thailand, and Russia. However, each rising market's contribution to the global economy is significant and distinct.

Each emerging market has its collection of advanced industries. The emergence and expansion of such advanced sectors is critical as it drives that country’s economic development. 

The share of agriculture and allied activities in the gross domestic product is one of the distinct characteristics of most emerging markets. However, as an economy transitions, the dependency shifts to the service sector.

Information and communication technology industry, advanced manufacturing, oil and gas industry, textile and apparel industry, chemical industry, and so on are a few common advanced industries of emerging markets.   

Information and Communication Technology Industry

This industry is one of the biggest growth drivers. It is not a self-contained industry. Rather, it is an indispensable part of every other industry. The telecom industry is also a subset of this industry. 

The Boston Consulting Group recognizes China and the United States of America as the “gold coasts” where most of the innovation activities are centered.

Over the years, the development of tech giants in China like Alibaba, Huawei, Tencent, China Mobile, and so on, has made it the tech-king of the emerging markets. On the MSCI Emerging Markets Information Technology Index 90 percent are Chinese companies. However, this paradigm is changing, with a new generation of digital rivals coming up from a variety of emerging markets. 

The tech unicorns just from the emerging markets are valued at $1 billion or more. Whereas the other tech challengers, i.e. the non-unicorns, are valued at close to $6.3 billion. This depicts the positive and bright future of this industry in emerging markets.

Post-2014, close to 10,000 tech companies were incorporated in the emerging markets. Of this, half was from China and the balance was from India, Singapore, Israel, Brazil, Indonesia, Turkey, South Africa, Nigeria, and others. 

The advancement of tech giants in Singapore and Indonesia is worth taking note of. 

Singapore is considered one of the world’s most technologically sophisticated countries. 80 percent of the top tech companies have their presence in the “Miniature Silicon Valley'' of Singapore, the credit goes to the measures taken by the government.

The Singaporean government's Accreditation@SGD programme is functioning as a trigger. It is a magnet attracting investment from local as well as international players. 

The construction of Dubai Internet City in 1999 and Dubai Media City in 2000 was a forward-thinking step by the government of the United Arab Emirates (UAE) in growing its ICT industry.  Dubai Silicon Oasis is a hub of tech companies based out of the UAE.  

The UAE government is providing a forum for the progress of the ICT industry through the Annual Investment Meeting. Entrepreneurs from all backgrounds gather under one roof to market their ideas at this gathering.

This sector's expansion is unavoidable for both developed and emerging countries. 

The COVID-19 pandemic increased the reliance on this sector even further, propelling it into the top five fastest-growing industries of most economies. 

 The greatest challenge of technological advancement is the disparity that it nurtures amongst the world countries.

Advanced Manufacturing i.e. the Fourth Industrial Revolution 

Following agriculture, manufacturing activity in a variety of industries dominates emerging markets. 

When digital technology is combined with the industrial industry, the result is advanced manufacturing also dubbed as "Industry 4.0." 

Over the previous few decades, South Korea has established itself as a premier industrial economy. Korea's Creative Economy Initiative, launched in 2014, was centered on advanced manufacturing. The Korean government has named it "Manufacturing Industry Innovation 3.0," and it includes the construction of smart factories. The commercial and public sectors have vowed to establish more than 30,000 smart factories in South Korea by 2022. The Korean government will also devise strategies to assist more than 40,000 workers in adapting to the new technology.

In comparison to domestic technology, Russia has a significant reliance on foreign technologies. This pattern, however, is undergoing a smooth shift.

This does not change the reality that Russia is already utilizing advanced manufacturing processes. Between 2011 and 2018, it saw a 33 percent growth in the utilization of innovative manufacturing technology.

Soon, African countries will emerge as a technological powerhouse boosting the use of advanced manufacturing. Natural resources, demographics, consistent economic growth, mobile technology adoption, and other factors will fuel this shift in Africa.

Global economies will face several issues as a result of the arrival of automation and digitalization in the manufacturing industry, the most significant of which is a high percentage of unemployment. This stumbling block will exacerbate the plight of emerging markets.

Oil and Gas Industry 

The oil and gas industry is the backbone of any country since it is essential to various activities ranging from industrial production to transportation to domestic use. 

Oil price volatility in the 1970s showed its direct relationship to global economic development.

Many emerging markets, particularly the MENA nations, rely on the oil and gas industry for its economic growth. Industrialization, growing demand for fossil fuels, and the construction of a solid supply chain structure have all contributed to these countries' economic growth during the previous five decades.

Seventeen percent of the world’s petroleum reserves are with Saudi Arabia. The oil and gas industry contributes to about 50 percent of its gross domestic product. 

UAE and Russia also have a major portion of their gross domestic product coming from the oil and gas industry, at 30 percent and 15 percent, respectively. 

The oil price shock caused by the COVID -19 pandemic slowed economic development and generated a budget deficit in these oil-producing and exporting nations. This affected the local government spending capacities during the major crises.

Climate change and the need to invest in a sustainable future are threatening the industry's survival. Local governments are taking measures to gradually reduce their dependency on this sector and invest more in developing eco-friendly substitutes for this industry.

Textile and Apparel Industry

Textile and apparel industries have been at the center of many emerging markets like China, India, Thailand, Indonesia, Bangladesh, and so on. On a global front, it generates about $1000 billion yearly. 

The contemporary influencer era, along with fast fashion, has raised the demand for these businesses. 

The availability of suitable terrain and climate conditions to produce raw materials, as well as inexpensive labour, has supported the rise of this industry in emerging markets.

China ranks first in the world in terms of production and export of textile-related products. The second in line is India which is again an emerging market. 

This industry generates high employment which is crucial to the economic development of a country. In 1977, close to 13 percent of the entire Chinese workforce was employed in this industry, growing to 20 percent in 2001. These numbers have come down due to rapid automation in the industries of China. 

Bangladesh is the second biggest exporter in the industry of textile and apparel, after China. In the year 2018, its exported value was close to $32.9 billion. The textile and apparel industry generates employment for close to 4.5 million people and 10 million people in other related occupations.   

Indonesia’s textile and apparel industry recorded exports of $13.8 billion in the year 2019. These values were $10 billion greater than the previous year. The Indonesian Textile Association aims to expand the sector at a compound annual growth rate of 5 percent. Furthermore, the Indonesian government is putting in place the necessary infrastructure to make Indonesia one of the top five major textile centers in the world by 2030.

Thailand is also taking shape. According to Verified Market Research, the textile market in Thailand is expected to reach $11097.9 billion by 2028 from $8085 billion in 2020. 

Environmental disruption is the biggest challenge facing this industry. The textile market is the second-worst polluter of the environment after the oil sector. As this business develops, more gases are emitted into the atmosphere, generating the greenhouse effect. Furthermore, the paints and dyes used in manufacturing clothes pollute the water.

Speciality Chemical Industry 

Technological advancements, diversified application, and increased demand from the end-user industries are pushing the growth of the specialty chemical industry. 

Specialty chemicals are used in the automobile, pharmaceutical, construction, cosmetic, food packaging, oilfields, paper and pulp, and so on.  

 This industry will reach $379.4 billion by 2027and the Asia-Pacific countries will be its largest contributor. 

China, Korea, India and Brazil have commenced strengthening the performance of this industry. 

Even for the Gulf Cooperation Council, this industry holds significant importance. Saudi Arabia and the UAE with the development of smart cities and increased construction projects are expected to fuel the demand for specialty chemicals. Given its demand in foreseeable future, the local government is providing lucrative incentives to the players who want to establish specialty chemical industry.

Chemicals have their way to harm our lives as well as our surroundings. Over the past few years, the sentiment of equity investors has not remained positive towards the chemical industry. These can poise a challenge for the future of this industry. 

Healthcare, real estate, e-commerce, tourism, and so on are other industries driving the growth of emerging markets.

Every economy is unique, and its development is motivated by its reserves of natural resources, geography, demography, political stability, technological evolution, and other factors. Therefore, each growing country has its own story of how advanced industries evolved and propelled it's economic expansion.