More and more Dutch companies are looking abroad for growth. Whereas previously, the focus was mainly on Europe or the United States, attention is increasingly shifting to so-called emerging markets. These emerging economies play an increasing role in the global economy and offer interesting opportunities for Dutch companies and organisations that operate or want to operate internationally.
Emerging markets are countries with fast-growing economies located between developing and fully developed economies. They are characterised by strong industrialisation, a growing middle class, increasing foreign investment and ever-improving infrastructure. Well-known examples of these types of economies are countries such as China, India, Brazil, Mexico, Indonesia, South Africa and the United Arab Emirates. In many of these countries, economic dynamism is significantly greater than in traditional western markets.
High growth rates
A major reason for this is the strong economic growth shown by many emerging markets. Compared to countries within the European Union or the United States, growth rates are often significantly higher. This is partly driven by a young and growing population, rapid urbanisation and increasing consumption. In addition, these countries attract a lot of foreign investment, developing industries and creating new economic sectors. In terms of technology and digitalisation, many emerging markets also play a notable role. In some cases, these countries even skip entire stages of development. Whereas Western countries have gone through a long evolution of traditional banking services, in parts of Africa mobile banking has immediately become the standard. In Asia, e-commerce is growing rapidly and countries like China and India are leading the way in fintech and digital innovation. This is creating new business models and accelerating economic development.
Increasing influence
These developments also increase the international influence of emerging markets. China and India in particular are playing an increasing role in the global economy, geopolitics and international trade. Their influence now extends far beyond their own region and has a direct impact on global trade flows and economic relations. And that can provide interesting opportunities for Dutch companies. The growing middle class is creating new sales markets and increasing demand for products and services. In addition, some countries offer attractive production locations due to lower costs or a strategic location. Access to raw materials can also be an important reason to do business in these regions. For companies exporting, investing or entering into international partnerships, emerging markets can therefore represent a valuable market expansion.
Challenges?
Opportunities also bring challenges. Political instability, corruption and weaker regulation can pose risks. In addition, currency fluctuations or economic dependence on commodities can create uncertainty. Economic fluctuations in Brazil or political tensions in South Africa show how quickly conditions can change and the impact this can have on investments and trade relations. Despite this, many emerging markets are emphatically investing in their future. There is increasing investment in renewable energy, education, infrastructure and technological innovation. As a result, these economies are expected to become an increasing share of global gross domestic product in the coming decades.
Risks
If you operate internationally, it is important to look not only at growth opportunities, but also at the risks involved in international trade. Especially when exporting to these countries and offering supplier credit, it is wise to properly analyse risks and hedge them where possible. This includes not only debtor risks, but also so-called political risks. Indeed, in some situations, a debtor may want to pay, but simply not be able to because, for instance, there is a shortage of foreign exchange in the country or because political tensions or war are blocking payments. If you properly identify and manage these risks, emerging markets can actually offer a lot of value for an organisation's growth. This allows companies to take advantage of the opportunities these fast-growing economies offer, without taking unnecessary risks.