Author, Morgan Stanley, Chief Global Strategist at Investment Management, author of ‘Ten Rules for a Successful Decade’
Emerging economies have struggled to grow in the 2010s, and pessimism is now cutting them off. People wonder how they will pay off debts during the epidemic and how they can grow as fast as in the past – exporting on the path to prosperity – in an era of decline.
Many of the answers to this puzzle are refreshing fast-expanding digital revolutions. Emerging countries are adopting low- and low-cost cutting edge technology, which increases their domestic demand and can overcome traditional stagnant barriers to growth. Over the past decade, the number of smartphone owners has skyrocketed from 150 meters to 4 billion worldwide. More than half the world’s population now carries the power of a supercomputer in their pockets.
The world’s largest emerging market has already demonstrated the transformative effects of digital technology. This emerging technology sector has saved the economy as China’s older rustbelt industries have slowed down more slowly over the past few decades than they did over the past few decades, and could have exploded in the crisis a few years ago. .
Now, often taking the place of innovation, China’s emerging market peers are getting a push from the same digital engines. Since 2014, more than 10,000 technology companies have launched in emerging markets – about half of them outside of China. From Bangladesh to Egypt, it’s easy to find entrepreneurs working for Google, Facebook or other US giants before coming home to start their own company.
In addition, China has the so-called Amazon, Russia, Poland, Latin America and Southeast Asia Amazon. Local companies dominate the market for search in Russia, ride-hailing in Indonesia and digital payments in Kenya.
By a key metric, the digital revolution has evolved as already evolving in emerging economies. 16 of the top 30 countries in the emerging world earn from digital services as part of GDP. For example, Indonesia is more advanced than France or Canada in this measure, and since 2013, the amount of digital revenue in emerging countries has grown at an average rate of 2 per cent per annum, compared to 11 per cent in developing countries.
How can it be that poor countries are adopting common digital technology faster than the rich? An explanatory practice and its absence. In brick-and-mortar stores and service associations, customers often feel comfortable and are slow to leave their suppliers. In countries where people find it difficult to even find a bank or a doctor, they bring the first digital option.
Outsiders have a hard time realizing what impact digital services can have on the underserved population. Countries with shortages in schools, hospitals and banks can quickly address these gaps by setting up online services. Although only 5 percent of Kenyans carry credit cards, more than 70 percent have access to digital banking.
The “digital divide” is getting narrower in many places. Most of the big countries in the emerging world are fast growing internet bandwidth and mobile broadband subscriptions. In the last decade, the number of Internet users has doubled in the G20 countries, but emerging countries such as Brazil and India have seen the biggest gains.
The key to sustainable economic development, the digital impact on productivity is visible on the ground. Many governments are running online services to make online services more transparent and risk of corruption, perhaps the most formidable obstacle to doing business in the emerging world.
The cost of starting a business has stabilized in developed countries, declining sharply in emerging countries since 2010, to just 227 percent from 66 percent of average annual income. Entrepreneurs can now start an affordable business by organizing many of what they need on their smartphones. Lagos and Nairobi are emerging as local fintech hubs, with leading executives committed to further expanding Internet financing opportunities to boost Africa’s “digital GDP”.
This is the very first day. As an economist Carlotta Perez showed up, Technological revolutions are long lasting. Innovations such as cars and steam engines were still transformed into economies half a century later. Now, the faded era of globalization will only limit the number of emerging economies that can improve exports, but the era of rapid digitization has barely begun. It provides a revolutionary new way for many developing economies to adapt to the developed world.