The word “fundamental” is overused, but there’s no doubt that global market expansion is experiencing a fundamental recalibration. Traditional BRICS economies continue to feature prominently but a new generation of emerging and frontier markets will be the engine of future global growth. For C-suite executives seeking sustainable expansion opportunities, or just to understand their own position, acknowledging these next-generation markets is imperative.
The Shifting Geography of Growth
The headline figures are impressive, by 2035 emerging markets will contribute approximately 65% of global economic growth, averaging 4.06% GDP expansion compared to just 1.59% in advanced economies.[1]
India’s trajectory is emblematic. About to cement its position as the world’s third-largest economy by 2035, its recent inclusion in JP Morgan’s Government Emerging Market Bond Index is more than a technical milestone.[2] It indicates a maturation of capital markets that will unlock substantial resources for infrastructure and development.
The Demographic Dividend: A Double-Edged Opportunity
Demographics constitute perhaps the most compelling argument for emerging market engagement. Whilst advanced economies grapple with ageing populations, emerging markets benefit from a more supportive demographic structure. This creates an expanding labour force and consumer market at precisely the moment when developed nations face workforce contraction.
However, forward-thinking executives recognise that demographic advantage alone guarantees nothing. China, Poland, Thailand, and Hungary all face accelerating population ageing. Even favourable demographics can strain healthcare systems and fiscal accounts through rising pension expenditures. The critical differentiator will be investment in human capital (notably education and technology adoption) to ensure demographic dividends translate into productivity gains rather than remaining unfulfilled potential.
Technology: The Great Leapfrog Opportunity
The relationship between emerging markets and technology represents both profound opportunity and significant risk. Historically low research and development investment has created a technological lag, yet this same gap enables leapfrogging; adopting cutting-edge solutions without the burden of legacy infrastructure.
The telecommunications revolution across Africa exemplifies this dynamic. Nigeria’s Nollywood – now producing 1,500 films annually and worth £2.6 billion – emerged not despite technological constraints but through creative adaptation.[3]
The challenge for executives lies in identifying markets where technological adoption accelerates productivity rather than displaces existing competitive advantages.
Critical Minerals: The New Resource Equation
The energy transition is also rewriting the geopolitical and economic importance of resource-rich emerging markets. Copper demand is projected to double from 25 million metric tonnes today to 50 million by 2035. Lithium requirements must increase 18-fold by 2030 and 60-fold by 2050 to meet European energy transition targets alone.[4]
All this creates extraordinary opportunities for nations with substantial reserves. Indonesia’s strategic ban on nickel exports demonstrates sophisticated resource nationalism designed to foster domestic processing capabilities and attract electric vehicle manufacturers. Additional targeted incentives, including reduced value-added tax and corporate tax concessions further this nationalist ambition. Chile and Argentina are similarly leveraging lithium reserves through investment attraction schemes that balance state involvement with private sector participation.
For multinational corporations, this environment demands nuanced engagement strategies that recognise resource nationalism not as impediment but as framework for mutually beneficial partnerships.
Climate Risk: The Persistent Disruptor
Water stress is likely to impact South and East Asia, the Caribbean, Mexico, southern Argentina, India, the Middle East, and southern Africa. National governments will need location-specific adaptation strategies; for which there may not be sufficient national budget. This means executives have to factor climate resilience into investment decisions, adaptation infrastructure creates opportunities whilst mitigating existential risks to operations.[5]
Supply Chain Reconfiguration: The Near-shoring Imperative
Strategic competition between the United States and China, amplified by pandemic disruptions and geopolitical tensions, has accelerated supply chain diversification. Mexico’s manufacturing ties and market access position it as an obvious near-shoring beneficiary, yet realising this potential requires addressing inadequate infrastructure, security concerns, and regulatory impediments – and of course, political will.[6]
Vietnam demonstrates what sustained policy consistency can achieve. Exports to the United States have quadrupled since 2013, accelerating following tariffs imposed on China. As America’s seventh-largest goods supplier, Vietnam’s success as one of the next-generation emerging markets, comes from deliberate reinforcement of trade potential, despite infrastructural, labour, and resource constraints remaining binding.
The implication is clear: supply chain relocation creates first-mover advantages, but success requires patient capital and willingness to invest in market-specific capabilities rather than simply exploiting cost arbitrage.
Navigating the Geopolitical Labyrinth
The post-Cold War consensus favouring frictionless trade has fractured, replaced by strategic competition and protectionist industrial policies. Most emerging markets maintain hedging strategies, deepening ties with multiple powers whilst expanding regional linkages. For C-suite executives, this environment demands sophisticated political risk assessment that recognises geopolitical fluidity as permanent feature rather than temporary aberration. Frontier market strategies are flexible, not risk avoiding.
Investment Imperative
Traditional metrics suggest emerging markets trade at a one-third valuation discount to developed markets despite superior earnings per share growth projections exceeding 13% annually over the coming two years. This discount reflects both genuine risks and persistent misperceptions about frontier market stability.
Recent capital flows suggest this sentiment is shifting. Emerging market debt funds have experienced their longest consecutive inflows in over four years, whilst exchange-traded funds attracted record inflows.[7]
Five Principles for Market-Creating Success:
- Recognise latent potential: Significant opportunities exist precisely where traditional analysis suggests none, particularly in areas of mass non-consumption
- Democratise existing products: Most offerings can create new growth markets through radical affordability and accessibility improvements – aka demographic dividend investing
- Build complete systems: Successful market creation requires developing entire ecosystem; infrastructure, distribution, training, and support – not merely products
- Innovate around obstacles: Market-creating innovations pull in necessary resources rather than waiting for governments to push solutions
- Target non-consumption for scale: Addressing unmet needs among non-consumers enables rapid, cost-effective scaling compared to competing in crowded existing markets.
The critical insight for executives is that emerging markets 3.0 require moving beyond exploitative models such as cheap labour or resource extraction, towards market-creating innovation that generates local employment, pulls in infrastructure, and builds sustainable competitive advantages.[8] Companies like India’s Narayana Health, performing open heart surgery for £800 to £1,600 with mortality rates comparable to Western standards, exemplify this approach.
Conclusion: Reimagining What’s Possible
The next decade of global growth will emerge not from established centres but from developing economy opportunities that innovate around constraints rather than wait for their elimination. For C-suite executives, success requires abandoning conventional frameworks that view emerging markets through deficit lenses – inadequate infrastructure, institutional voids, corruption – and instead recognising these markets’ capacity to leapfrog development stages through market-creating innovation.
The opportunity is substantial: emerging markets growth will contribute two-thirds of global growth by 2035. Capturing this opportunity demands patient capital, willingness to invest in local capabilities, and recognition that today’s frontier markets are tomorrow’s growth engines. The question for executives is not whether to engage with emerging markets 3.0, but how quickly they can position their organisations to capture the opportunities that conventional wisdom continues to overlook.
Sources
[1] https://www.spglobal.com/en/research-insights/special-reports/look-forward/emerging-markets-a-decisive-decade
[2] https://www.spglobal.com/en/research-insights/special-reports/look-forward/emerging-markets-a-decisive-decade
[3] https://hbr.org/2019/01/cracking-frontier-markets
[4] https://www.spglobal.com/en/research-insights/special-reports/look-forward/emerging-markets-a-decisive-decade
[5] https://www.spglobal.com/en/research-insights/special-reports/look-forward/emerging-markets-a-decisive-decade
[6] https://www.ft.com/content/85e5895f-9ddd-45a6-9126-6fcf742d47e5
[7] https://www.ft.com/content/85e5895f-9ddd-45a6-9126-6fcf742d47e5
[8] https://www.weforum.org/stories/2024/04/five-surprising-facts-about-investing-in-frontier-markets/
