Emerging Economies; Heaven or Hell?

Emerging economies in other words developing economies are important part of  World economy. How one country can have emerging economy? It is basically, if country is developing economically and growth rate is higher we can call it emerging economy. In this article, I will try to show you advantages and disadvantages of this economies for investors.


However, we can not talk about Emerging Economies like a one parameter because usually countries which have emerging economy have different economic power than each other.(Like China and Mexico) We can not compare China with Mexico because China is a big-boy of world economy. So, what is disadvantage and advantage is actually depends on the country's itself. But I will try to give examples to explain.

Good Side

• Firstly, if you are making business in emerging economies it is very big chance that you can be the first in this virgin countries. For example; If you open McDonald's Restaurant in USA, WHO CARES? really. But if you open McDonald's Restaurant in Kazakhstan! Everyone cares, because they don't have any McDonald's yet. (or Starbucks or KFC) So this is very good opportunity for investors who want to make their start-ups in emerging economies.

• Usually in developing countries, clothes, cars, watches everything makes your status better. So, if you have a company or if you can bring to these countries luxury production (it doesn't have to be luxury, it just have to be symbol brand like Rolex or simply Armani) it is very big chance that you will sell it with more price to more people than Developed countries. This is also very big advantage for investors.

• If your firm's local market cap is low or you will start-up small firm, maybe it is time to attract emerging markets. Because mostly in emerging economies the economy is just developing and becoming a new shape. So you can take your seat in there easier and be a big-boy firm easier. And their growth rate is much higher than developed country's growth rate which can have positive effect on your business.

Bad Side

• Mostly developing countries have different cultures than Europe and USA. If you want to be successful in these countries you have to adapt your firm to these countries. Did you know that world's first and probably last non-meat McDonald's is in India? Because in Hindi culture eating cow-meat is forbidden. So, you can adapt somehow to country of course but some firms have big trouble about losing their characteristic features. For big companies it is easier to adapt than small companies.

• Safety is also another negative point. If you have buildings or products traveling across the country it is more easier to protect them in developed countries than developing countries. Because crime-level of developing countries is bigger than developed countries and also depends on the geography of the country terrorism acts is a big threat also. What we see in Arab Spring also, developing countries don't have stable political situation and this can cause civil-wars, military coups which will change the country's economy policies.

Conclusion

Investing in developing countries has big risk but also big gain. If you have some connections in these country's or if you are in one of these countries, you can start-up your business in these economies and be local leader. But it has very big risk, I personally suggest to invest in old-Soviet new-EU countries which have stable policy, no safety threat that much and developing upper-class population.