Apr 12

How Emerging Markets Are Emerging as the World’s Oyster for Tech Investors

Emerging economies are making big headlines these days for all the good reasons. Think about it - not only do they have a plethora of opportunities lying around with minimal players to play with, but they also have untapped potential.

The only thing these markets lack is undoubtedly the opportunity to unfurl those hidden potentials. According to Investopedia, emerging markets in 2020 covered countries like India, Mexico, Russia, Pakistan, and Saudi Arabia. As per predictions, Emerging Asia's growth was expected to be somewhere at 5.7% for the period between 2020-24. However, the pandemic of 2020 slashed growth projections over 2% in the same year.
Nevertheless, the MSCI Index for Emerging Markets outperformed the Global MSCI Index at the end of 2020, with a 19.7% return, rather than 14.0%.

To elaborate, MSCI Emerging Markets Index refers to Morgan Stanley Capital International and measures equity market performance in global emerging markets. However, we are not delving deeper into the mentioned concept for now.

The whole point of saying the above statistics is to bring home the fact that investments into emerging markets are not devoid of risks. Still, they allow diversity in an investor's portfolio. Also, the returns are most volatile.
During the trying times, this sector’s overall performance has enticed investors to consider investing in these countries in the coming years seriously. Why? The obvious answer is untamed potential available at reasonable prices.
But, we are still left with another question -

What are the chances for tech investments in the said market?

Tech companies from developing economies might have failed to achieve Apple's global scale, but they bring innovative services faster than the developed markets. During the tumultuous year 2020, the emerging economies had fostered creative solutions to overcome challenges in the education, healthcare, and banking sectors.

Considering the recent trends, we can safely say that the world is on the verge of a digital revolution with emerging markets leading from the front.

The New Digital Revolution

In a time where human contact is frowned upon, digital media was the only way out. This was a challenge for developing countries where the Internet did not reach every nook and corner. This fact, however, did not deter indigenous startups from coming up with innovative solutions to countering the endless challenges.
Let's take the example of the education sector, for instance. Nigerian startup uLesson or Peruvian venture Crehana had successfully bridged the network connectivity gaps and shifted classes online. In China, 200 million students pursued their education online during the pandemic.

The financial sector is not far behind in the race. McKinsey report says mobile-based financial service is the effective conduit for the unbanked during the covid crisis. Some reports suggest the year 2020 was indeed a breakthrough year for Fintech in emerging economies - the examples are endless and counting.

The Surge of Digital Connectivity

Lack of massive investment in infrastructure and digital access widens the digital divide. This is quite a challenge faced by many small and medium-sized enterprises, which usually make up 40% – 90% of GDP across emerging economies. To counter that, the International Telecommunication Union (ITU), the World Bank, and other multilateral and regional bodies have been encouraging investment in digital capabilities across the developing nations. For instance, The World Bank's Digital Moonshot Initiative, a USD 25 billion fund, was created to support the African Union's Digital Transformation Agenda 2030 and digitally connect every individual, business, and government in Africa by 2030.

Internet Outreach
Digitalization is not possible in the absence of proper Internet connectivity. For instance, one-third of India's population does not have access to the Internet, but it is still the world's fastest-growing smartphone market. This figure has doubled in the last four years reaching over half a billion internet subscribers. The digitalizing of India is happening a lot faster than our expectations, and the country is presently a hotspot for the tech sector.

Emerging Talents
The scope of digitalization relies not on semi-skilled or unskilled talents but on skills that are at par with the global standards. Massive open online courses and opportunities to attain degrees from premium universities in other countries have given rise to a new generation of emerging countries' talents. Many are educated in the US or Australia and head back to their countries to work for local and multinational companies. The concentration of talent has shifted base, and emerging nations have reached the forefront.

The mentioned factors shed light on the fact that the emerging nations hone the prerequisites to lead the world in tech innovations. They are the future for tech ventures to play their money and gain valuable returns in the long run.