Imagine health care coverage at a cost of $3 a year. Or an entire consumer banking system moving to mobile phones for a public without Internet access. These are innovations taking place in emerging markets out of necessity as these economies rise at an incredible pace, in particular China, India, Brazil and Russia. Along with innovation, these countries are also changing global competition, the financial landscape and the future of business – creating opportunities and challenges for U.S. industry and government.
These issues were the focus of the Emerging Markets Forum, hosted by the Center for International Business Education and Research (CIBER) at the University of Maryland’s Robert H. Smith School of Business on April 29 at the Ronald Reagan Building in Washington, D.C. The daylong event brought together nearly 150 leaders from business, government and academia and many MBA and undergraduate students.
With emerging markets contributing 30 percent of the world’s GDP last year, it is critical for governments and businesses to consider these economies in policy and strategies. “The entire world is so interconnected that if you’re not a player in the rest of the world, you really don’t matter,” said G. “Anand” Anandalingam, dean.
“Our future – for better or worse – is deeply linked with these [emerging] economies,” said Rebecca Blank, Under Secretary for Economic Affairs at the U.S. Department of Commerce, the conference’s opening keynote. Blank said the Obama administration is focused on improving education, supporting innovation and improving infrastructure to make sure the United States retains its strength in the global economy. She pointed to trade with emerging markets. The U.S. exports to these countries, and almost 50% of imports come from emerging markets, with the lion’s share from China and Mexico. But there are also concerns of increased competition and intellectual property infringement that need to be considered.
Businesses leaders are also very attuned to the competition and opportunities in emerging markets. A panel of CEOs from global companies based in Maryland talked about their companies’ strategies for operating in emerging markets, primarily in China and India. Peter Bowe, president of Ellicott Dredges, a Baltimore-based manufacturer of dredging equipment for ports and mining, said his company is operating in many emerging areas, but not China because they are not willing to risk losing the intellectual property that makes them a leading equipment provider globally. The other CEOs on the panel said lack of intellectual property protection is one risk to operating in emerging markets, but one that cannot keep them out.
All of the business leaders agreed that decisions to enter new markets are based on which areas are growing most. These investments became part of the debate on whether the rise of new economies equals the decline of the West and the role of business and government in spurring development.
“It’s not all a zero-sum game,” said panelist Arvind Panagariya, an economics professor from Columbia University. “It’s important to be in emerging economies. It’s positive that innovation is happening in other markets because it speeds up innovation here. Our living standards will be higher as living standards in other parts of the world increase.”
All speakers agreed on the importance of innovation for economic growth – both for the U.S. to stay competitive and for new markets to compete. An afternoon panel explored the genesis of innovations in emerging markets, many of which come from unique challenges of specific markets and users in those markets.
“The locus of innovation has changed; it’s everywhere – and that’s a good thing for the entire world,” said afternoon keynote Tarun Khanna, a professor at Harvard Business School. “The goodness of the world is increased if experiments are run in other places, too. And to tap into that, you need have the structure in place to do it.” Khanna focused on an example of a company in India that has innovated a radical new factory model for hospitals and heart surgeries and can offer full health coverage to citizens for $3 a year.
A final panel addressed the growing financial sector in emerging markets, and how those economies could deal with banking and financial reforms. They also talked about risks and rewards for U.S. banks and financial institutions investing in these markets. Panelists echoed the conclusion reached throughout the day: The future is in the emerging markets.