Emerging Markets – The Rise of New Economic Powers
and America’s Future
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.
