Emerging Markets’ Decade of Disruption

Over the past decade, emerging markets have become the global economy’s main growth engine. According to HSBC, 19 of today’s emerging-market countries will be among the world’s 30 largest economies in 2050, and they will be more important than the current OECD countries.

Emerging markets have already captured 40% of world GDP and 37% of global foreign direct investment. And, while OECD countries continue to stagnate in 2011, emerging markets are growing strongly. China this year jumped ahead of Japan as the world’s second-largest economy, while India attracted a record $80 billion in FDI, double that of 2010. Brazil’s Petrobras, already one of the world’s largest petroleum companies, had a record-setting $67 billion IPO last year.

These economies’ growing wealth is attracting a rising number of OECD multinationals. In Asia, the middle class now represents 60% of the total population (1.9 billion people). China became the world’s top car market in 2010. The world’s richest person is from Mexico. And rapid economic growth is occurring in an environment of small deficits, low debt, and controlled inflation.

But there is another, quieter revolution bringing companies from OECD countries to emerging markets: disruptive innovation. On one hand, emerging-market multinationals are excelling even in high-value-added and technology-intensive sectors; on the other hand, firms from OECD countries are increasingly re-importing innovation from emerging-market companies.