Biggest Challenges Facing Emerging Markets

The emerging markets are challenging developed countries by producing innovative business services and products, for less cost than western nations. Countries including: Kenya, Indonesia, Jordan, Nigeria and Sri Lanka, have emerged as up-and-coming investment hubs.

However, there are a number of obstacles that these countries must overcome in order to keep up with their more developed counterparts. Global real estate portal Lamudi explores the challenges facing the emerging markets.

Attracting talent

The bigger economic capitals draw the majority of the talent, as they have greater recognition around the world, but in the emerging markets there are a number of benefits for businesses. Think cheaper rent, or less competition than many Western countries. Smaller markets offer higher growth potential, with less competition. For these reasons, companies are setting up in emerging markets, and spending time and resources developing local and international talent.

Smaller cities are rising to the challenge by working to invest in their own education and training to narrow the skills gap. Irbid, Jordan’s third most populous city, is home to a number of universities, including Yarmouk University, the Jordan University of Science and Technology, and a number of businesses related to these institutions to develop home-grown talent.

Fluctuating oil prices

The fall of global oil prices in recent months has put growing pressure on energy-exporting countries that count on the commodity as their primary source of income. Economies in Nigeria, Indonesia, Saudi Arabia, and Qatar are all influenced by the changing prices. Nigerian finances are dependent on crude oil for 70 percent of revenue, and therefore any drop in prices has a significant impact of the country’s primary source of income.

However, these countries are diversifying their economies away from dependence on the oil and gas sector. In Qatar, for example, the drop in oil prices is expected to have little impact on the country’s finances.

Infrastructure development

Growing cities within the emerging markets must invest in themselves, to develop their infrastructure, and position themselves as competitors to the bigger markets. In Indonesia, the government is eager to invest billions of dollar in infrastructure projects across the country.

However it is bigger cities such as Jakarta that see the bulk of investment, which makes them increasingly attractive to investors; this is instead of cities such as Bekasi, which has potential to be one of Greater Jakarta’s emerging hotspots, and would benefit from increased investment to achieve faster growth.

Lack of recognition

Smaller cities within the emerging markets are often unheard of – cities like Naivasha, or Ndola – which is a big challenge in attracting FDI and human talent, and therefore in supporting business development. Bigger cities, particularly in the western world, are in the news, attracting investment, whilst the smaller cities are growing rapidly but stay out of the spotlight. The biggest challenge here for these countries is drawing attention to themselves to really show off their potential to investors.

Rapid urbanization

Rapid urbanization is affecting many smaller cities, particularly in Africa. The working population is young, with increasing disposable income, and the majority of these young people live in cities. As people become more affluent, they also become better educated, more career-minded and therefore they have more purchasing power.

The migration to cities increases demand for housing, infrastructure development, retail and commercial spaces. This is putting increased strain on local governments to create more housing units to keep up with the growing demand for high-quality, yet affordable accommodation.