Preface

First, a clarification of when a country is classified or considered an "emerging market" should be provided. There are some varieties within the existing literature of this specific field. The literature defines the critical characteristic of an emerging market as a permanent change. Such markets show attributes of an evolving economy, ongoing improvement of living standards, and stable development of their economy and institutional structures. Overall, an emerging market must be in a steady state of economic and social evolution. The wealth of the country is neither extraordinarily high nor extremely low. The economy and political situation are not too protective among foreign capital and actions.

However, according to the literature, the widely used economic development measure of emerging markets is the doubling of per capita income. The United States needed 47 years from 1838 onward, and Britain needed even longer with 58 years starting from 1780. The Asian countries overtook them by far, needing only 34 years during the countries' industrial-economic liberalization through the United States in 1885, and South Korea achieved a doubling in 11 years in 1966. China topped that growth by achieving a doubling of per capita income in only nine years, followed by another doubling in the subsequent nine years, and achieved this a third time as well. India showed a slower but steady growth and managed a doubling in 25 years the first time. It can be concluded that a country is considered an emerging market when it shows the following characteristics: steadily changing but improving economy, certain liberalization of the economy, increasing living standards, and working institutions. In addition, it must be able to double its per capita income—expanded by the indicator of a still low indicted economy which demarcates from an industrial fully developed country.

Some chapters in this book outline preconditions necessary to clarify the origin and development of an emerging market. According to the literature, two principal strategies exist for the acceleration of an emerging economy. The first path is based on the fact that every country striving for an emerging economy can learn valuable lessons from countries that went through all development phases before them. According to their advanced and wealthy economies, the Asian countries went through that development in the last two decades to become high-level emerging markets. Those countries became so-called Organization for Economic Cooperation and Development (OECD) countries and provided sufficient guidelines for creating a development strategy.

Those guidelines include several historical experiences, observations, and analyses that indicate the chances of success or failure of specific strategic approaches to become an emerging nation. Historic observation of economists suggests that market economies typically have good chances to outperform a planned economy, which increases when production activities become more information-intensive and sophisticated. Furthermore, it could be determined that there is no evidence of significant economic development under the governmental form of autarky since a certain liberalization of an economy, its openness to trade, as well as the support of

technology and innovative ideas from foreign countries, are preliminary attributes to start significant and fast economic growth. However, recent studies have emphasized the multiplicity of attributes that can be beneficial to or inhibit increasing development and, in particular, the idiosyncrasies of institutions. This proposes that there is no transparent development model or a simple policy prescription that guarantees development. Exemplified by China and India, both countries' development strategies were significantly different, and neither corresponded precisely to the neoclassical economic tenet.

incentives representing protection against the threat of failure or takeover. The focus of privatization-based organizations switches to a profit-orientated manage-

Furthermore, the reliance on international institutions and organizations who monitor and support but provide consultation to economic development is necessary. Those institutions guarantee international law enforcement regarding property and contractual rights and serve as a transmitter of information, managing competition and observing and regulating the process of investing and growth.

Even though there is no clear blueprint for creating an emerging market, including the factors mentioned in this Preface, the illustration below draws the analyzed interrelations between national institutions and areas to give an overview of neces-

The start of the economic evolution of emerging markets relies on specific external and internal influences. International organizations represent external resources that provide a list of recommendations for those nations, such as trade, aid, and financial matters. The so-called Washington consensus provides a clear set of beliefs building the fundamental attributes of development policy. Those attributes included the mentioned liberalization of external economies to deregulate and privatize industry branches, pursue monetary asset flows, and create a stable fiscal

In an ideal case, the literature recommends a combination of globalization and liberalization as the real possibility to increase economic growth and levels of competition on a global scale. This increasing competition contains specific negative and positive side effects, as the domestic market's pressure increases due to the global selection of industry. On the other side, this increased competition will also raise investors' attractiveness level and benefit the overall import rate of tradeable goods. Nevertheless, both need to be considered by the host country since a certain level of limitation and restriction is necessary to protect the new emerging economy and production from global competitors and international investors. This level of national economy protection needs to be well-balanced to remain attractive for foreign players and protect the national economy to enable sustainable growth. This is mainly because in the very early stages of an emerging market, the FDIs of external powers will focus on an undeveloped country's infrastructure and technology. This high focus on rudimentary infrastructure sections can significantly influence and long-term dependency on foreign players at the local level. Examples of a balance between those factors are Singapore, Costa Rica, and the Republic of Ireland, especially for FDIs as the main drivers of economic growth. Nevertheless, while it has been tolerated that external factors could limit the domestic policy discretion, considerable freedom for national management remains. To lead back to the illustration above, the initial task of a nation should be to focus on macroeconomic stability, containing a stable growth, low level of inflation, a good external and fiscal balance, and an attractive business environment in the form of well-developed

We would like to thank IntechOpen publishing for the opportunity to serve as editors of this book. We appreciate that they believed we could provide the necessary knowledge and technical assistance. Together we managed to find the other great colleagues that contributed to this book. We thank each of the authors for

sary attributes to address the future development of emerging markets.

ment perspective.

policy.

infrastructure.

The second strategy for the acceleration of an emerging economy is the overall influence and toleration of foreign influence since those international resources will be an essential facilitator for the progress of economic development. Sufficient monetary resources are essential to trigger real economic growth. These monetary resources can be raised by domestic savings or be provided by Foreign Direct Investments (FDIs). China and India provide a real example of increasing their national economy by investments from international sources. Both economies relied heavily on foreign capital to build up and drive new industry branches, particularly China, which attracted enormous monetary flows into the domestic economy. Those financial streams under international businesses' control have tremendous positive side effects for an emerging economy since they also provide more than just sheer capital, such as knowledge, know-how, technology, management skills, innovations, and overseas market access. Very labor-intensive, small-scale (clothing, toys) industries were the first targets of these international investments, in later years followed by high-tech multinational companies. In comparison, India's focus is the attraction of technological know-how to build up a significant service industry for software-related development that directly benefits the nation's technological expertise.

One precondition to continue the growth and stability of an economy, in the long run, is a stable macroeconomic environment. If this stability is missing, domestic economic agents are reluctant to commit capital and contribute to the development of a nation, and international financial investors are likely to avoid such economies. Analyzing poorer countries or regional areas on a global scale that continue failing to trigger the economic development process can determine that those countries are in grave danger to miss the political broader sense. In most cases, the sources of economic, political, or social failure can be determined as factors of economic instability. Stability needed to perform an economic reform includes controlling certain institutions and processes that facilitate economic stability, inflation control, currency fluctuations, unsustainable trade deficits, or excessive governmental expenditures.

Additionally, the stabilization of the national economy's opening is a key factor in sustaining ongoing growth. Historical analysis has shown that partial or complete liberalization of the national economy is preliminary to attract foreign resources since there is no evidence for rapid economic growth of a closed economy of autarky. The literature points out that the administration of a nation needs to address specific points when performing an economic reform of the country, including the necessity to allow or encourage certain privatization actions of publicly owned facilities within the national economy to lower expenses and abet knowledge transfer. Privatization benefits allocation efficiency through improved management and lower prices. It increases the production rate of used resources (time and material) since privatization enables the creation of market-based

incentives representing protection against the threat of failure or takeover. The focus of privatization-based organizations switches to a profit-orientated management perspective.

Furthermore, the reliance on international institutions and organizations who monitor and support but provide consultation to economic development is necessary. Those institutions guarantee international law enforcement regarding property and contractual rights and serve as a transmitter of information, managing competition and observing and regulating the process of investing and growth.

Even though there is no clear blueprint for creating an emerging market, including the factors mentioned in this Preface, the illustration below draws the analyzed interrelations between national institutions and areas to give an overview of necessary attributes to address the future development of emerging markets.

The start of the economic evolution of emerging markets relies on specific external and internal influences. International organizations represent external resources that provide a list of recommendations for those nations, such as trade, aid, and financial matters. The so-called Washington consensus provides a clear set of beliefs building the fundamental attributes of development policy. Those attributes included the mentioned liberalization of external economies to deregulate and privatize industry branches, pursue monetary asset flows, and create a stable fiscal policy.

In an ideal case, the literature recommends a combination of globalization and liberalization as the real possibility to increase economic growth and levels of competition on a global scale. This increasing competition contains specific negative and positive side effects, as the domestic market's pressure increases due to the global selection of industry. On the other side, this increased competition will also raise investors' attractiveness level and benefit the overall import rate of tradeable goods. Nevertheless, both need to be considered by the host country since a certain level of limitation and restriction is necessary to protect the new emerging economy and production from global competitors and international investors. This level of national economy protection needs to be well-balanced to remain attractive for foreign players and protect the national economy to enable sustainable growth. This is mainly because in the very early stages of an emerging market, the FDIs of external powers will focus on an undeveloped country's infrastructure and technology. This high focus on rudimentary infrastructure sections can significantly influence and long-term dependency on foreign players at the local level. Examples of a balance between those factors are Singapore, Costa Rica, and the Republic of Ireland, especially for FDIs as the main drivers of economic growth. Nevertheless, while it has been tolerated that external factors could limit the domestic policy discretion, considerable freedom for national management remains. To lead back to the illustration above, the initial task of a nation should be to focus on macroeconomic stability, containing a stable growth, low level of inflation, a good external and fiscal balance, and an attractive business environment in the form of well-developed infrastructure.

We would like to thank IntechOpen publishing for the opportunity to serve as editors of this book. We appreciate that they believed we could provide the necessary knowledge and technical assistance. Together we managed to find the other great colleagues that contributed to this book. We thank each of the authors for

their valuable contributions. We think this volume will be an asset to the professional community. We also wish to thank our technical reviewers and colleagues at IntechOpen. We could not have done it without you.

#### **Dr. Vito Bobek**

Section 1

Critical Issues of Economic

Development of Emerging

Markets

Institute of International Management, University of Applied Sciences FH Joanneum, Graz, Austria

#### **Dr. Chee-Heong Quah**

Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur, Malaysia

## Section 1
