Emerging Countries vs Developing Countries: Differences and Similarities
Emerging countries vs developing countries are distinct in several ways such as level of economic growth, market size, and income. They also share similarities, especially in having considerable mineral and natural resources.
The categorization of countries into developed, emerging, or developing countries is used by several international organizations such as the World Bank, International Monetary Fund (IMF), and the World Trade Organization to classify countries based on their economic situations, extent of infrastructural and human development, market size, population, etc.
This categorization of countries is often useful in the distribution of grants and aid as well as several intervention programs aimed at improving the recipient countries.
Most people find it hard to differentiate between emerging countries and developing countries. This may be due to some similarities that exist in these countries, it may also be due to inadequate information on the exact differences.
The Human Development Index (HDI) is a measure of a country’s level of development. It evaluates factors such as life expectancy, educational level, and Gross Domestic Product (GDP) per capita. HDI is often used to ascertain whether a country is developed, emerging, or developing.
Generally, emerging countries have a mid-level life expectancy, education, and GDP. Developing countries on the other hand have low life expectancy, high illiteracy rates, and low GDP.
In this article, we shall consider the factors that differentiate emerging countries from developing countries. We shall also consider their similarities but that will be after we understand what emerging countries and developing countries mean.
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What are emerging countries?
Due to this rapid growth through establishing new firms and expanding existing industries, they have high productivity levels and a consequent high gross domestic product (GDP).
A study by Laurence Daziano in 2014 outlined that emerging countries can be identified using the following five economic criteria:
- A large population of over 100 million people.
- A potential 10-year growth rate hovering around 5%.
- An urbanization rate of 50% and still growing.
- Infrastructural development alongside the economic boom
- A politically stable environment that will aid the implementation of long-term projects.
Vladimir Kvint gave an additional definition of emerging countries in his book titled, The Global Emerging Market: Strategic Management and Economics, thus:
An emerging market country is a society transitioning from a dictatorship to a free-market-oriented-economy, with increasing economic freedom, gradual integration with the Global Marketplace and with other members of the GEM (Global Emerging Market), an expanding middle class, improving standards of living, social stability and tolerance, as well as an increase in cooperation with multilateral institutions.
Vladimir Kvint
Characteristics of emerging countries
A top characteristic of emerging countries is their high population, mostly comprised of working-age people. This provides an adequate workforce for the expanding industries.
As more people get gainfully employed, the living standards of citizens improve, leading to reduced poverty rates.
Additionally, the high level of production leads to the availability of more goods than can be locally consumed, hence the export sector of emerging markets is vibrant as they export these goods to other countries.
The revenue generated has a direct effect on the country’s GDP growth and an influx of capital which further sponsors the continual growth of industries. Thus, some characteristics of emerging countries are high levels of production and high rates of economic growth.
An additional feature of emerging countries is their attractive markets. Investors are usually attracted to emerging markets due to the higher return on investments that they offer.
The higher rates are an incentive to attract investors since most emerging markets are prone to market volatility and most investors, especially those that are risk-averse would ordinarily not want to invest.
All these combine to ensure the rapid economic growth that is recorded in emerging countries as well as the expansion of its market to accommodate more players by adopting a free market approach or a mixed economy.
See also: LME vs CME: Coordinated Market Economy vs Liberal Market Economy
What are developing countries?
When compared to developed countries such as Switzerland, the United Kingdom, or the United States, developing nations often experience higher rates of poverty and unemployment and lower literacy rates.
Developing countries are alternatively called underdeveloped or less developed countries. This is most likely due to the low level of development evident in most countries that are classified thus.
Characteristics of developing countries
Some characteristics of developing countries are high unemployment rates and a large dependence on subsistence agriculture. The high unemployment rate can be attributed to low literacy rates and poor infrastructural development.
These combine to slow the rate of industrialization because most industries cannot judiciously operate in areas without basic infrastructure such as good transportation networks, and regular water and power supply.
Since subsistence farming is the most common employment, individuals rarely produce more than they can consume. This also has a direct impact on industrialization as there are hardly enough raw materials for industries.
High rates of poverty is another characteristic of developing countries. This can be attributed to the low rate of industrialization and the high rates of unemployment which directly impact the purchasing power of individuals and households.
Due to the high rate of poverty in developing countries, another characteristic they have is the low standard of living. Most cannot afford basic necessities such as food, shelter, and clothing.
An example of a developing country with a high poverty rate and poor living standards is South Sudan. The World Population Review reported that the country’s poverty rate is 82.3%
South Sudan’s poverty rate is 82.3%, indicating dire economic challenges and a critical need for humanitarian and developmental aid.
Additionally, economic activities in developing countries are generally low thereby making them have an equally low GDP.
See also: Free Market vs Regulated Market: Similarities and Differences
Differences between emerging countries vs developing countries
- Access to funds and investments
- Market size
- Level of production
- Income level
- Economic growth
- Type of government
- Infrastructural development
Access to funds and investments
Emerging economies have greater access to funds and investments. This is due to their highly attractive markets which offer investors a high return on their investments.
This incentive makes more investors willing to invest in emerging markets thereby aiding more companies to have adequate funds to finance their business operations.
On the other hand, developing countries have a poor level of industrialization, hence, there are no structured channels through which investors can invest. Hence, there is generally limited access to funds and investments for the few companies that operate in a developing country.
Therefore, access to funds and investments is another factor that differentiates emerging countries from developing countries.
Market size
The markets in emerging countries are usually bigger and better structured than those in developing countries. Most emerging countries have standard stock markets as well as structured operations for exports and imports.
This helps in aiding the smooth running of diverse economic activities in emerging markets and aids their continual growth and ever-expanding economy.
Developing countries largely have smaller markets that operate more on internal or local market operations with basic structures that may not align with global requirements.
For instance, while emerging countries like China and India have standard stock markets such as the Shanghai Stock Exchange and the National Stock Exchange of India respectively, developing countries such as Madagascar and Equatorial Guinea do not have a stock market.
Level of production
The level of production is another key differentiator between an emerging country and a developing country. In emerging countries, the rapid rate of industrialization often leads to high levels of production which consequently leads to increased economic activities, especially exports.
The high dependence on agricultural activities, especially subsistence agriculture, in developing countries, often results in low levels of production as individuals and groups rarely have access to mechanized equipment which can commercialize and increase production.
Income level
Generally, emerging countries fall between lower middle to upper middle-income economies while developing countries fall between low income to lower middle-income economies.
This means that the gross national income (GNI) for emerging countries is between $1,136 and $4,465 or $4,466 and $13,845 while developing countries have a GNI of less than $1,135 or $1,136 and $4,465 based on data from the World Bank.
Since a country’s GNI is an indicator of the per capita income of its citizens, individuals in emerging economies earn better and thus have a higher standard of living. Individuals in developing economies conversely earn less and have a lower standard of living.
Economic growth
The economic growth of emerging countries and those of developing countries are also distinctly different. Emerging countries are known to have a rapid rate of economic growth due to the increased economic activities that occur in them as a result of rapid industrialization and well-structured financial markets.
For developing countries, economic growth is usually slow due to poor infrastructure, largely unstructured financial markets, and low industrialization.
Type of government
The type of government is another difference that exists between emerging countries and developing countries. Most emerging countries are democratic countries that have a free market or a mixed economy.
The presence of a democratic government and a mixed or free economy fosters the economic growth and development of emerging markets by aiding them to have access to global market opportunities.
Developing countries on the other hand mostly have monarchies or dictatorships as their main governing practice. Additionally, they mostly have a traditional economy which does not encourage external trade or expansion to get a global market.
Infrastructural development
The level of infrastructural development is also a differentiator of emerging and developing countries. In emerging countries, a larger percentage of the country has good infrastructure such as good roads and transportation networks, portable water, and regular power supply. The rate of infrastructural development and maintenance is equally high.
For developing countries, it is mostly the urban areas that have some level of access to good infrastructures but the larger percentage of the country especially the rural areas do not enjoy infrastructural development nor have access to basic infrastructures.
See also: Importance of Emerging Markets
Similarities between emerging countries vs developing countries
- Both emerging and developing countries may experience market volatility due to various factors including political instability, changes in the prices of commodities, and other socioeconomic and political factors.
- Some emerging and developing countries are classified within the same group as lower-middle-income countries. Examples include emerging countries such as India, Nigeria, and Iran and developing countries such as Vietnam, Mongolia, and Zimbabwe.
- Both emerging and developing countries mostly have large deposits of mineral and natural resources such as precious stones, crude oil, and precious metals.
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What is the difference between emerging and developing nations?
Emerging nations generally have better access to funds and investments, bigger markets, and a democratic government. They additionally have more rapid economic growth, higher income, and high rates of production.
Conversely, developing nations have limited access to funding and investments, a small market size, and an authoritarian government. They also lack proper infrastructures to boost production levels and have low incomes.
The table below summarizes the main difference between emerging nations and developing nations.
| Comparison criteria | Emerging nations | Developing nations |
|---|---|---|
| Market size | Big | Small |
| Type of government | Democracy | Monarchy or dictatorship |
| Production level | High | Low |
| Per capita income | High | Low |
| Living standards | High | Low |
| Unemployement rate | Low | High |
| Economic growth | Rapid | Slow |
| Access to funds and investments | Easier | Hard |
| Poverty rate | Minimal | High |
| Literacy rate | High | Low |
| Type of economy | Industrialized | Agrarian |
| Infrastructural development | Better | Poor |
