Critical Distinctions Between “Less Developed” and “Emerging Markets”

          More than 880 million people, around 12% of the world’s population, and less than 2% of world GDP, as well as 1% of global trade in goods, make up the world’s poorest and weakest segment of the international populace.  This population is known as the least developed countries (LDC); which includes 48 countries; 33 in Africa, 14 in Asia and the Pacific, and 1 in Latin America, Haiti.  The socio-economic development is low in these countries, defined by impuissant human and institutional measures, such as low and unfair income and domestic financial resources are insufficient.  These countries are often plagued by political instability, as well as internal and external warfare.  Low investment and productivity affects their large agrarian economies negatively. 

         Only a few of these countries has been able to cross over into the manufacturing sector, however their product range (textiles and clothing) is limited in labor-intensive industries.  They are of high vulnerability to external terms-of-trade shocks because they rely on few primary commodities for exporting and fiscal earnings.  The LDCs are kept in poverty for many reasons, these include, high debt, dependence on external financing, incessant external deficits, inadequate domestic resource mobilization, program design and application is weak, and low economic management retention.

    In contrast, emerging markets (EME), as the name suggests, are a group of countries that are “emerging,” or developing.  Meaning, their industrial economies are growing rapidly, however, they are not fully developed, unlike the U.S. and Europe, therefore, their economies are more volatile and more receptive to shocks.  These emerging markets have low to middle per capita income, and are undergoing political and economic reforms; thus, have become huge players in the world’s economic, political, and social affairs.  These EMEs have large populations, resource bases, and markets, and are the fastest growing economies in the world, which has enriched the world’s trade growth.  Other transitioning factors include, demographics, such as life expectancy, fertility rates, and educational status, and closer interaction with international capital markets.