Emerging economies are the major players of tomorrow in the worldwide economy. As a matter of fact, these economies are considered as the vehicles that would drive the world out of poverty because, in addition to that, they would upgrade the living conditions and make stable societies. The question of long-term development is about more than just short bursts of GDP growth. Real long-term development requires the economy to grow and sustain it, the society to uplift, the environment to be protected, and the institutions to be resilient. Thus, the emerging economies can only envisage the lifespan of their success not in years but in decades if they have sound strategies that combine investment, innovation, social capacity and sustainable practices.
One of the cornerstones of long-term development is institutional quality. To be precise, for countries with institutions that are open, answerable and democratically governed, it is a common feature to be more attractive and stable with their investments, use their public resources efficiently and provide their services to the public in a way that is both effective and trustworthy. The effect of institutional quality along with infrastructure and human capital and foreign investment as the main pillars of sustainable economic growth in developing economies has been acknowledged by the research evidence.
Moreover, strong governance is vital and, among other things, decisive in such major changes as when an economy shifts its energy mix. A study on energy finance in emerging economies indicates that efficient governance makes the investments that are against environmental pollution and less energy-intensive, in both fossil and renewable energy, more profitable in that they reduce the negative impacts on the environment and stimulate economic growth if the policies are well-regulated.
Put simply, without institutions that are capable of not only enforcing laws but also regulating markets and managing public resources on a fair and efficient basis, a country cannot build long-term prosperity.
In most cases, emerging economies are characterized by the lack of basic infrastructure in water supply, sanitation, transport, energy, and communications. Their long-term development depends on how they overcome these deficits. Hence, major international organizations advice that public investment in infrastructure should be prioritized in order to reduce business costs, accelerate private-sector growth, and strengthen long-term development.
Likewise, the development of local supply chains and local businesses, e.g. small and medium enterprises, will not only help the country to be economically resilient but also less vulnerable to external shocks. On the side of government, removal of market-entry barriers and opening up for foreign investment while still nurturing domestic entrepreneurship will greatly contribute to this process.
The public investment strategy of this kind is pivotal in shaping the future economy by making it possible for the country to grow, create employment, facilitate transportation, and raise the standard of living.
An economy in its early stages is mostly built upon a few limited exportable goods or sometimes natural-resource endowments. However, relying solely on such a strategy may result in the gradual fading of the economy, especially if global demand changes or commodities lose their value. Therefore, the diversification of the economy becomes a must. The economies which spread their export baskets, lean toward more complex manufacturing or services, and raise their industrial capabilities have a higher rate of growth that is not only sustainable but also faster.
Export-led industrialization has been one of the foremost models in industrializing countries by which the latter use global trade to build their industrial capacity, create jobs, and integrate the economies with international supply chains.
Complementing the structural reforms that result in public spending being mostly on capital projects, easing of business regulations and welcoming of foreign and domestic investments create a setting wherein trade and industrialization are able to thrive.
By diversifying, one reduces the dependence on a limited number of sectors, manages economic risk, and at the same time creates a stronger and more flexible growth engine that is capable of withstanding different kinds of shocks.
Emerging economies that are solely dependent on the exploitation of natural resources or low-cost labour usually become victims of stagflation after some time. In order to develop in the long run, it is necessary to invest in human capital, education, and innovation. People who have up-to-date knowledge and skills and are in good health contribute to increased productivity, are in a better position to handle complex industries and are a stepping-stone for the economy to reach higher levels in the value chain.
Innovation along with research and development (R&D) is equally important. Committing resources to R&D, embracing new technologies, and creating an environment for innovation are some of the ways through which a country not only got prepared for adapting and competing globally but also led in manufacturing, services, green energy, and digitalizing economies. While some studies contend that innovation alone may not be sufficient to bring about growth in middle-income countries, the overarching argument remains the same: human capital and innovation generate more possibilities than commodity-based models.
In this age of changing global demand and growing competition, it is reasonable to assume that countries that provide their people with skills, education and adaptability are the most likely to succeed.
Green financing along with renewable energy is the answer to sustainable development in emerging economies
Quite a few emerging economies are caught in a dilemma, emphemeral rapid economic growth usually leads to environmental degradation. Nevertheless, environmental sustainability is an inherent part of any long-term development plan. The solution is to shift the investment to renewables and use green financing to facilitate the transition. In their longitudinal study of 25 developing countries over nearly 30 years, the authors came to the conclusion that embracing green technologies resulted in both green growth and environmental sustainability improvements in these countries.
To top it off, financing mechanisms that pave the way for low-carbon and climate-friendly projects, such as green bonds, sustainable infrastructure financing, and renewable energy investment, are the ones that can keep the equilibrium between growth and ecological responsibility.
By taking this dual approach, i.e., trying to grow and at the same time protect the environment, they are opening up a way for development that does not undermine the needs of future generations.
Coordinate Policies and Maintain a Long-Term Vision
Sustainable development is an outcome of neither a single policy nor an initiative. It calls for a well-thought-out set of coherent policies that, apart from the economic, social, environmental, and institutional goals, are also aligned. The concept of policy coherence for development implies that governments have to coordinate their actions across various sectors, e.g., trade, education, infrastructure, energy, environment, industry, finance.
Planning for the long run needs to consider not only the current global trends but also potential shifts in these areas such as climate goals, technological advances, demographic changes. A number of recent academic works give support to the idea of anticipatory governance, a governance model that includes foresight, flexibility, and preparedness features and as a result enables emerging economies not to react to future shocks but to respond.
A vision like that depends on the presence of political will, stable institutions, and the trust of the people.
Conclusion
Emerging economies are on the verge of two different paths. On one side, they are in a position to lift millions out of poverty, shape modern societies and make a substantial contribution to global prosperity. On the other hand, without the right strategies, they are at risk of experiencing short-lived growth, inequality, environmental degradation, or the so-called middle-income trap.
Long-term development is first of all a strong combination between institutions, infrastructure investment, economic diversification, human capital development, green finance, and policy planning. The way these factors work together determines whether a country can build resilient, inclusive, and sustainable economies.
The future is going to be owned by the nations that take the time to think not a few quarters ahead but decades ahead. Emerging economies which are willing to invest in people, institutions, innovation and sustainability today will be the ones to enjoy the fruits of these investments tomorrow.
