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Emerging Focus: Emerging Market Economies to Benefit from Robust Growth in Internet Usage and Access

7/19/2011
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Internet usage and access are growing at an alarming pace in emerging market economies. This will benefit economic growth in these countries by contributing towards labour productivity, empowering consumers with knowledge and increasing the overall competitiveness of the economy. It will also have significant implications on businesses creating many opportunities.

Average Annual Growth in Internet Users in 25 Key Emerging Market Economies: 2011-2020

average annual % growth 


Avg annual growth
(Click map to view in detail)

Source: International Telecommunications Union/World Bank/Trade Sources/Euromonitor International

Note: (1) Emerging market economies cover 25 key economies which include Argentina, Brazil, Chile, China, Colombia, Egypt, Hungary, India, Indonesia, Kazakhstan, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Romania, Russia, Saudi Arabia, South Africa, Thailand, Turkey, the UAE, Ukraine, and Vietnam.

Key points

  • Internet access and usage in emerging market economies (EMEs) are expanding at a rapid pace owing to their large populations and rising disposable incomes. The number of Internet users in 25 key EMEs grew by 177% between 2005 and 2010 reaching 954 million compared to the 26.7% increase witnessed in advanced economies during the same period;
  • By 2020, almost 60.0% of the world’s Internet users will reside in 25 key EMEs, up from 48.6% in 2010. The number of Internet users in these countries is expected to grow by an annual average growth rate of 9.8% between 2011 and 2020, reaching 2.2 billion by the end of that period. Within EMEs, India is expected to see the fastest growth in Internet users between 2011 and 2020, rising by 22.1% per year;
  • Despite rapid growth in Internet users, broadband penetration rates vary significantly amongst EMEs and remain low in many countries due to lack of infrastructural development, particularly in rural areas. In 2010, Poland had the highest broadband penetration rate within EMEs with 60.8% of households owning a broadband Internet enabled computer, followed by Hungary (57.3%) and the UAE (45.6%). On the other hand, in Indonesia, only 1.6% of households had a broadband Internet enabled computer in the same year;
  • Robust growth in Internet markets will benefit overall economic growth, create business opportunities and influence consumer spending patterns by empowering consumers with knowledge and choice. The total market size of Internet retailing reached US$38.1 billion in 2010, up from US$8.4 billion 2005, with China alone accounting for over 30.0% of the market size;
  •  However, a ‘digital divide’ persists between advanced economies and EMEs, where the latter lag behind in terms of Internet usage and access. Information, communications and technology (ICT) infrastructure in many of these countries is still underdeveloped compared to advanced economies and may prove to be a challenge in the coming years.

Challenges ahead

  • Despite rapid growth in EMEs, a ‘digital divide’ persists between advanced economies and EMEs. Advanced economies are more competitive in their digital infrastructure and productivity which EMEs are yet to compete with. While this gap is narrowing it was still significant:
  • In 2010, broadband penetration rates in EMEs averaged 21.2% of households compared to an average of 67.5% of households in advanced economies;
  • The networked readiness (NRI) index that measures the propensity for countries to exploit the opportunities offered by information and communications technology is lower in EMEs compared to advanced economies. For example, in Russia the index stood at 3.7 in 2010 compared to 5.3 in the USA;
  • With growing Internet usage, concerns over privacy and data protection, and cyber attacks on businesses and governments are increasing. For example, in 2011, the IMF suffered a cyber-attack on some of its systems while personal information of an estimated 77 million users was stolen by breaching Sony’s PlayStation network;
  • Finally, the growing Internet markets and rising popularity of Internet retailing could threaten traditional businesses like print media or travel agencies. While this trend is not as developed in EMEs as it is in advanced economies, it is growing in importance and will be popular in the coming years.

Prospects

  • By 2020, almost 60% of the world’s Internet users will reside in 25 key EMEs, up from 48.6% in 2010. The number of Internet users in these countries is expected to grow by an annual average growth rate of 9.8% between 2011 and 2020 reaching 2.2 billion by the end of that period. The total number of Internet subscribers will also increase significantly reaching 582 million in 2020, up from 380 million in 2010;
  • Within EMEs, India is expected to see the fastest growth in Internet users between 2011 and 2020, rising by 22.1% per year followed by Philippines (14.2%) and Indonesia (13.7%). India will overtake the USA to become the world’s second largest Internet market by 2020;
  • Broadband penetration rates are also forecast to more than double within EMEs reaching on average 46.3% of households in 2020. This growth will mainly be boosted by increased investments in wireless technologies such as WiMAX and LTE (Long Term Evolution) by governments in major EMEs.

 

 

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