The newly-released Fortune Global 500 Index for 2017 reaffirms the ever-increasing role that emerging markets are playing as a driver of growth across the world economy and the pull they are exerting on many of the biggest international companies.
According to a press release issued by the Oxford Business Group (OBG) the number of top firms either relocating to emerging economies or extending their reach into these dynamic markets has been rising steadily since the turn of the millennium. Data compiled by EY shows that 132 of the world’s largest companies were headquartered in emerging markets in 2014, up from 21 in the year 2000.
Oliver Cornock, OBG’s Editor-in-Chief, said that while emerging markets have been increasing their share of global GDP since the fall of the Berlin Wall, their expansion had accelerated markedly over the past two decades, buoyed by favourable tax environments and other competitive advantages.
“Corporate income tax imposed on non-US-headquartered companies fell from 39,2% in 2000 to 28,1% in 2014, while the share of Fortune Global 500 companies based in the US declined from roughly 36% to 26% over the same period,” he said. “Other factors fuelling the relocation of these companies to emerging economies include local market potential, maturity of the industry, logistical capabilities, level of infrastructure, political stability, the quality of the employment market and ease of business entry.”
Cornock noted that data also pointed to a rise in the number of new firms from within emerging markets earning a place on the Fortune Global 500 list, especially state-owned enterprises (SOEs). According to a report by PwC, the proportion of SOEs on the index grew from 9% in 2005 to 23% in 2014. SOEs from China are playing a key part in steering this shift, which is expected to continue, according to Cornock.
“Privatisation and partial divestments of state-owned firms and assets in the years to come will undoubtedly result in more companies finding their way onto the Fortune Global 500 list,” he said.
Cornock added that emerging markets were expected to dominate the development and composition of the index in the years to come. “Research suggests that emerging economies’ share of the Fortune Global 500 companies will jump to more than 45% by 2025.
The Fortune Global 500 Index is an annually-produced list of the world’s 500 largest corporations, ranked by revenue for the fiscal year ended on or before March 31. Its latest list was published on July 20.