New global rising stars: VIIP countries in the global economy

Time for new BRICS

In 2001, British economist Jim O’Neill coined an acronym that summarised the rising economies of the 2000s. Brazil, Russia, India, and China were giants expected to dominate the global economy in the future. After several years, the BRIC acronym was expanded to include the “S” for South Africa, becoming BRICS. The idea inspired decision-makers in these countries to create a framework for global cooperation that was meant to replace US and USD dominance in the global economy.

However, after 2008, some things changed. Brazil and South Africa fell into prolonged stagnation and are no longer associated with economic transformation. Russia became bogged down in a protracted war with Ukraine and slid into isolation. China’s economic growth slowed down due to the real estate market crisis. Its future growth prospects are uncertain because of growing protectionism and the demographic crisis that China will face in the not-too-distant future. Only India sustains high economic growth, far above 5% annually. Today, investors, entrepreneurs, and political decision-makers need to identify which countries will pioneer future economic growth. There is a set of countries that could be classified as the new “BRICS”.

VIIP framework of global development

An average GDP growth of 5% or more, 25% of the global population, bright demographic prospects, and a combined GDP of USD 6.41 trillion. These are the features of the proposed VIIP countries – Vietnam, India, Indonesia, and the Philippines. These countries have a lot in common. They have lower-middle-income status and huge development aspirations. However, they have far fewer geopolitical ambitions than BRICS countries such as China or Russia. Their clear development goals create a stable investment climate for investors.

In the 1990s and 2000s, and partially in the 2010s, global industrial growth was concentrated in China. A cheap labour force, a huge internal market, highly qualified human capital, and well-functioning infrastructure created a good environment for manufacturing FDI. China’s competitiveness overshadowed the competitive advantages of the VIIP countries. However, growing tensions between the USA and China create opportunities for manufacturing investment in these states. Vietnam has gained the most from such investment. Geopolitical tensions, however, are not the only opportunity for economic growth.

China faces a huge demographic crisis. Its population started to decline in 2022, and in 2023 India surpassed China as the most populous country. China will also face population ageing, with problems such as labour shortages and weakened consumption. China’s fertility rate remains close to 1 child per woman, which hinders sustainable economic growth. This long-term problem will create pressure to move factories and supply chains from China to the VIIP countries. Taiwan, South Korea, Thailand, and Japan face similar challenges and will create similar pressure and opportunities for the new rising economies.

Demographic dividend

One of the biggest advantages of Vietnam, India, Indonesia, and the Philippines is the demographic dividend. This term means that people of working age (15–64) are overrepresented compared to the youth population (0–14) and the elderly population (65+). There are not as many young people as in African countries, and not as many elderly people as in Europe. The demographic dividend is the best demographic configuration for development.

The average fertility rate of the VIIP countries is close to 2 children per woman. There are regional differences: for example, South Indian states have a fertility rate close to 1.5 per woman, similar to Europe, while in Indonesia’s eastern provinces it exceeds 3. However, the overall demographic landscape of these countries is stable, and even if there were a sharp fertility decline similar to that in Korea or China, its effects would be visible only after 30 years. While ageing populations in Europe and East Asia and youth bulges in Africa will create demographic challenges for development, the unique position of the VIIP countries gives them additional, and perhaps the biggest, advantages for economic growth.

Energy transition opportunities and challenges

The global economic boom of the 2000s put strong upward pressure on oil prices, which could constrain the economic development of the poorest countries. Similarly, China’s economic transformation pushed up the prices of materials such as copper, aluminium, and iron. Today, stagnation of the European economy and potentially of China’s could make oil and materials cheaper. China’s oil consumption is projected to decline by 4.9% in 2026 due to the transition to electric vehicles.

Declining oil consumption in Europe and China, as well as in Japan and South Korea, will push oil prices down and create opportunities for lower logistics costs in the VIIP countries. This could be a huge opportunity if logistics costs remain a constraint in these countries. Fierce competition on the Chinese EV market is also pushing EV prices down, which may help achieve a faster green transition and energy independence in the transport and logistics sector.

However, these countries face similar challenges regarding energy security. All the VIIP countries depend heavily on oil supplies, and supply shocks such as a blockade of the Strait of Hormuz pose serious risks. Structurally, oil demand and oil prices may decline; however, growing geopolitical instability could make supply shocks more common and create additional challenges for these states. It is important for the VIIP countries to ensure energy security and speed up the energy transition.

AI, threat or opportunity?

There are growing concerns about the challenges that artificial intelligence poses for emerging economies. The mainstream development path for a typical Global South economy was to create an investment climate for manufacturing or service outsourcing from developed economies with large capital surpluses. However, automation and AI will challenge this model because they make it possible to replace cheap labour with algorithms. But is AI only a challenge, or could it also be an opportunity for these countries?

First, consider AI-related breaking news: it mostly mentions issues such as mass layoffs and the capabilities of language models. However, as with previous technologies, AI development will focus not only on growing capabilities but also on adapting them for end users. What does this mean? After the internet was created, with its impressive capabilities, its main commercialisation was based on applying those capabilities directly in daily life. Social media followed, and later more specialised products such as online banking and online government portals.

AI should go through a similar stage of development if the technology is to succeed. The VIIP countries have some competitive advantages in adapting to these changes. Large domestic markets of more than 100 million people each provide fertile ground for product testing. High English language proficiency will enable global cooperation with AI pioneers, such as US companies. A young and ambitious workforce makes quicker AI adoption possible. Also, the absence of an entrenched old-technology status quo will weaken any anti-AI lobbying within these states.

Bright future for VIIP?

Prospects for global economic growth have become less and less optimistic compared with the 1990s or 2000s. There are several reasons for this: population ageing, geopolitical tensions, rising inequalities, climate change, and the interruption of global convergence (the process in which developing countries catch up with developed ones). However, despite this less optimistic big picture, there are some bright spots in the global economy, and the VIIP countries are the brightest of them on the map of global economic growth.

Continued, stable economic growth in the VIIP countries is in the core interest of Western democracies. The transformation of these nations, which are mostly focused on economic growth, may weaken the position of BRICS countries, which are mostly focused on geopolitical ambitions. The VIIP states have high economic aspirations but are highly vulnerable to geopolitical shocks, so it is in their best interest to maintain global stability. Growing economies in these countries may also ease global migration pressure. We can therefore wish them good luck!