What Is a Developing Country?

Definition and Examples of Developing Countries

A developing country is one with comparatively low economic output. There has been a lot of debate as to where to draw the line between a developed country and a developing one, which can be seen by the lack of one single meaning for the term.

The United Nations has some rules for distinguishing between developed and developing countries. The World Bank has stopped using these terms in favor of others, such as "low-income" or "lower-middle-income" economies, based on gross national income (GNI) per person.

• Alternate name: Low-income economy
• Alternate definition: Countries with a per-person income of less than $1,045 in 2020 are considered low-income. The International Monetary Fund's (IMF) definition is based on per-person income, export diversification, and the degree of union with the global financial system.

Countries that are deemed more developed are referred to as developed countries, while those that are less developed are known as less economically developed countries (LEDCs) or frontier markets.

Investors often sort countries around the world based on their level of economic development. Several levels exist, and investors use many economic and social criteria to calculate those levels. These range from per capita income and life expectancy to literacy rates. Developing countries, least developed countries (LDCs), and emerging markets have lower ratings.

While lists of which countries qualify as "developing" may change depending on who is creating them, the following is a list of some of the countries included on the United Nations' list of least developed countries:

• Angola
• Bangladesh
• Benin
• Bhutan
• Cambodia
• Chad
• Ethiopia
• Haiti
• Kiribati
• Liberia
• Myanmar
• Solomon Islands
• Timor-Leste
• Yemen
  

How Developing Countries Work

In the 1960s, classifying countries became common as a way to better understand the outcomes of countries in each group. Sorting countries into these groups allows for easier policy discussions on moving resources to the countries with impoverished populations.

Organizations use different measures to determine how countries are classified. One such grouping is Brazil, Russia, India, China, and South Africa (BRICS), which are often thought to be rapidly developing countries.

Another grouping is newly industrialized countries (NICs), which are countries that are having rapid economic growth based on exports. China, Brazil, India, and South Africa are widely considered to be NICs. Indonesia, Malaysia, Mexico, Philippines, Thailand, and Turkey are also often considered newly industrialized countries.

Exactly why some countries are considered developing isn't just a matter of their current economic state, but extends back to their pre- and post-colonial histories. For example, many countries in Africa are considered "developing." Some historians have argued that colonization hampered the development of those nations and led to the economic issues they face today.

Developing Country vs. Emerging Market

An emerging market is a developing country that is investing in its productive capacity.

The primary difference between these countries is the increased presence of industrialization. Unlike countries that rely on agriculture as their prime industry, emerging markets are making strides in technology, infrastructure, and manufacturing, leading to increased income and growth.