First, all else being equal in theory developing markets ought to offer excess returns in pretty much every sector because they are not as efficient/sophisticated as developed markets. I made a sneering remark earlier about exporting best practices to Nigerian breweries. "Best practices" which ignore local political/cultural/social conditions are unworkable practices or, worse, practices that, when implemented, achieve some completely unintended effect. But you don't need to implement best practices to beat your competition in developing markets, just better practices. To do that, you must understand how and why things work they way they do in the country you're in.

The problem is that all things are not equal. Developing markets must compete for human capital just as they must compete for investment capital. The educated people who would normally be smart, agressive entrepreneurs in developing countries are either a) already part of the established rent-seeking system and, therefore, already making excess returns or b) taking advantage of better opportunities elsewhere. Why mess about with trying to crack the local system when you can make piles of cash in the developed world without having to worry about being economically or physically knee-capped?

In other words, you need the right kind of local partner to make these investments work. But the right kind of local partner often has better things to do than be your local partner. Thus, you're left to choose between various wrong kinds of local partner.

China is a good example of this. When China first opened up, it was as worthless a mess as you could ever hope to see. The best and the brightest Chinese got out of China and never went back, often starting or working for extremely innovative companies in the U.S.

But China did have a lot of highly-trained smart, agressive people who were willing and able (language skills) to game the system -- Hong Kong. They turned China into a place to do business. Now, many Chinese who left China back in the 70s and 80s have gone back or at least established strong business links there and have made piles of cash in the process.

Had you tried to convince some of these people to go back to China to start a business in, say, 1985, they would have laughed at you and quite right, too. But without their (or someone like them's) cultural/political/linguistic skills, any enterpreneurial effort would have been doomed to failure.

In conclusion, if you have the right sort of local partners with the right sort of modern business attitudes you ought to make money in almost any sector -- the more basic the better. If you don't have the right sort of local partners with the right sort of modern business attitudes, you're probably going down in flames no matter how good your idea is.