Least Developing Countries

Least developing countries

Least Developing Countries

A country is classified as a Least Developed Country if it meets three criteria:

Poverty Three-year average GNI per capita of less than US $905, which must exceed $1,086 to leave the list

Human resources

Weakness based on indicators of nutrition, health, education and adult literacy

Economic vulnerability

(based on instability of agricultural production, instability of exports of goods and services, economic importance of non-traditional activities).

Structure of Developing Countries

Similar characteristics of LDC’S

Dissimilar characteristics of LDC’S

Dissimilar characteristics of ldc’s

Size and income level Historical backgrounds of a countryResource endowment of countryImportance of public or private sectorNature of industrial sector degree of dependence on external economic forces distribution of powerEthnic and religious composition

Dissimilar Characteristics of LDC’S Size and income level Third world countries differentiate from one an other: The physical size of a countryits population its GDP per capita e.g india 1016 million in 2000 with GDP Per capita level of $460While singapor population of 4 million with GNP per capita $24740

Historical Background Most of the third world nations have been colonies of England, France,Germany, pain etc

Physical and human resources Some are rich in natural resources and some are nothuman resources affected by tradition, religions, ethnic

Public and private sector UDC’S depends upon a mixture of public and private sectorse.g greater role of private sectors in LATIN American n South east Asianas compare to African n South Asian countries

Industrial SectorMain occupation of UDC’S is agriculture {traditional}1996 13% of total labour force in India whileAfghanistan Bhutan lack the setup

External Dependence Foreign goods ,technologies, valuesBound to export raw materialDegree of such dependence vary from one ldc to other

Political structurePeople come to the power to get their interests, though these interest differ from country to country

Ethnic n religious compositionUDC’S racial, ethical, religious ,cultural have often stop developing efforts Religious values {sunni shyah fsad in pak}

Dissimilar characteristics of ldc’s

Similar characteristics of ldc’s

Lower per capita income low level of human capital {skilled person} High level of poverty and under nutrition higher population growth rate dominance of agriculture rapid migration rural to urban dominance of informal sector

low Income

Low Saving

Low investmentper capita

High unemployment under employment

High Fertility

HighpopulationGrowth rate

High labour

supply

Low labour

Demand

Externally mortality control Dependence of foreign labourSaving technologies

Low laborForceproductivity

Poor healthnutrition

Limitededucationalfacilities

Low income

Lower level of living1. Absolute poverty2. In adequate health3. poor education

Low self Esteem

Limited freedoma) From external b)Of choiceDependence material gain Trade policies Leisure Aid life styleTechnologyEducationValues

Poor attitude

Low motivation

International transfer

of material value

Effect of international

economic power

Economic

technologies

Willingness To be dominant

Lack of Control ofOwn destiny

Internal limiting factors

•Vicious circle of poverty•Low rate of capital formation•Agriculture backwardness•Backward human resources•Socio cultural constraints

•Foreign Exchange Constraints

BRIEF INTRODUCTION

• Created after the World War 2 at Bretton Woods Conference in 1944. . The most powerful countries in attendance were the United States and United Kingdom.

• Head Quarters are in Washington D.C,U.S.• Membership with 360 countries.• A number of Partnerships.• First President: Eugene Meyer• Current President: Jim Yong Kim

• Lord Keynes (right) and Harry Dexter White, the "founding fathers" of both the World Bank and the IMF. Seen here at the Bretton Woods conference, where plans were laid to launch the two institutions.

WHAT IS WORLD BANK ?

An International banking organization established to control the distribution of economic aid b/w member nations and to provide loans to the

developing nations for their economic advancement.

It’s official goal is the reduction

of poverty allover the

world

According to the World Bank's Articles of Agreement (as amended effective 16 Feb 1989), all of its

decisions must be guided by a commitment to promote foreign investment, international trade, &

facilitate capital investment.

MAJOR INSTITUTIONS The World Bank comprises of 2 institutions:

i. The International Bank for Reconstruction and Development (IBRD) -188 member countries.

ii. The International Development Association (IDA)- 172 member countries.

•  Pakistan

•  Palau

•  Panama

•  Papua New Guinea

•  Paraguay

•  Peru

•  Philippines

•  Poland

•  Portugal

•  Qatar

•  Romania

•  Russia

•  Rwanda

•  Saint Kitts and Nevis

•  Saint Lucia

Global Alliance for Vaccines and Immunization (GAVI)

Seeks to protect public health worldwide through the widespread use of vaccines.

Joint United Nations Programme on HIV/AIDS Advocates for global action on the HIV/AIDS

epidemic and works with civil society, the business community and the private sector.

The Carbon Fund Works to develop viable, flexible market mechanisms to reduce

greenhouse gas emissions under the Kyoto Protocol.

Global Water Partnership (GWP)Supports countries in the sustainable management of

their water resources.

Resources

The World Bank had initially authorized capital of $10 billion, subscribed by the member countries. The United States of America is the largest subscriber.

The Bank collects funds from members as well as by issue of international bonds.

Functions

1. Granting reconstruction loans to war devastated countries.

2. Granting developmental loans to UDC’s.3. Providing loans to govt. for agriculture, irrigation, power,

transport, water supply, education & health etc4. Providing loans to private concerns for specified projects.5. Promoting foreign investment by guaranteeing loans

provided by other organizations.6. Providing technical, economic and monetary advice to

member countries for specific projects.7. Encouraging industrial development of UDC’s by

promoting economic reforms.

GOALS & Objectives

The, objectives of the Bank, as set forth in the 'Articles of Agreement’ are as follows:

1. To promote long-term foreign investment loans on reasonable terms.

2. To assist the members by facilitating the investment of capital for productive purposes.

3. To promote private investment by means of guarantee or participation in loans and other investments made by private investors.

4. To promote the long-range balanced growth of international trade.

ROLE For achieving sustainable poverty reduction, World Bank

designed a Comprehensive Development Framework (CDF), to play efficient role in assisting developing nations. They are working on some strategies like;

1. Poverty reduction strategies, prepared by IDA-eligible countries.

2. Country assistance strategies, prepared by the World Bank for all borrowing countries.

3. Thematic and sector strategies, prepared by the World Bank for all borrowing countries.

4. Strategy for the support of Africa.

5. The Global Development Learning Network (GDLN) is a partnership of over 120 learning centers in nearly 80 countries around the world. It connects people across countries and regions for learning and dialogue on development issues.

6. The World Bank has been assigned temporary management responsibility of the Clean Technology Fund (CTF), focused on making renewable energy which will be cost-competitive with coal-fired power as quickly as possible.

7. Clean Air Initiative (CAI) is another World Bank initiative to advance innovative ways to improve air quality in cities through partnerships in selected regions of the world. It includes electric vehicles.

COMPETITIVENESS & DETERMINANTS OF EXPORT GROWTH

Concept of competitiveness

If we apply the concept of competitivness on some firm or industry it is concerned with relative price as if Toyota corporation produce some vehicle at a price lower than general motors ,then it is said that Toyota is more competitive than general motors.

Example

According to prof. Krugman uses the word of competitiveness in different meanings. he says that countries do not compete as do the firms. when the firms compete the gain to one firm is equal to the loss of other firm.

Concept of Export;

The exports play an important role in economic growth of a country .Now a days each country is striving hard to boost its exports. thus we locate the determinants of export growth.

The determinants of Export Growth;

1: The quality of exports be improved.

2: The costs of export be decreased. For this electricity, gas and transportation costs be decreased. As a result, the prices of exports will decrease making them attractive for foreigners.

3; The establishment of export industries be encouraged. They be provided with cheaper loans, given relief in term of custom duties and sales tax.

4. The exporters be provided with the facilities to participate in bzns affairs,exhibitions & trade

conferences.5. The innovations and inventions in export industries be promoted.Those techniques be used in export industries

which could improve quality and reduce costs.6.The exporters be not only provided with technical and financial assistance but they also be made available the

consultancy services regarding exportation.

Importance of multinational companies

in under developed countries:

What is multinational company?

• A multinational corporation (MNC) or multinational enterprise (MNE)[1] is a corporation that is registered in more than one country or that has operations in more than one country. It is a large corporation which both produces and sells goods or services in various countries.

Why do multinational companies invest in under developed countries :

• Extraction of natural resources such as oil or iron ore

• Lower labor and production costs• To avoid barriers to entry• Penetrate a new market• Developing countries tend to

have weaker regulatory systems than developed countries

MNCs are beneficial to less developed countries.

• They improve the foundations of a "backwards" economic environment through the diffusion of capital, technology, skills, and exports.

• MNCs have a direct effect on the development of a more citizen welfare conscious government.

• the number of jobs increases, consumer spending increases, the tax base grows and health care is more widely accessible.

• They also have an apparent lasting effect on the values and institutions of the host country .

• in the end there really is no other more reliable way to improve the social, economic, and political environment of a state than by allowing a MNC to invest

IMPORTANCE:

• Multinational companies (MNCs) are spreading their production facilities and operations throughout many underdeveloped and developing countries.

• MNC’S are detrimental to the communities in which they operate. large multinationals hire workers in underdeveloped countries, by paying them low wages which reduces unemployment.

• There are also many instances where multinationals help the communities in which they operate. MNCs often provide jobs to areas where there is little opportunity to work. MNCs also tend to transfer technology to their host countries, by teaching certain Western business practices to workers.

multinational tapping into new market ;those in under developed countries

• According to the article, chocolate company Nestle sells a particular chocolate drink for children in Indonesia for ten cents. Sales of this drink have remained high in Indonesia, even during times of a weak or rough economy. This may be surprising to some, but not to the large multinational companies, who have realized this strong, new market of consumers.

• However, what are the repercussions of multinationals purposefully marketing their products at a very cheap cost to the poor in underdeveloped countries, in order to bring in large sales? One possible consequence may be that if those in underdeveloped countries consume large amounts of these cheap products (which are not necessarily healthy), health problems may emerge.

• It is difficult to say whether the work of MNCs is truly good or bad, as there are so many factors that contribute to their role in underdeveloped and developing countries. Each MNC has the ability to establish their own reputation and way of conducting business affairs in the countries in which they operate. It is up to each individual company to find the right balance between administering a business that results in great profit, and helping the workers and communities that are directly involved and affected by their production practices.

• ROLE OF MULTINATIONAL COMPANIES IN UNDER DEVELOPED COUNTRIES

• 1) presence of MNC is essential for LDCs to achieve the desired level of investment. Most of the LDCs, the argument goes, face a gap between national savings and the desired level of investment. In case of Pakistan, . The gap is to be filled by transfer of resources from abroad. FDI made by MNCs is one the most important, of these sources.

• 2) Technology is the mainspring of economic development. Technology requires a lot of investment in research and development (R&D). LDCs, however, are deficient in both funds and skills necessary for R&D. MNCs, on the other hand, command resources for R&D, which can stimulate innovation in host or recipient countries.

• 3) MNCs also introduce the host country with superior management philosophies and skills. The higher the number of local people employed in managerial positions in MNCs’ subsidiaries, the more pronounced is the effect.

• (4) MNC investment also helps broaden the host country’s industrial base. Foreign investment in an industry benefits those industries that supply inputs to that industry, as well as industries producing complementary goods and services consumed by the factors of production employed in the first industry.

• (5) By broadening the industrial base, FDI also broadens the export base of a developing economy.

• 6) The profits earned by MNCs are taxed by the host government and constitute a fundamental part of public revenue

• 7) LDCs have an extensive capital-labor gap, which accounts for much of unemployment and underemployment. FDI helps fill this gap. By employing local people in their production facilities set up in the recipient country, MNCs generate jobs.

• 8) Another benefit of MNC investment to a LDC’s economy is that it helps promote a business culture of competitiveness, quality and efficiency.

• ) FDI helps improve BALANCE OF PAYMENT position of the host country. BOP may improve on both current account and capital account. Current account position is improved when MNCs export goods from the host country,. As for capital account balance, it is improved when MNCs inject capital into the host economy