Globalisation, ICT and Developing Nations:The Main Challenges

Sumit Roy

The Conceptual Frame

• Globalisation: a historical process encapsulates in its recent phase compression of the world economy, based on ICT, and above all opening up of space which transcends national boundaries while coexisting with the nation state and inter-state and international relations

• Essential to re-conceptualize traditional notions of national and international relationships based on simple territorial divisions and ushering in global relationships and a global political economy

• Gaps in studies on globalisation: often based on either abstract or selective empirical findings with limited use of a comparative inter-disciplinary approach encompassing developing-world interactions, and the scope of state and non-state forces in shaping the process

• Aim of paper to contribute –exploring relationship between globalisation, international relations and international political economy-encompassing the comparative Asian and African experience of integrating into the global economy and the role of ICT in stimulating development

• Theoretical framework is political economy using economics and international relations within a comparative structure

• The focus is on role of state and non state forces in shaping globalisation within a n international and comparative frame and its implications for growth and conflict reduction

• The analysis challenges the early studies of globalisation which implicitly assumed that it was positive and would unfold material gains surpassing temporary disruptions to national structures and hence would be enthusiastically embraced by the majority of people

• Harsh reality unfolds a complex and uneven process of integration, disintegration, marginalization and re-integration of nations, regions, and social groups into the changing world economy

• Analysis unfolds the role of state and non-state institutions in trying to fulfil the laudable goals of globalising and the prospects of realizing a vision of one world with shared universal values

Globalisation,International Relations and Political Economy

• This section focuses on the relevance of concepts and the emerging policies underlying the shift from state to non-state institutions in shaping growth and conflict reduction impinging on institutions:international and regional institutions, non-governmental, and multinationals

• First, the study of international and regional institutions and its roots in ‘Regime’ theories needs to be discussed: to assess the separate,complementary and often conflicting

• norms based on basic Values, ideology, internal organization structures, hierarchy, funding sources, and devising, interpreting and reforming institutional arrangements

• Second, the role of non-governmental organizations supported by civil society and democratic participatory movements can reinforce state and non-state actors and compensate for their limitations to fulfil economic and political goals;

• NGO’s may use their flexibility, individually and collectively, to ensure the formulation, establishment, and monitoring of official mechanisms and procedures for implementing inter-state agreements

• Third, private institutions, exemplified by multinationals can shape the flow of foreign direct investment embodying finance, technology,skills and management to boost growth through domestic and export markets.

• In a global world new forms of relationships are emerging between states and multinationals, between multinationals and domestic capital, and multinationals and international institutions.

• Against this backdrop the emergence of a new conception of IR needs to embrace inter and intra state relationships :new forms of post cold war conflicts, wars,and globalisation and changing domestic-international interactions

• International Institutions:• The role of the major ones should be analysed: the United

Nations and the Bretton Woods institutions• Remit of the institutions may vary;they may serve as an

arena, an instrument, or an actor covering conventional concerns-preventive diplomacy, peace making, and peace keeping, and stimulating growth-to recent focus on the environment, migration, crime prevention & collective security.

• United Nations is the key institution which captures the aims of stimulating growth and reducing conflict.

• UN’s Agenda for Peace and Agenda for Development

• Limits imposed on the UN-finance-dependence on the USA which contributes about 25% of the budget

• Challenges faced by the UN:limits of the Security Council and the General Assembly:latter alleged to tedious, repetitive,and without moral and political force

• Reform of the UN:bureaucracy, duplication,financial accountability, co-ordination of peace keeping and development activities

• The Bretton Woods institutions-the World Bank and the IMF-and the related WTO:

• Such institutions seen as conservators of the rules, conventions, and understandings that have moulded international economic relations against a backdrop of the depression of the 1930’s and the costs of failure to develop regulations and organizational structures to guide economic policies

• Both Bretton Woods institutions and the UN confront complex problems stemming from the nature of globalisation-exemplified by speculative flows of finance –originating in the East Asian crisis [1997]

• The WTO-originating in GATT-force behind the attempt to create an open world economy-to bring about free movement of goods, services, and investment

• Limits and strengths of GATT and subsequently the WTO to cope with the diverse and changing nature of the global economy

• The GATT/WTO ‘Rounds,’ the rise of the UR,Uruguay Round, and expanding free trade taking into account the interest of both developed and developing countries-former concentrating on manufactured goods while the latter dominated by agricultural based goods and industries

• The Seattle [1999] and the Post Seattle pursuit of a balanced world trading system against a backdrop of attempts by other groups and institutions-G7,UNCTAD, developing country groups-to champion the needs to embrace the needs of developing countries-market access for agricultural exports, support for special and differential treatment, and liberalization which takes into account their specific stage of development

• Doha [November 2001] Round and the Post Doha agenda: ‘implementation’ and ‘new’ issues-former centred on agriculture,TRIPS,and services while the latter covers ‘Singapore’ or trade and investment, the environment and trade and debt.

• At Doha developing countries dissatisfied with the outcome especially the lack of execution of agreed norms by developed countries-especially in agriculture and anxiety over inclusion under ‘Singapore’ of investment norms which could act as disincentives for domestic industry, and strong opposition of including the environment; some satisfaction over TRIPS and facilitating access to medicines by developing countries

• At Cancun [September 2003] failure to take major steps to resolve the problem of the critical agricultural sector-ie reducing subsidies by developed countries, focussing on aspects of the Singapore issue against the wishes of developing countries, and basic doubts about the future of multilateral negotiations

Regional Institutions

• The context: emergence of nations into breakaway states, or foreign intervention, necessitates devising legal, political and social solutions to curb tensions, and ensure that regional institutions play a pivotal role

• In developed world specific pockets face critical choices in ushering in political change:exemplified by the Balkans

• In developing world many challenges underpinned by measures to be integrated with the global economy:exemplified by the contrasting experience of East and South Asia and Africa

• Asia: East Asian region unfolds uncertainty, anxiety,and expectations about

the re-grouping of alliances in the post cold war era and its impact on regional security,peace and development

South Asia:

Dominated by India- unfolds diversity in politics and economics, with varying levels of democracy, and authoritarian regimes, with intense inter and intra state tensions;manifesting themselves in clashes, skirmishes, wars, and emerging rivalries over nuclear and non-nuclear military prowess stemming from ethnic, religious, linguistic, tribal, class,and caste conflicts-including secessionist movements

East Asia-South Asia:

Relations moulded by economic and political forces and how these interact with changes in the global economy-exemplified by tensions between India [South Asia] and China [East Asia]

Africa:

Integration in a globalizing world poses critical questions on governanace impinging on bringing about economic, political and social change

Colonial roots of interaction with the world economy, economic structure, and post colonial relationships

Non Governmental Institutions

• NGO’s shaping economic and political goals-complementing and compensating the traditional role of the state

• NGO’s are basically pressure groups complementing and compensating the traditional role of the state and non-state actors-including international, regional, and multinationals under globalisation

• NGO’s in the frame of ‘globalisation from below’-supported by local socio-economic struggles against discrimination on grounds of ethnicity,class, and gender

• NGO’s can help to redefine, reshape and challenge conventional notions of ‘globalisation from above’

• NGO’s claim to fulfil basic needs and basic rights of the marginalized, neglected, and poor socio-economic groups based on participatory democratic principles

Multinationals

• Multinationals critical, though controversial in shaping the economics and politics of globalisation-trade for instance transformed over last 50 years with some of it being conducted through it

• MNC’s impinge on the flow of direct investment embodying key resources-finance, technology, skills, and management- to boost productivity and growth, and pave economic transformation, based on domestic/national and export/external markets

• The political context within which MNC’s operate is critical-conservative, liberal,and radical-impinging on the nature of bargaining, collaboration and tensions between MNC’s and the state, MNC’s and domestic forces,and MNC’s and non-state actors

• Forms of collaboration between MNC’s and state and non-state actors encompass various forms of direct investment: cross border mergers, joint ventures, and various forms of alliances

• Liberalization through SAP’s, Structural Adjustment Programmes, MNC’s and globalisation: paving the way for foreign direct investment

Globalisation,Regionalization and Structural Change

• Background:

• Underscored by contrasting experience of Asia, with emphasis on East Asia, and Africa- the former symbolizing integration, and re-integration, while the latter emerges as a case of weakness and marginalization-in the pursuit of globalizing

• Key role of key regional institutions, often supported by international institutions, to fulfil goals of sustainable growth and interactions with the international economy-East Asian regional institutions including ASEAN, ASEM, and APEC-weaknesses of African regional institutions unfolds dependence on international institutions exemplified by the World Bank and the IMF

• Instabilities in regional-international relationships-East Asian economic‘miracle,’ collapse,and gradual recovery in contrast to Africa’s weak bargaining position in the international economy encapsulated in the ‘debt crisis’ and the ensuring reliance on international institutions to resolve domestic economic problems

•

East Asia:The Context

• East Asia:• The region exposed to uncertainty and anxiety –regrouping of alliances in

the post coldwar phase and its impact on security, peace and development• Role of key regional bodies-APEC-encompassing both East Asian and

developed nations-in stimulating regional growth• The East Asian ‘Miracle’:

• Typology-domestic-external linkages-• [a] the level of income, savings, productive sectors, labour use, and human

development• [b] extent and nature of external dependence-trade as a % of GDP, external

structure, including resource flows• Interaction between [a]and [b] –can inhibit or advance transition, structural

change and integration into world economy

East Asia:’The Miracle’

Asian ‘Miracle’-role of the state and the market and insights into policies on development consistent with national aspirations

- marked by measures to boost agricultural and industrial production through creative synthesis of investment, technology, and credit-including structuring of market competition

- while providing incentives for generating profits under domestic and export led growth

- The ‘tiers’ of development-First, Second,and Third

- Second Tier more market oriented than the First Tier

Post ‘Miracle’ Crisis

• Post ‘Miracle’ Crisis:• Collapse and subsequent gradual recovery • Nature, causes and possible remedies-bedevilled east Asia

from 1997 onwards• The nature of the crisis-collapse of financial markets -a sharp rise in foreign debt -heavy devaluation, -falling outputs -rising unemployment

• History of East Asian financial crisis-began in Thailand with devaluation of the Baht-on 2 July 1977 and quickly spread to other countries in South East Asia and adversely impacting on countries outside East Asian region

• June 1997-end of year –the median currency devaluation –in 12 of the largest emerging markets was 39% and in the 5 East Asian countries hardest hit by the crisis-Indonesia, Korea, Malaysia, the Phillipines, and Thailand-it was 80%

• International Finance Corporation emerging stock market index dropped 25% between June-December 1997 and its Asia index fell 53%

• The crisis and ‘melting down’ had critical consequences for the global economy

• Focus on East Asia stemmed from shock and uncertainty over the sudden collapse of the economies and long term impact on both the region and the world economy-including the industrialized and developing markets

• Capacity of East Asia to purchase the exports of industrialized countries, cutbacks in foreign investment by the region and its implications for unemployment in Europe and North America –and in turn reduction of developing country exports to the industrialized countries

• Forecasts-pessimistic-key countries-1998-Thailand, Indonesia, Malaysia and Philippines were set to grow at 1.7% on average compared with previous forecast of 3.7%; South Korea’s growth was adjusted to 2.5%-down from 6%-while Japan’s was halved to 1.1%

• Overall world growth forecasts were revised downwards from 4.3% to 3.5%

• Subsequent experience shows growth rates of East Asian countries sharply reduced with adverse impact on developed and developing countries

Roots of East Asian Crisis

• Combination of reasons:• Poor lending and borrowing policies• Oversupply of international finance• Cheap credit• Speculative ventures without effective demand fuelled by inadequacies

of domestic financial markets and corruption in allocation of finance• Key problems confronting East Asian economies-Stagnation of industries-formerly engines of growthDeclining exportsReduced rate of growthIncreasing current account and public finance sector deficitsFinancial instability

East Asian Crisis:Remedies

• Devising appropriate short,medium and long term policies

• Reducing external debts and overcoming balance of payments problems and restoring external and internal balance

• Harsh policies to regain confidence of international financiers and investors

• Using regional institutions-APEC,ASEAN, and ASEM-co-operation to boost each country’s competitive capacity and initiating inflows of foreign investment and technology

transfers

• Financial provisions by the IMF

• Regional institutions-critical-to establish regional peace and security along with economic development

• ASEAN-for instance-Ministerial Meeting, Hanoi,23-24 July 2001-focussed on positive steps towards peace, stability and co-operation in the context of globalisation; fundamental question emerged how ASEAN could help members reap benefits of globalization

• Prospects of East Asia making a full recovery-influenced by the changing fortunes of the USA-exemplified by the September 2001 and the 2003 Iraq crisis-dangers of excessive financial liberalization creating systematic instability and recurrent crisis

South Asia

• South Asian vision of globalisation-context of regional security, peace and co-operation within relatively ‘closed’ economies

• South Asia dominated by India-resolving deep rooted pre-liberalization socio-economic problems and paving the way for international competitiveness

• Acceleration of agricultural growth, agricultural reforms, and agricultural investments, and poverty and employment programmes-coupled with use of market forces to meet national goals

• Improving public sector efficiency• Export led growth-through measures to absorb labour and enhance

skills• Fusion of state and market forces to accomplish developmental goals

and globalise

Africa

• Historical context of integration with the world economy, commodity dependence and economic structure, weak bargaining power and marginalization in the world economy

• Debt crisis-1980’s onwards-encapsulating imbalances between the domestic and the external economy-through debt relief subject to meeting the technical,economic and socio-economic criteria of international institutions.eg the IMF and the World Bank

• History of debt relief through HIPC, Heavily Indebted Poor Countries Initiative, under the IMF-World Bank-stringent terms and conditions to obtain relief encompassing reform of domestic and external sectors

• Results of HIPC debt relief limited and pose questions on the need for measures to tackle root causes of BOP disequilibrium

• Liberalization and globalisation for Africa a major political economy

challenge

Insights of Asian and African Experience

• Transforming an economy from an agricultural to an industrial economy and integrating with the world economy

• Agricultural growth critical-to boost productivity, income, savings, and employment capacity to generate demand for industrial goods, supply of labour to industry, investment in agriculture

• Major role of land reform in creating conditions for agricultural growth

• Supporting role of poverty and employment programmes

• Devising appropriate liberalization policies- shedding ailing industries - selling to private sector or foreign capital -- -closing them down

-making labour laws more flexible

-welcoming foreign investment where domestic capital is weak

• Develop more democratic structures

• Assess the extent to which free reign of markets undermines confidence

• Need for information to guide investment decisions

• Pitfalls of free flows of large capital inflows-need for IMF and World Bank cooperation-and a world financial authority to cope with erratic capital movements and monitoring international institutions

• Creating a more open and democratic government

ICT: The Digital Divide and Transformation

• ICT :the major force in enabling instant communication over space, blurring national borders,and ushering in transnational relationships

• ICT implemented through collection, storage, processing, and instant transmission of information-convergence of text, sound [audio], graphics, and vision [video] in digital form and its application for diverse economic, social, political and cultural goals

• This section encapsulates the ways in which ICT offers a challenge and opportunity to stimulate development and structural change-diffusion, efficiency, productivity, and in particular employment,and supporting human capital development-and pave the way towards the Information Age.

• ICT and Innovations: usefulness of ICT range from intense optimism to much scepticism-

the former emphasises the importance of ‘knowledge or information gaps’

as a development constraint and its role in reducing North-South gasp by increasing agricultural and industrial productivity, efficiency of public administration and economic reforms, sharpening competitiveness, and stimulating participation and democracy

the latter poses doubts about the claims of the benefits of ICT

• Adoption and diffusion of ICT has to be set against historical backdrop of innovations to increase efficiency, productivity,and growth

• Innovations: improvements to existing products, new product lines, additions to existing product lines, new to the world products, cost reduction-process developments

• ICT productivity and growth- -boosting micro and macro economic and social productivity and efficiency, reducing transaction costs, and bolstering bargaining and competitive power across national borders

• ICT, democracy and power-empowering people and re-vamping the nature of competitive democracy ushering in participation, transparency, and accountability by enabling diverse civil society groups, social movements, and marginalized individuals to forge links across the local, the national, and the global

• Adoption of ICT:diverse facets of access to ICT, patterns of use, and the scope of policies to incorporate technology as a force in socio-economic transformation in developed and developing nations

ICT:Developed Nations

• Developed nations:

• Access to a computer and the internet in selected OECD countries-access to PC’s varies between 64% and 21% and access to the internet between 50% and about 8%

• PC diffusion in households is increasing throughout the OECD regions-rates are highest in Netherlands, Australia, and the US-

internet access generally faster than diffusion of PC’s as the necessary investments in PC equipment and personal skills have already been made

• In business ICT penetration and internet access a function of firm size-smaller business units less likely to have invested in new technologies

• Sectoral distribution-internet access in urban areas greater than in rural areas and members of households in urban areas more likely to be in occupations where computers and internet a component of their work

• Household or individual income an important determinant of the presence of PC’s and the extent of internet use in homes

• The annual % point change has been higher for the highest income groups and penetration is now very high in those groups; in France for instance the highest income group bracket had 74% PC penetration in 2000 and the lowest income bracket only 11%;’ the growth rate from 1998-2000 was only 11%; the growth rate from 1998-2000 was 68% for the lowest bracket compared to 47% for the highest income bracket

ICT:Developing Nations

• Developing nations:

• Sharp contrast in diffusion of ICT in developing compared to developed countries-major challenge for developing countries

• ICT can facilitate growth through increasing productivity, efficiency in both the economic and the social sectors [education and health] and scope of intensifying political empowerment

• Need to explore the lack of a clear link between ICT and productivity- and measures to boost efficiency has to be accompanied by measures to protect workers and re-thinking labour laws and collective agreements

• Empirical observations on ICT in developing countries shows high correlation with most measures of development-this in turn is highly correlated with measures of development-telephones per capita

• Despite the potential links between ICT and poverty reduction direct access by the poor to ICT very limited

• ICT offers promise in promotion of exports-especially in services-by improving the function of markets, and increasing the quality and efficiency of government services

ICT on the political front can enable the disadvantaged to have a voice

ICT and education: offsetting remoteness, helping alleviate shortages of teachers, expanding distance learning, enhance technology skills

Evaluating investments against infrastructure and related needs in the education field

ICT’s potential of improving administration and management, storage and transmission of data, surveillance,monitoring, publications and dissemination of medical findings

ICT’s role in governance-empowering people to exercise their rights-technology as a vehicle for harnessing discontent and organizing protests against injustices

ICT:Asia

• Asia

• Diffusion of ICT in East Asia-the major physical, technical, and socio-economic obstacles and the scope of shaping and executing relevant policies under different political systems

• East Asian countries, a national Information Infrastructure policy, and an Internet policy

• ICT policies in East Asia embrace varying combinations of the state and the market-China a state thrust policy; Thailand passing through three phases with limited privatization and greater liberalization; Malaysia policies articulated from the highest level of government

• South Asia behind in the ICT ‘digital race’ compared with developed countries –against a backdrop of poverty and unemployment-but countries such as India have strong research and technology foundation, skilled labour and firm democratic tradition

• In India-ICT has to be closely linked to development strategies to stimulate productivity, market and bargaining power in key sectors-agriculture,services, and relevant manufacturing-strengthening literacy, skills, and knowledge

• In India-ICT and its relationship with employment creation and reduction needs to be carefully analysed-by sector and sub-sector and socio-economic group

ICT:Africa

• Africa:

• Inevitable ’digital gap’ between Africa and the rest of the world-internet access, numbers of dial up subscribers, cost of using Internet, limits of bandwidth

• Developing ICT in Africa requires strong external support-USAID, UNDP, EU, the World Bank, IDRC programmes in the frame of African development priorities-including improving accessibility to ICT in rural areas through shared public facilities and cost effective services

The Future:Beyond Globalization

• Early assessment of globalisation-implicit assumption that it was positive and would bring material benefits surpassing any temporary disruptions to national economic and socio-economic system

• Globalisation has to be encompassed within the context of the emergence of largely dormant forces which had been suppressed in the cold war ideological battles between capitalism and socialism

• Critical to challenge the avowed universal values of globalisation • Factors underlying support and opposition to globalisation • Urgent need to re-conceptualize globalisation-to encapsulate and

integrate universal and specific,varying, and shifting multiple local identities which can capture global diversity

• Essential to explore policies which can fulfil such goals: this encompasses critical economic ones linking flows of trade and finance to sustainable growth in a historical frame

• Summary:

• Globalisation creating a space which transcends national borders but likely to coexist with the nation state and traditional international relations based on inter-state relationship

• Shift in policies from state to non-state institutions and increasing focus on global rather than domestic institutions to guide economic, social and political change

• This is underscored by a global political economy breaking down relationships based on simple territorial divisions

• Globalisation can then usher in a vision of one world with shared values encompassing diversity and conflict

Thank You