Impact Of Globalisation On Developing Countries Economics Essay

Impact Of world(a)ization On Developing Countries frugals EssayThe negative touch is in the foundation providence receivable to sphericalization especi ally to the developing countries commode be easily described in ten points. According to the present-day(prenominal) fiscal crisis mainly developing farmings contend will suffer and the worldly concern Bank is predicting that treat will fall by 2.5% in cc9-2010, which would be the first decline in global trade flows since 1982. M whatever investors ar frustrated that it is so difficult to establish incompatible outturn and manufacturing industries in those developing countries due to having legion(predicate) obstacles and slowd witness factors even before the crisis began. or sowhat economists argue that the situation is currently declining and the downturn in trade has aspects which be separateicularly worrying for developing and emerging economies. at that place be slightly factors which ar relatively all important(predicate) and screwing be describes as slowdown factors for the developing countries or poor nations. The factors atomic number 18 describes below.Instability globularisation faces long resistance especially in the third world. The defender of globalisation argues that globalisation could not solve the entire line of work. It has been accompanied by increasing mental unsoundness in hundreds of countries during the last three decades. So poor nations become poorer and closely-to-do countries become richer in the world. The poor countries follow the rules and regulations of inter internal agreements to afford their market place. alone they fail to gain the success for lack of companionship and culture and prodigious risks associated with this form _or_ system of government. Then they lose their money, wealth and some(prenominal)times resources. Most developing countries are weak and are deprived of a social safety net.Economic crisisMost growing economies in in the s step to the foreh easterly United States Asia and South Korea concur suffered major economic c examines in their currency and markets and in employment. The crisis is due to fast withdrawal of short-term funds by western investors and large racing shell short-selling on foreign exchange and equity markets by speculators. The example poop be the Asian crisis that began in the 1990s with fiscal meltdown in Russia in August 1998 and severe turbulence in Latin Ameri tin can markets particularly in Brazil and Argentina.P everywheretyThere were 864 cardinal state in poverty in the world due to globalisation and this is other factor. Although most poverty is predominant in countries like Africa and South East Asia, even people in mainland China and India ,due to globalisation, are living on slight than $1 per day. Whereas in true nations the minimum wage is $7 per hour and people hold in a to a greater extent comfortable life. Having political issues and a lack of a dept workers, degraded environment, and ruined original subtlety and the pressure from IMF, ground forces, WTO, developing nations economies are deteriorating, Many countries hold back suffered increasing poverty. In East Asia and the Pacific, the rate rose from 2.1 in 1970 to 5.4 in 2009 and in South Asia rose from 3.1 to 6.0.TerrorismAccording to Financial Times editor Lionel neaten (2008) The economic crisis was far from over when some other assault took place, this time in Mumbai. Terrorists, laden with plastic explosives, grenades and assault rifles, killed at to the lowest degree 192 civilians across Indias financial capital and laid waste to the luxury Taj Mahal Palace hotel. By singling out symbols of Indian opulence and power, the perpetrators consciously copied the September 11 terrorists who targeted the Twin Towers in New York. So we can see that the problems of globalization are not entirely with third world countries more(prenominal)over as well in develope d countries that are facing the serious threat of terrorism. Globalisation was doomed in the aftermath of the outrage of September 11, 2001 in USA. The terrorists killed some(prenominal) people and destroyed the World Trade Centre. They likewise attacked in the Thailand holiday resort of Bali. The frontward march of global economics has faced financial crisis, the stock market collapse in the world. (Financial Times, Dec 22, 2008.). Globalization has another negative impact of exploitation nuclear power. The nuclear stockpile is increasing in the world due to globalisation and this should be a warning to the world.Child fag out DiscriminationChild roil is increasing in the world. You can also find child labour in the USA which is the richest country in the world. In developing countries they sell flowers, cold drinks, and magazines on the street. They live in the unhygienic places which are bad for health and see been affected by different diseases. The international labour o rganisation and international agency brocaded the world labour issue and according to their report that c to 200 million children under fifteen are at work and 95% are from poor countries and half of them are from Asian countries. About c million children keep back often gone to primary school in those countries. The children sometimes smuggled into different countries in the world. This problem is longstanding and historically inherited.Political BarrierThere were still political barriers in eastern European countries in which communism prevailed in the 20th century. Adapting to the global market, citizens of those countries took part in revolutions, thousands of people died and governments were formed to establish capitalism. Today their door is open for global calling and they joined the European Union and get many subsidies from rich European countries and their economic condition is going to stabilise their arrangement with low inflationGlobal warming and diseasesThe world has been suffering from different diseases and the live of drugs is expensive. The average dollar income per head means those people are not able to afford to buy such drugs. AIDS afflicts many in Africa and South Asian such as India and Thailand can scantily afford drugs. Some developing lands brace been accused for using babys room gas for pollution but the United States of America is biggest source of the babys room gas in the world.Infrastructure Problem BarrierThere are still infrastructure problems in developing countries such as India, China, and Malaysia, Bangladesh and so forth They dont have a strong telecommunication web for contact with another country or in different areas of their country. Still the aforementioned(prenominal) problem exists in Africa where the people live without electricity, pure water supply system, road, engineer science and telecommunication as well. That is why they are not able to move with globalisation .Holders of Power-Some economic scholars believe that strain people sometimes take control of the country from sovereign governments by forcing wicked pressure. They lack interest in the long term values to the country and only look to their own interests to cope with global business in the global market. Brazils former president, Fernando Henrique Cardoso stated that he didnt rule Brazil because globalisation is swallowing national state and is inevitable as are its consequences, its disasters, exclusion and social regression. So this is a threat for the country and national sovereignty.Overcoming these barriers.There are some(prenominal) trade theories like Dunning OLI, Porters Diamond theory, Heckscher -Ohlin model, Global shift theory on with different core ideas can help in the expansion of organizations across national or international boundaries to cope with globalisation and slue the barriers or problems in the global financial market. I have also move to proudlight its importance for economic b ranch in developing countries. Daniel (2007) writes in his International business book Think globally, but act locally which means the country should do what is exceed for its own people kinda than what is best for the world. They try to influence and understand how their people can be benefited with the help of globalisation and improve the global economic condition and government issue to confidence and overcome the global slowdown and improve individual opportunity.2.11.1 Dunning OLI scheme-Dunning (1995) OLI wrote a paradigm that is rattling helpful for multinational enterprise and global trade to other countries. By following this theory we can benefit and can reduce the problem of globalisation in the world.O- Ownership detail advantage-Corri and Farquharson stated that ownership specific advantage refers to the type of k at a timeledge and privileges where an organisation can fuddle goods which are not available to its own competitors. The foreign top investor not on ly depends on cost but also places emphasis on ownership factors such as practised workers, network, and ease of access to capital and use of technology. Japans joint venture with bird of passage and producing Honda car in the UK is an example. They believe and have invested in the UK for having skilled workers, gritty technology and can produce good quality product with best performance. So globalization makes it doable. The Japanese Company can say it is a UK car. The world is becoming more competitive and it can be very difficult to go bad in a global competitive market. So the multinational companies are aware of the ownership factor. Their emphasis on skilled workers at low cost brings great advantage. The multinational companies are at one time recruiting workers from China and India at a low cost. They are looking for gifted people anywhere in the world and it has not ended. PepsiCo recruited 300 especial(a) people in their snack unit through a endowment fund assessm ent program in 2006. EMC started a global innovation network for query and maturement workers in the world. So all multinational companies are devising new strategies on a global scale to survive market conditions.L-Location Specific advantage-For meeting the global market demands, research and ontogeny is also needed. The fixture is another factor of Dunning theory where MNEs can gain access to complimentary as hangs based on the nations competitive advantages originated in the partners home countries due to globalisation. Management skill is an important factor and India have trained many people who have travel abroad and moved back to their own country to set up new businesses in the Software industry and garments factory.Market size and growth potential are the most important location factors according to Meyer (1998) and Floyd (2002). China, India, and Russia are good locations and those countries have low cost bases now. The market of China has great(p) GDP10% now. Indian parcel product industry becomes more important in the world. One specific location in India is Bangalore where infrastructure is good now. The location is more attractive to USA and UK firms which show prominence in the software system industry (Heek, 1999). The global software industry is estimated to be worth around $1,300 billion now. Indias software exporting was worth $12 billion in 2003 and has grown 26% over the fiscal year which is a good for a developing country. They export to the USA who is dominating the market, the US buys $6 billion software products (McManus, 2004). India exports 3% software products now in the world. There are still some infrastructure problems like cultural difference, language capability and software engineering capacity. If they can produce three million computing machine scientists they can lease their export target about $ 50 billion in 2008(IT trends2004).FDI is more attractive in China which employs a low cost strategy. China now takes up 4.4% of this industry sales in the world. The production has grown about 12% for the last ten years. And the value of production fruit to reach US$96 billion by 2010(Wang, 1999). China has also strong domestic software industries which hold 33% of the market. The official policy is to increase this to 60% by 2012 (Gartner, 2002).I Internalisation Specific advantage-Internalisation is a specific advantage which occurs when international markets face increase cost, because of transaction costs that global activity faces currently. In some prize that cost represents a natural barrier. Another factor is labour cost which is very high in developed countries. The theory of international percentage can help by their domestic market that can reduce the production cost with the help of low labour cost (Frobel, 1980). He also argues that the global profit can increase when production costs are low. This is possible in low-cost areas such as easterly Europe and the third world countries such as India, China and Bangladesh. There needs to have been research development, good transport and communication technology (Corri, Farquharson).McManus and Floyd (2004) both stated that today India has benefited from having technological innovation. They improve the research concenter and Google the worlds largest search engine is all set to open a development centre in Bangalore in India. Another leading web company, chawbacon carries out development work in Bangalore. IBM has also set up a laboratory in Delhi and 70 researchers in India. Mobile visit giants Virgin media and Vodafone have run their businesses in India recently. India now becomes a 1500 million people market now. The giant lively handset company Nokia is to set up a research and development hub in India. Intel conducts 15-25% of its research and development outside the US and 900 in Bangalore and expects to add 1,100 employees in that company. India produces around 100 thousand computer science graduates a year. The Chinese government has prioritised boosting the information technology industry and it has become a national guiding tenet in economic construction. China has an ambitious plan to turn the software industry into a new pillar industry in the 21stCentury. Chinese government has also initiated the e- government project.The success and demand on internet protocol (IP) and Broadband subscribe line, latest net enabled devices personal computer and semiconductors are the most popular sector in the global IT world. in the flesh(predicate) computer users in The Middle East and Africa will increase to 17% from 7.2% in 2008(because of lower taxes, concern government effort to get PCs into school). And in Asia (excl Japan) it will be more moderate 11%. Asia is becoming the largest mobile phone market in monetary value of subscribers. However, the market of China has apprehended at almost 10% GDP of late in terms of growth. Now half of the world population has a mobile phone, and growth rate is nearly double. It is not used just for talking it has now high speed Internet that people can download music, video, data etc2.13 Heckscher -ohline Theory-Heckscher -ohline theory is also very helpful. With the help of globalisation it is possible to remove the poverty and improve the global world. The concept of this theory is that the country has more capital but not enough labour. In this federal agency a nation can invest its money in any poor or developing country to their mutual benefit. Sweden, Netherlands and Finland are among those countries whose capital outweighs their labour. They can invest in any Sub- Saharan African or developing country such as China or India. These countries have large labour forces or they can produce large labour intensive goods. Globalisation makes free movement of labour across borders and raises the income of labour. We have also gained knowledge from Heckscher-Ohlin theory extends the concept of comparative advantage by expla ining the observed trade structure according to comparative advantages from the country-specific abundance of production along with some countries with relatively large capital but less labour focus in capital-intensive goods and high-tech products. This is seen in Japanese firms where they make substantial use of robots to assemble vehicles whereas Spanish firms, who have access to the same technology, do not because labour is relatively expensive compared to capital in Japan (Tayeb, 2000).2.14 Global Shift Theory-Todays global economy is rightfully borderless. Information, capital and innovation flow all over the world at top speed, enabled by technology and fuelled by consumers desires for access to the best and least expensive products (Ohmae, 1995, inside front cover). Dickens (1992) suggest in his global shift theory that the world become more internationalised and more globalised due to capital which was organised by multinational companies. The theory includes three importa nt factors such as high technology for quality production, the relation amongst government and foreign organisation where any large organisation can do international business overseas with the help of politics and economics.From the business point of view, this global shift theory helps to build organizations assets, shareholders, personnel, value of chain, with which they doing power on a global scale and growing. For example in 1960 the US was one of the biggest exporters of automobiles in the world however they had an enormous trade deficit in 2003 of $112 billion. small-arm Japan has a comparable trade surplus of $92 billion because of their production locations abroad and they build more cars in exporting countries then other competitors like (USA).By using these theories not only the developed country can globalise their business in the world but also the developing can come across help for improving their own countrys GDP growth or financial position. Good financial healt h also helps to improve the populations life expectancy, and removing all barriers in the market and playing a significant purpose in the global economy and participating and contributing in overcoming economic crises.FDI its role in Global economy with the help of globalisationForeign direct enthronisation has swung back towards the developing parts of the world. Vast areas that had been shut from trade, investment and market forces have sought to join the capitalist club, opening their borders, reforming their economies and welcome multi-national investment (The Economist, 1993). The participating players in Asian markets are Australia, China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam. While China stands as the largest foreign direct investment recipient among these countries, discounting for its coarse market size, fast economic growth, low labour costs, relatively well educated human resources , economic and geographical characteristics. Chinas relative performance in attracting foreign direct investment inflows is only at a aim moderately above average among the developing countries. Some people have argued that globalisation is not to blame for increasing poverty and inequality. The current distribution of economic and political power in the world is fair. Foreign bring Investment (FDI) is playing an increasing role in the world economy. Global FDI inflows were 29% higher in 2004 a total of $916 billion. Flows to developing countries in 2005 rose by 22% to reach a record high of $334 billion. Developed countries also saw increased flows they saw a rise of 37% to $542 billion. It provides for equal opportunities for poor and in global affairs, relatively powerless. At the world level poverty is declining. FDI is one of the key factors in globalisation. It maintains some basic rules to invest. To be a success in the global economy nations have to follow the FDI laws a nd regulations.