Impact Of Globalisation On Developing Countries Economics Essay

Impact Of Globalisation On Developing Countries Economics EssayThe veto impact is in the world economy due to globalisation especially to the maturation countries lav be easily described in ten points. concord to the current financial crisis mainly growing rustics switch exit suffer and the World Bank is predicting that divvy up will fall by 2.5% in 2009-2010, which would be the first decline in global trade flows since 1982. M whatever investors be frustrated that it is so difficult to establish diverse production and manufacturing industries in those developing countries due to having many obstacles and slowdown factors even before the crisis began. Some economists argue that the situation is currently declining and the downturn in trade has aspects which be particularly sorry for developing and emerging economies.There are some factors which are relatively important and can be describes as slowdown factors for the developing countries or short(p) nations. The factor s are describes below.InstabilityGlobalisation faces enormous resistance especially in the third world. The defender of globalisation argues that globalisation could not solve the entire problem. It has been attended by change magnitude instability in hundreds of countries during the last tierce decades. So poor nations become poorer and rich countries become richer in the world. The poor countries follow the rules and regulations of right(prenominal) agreements to sluttish their market. But they fail to gain the success for lack of k at presentledge and information and super risks associated with this policy. Then they lose their money, wealth and sometimes resources. Most developing countries are weak and are deprived of a social safety net.Economic crisisMost growing economies in confederation East Asia and South Korea give up suffered major economic crises in their currency and markets and in employment. The crisis is due to sudden withdrawal of short-term funds by we stern investors and large scale short-selling on foreign exchange and equity markets by speculators. The example can be the Asian crisis that began in the 1990s with financial meltdown in Russia in shocking 1998 and severe turbulence in Latin American markets particularly in Brazil and Argentina.PovertyThere were 864 trillion people in pauperism 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 less(prenominal) than $1 per day. Whereas in developed nations the minimum wage is $7 per hour and people have a more than comfortable life. Having political issues and a lack of skilled workers, degraded environment, and destroyed original culture and the pressure from IMF, USA, WTO, developing nations economies are deteriorating, Many countries have suffered increasing poverty. In East Asia and the Pacific, the rate ro se 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 another assault took place, this time in Mumbai. Terrorists, laden with plastic explosives, grenades and assault rifles, killed at least 192 civilians across Indias financial dandy 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 only with third world countries but in addition in developed countries that are facing the heartrending threat of terrorism. Globalisation was doomed in the aftermath of the outrage of September 11, 2001 in USA. The terrorists killed many people and destroyed the World Trade Centre. They also attacked in the Thailand holiday resort of Bali. The onward 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 using nuclear power. The nuclear stockpile is increasing in the world due to globalisation and this should be a warning to the world. boor Labour DiscriminationChild labour 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 headspringness and have been affected by different diseases. The inter matter labour organisation and international agency raised the world labour issue and according to their report that 100 to 200 million children nether fifteen are at work and 95% are from poor countries and half of them are from Asian countries. About 100 million children have lots gone to primary school in those countries. The c hildren sometimes smuggled into different countries in the world. This problem is longstanding and historically inherited.Political BarrierThere were becalm 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. at once their door is open for global business and they joined the European Union and get many subsidies from rich European countries and their economic condition is going to stabilize their position with low inflationGlobal warming and diseasesThe world has been suffering from different diseases and the represent of drugs is expensive. The average dollar income per head means those people are not able to soften to buy such drugs. AIDS afflicts many in Africa and South Asian such as India and Thailand can hardly afford drugs. Some developing lands have been accused fo r using greenhouse gas for pollution but the United States of America is biggest source of the greenhouse gas in the world.Infrastructure Problem BarrierThere are still infrastructure problems in developing countries such as India, China, and Malaysia, Bangladesh etc. They dont have a unattackable telecommunication network for contact with another country or in different areas of their country. Still the same problem exists in Africa where the people live without electricity, delicate water supply system, road, technology and telecommunication as well. That is why they are not able to cope with globalisation .Holders of Power-Some economic scholars bank that business people sometimes take control of the country from sovereign governments by forcing illegal pressure. They lack interest in the long term benefits 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 di dnt 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 several trade theories like Dunning OLI, Porters Diamond theory, Heckscher -Ohlin model, Global shift theory along with different core ideas can help in the expansion of organizations across national or international boundaries to cope with globalisation and reduce the barriers or problems in the global financial market. I have also tried to high-pitchedlight its importance for economic growth in developing countries. Daniel (2007) writes in his International business book Think globally, but act locally which means the country should do what is opera hat for its own people rather 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 g lobal economic condition and return to confidence and overcome the global slowdown and improve individual opportunity.2.11.1 Dunning OLI Theory-Dunning (1995) OLI wrote a paradigm that is really helpful for international attempt 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 special(prenominal) expediency-Corri and Farquharson stated that ownership proper(postnominal) advantage refers to the type of knowledge and privileges where an organisation can make in effect(p)s which are not available to its own competitors. The foreign direct investor not only depends on cost but also places strain on ownership factors such as skilled workers, network, and ease of doorway to capital and use of technology. Japans joint venture with Rover and producing Honda car in the UK is an example. They believe and have invested in the UK for having skilled workers, high technology and can put out good quality product with best performance. So globalization makes it possible. The Japanese Company can say it is a UK car. The world is meet more hawkish and it can be very difficult to survive 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 now recruiting workers from China and India at a low cost. They are flavor for natural endowmented people anywhere in the world and it has not ended. PepsiCo recruited 300 extra people in their snack unit through a talent assessment program in 2006. EMC started a global variation network for research and development workers in the world. So all multinational companies are formulate forward-looking strategies on a global scale to survive market conditions.L-Location Specific advantage-For meeting the global market demands, research and development is also needed. The location is another f actor of Dunning theory where MNEs can gain access to complimentary as roundabouts based on the nations competitive advantages originated in the partners home countries due to globalisation. guidance skill is an important factor and India have trained many people who have moved abroad and moved back to their own country to preen up new businesses in the Software patience 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 grown GDP10% now. Indian packet 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 industry (Heek, 1999). The global software industry is estimated to be worth around $1,300 billion now. Indias software ex port was worth $12 billion in 2003 and has grown 26% over the monetary 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 fetch three million computer scientists they can fill 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 nurture of production output to reach US$96 billion by 2010(Wang, 1999). China has also strong domestic software industries which hold 33% of the market. The semiofficial policy is to increase this to 60% by 2012 (Gartner, 2002).I Internalisation Specific advan tage-Internalisation is a specific advantage which occurs when international markets face change magnitude costs, because of transaction costs that global activity faces currently. In some respects that cost represents a natural barrier. Another factor is labour cost which is very high in developed countries. The theory of international division 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 Eastern 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 centre and Google the worlds largest search engine is all set to open a develo pment centre in Bangalore in India. Another leading web company, Yahoo carries out development work in Bangalore. IBM has also set up a laboratory in Delhi and 70 researchers in India. Mobile phone giants Virgin media and Vodafone have run their businesses in India recently. India now becomes a 1500 million people market now. The giant mobile 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 principle 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 pro tocol (IP) and Broadband subscribe line, up-to-the-minute net enabled devices personal computer and semiconductors are the most popular sector in the global IT world. Personal 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 cost of subscribers. However, the market of China has appreciated 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 n ot enough labour. In this way 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 explaining 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 tec hnology, do not because labour is relatively expensive compared to capital in Japan (Tayeb, 2000).2.14 Global Shift Theory-Todays global economy is genuinely 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 presence 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 important factors such as high technology for quality production, the relation between 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, cherish of chain, with which they exercise 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. While 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 receive help for improving their own countrys GDP growth or financial position. Good financial health also helps to improve the populations life expectancy, and removing all barriers in the market and playing a significant role in the global economy and participating and lend in overcoming economic crises.FDI its role in Global economy with the help of globalisationForeign direct investment has swung back towards the developing parts of the world. wide areas that had been shut from trade, investm ent and market forces have sought to join the capitalist club, opening their borders, reforming their economies and welcoming 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 huge 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 level reasonably 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 Direct Investment (FDI) is playing a n 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 increase 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 tell 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 and regulations.