2. 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).
3. Structure of Developing Countries
Similar characteristics
of LDC’S
Dissimilar
characteristics of LDC’S
4. Dissimilar characteristics of ldc’s
Size and income level
Historical backgrounds of a country
Resource endowment of country
Importance of public or private sector
Nature of industrial sector
degree of dependence on external economic forces
distribution of power
Ethnic and religious composition
5. Dissimilar Characteristics of LDC’S
Size and income level
Third world countries differentiate from one an other:
The physical size of a country
its population
its GDP per capita
e.g india 1016 million in 2000 with GDP Per capita level of $460
While 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 not
human resources affected by tradition, religions, ethnic
Public and private sector
UDC’S depends upon a mixture of public and private sectors
e.g greater role of private sectors in LATIN American n South east Asian
as compare to African n South Asian countries
6. Industrial Sector
Main occupation of UDC’S is agriculture {traditional}
1996 13% of total labour force in India while
Afghanistan Bhutan lack the setup
External Dependence
Foreign goods ,technologies, values
Bound to export raw material
Degree of such dependence vary from one ldc to other
Political structure
People come to the power to get their interests, though these interest differ from
country to country
Ethnic n religious composition
UDC’S racial, ethical, religious ,cultural have often stop developing efforts
Religious values {sunni shyah fsad in pak}
Dissimilar characteristics of ldc’s
7. 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
8. low Income
Low Saving
Low
investment
per capita
High unemployment
under employment
High Fertility
High
population
Growth rate
High labour
supply
Low labour
Demand
Externally mortality control Dependence of foreign labour
Saving technologies
Low labor
Force
productivity
Poor health
nutrition
Limited
educational
facilities
9. Low income
Lower level of living
1. Absolute poverty
2. In adequate health
3. poor education
Low self Esteem
Limited freedom
a) From external b)Of choice
Dependence material gain
Trade policies Leisure
Aid life style
Technology
Education
Values
Willingness
To be
dominant
Lack of
Control of
Own destiny
10. Internal limiting factors
•Vicious circle of poverty
•Low rate of capital formation
•Agriculture backwardness
•Backward human resources
•Socio cultural constraints
•Foreign Exchange Constraints
11.
12. 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
13. • 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.
14. 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.
16. 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.
17. 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.
18. • Pakistan
• Palau
• Panama
• Papua New Guinea
• Paraguay
• Peru
• Philippines
• Poland
• Portugal
• Qatar
• Romania
• Russia
• Rwanda
• Saint Kitts and Nevis
• Saint Lucia
19. 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.
20. 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.
21. 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 etc
4. 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.
22. 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.
23. 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.
24. 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.
26. 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.
27. 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.
28. 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.
29. 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.
30. 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.
32. 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.
33.
34.
35. 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
36. 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
38. • 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.
39. • 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.
40. 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.
41.
42. • 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.
43. • 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.
44. • ROLE OF MULTINATIONAL COMPANIES IN
UNDER DEVELOPED COUNTRIES
45. • 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.
46. • 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.
47. • 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.
48. • (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.
49. • (5) By broadening the industrial base, FDI also
broadens the export base of a developing
economy.
50. • 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.
51. • 8) Another benefit of MNC investment to a
LDC’s economy is that it helps promote a
business culture of competitiveness, quality
and efficiency.
52. • ) 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
