Lecture Slides of CMDC, Chapter 2, Linkage between developed and developing countries, June 2020, Nepal Engineering College, Pokhara University

1. Chapter 2
Linkage between developed and
developing countries
How Are We Linked?
(3 hours)
Updated: June 4, 2020

2.  Global Village
 Transportation and ICT
 Environment
 Rivers and winds
 Groundwater,
 biodiversity…
 Population
 Migration/immigration
 Investment, Debt, Grant
 Jobs: outsourcing, expats
Education and research
Trade and Transit: export/import
Value of life: disasters, famine, basic
necessities
Travel and Tourism
Politics and peace
Terrorism, Drug/human trafficking,
Money Laundering
Supranational institutes: UN bodies,
regional organizations
Global Pandemic
Developed and Developing Countries are
Linked in many ways
We are more concerned with the specific effects on CMDC created by these
links. For example, we are concerned with how the international job markets
link the developed and developing countries and how this link affects the
CMDC (not other aspects of DC).

3. 1. Global village
 Information and communication
Computer, Internet, Social Media, Holoportation
 Transportation
Concord, supersonic planes, bullet train
 Events in a part of the globe, like Covid-19, affects
other parts, hence, like a village.
For effects of Globalization on LDCs:
http://unohrlls.org/UserFiles/File/LDC%20Documents/Backgroun
d%20paper.pdf

4. 2. Environment
Global warming: 3 ° to 5° by 2100? Limit to 2°?
Green house gases
Sea level rising: 23 inches by 2100?
Snowless Alps and Himalayas by 2050?
Ozone depletion
Natural resources (e.g., Rain forests)
Acid rain
Wind
River
Wildlife
Desertification

6. Oct. 21, 2019
2019 Ozone Hole is the Smallest on Record Since Its Discovery
Abnormal weather patterns in the upper atmosphere over Antarctica dramatically
limited ozone depletion in September and October, resulting in the smallest ozone hole
observed since 1982, NASA and NOAA scientists reported today.
https://www.nasa.gov/feature/goddard/2019/2019-ozone-hole-is-the-smallest-on-record-since-its-discovery

7. 3. Population
People migrate due to the issues related to
• Poverty and inequalities
• Education
• Food, Water and Health
• Environment
• Political and religious prosecution
• Ethnic cleansing
• Civil and international war
• Better economic opportunities
• Better recognition/value of skills

8. 4. Debt
Development Assistance (Foreign Aid)
• one-fifth of global aid is actually going to
the world's poorest countries, say
humanitarian agencies.
• up to 40% of aid is "tied", forcing
developing countries to buy overpriced
goods from donor countries.

9. What Motivates the Donors to give Aid?
• Political/Strategic
Motivations
• Economic Motivations
(for the recipient
country’s benefit)
• Economic Motivations
(Donor’s self- interest)
• Moral and Humanitarian
Motivations
Nepal per capita debt in 2016
was199 dollars per inhabitant.

11. 5. Jobs/Outsourcing
Global job market has made us linked together
LDCs are providing cheap labor force
Developed countries are in need of untrained,
semi-trained, trained, and highly trained human
resources
Developed countries have become the point of
attractions for professionals of the LDCs
Fulfillment of mutual interest has linked the
developing and developed countries

12. 6. Education
• The need for quality education and access to
the educational institutes around the world has
linked the countries and the people all around
the world.
• Franchising of educational institutes
• Income from foreign students a major source of
income for USA, UK, and Australia
• The British College
• The Lincoln School
• Nepalese entrepreneurs opening colleges in
UK, Australia, …

13.  Imports and exports of raw materials
 Supplies and manufactured products
 Transfer of capital and labors (unskilled and
knowledge workers).
 There are implications for the developed
countries if developing countries do not do well
economically (Reverse to the argument that if
developed countries do not support the
developing ones, the latter would face adverse
consequences).
7. Trade and Transit

14.  Dependence of the US on developing nations:
For the imports of 80% of its fuel, 26% of
industrial supplies, 25% of capital goods, 53% of
consumer goods. Likewise 40% of US exports go
to LDCs. US$1b export sustains approx. 25,200
American jobs.
 Developing countries are expected to absorb 70%
of the growth in the world imports over the next
25 years

15. Private Foreign Direct Investment
• Private FDI by multinational companies
(MNCs) whose objective is to maximize their
return on capital.
• MNCs are mainly from North America,
Europe, Japan, and NICs such as South
Korea, Taiwan, Brazil.
• 90% of global FDI goes to other industrial
countries and the fast growing LDCs/MDCs.
• There is rapidly increasing trend of FDI,
huge chunk (60%) of which goes to Asia.

17. Nepal’s net foreign direct investment (FDI) inflows are the lowest in the region as well as
among least developed countries (LDCs). The country received $52 million net FDI in
2015, 0.1% of the amount that South Asia received and 0.13% of what LDCs received.
Least-developed countries like Afghanistan, Ethiopia and Haiti mobilised FDI worth $169
million, $2.2 billion, and $109 million in 2015 respectively.

18. Arguments in support of FDI
 FDI as a way of filling gaps between the
domestically available supplies of savings,
forex, govt revenue, technologies and human
capital skills, and desired level of these
resources necessary to achieve growth and
development target.

19. Arguments against FDI
-They may lower domestic savings:
Repatriation of their profits; Generating
domestic savings for low saving income
groups; Worsening the situation for
indigenous firms by importing the
intermediate products from overseas
affiliates
Potential thesis topic:
Impact of FDI in Hydropower development of Nepal.
Impact of FDI in construction industries in Nepal.
Impacts of FDI in construction material industries in Nepal.
Strengths and weaknesses of FDI provisions in Nepal.
Technological and socio-environmental impacts of FDI in Nepal

20. लगानीका लागग असुरक्षित राष्ट्रको सूचीमा नेपाल विश्िमै तेस्ोोः अध्ययन
एफएम ग्लोबल नामक अमेरिकी इन्स्योिेन्सस कम्पनीले प्रकाशित गिेको लगानीका लागग सुिक्षित
िाष्ट्रहरुको सुचीमा नेपाल पुछािबाट तेस्रो नम्बिमा पिेको हो । सुचीमा नेपालभन्सदा पछाडि हाइटी ि
भेनेजुयला मात्र छन्। अध्ययनका क्रममा विश्िका १ सय ३० िटा िाष्ट्र तथा िेत्रहरुको लगानी
िाताििण अध्ययन गरिएको गथयो ।
१३० औं ्थानमा िहेको हाइटीले १०० पुणाांकमा िून्सय अंक प्राप्त गिेको छ । १२९ औं ्थानमा
िहेको भेनेजुयलाले ५.६ अंक मात्रै प्राप्त गिेको छ । नेपालले ११. ६ अंक प्राप्त गिेि १२८ औं
्थानमा िहेको छ । दक्षिण एशियाली िाष्ट्र पाकक्तान नेपालभन्सदा मागथ िहेको छ । यसले १३.५
अंक प्राप्त गिेि १२५ औ ्थान ओगटेको छ ।
लगानीका लागग सबैभन्सदा सुिक्षित िाष्ट्रमा ्िीजिल्याण्ि ठहरिएको छ । यसले १ सय अंक पापत
गिेि पहहलो ्थान कब्जा गिेको हो । लक्जेमबगग दोस्रो ्थानमा पिेको छ । सन्२०१३ मा यो िाष्ट्र
आठौ ्थानमा िहेको गथयो ।
त्यसैगिी लगानीका लागग सुिक्षित िाष्ट्रहरुको सूचीमा ्िीिेन तेस्रो, अष्ट्ष्ट्रया चौंथो, जमगनी पाचौं ि
बेष्ट्ल्जयम छैठौं ्थानमा िहेका छन्। बेलायत भने यो िर्ग १६ औ ्थानमा पिेको छ । छछमेकी
िाष्ट्र भाितले ४१.७ अंक प्राप्त गिेको छ ि लगानीका लागग सुिक्षित िाष्ट्रमा ६० औं ्थानमा पिेको
छ ।
एफएम ग्लोबलले िल्र्ि इकोनोशमक फोिम, विश्ि बैंक ि अन्सतिागष्ट्ष्ट्रय मुद्रा कोर्ले उपलब्ध गिाएको
तथयांकमा आधारित िहेि यो सूची प्रकाशित गिेको हो ।
२०७४ िैिाख २९ गते १५:५६ मा प्रकाशित (२०७४ िैिाख ३० गते १८:४८मा अद्यािगधक गरिएको)
Accessed: May 15, 2017
http://www.onlinekhabar.com/2017/05/583878/#.WRYRRTMMCP0.twitter

21. Nepal’s Risk Assessment (Provided by Coface)
Country rating: D –
• A high-risk political and economic situation and an often very difficult business environment can
have a very significant impact on corporate payment behavior. Corporate default probability is very
high.
Business Climate rating: D - The business environment is very difficult. Corporate financial information
is rarely available and when available usually unreliable. The legal system makes debt collection very
unpredictable. The institutional framework has very serious weaknesses. Intercompany transactions
can thus be very difficult to manage in the highly risky environments rated D.
Strengths
• Private transfers sustaining household consumption, the main driver of growth
• Strong services sector, particularly tourism
• Financial and technical support from India and China
• International solidarity
Weaknesses
• Heavily dependent on the agricultural sector and vulnerable to climatic vagaries
• Isolation and difficulties of access to many of the country’s regions
• Economy strongly affected by the earthquakes of April and May 2015
• Weak productivity of the secondary sector Poor infrastructure, recurrent shortages of electricity
and fuel
• Absence of a political consensus, leading to fear of worsening social and political tensions
http://globaledge.msu.edu/countries/nepal/memo (2016)
When this is the international perception, FDI target is difficult to materialize.

22. 8. Value of life
People at one corner is deprived of
minimum human need and the people at
other corner is enjoying each and every
luxury available in the world. Extreme
disparity between haves and have-nots
breeds resentment and turmoil in society,
which creates insecurity and lack of
harmony. To address this issue, countries
cooperate with each other.
The Poverty Alleviation Project in Nepal is
an example.

23. 9. Peace and politics
• The world is linked for
peace and politics is
responsible for peace
and prosperity of the
world around us.
• Egypt, Libya, Syria, …

24. 10. Terrorism
• Probably this has been the new
and most significant issue for us to
fight with or to live with.
• In 2017, seven Arab countries cut
off diplomatic relation with Qatar
accusing it of supporting terrorist
organizations.
• Developed countries support other
countries to reduce international
terrorism.

25. Global Terrorism Index 2018; http://visionofhumanity.org/indexes/terrorism-index/

26. https://covid19.who.int/

27. Political
Interdependence
Socio-economic
Interdependence
Environmental
Interdependence
Population
Debt
Global Village
EnvironmentJob
Value of Life
Terrorism
Peace and
Politics
Immigration
Education
Interdependence of Developed and Developing Countries: A Model?

28. Factors linking Developed
and Developing Countries
Positive Impacts on CMDC Negative Impacts on CMDC
Global Village
Environment
Climate change
Population
Migration
Grant, Debt, FDI
Job
International Share Market
Education and Research
Trade and Transit
Value of Life
Tourism
Politics and Peace
Terrorism
Supranational Agencies
Add your own factor(s)

29. • If a large country like US or
China sneezes the whole
world catches pneumonia.
• The world is like a human
body, if a part aches whole
body suffers
End of Chapter 2

30. Test yourself. Answer these questions using different resources.
Chapter 2: Linkage between developed and developing countries
• Explain the relationship between population growth rate and the level of
development of a country, since some developed countries are trying to
increase the population growth rate and some developing countries are
doing just the opposite.
• Some of the factors linking the developed and developing countries are (i)
job, (ii) education and (iii) migration. Explain the positive and negative
aspects of these factors on CDMC.
• Describe the benefits for the developing countries from the developed
countries.
• How has the development in transportation and information-communication
technology changed the level of linkage between developed and developing
countries? Explain with examples.
• The foreign direct investment (FDI) is increasing linkage between
developed and developing countries. Explain, with reference of Nepal, how
can developing countries minimize negative impacts and maximize positive
impacts of FDI in developing countries?
• Developing countries like Nepal, India, Bangladesh and Philippines are
exporting thousands of its trained and un-trained human resources in
developed countries every year, and enjoying increase in remittance. Which
type of country (developed or developing) benefits more from this type of
linkage between developed and developing country?
• Discuss the different ways the developed and the developing countries are
linked with each other.

31. Test yourself. Answer them using different resources.
Chapter 2: Linkage between developed and developing countries
• Discuss the sources of linkages between the developed and the developing
countries. Can, and should, these links be broken?
• Can a particular country choose to run its entire activities in complete isolation,
with no link to other any countries? Discuss with specific examples.
• Discuss the socio-economical, political, and environmental interdependence of
the developed and the developing countries. Is interdependence of the
developing and the developed countries increasing, or decreasing? Explain with
specific examples.
• How does the interdependence between developing and the developed
countries influence the construction project management in a developing
country? Explain with specific examples.
• The development of science and technology change in the global environment,
population and others because the whole people of different countries are linked
with one another or earth is linked with one another. Would you justify the role of
following linkage factors are (i) Global Village (ii) Environment (iii) Population (iv)
Debt (v) Jobs (vi) Migration or Immigration (vii) Trade (viii) Politics and Peace (ix)
Value of Life, how would you conceptualized about the development?
• How does the (natural) environment link the developed and developing
countries, and how does this link affect the CMDC?