Also known as import substitution industrialization (ISI)

Government adopts a policy of organising the selection of goods to produce domestically – labour intensive, low skill manufactured goods

Subsidies are made available – encourage domestic industries

Protects jobs in domestic market – foreign firms are prevented from competing

Protects local culture by isolating economy from foreign influence

minimum wages trend often indicates a positive impact in term of poverty reduction

Protect jobs in the short – long run, lead to lack of job creation

Countries don’t enjoy benefits from comparative advantage and specialisation – produce products inefficiently

High rates of inflation due to domestic aggregate supply constraints

Other countries take retaliatory protectionist measures

Countries that adopt ISI strategy: Argentina, Brazil, Mexico, Chile

However, policies started to fail and does not seen to be a chosen option for economic growth

They promote economic growth/development, humantarian ideals, sustainable development

minimum wage that does not coincides with the living wage, developmental strategy are forced to be applied in order to increase its value accordingly.

although it may improve incomes for some, imposition or increment of minimum wage may also cause employees to lay off their workers resulting in an increase of unemployment rate

However, it is hard to identify a country's needs/ appropriate services/ financial cost/ most importantly, the access to the services provided

they operate independently without government intervention

plan specifically targeted projects in developing countries

pressure governments and affect the amount of official aid given.

influence buying patterns to promote better working conditions and the promotion of sustainable development

examples of aids:

• help those affected by natural disaster
• assist developing countries in achieving economic development
• improving the quality of HR in developing country
• strengthen institutions
• improve the level of technology
• fund specific development projects
• help meet SDGs

given to save lives & reduce suffering during emergencies or crisis

Short term: may prolong if host gov is unable to handle or stabilise the situation

promote economic/ social/ environmental/ political development of recipient countries

government aid that promotes and specifically targets the economic development & welfare of developing countries

1. foreign aid must be provided by official agencies and must be "concessional"

Priority

• when government power do not priorities the welfare of the majority, it is possible that the aid may be directed to only a small portion of the population
• In some cases those on the receiving end do not even need the financial aid

Motivation

• aids were given as political gestures instead of genuine help
• this will cause the poorest (globally) to receive less aid than people in middle-income countries

Political Views

• Aids are often linked to political views
• when these views change (probably from changing government) it may affect the willingness of the providing country to supply financial aids

Concentrating on increasing exports and export revenue as a leading factor in the AD of the country.

Increase exports, increase GDP, higher incomes, growth in domestic and exporting markets

Liberalised trade: gain access to foreign markets

Liberalised capital flows: reduce restrictions on foreign direct investment

Emergence of China as an exporting powerhouse led to increased protectionism in developed countries against manufactured products from developing countries

If countries want to attract MNCs, MNCs might become too powerful within the country and may lead to problems

Larger export markets allow producers to gain economies of scale / encourage diversification

Opportunities for companies to invest in foreign countries

Consumers have access to less expensive imports

a country give money for a particular aid project on the condition that the recipient country uses the money to buy goods & services from the donor country

• donor country may pay more than selling in open market
• reduce possible trade between developing countries who may able to supply G&D at a lower price

Unemployment increases, less efficient companies can’t compete with cheap imports from other member countries

Trade becomes complicated with agreements with other blocs

Countries pursuing export diversification to gain economic growth

Export primary commodities to export manufactured and semi-manufactured products

Protect from volatile changes, stabilise and increase export revenue, increase employment, increased use of technology, increased demand for skilled workers

Tariff escalation – rate of import tariffs on goods rises the more goods are processed

Need for highly qualified workforce – difficult to fund improving educational system, country is in poverty trap. Low education leads to low profit commodities, low income for govt, can’t fund education

Term of Provision

• Short-term: may be essential (food)
• long-term: may force down domestic prices and threaten domestic farmers (large quantity of food)

Removal/reduction of trade barriers that block free trade between countries (tariffs, quotas, export subsidies and administrative legislation)

Sale of public govt-owned firms (nationalised) to the private sector

Private-owned firms are more efficient, increases output

There are GNS that is needed to be provided by nationalised firms, if they are privatised, it might take basic human right from poor people like water and sanitation

Culture of Dependency

• limit long term economic development
• gov has little incentive to implement strategies of its own
• if domestic economy in donor countries worsen, it will reduce the amount of aid provided. Thus damaging the economy of the recipient country

But, process of privatisation is difficult and challenging in developing countries

Reduction in regulations help increase AS, generate economic growth

Getting rid of red tape will increase investment

Drawback: if deregulation damages safety and rights of workers, then affect economic growth. deregulation relates to environmental laws, growth will be at the cost of sustainable development

Brazil, China and India are huge growing markets – MNCs have better access to potential consumers, high demand

Focus

• often towards modern industrial sector
• create greater gap in incomes/ living standards between those in MIS and traditional agriculture sector

MNCs provide employment in the country – education and training, improve skill of workforce

Host government gain tax revenue from MNCs – used for health and education, economic growth

Provide more choice and lower price for consumers – provide essential goods that aren’t available domestically

MNCs bring their own management teams – limits host countries to acquire new technologies

MNCs have too much power, gain large tax advantages and subsidies

MNCs damage environment of host country, exploit workers (low wage, poor working environment)

Contribute to economic, environmental and social progress

Provide full financial and operating information

Policies

• aid is often only given to country that agree to adopt certain economic policies
• however, these policies might be more in the interest of the developed countries & its multinational companies

Sunny Money, aims to provide solar powered products to rural communities in Africa (solar torches, solar lights, solar battery chargers)

Unavailability of savings account, debit cards, payment systems limit ability of business and household to save in developing countries – affects the purchase of GNS, limits entrepreneurs and firms to gain credit to start business

Debt

• repayment of financial aid may lead to massive indebtedness for developing countries

Microfinance – small loans to individuals (micro-credit) to set up small-scale businesses (micro-enterprises), include knitting, market stalls, woodworking. Loans help families gain regular income and escape poverty

Mobile phone banking – contributes to development, people can easily, cost-effectively, securely send remittances home using mobile bank services

iii. Create safe environment at home, workplace, society

Corruption limits govt’s ability to grow economy – govt receive lower tax revenue because people avoid paying taxes

ii. Reform institutions – reforms to tax administrations have greater payoff of tax laws are simpler

iii. Build a professional civil service – heads of agencies, ministries must promote ethical behaviour

i. Invest in high levels of transparency and independent external scrutiny – citizen can monitor physical and financial progress of investment projects

Legally protected property rights can develop world’s wealth and prosperity

Reforming legal structure to ensure property titles to allow the poor to use their small homes or land to borrow money and start business

a. Sectors of economy where poor work (agriculture, informal)

b. Areas that poor live (town ghettos, rural regions)

Lend money to countries in West Europe after WW2

Govt earn money taxes and redistribute through transfer payments

Developing countries can’t redistribute income this way because their fiscal capacity (ability to raise revenues from taxes) is limited, hence govt can’t provide transfer payments and finance merit goods (health service, education)

loan provided are generated from the issue of WB bonds in global capital markets

ii. Reduce poverty by making welfare programs, govt only transfer money if poor fulfil the conditions: children’s school attendance, vaccinations, visits to health facility

iii. Can alleviate poverty and improve quality of human capital

iv. CCTs don’t create jobs but allow kids to become more productive, lead to higher income, break poverty cycle

v. E.g., CCT in Bangladesh allow girls to extend their education

IRBD can lend at a rate below the rate that the countries would have to pay if they borrowed the money from other sources

the poorer the country, the more favorable the loan conditions

provide loans to large scale infrastructure projects: electricity generation & transportation

focus on smaller projects that aim directly target & benefit the poorest people

ensure stability of the international monetary system

Responsibilities

• promote international monetary cooperation
• facilitating the expansion and balanced growth of international trade
• promoting exchange stability
• assistsng in the establishment of a multilateral system of payments
• making its resources available to member experiencing balance of payments difficulties

offer technical assistance & training to member countries (FOC) especially in fiscal & monetary policy, exchange rate policy, banking & finance, statistics

Provide concessional lending through Poverty Reduction & Growth Trust (no interest & debt relief under Heavily Indebted Poor Countries HIPC)

join international debt relief efforts to aid countries affected by natural disasters & public health crisis

Both org were established in US which has been accused of promoting free market/ business-friendly policies that has helped companies in developed country & high-income people in developing country

Ho World Bank is appointed by US president. it creates concerns towards the bias of the policies implemented

austerity measures to reduce gov spending (education & health)

for debt reduction to have tangible impact on poverty, additional money need to be spent on programs that benefit the poor

before HIPC initiative, more money were spent on paying debt then social commodities.

now, more expenditure is projected towards health, education and other o=social services

receiving countries has seen a decline in debt service paid of 1.5 percentage points of GDP

countries need to pursue cautious borrowing policies & strengthen public debt management

A more inclusive & sustainable economic development is set to be achieved

demand side policies(impacting short term macroeconomic outcomes)