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Economic Impacts of Globalisation - Coggle Diagram
Economic Impacts of Globalisation
Countries
Positive Impacts
Eg. Foreign Direct Investment (FDI)
In 2012, FDI in Singapore reached $747.7 billion, mainly from the US
FDIs help local businesses to grow and compete on a larger scale, allowing Singapore to take advantage of a greater number of economic trade opportunities.
Economic Growth
Countries depend on different economic activities such as
agriculture
,
manufacturing
,
tourism
,
trade and investments
Due to globalisation,
trading and expansion of businesses
in different parts of the world have
increased
This leads to an
increase in tax revenue earned
, which can be used to
build more infrastructure
and
improve the lives of the people
Eg. Free Trade Agreement (FTA)
The USA and Singapore signed an FTA in 2004. This benefitted industries such as the electronics, information technology, chemicals, petrochemicals and textile
FTAs help save on tariffs, increased trade between Singapore and its partners and also increases job opportunities/revenue for the people
Negative Impacts
Economic Downturn
The
rise and fall of economies
are closely tied to
trade and investment between countries
Especially when one country faces an economic downturn, it will inevitably
affect other economies around the world
This could lead to
business closure
and an
increase in unemployment
. Reduction in trade will also cause countries to face a
significant loss of national revenue
Hence, hampering the building of infrastructure and
slows down the progress of a country
Eg. 2008 Global Financial Crisis
The bankruptcy of the US-owned Lehman Brothers escalated to a global recession due to the US' large role in international economies
Many international banks were hence, forced to close down because their incomes were derived from investments in the US
Companies (MNCs)
Positive Impacts
Larger Market Shares/Higher Profits
They can be attained by companies due to
globalisation
MNCs
expand their production
and
sales of goods
in many parts of the world
As a result, companies would experience
economic growth
with the increase in economic activities. They would also be able to
sell more products and earn a larger profit
-
Eg.
Singaporean companies like CapitaLand have set up operations in other countries so as to maximise market outreach. In particular, CapitaLand is present in over 20 countries, increasing its consumer pool
Eg.
Labour costs may be lower in another country and globalisation will allow the company to move its production facilities offshore. iPhone, an American company, has its production facility in Shenzhen, China as it has extremely low labour costs as compared to Western countries
Negative Impacts
Smaller Market Share/Lower Profits
Due to globalisation, there will be
increased competition
from other countries in the global economy
This can make it harder to compete for a
share of profits
In order to remain successful, companies have to
continually innovate and diversify
. If they are able unable to do so, they will eventually
fall behind and be eliminated
as a result of globalisation
Eg.
In 2012, Carrefour, a French hypermarket chain, closed its only branch in Singapore after 15 years due to intense competition
Individuals
Positive Impacts
Higher income
Due to
increased mobility
, it is easier for individuals all over the world to have
access to employment opportunities
Individuals will benefit as they can have
better job prospects and earn a higher income
(better living standards)
Eg.
Engineers from NTU have been headhunted for a job in Dubai for thrice of Singapore's pay and a less demanding lifestyle
Negative Impacts
Loss of income
Due to
increased mobility
, companies will re-locate to places where there is a
larger market or lower labour costs
This may result in
increased competition for jobs
all around the world, as well as,
loss of jobs
and
lower income
for certain individuals
Eg.
Uniqlo, a Japanese fashion chain, started product operations in Shenzhen, China due to the low labour costs there. However, over time, China's manufacturing and labour costs rose. This caused them to move its operations to Vietnam, where the labour costs were even lower
Solution:
Workfare Training Support Scheme
Offers training courses relevant to workers in Singapore
It helps to improve an individual's skill set, enabling them to keep up with the constantly evolving industry or even seek better job prospects with their renewed skills