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Economic Development Funding: Opportunities and Barriers for Newly Industrialized Countries

The economic development of Newly Industrialized Countries (NICs) hinges on various funding avenues such as foreign aid, foreign direct investment, and development loans. While foreign aid provides essential infrastructure without the requirement of payback, direct investments seek profits for private investors. Development loans, while crucial for funding, often come with repayment conditions and criticism for imposing burdens on Less Developed Countries (LDCs). Understanding the roles of major global finance organizations like the IMF, World Bank, and WTO is vital as they shape economic policies and address the growing inequality gaps between nations.

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Economic Development Funding: Opportunities and Barriers for Newly Industrialized Countries

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  1. Economic Development Funding and Barriers

  2. NICs

  3. Look up general background info and economic info on CIA World Factbook

  4. NIC Development Funding • Foreign Aid– money from MDCs to build LDC infrastructure • Not a loan – don’t have to pay it back • Foreign Direct Investment – money from private investors or investment firms in other countries • Looking to make a profit • Development Loans– international development loans from organizations like the World Bank • Given to NICs to fund major projects that can charge fees (like utilities) • Loans paid back through fees • Criticism – LDCs cannot pay back loans, projects didn’t develop as they intended

  5. Global Finance Organizations • IMF = International Monetary Fund • 188 member countries • Created after WWII to rebuild countries • Help with international trade • Overseeing exchange rates • Loans to developing countries • CONS • Loans come with specific requirements for the type of development and financial policies

  6. Global Finance Organizations • World Bank • International bank that lends money to developing countries • Similar to IMF, started after WWII to help countries rebuild • CONS • Development happens too quickly without regard for specific circumstances of the developing countries • Western perspective of “development” • Represents 186 countries but is run by a small group of powerful countries • U.S., Japan, China, Germany, France, UK

  7. Global Finance Organizations • WTO = World Trade Organization • Established in 1995 to help negotiate and regulate trade between countries • Fewer barriers to trade between member organizations (globalization!) • 153 member countries • CONS • Accused of widening the gap between rich and poor countries • High trade protections of agricultural products in rich countries while poor countries are encourage to open their doors • Ignores environmental and labor concerns of developing countries

  8. Push for Change • LDCs can’t pay back loans without taking much needed money from education, health programs, and other social services • Movement to cancel or forgive loans to LDCs http://www.one.org/us/ http://www.one.org/us/shareworthy/bono-at-ted/

  9. NIC Case Study:India’s Jump to Services • Focus on manufacturing until 1990s • Globalization: India had comparative advantages over other NICs • Due to British schools during colonial period • High number of educated workers • Speak English

  10. NIC Case Study:China’s Demand for Energy • Industrial development • New wealth of Chinese people = huge demand for energy • Coal has been primary domestic source • Oil also in demand – China invests in oil exploration in politically sensitive LDCs like Sudan • Increased pollution in China

  11. Asian Tigers • Industrial economies of Asia that are rapidly growing

  12. Asian Tigers: Two Types

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