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Why do less developed countries face obstacles to development?

An overview of development through self-sufficiency or international trade and how it is financed.

Jasmine Rayee

on 26 April 2011

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Transcript of Why do less developed countries face obstacles to development?

Why do less developed countries face obstacles to development? LDC's have been developing, but at the same time MDC's have also experienced growth: the gap between the two has therefore not become smaller. 2 fundamental obstacles: how to adopt the right policies how to find suffiecient funds The self-sufficiency approach equal investment in all sectors of the economy side by side development of countryside and city reducing poverty HOW? By limiting import with high taxes (tariffs), quotas, and requiring licences, and combining this with a little export, th country can grow with its own ressources. Ex: INDIA Problems: inefficiency because of government control (little incentive, no pressure to improve) large bureaucracy which may lead to some abuse or corruption (and maybe a black market) International trade Rostow's Development Model 1. Pre-development: the traditional society is highly active in agriculture and "non-productive" activities such as military.

2. The preconditions for takeoff: new investments in technology and infrastructure to increase productivity.

3.The takeoff:the nation grows fast econ omically through certain industries.

4.The drive to maturity:more and more industries "take off",growing and specializing.

5.The age of mass consumption: shifting from heavy industry to consumer goods.
Examples: South Korea, Singapore, Taiwan, and Hong Kong: the "four dragons". Lacking natural resources, they produced specific manufactured goods (clothing and electronics) which turned out to be inexpensive (low labor costs) for MDC's: the LDC's grew. Saudi Arabia, Kuwait, Bahrain, Oman, and the United Arab Emorates benefited immensely of the rising petroleum prices in the 1970s. http://www.odi.org.uk/resources/details.asp?id=4899&title=reforming-trade-preferences-least-developed-countries This is a professional look at what international trade really requires in a LDC. Problems uneven resource distribution market stagnation increased dependence on MDC's WTO = World Trade Organization, established in 1995 (http://www.wto.org/) works to reduce trade barriers in the world. Restrictions on imports or exports, or on money, are negotiated between the members (97% of the world) Transnational Corporations Trade always involves several countries; foreign companies invest in the economy of another country (FDI, or Foreign Direct Investment) : major companies are the TNCs. This does not flow equally throughout the world. by Jasmine Rayée Financing development LOANS STRUCTURAL ADJUSTMENT PROGRAMS There is a need to borrow money to obtain sufficient funds to build new infrastructure. The LDCs lend most from IMF (Intl Monetary Fund) and The World Bank. Through sales of bonds or gov't contributions, both lend to private investors. The biggest problem though is that most funded projets turn out to be failures, and the idea that it in turn would attract new business dies with it. This is why many LDCs have been unable to repay the loans, which causes considerable tensions with MDCs. This is a program that includes all the information necessary before investing in a PFP (Policy Framework Paper). It helps setting requirements for debt relief. In it, the focus is on long-term benefits, but international organizations have realized they must also ease the short-term weight on the (poor) people. "1. Trade carried on legally.
2. Trade in which fair prices are paid to producers in developing countries." Producer Standards Worker Standards
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