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Impact of globalization on developing countries like pakistan

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Published: Mon, 5 Dec 2016

(Krishn, 2006) An article was published by Krishn A Goyal the text of this article show the impact of globalization on developing economy special reference to India. India has opened up the economy in the early 1990’s after a foreign exchange crisis that hang-up the economy close to defaulting on loans. Globalization is the process not only opening up the world trade, advanced means of communication, worldwide financial markets, easily transfer of goods ,services ,capital but also reduced the pollution or diseases.

In context to India, it’s mean to opening the economy to foreign direct investment by giving the different advantages to foreign companies to invest in special economic area of India. This has helped the Indian economy to grow at a faster rate. Foreign direct investment is an important element of economic growth and development.

Globalization in India had a positive impact on the whole growth rate of the economy. Due to Globalization not only Increase in FDI and GDP but also the direction of growth in the sector has also been changed and also increase the competition between the private sectors. As a result India’s position in the global economy has improved to the 4th position in 2001 from the 8th position in 1991in terms of purchasing power. Krishn also show the future challenges of India economy.

Sulaiman D. Muhammad et al (2010) the article on ‘Impact of Globalization on HDI (Human Development Index): Case Study of Pakistan’. This research focuses on foreign direct investment (FDI) and international trade. This article shows that whether the (FDI) and international trade expansion is an effective tool of economic stability and development in the present global situation in case of Pakistan or not. Globalization suggests a restricted opportunity for developing countries to achieve a faster economic growth by trade and investment. Foreign investment provides an inflow of foreign capital and funds, job opportunities, an increase in the transfer of skills and technology.

FDI allows the foreign investors to get the benefits from their resources and assets resourcefully. from 1991 to 2000 the worldwide FDI flow improved by 24 percent throughout the period, while according to world development report, in 2002 shows that the FDI flow of developing countries remain growing at 20 percent. FDI provides much attractive funds to developing countries such as, innovation, technology, capital, entrepreneurial ability, managerial skills, and access to new markets. Tax is imposed on an import when goods are imported into a country this is helpful to increase the pries of imported goods and to increase the use of domestic goods. In case of developing countries these capital and intermediary goods are necessary inputs for the manufacture of exported goods. Openness to FDI can supply to growth by inspiring domestic investment, improving productivity and efficiency, or by increasing the practical knowledge to production. Globalization made easy to transfer of technology, supply the resources such as physical and human capital and innovation are the benefits of the FDI to the developing countries. This research also concluded that the international trade and foreign direct investment can play a main role to incrarease the economic development and growth.

(Jephias Mapuva, 2010) THE IMPACT OF GLOBALIZATION ON SOUTH AFRICA’S ECONOMIC DEVELOPMENT

This article has a dual purpose, that of providing a review of global integration of South Africa and how to deal with the dynamic global economic developments, as well to analyze the impact of globalization on emerging market economies. The concept of globalization is a very broad and comprises the fields of economics, politics, society, and culture.

Globalization is a process due to this comparatively small number of countries benefiting from this process. The processes and activities, in general, refer to the decrease in barriers between countries. This process has essentially encouraged closer economic, social, and political interaction. Economic globalization increases the international trade, financial flows, and foreign direct investment.

South Africa re-entered in the international economy in the 1990s at a time when the process of globalization was beginning to gain momentum and apart from cope with the forces of globalization, the South African economy also has to manage its emerging market status.

Globalization has a positive impact on different parts of the world. Economic, political, and social developments in other parts of the world have impacted on South Africa’s tendency to provide possible economic benefits for its citizens.

(Smith, 2001)In comparison, with other emerging market economies, South Africa seems to be a modest globalizer. The globalization process in South Africa is also mainly driven by trade.

Both net portfolio inflows and FDI inflows seem to have a very limited impact on economic growth in the country due to their high levels of instability.

(S.R. Osmani, 2005) This paper attempts to take a look at the impact of globalization on poverty situation in Bangladesh .Today’s the main topic in the world is globalization and every one want to debate on it. Globalization has a strong impact on the political discussions and in education as well. Bangladesh holds the wave of globalization in the 1990s. The globalization has effect on the economy of Bangladesh, on the lives of its people and some other areas. In 2000, foreign direct investment was low, even by the values of low-income countries. But significant advances have been made in some of the other levels. The foreign exchange earnings from remittances now increase due to the globalization.

Globalization increases the merger of a national economy with the world economy through trading of goods and services, technology, capital flows and information.

Forces of globalization have contributed positively to poverty reduction in Bangladesh.

Globalization increasing the link with the world economy and it’s helped the increase in growth of non-tradable in two ways.

By rising the demand for non-tradable

By dropping their cost of production

It has done through increasing the range of profitability employment opportunities of the Poor. The employment opportunities in the tradable sectors have been positive, as the new opportunities have exceeded the job losses that certainly occurred through changes regarding with the globalization. The purpose is to increase the employment opportunities in the non-farm non-tradable sectors. Non-tradable sector has enabled the poor to find more wage employment. Trade exportable liberalization reduced the import substitutes, and thus raised the incentives for both and non-tradable and also increases the use of domestic products. Globalization has contributed positively increase in the growth that led to faster reduction of poverty in the 1990’s.

(Sanjaya Lall, 2003) The Employment Impact of Globalization in Developing Countries

‘Globalization’ means different things to different people.

Globalization can offer many employment benefits to developing countries. During globalization many factors that affect on the employment.

In the external world these countries face, markets become more accessible, lower transport costs, easier to get information, easier to access technology and easier to raise capital: this promises increase exports, more rapidly transfer of Technology and superior investment resources.

On the domestic front, faster integration with the world economy also increases the promises. Trade liberalization, according to received trade theory, promotes labor-intensity in export and domestic -leaning activities and thus increases in employment. Investment liberalization conducts to better inflows of technology, capital, skills, information and different services.

Globalization may also give access to the domestic production systems of TNCs (transnational corporations) that increasingly cover the world and offer huge markets, rapid growth and technological as well as employment benefits. Opening the economy to worldwide service and communications providers can help to generate more jobs, increase productivity and support competitiveness. It is not just foreign firms that benefit: local enterprises can respond to open new market opportunities by increasing their efficiency .In sum, therefore, the FDI feature of globalization offers wide employment benefits to the countries that are able to attract, hold and control it. Unfortunately in this category very few developing countries fall. And some of those face serious challenges as wage rise and show cheaper competitor. Again, the serious variable is the ability to provide a competitive setting for TNCs to find operations, not just based on low wages but on the entire range of capabilities that is now required for modern industry.

(RAHMAN MD FAIZUR, 2005) globalization and its impact on Bangladesh

This article text shows that, globalization has now become a new world order, which almost influences everything that comes in our mind. Globalization has some positive and negative effect on almost every part of life. Globalization is a long-term process and it has an impact on economy. It has economic, political and cultural and social impact. Developing countries like Bangladesh with weak geopolitical locations and fragile economies are now looking at globalization to build up their economy to clash any threats.

Western institutions played important roles to help the economies; globalization is played under the rules of International Monetary Fund, the World Bank, and the World Trade Organization. Though, a faster gaze at the globalization will show that it has some positive and negative impacts on the economy of Bangladesh. A detailed perceptive of the effect of globalization is needed to utilize its return to develop the economy.

This may also help Bangladesh continue a constant growth. This article show both negative and positive impacts of globalization on economic sectors of Bangladesh. It also discussed some measures to conquer the negative impacts and also the technique to develop the opportunities created. Finally this article provides some procedures to meet the challenges of economic globalization by the Bangladesh.

(DR. COMPTON BOURNE, O.E, 2006) the text article that shows how the developing economies effected by the globalization. Countries vary obviously in their centrality to the processes, the benefit-cost outcomes from contribution in the worldwide economy and their cost influence on the world developments. Small developing economies operate with in the structure of rules and regulations formulate by the powerful developed countries. But the level of integration into the global economy and society is not consistent. In the economic globe, globalization increases the international trade relations through higher ratio of trade and by higher ratio of imports to national income.

Due to globalization developing countries have become more trade dependent. Small Caribbean economies have traditionally benefited. The affected commodities are mainly agricultural products but manufactured merchandise may also be affected. Under which rules WTO governs the world trade make it very complex for the small developing countries to defend their own procedures from import rivalry from large economies in which procedures provides more benefit from economies of scale. Globalization increases the competition between developing countries. There are at least four points of significance to this set of globalization Characteristics for small developing Caribbean economies.

Developing Caribbean economies have to face strong worldwide competition in their nationwide markets. To maintain the market share, attain the higher levels of production efficiency reflected in more competitive prices and offer quality products.

Developing Caribbean exporters face stronger competition due to entrance of the new suppliers.

Small developing Caribbean economies have no alternative but try to find to develop new product lines in those lines in which they are not adequately cost-competitive.

Fourth, markets comprised of immigrant communities can be approached as a way of export diversification even within traditional geographical trading patterns.

(Axel Dreher 2003) Does Globalization Affect Growth The article shows an indicator of globalization covering its three main dimensions: economic, social, and political integration. The Research show that globalization encourage growth but not to a level essential to diminish poverty on a large scale. The dimensions most strongly related with growth refer to real economic flows and limitations in developed countries. Although information flows also encourage growth where political incorporation has no effect. Among others Keohane and Nye (2000: 4) highlight the following dimensions of globalization:

Economic globalization, characterized as flows of goods, capital and services.

Political globalization, characterized by a flow of government policies

Social globalization, expressed as the broadening of ideas, information, and People.

Globalization is good for growth and positively promotes the growth. Countries that globalized have higher growth rates. The increase in the growth rate due to the economic integration and in developing countries the absence of restrictions on trade and capital. There is although proof, that cross border information flows encourage growth. The claim that poverty exist because of globalization is therefore not suitable. Those countries with the lowest growth rates are those who did not globalize. Countries like Zimbabwe or Rwanda, e.g., insulated themselves from the world economy. They have poor institutions which suppress growth and promote poverty. On the other hand, poor countries simply to globalize their economies to prompt growth rates and reduce poverty.

As another example, the country with the positive change in globalization from 1975 to 2000 has been China. Its index increased by 2.14 points. According to the regression results China’s growth rate in 2000 is 2.33 percentage points higher as in 1975 due to increased integration with the rest of the world. This example shows the limitations of the globalization process in reducing poverty as well. To become globalized would require massive efforts. Such effort is almost impossible to achieve in the short run but will take long time.

(Ali M. Alli, Gregory S. Winter David L. May, 2007) this article shows that the globalization and main areas affected by the globalization. Global culture is becoming increasingly developing. The globalization process is characterized by challenges such as environmental deficiency, over-population, over-consumption, public health, and education.

There are five main areas affected by globalization: economy, increase in the information/communication technology, politics, business, and education. The General Agreement on Tariffs and Trade affect free trade between countries by encouraging the reduction of tariff and non-tariff hurdles. This allows firms to increase trade and move around the world. The increase in the markets productivity is one of the most important developments of this century. Its impact on the economic dealings, processes, and on institutions.

The process of globalization is facilitated by technology which dislocates the humans from both time and space and projects them into a world where the future and past exist at the same time. People are better able to communication with each other, understand, and learn from each other using technology as a standard perspective. A world is being formed where people assist and work together to overcome common challenges. Globalization has already distorted our world radically: the internet and E-mail are globally direct methods of information collection and communication.

(Pinelopi Koujianou Goldberg Nina Pavcnik, 2006) The text of that article shows the distributional effect of globalization in developing countries. Globalization is a wider perception usually used to illustrate a variety of phenomena that increased the economic interdependency of countries. Such incidents include flow of goods and services across the border, restrictions in policy and reduction in trade barriers, foreign direct investment and immigration. The number of developing countries entry in the global market increase with the changes in different measures of inequality in these countries.

Changes in the trade theory is that in a country’s experience to international trade, and world markets more frequently, affect the distribution of resources within country and can create significant distributional conflicts. Two trends appear clearly from the data analysis. First, to increase the contact with international markets as measured by the degree of trade protection of developing countries, the share of imports and/or exports in GDP, and the importance of capital flows, foreign direct investment, and exchange rate fluctuations have increased substantially in current years. Second, while inequality has many different extent, all offered measures for inequality in developing countries appear to an increase in inequality.

Globalization and Liberalization: The Impact on Developing Countries (Barbara Stallings, 2001)

This article shows the impact of globalization on developing countries, usually in terms of its effects on developing countries and how has it affected the potential for growth and equity. Four basic opinions are elaborate in the paper with reference to the impact of financial globalization.

First, increase in the capital availability in developing countries, if they had to rely completely on their own resources also increase their ability to grow more rapidly. All capital flows are not providing equally growth, though; temporary flows and the acquired assets are less costly than investment in new facilities

Second, capital flows are unequally distributed by province and country, thus bias in the patterns of growth. Inequality has also increased within countries, due in part to the employment patterns generated by international investors. There is also an irregular distribution of capital within countries.

Third, government try to remove the profit from the globalization of capital, while restricting the costs, is more possible than generally thought. The basis of many troubles is local rather than global. International and domestic policies are needed to change if developing countries are to maximize the benefits and minimize the costs from the new world environment created by globalization. Unfortunately these countries have little voice with respect to international policies, which are mainly determined by the major developed countries together with the international financial institutions. Finally, policy changes at the worldwide, local, and state levels can help to improve the image of developing economies.

(2009) the text that article shows how the process of globalization has affected the Chinese economy in areas of trade, finance, income distribution and environmental issues. China joined WTO in 2005 in response to globalization. Due to Globalization china reduce their trade hurdles, giving positive impact of increases in international trade and foreign investment and caused increase in the economic development and growth. There has also been an increase in education level and reduction in poverty. Increase in income level also increases the investment. This also increases the economic growth in china. The Chinese government has providing a channel for both domestic and international deals. But the benefits of the globalization are not equally enjoyed by the entire population. The growth rate increase in economy resulting in environmental problems such as pollution and degradation.

Rusdy Hartungi, (2006) “Could developing countries take the benefit of globalization?”

Globalization is a very wide issue. This article discusses the issue related to trade, labor, intellectual property and environment. The impact of globalization provides benefit mostly to industrialized countries or MNC’s operating in developing countries. Globalization provides a new taught and suggestion to developing countries. Globalization will bring success to developing world only if industrialized countries and MNC’s are ready to adopt a new system, which permits their profit object to be corresponding with the self-sufficient interest of developing nations.

(Dr. I V Malhan , Shivarma Rao, 2007) In this article discusses the advances in information and communication technologies and their access and impact on Indian agriculture sector.

The current process of globalization has influenced all the sectors of economy including the agriculture sector. Globalization has offered vast opportunities but also fear to communities that are not sufficiently prepared to face its challenges. It has created unrest, competitiveness, uncertainty, need for adaptation to change and adoption of technologies. The globalization has affected the poor and uneducated people of the world particularly the rural people and small farmers having small land holdings. In the large number of developing countries, agriculture is the most important sector of the economy, accounting for the biggest proportion of employment. In agriculture sector better technologies is essential to enhance the productivity of the work. Globalization has also offered huge opportunities for Indian farmers to export their agriculture products in international markets. The rising cost of agricultural inputs and in international market relatively low cost of agricultural products is creating a disaster condition for Indian agriculture. Globalization in the perspective of agriculture sector can be discussed three components:

Development of productive efficiency by ensuring the convergence of potential and realized outputs

Agriculture exports increase in the country.

Better access to international and domestic markets that are either closely in harmony or overly protected.

(Eswar Prasad et al 2003) This article shows the effects of financial globalization on developing economies. The research focuses on three questions:

Does financial globalization promote economic growth in developing countries?

What is its impact on macroeconomic instability in developing countries?

What factors can help to control the benefits of financial globalization?

Financial globalization and financial mixing are, in principle two different techniques.

Financial globalization is a broad concept that expanding the global linkages through Cross-border financial flows. Financial integration refers to country’s linkages to international capital markets. Financial globalization helps the developing countries to better deal with the output and consumption instability.

International financial integration can support economic growth in developing countries.

International financial integration also helps countries to reduce macroeconomic instability. The available evidence refer that developing countries have not completely acquired this possible benefit. The current wave of financial globalization since the mid-1980s has been marked by a Surge in capital flows among industrial countries and, more notably, between industrial and Developing countries. Although these capital flows have been related with high growth rates in some developing countries, a number of countries have experienced periodic fall down in growth rates and significant financial disaster over the same period.

Tilat Anwar (2001) this article focuses on how globalization and liberalization affect economy growth, poverty and employment. Globalization is also a key to future economic growth. It is also discussed that it increases the poverty, threatens employment and living standards of the poor. Like many other developing countries, Pakistan is also tackled to combine its economy with the international economy through liberalization its investment and trade system.

Globalization mad easily integration of international markets for goods and services, finance and to some extent labor. It is usually determined by a push towards the liberalization of trade investment system. It is broadly argued that a liberal trade regime is the best strategy for a small open economy.

The lowering of tariffs rates tend to a substantial loss of revenue and resulted in inactive tax GDP ratio, resulting in increased need to cut development expenditure to reduce the budget deficit. Sachs and warner (1995) concluded that the open economies have grown about2.5 % faster than closed economies. Openness affects the growth through efficiency of investment in number of ways. First, an open trade system can increase market size and increase the investment returns that would not have been possible in a small market size. Second, openness may guide to increase investment a thus capital goods that were at too high cost. Third, openness may increase the efficiency of investment and lead to higher foreign direct investment. Finally openness may lead to greater exposure to a global collection of productivity enhancing knowledge and thus increased growth.

Realizing the benefit of openness, many developing countries have integrated their economies with the global economy, particularly through trade financial flows since the early 1980s. These countries have not only liberalized their trade regime but also opened up their economies for foreign investment. By adopting the liberalization polices these countries became attractive destinations for private capital flows. With the increasing development of global financial markets, the developing countries were offered more long term finance.

In last concluded that to prevent the rapidly growing poverty in Pakistan and other developing countries, there is a need to combine the objectives of achieving higher economic growth rate, over all pattern of social progress and distribution. These objective should be achieved in away that involves transparency and broad-based participation in the choice of goals, the formulation polices and the monitoring of implementation.

(Enrico Santarelli, Paolo Figini, 2002) the text of that article shows the impact of globalization on poverty. Globalization has emerged over the two last decades, and it may also increase or reduce country poverty.

Enrico Santarelli analyze the experimental evidence on the relationship between Globalization and within-country poverty in the Developing Countries and to measure globalization uses standard indices of trade and financial openness and privatization. As Xavier Sala – i- martin says that globalization is bad because it increases the poverty and inequality. Poverty is a multidimensional problem which results from a combination of political, economic, and environmental factors, and which comprises several different aspects. Generalized poverty can be straightforwardly defined as “a situation in which a major part of the population lives at or below income levels sufficient to meet their basic needs” (UNCTAD, 2002, p.39).

This research shows the social and economic effects of trade openness and globalization.

This paper tend to focus on the with-in country relationship between openness and domestic poverty, leaving the analysis of cross-section comparison of poverty and globalization and the study of the relationship between inequality and globalization to other research. chenry et al. 1979 Stressed that the extent of with in country poverty depends on two main factors

The average level of income

The level of inequality in its distribution

Poverty and income inequality are usually mentioned together, they are very different concepts and retain different policy implications. Excessive inequality creates social tensions and political instability. Globalization has emerged over the last two decades, and it may either increase or reduce within-country poverty. Trade openness tends not to significantly affect relative poverty, while financial openness tends to be linked with higher relative poverty. It has therefore to be emphasized that relative and absolute poverty are two separate concepts, with different meanings, measurement procedures, and theoretical links with globalization.

(Naima seed) in this article author show an impact of globalization on Pakistan economy. The objective of this paper is to help improve understanding of the effects of the gradual and selective approach to globalization in terms of trade, wages, employment and social progress in Pakistan.

The trend of globalism might be seen during the period of moderation of the 19th century, but the relative stability of globalization after the First World War and 1950s and 1960s a known as the golden years. The WTO was formed essentially as a recreation of the ITO (International Trade Organization) which was came after the Second World War.This then shows a tendency towards globalism Katsuni Sugiura (1999) In Social Development in Pakistan, Annual Review, 2001, an average Pakistani purchasing power is three and half times greater than in

The decline in import duties as a revenue source can be seen from the fact that their

contribution to total taxes has fallen from 50.4% in 1987-88 to 15.9% in 2000-01

This paper has shown that the Pakistan’s economic performance since

integration with the global economy can be characterized by a increase in GDP growth

rates, decline in import duties, an increase in FDI during the post 1988 decade, a sharp

increase in openness leading to a deteriorating balance of payments situation and

continued high levels of poverty and unemployment.

As globalization involves enterprises and workers of nearly all the world’s

countries in the goods as well as in the service sector. Consequently, the majority of the

world’s labour force is experiencing the effects of international competition. In Pakistan

except for the government servants there is increase in the wages in the informal sector as

well as wages of the production workers till 1990. As for as education is concerned,

although the literacy rate is still low, the number of literate persons in the country has

climbed up 17-fold and the number of universities has increased from four to 25.

importance of examining the interactions between globalization, economic development

and social progress. Advocates of social progress should acknowledge the key role of

trade and investment liberalization in creating new business opportunities and raising

living standards.


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