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Relationship between economic growth and development
Relationship between economic growth and development
Relationship between economic growth and social development
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The link between economic growth and human development has been a subject of rigorous empirical econometric work since the 1970s. Foreign Direct Investment (FDI), which is an important component of human development especially in modern regional and global economies, has been found to explain varying levels of return and economic growth.
Foreign Direct Investment is a major source of capital for most developed and developing countries. It is usually difficult for countries to generate capital through domestic savings and based on their domestic strengths and capacities alone. It is even more difficult to import up-to date technology from abroad taking into consideration issues of transportation and the technical expertise required for operation,
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Tanzania has made considerable efforts over past three decade to improve investment climate with the vision to attract more FDI, whereby to this extent major policy and structural reforms were carried out since mid of 1980s in order to transform/improve business and investment environment in the country. One of the efforts that have been done is that Tanzania has been able to set up several autonomous government institutions and authorities to attract FDI inflows in the country. For instance in 1990s the government set up special authority Investment Promotion Centre (IPC), although after seven years the authority failed to attract FDI to the level that was predicted. Despite the challenges, but the country had made some improvements through IPC with respect to the development of private sectors in which the annual FDI value reached about USD 148.50 million. Due to the failure of IPC to attract more FDI into the country then the government decided to transform the authority into more aggressive institution so that it can attract more FDIs inflow into the …show more content…
Furthermore, the relative importance of FDI determinants may change over time, for instance due to globalization. Factors that have been brought out as determinants of FDI in developing countries include political and macroeconomic stability, infrastructure quality, governance, regulatory environment openness to trade and investment promotion strategies (UNCTAD, 1998). However, it is important to note that even though these factors have been empirically proven to be FDI determinants, some determinants may apply to some regions but not others. For instance, on average, countries in Sub-Sahara Africa (SSA) receive less FDI than other regions by virtue of their geographical location (Asiedu, 2002). However, it is important to note that even when factors apply to a particular region, they may not be applicable to a specific country within that
I found this article "Foreign direct investment: Companies rush in with the cash" on the financial times website (www.FT.com) published December 11, 2002 written by John Thornhill. The reason for choosing this article is my personal interest in the Chinese economy and its attractiveness to the foreign investors. Apart from the foreign direct investment this topic has also helped me in understanding the impact of Chinese economy on the global market.
The paper first compared the broad categories of aid to physical capital with aid to complementary factors of production. It was found that aid to physical capital produces a crowding out effect for private investment but that aid to complementary inputs attracts private investment. Within the category of complementary inputs was social aid and economic aid. Though development in both human capital and infrastructure is important in promoting FDI, foreign aid was found to be relatively unsuccessful in fostering growth in human capital. Therefore, aid to infrastructure was shown to be the most effective form of ODA in attracting FDI.
Due to the sudden collapse of the world’s economy in 2008 M&A became an unfavourable method of FDI and in just one year IFDI into UK shrank by 50%. The trend continued up to 2011, as the FDI pattern moved towards investments into third world countries and developing nations. This enormous change in the FDI graph after the financial crisis is mainly due to a decline in investments from transnational corporations that are located in the European Union. As the world’s economy has...
Outsourcing has been around for many years. In this paper I will discuss some of the history of outsourcing, the goods things about outsourcing, and the bad things about outsourcing.
In the year 2007, China and India ranked first and second respectively in the list of ideal foreign direct investment (FDI) destinations, according to A T Kearney, a global strategic management consulting firm (The Press Trust of India Limited, 2007a). The two nations, because of their similarities in geopolitical, economic and demographic aspects, are often compared with each other. To determine which one is more attractive for businesses to expand to, this essay will examine the business environment of both countries from the following perspectives: political/legal, economic, socio-cultural and technological.
The influx of foreign of foreign investors as argued by Pietrobelli and Saliola (2007) is regarded as an international trade that contributes to economic growth. From the report posted on Worldbank webpage (2016), the economic boom in Thailand over the last thirty (30) years and its continuous sustainability causes poverty rate decrease from 67% to 11% meaning that more jobs were being created. Moreover, the economic boom in Thailand is because of weak importation and strong production and exportation of produced materials to other countries resulting from the effectiveness of SMEs operation (Asian Development Bank “ADB”, 2016;
When deciding to engage in international trade an enterprise must make a choice of mode of entry into a foreign market. Depending on their resources, commitments, and long-term goals, the enterprise may select exporting (direct or indirect) or equity investment (foreign direct investment (FDI) or licensing/franchising) as a mode of entry (Peng, 2014). Exporting requires the least commitment, has the lowest investment of resources (and resulting risk), and capitalizes on use of home country capital – economy of scale. However, the tradeoff is higher transportation costs, potential loss of profit from local distribution, and liability of foreignness compared to equity based modes of entry. At the other end of the spectrum, FDI requires the most commitment, highest investment (and risk), and presents the necessity of managing a satellite facility in a foreign country. Conversely, it reduces transportation costs, greater access to local knowledge and profits, and counter liability of foreignness (Quick, 2010; Carter, 1997). Therefore, analysis of a business, the industry, and the environment of home and host country is necessary to determine the best mode of entry.
In international parlance, development encompasses the need and the means by which to provide better life for people in poor countries and it includes not only economic growth, although that is crucial, but also human development like...
There are at least four different research perspectives about the relationship between development and economic growth. Firstly, economic growth is the basis for social development. Secondly, economic growth and social development are not necessarily linked. Thirdly, both economic growth and social development are not basic causes by each other, but they depend on interaction. Fourthly, social development is the prerequisite for economic growth (Mazumdar. 1...
wate18005&it=r&p=AONE&sw=w&asid=820ae530c5fee2f671440f99e21dbb46 Nagheli, S., Nagheli, E., & Sadeghi, B. (2013). The impact of foreign direct investment and
The term economic growth implies an increase in the nation’s real GDP, and more importantly, an increase in the nation’s per capita income. When we are analyzing a nation’s economic growth, we are basically studying as to how that economy is advancing in quantitative terms. Economic development, on the other hand, is a much more encompassing term which includes both the qualitative as well as the quantitative dimensions of economic progress. Not only does it include the aspect of economic growth, but it also considers the process by which an economy improves the economic and social well being of it’s citizens. A mere look at the figures is not enough. We have to judge the progress of an economy by assessing a number of other factors like the level of infrastructure, health, education etc. Economic growth is no doubt important, but so is the development of the social sector. Economic growth, economic development and the social sector are all intertwined and are key elements in a nation’s progress. We shall now go on to discuss the role that they have played with respect to the Indian economy.
FDI inflow is divided into four (4) main sectors: agriculture, industries, infrastructure and tourism. FDI in the agricultural sector amounted to US $ 794.5 million in 2011, US $ 556.6 million in 2012 and a sharp increase of US $ 1,128.8 million in 2013. However, it started to decline of US $ 264.7 million in 2014 and US $ 482.6 million FDI flows in the infrastructure sector, which amounted for US $ 3,129.8 million in 2015 compared to the industrial sector, amounted for US $ 919.3 million and the tourism sector represents only US $ 111.9 million in
International trade is an economic practice where countries can import and export goods with no concerns to government intervention which includes tariffs and import/export bans or limitations. International trade has several advantages on developing countries; who are nations with low levels of economic resources or low standard of living. Developing countries can advance their economy through strategic free trade agreements. Free trade generally improves the quality of life of poor nations. Nations can import goods that are not easily available within their borders; importing goods may be cheaper for than trying to produce consumer goods. Many developing nations do not have the production procedures available for translating raw materials into valuable goods.
Economic development typically involves improvements in a variety of indicators such as literacy rates, life expectancy, and poverty rates. Due to the fact that GDP alone does not take into account other aspects such as leisure time, environmental quality, freedom, or social justice; alternative measures of economic well-being have been proposed. Essentially, a country’s economic development is related to its human development, which encompasses, among other things, health and education. These factors are, however, closely related to economic growth so that development and growth often go together.
Human capital is one important factor in the process of economic growth. With high-quality human capital, economic performance is also believed to be better. These qualities can be seen from the level of education, health, or other indicators viz. Human development index. Human development plays an important role for economic growth of a country. In simple words, human development would imply a process of enlarging choices. But in addition it is also concerned with the outcomes of the concerned choices (Gupte, M., 2016). Human Development, described as the ultimate goal of the development process, with economic growth, described as an imperfect proxy for more general welfare, or as a means toward enhanced human development (Ranis,