Ways of promoting Economic Growth and Development in Developing Countries
Economic growth is a confined concept of economics that occurs whenever people acquire resources and redistribute them in ways that make them more valuable. Economic development on the other hand looks at how the standards of living have improved and how the life rates and expectancy which influence productivity can lead to economic growth. This paper seeks to evaluate four ways in which economic growth and development might be enhanced in developing countries.
Promoting Economic Partnerships and Agreements.
The creation of trade blocks, agreements and partnerships that serve a common purpose of making the business environment favorable can help reduce many trade barriers. Most businesses in the developing nations have thrived as a result of the reduction of taxes imposed on goods produced and sold within these blocks. A great example is the AGOA program, which has considerably increased exports from the developing countries. It has made it cheaper to export certain goods to the US than in other developed nations where the taxes imposed are very high. Legislations that limit non-tariff barriers have also helped expedite the movement of goods and services. Through economic agreements, developed nations have been involved in various projects aimed at boosting investment and availing business opportunities for most local and international companies in developing countries.
The advancement of business and legal systems.
The international business scene has embraced technology as a result of the globalization of markets. Multinational companies are now able to control their subsidiaries in various countries from their headquarters. Globally accepted trade and business standards built on the World Trade Organization's rules and other international rules are critical in promoting international business. These standards are however not well established in most developing nations, a situation that hinders the businesses of most overseas companies from operating locally. A good example is the weak legal framework surrounding Intellectual Property Rights especially in piracy and counterfeiting. It is necessary for the governments in developing countries to protect these foreign companies by formulating and implementing proper legal and business systems that will protect them from huge losses.
Formulation and Implementation of proper Monetary and Fiscal policies.
Developing countries should maintain a low and stable inflation environment while ensuring that adequate levels of international reserves remain the focus of their monetary policy. A comfortable level of foreign reserves and a reduction in the inflation rate reduces the high lending and interest rates imposed on commercial banks. Increasing the statutory deposit ratio for banks will reduce the risks that a high liquidity environment could pose on the foreign reserves and inflation. It is important to have adequate financial reserves for the important sectors of the economy such as agriculture and especially those that need value addition to export. A favorable fiscal policy is the one that appreciates its own financial environment. Developing countries should have favorable tax rates that seek to promote trade while at the same time reduce the cost of living of her citizens.
The governments in these countries must develop and implement the best political policies in order to advance the goals of good governance, prosperity, peace and national unity. It is important that they consult widely with the private sector, NGOs and its own citizens to identify the right individuals and policies that are appropriate to the political situation in their countries. Corruption must not be tolerated. There should be transparency and accountability in the running of public affairs. Political stability enhances a good economic environment.
Economic growth and development in developing countries is attainable. Economic policies should be geared towards poverty reduction, better education, proper governance, social justice, investment, finance and environment.