Topics: Economics, Investment, Per capita income Pages: 6 (1728 words) Published: September 16, 2013
Rachaita Vyas
Ideas and issues

Is globalisation a threat or an opportunity to developing countries?

Globalisation as an opportunity
Economic development
Globalisation can be said to be economically benign; playing the significant role of enhancing economic prosperity and offering a new beacon of hope to developing countries. Globalization is often characterised by a reduction in trade barriers such that there is a free flow of goods, services and labour from one country to another contends with these views and adds that that the effect of this is increased trade which in turn translates into increased income for developing countries. Globalisation therefore serves as an opportunity for developing countries to stabilise their economies by taking advantage of trade. These statements can be considered true because globalisation has greatly reduced barriers between countries through elimination of tariffs and import duties. The rise in globalisation has led to increased capital flow into developing countries’ economies. Foreign Direct Investment (FDI) injects a considerable amount of capital into developing countries thus easing their efforts towards economic stability. The developing countries have also benefited in terms of increased financing through loans and grants from developed countries. It is true that increase in capital inflow serves the purpose of enhancing economic development in a country. What proponents fail to incorporate in their studies however is that net capital inflow could lead to negative effects on trade. Chan and Scarritt (2001, p. 154) note that large capital inflows often result in appreciation of exchange rates and inflationary pressures that impact on the country’s current account. This means that globalisation in an attempt to improve the economy could actually thwart the progress of the economy.

The reduction in trade barriers has led to the promotion of specialisation. This is an economic concept which denotes that countries can concentrate on the production of commodities that they can produce at the least cost (Aurifeille, 2006, p. 252). This commodity can then be traded to earn maximum income for the country while other goods may be imported from other countries. In this regard developing countries should take advantage of globalisation to enhance their income through trading in goods which they can produce most effectively. Such a development not only gives developing countries an opportunity to prosper economically but also to obtain goods that prove expensive to produce in their own countries. Most studies on globalisation contend that globalisation enhances competition as the flow of goods and services between countries becomes easier. According to Corsi (2009, p. 9), competition is an effective way of enhancing innovation and the production of better quality goods.

Technological advancement and knowledge transfer

The transfer of technological know-how has taken an integral part in globalisation. Corsi (2000, p. 9) points out that this has led to increased innovation and better methods of production to developing countries. The direct result of this is increased income and thus appreciation of the countries’ economic development. At the same time, globalisation has led to increased transfer of knowledge and skills to developing countries (OECD, 2000, p. 61). Foreign nationals coming to work in multinational companies add to the knowledge banks of developing countries thus increasing the level of efficiency. Increased knowledge about production methods, economic policies and management techniques present invaluable inputs in developing countries. At this juncture, it would be worthwhile to note that developing countries should use this as an advantage to tap these knowledge and skills because foreign investors are not destined to stay there forever. Training of professionals and development of technology within the country are vital yet they are not effectively...
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