To what extent do you agree with the World Bank that privatization and trade liberalisation are the

most effective measures states should adopt to promote economic development in today s globalized economy? [16] Privatization is the process of allowing free market forces to operate in the industries with minimal state intervention while trade liberalisation is the removal of trade barriers which involves the removal of government incentives and restrictions from trade between nations. Such measures have indeed proven themselves to be effective in promoting economic development in today s globalized economy, but these measures may have only benefitted the developed countries that stand to gain the most out of it, usually at the expense of the less developed countries. Privatization and trade liberalisation has promoted economic development through higher economic efficiency and productivity as the market allows for more competition, as well as inviting foreign investment into the country, driving economic growth. The export processing zones (EPZs) are particularly in lined with these two measures as it aims to attract export oriented industries with favourable investments and trade conditions such as waiver on restrictions on foreign ownership, allowing hundred percent ownership of export processing ventures and exemptions from certain kinds of legislations, implying that foreign companies are their own bosses in this area. It is the model for an open economy with large amounts of foreign investments and non-traditional exports. One EPZ would be the maquiladoras in Mexico, where about 500,000 jobs were created in the area with the transnational corporations providing the technology, capital, material inputs and export market, essentially an important phase of Mexico s industrial growth. With so many significant EPZs in the world today, it has definitely generated employment for many people, contributing to many countries economic growth. However, state intervention is still important in protecting its own national economy. Due to the fact that in today s globalized economy, there is the strong influence of the transnational corporations, domestic enterprises may be squeezed out by their size and strength, and new local firm formation may also be inhibited. In order to protect its local market, the state can choose to implement certain policies, such as tariffs, which are taxes levied on the value of imports that increase the price to domestic consumers and thus making import goods less competitive. This can help to protect domestic manufacturing industry while at the same time, allowing for the import of industrial raw materials. One example of a country which still has the presence of a centrally controlled economy would be China in which state-owned enterprises predominate the more important industries. Even the United States, being the leading advocate of free trade, still intervened with the use of tariffs and non -tariff barriers to protect particular interests such as in the sectors of textiles and automobile with Japan. As such, economic development of a country cannot be left to the free market on its own, but requires certain state intervention to regulate its economy as well. Furthermore, critics have argued that in most cases, the less developed countries are often at the losing end in the process of privatization and trade liberalization. This can also be seen in the case of the regional trading blocs, which allows free trade between member countries but impose tariffs on other countries who may wish to trade with them. These trading blocs enable countries to use their political ties to further their economic development, gaining free access to each other s markets. However, countries from the developing world are often neglected and left out from the mainstream, thus harder for them to trade and develop. For instance, the North

American Free Trade Agreement (NAFTA) has failed to deliver its promise of a better life to the Mexicans especially, as it has reinforced a low-wage mentality in Mexico, forcing uncompetitive Mexican peasants out of agriculture as well as treating Mexico as a dumping ground for hazardous material by the US firms, polluting its rivers and air due to the less stringent environmental regulations present in the country. Therefore, it can be seen that the two measures of privatization and trade liberalization may not be so effective after all, especially towards the less developed countries as they are often used to be exploited by the developed countries. In conclusion, privatization and trade liberalization has helped certain economies achieve higher growth, developing at rapid pace; however the economies which have gained the most are usually those in the developed world, while these measures may not be so effective for those in the developing world.