ANGHEL SIMONA GRUPA 406

Developing Countries and the World Economy

The world economy has many Developing Nations. Today, I am here to talk about the role of financial institutions such as the World Bank and aid organizations such as CAA and the success of current strategies in promoting development. The basis of international institutions and organizations roles are assisting developing countries to improve their development performance. The development of economies is enhanced from change from simple forms of organization and production to complex modern ones such as the role played by financial institutions such as the World Bank and aid organizations such as CAA. As this is the subject of development economics, Developing countries as whole economies can be poor; or they can grow but still leave large sections of their people in poverty.A developing country can be a result of many characteristics: resources, historical background, population, economic structure and system. They are basically under developed country that reflects a failure to gain levels of living throughout most of their population. Yet there has been a significant improvement by these countries general level of living as growth.The information I will be discussing will be relevant to what is the World Bank and what is its focus? The World Bank can institute various strategies in promoting development that is if the economies are not in serious trouble.The bank grants loans only to member nations, for the purpose of financing specific projects. Before a nation can secure a loan, advisers and experts representing the bank must determine that the prospective borrower can meet conditions stipulated by the bank. Most of these conditions are designed to ensure that loans will be used productively and that they will be repaid. The bank requires that the borrower be unable to secure a loan for the particular project from any other source on reasonable terms and that the prospective project be technically feasible and economically sound.The World Bank, main objectives initially was to assist in the reconstruction and development of damaged economies by facilitating the investment of capital for productive purposes. In recent times it focus has been on assisting developing countries. They also assist in promoting private foreign investment by means of guarantees or participation in loans and to supplement private investment by providing, finance for productive purposes out of its own capital.Once a basic knowledge of the work of World Bank is known, I will give you an example in involvement in developing countries.Recently the World Bank has just indicated that Indonesia's 2001 budget deficit, that is being forced up by growth pressure would not be fundable. The current estimation of 3.7 per cent budget deficit could rise to at leat 5-6 percent. A situation neither desirable nor fundable. The government is very limited in its ability to raise extra revenue, part because of the state of Indonesia's tax system and high debt. Indonesia's public debt already stands at over 100 per cent of GDP which severely limits the ability fund more debt. Indonesia bonds are impossible to sell to foreign investors and there is already a flood of domestic bonds on issue to fund the Government's bank restructuring program. Unless it can quickly get its finance back into shape Indonesia will be forced to rely on foreign aid donors to funs the budget deficit.Aid organizations such as CAA, is the help provided by developed nations such as Australia, USA and Japan to the developing nations. More specifically, aid refers to the net flow of official development assistance provided by governments and institutions of the industrialized countries. Institutions aims to improve the levels and effectiveness of economies, the basic aim to other countries is to improve their standard of living, through the promotion of economic development through funds.The following information expands on the impact of aid from neighboring countries:This is an example of a Timor, as an emerging country needs all the revenue form the development of oil resources that represents East Timor's best prospects of being recognized as a country friendly to foreign investment. Australia has a clear vested interest in taking a generous approach to revenue split under the existing arrangements. This is because of its role in accepting the Indonesian occupation and because it is better for East Timor to fund itself from oil revenue that to get it recycled from Australia in higher aid. The aid dependence on Australia of neighboring Papua New Guinea and its tendency to blame its problems on Australia are typical of relationship model to be avoided with East Timor. After all that Timor has been through, it will be a particular tragedy is more oil money than expected undermines diversified economic development.Most loans have been granted to economically developing countries in Africa, Asia, and Latin

America. Despite many developing countries, each country varies widely as a separate economy: Africa is being improved forecasting more than 4 per cent growth rising one percent since last year, South and East Asia is experiencing a slow down and should loose growth as well as a slight decrease in Latin America. Interestingly enough countries that are developing nations, are one third of the worlds population, are located in Latin America, Africa and Asia. Some are moving out of their previous situation and are on the verge of joining the ranks of industrialized countries.The bank gives particular attention to projects that directly benefits the poorest people in developing nations by helping them to raise their productivity and to gain access to such necessities as to their standard of living. If we look at these types or particular economies we can see that there most productivity come from agriculture. Direct involvement of the poorest people in economic activity is being promoted by providing loans for agriculture and rural development, small-scale enterprises, and urban development. The bank also expands its assistance to energy development and environmental concerns.Between output and input, the output being goods and services, the input the factors of production used to produce those goods and services. As productivity generally refers to labor productivity: output per worker in the economy. Maximizing productivity is the key to economic development. Human capital is the main form of utilizing production by means of short-term improvements in productivity may reflect capacity utilization. Human capital focuses on the attention on the fact that human labor is a resource in which nation must invest in if they are to advance. The skills, health, motivation and mobility that increase the productivity of human resources are result of expenditures on these attributes.By comparing developing to developed countries and using world average figures are useful measures of relative economic performance. In comparison of both developed and developing nations in relation to world results. The crude birth and death rates, which also incorporates the percentage growth rates for that particular year show that it is easily distinguished that developing countries have a high crude birth rate, a higher crude death rate and higher growth rate. The indications of poverty recently indicate that firstly in all developing countries the indication in the household final consumption expenditure (per capita growth) that last recorded at 0.6 percent. It has been stated that in some of the less developed countries, a third of the world's population survive on less than a US41 a day, a total of 1313.9 people. According to the World Bank infant deaths has decreased, life expectancy has risen on average by four months a year and growth in food production has exceeded the growth of population.The World Bank isn't an institution that only provides assistance to governments in poor developing economies. It attempts to create an environment where foreign business is willing to invest in their countries. Theories used explain the nature of development; the dominant causes of developing economies and are guidance for implemented strategies to achieve development. Economy has a variety of similar issues although each has its unique characteristics. The schools of thought on development are: Modernization Structuralism Dependency Basic need Neo classical. The theories are main goals, target variables, policy focus and role of government. The different schools of development thought suggest strategies to pursue development. They range from a focus on local needs to a focus on global economy and from an active role for government to a minimal role for government.The World Bank has been heavily criticized in recent years for its poor performance in development economics, especially with regard to the social and environmental issues of the development in Third World economies. As the

organizations are often seen as being in control of the major economic power. The bank itself has admitted considerable wrongdoing. However, it is arguable that it is less at fault than many of the corrupt or incompetent regimes whose schemes it is called on to fund. The bank's role in development has in any case diminished with the vast influx of private capital into profitable projects in developing countries. Health, education, and other fields unlikely to yield profits remain in need of an institution such as the World Bank.