Economic development of the countries after SAP - Essay Example

? Topic Part One With reference to your team’s groups of countries, compare and contrast the performance of their economic development strategies between the pre-SAP and post SAP periods. Structural Adjustments were a set of policies implemented on developing countries by the IMF and World Bank. These policies targeted areas like reducing expenditure, focusing on economic growth and output, increasing trade liberalization and stability to increase foreign investment, devaluing currencies, privatization and improving governance, etc. There is a significant difference in the economic development and performance of the countries before and after they adopted the SAPs. There are, however, some countries who did not adopt these SAPs. An example of such a country is Qatar, a country rich in oil and gas reserves that has attained progress without implementing these policies. It maintained inflation in single digits during the 1970s and 1980s and experienced financial surpluses and rapid economic growth. However, inflation increased sharply in 1985 due to the hike in oil prices. But it should also be kept in mind that the dependency of their GDP on oil prices has also reaped them immense awards over the years in economical terms by significantly improving their GDP during the oil shocks of 1973-74 and 1978-79. Oman, which is also an oil based economy, opened itself to world trade during 1970. Economic reforms implemented in Oman focused on increasing public spending by spending on health, education and welfare provision. Reforms based on development and modernizations were also implemented. These included developing the economy’s infrastructure by building roads, providing low cost housing and building hospitals. Though Oman’s main economic strength has been oil production, it started focusing on other things like tourism and development of natural gas reserves after the oil price slump adversely affected its economy. The general trends of the economic reforms implemented in Oman has been geared towards making the country better off in terms of economic and financial stability, increasing the skill level of their labor force and diversifying its income sources by investing in avenues other than oil production to decrease singular dependency on oil production. The UAE has gained a substantial amount of economic progress due to the economic reforms implemented in the country as part of SAP. However, economic trends in the UAE have been erratic to a large extent with regard to its economic cycles of booms and recessions, wealth, resource reserves, international relations and its struggle to meet challenges that came up over the years. Some particular struggles that the UAE faced have been to do with issues of governance, relating particularly to the adequate management of resources, socioeconomic stability, implementation of democracy, domestic and foreign business and overall economic stability and security. The UAE has been particularly interested in working to overcome these challenges by implementing economic policies and taking on measures of economic development. The economy has allowed for immense expenditure on developing its infrastructure, its real estate market and its leisure and tourism sectors. Kuwait is an economy that also has oil reserves that it manages on its own. Oil production in Kuwait is expected to increase and the economy is, therefore, spending big money on upgrading and expanding its oil refineries. Kuwait also has a sophisticated financial market and a well developed banking system to its added advantage; thus, areas of development in Kuwait apart from the money spent to manage oil resources are centered around the financial industry, most particularly concerning the financial system itself, securities traded, stability of the market and introducing innovative measures to maintain a competitive edge over other financial markets. South Korea has not done as well as the other countries mentioned as a result of the implementation of SAPs. It made huge investments in its infrastructure development by building roads, houses and providing public amenities. In 1970, South Korea took active measures to reduce economic dependency on the USA, even though the USA was its ally. From the 1970s-90s, South Korea worked on import substitution. It invested heavily in capital intensive industries, however this ended up having an adverse reaction for the economy. It resulted in a slower than average economic growth and large increases in the level of inflation in the economy. What compounded the adverse effects in the situation was the fact that along with these deteriorating effects, South Korea was also accumulating a large number or non-performing loans. Thus, South Korea’s growth has been much hindered. The Kingdom of Saudi Arabia is the largest oil producer in the world, contributing almost 1/5th of the world’s total oil production. Due to this, Saudi Arabia plays an important role as a member of the OPEC. Their GDP is highly dependent on petroleum and petroleum product; they account for 80% of their budget revenue and 45% of their GDP. Saudi Arabia has spent large sums of money on developing its education and health sectors and has achieved a rapid growth over a very short period of time as compared to other countries. Part Two: 2. With reference to your country, compare and contrast the performance of its pre-SAP economic development strategies with at least three other countries on the basis of the following: a. Dependency strategy and issues In pre-SAP stages, Pakistan had a high economic dependency on countries that it traded with. However it had a strong level of growth rates in real agricultural value addition. Pre-adjustment policies were geared towards protecting the domestic manufacturing sector; this was done by highly taxing imports and providing subsidies to the domestic manufacturing sector; however these measures did little to reduce trade dependency on other countries. South Korea was also largely reliant on the United States before it implemented the SAPs prescribed to it by the IMF and World Bank. Saudi Arabia, however, has maintained its dominant position because it holds immense soft power due to its extensive petroleum reserves. Oman, on the other hand, was more economically dependent on other countries because it was new to the arena of world trade (open economy implemented in 1970) and also, it needed to expand its trading base by developing its domestic industry. b. Import substitution strategy and issues As mentioned before, Pakistan was using high tariff rates on imports and subsidizing local industry to induce the phenomenon of import substitution. It was expected that these measures would help the economy in generating a trend which propagated a move from preferring imported goods to locally made goods. In comparison to Pakistan, Qatar was investing immensely in oil and natural gas sectors so that it could boost its exports. Oman was also focusing on different aspects of its trade economy by developing the tourism and natural gas sectors so that preference for imports in these sectors could be shifted to a preference for local markets. South Korea is another example of an instance where an economy tried to implement strategies to further the phenomenon of import substitution and as a result, made massive investments in infrastructure and capital intensive industries. c. Basic needs strategy and issues Pakistan’s basic needs included getting its inflation levels in check and stabilizing its economy. There was a growing need to make its exports stronger so that healthy levels of economic growth could be achieved. There was also a need to relieve its debt burden which had been growing excessively. Issues of poverty and income distribution also needed addressing. In comparison to Pakistan, Kuwait needed to spend on and renovate its oil refineries to deal with expected increase in oil production. South Korea needed to decrease trade dependency and develop its infrastructure. Oman, on the other hand, needed to increase public welfare spending and to expand and develop its infrastructure. These countries used capital, investment and resource injections to develop these areas of concern. Read More