Impact of the world bank and UNCTAD on developing countries - Essay Example

 Impact of the world bank and UNCTAD on developing countries UNCTAD (United Nations Conference on Trade and Development) is a trade development agreement and the world’s apex financial institutions like World Bank have highly conjectured on the welfare dynamics of the developing nations. In the exorbitant milieu of complex business process and developing globalisation, economic inequality can be said to be one of the primal parameters in the measurement of the growth and the developmental judgment of several economies of the world (Dey, 2004, pp. 26-27) . Capitalism, colonialism, influx of capital spread and concentration of wealth has generated prosperity among several territories of the world and has given rise to the developed and rich nations (Social Justice in an Open World, 2006, p.5). In the trading pattern also the developed countries have been seizing a mammoth amount of wealth with the dominance over the less developed and developing nations and have brought the mechanism of the trading pattern in their own hands with the dictating behavior of the wealth in their own hand and the drawing of the valuable resources for production and economic development in their own territorial entity (Sturtevant, 1981, pp. 330-331). The less developed and the developing nations of the world have been highly lacking in resources and lacking in wealth accumulation with the dominance of the developed and rich nations in their favor. The lack in resources as well as lack in the wealth accumulation of these countries has made these countries plunge into the realms of vicious circle of poverty and have lead to the utter misfortune of these countries. Thus there has been the requirement of various international financial institutions to try and develop the economic deterioration of these countries and impart these countries towards the trajectory of sustainable growth. The paper will be highlighting on the studies of the UNCTAD and the word bank with respect to the developing nations and will focus particularly on two case studies which will be highlighting the tasks of contribution of UNCTAD and the World Bank towards these developing countries. The two countries which will be taken for the purpose are that of Bolivia on which the contribution of the World Bank will be mentioned and Costa Rica on which the contribution of the UNCTAD will be mentioned. Coordinated impacts of the institutions on the developing economies Established in the year 1964, UNCTAD’s motive was directed towards a stylized development mission. At that juncture, the world has been changed drastically and the critical division of the East West was making very little significant change after the collapse of the Berlin Wall (The Least developed Countries, 2009). The axis of the North South was a reality of the world with the North being depicted as the developed nations and the south being that of the developing as well as the developing nations. The trajectory of the development on the angle of North South division was becoming the prime concern regarding the division of the developing as well as the developed nations. At this critical juncture, there was a high emergence of a developmental strategy which would be throwing the developing nations towards a domain where they will be receiving a high sigh of relief. The creation of UNCTAD was basically conjectured on the agenda of promoting development and advancement to the un-developed as well as the under-developed and newly independent countries as well as the newly industrialised countries (NICs). The main purpose of its establishment was focused on the economic integration of these economies into the world economy through the method of a balanced approach. It was the time when UNCTAD was developed, the world was at the summit of the East-West conflict and the south has been emerging as an economic clustering of poor countries vis-à-vis the northern countries which are the rich countries. The member of states of UNCTAD were highly arranged into groups with a group of 77 members which are further divided into separate groups like that of Group A (developing countries, further subdivided into regional groupings ,Group B (developed countries), Group D (the then Central and Eastern European countries) and China. With the termination of the Cold War the earlier communist countries of the Central and the Eastern Europe have been seeking to make certain successful transition from their earlier political dynamics towards the new economic systems. Some of member countries joined the European Union and the others inculcated with the problems faced by their particularities and aspirations are now largely common with those of the majority of the developing countries of the South (ENHANCING THE DEVELOPMENT ROLE AND IMPACT OF UNCTAD, 2006). The agendas which have been developing since the period of 1960s, the competence of UNCTAD can be highly assessed with the help of the record performance rather than through the focal point of the current perceptions. The UNCTAD has enthralled leadership in several areas with the highlight and analysis of the issues that are highly salient in the making of the international policy in the development dimensions. The various success of UNCTAD can be referred to as follows: The conference developed the notion of the Generalized System of Preferences (GSP) devoted to the pioneering mechanism of the issues of trade in the services which became later the central feature of General Agreement of Trade (GATT) with high discussions and negotiations. In the early stage of the game, the UNCTAD highlighted on the issue of the selection of the tariff which is an existent phenomenon for the purpose of development of the influential theory of effective protection which points towards the value added protection mechanisms. In the late 1960s , the UNCTAD pioneered on the trading patterns of the South-South trade which is a much debated talk in the contemporary world. The agreement also provides a highly substantial amount of input to the commodity agreements as a way to the solutions of the persistent problems of earnings and instability by the countries depending on development of only one or just a few of the primary products. The agreement also pioneered in the analysis of the skilled migration with multifaceted studies of the brain drain theory from the developing countries and the also with the organized discussions of the proposals for the purpose of dealing with the issue through such measures (ENHANCING THE DEVELOPMENT ROLE AND IMPACT OF UNCTAD, 2006). With the headquarters in Washington, the apex financial institutions of the world, the World Bank has emerged into the world with that of the slogan stating the dream is to see a world devoid of poverty (Poverty Reduction and the World Bank: Progress in Fiscal 1998, p.1). The structural adjustment programs of the bank can be attributed as one of the greatest agendas and move by the bank which find its high implications on the recent East Asian currency crisis as well as its aftermath in the other countries also generated intense concern about the way in which the poverty of the developing nations could be neutralized (Easterly, 2000). In the recent years it can be found out that the US financial crisis not only crippled down the markets of the United States but also impacted its adverse effects on the developing nations as well and the other poor nations attached with the US. The World Bank has been highly helpful in providing the optimal funding towards the public sector as well as the private sectors of these economies (Lin, 2008). The bank is constantly on the spree of monitoring the development of developing economies against the measures of the absolute poverty. The latest estimates drawn over 850 household surveys for almost 130 developing nations which represented almost around 90% of the populations of the developing world and it was found that the results for the year 2005 and 2008 were totally based on the interviews with the 1.23 millions of sampled households. The survey coverage tended to be poorer in the 1980s and in some other regions it can be seen for the others regions in the world today. All the amounts of money values which are adjusted in terms of inflation and exchange rates reflected the actual prices which prevailed in the country. The commodities which were not traded internationally were highly cheaper in the poor countries. The past estimates revised back to around 1981 on a constant basis was found to be improving on the sides of the developing economies. The lags in the availability in the year 2008 seemed to be a global estimate and with the estimate of the data with that of the many countries it was found that the estimates of 2010 were highly diminishing (An update to the World Bank’s estimates of consumption poverty in the developing world, 2012). One of the leading causes of death in the developing nations is the lack of educations and health facilities. The bank through its core lending structure and lending in health has contributed to around more than the US$1.9 billion. The supporting projects of the bank has been highly designed in the decline of the child mortality as well as improved maternal health as well as care and education towards the attainment of the basic nutritional levels incorporated within the rural health clinic. The health programs are generally complemented by US$665 million with the implementation of the basic amenities like that of the infrastructure for the water supply as well as the sanitation facilities (Development and Human Rights: The Role of the World Bank, 1998, p.7). A case study of UNCTAD The UNCTAD plays a pioneering role in the development of the trade relations among the developing nations. Among the various policies, the Investment Policy of UNCTAD are directed towards the developing countries in order to enhance their investment policies as well as to publicize the governments and the international private sector with an individual country’s business atmosphere. The UNCTAD Commission on Investment, Technology and related financial Issues are responsible for the execution of the policies (INVESTMENT POLICY REVIEW DOMINICAN REPUBLIC, 2009, p. v). The following segment will be analyzing the role of the UNCTAD with its intervention in the Costa Rican chamber industry. Developing trajectory of Costa Rica Costa Rica is a developing nation of the Central America. In the decades of 1960s and 1970s, the country highly depended on the performance of few traditional exports area and mainly focused on the policy of import substitution rather than on export promotion leading the flow of the foreign reserves out of the country (Costa Rica, 2006). Again, the country was highly affected by a debt crisis during the early 1980s. At this point of time, the Costa Rican government focused on a highly aggressive policy which led to the diversification of the production as well as the exports. The new dynamic approach to the development consisted of two elements as that of the pursuit of the free agreement as well as the attraction of the foreign direct investments (FDI). It was seen that most of the FDIs went to the Latin American countries’ manufacturing sector and also stands out for its high ability to attract the FDI in the high-tech sectors. It was seen that in the microeconomic levels, there was the presence of the backward linkages as well as that of the technological spillovers in the technological terms but in the macroeconomic or the aggregate levels it was found that the FDIs, TNCs brought escalated economic development in the country. In this respect, the role of the UNCTAD in the Costa Rican Chamber industry will be developed with a short insight on the Costa Rican Chamber industry (Cordero & Paus, 2008, p.1). The Costa Rican Chamber Industry Around 24% of the Gross Domestic Product of the Costa Rican economy comes from the industrial production and the sector generates around 18% of the country’s formal employment. For the countries’ small and medium size industries, it is highly necessary for paying taxes, the expenses associated with the social security and for that reason it is an utmost necessity in developing the competitive locale of the country. In this context the role of the Chamber industry is crucial as it acts as both as a participant and that of suppliers of goods and services. It also interacts with the countries at the same time keeping a bird’s eye view on the economic development of the country (José, 2003, p.32). In Costa Rica, UNCTAD’s supplier Development for the high tech Multinational Companies was initiated in the year 1999 and it was considered as a pilot project which was aimed at increasing the domestic value added in the output of high-tech transnational corporations, augmenting the competitiveness of the small as well as the medium sized industries (SME), improving the technical competence of the SMEs and the overall aim of the project was to enable the SMEs in order to achieve the levels of technology which is absolutely necessary for the optimal operation of the production chains of the transnational corporations (TNCs). The funding was channelized by the Foreign Trade Promotion Agency of Costa Rica, the Costa Rican Coalition of Development Initiatives, and the TNCs and so on. With the successful completion of the pilot project in the year 2003, there was a development of a domestic supplier development office which has been integrated which has been infused into the Foreign Trade Corporation of Costa Rica (PROCOMER). It has been seen that the projects supports in the manufacturing of the products by SMEs dedicated towards the production chains of the high-tech transnational corporations. The procedure is such that it selects according to the motivation as well as the quality criteria which requires the SMEs to be admitted into the program. After that a suitable methodology is drawn up by an international expert who analyses the basis of the demand of the products from the high-tech multinational companies as well as interprets the technical as well as the status of the SMEs. Again, the project also cultivates the development of certain selected SMEs with the help of technical assistance and the activities. Apart from that there is also a provision of an information collecting system which is dedicated towards the notion that the enterprises which are associated with the project with the access to the sources of supply and demand for the products and services which establishes the links with the SME support institutions and also acts as a guiding mechanism in their search for the funding as well as that of the venture capital (INVESTMENT POLICY REVIEWDOMINICAN REPUBLIC, 2009, p.84). The venture thus described has been successful in the creation of around 120 linkages between the SMEs and the multinational enterprises which surpassed the target of around 45 linkages. The aftermath of the project there were around 403 linkages by the year 2009. The exports from the participation in the SMEs enhanced from around $2mm to $52mm within the span of time period 2002-2005 and it also reached by an amount of $105mm by 2009. The technology based multinationals operating in Costa Rica increased the purchases of the local tradable goods and services as percentage of total imports increased from a percentage of around 1.6% in 2002 to around 2.3% in the year 2005. The factors which contributed to the successful linkages was due to the technological as well as managerial keenness within the SMEs. The multinationals also encouraged the local sourcing mechanism. The project was also successful in the establishment of the Costa Rica Provee which is a dedicated service within the governmental structure focusing on the export promotion policies for the creation of the linkages between the SMEs and the multinational enterprises. The project was also highly significant in the promotion of the legal reforms which helped in the encouragement of the linkages between the local SMEs as well as the multinational enterprises with a positive impact throughout (SME Suppliers, n.d.). A Case Study Of World bank Background of the Bolivian economy Bolivia is a Latin American country with the crux of decentralization and administrative reforms at its core. The prime agenda was that the neoliberal policies was thought to be of bringing high development and would be infusing the roots of democracy (Laserna, 2011). But in the Bolivian case the application of political and economic restructuring added to the generation of a high reduction in the state revenues, massive social unrest as well as that of the easy entrance of the multinational corporations (MNCs) leading to that of the exploitation of the Bolivian natural resources. With the imposition of new structural adjustment program in 1985 resulted into the rapid growth of the informal sector and the spreading of the popular opposition which was met by that of the acts of repression (Hindery, 2004, p. 281). Despite the fact that the country generated a huge wealth for the Spanish empire Bolivia is in the current situation is one of the poorest countries in Latin America. Around 60% of the population lives below the poverty as calculated with respect to the year 2006, with a human development index ranking of 108 in the World. The hydrocarbon industry is one of the pioneering sectors of the Bolivian economy which attributes to a mammoth amount of the export products of the country. But still possessing such a huge asset of natural resources, the country has been trapped in the realsm of underdevelopment from time to time. With the further exacerbation of the issue, it has been found that the poverty as well as that of the extraction of the natural resources in Bolivia possessed wider adverse effects on the indigenous population of the country with the incorporation and amplifications in the wide scale inequality among the common mass of the country. It has been said for the case of Bolivia that the huge resources of hydrocarbon has been actually exposited as a resource curse (Fields, 2012, pp. 6-7). There are several reasons behind the underdevelopment in the industry however one of the main reason which can be mentioned in this case is that the leaders and the administrative people of the country has been highly promoting the mining and hydrocarbon industries at the expense of other industries in the country which led to the aggregate downfall in the economy and the incident can be highly associated with the famous ‘Dutch Disease’ occurred in Netherlands (Nkusu, 2004, p.15). Arena of hydrocarbon industry In Bolivia with the introduction of the neoliberal structural reforms along with the structural adjustments in the year 1985, the capitalization of the state oil company Yacimientos Petroliferos Fiscales Bolivianos (YPFB) and the passage of the Hydrocarbons Law (Ley de hidrocarburos) both in 1996 allowed the entrance of several multinational oil corporations which were highly responsible for a series of social as well as the environmental impacts throughout the country (Vinding, , 2004, pp. 163-165). The process of capitalization seemed to be highly significant as the government of Bolivia sold around 50 per cent of the equity in the state oil company to the various multinational corporations (MNCs). With high levels of criticisms, the process was debarred from the process of public scrutiny and accountability. Environmental and economic destruction was an indispensible aftermath. The reform policies and helping hand has been forwarded by the international financial institutes like that of the World Bank, International Monetary Fund (IMF) as well as the Inter-American Development Bank (IDB) which boosted high levels of investments and structural policy implementations which aggravated the development of the socio-economic environment of Bolivia. However in this case we will be only concerned about the role of the World Bank with its intervention in the Bolivian economy (Hindery, 2004, p. 281). Role and the impact of World bank on Bolivia The influence of the World Bank on the Bolivia has been immense. The bank took a rigorous part influencing the Bolivian state in several ways through the policy of structural adjustment and capitalization along with the financial and legal reforms. In the domain of the hydrocarbon sector, the World Bank’s policy implications were manifold. The proliferation of the Hydrocarbons Law in 1996 was highly expected in liberalizing trade in the oil and the natural gas sector with the establishment of an autonomous government agency dedicated for the promotion of the explorations and investments and negotiates contracts creating an agency system for regulation of the tariffs as well as the practice of the anti-competitive tactics. The investment, mining and the hydrocarbon laws are of high significance and the World Bank made their way through adaptation of the judicial reform loan. The Bolivian government requested the World Bank for the loan provision and it was confirmed that the passage of promotion of various other laws were absolutely necessary. Although criticisms cropped up as through the pushing of these conditional loans the state employees became highly dependent on the World Bank funding. Nevertheless, there were many other reforms made by the World Bank in solidifying the economic environment of Bolivia. The World Bank’s project for hydrocarbons sector reform and capitalization credit resulted in the creation of an environmental office known as the Unidad del Medio Ambiente (UMA), within the Vice-Ministry (VMEH), highly dedicated towards the regulation, prevention and mitigation of the social and the environmental impacts associated with the economic reforms in the hydrocarbons sector. The sponsors of the World Bank came in the name of learning and innovation loan” (LIL) capacity-building dedicated towards the strengthening of the socio-environmental conditions. The accumulated cost of the LIL project was around estimated levels of USD 5.5 million among which the bank financed around USD 4.8million. The project of LIL is considered as one of the vital institution-building activities sponsored by the bank in order to ensure the structural, legal and financial reforms were judiciously implemented with the total avoidance of the negative effects (Hindery, 2004, pp. 287-289). 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