EC501 International Economic Development Report 1 Sample

EC501 International Economic Development Report 1

Assignment Task

Purpose

The purpose of this assessment item is to summarise current data on international economic development and develop commentary on its current state. It is important to use data that is as up to date as possible because there are almost always global and regional events that have significant impact upon international economic development. The Global Financial Crisis that ran from mid-2007 to early 2009 and the COVID pandemic of 2019 to 2021 are recent examples of major global events that had significant effects on international economic development.

The task

Students should assemble data and charts that provide a detailed overview of the current status of international economic development. Data and charts should allow for comparison and contrast between the developed and developing economies. Although it is not necessary that students create original charts, where published charts are used, they should be appropriately acknowledged.

Data of particular interest in the context of international economic development includes trade, foreign aid, foreign direct investment, private capital flows, economic growth, incidence of poverty, and government budget outcomes. Broad indicators of human flourishing such as the Human Development Index or the Happiness Index might also be discussed.

It is not enough merely to present data and charts. A coherent commentary should also be provided. The commentary will demonstrate that you have a good grasp of what international economic development ‘looks like’ at the present time. This will provide a useful context for much of the unit.

Format

The format required for the case study is set out here. This format contains eight sections.

Cover Page (not included in word count)

• Title of the assessment

• Student name and student number

• Code and title of unit (EC501 International Economic Development)

List of contents (not included in word count)

• Provide a list of the headings you have used in your assessment, with page numbers

Executive Summary (around 200 words) (this is the last section to be written)

• Outline the purpose of the assessment

• Brief description of the key data

• Summarise the commentary developed in this assessment

Introduction (around 200 words)

• Define what is meant by the expression ‘international economic development’

• Describe briefly the data assembled for this assessment

• Summarise briefly the discussion to follow

Discussion (around 1,000 words)

• Present all the data and charts chosen for this assessment (tables and charts are not included in the word count)

• Provide a coherent commentary on the data and charts that creates a ‘picture’ of what international economic development ‘looks like’

• Reflection on learning that addresses the following:

o What was the most important thing that you learnt in writing this assignment?

o What did you find hardest to understand while writing this assignment?

o What is the most important question you hope to answer as you study this unit?

• This section is often divided into sub-sections

Conclusion (around 200 words)

• Provide a summary of the discussion to follow

• Highlight any areas that should be closely watched in the short to medium-term

References (not included in word count)

• You must use at least three references drawn from the Unit Outline for this unit. These may include books, journal articles and websites

• Make sure all references are cited correctly

Appendices (if any) (not included in word count)

• Attach a completed Checklist to Help Ensure Academic Integrity (download from this Moodle page)

• Attach any other appendix material such as web pages or spreadsheets

Solution

1. Introduction

International economic development provides insight into the processes and policies that cause nations to improve their economic well-being. This holds true for economic growth, but also human welfare and poverty alleviation. This report, taking stock of current dynamics and over the past broader trends in international economic development, brings together related data on trade, foreign direct investment (FDI), economic growth, poverty and human development. The International Monetary Fund (IMF), World Bank, and United Nations are among the sources of data that were compiled to gain an up-to-date perspective on how countries are coping in the midst of changing economies. This report will analyze these data to reveal trends, such as the widening gap between developed and developing economies and the added challenge of shocks to the global economy as seen by the COVID-19 pandemic.

2. Discussion

2.1. Data and Charts

Here, we examine some of the figures and graphs that give a fuller picture of the current global economic development situation. These estimates are based on good data from sources like the World Bank, the IMF, and the UN emphasizing trade, foreign direct investment (FDI), growth, poverty levels, and human development variables. The charts will enable the comparison of both developed and developing economies and will illustrate the key trends for MBA assignment expert shaping global economic development today.

i. Economic Growth and Global Inequality

Economic growth is still an important measure of development. However, the growth rates vary widely among developed and developing nations (Windhani et al., 2023). The COVID-19 pandemic caused the global economy to shrink by 3.5% in 2020, making it the deepest recession since the Second World War (WorldBank 2020). According to the IMF, although developed economies like the US, for example, experienced negative growth, the decline in GDP per capita in EMDEs was much broader and significant. Specifically, economies in sub-Saharan Africa and parts of Asia suffered significant economic pain due to their reliance on exports and global trade (week 2). A chart of GDP growth across different regions illustrates the sharp contrast in economic resilience, as advanced economies have rebounded more quickly than developing countries.

ii. Foreign Direct Investment (FDI)

Foreign direct investment (FDI) has historically been an important source of capital for developing economies (Kim 2023). FDI inflows should help to stabilise an economy in crisis by providing valuable resources for infrastructure, manufacturing, and technology transfer. Global FDI however fell dramatically in 2020, down 42% as multinational companies reduced investments in the face of economic uncertainty (UNCTAD 2020). The comparative data on FDI inflows to continents shows that while there was an overall decrease in global FDI, developing nations also had a more stable flow of investments. As reported in the UNCTAD World Investment Report (2021), developing economies, especially around Asia, attracted considerable FDI inflows, while global FDI fell overall . This chart shows what this looks like in terms of FDI trends from 2015 to 2020 and how the crisis affected the flow of capital, given that some regions, especially Africa, experienced sharper declines in investments than others.

(World Bank, IMF)

(UNCTAD 2020)

iii. Poverty Levels and the Impact of COVID-19

The most frightening element of the economic fallout from covid-19 is the impact on global poverty. The World Bank has observed it for the first time in more than two decades, the poverty reduction trends have reversed. For the first time since 1998, the number of people living in extreme poverty (on less than $1.90 a day) increased in 2020 (United Nations 2022). While there were some vaccine rollouts and economic recovery took tentative steps forward, developing countries disproportionately benefited neither from the globalised economy before nor from the cash that followed it as they often relied on informal employment sectors vulnerable to the lockdowns (week 1). The most important chart on trends in poverty shows how rates of poverty have shifted from region to region, with sub-Saharan Africa and South Asia seeing the sharpest increase in number of people living in poverty. According to the International Labour Organization (ILO), the pandemic has hit the most vulnerable groups the hardest - women, youth and informal workers. Such groups, who generally have restricted access to social security, experienced unemployment and income loss. Consequently, millions fell back into extreme poverty, reversing years of progress in poverty alleviating.

iv. Commodity Dependence and Terms of Trade

The majority of low-income countries remain reliant on exports of primary commodities, including oil and minerals as well as agricultural products. However, such commodities face volatile price fluctuations in international markets. Consequently, countries reliant on the export of commodities are grappling with long-term economic uncertainties, especially against the backdrop of decreasing global demand and changing global trading patterns.

As reported by the UNCTAD (2021), the prices of primary commodities have continuously fallen in comparison to manufactured goods over the decades, causing a worsening of the terms of trade (TOT) for a lot of developing countries in the world (week 3). The chart compares the sensitivity of the terms of trade for a number commodity-dependent countries and shows a path of gradual destruction of their purchasing power of time. With a bad Terms of Trade, they cannot even import appropriately capital goods and high-technology products which are critical for developing their economies.

According to the Prebisch-Singer hypothesis, the dependence of developing countries on the export of primary goods tends to lead to falling export prices, resulting in reducing the countries'' potential to invest in their development into industrialization and human capital (Fahmy 2021). As the process slows down, low-income countries get stuck in a vicious cycle of economy stagnation, driven by low productivity and failing export returns.

2.2. Analysis and Commentary

The data illustrates several key themes in international economic development:

i. Impact of COVID-19 on Global Development

The COVID-19 pandemic has shaken the world, interrupting years of advancement in fundamental fields of improvement, like accepted patterns, financial cycles, and exchange (Fakhry 2020). The data reflected a global economy that has contracted sharply, with some of the world’s poorest nations the most significantly affected. That reflects the fragility of emerging economies, which are often heavily dependent on global trade, tourism and remittances — sectors of the economy that have been ravaged by the pandemic.

The pandemic has also made inequalities between rich and poor countries worse. High-income countries managed to execute stimulus packages and secure vaccines, while low-income countries struggled to respond to the health crisis and supported vulnerable economic groups (Fakhry 2020). It can be witnessed how devastating the impact on global poverty levels is in the World Bank's estimation of an extra 119 to 124 million people being pushed into extreme poverty as a result of the COVID-19 economic fallout.

(OECD World bank)

ii. FDI as a Stabilizing Force

FDI has long been a key source of development in many emerging markets. While the global economy was in downturn during 2020, developing economies, particularly Asian ones, proved to be more resilient to FDI flows. This is especially significant since FDI is essential in terms of supplying finance, technology and expertise to developing nations, which in turn, develops infrastructure, generates jobs and increases productivity. FDI inflows are critical for sustaining economic development but are also sensitive to many factors, including policies that promote political stability, a predictable regulatory environment, and an appropriate regime of protection of intellectual property rights. For instance, large domestic markets and reasonably stable business environments in China and India continue to make that a region with high interest for foreign direct investors (Mallampally & Sauvant, 2019). Yet the pandemic laid bare the vulnerabilities of countries overly dependent on foreign investment. In some instances, it was focused on sectors that were especially hard hit by global disruptions, like manufacturing and tourism.

(Week 5)

iii. Terms of Trade and Commodity Dependence

This situation poses significant challenges to the ability of commodity-dependent countries to improve their economic performance since global commodity prices are cyclical. Many developing economies suffered in terms of the deterioration of their terms of trade (TOT) which has been the most critical factor impeding their growth potential. As visible in data on countries dependent on exporting basic commodities, their purchasing power is gradually diminishing over time, leaving little resources to import vital goods to advance in industrial and technological development (week 3) Even today, the Prebisch-Singer hypothesis, that the terms of trade for primary commodity exporters fall in the long run, holds true. These commodity-dependent countries often find themselves unable to ascend the value chain into manufacturing or high-value-added services, limiting their prospects for sustained economic growth. Other countries, like South Korea and Taiwan, that successfully diversified their economies were subsequently able to establish industrial bases and enhance their terms of trade

2.3. Reflection on Learning

What was the biggest lesson learned while writing this assignment?

The key associated lesson from this exercise concerns the complex interplay of global circumstances — such as the COVID-19 pandemic — and long-standing trends in international economic development. The pandemic has reversed years of progress in reducing poverty, but also underlined how vulnerable developing economies are to external shocks.

What was the hardest about the data or theories to understand?

The Prebisch-Singer hypothesis that the terms of trade would decline for commodity-dependent countries was hard to swallow at first. Understanding how these countries become trapped in a downward spiral of ever worsening trade conditions did however help me think in clearer terms about the implications for development policy around industrialization and diversification.

What is the most significant question that you would like to investigate as you pursue your studies in this unit?

The key question I would like to further examine is how developing countries can escape commodity dependence and realize sustained economic growth. The key will be the role of foreign direct investment and trade policy in this process.

Conclusion

Training Data: Until October 2023 The effects of the COVID-19 pandemic have intensified these problems, with millions being driven back to poverty and global trade patterns being destabilized.

Data from foreign direct investment (FDI) attest to the relative resilience of investment flows to developing countries in a context of global economic slowdown. It emphasizes the significance of FDI in balancing economies and promoting growth. Furthermore, the dwindling terms of trade faced by commodity-dependent nations accentuate the necessity of diversion and industrialization policies to interrupt the pattern of unequal exchange.

As we move forward, three critical areas to watch will be the recovery of global trade, the role of multilateral agencies (e.g., the World Bank and IMF), and the continued impact of COVID-19 on poverty and economic growth. Economies are capable of tailoring their fiscal policies to be more resilient, productive, and less reliant on vulnerable sectors.

References

Fahmy, H. (2021). A Reappraisal of the Prebisch-Singer Hypothesis Using Wavelets Analysis. Journal of Risk and Financial Management, 14(7), 319. https://doi.org/10.3390/jrfm14070319

Fakhry, B. (2020). The Covid-19 pandemic uncertainty behavioural factor model. Turkish Economic Review, 7(4), 214–265. https://doi.org/10.1453/ter.v7i4.2153

Kim, S. (2023). Protecting home: how firms’ investment plans affect the formation of bilateral investment treaties. The Review of International Organizations, 18(4). https://doi.org/10.1007/s11558-023-09486-4

Mallampally, P., & Sauvant, K. (2019). Foreign Direct Investment in Developing Countries. Finance and Development | F&D. https://www.imf.org/external/pubs/ft/fandd/1999/03/mallampa.htm

OECD. (2020). OECD Quarterly International Trade Statistics, Volume 2020 Issue 4. OECD. https://www.oecd.org/en/publications/2021/08/oecd-quarterly-international-trade-statistics-volume-2020-issue-4_35ea2d49.html

UNCTAD. (2021). Global foreign direct investment fell by 42% in 2020, outlook remains weak | UNCTAD. Unctad.org. https://unctad.org/news/global-foreign-direct-investment-fell-42-2020-outlook-remains-weak

United Nations. (2022). SDG Indicators. Unstats.un.org. https://unstats.un.org/sdgs/report/2022/Goal-01/

United Nations Conference on Trade and Development. (2021). State of Commodity Dependence 2021. https://unctad.org/publication/state-commodity-dependence-2021

Windhani, K., Purwaningsih, Y., Mulyaningsih, T., Rizky Samudro, B., & Hardoyono, F. (2023). Human Capital and Regional Economic Growth in Indonesia: A Spatial Analysis Approach. Indonesian Journal of Geography, 55(3). https://doi.org/10.22146/ijg.88241

World Bank. (2020, June 8). COVID-19 to Plunge Global Economy into Worst Recession since World War II. World Bank. https://www.worldbank.org/en/news/press-release/2020/06/08/covid-19-to-plunge-global-economy-into-worst-recession-since-world-war-ii