During most of summit meetings conducted by the developed countries’ heads of states , one factor keeps emerging: the need to commit towards debt relief and an increased number of programs for developing countries. For instance, one of the components of the millennium development goals of the UN is to reduce world poverty levels by half by 2015. A key avenue to the achievement of the millennium development goal is through raising international aid to 0.7% of the GDP of the developed countries, which is intended to be channeled to developing countries, especially African countries. Another way of helping developing countries is through trade negotiations and establishing markets to allow for exportation of products and services to developed economies. Developed economies can massively impact on the economic stability of developing countries in times of economic crises, by largely providing resources and trading opportunities for these developing countries in particular. However, developing countries have the biggest influence on determining the outcome of support from developed economies. Developing countries must have structures that enhance and attract foreign support. Effective policies that govern the utilization of resources are essential in ensuring the success of the support strategies from developed economies.
How Developed Economies Can Help Developing Economies during Harsh Economic Conditions
Reduction of Tariffs and Barriers to Trade
Most rich countries tend to enact extremely high tariffs on products from developing countries. For instance, the majority of developing countries rely on production of agricultural products or textiles, which are perishable and bulky. These tariffs tend to escalate with the increasing level of processing. Such actions discourage industrialization progress in the developing countries. Thus, during harsh economic periods, developed economies must commit towards the enhancement of trading activities with the developing countries. One way of attaining this is by reducing the tariffs and barriers imposed on products from developing countries in the international market. Reduction of trade barriers by the strong economies will increase the revenue collected by developing countries from the sale of domestic products to the international market. In addition, the tariffs on processed products will be manageable, which will promote industrialization in the developing countries.
Provision of Financial Aid to the Developing Countries
Developed economies can offer support to developing countries by providing them with financial aid. The aid could be in the form of financial donations, for example, in order to support programs such as education and healthcare provision among poor households. Alternatively, the aid could also be in the form of soft loans to the central banks of developing countries in order to finance their monetary policies and structures. This is an essential tool in maintaining economic operations of the developing countries. Provision of financial aid to support education programs, for instance, could have lasting impacts. This is because such a step is an investment in the human capital of developing countries, which often suffer from the inadequacy of technical personnel necessary to run and manage economic policies and programs. Thus, developed economies can be of remarkable help to developing countries by financing such programs. Provision of free medical services is also an investment in the human capital of the developing country. A healthy population is a productive population.
Monitoring of Governance Policies in the Developing Countries
In most instances, developing countries become victims of harsh economic challenges due to the poor policies adopted by their governments. Some developing countries implement monetary and fiscal policies that are vulnerable to the volatile nature of economic conditions. Developed economies can help such developing countries by providing technical expertise on the most appropriate economic policies, which can stabilize economic activity and the competitive advantage of the country in the global market. Such policies include tax policies, exchange rate regulations, and government expenditure regulations. Policies are a key determinant of the success of any economic project. In fact, the policies that govern a country will largely determine the chances of such a country receiving aid from developed countries. Developed economies can aid in streamlining the governance structure of the developing countries by preventing corruption activities in the utilization of funds and other economic resources.
Foreign Direct Investments in the Weak Economies
Most weak economies do not have the capacity to establish production systems that employ highly modern levels of technology. This accounts to the lack of resources and the high cost of modern production techniques. This factor has contributed to the high costs of production in developing countries and a low rate of creating of employment opportunities. Such conditions tend to worsen when the whole global economy is facing a crisis. Strong economies can support the weak ones by starting investment activities and projects in these developing countries. Such a move will see the introduction of superior production technologies that will increase productivity in the developing countries. High production rates will have impacts on the amount of revenue collected from the sales of such products in the global market. The introduction of these technologies of production will reduce costs of production by remarkable margins to the extent that the revenue collections will surpass tariffs imposed by the world market. In addition, foreign direct investments will increase the number of jobs created in the economy of developing countries.
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In conclusion, developing countries need assistance from the developed economies. However, the support should be systematic in order to avoid cases of overdependence on the developed economies by the developing countries. Developing economies, on the other hand, should show the potential of self sustainability after the withdrawal of support by the developed economies.
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