GLOBALIZATION

 Negative effects of globalization for developing country business

Critics of global economic integration warn that
(Watkins, 2002, Yusuf, 2001):
The growth of international trade is exacerbating
income inequalities, both between and within
industrialized and less industrialized nations
Global commerce is increasingly dominated by
transnational corporations which seek to maximize
profits without regard for the development needs
of individual countries or the local populations
Protectionist policies in industrialized countries
prevent many producers in the Third World from
accessing export markets ;
The volume and volatility of capital flows increases
the risks of banking and currency crises, especially
in countries with weak financial institutions
Competition among developing countries to attract
foreign investment leads to a "race to the bottom"
in which countries dangerously lower
environmental standards
Cultural uniqueness is lost in favor of
homogenization and a "universal culture " that
draws heavily from American culture
Critics of economic integration often point to Latin
America as an example where increased openness to
international trade had a negative economic effect.
Many governments in Latin America (e.g. Peru)
liberalized imports far more rapidly than in other
regions. In much of Latin America, import
liberalization has been credited with increasing the
number of people living below the USD $1 a day
poverty line and has perpetuated already existing
inequalities (Watkins, 2002).

Positive effects of globalization for developing country business;

Conversely, globalization can create new opportunities,
new ideas, and open new markets that an
entrepreneur may have not had in their home country.
As a result, there are a number of positives associated
with globalization:
It creates greater opportunities for firms in less
industrialized countries to tap into more and larger
markets around the world
This can lead to more access to capital flows,
technology, human capital , cheaper imports and
larger export markets
It allows businesses in less industrialized countries
to become part of international production
networks and supply chains that are the main
conduits of trade
For example, the experience of the East Asian
economies demonstrates the positive effect of
globalization on economic growth and shows that at
least under some circumstances globalization decreases
poverty. The spectacular growth in East Asia, which
increased GDP per capita by eightfold and raised
millions of people out of poverty, was based largely on
globalization—export-led growth and closing the
technology gap with industrialized countries (Stiglitz,
2003). Generally, economies that globalize have higher
growth rates than non-globalizers (Bhagwati and
Srinivasan, 2002).
Also, the role of developing country firms in the value
chain is becoming increasingly sophisticated as these
firms expand beyond manufacturing into services . For
example, it is now commonplace for businesses in
industrialized countries to outsource functions such as
data processing, customer service and reading x-rays
to India and other less industrialized countries
(Bhagwati et al, 2004). Advanced telecommunications
and the Internet are facilitating the transfer of these
service jobs from industrialized to less industrialized
and making it easier and cheaper for less industrialized
country firms to enter global markets. In addition to
bringing in capital, outsourcing helps prevent "brain
drain" because skilled workers may choose to remain
in their home country rather than having to migrate to
an industrialized country to find work.
Further, some of the allegations made by critics of
globalization are very much in dispute—for example,
that globalization necessarily leads to growing income
inequality or harm to the environment. While there
are some countries in which economic integration has
led to increased inequality—China, for instance—there
is no worldwide trend (Dollar, 2003). With regard to
the environment, international trade and foreign
direct investment can provide less industrialized
countries with the incentive to adopt, and the access
to, new technologies that may be more ecologically
sound (World Bank Briefing Paper, 2001).
Transnational corporations may also help the
environment by exporting higher standards and best
practices to less industrialized countries.
     By KINGALU AVIN
           BAPRM 42697