Newly Industrialized Countries Growth factors

Objectives of Developing Countries:

A thorough assessment of economic development and marketing should begin with a brief review of the basic facts and objectives of economic development.

Industrialization is the fundamental objective of most developing countries. Most countries see in economic growth the achievement of social as well as economic goals. Better education, better and more effective government, elimination of many social inequities and improvements in moral and ethical responsibilities are some of the expectations of developing countries. Thus economic growth is measured not solely in economic goals but also in social achievements.

Because foreign businesses are outsiders they often are feared as having goals in conflict with those of the host country. Considered exploiters of sources, many multinational firms were expropriated in the 1950s and 1960s. Others faced excessively high tariffs and quotas, and foreign investment was forbidden or discouraged. Today, foreign investors are seen as vital partners in economic development. Experience with state owned business proved to be a disappointment to most governments. Instead of being engines for accelerated economic growth, state owned enterprises were mismanaged inefficient drains on state treasuries. Many countries have deregulated industry, opened their doors to foreign investment, lowered trade barriers and begun privatizing SOEs. The Trend toward privatization is currently major economic phenomenon in industrialized as well as in developing countries.

Infrastructure and Development

One indicator of economic development is the extent of social overhead capital, or infrastructure within the economy. Infrastructure represents those types of capital gods that serve the activities of many industries. Included in country’s infrastructure are paved roads, railroads, seaports, communications networks, financial networks and energy supplies – all necessary to support production and marketing. The quality of an infrastructure directly affects country’s economic growth potential and the ability of an enterprise to engage effectively in business.

Infrastructure is a crucial component of the uncontrollable elements facing markets. Without adequate transportation facilities for example, distribution cost increase substantially and the ability to reach certain segments of the market is impaired. To a marketer the key issue is the impact of a country’s infrastructure of firm’s ability to market effectively. Business efficiency is effected by the presence or absence of financial an commercial service infrastructure found within a country – such as advertising agencies warehousing storage facilities credit and banking facilities marketing research agencies and satisfactory specialized middlemen , Generally seeking the less developed a country is the less adequate the infrastructure is for conducting business. Companies do market in less developed countries but often they must modify offerings and augment existing levels of infrastructure.

Countries begin to lose economic development ground when their infrastructures support an expanding population and economy. A country that has the ability to produce commodities for export may be unable to export them because of an inadequate infrastructure. For example, Mexico’s economy has been throttled by its archaic transport system. Roads and seaports are inadequate and the railroad system has seen little modernization since the 1910 revolution. If it were not for Mexico’s highway system ( although it, too is in poor condition) the economy would have come to a halt; Mexico highways have consistently carried more freight than its railroads . Conditions in other Latin American countries are no better . Shallow harbors and inadequate port equipment make a container filed with computers about $ 1,000 more expensive to ship fm Miami to san Antonio , Chile (about 3,900 miles), than the same container shipped firm Yokohama , Japan to Miami ( 8,900 miles).

The UN’s designations for stages of economic development reflect a static model in that they do not account for the dynamic changes in economic, political; and social conditions in many developing countries, especially among NICs. Why some countries have grown so rapidly and successfully while others with similar or more plentiful resources languish or have modest rates of growth is a question to which many have answers. Is it cultural values, better climate, more energetic population, or just an Asian Miracle? There is ample debate as to why the NICs have grown while other underdeveloped nations have not. Some attribute their growth to cultural values, others to cheap labor, and still others to an educated and literate population. Certainly all of these factors have contributed to growth, but other important factors are preset in all rapidly growing economies many of which seem to be absent in those nations that have not enjoyed comparable economic growth.

One of the paradoxes of Africa is that its people are for the most part desperately poor while its land is extraordinarily rich. East Asia is the opposite. It is a region mostly poor in resources that over the last few decades has enjoyed an enormous economic boom. When several African countries in the 1950s (for example Congo, for former Zaire) were at the same income level as many east Asian countries (for example, South Korea) and were blessed with far natural resources, it might have been seemed reasonable for the African countries to have prospered more than their Asian counterparts. Although there is no doubt that East Asia enjoyed some significant cultural and historical advantages economic boom relied on other factors that have been replicated elsewhere but are absent in Africa. The formula for success and East Asia was an outward oriented market based economic policy coupled with an emphasis on education and health care. This is a model that most newly industrialized countries have followed in one form or another:

The factors that existed to some extent during the economic growth of NIC’s we as follows:

1) Political stability in policies affecting their development.
2) Economic and legal reforms. Poorly defined and /or weakly enforced contract and property rights are features the poorest countries have in common.
3) Entrepreneurship. In all of these nations, free enterprise in the hands of the self employed was the seed of the new economic growth.
4) Planning. A central plan with observable and measurable development goals linked to specific policies was in place.
5) Outward orientation Production for the domestic market an export with increases in efficiencies and continual differentiation of exports from competition was the focus.
6) Factors of production. If deficient in the factors of production – land (raw materials) labor, capital, management, technology – an environment existed where these factors could easily come from outside the country and be directed to development objectives.
7) Industries targeted for growth. Strategically directed industrial an international trade policies were created to identify those sectors where opportunity existed. Key industries were encouraged to achieve better positions in world markets by directing resources into promising target sectors.
8) Incentive to force a high domestic rate of savings and to direct capital the infrastructure transportation housing education n training.
9) Privatization of state owned enterprises (SOEs) that placed a drain on budgets Privatization released immediate capital to invest in strategic areas and gave relief from a continuing drain on future national resources. Often when industries are privatized, the new investors modernize thus creating new economic growth

The final factors that have been present are large, accessible markets it low tariffs. During the early growth of many of the NICs the first stage open market as United States later joined by Europe and now as the fundamental principle of the World Trade Organization (WTO) is put into place by much of the rest of the world.

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