Economic Project

What Is Globalization? This word is shorthand for how our lives are becoming increasingly interwined with those of distant people and places around the world – economically, politically, culturally.

History: The history of new mineral based global economy falls into 3 phases, defined with reference to the degree of global centralization of power. • First Phase  1800-1913. POWER Concentrated The first phase, lasting from 1800 to 1913, concentrated power—and, with it, capital, technology, science and manufactures—in a small number of Core areas, notably Britain, France, United States, and Germany. Conversely, the greater part of the Periphery—nearly all of Asia and Africa —lost its sovereignty to a few Core countries, was forced to open their economies to Core capital, specialized in primary goods, and scarcely experienced any improvements in the living standards of the indigenous population. • Second Phase  1917-1980 Power Decentralization. The global economy slowly entered into a second phase in the late 1940s, although this process was initiated earlier with the Russian Revolution of 1917, when power was decentralized from the Core to the Periphery. On the level of the economy, this decentralization reversed the earlier concentration of manufactures in the Core countries, and produced dramatic acceleration of growth in the dependent Periphery. • Third Phase  1980- Onwards. Power Recentralize. Starting in the 1980s, however, power was again re-centralized in the Core countries. Already, by the mid-1990s, this re-centralization had exceeded the previous peak in the global centralization of power attained during the late nineteenth century.

ECONOMIC ASPECTS What are Economic Aspects? The Ways which enables us to stand in a Global Market.

Ways: These ways can be agriculture, import & exports, industries, foreign exchange and a long way to go on.

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Agriculture Food Supply & Industrial Raw Material. Agriculture supplies food and provides raw material for factories. Textile industry is dependant upon cotton, jute, flax & wool. Needless to say food processing industries get their raw material from agricultural fields. Rubber industry uses large quantities of natural rubber.

Labor Force. Agriculture absorbs a large no of labor force. There was a time when agriculture was the major employer in most countries. This envious position was challenged soon after industrial revolution (1769). In developed countries, farming has become a minor employer where less than 10% of labor force is accounted for; by agriculture but in developing countries, ratio is still very high.

Promoting Trade. Agriculture plays an important role in international trade. All countries are not self sufficient in food. Therefore, they import foodstuff from the countries which have SURPLUS. Wheat from USA, CANADA, ARGENTINA & AUSTRALIA find market in EUROPE & some other ASIAN countries. Tropical products like sugar cane, tea, coffee, cocoa and tropical fruits go to AMERICA, EUROPE & JAPAN. Many raw materials like cotton, rubber, hides and skin are produced in tropical countries. Therefore, the two regions have established trade relations.

Supreme in Competition. As a supplier of food, agriculture is supreme. In future also it is not likely to have any competitor.

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Import & Exports Export An approach to going global that involves making products at home and selling them overseas.

Import An approach to going global that involves selling products at home that are made overseas.

Importance: During the last 50 years, volume of world exports has raised 20 folds and volume of world manufactured exports almost 40 fold, world output, on the other hand, has grown only 7 fold.

Global Perspective Dependence on Domestic Market not sufficient. If we depend on domestic markets, we won’t be able to generate any foreign exchange needed for imports to provide raw materials, components, machinery, equipment to our industry and pay for petroleum products to keep our transport, electricity and other economic activities running.

China: Most aggressive developing country. There is no doubt that china has been the most aggressive among the developing countries to promote global markets and become 5th largest exporter of the world. But we should not forget that CHINA is also one of the fastest growing economies in the world with par capita income doubling every 10 years and the real effective power rising significantly every year.

Target achievement in 6 years. In almost 6 years, we will be able to double the value of exports to china to 5 billion annually.

Key to Progress -strong public private partnership is key to success. -china’s progress is all about encouraging foreign direct investment and joint ventures for establishing commercial presence. So adopting this way, we can better move on to further improvements and progress. -trade links are better because TECHNOLOGY has improved. So there is no harm to get connected and transfer technology from one country to another country.

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Dumping It’s a form of price discrimination. It takes place when monopolist sells a portion of his output at very low price in international market and high price in domestic market. In fact, the home market is controlled and protected while international market is free.

Assumptions:

- Total output is not fixed and it can be varied. - International market is perfectly competitive and domestic market is monopolistic.

Is price discrimination beneficial for SOCIETY? -Raising economic growth. Beneficial if it helps in raising economic welfare, economic development & economic growth.

-Reducing inequalities of personal income. Beneficial if it helps in reducing inequalities of personal incomes i-e high prices from rich class and low prices from poor class.

- Beneficial, when goods are exported at cheaper prices than sold at home. Profitable & beneficial when goods are exported at cheaper prices than sold at home. This will help not only increase in foreign exchange but also outlet of surpluses.

-Harmful, when it leads to mal-distribution of resources. Harmful, when leads to mal distribution of resources i-e output, employment & income are not maximized.

-Wastage of resource when prices are charged for smaller quantities. Wastage of resources when higher prices are charged for smaller quantities.

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Empowering the poor A snap shot of poor; When there is shortage of water, those in offices get 1st, others with money buy it & the POOR have to struggle or fight for their bucketful of water. This is poor.

Poverty reduction projects: - “Making the global economy work for all” is the goal of IMF according to its annual report for 2003 and making the services worth for poor people is the goal of WORLD BANK according to world development report 2004. - The 1st is to eradicate extreme poverty and hunger, and halving the proportion of people living on less than one dollar a day by 2015 and achieving universal primary education and also to promote gender equality and empower woman.

Education for all Education is the light in the darkness of ignorance.

Perspectives: Education has a wide range of advantages for economical, social & political development of a country. The positive relationship between economic development and education levels and the impact of investment in education on economic growth are well established. The transiting of world toward a knowledge based economy is adding to the importance of human resources in general, and of education in particular.

Where we stand??? -Figures obtained from survey reveal that PAKISTAN has been placed at the 144th position out of 175 countries in terms of human development index. -PAKISTAN is among the 12 countries in the world that spend less than 3% of GDP on education. In other words, PAKISTAN is ranked at the bottom 30 countries of the world. Net primary enrollment rate in PAKISTAN is at 46%, the lowest in SOUTH ASIA. Even BANGLADESH, BHUTAN & NEPAL fare better than PK in almost all key educational indicators.

Key to success: The role of private sector needs to be better appreciated by the community. Rather than be perceived as rivals, private sector should be considered as partners in the domain of higher education. The GOVT. with its severe financial constrains, is not in a position to carry the entire delivery system of quality education all by itself. This situation is not likely to change in the foreseeable future.

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Industries Textile & clothing is the largest industry and major foreign exchange earner of any country. Its performance is directly dependant on cotton availability and its prices in the domestic and international markets. It must be kept in mind that the garment manufacturing is on continuous RELOCATION. Investment goes to those countries where raw material & skilled manpower are available and GOVT. follow market oriented policies. The countries presently considered suitable for made up manufacturing are BANGLADESH, VIETNAM, THAILAND & PAKISTAN. CHINA has already attracted the largest investments.

To face global challenges Exporters have to concentrate on the following basic fundamentals. 1. Increasing volume production Increasing volume of production to cut down cost of production through ec9onomy of scale using MASS PRODUCTION. 2. Integration of small units Integration of smaller units through mergers and acquisitions. 3. Collective approach Instead of working in isolation as an individual, collective mental approach would be prerequisite. 4. More business & less profit Industries are used to enjoy huge profits of their products. They would have to compromise on the principle of MORE BUSINESS & LESS PROFIT. 5. Consumer demand & FASHION TRENDZ Consumer demand also does matter. Most of the garments units produce for men while a huge portion of the garment exporters comprise over women fashion apparels. They have to bring in change for the ladies garments according to market requirements. 6. Attractive foreign investors The idea of developing textiles cities and garment cities aims at attracting foreign investors. 7. Count strengths & remove weaknesses In order to face emerging challenges, it is necessary to count the strength & remove weaknesses. To remove all the smaller irritants and then come up with all the stakeholders. A good effort was made in recent past by preparing “VISION 2005”.

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Foreign exchange The system by which one currency is exchange for another, enables international transactions took place. Through foreign trade, developing countries can earn foreign exchange by exporting surpluses & use this foreign exchange for the import of those goods which promote economic development. Recently STATE BANK OF PAKISTAN (SBP) has decided to replace the existing money changers business by foreign exchange companies. The objective of converting MC into EXCHANGE COMPANIES will not only make remittance transaction fully documented but this will help curb the activities of unauthorized money changers & HUNDI business.

E-business E-business is any form of business exchange in which the parties interact using electronic linkages. (Net based)

Tele shopping: Tele shopping or home shopping is day by day becoming very popular with the upper and a significant section of middle strata of the society. Big manufacturers and traders are vigorously promoting it. Buyers can place orders for desired goods from their cozy homes on telephone or e-mail. They do not have to stir out of their homes and waste time and energy on traveling and going round shops. Desired goods are promptly delivered.

Credit society: An important feature of present-day globalization is the advent of consumer credit society. Till the arrival credit cards, the purchasing power at a person’s disposal and his ability to raise loans limited the extent of his consumption. Credit cards have played a vital role in tremendously extending this limit. A person can now buy goods and services even if he does not have sufficient purchasing power at his disposal and the prospect of raising a loan without difficulty. Credit cards have given enormous boost to consumerism and pushed many a household into indebtedness.

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Media In global age, media is the biggest source to convey information from one part of the world to another.

Forms: Media have many forms to glue the world over all. it includes TV, FILM, RADIO, PRINT MEDIA, CABLE & so on.

Aspects of media Broader demographic audience reach. In terms of category shifts, the current economic environment favors media with a broader demographic audience reach.

More attractive to advertisers. The above factor makes broad cast TV networks more attractive to advertisers who will some resources away from cable even though collectively, cable now attracts a larger audience. However, as cable networks begin to produce more original programming, they will draw larger audience and vie for greater ADVERTISING DOLLARS. According to a survey, it is guessed that US broadcast and cable television advertising will grow at a 5.7% AVG annual rate, reaching $37.4 billion by 2007.

Communications frontier covers the whole globe. World has now covered up into a global village, so communication have crossed borders now. You by sitting in home get news from all over the world with latest reports, issues and also through analysts. So then communication frontier covers the whole globe.

Newspapers, TV can improve living standards. Electronic and print media also plays its role in changing living standards. New fashion, styles all are play on these media contents. So these also help in improving and changing the living standards to stand in a global age.

Media Success is on their independence. Success of media all depends getting INDEPENDENT. Freedom will make them to work without any stress and get on achieving the required success.

ASIA is the culture of future. (Indian domination) This is the prediction made by SHEKHAR KUMAR, India’s famous film Producer, in a recent interview took by British magazine; Indian frontiers dominate South Asia and also entered to other parts of planets because of BOLLYWOOD, and of country’s willingness to be part of a contemporary global culture. The expanding INFOTAINMENT MARKET estimated to grow to more than a trillion dollars in 10 years has profound implications for INDIA & ASIA.

Culture 9

The values and attitude shared by individuals from a specific country that shape their behavior & belief.

Global culture & commercial culture: Global culture entails the promotion of a specific kind of life-style, consumption pattern, products, and identities. High-voltage advertisement campaign is deployed by TNCs to penetrate local markets in non-Western world in order to create an ever-expanding market for their products by crushing local resistance. Growing reach of private cable and satellite television network has strengthened the grip of commercial culture. The “global culture” is actually “western culture” or “American culture”. The direction of any transnational media effects is always from richer to poorer, larger to smaller, which entirely corresponds to the unbalanced structure of global economic relations. The concept of “cultural imperialism” implies these unequal international processes, and suggests certain degree of coercion, invasion, or repression. The unequal information flow increases the global power of large and wealthy countries and hinders the growth of an appropriate national identities and self-images in the receiving nations. The imbalance in the global cultural production undermines cultural autonomy and holds back the development of the disadvantaged cultures. The "cultural hegemony" leads to an absolutely aggressive form of dominant culture that has no specific connection with real experience for most people in poorer countries. The disadvantaged cultures are deprived of their ability to describe themselves.”

Border tensions Globalization is related to the “opening of frontiers”. So border tensions can prove a big hurdle in a way to stand in global market.

Restrictions: Crises like Iraq war, Kashmir tension and 9/11; these impose restrictions on certain countries. It was actually loss in terms of import exports and also to raise the slogan of globalization. So this should give an end because it is not only destroying the human being as well as the true picture of world.

Economic fluctuations 10

Fluctuating currency & exchange rates. A global firm’s profit can vary dramatically depend on the strength of its HOME CURRENCY and the currencies of the countries in which it is operating. Any devaluation of a nation’s currency significantly affects the level of a company’s profit. The strength of a foreign nation’s currency can also affect.

Inflation rates. Economic inflation rates can vary widely in different regions of the world. For example, in late 1999, the annual inflation rate in TURKEY had decreased to 100%. Between september1999 and April 2000, the exchange rate for TURKISH LIRA went from 462,000 per U.S dollar to 611,000! Even larger and more industrialized countries such as BRAZIL and RUSSIA have suffered from high inflation rates. For instance, it has sometimes reached 2,700 % in Brazil. The inflation rate influences price that a company can charge for its goods and services.

Diverse tax policies. Diverse tax policies are also a major worry. Tax rules differ from countries to countries in which they operate to minimize their business’s overall tax obligation.

Law rules in a certain country. Global organization must stay informed of the specific laws in countries where they do business. The legal political environment does not have to be UNSTABLE.

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What is WTO??? Definition: WTO (World Trade Organization) is the only global international organization dealing with rules and trade between the NATIONS. It is rule based, member driven organization. All decisions are made by member countries.

GOAL: The goal is to help producers of goods and services, importers and exporters conduct their business and to improve the welfare of people of the member countries. By lowering the trade barriers, the WTO’s system also breaks down other barriers b/w PEOPLE & NATIONS.

Why WTO was necessary in the presence of GATT? The GATT was a provisional arrangement arrived after the world wars period, which had no institutional standing. GATT did not extend the coverage and intellectual property rights. The WTO extended coverage to all these areas in addition to bringing the trade back into normal trading system and institutions of effective dispute settlement mechanism.

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Benefits -To promote Peace. The system helps to promote peace.

-To handle the disputes. The system allows disputes to be handled constructively.

-Rule Based Society. Rules make the life easier for all.

-More choice of products and quality. It provides more choice of products & qualities.

-Free trade cuts the cost of buying. Free trade cuts the cost of living.

-Trade raises income. Free trade raises income also.

-Trade stimulates economic growth. Trade stimulates economic growth & development.

-Basic principle makes life more efficient. The basic principle make life more efficient.

-Governments are shielded from lobbying. Govts. are shielded from lobbying.

-Encouragement of good Government. The system encourages good governments.

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CONCLUSION In conclusion, we are taking example of MALAYSIA who stood from underdeveloped country to developed country.

Malaysia: Economic Growth in 2002 within Expectations The Malaysian economy grew by 4.2 per cent in 2002, although it slowed in the fourth quarter. Government spending remained the engine of growth, with the budget deficit significantly exceeding forecast. Mining activity, especially for crude oil and gas, and agriculture, benefited from higher prices. Manufacturing growth, while an improvement on 2001, slowed in the fourth quarter. There was also a downturn in net exports. Prospects for 2003 remain uncertain. Heavily dependent on trade, prospects for Malaysia's major markets are not encouraging. Nevertheless, growth of 4-5 per cent appears achievable this year. Overview

Real economic growth in Malaysia in 2002 expanded by 4.2 per cent year-onyear (YOY). Growth in the fourth quarter - 5.6 per cent YOY- while down slightly on third quarter growth, managed to push Malaysia over the 4 per cent most analysts had forecast.

Domestic consumption growth in the fourth quarter slowed somewhat compared with the third quarter. But private sector consumption improved and for 2002 almost doubled the previous year's outcome. Still, public sector consumption remained the engine of growth for the year, despite spending slowing considerably in the fourth quarter.

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The federal government budget deficit blew out by RM3.5 billion to RM20.3 billion (equivalent to 5.7 per cent of GDP). While the deficit in the fourth quarter was significantly reduced compared with the same period in 2001, cumulative quarterly results pushed the government further into the red. Both operating and development expenditure exceeded the budget forecast. Government debt increased by RM17 billion to RM162.7 billion, or 46 per cent of GDP. Gross fixed capital formation turned positive in 2002, albeit marginally, after contracting in 2001. The improvement was due in large part to the government's development expenditure especially for housing and public utilities. Fixed investment picked up significantly in the fourth quarter, growing by almost 10 per cent, due mostly to a favorable base year. Agriculture

Agriculture output slowed considerably for the year. Growth turned positive in the second half of the year, ending a year long slump in the sector. But lower yields for crude palm oil saw a large fall in growth in the fourth quarter compared with the third quarter of 2002. Prices for Malaysia's major agricultural commodities continued to improve in the fourth quarter of 2002, rising 50 to 70 per cent compared with the same period in 2001. Mining

Output in the mining sector increased significantly in 2002, as higher prices for crude oil and gas encouraged higher production. Exports of mining sector products increased almost a third in the fourth quarter, reflecting the higher prices. The construction sector was still affected by the reduction in guest workers. Growth in value added for the sector slipped to 0.5 per cent in the fourth quarter, and 2.3 per cent for the year. Manufacturing

The manufacturing sector picked up considerably in 2002, but growth slowed in the fourth quarter. The export sector picked up during the year, although electrical and electronic products growth moderated in the last quarter of 2002. Growth in the domestic-oriented sector halved in 2002, reflecting lower output in transport equipment (falling 7.4 per cent in the final quarter) and petroleum products (down 6.5 per cent at the same time). Capacity utilization rates in the manufacturing sector ended up on the 2001 levels, but down on third quarter 2002 highs. Transport equipment capacity utilization was down 10 percentage 15

points on its second quarter 2002 highs, reflecting slower output of passenger motor vehicles. Services

Services sector growth slowed in 2002 compared with 2001, although it picked up in the fourth quarter of the year. Output in the transport sector recorded higher growth, reflecting improved performances in air transportation and increased port activity. The latter most likely reflected the move by Evergreen (a Taiwanese-owned shipper) to Port of TanJung Pelepas (PTP) in Malaysia. Trade performance

Malaysia's exports and imports both recorded positive growth in 2002, although the rate of growth slowed considerably in the fourth quarter: seasonally adjusted exports fell in both November and December, ending the year at the lowest level since February. Imports grew faster than exports, leading to a reduction of RM3.2 billion in the trade balance in 2002. While imports of capital goods grew by double digits for the year, there was a significant moderation in growth in the fourth quarter. Similarly import growth of intermediate goods dropped significantly in the final quarter. This suggests that exports in the first quarter will be down significantly. Exports to Asian countries grew strongly throughout the year, but this may not be enough to compensate for a fall in exports to Malaysia's major markets in 2003. Further, most of these countries tend to rely on the United States as a major export destination and may also be affected by any slow down there. Foreign exchange reserves

With interest rates in Malaysia's favor, foreign exchange reserves increased by around RM14.3 billion (USD3.8 billion) over the year to RM131.5 billion. But external debt increased by USD4 billion to USD48.8 billion by the end of 2002 - 52 per cent of GDP. Most of this increase was attributed to a rise in short term debt. Inflation

Inflation was moderate throughout the year, and the unemployment rate remained below 4 per cent. Inventories fell in the fourth quarter after being built up throughout the year, possibly reflecting business perceptions of a slower first half in 2003.

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