Abstract:
Many experts argue that there needs to be high flexibility in the way in which the economic integration policies are set. This means that there will be a space for allowing speed and formulations of geometry, regarding the developing economies. There should not be such an integration which overlaps with the memberships in such organizations and contains varied objectives, keeping up with each one being a tough task to handle.
The way in which a developing can choose the right global economic integration for itself is by making comparisons and distinctions between the comparative advantage of the preferences in trade and the ease in coordinating policies and procedures. The decisive objective should be the preferment of higher efficiency in resource allocation and competition intensity elevation. Private investment increase and political stability should also be the joint efforts.
Various forms of securities assessments and discussions should be made before the economic integration of an economy is selected. The addition of value into the economic chain should be the main point for identifying the ways in which economic integration can be of help to people. The integration of economies at the regional level and the international level as a whole should be kept into consideration and affects well assessed before making any decisions.
Introduction:
The global economy is an expanding era of financial resources and any country which gets affiliated to it means that they can get access to the huge inventory of resources. However, there may be certain limitations to this situation of benefits. The capacity in which the resources of the global economy are to be used by the Government is to be well assessed by the individuals. Sustainability of the growth prospects is also an issue, which needs to be considered in order to critically analyze the effects of global economic integration.
There are many developing economies which are getting affiliated with many regional organizations in order to create a multiplier impact on their economies. But, the effects of these integrations are still to be well debated and accounted for. There are economies which have yet to understand the benefits of global economic integration and get involved in such organizations which boost their economic status.
The effects of global economic integration can be seen in two folds: the first is the advantages of having a global integration and the other are the challenges related to these integrations (Fao.org, 2015). The advantages include free movement of resources across trade zones and the easy accessibility of markets, whereas the challenges for this are argues as issues of protectionism and the development lag of domestic industries.
The issue is that developing economies as a whole should receive positive effects from this kind of association and there should be proper policies for channelizing these opportunities. Only then can there be favorable impacts of these opportunities and the economies can make the best use of it. Here, we study some of the observations and trends in the developing economies associated with their integration in the global economy.
Literature Review:
Literature 1: Integrating Developing Countries in the Global Services Economy
The concept of sustainable development should be kept in mind when we think of entering into the global economy, be it in any aspect of it. Organizations and Government institutions should be well informed about the measures of carrying out this assessment of impacts of the economic integration on the individual economies and the impacts that are created on the other economies.
The main concern of the Governments in this regard should be the assessment on determination of not just the policies that need to be prioritized, but also the policies on negotiation powers and potential trade prospects. The individuals to be involved in the process are also to be decided. A multi-stakeholder approach should be the best initiative in this phase (Prasad, 2015). The focuses in assessing the effects of such integration into the global economy could be:
- The developmental, social, economic and other impacts
- The human development impacts and its assessments
- Human rights impacts and its assessments
- Health care system and impacts
- Economic sustainability and its impacts
- Employment impacts
- Policies of education and culture impacts
The main issue is that the policies that are established in the developing economies are in suitable situations to the need and circumstance of development and poverty reduction, sustainable growth and development and the issues of gender and other forms of equity and equality. There needs to be a strategic approach in identifying the trade policies of the developing economies and sequential approach should be adopted for leading to liberalization and proper and effective assessment in the service economy at the homeland.
The overall analysis thus suggests that there should be a point of participation for all the developing countries, wherein, there are economic gains identified and realized and thus the costs related to it are outweighed. The environmental and social gains should also be well assessed. The main consideration is choosing the right kind of framework that is applicable in varied sectors and the favorable international situations that need to be positively contributed for the developing economies and stand as the foundations for economic development.
Literature 2: Economic Globalization and Political Stability in Developing Countries
This paper mainly studies the effects of the economic globalization in relation to the state of politics in the developing economies. The main argument is that the ability of these institutions in organizing and managing change is the central crux of the developing nations’ capacity (Walle, 2015). This allows for the conclusion that the entry of developing economies into the global economic scenario brings about a positive kick into the change and reforms that are implemented in the developing nations. The downfall of this is that the nations may lose the ability of actively and acutely manage the rapid changes that are happening in the nation. The essay thus presents the central theme that the growth in global economic liberalization will lead to greater benefits and lead the state to be more competent and confident in dealing with the change, so that stability and prosperity of the economy can be maintained. The quality and supply and demand and the intersection among them can be correctly tracked.
There will not be much difficulty for states that have a stable government and politics to enter into the global economic front. They will have the resources and ability to deal with the dynamics and volatility of the financial markets and will be able to exploit the opportunities of technological and foreign capital advancements. On the other hand, there are other low-income developing economies, who would fail at utilizing the benefits of global economic integration and eventually lose the linkage with the global economic front. The deficiencies that these economies face in terms of their labor system, infrastructure status and the quality of governance will lead to work against the integration efforts of these economies.
Actually, for these kinds of economies, there may not be as much advantage and may in fact be a form of danger, because of their lack of apt interest in the private forms of global finance. The transition may never take place for these economies because other the aid fatigue that they are facing being the recipient of the donor economies. The developing economies have risks as well as opportunities associated with the use of global integration. Higher employment and faster growth may be the advantages but there are also risks related to the macroeconomic aspects. It all depends on how the changes brought about by the integration are managed and used for the greater good.
Examples and Evidences:
For understanding the effects of global economic integration, we could take the example of China.
The main development or advantage that China has been able to achieve from global economic integration is the one related to the labor market. There is a projection saying that the capacity of labor market is the absorption of about 160 million or more workers that can be utilized in the urban as well as rural areas of the country. This data can be utilized by the observation that there is a correlation between the GDP growth and the rise in non-agricultural employment in the ratio of 1:0.4. This means that as there a unit rise in GDP of a nation, there is a 0.4 percent rise in the employment in sectors other than agriculture, if we see the statistics of the past two decades. The performance and relationship is stronger in areas where the degree of private investments is high. The central population data that has been utilized comprises of information such as the increase in working age population by 12 million approximately, the stable rate of working population at 83 percent, high demand in non-agricultural sector employments, growth in non -agricultural GDP by 71 percent, growth in elasticity of growth in employment and output and lower impacts of growth in wage on the employment (Yang, 2015).
The high market oriented nature of the labor force in the past two decades created a major challenge of providing qualitative and equitable jobs to the concerned people. The absorption of the large human resources in the areas of rural and urban sectors is also to be considered. Private sector enhancement is thus the main target by which the Government may be able to pump in necessary energy into the economic system. The support of the private sector investment is a major issue, which can solve many problems in the economy and can also create a system where employment can be supported at various levels. This has been discussed, supported and advocated by many. The hindrances to growth are thus to be removed and a healthy system implemented for the betterment of all those involved. Private sector development is thus crucial for the development of the creation of employment in this sector. Further liberalization is being considered by China, in order to create a system where the labor force of the nation is well utilized.
This will also help the transfer of labor from rural areas to high end areas and vice versa. This can go a long way in solving the income disparity problem in the urban and rural areas. The enhancement of labor, the provision of easy access to resources of information and job creation alternatives, along with private employment agency establishment should be a major concern for the economy, which can be solved through increased investment in the private sector.
This increase in the health sustainability and feasibility of the economy is possible only when there are enough opportunities to capitalize of the economic liberalization through active involvement in the liberalization process. The participation of China into the World Trade Organization is another milestone in achieving the benefits of the open trade and economic liberalization that is attained through involvement in the global economic scenario. There are, however, additional concerns and issues that the economic integration of China into the world’s economic system should follow the adjustment in structures of other economies.
Critical Analysis and Observations:
Global economic integration means the union of different countries established for facilitating free trade within economies around the globe. At the initial phase, these integrations may exist as just economic union whose main focus is to nurture economic cooperation among the member countries by providing economic independence to the member nations and by avoiding conflict. Later, the organizations may evolve into a political union like the European Union did in 1993.
Each economic union of the global economic network has a set of distinct features, which are applicable to all the member nations. Some of the important features of these types of economic unions are listed below:
Economic, social and territorial cohesion.
Use of single currency throughout the member nations.
Single and common internal market for all member nations, facilitating free circulation of goods, capital, people and service.
Focus on protecting human right within the union as well as around the globe.
Common monetary and fiscal policy.
Focus on conservation of marine biology of the member country under common fishery policy.
Area of freedom, security and justice by the application of common justice system.
Common foreign security and defense policies are opted but there is no unified military force. The countries share the same agricultural policy as well.
Economic Unions are formed to facilitate mutual benefits to all the member nations. Though there is a larger benefit part involved, there needs an overall assessment of what the both sided effects of participation in such economic integrations can be. The advantages of involvement in economic unions, being a part of the global economic integration can be assessed as:
Economic Unions facilitates the free movement of citizens of member nation across borders without the requirement of a VISA. There are no restrictions for the member nations to travel, work, and start a business and others. This gives enhanced opportunity for flourishing business and other lifestyle attributes in different sections of the Economic Union.
The free flow of funds from one sector to another is also facilitated by involvement in economic unions. This helps the under-developed and developing nations to procure funds for the infrastructure development projects like health, transportation and others.
The protection of voice of the member nations falls in the hands of the economic union as a whole. Protection against unfair treatment, within the group and also outside the group can be attained through membership into a definite economic union.
Economic Unions protect the rights of workers along with the promotion of free flow of goods and services.
The application of common currency systems inside all the member countries universalizes the buying and selling of goods and services.
The other part of the coin that reflects the disadvantages of involvement in economic unions can be summarized as: Similarly, there are some disadvantages of being the member of economic unions which are as follows:
Economic burden is created to the member nations in terms of periodic charges and fees that need to be paid to the main committee.
Sometimes, the individual nations become the victims of inefficient policies that are collectively drafted for all the member nations. An example may be the huge amounts and resources spent in the formulation of common agricultural policy.
There is generally an unfair trend that the developed nations of an economic union take the major benefits from the common formulation and allocation of resources. The under-developed nations may get victimized of unfair treatment.
The common rules and policies applicable to all nations tend to dominate the individual nation’s governance policies, which creates greater bureaucracy and less democracy.
Single currency systems that are applicable in some member nations under the economic unions may create problems for some of the member nations.
Economic Unions such as the EU and SAFTA were formed with a purpose of binding the different member nations into one distinct economic policy, so that they collectively function as a separate economic entity when observed by the remaining world. Developing nations require newer alternatives to standing a foot above and establish themselves as the rising leaders in the economic development domain. The benefits that can be derived by developing economies by being a part of the regional economic integration may be summarized as:
The pace of economic development of developing nations can be catalyzed with the application of industrial revolution and not just agricultural advancement. The involvement of Nepal into an economic union will help divert human and other resources from an agricultural area to the growing manufacturing impetus, resulted due to increasing in FDIs.
One of the advantages that economic unions derive is that the tourists entering one country can travel, with the same permit to other countries of the same union as well. Developing economies with a huge prospect of tourism, can take full advantage of this opportunity.
The prospects of derivable advantages of economies as a transit economy are increased with the formation of a common market in an economic union.
Thus, Economic unions, if utilized to the full potentials and without a conflict of interests within the member nations, can produce enhanced economic results, which will in turn act as a positive catalyst for overall regional economy.
References
Fao.org,. (2015). EXECUTIVE SUMMARY. Retrieved 28 April 2015, from http://www.fao.org/docrep/004/y4793e/y4793e03.htm
Prasad, E. (2015). Growth and Integration into the World Economy Prospects and Challenges (1st ed.).
Walle, N. (2015). Economic Globalization and Political Stability in Developing Countries (1st ed.).
Yang, Y. (2015). China’s Integration into the World Economy: Implications for Developing Countries(1st ed.).
