The GATT agreement on trade related investment measures: Implications for developing countries and their relationship with transnational corporations

This article addresses three issues. First, it argues that the use of trade related investment measures (TRIMs) by LDCs can only be analysed in the context of their dealings with transnational corporations (TNCs). Second, it considers the applicability of existing GATT rules to TRIMs and shows that they are inadequate and can pose difficulties for LDCs seeking foreign direct investment by TNCs. Third, it suggests a framework for regulating TRIMs as one element of host‐TNC relations. The article concludes with proposals for enhancing the capacity of LDCs in their dealings with TNCs.     

Modelling the demand for foreign savings in developing countries: Testing a hypothesis with Latin American data

The demand for foreign savings is an important feature of the economy in many LDCs, and it would be helpful to have a better understanding of its determinants. This paper considers one approach to modelling the demand for foreign savings in LDCs. If the demand for investment shifts out more buoyantly than does the supply of domestic saving in response to current macro‐economic conditions, persistent demand for foreign savings will be generated as a normal feature of the development process. We test this hypothesis with elasticities computed from the parameters of investment and domestic saving equations estimated for a sample of 21 Latin American countries. The empirical results show that in approximately half of the countries in the sample (and most notably in Brazil and in Mexico), the demand for foreign savings is rooted in the parameters of the investment and domestic saving functions.     

The agricultural crisis in Egypt

The paper probes the historical origins of and current responses to the agricultural problems of Egypt. Much of the difficulty stems from the fact that the class structure, the distribution of resources, and the social bases of both Nasser's and Sadat's regime have blocked either the mobilization of the peasantry on the one hand or the provision of decentralized incentives on the other. After a brief assessment of Nasser's land reforms, price policies, and investment strategy, the current responses of changing crop patterns and mechanization are assessed. Such a strategy seems unlikely to succeed, but no other obvious alternative strategy is at hand.     

Capturing the effects of capital subsidies

Most developing countries provide fiscal incentives to encourage domestic and foreign investment. This study shows that these schemes subsidise significantly the use of capital and produce greater capital intensity in Malaysian manufacturing. These results were obtained by conducting the analysis at the establishment level, which avoids the artificial aggregation of establishments with different production structures into an industry‐group and having to choose an appropriate weighting system in the aggregation process.     

Local Public-Services Provision under Public–Private Partnerships: Contractual Design and Contracting Parties Incentives

When deciding to resort to a PPP contract for the provision of a local public service, local governments have to consider the demand risk allocation between the contracting parties. In this article, I investigate the effects of demand risk allocation on the accountability of procuring authorities regarding consumers changing demand, as well as on the cost-reducing effort incentives of the private public-service provider. I show that contracts in which the private provider bears demand risk motivate more the public authority from responding to customer needs. This is due to the fact that consumers are empowered when the private provider bears demand risk, that is, they have the possibility to oust the private provider in case of non-satisfaction with the service provision, which provides procuring authorities with more credibility in side-trading and then more incentives to be responsive. As a consequence, I show that there is a lower matching with consumers’ preferences over time when demand risk is on the public authority rather than on the private provider, and this is corroborated in the light of two famous case studies. However, contracts in which the private provider does not bear demand risk motivate more the private provider from investing in cost-reducing efforts. I highlight then a tradeoff in the allocation of demand risk between productive and allocative efficiency. The striking policy implication of this article for local governments would be that the current trend towards a greater resort to contracts where private providers bear little or no demand risk may not be optimal. Local governments should impose demand risk on private providers within PPP contracts when they expect that consumers’ preferences over the service provision will change over time.     

The world population situation

Population experts appear to be reaching a consensus that there has been a perceptible decline over the last decade in the growth of the world's population. The decline is accounted for by the "new demographic transition" in the less developed countries (LDCs). The decline in fertility rates began in the 1950s in some LDCs and became more widespread during the 1970s. The process has not yet begun in many of the LDCs. During the 1960s it was observed that the declines in birth rates (to levels of 30 of less per 1000) were occurring mostly in small countries. Many of these countries were islands with levels of social and economic development above the developing country average. The key question is whether the recent downward trend in fertility in LDCs will continue, stabilize at the current level, or rise again. A primary concern about the future is that the poorer and less developed countries will end up with an increasing share of the world's population, with the share of the developed countries declining from 34% to 22% over the 1950-2000 period. Considerable differential exists in demographic growth patterns among various regions. The 12 largest LDCs (China, India, Indonesia, Brazil, Bangladesh, Pakistan, Nigeria, Mexico, Vietnam, Philippines, Thailand, Turkey) contain 55% of the current world population, and the fertility decline of these nations is expected to have the maximum impact. 7 of these countries have had fertility declines of 14-35%. The force of the "population momentum" must also be considered. Most developing country populations have a young age distribution with considerable potential for population growth even after the fertility level reaches a replacement level and the net reproduction rate equals 1.     

International patron-client relationships: A conceptual framework

Dependency theory has cast new light on the workings of the international political economy, and on the relations between more and less developed countries. Insofar as dependency theory aims at specifying generalsystemic constraints on the behavior of Third World states, its ability to explain/predict how particular Third World states respond to these constraints is limited. Our concern is with the foreign policy responses of the LDCs. The comparative foreign policy approach to this question has attempted to account for cross-national variation in foreign policy responses of LDCs with variation in theirdomestic features, i.e., attributes, capabilities, and regime types. Here we suggest that an understanding of the foreign policies of the LDCs can be enhanced by adding an explicitly dyadic perspective to dependency and comparative foreign policy approaches, conceptualized as a form of patron-cliency.     

Debt crisis of the less developed countries and the transfer debate once again

In the perspective of substantial amount of net transfers from the debtor less developed countries (LDCs) to the creditor developed countries (DCs) in the recent debt crisis years, there is a renewed debate (that started in the context of German reparation payments after the First World War) on the question of transfer burden of debt. The present study assembles some evidence to show that the LDCs in general expanded their export‐volumes and faced losses in their export unit values in the process of their debt repayments. Many LDCs faced this transfer burden of debt irrespective of whether their export drive was in the field of primary products or manufactures. Thus the Keynesian analysis for German transfer problems seems to be relevant in the context of the present experience of the LDCs. For some debtor countries, the ‘insoluble’ transfer problem mentioned by Keynes exists as they are facing ‘Fisher's paradox’: The more the debtors pay, the more they owe.     

Participation and accountability in development management

This article critically reviews the role of participatory theory in managing development projects and programmes in poor countries. Participation has emerged in response to global demands for greater individual and social control over the activities of state and private agencies, and especially to the manifest failures of traditional ‘top-down’ management systems in LDCs. Claims made on behalf of these participatory methodologies are critically reviewed and a distinction is drawn between strong and weak versions of the theory. Empirical evidence is then considered to evaluate the effectiveness of these methodologies, using long-standing insights of social science theory to show that participation can succeed for specific kinds of projects and programmes in favourable circumstances, but is unsuitable for many others. It commonly fails in contexts where local conditions make co-operative and collective action very difficult, or where it is manipulated by implementing agencies to justify their own actions or poor performance.     

On the apparent benefits of higher productivity: An arithmetical illustration a comment

During the 1980s, like many other developing countries Nepal attempted actively to attract direct foreign investment. This article reports the results of a survey of the foreign‐owned firms in operation at the end of the 1980s. The motives of firms for their investment decisions in Nepal are summarised. The impact of foreign investment is assessed quantitatively using both financial and economic cost‐benefit criteria. In general, it appears that foreign investment has been beneficial to both the foreign investors and the national economy. Foreign investors from India have played a particularly important role. However, much of the national returns from foreign investment is derived from the payment of taxes, so that an excessively generous policy of tax incentives may not maximise national returns.     

Tax revenue instability,with particular reference to sub‐Saharan Africa

This article examines the temporal instability of tax revenues across a sample of developed and less developed countries. It is shown that instability is especially high in LDCs and is highest in open economies with low per capita income, high output variance and inflationary problems. Even allowing for these factors, revenue instability appears to be particularly high in sub‐Saharan Africa. Revenue instability can be expected, via the government budget constraint, to be associated with expenditure instability and/or instability in the sources of deficit finance. Cross‐section evidence for LDCs confirms that countries with high tax revenue instability tend also to have high expenditure instability. Time‐series evidence for six African countries however, suggests that revenues and expenditures do not move together in a uniform manner, and the direction of causality is generally ambiguous. There is some evidence however that foreign borrowing is used more to finance expenditure increases than to counteract revenue shortfalls.     

Bilateral Graduation: The Impact of EPAs on LDC Trade Space

Abstract

As trade is prominently mainstreamed into development policies, the ongoing Economic Partnership Agreement (EPA) negotiations between the EU and the African, Carribbean and Pacific (ACP) countries are a turning point in Least Developed Countries (LDC) engagement with the international trading system. The process covers most UN-designated LDCs and is the first time they feature in the first row of international trade talks. We explore how the space LDCs occupy in the trade regime will be affected by EPAs. The analysis suggests that they move LDCs towards effective graduation from special and differential treatment, while innovating on policy tools to address underdevelopment.     

Business priorities and the relative importance of state and local economic-development incentives

State and local governments commonly use a variety of incentives to encourage economic development and business retention. Policies which include economic development incentives are commonly criticized as being ineffective and wasteful uses of public funds. This paper addresses the issue of wastefulness through a business community's assessment of the relative value of eighteen incentives commonly used for business retention and development. Results are based on survey responses from nearly 700 businesses located in Wichita, Kansas. This study illuminates differences in value assigned to incentives by different types of business. Findings indicate that state and local governments that offer incentives without consideration of business type are in many cases delivering “windfalls” to the private sector. Even such highly touted incentives as property tax abatements are not valued equally by all types of businesses. This paper provides state and local governments with an improved understanding of business investment motivation and the relative value of different incentives to effective economic development policy.     

Are the LDCs really the world’s least developed countries?

The term ‘the least developed countries’ (LDCs) is widely understood to designate, exactly as stated, the world’s least developed countries. In conjunction with the 2015 United Nations (UN) triennial review of the LDC category, this article attempts to critically evaluate the UN’s list of LDC countries in the light of various indicators – economic, social, political, military and security related, and psychological. It concludes that the official and actual lists of LDCs, despite important similarities, are not completely identical. The term ‘the LDCs’ as used by the UN is therefore not fully consistent with the reality it attempts to designate and describe.     

Population growth and development in the third world: The neocolonial context

Less developed countries (LDCs) that were colonies of other nations continued operating under the same social and political structures set up by the former ruling nations. The small minority of elites in the LDCs held on to the power acquired during colonial times. In order to preserve their political and financial status after independence, they maintained their close linkages to the capitalist nations and their multinational corporations (MNCs). The elites did not generally have popular support, however. These capitalist nations and their commercial interests continue to dictate most LDCs development process which supports the financial interests of the MNCs and the local elites and not those of the majority, the poor. The poor realize that they are trapped and unable to break away from the economic and political structures, therefore, to assure some form of security, they have many children which exacerbates their poverty. Yet population control policies based on Malthusian theory and those that rely on such undimensional, technical approaches as family planning alone cannot cure the multidimensional social problems of high population growth and poverty. Neither the Malthusian nor Marxist theories totally explain the situation in the LDCs or even provide workable solutions. Research on population and development in LDCs needs to address both the Malthusian concern for the problems posed by high growth rates and the Marxist critique of class struggle in development trends. To eliminate the trap of poverty and dependent economies, each country must design its own remedies based on its history, culture, and geography and alter the prevailing social, economic, and political power structures in favor of the poor. 6 propositions that must be modified to each nation's particular problems and needs are presented to guide LDCs in formulating or reformulating policies to alleviate the problems of population and poverty.     

Industrialisation as a structural determinant of inflation performance in IMF stabilisation programmes in less developed countries

This article considers the impact of IMF stabilisation programmes on inflation performance in LDCs. It is argued that the success of a programme in effecting a change in the inflationary process will be influenced by the structural characteristics of the economy and in particular by the stage of industrialisation reached. The empirical analysis is based on a sample of LDCs which undertook adjustment programmes supported by Fund resources during the 1970s, and the results obtained are consistent with the hypothesis of an association between economic structure and inflation performance.     

Instability and Oil: How Political Time Horizons Affect Oil Revenue Management

While economic explanations for the “resource curse” are well established, the political factors explaining why governments fail to take corrective action remain poorly understood. Research demonstrates that if governments save oil profits abroad and slowly re-introduce the oil-generated revenue into the domestic economy once the rate of return on investment is greater at home than abroad and the quality of project implementation developed, many of the economic problems that plague oil-rich countries can be avoided. Political time horizons shape the incentives of governments to pursue this strategy. Unstable leaders rely on oil revenue to maintain positions of power. They also have less incentive to save oil windfalls abroad as they fear they will not be in office long enough to benefit from such decisions. This paper uses both quantitative data and case study analysis of Azerbaijan and Kazakhstan to demonstrate that leaders with longer time horizons save a greater proportion of oil windfalls abroad than their less stable counterparts, helping avoid the economic pitfalls of oil abundance.     

Debt and the developing countries: A note on optimal international borrowing

This note re‐examines the economic model of optimal international borrowing for LDCs proposed by Gemmell [1988]. Pursuing a rigorous methodology, this note derives alternative optimal debt functions, and discusses the sufficient conditions under which the optimal debt level is positive. Interesting implications of the analysis in this note, inter alia, rest in identifying the appropriate role of social inter‐temporal consumption preferences in a more realistic setting, and in perceiving, unambiguously, the tendency of ‘overborrowing’ by LDCs that only service their debts over long periods.     

The Politics of Telecommunications Regulation: State–Industry Alliance Favouring Foreign Investment in India

This paper explores the political economy of three significant policy decisions of the Congress–United Progressive Alliance government between November 2005 and February 2006. These decisions improved the regulatory incentives for the smaller and efficient firms in the Indian GSM industry, which were heavily dependent on foreign investment for their expansion. India's telecommunications sector became more attractive to foreign investors as a result of these regulatory changes. This was a notable departure from the past when government policy had favoured large domestic investors using CDMA technology who were not dependent on foreign capital. A globalisation friendly policy change occurred after a Centre-Left United Progressive Alliance coalition came to power. The paper argues that these decisions, which promoted both competition and foreign investment, occurred due to the increased sensitivity of the Department of Telecommunications towards the needs of the relatively smaller GSM service providers, driven by considerations of efficiency. They were not driven by a crisis of private investment, foreign pressure, or stealth. The shift occurred in normal times when the Department of Telecommunications under a persistent ministerial stewardship took on a regulator, which was less interested in engineering this shift. This globalisation-friendly strategy depended to a large extent on the particular industrial sub-sector that the ruling party or coalition supported for spreading telecommunications in India.     

Poverty,resource distribution and security: The impact of new agricultural technology in rural Bangladesh

Recent studies have examined the relationship between agrarian change and rural poverty in LDCs concentrating on either exchange or non‐exchange income. Neither approach employed independently is, however, adequate. Bangladeshi evidence is presented of growing concentration of control of land, of components of new agricultural technology and of ancillary resources. Increasing incidence of landlessness and near landlessness has resulted in greater dependence on wage employment for subsistence by the rural poor. It is argued that the non‐exchange component of income is important in slack periods and assumes even greater significance in abnormal years when both real wage and employment fall sharply. With rapid population growth, depletion of natural resources and greater penetration of technological and market forces, the cushioning effect of access to natural resources, in adverse circumstances, on the rural poor has become more limited and their income security has been undermined.