July 18, 2024

The Domestikated Life

One Passion

Economic Prescription for Developing Countries!

Economic Prescription for Developing Countries!

The industrial and business environment of developing countries has been subjected to a sea of changes owing to the economic reforms and policies in the light of globalization, privatization and liberalization. A long term economic vision is necessary for these countries to establish themselves in the global market which facilitates the process of becoming self sufficient in due course of time. Let me present you with a synopsis of how this change can happen and how countries are adapting themselves in lieu of the global economic boom.

  • More number of multinational companies have acquired and are trying to acquire a major part of equity in the industries of the host country and sometimes they opt for Joint ventures to factorise the economy of scale and also which proves to be a win-win situation for both the parties. Developing countries have altered their economic views on foreign direct investment and are very liberal in their attitude in providing with the necessary licenses. The entry of multinational companies and their potential investment has even altered core sectors like power, oil and telecommunications. Moreover, the benefit of cheap labor, economic subsidies for the start of operations in economically backward regions lure foreign investors.
  • There is a rush of entrepreneurship in the developing countries, in the form of setting up of small scale industries, cottage industries for which liberal subsidies are provided by the governments to encourage the act of entrepreneurialism. Also people want to go for diversification, mergers and acquisitions in the wake of global competition.
  • Capital markets have gained new buoyancy. The rapid growth of stock market and its influence over the international economic scenario have made foreign brokers to keenly follow the market changes for potential investment. The one striking feature of the economy of developing countries is that, it is a self made economy and withstands the pressures of the business cycle, such as recession and inflation, unlike foreign markets that have failed to stabilize their markets owing to what is called sub prime lending, a plan that has failed to achieve the desired economic growth. Instead of making the capital market alive with fresh infusions of funds, it has left many banks and financial institutions bankrupt.
  • Banking sector has scaled to greater heights and has come under a competitive environment. Deregulation of interest rates to attract potential investors, new technology, products and aggressive marketing usher in new competition, disinvestment of government equity in nationalized banks have made banks to operate as commercial institutions and their services get marketed as branded consumer products.
  • Financial services have emerged as a new business and funding options are aplenty increasing the chances of raising capital. This has evolved as a separate and major source of business fetching revenue to the service providers.
  • Private sector is gaining importance in countries like India, where they have entered all the core industries like oil, mining, telecommunications, road building, railways, ports, civil aviation etc… this serves as a revenue source for the government and this kind of economic restructuring has brought a wave of enthusiasm amongst the potential investors.
  • Imports have become an entrepreneurial activity and are out of the government domain and this has been facilitated by relaxation of licensing hassles. These are some of the recent trends in the developing countries that have captured the interest of multinational investors.