FACULTY OF BUSINESS AND LAW MAITF VIETNAM ASSIGNMENT HAND-IN FORM

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Student ID: Level of Study: Module Title: Course Title: Module Tutor: Student Name:

77093665 Post Graduate (Master) Trade, Development and Growth MAITF03 in Hanoi, Vietnam Ron Ainsbury Le, Quang Minh Minh

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Date of Submission: April 15th, 2011

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Recent Global Financial Crisis The crisis resulted from bubble situation of real- estate market in the US with highrisk loans and adjustable rate mortgage, which peaked in approximately 20052006. Before the crisis, home ownership encouragement and simple loan agreements with low interest rates had attracted many customers who borrowed loans to invest in real estate sector. As a result, investment in real estate sector increased rapidly. With financial incentives to close as many mortgage applications as possible, lenders increasing offered mortgages to borrowers of lower and lower credit quality. Therefore, low quality debt increased higher & higher. American banks used securitization in order to turn real estate loan into high-risk mortgage-backed securities (MBS) and collateralized debt obligations (CDO) bonds. As a result, all risks from loan will be transfer to CDO and MBS bonds. When Central Bank decided to increase interest rates, many borrowers realized that they could not pay their debts. Therefore, they had to pay by their real estate properties. This led to fallen price in housing market and equity markets. Banks owned CDO and MBS bonds had to report their losses. The crisis has influenced profoundly not only America but also other countries such as: French, UK, Germany, Japan, etc. The global financial crisis started to show its effects in the middle of 2007 and into 2008. Around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. Many nations of the world have enacted fiscal stimulus plans in response to the global recession. In 2008 the United State Congress passed and then- President George Bush signedthe Economic Stimulus Act of 2008, a $152 billion stimulus designed to help stave off a recession. The bill primarily consisted of $600 tax rebates to low and middle income Americans.[1] The United States combined many stimulus measures into the American Recovery and Reinvestment Act of 2009, $787 billion bill covering a variety of expenditures from tax cuts to infrastructure investment. $184.9 billion will be spent in 2009, and $399.4 billion will be spent in 2010 with the remainder of the bill's appropriations spread over the rest of the decade. [2] Announcements of rescue plans were associated with positive returns whereas a public intervention in favor of a specific bank showed negative impacts. The European Union passed a 200 billion

euro plan with member countries developing their own national plans, worth 170bn to 200bn euro in total, and an EU-wide plan of 30bn euro coming from EU funding November 2008
[4] [3]

For China, The Chinese State Council approved a $586 billion stimulus package in . In April 2009 Japan announced a third stimulus plan of 15.4 trillion yen stimulus ($153 billion). This new plan includes 1.6 trillion yen investment in low-carbon technology, 1.9 trillion yen on employment programs, and 370 billion yen for new car subsidies.[5] The recession that began in December 2007 ended in June 2009, according to the U.S. National Bureau of Economic Research (NBER)[6] and the financial crisis appears to have ended about the same time. Globalization Globalization is a process of global economical, political and cultural integration. Its major characteristic features are capitalism expansions, global labor division, migration of financial, human and production resources within the planet, standardization of legislation, economic and technological processes as well as removing the borders between cultures of various countries. The last twenty years of economic development, which has been called the globalization age, was a period when there was a massive improvement in the quality of life for billions of people all over the world. Absolute poverty decreased in a significant way for the first time in human history, and hundreds of millions of men and women lifted out of poverty were able to move further up to some modest prosperity. It is estimated that more than 900 million people entered into the population group with incomes above US$ 1,800 per capita and year over the last 10 years; one-third of them moved to incomes above US$ 6,000 p.c. (in purchasing power parities). With the increase of GDP per capita, qualitative factors of individual lives improved in a significant way across the world: higher life expectancy, improved access to safe water and education, and many others. Private sector investment both local and foreign invested increased; each year, about 6 million new firms are being created in the world (net of closures). 3

As a result, the annual creation of new jobs self-employed and employed almost doubled, productive employment expanded on its key role to add widespread wealth for families, societies and countries. But not all countries have integrated successfully into the global economy. The report says that some 2 billion people particularly in sub-Saharan Africa, the Middle East, and the former Soviet Union live in countries that are being left behind. These countries have been unable to increase their integration with the world economy. On average, these economies have contracted and poverty has risen. Actions for Developing Countries Improving the Investment Climate in Developing Countries Encouraging investment and creating jobs requires good economic governance measures to combat corruption, better-functioning bureaucracies and better regulation, contract enforcement, and protection of property rights. This is especially important for small and medium-sized firms and farms which are key to job creation and to raising living standards of the rural poor.

Improving Delivery of Education and Health Services The developing countries that have gained the most from integrating into the world economy have shown impressive gains in primary education and infant mortality. This suggests that many countries have made investments in education and health services that enable the poor to benefit from growth.

Provide Social Protection to a Changing Labor Market Tailoring social protection to the needs of a changing economy helps individual workers adjust to the challenges of a more open economy. Better social protection enables workers and entrepreneurs to take more risks and to avail themselves of new opportunities Actions for Developed Countries Rich Nations Should Increase Foreign Aid Evidence shows that private investors can be slow to respond when low-income countries improve their investment climate and social services. It is precisely at this stage when large-scale 4

aid can have a great impact on growth and poverty reduction. Aid should also address the serious health and geographic problems of the most marginalized countries. Foreign aid has fallen to 0.22 percent of donor countries' GDP--its smallest proportion since it was first institutionalized with the Marshall Plan in 1947.

Support Debt Relief for Reformers Reducing the debt of the most marginalized countries, especially in Africa, will enable them to participate more in globalization and the benefits it can bring. Debt relief is particularly powerful for those countries that improve their investment climate and social services. Debt relief packages are now in place for 24 countries under the enhanced HIPC Initiative for which total committed assistance is estimated at more than US$36 billion. It is critical, though, that further debt relief should not come out of the shrinking pie of foreign aid, which would simply move aid resources around. Debt relief must come in addition to foreign aid. Actions in international levels A 'Development Round' of Trade Talks Developing countries would gain enormously if rich nations make the WTO Doha Development Agenda a reality and agreed to bring down their trade barriers. Poor workers in developing countries today face tariffs twice as high as workers in rich countries. This must change. Rich countries must also take action to reduce dramatically their agricultural subsidies which currently stand at $350 billion a year, roughly seven times what rich countries spend on development aid. These subsidies not only hurt poor people in developing countries, they also mean higher taxes and higher prices for people in rich countries. Developing countries would also benefit from better access to each other's markets barriers between them are still higher than the barriers they face in rich countries Tackling Greenhouse Gases There is broad agreement among scientists that human activity is leading to potentially disastrous global warming, and that these changes in climate will be especially burdensome for poor countries and poor people. The report urges more effective international cooperation to address these problems. Actions of International Organizations United Nations - The Millennium Development Goals

The Millennium Development Goals (MDGs) are eight international development goals that all 192 United Nations member states and at least 23 international organizations have agreed to achieve by the year 2015. They include eradicating extreme poverty, reducing child mortality rates, fighting disease epidemics such as AIDS, and developing a global partnership for development.[ The MDGs focus on three major areas of Human development (humanity): bolstering human capital, improving infrastructure, and increasing social, economic and political rights, with the majority of the focus going towards increasing basic standards of living.[5] The objectives chosen within the human capital focus include improving nutrition, healthcare (including reducing levels of child mortality, HIV/AIDS, tuberculosis and malaria, and increasing reproductive health), and education. For the infrastructure focus, the objectives include improving infrastructure through increasing access to safe drinking water, energy and modern information/communication technology; amplifying farm outputs through sustainable practices; improving transportation infrastructure; and preserving the environment. Lastly, for the social, economic and political rights focus, the objectives include empowering women, reducing violence, increasing political voice, ensuring equal access to public services, and increasing security of property rights. The goals chosen were intended to increase an individuals human capabilities and advance the means to a productive life G20 - Multi-Year Action Plan on Development G20 identified nine areas, or key pillars, where action and reform are most critical to ensure inclusive and sustainable economic growth and resilience in developing countries and LICs. These areas are: infrastructure, private investment and job creation, human resource development, trade, financial inclusion, growth with resilience, food security, domestic resource mobilization and knowledge sharing. Creating optimal conditions for strong, sustainable and resilient economic growth in developing countries will require reform and transformation across each of these interlinked and mutually reinforcing key pillars.

REFERENCE
1. ^ "Bush signs stimulus bill; rebate checks expected in May". CNN. 13 February 2008. http://www.cnn.com/2008/POLITICS/02/13/bush.stimulus/. Retrieved 19 May 2010. 2. ^ H.R. 1 Conference Agreement. (PDF) . Retrieved on 2010-07-20. 3 ^ Fratianni, Michele; Francesco Marchionne (2009). "Rescuing Banks from the Effects of the Financial Crisis". SSRN Working Paper. http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1476786_code942286.pdf? abstractid=1476786&mirid=1. 4 ^ Paul Maidment. "China Announces Massive Stimulus Package." http://www.forbes.com/2008/11/09/china-stimulus-economy-bizcx_pm_1109notes.html 5 ^ Rial, Patrick. "Asian Stocks May Climb on Japan Stimulus, China Money Supply." Bloomberg. 13 April 2009. http://www.bloomberg.com/apps/news? pid=20601087&sid=a.Mekf7yvAbg&refer=home 6 ^ "Japan in 10 trillion yen stimulus." BBC News. 6 April 2009. http://news.bbc.co.uk/2/hi/business/7985239.stm 7. ^ Mark Hulbert (July 15, 2010). "It's Dippy to Fret About a Double-Dip Recession". http://online.barrons.com/article/SB5000142405297020398310457536747189603272 4.html?mod=googlenews_barrons.