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Impact of Globalization on Pakistan



Submitted to: Mr. Muhammad Ilyas Ansari Submitted by: Majid ALI 091320-079

DATE: 10-01-2012

Impact of Globalization on Pakistan


Impact of Globalization on Pakistan Acknowledgement

In the name of ALLAH most merciful and beneficent

I am gratified to Almighty God who is our creator and his Prophet Muhammad (PBUH) for showing blessing on me to develop this Assignment. And his blessing that has brightened every part of my lives. I am thankful to my teacher Mr. Muhammad Ilyas Ansari for excellent conducting the course of International relations and for enabling me to complete this Assignment which enhanced my knowledge. I am also thankful to Mr. Muhammad Ilyas Ansari who assigned me this topic and resolves my issues regarding my Assignment and guided in making that Assignment. I state my modest thanks to my parents whose prayers today able me to complete the research paper. I would like to thanks all those people who help me in making this Assignment. I also state my gratitude teacher Mr. Muhammad Ilyas Ansari this is their effort, guidelines that today I have completed the Assignment successfully.

Impact of Globalization on Pakistan CONTENTS


Impact of Globalization on Pakistan


The term 'globalization' is multi-dimensional. It has economic, social, cultural and political connotations. It is defined as a process of rapid economic integration among countries driven by the liberalization of trade, investment and capital flows, as well as technological change. Over the last 20 years or so, international trade in the world economy has grown more rapidly than the growth rate of GDP. This trend is expected to prevail in the future as well, as nearly all economic of the world are being integrated with each other through "globalization". Globalization is a process through which the links between people, communities and economics of the world strengthen. However, the links become weaker as the world confronts many challenges, posed by globalization. The fight against poverty represents the greatest challenge ever faced by the world economy. The objective of this assignment is to help improve understanding of the effects of the gradual and selective approach to globalization in terms of trade, wages, employment and social progress in Pakistan.

Globalization, by definition, is the integration and democratization of the world's culture, economy, and infrastructure through transnational investment, rapid proliferation of communication and information technologies, and the impacts of free-market on local, regional and national economies. The phenomenon of globalization has created a dichotomy of perception dividing the world into plethora of apprehensions and appreciations due to the intense velocity which the information about people, products, nature, environment, politics and economy disperses across borders, across countries and nations creating virtually one world into a global village. Here the golden words of late Dr. Mahbub-ul-Haq provides the true vision: "Globalization is no longer an option, it is a fact. Developing countries have either to learn to manage it far more skillfully, or simply drown in the global cross currents." Globalization is multidimensional and impacts all aspects of life economic social, cultural and political. Globalization in production and labor markets is leading to increasing outsourcing of parts, components, and services. The drive towards market liberalization has rapidly accelerated the pace of globalization during the past decade. Theoretically 1] Globalization opens up markets and ensures competition 2] Removes inefficiencies and leading to greater growth. 3] Ensures specialization takes place in areas of comparative advantage. 4] For labor abundant economies this means increased employment as well as growth. []

Impact of Globalization on Pakistan CAUSES OF GLOBALIZATION

The origin of globalization can be traced back till the 16th century when the West started to explore and discover for the new worlds and continents, bringing the English to India in form of East India Company, there first multinational was born for us and the rest is recorded history. The process of global economic integration was perpetrated at the behest of World War II and the first Great Depression, when the leaders of Britain and the US fumbled with the idea of reconstructing the war-torn world monetary system with a focus on favoring free of capital internationally, turn endure a liberal, capitalist world at the end of war to counter the shadows of Socialism and Marxism. To promote the new monetary world order, a conference was convened in July 1944, at Bretton Woods, New Hampshire, to create the world's most powerful institutions: the International Bank for Reconstruction and Development (the World Bank), and the Internationally Monetary Fund (IMF). With the development of international financial markets in 1970s and the debt crisis of developing countries, several developing countries opted for stabilization and structural adjustment programs, to qualify for the loans from IMF and WB. The first IMF/WB Structural Adjustment Loan (SAL) was given to Turkey, in the backdrop of appropriate market oriented policies, accompanied with conditional ties, in 1980. These programs in a nutshell were aimed at liberalization of developing-countries markets. The reforms and conditional ties imposed laid basic foundation to open economies to steer the mechanism of economic integration giving birth to the most controversial of all among international organizations, the World Trade Organization. []


Pakistan is a mixed economy consisting of a public sector domination of major sectors of the economy, which is changing very quickly under the freer market agenda of WTO making the role of government to minimum level under the globalization policies guided by World Bank and IMF. Although with the growing awareness among the intelligentsia of the country about the core issues of development not being address appropriately yet we have seen the growth role of institutions of globalization mentoring the economic direction of the country. In the preview of economic sanctions imposed on Pakistan in 1998, political instability, state-of-war with India, and most importantly the 11th September Crisis has not been able to hamper the country which these events has the potential. Economic growth remained mixed, in a year when many other Asian countries were recording negative growth. Inflation did not accelerate significantly, as was anticipated by most external forecasters. The current account deficit declined further, so that Pakistan's short-run balance of payments position remained viable once lending by the IMF and World Bank was resumed and debt had been rescheduled by the London and Paris Clubs. Complacency would nonetheless be out of place. Exports have been declining, normal capital inflows have almost dried up, and the country's weak credibility and policy uncertainties have discouraged foreign direct investment in particular and productive investment in general. Pakistan is the only country in South Asia that has recorded a lower rate of growth in the 1990s than in the preceding decades. Suspension of the convertibility of the foreign currency deposits, and the London and Paris Club rescheduling, were essential in the short run, but they will tend

Impact of Globalization on Pakistan

nevertheless to compromise Pakistan's ability to borrow internationally for years to come. The social indicators literacy, mortality, fertility, and poverty remain poor, even for a country with Pakistan's per capita income, and the squeeze on the budgets of the provincial governments suggests that this is unlikely to improve much in the short run. The country clearly faces a difficult challenge in reviving its economy and in achieving a level of social standards in which it can begin to take pride. []

WTO (World Trade Organization)

The World Trade Organization has 1] Formalized the global trading system 2] Provided, in principle, a structured Framework for ensuring a level playing 3] And a mechanism for dispute resolution 4] Several WTO agreements have a direct bearing on Pakistan poverty reduction efforts [ n&source=web&cd=2&sqi=2&ved=0CDIQFjAB& pdf%2FSeminar%2FGlobalization%2520and%2520its%2520Impact%2520on%2520Poverty%2 520Reduction.pdf&ei=kdAFT6bmI4jTrQe9hnzDw&usg=AFQjCNGP60lPuSFwMZHJZf4vDRLTZpsVDw&cad=rja]


Pakistan like any developing country rely on foreign aid on one end, and the whatever is earned through exports in terms of foreign exchange, the major chunk is paid back to the international lenders leaving little room and money for the drastic economic growth cycle to be ignited. In addition, with the appreciation of dollar, or devaluation of local currency the standard of living of an American may increase as the Pakistani goods become cheaper from him or her, but for Pakistan this devaluation hits directly the purchasing power of a common man burring into the vicious cycle of poverty. The implications to adopt the free liberalization under WTO has many pros and cons but until now there has been no comprehensive study to capitulate the total impact in economic terms focusing overall and individual sectors of the economy in particular. WTO demands open market access for foreign goods and services in the local market without any discrimination by creation of tariff or non-tariff barriers. Pakistan is also required to provide a Most Favored Nation (MFN) status to all trading partners who mean non-discriminatory treatment among the members implying on any imports or exports origination from respective countries. Pakistan under IMF conditionality and structural adjustment program Pakistan has to reduce its tariff from 65% to 30% gradually, and WTO also requires the same. Several WTO agreements have a direct bearing on Pakistan efforts, some examples are: Rationalizing the Tariff Structure Some Progress has been made but the focus for trade liberalization during the next one to three

Impact of Globalization on Pakistan

years should be on reducing tariff dispersion, increasing transparency, making indirect taxes trade neutral, and closing loopholes in exemptions The Agreement on Agriculture provides significant opportunities for Protecting Food and Livelihood Security and Rural Development Opportunities through the designation of Special Products and Special Safeguard Mechanisms. We have not been able to take advantage of Pakistans Agricultural potential in Trade because of 1] Inadequate Research 2] Structural problems within Pakistan's agri-food economy; 3] Barriers encountered in accessing export markets; and 4]Competition from other countries' exporters. Implications for Pakistan of Abolishing the Textile and Clothing Export 5] the overall short run impact of MFA abolition will be positive on the textiles sector and negative on clothing. 6] This will result from the improvements in efficiency of its resource allocation and in world market prices outweighing the loss of quota rents Despite liberalization/WTO there are several challenges to increased market access: 7] exceptionally high tariffs on the products of the export interests of the developing economies; 8] tariff escalation impacting adversely the exports of value added products; 9] subsidies on agriculture sector, 10] indiscriminate use of anti-dumping and countervailing duties, etc. The Biggest Constraint is significant absence of capacity to analyze the emerging issues in WTO agreements and the implications for Pakistan. The general knowledge of the Agreement and its provisions is high among officials, traders and non-governmental organizations. However, detailed practical understanding of the Agreements and the consequences, particularly for market access, is lacking. Maximizing Gains from the WTO Very few institutions are in Pakistan where different stake holders can interact on the WTO issues. Most of the positions taken on WTO issues in Pakistan lack an empirical research basis and are most often based on assumptions. A clear policy perspective emerging through consultations is necessary before the country commits itself to any position at the international level. And before it does any of the above most important barriers to globalization are institutional and jurisdictional discontinuities and the diversity of national institutional arrangements and not traditional border-type measures such as import tariffs, quantitative restrictions, and restrictions on the flow of foreign capital. Elimination of these discontinuities, especially those in the area of labor mobility can provide large benefits []


Pakistan liberalized its economy as part of the structural adjustment conditional ties of the IMF program and World Bank lending. Pakistans expansion in trade has not been as spectacular as that of some of the fast globalizes. Pakistans exports merchandize exports have not kept pace

Impact of Globalization on Pakistan

with that of the rest of the world. Pakistans experience with globalization between 1990 and 2002 has not been great. Pakistans share in the world merchandize exports has fallen from 0.16 to 0.15. Chinas share in world merchandize exports went up from 1.80 to 5.04. Malaysias share in world merchandize exports has increased from 0.85 to 1.44 []


While the size of the trade sector relative to GDP has grown from about 28 percent in 1980 to about 31 percent in 2003 it has been subject to large year to year variations. The trade sector has on an average grown only slightly faster than the growth of the economy. The overall growth of the economy and the social sector development indicators, particularly for the decade of 1990s, does not show any significant gains from the liberalization process. Poverty which was declining till the early 1990s started to increase thereafter till the end of the decade. The increase in the openness of the economy did not translate significantly into any enhancement of growth and subsequent decline in poverty Pakistans trade sector did not grow significantly during the 1990s despite the liberalization because of 1] narrow range of export markets and export products; 2] modest short-term demand responsiveness for major Pakistan export categories; 3] small foreign direct investment in tradable sectors; 4] anti-export bias in the trade policies of Pakistan; 5] inadequate infrastructure in certain potential growth sectors; 6] absence of trade risk mitigation structure to support the entry of new exporters and 7] inadequate development of non-traditional markets []


Originating from free-trade doctrine, some opinions claim that Pakistan, under globalization, should forget about possibilities of a new wave for industrialization altogether. Though controversial, the claim also argues that the East Asian Gang of Four days are over, and globalization - meaning flow of foreign direct investment (FDI) and openness - will determine whether the country can industrialise or not. Such arguments also advise that Pakistan should try to attract FDI through the policies of liberalisation, deregulation, and privatization. Most importantly, the government has to be cut-to-size and be kept out of markets in the process. However, on the opposite side, forceful voices originate from at least two quarters, which at a certain level are mutually supportive approaches to long-term economic development. Broadly speaking, one is new institutionalise political economy and the second is new growth and new trade theory the moral of the story is that industrialization under globalization for long-term economic development is too important an activity to be left to blind forces of FDI and openness.

Impact of Globalization on Pakistan


All three sectors, first (government), second (business), and third (civil society) must work together towards achieving national development objectives and strengthen national institutions. Each sector can contribute a set of competitive advantages. []


But in-spite of that deficit there is a significant increase in growth rate of output, trade and FDI inflows but the important question is: To what extent increase in these growth have helped the growth of employment in Pakistan? Years Unemployment 1980-90 1991-95 1996-2000 1991-2000 1999-2000 2000-2001 3.5% 5.4% 6.0% 5.7% 6.2% 6.7%

Thus despite increase in growth rate of output, trade and FDI. The unemployment rate, increased from an average of 3.5% during 1981-90 to 5.7% during 1991-2000, went up further to 6.7 percent in 2000-01, official statistics, as presented in the Pakistan Economic Survey (Statistical Supplement) for the year 2000-01, actually report unemployment in 2000-01 to be higher at 7.8 percent. []


Pakistans experience also shows that in the decade of 1990s, significant trade liberalization was accompanied by a steady decline in the GDP growth rate, from 6.1% in the 1980s to 4.5% in the 1990s. Similarly, wide-ranging policy changes and incentives to encourage foreign investment did not lead to any significant increase in investment, apart from larger investment in the private power sector in the mid-1990s in response to a very attractive incentive package. In fact, overall investment declined from about 19% of the GDP in 1989-90 to only 15% in 1999-2000. Even on the export front, the trade performance has not been satisfactory. Despite substantial reduction in tariff rates, removal of virtually all non-tariff barriers and successive devaluations of the currency (leading to an annual depreciation of about 10% in the exchange rate, from Rs 24 in 1990 to Rs 60 per dollar in 2000), the growth in exports in the 1990s was only 4.5% per annum, compared to 19% in the 1970s and 8.5% in the 1980s. []

Impact of Globalization on Pakistan THE PRICE CHANNELS


Globalization can affect poverty-inequality nexus through relative price changes in factor markets and goods market. Several effects are likely to occur. Protected industries will contract after the removal of tariff and NTBS of international trade. Consequently, the poor are likely to suffer in the short run. These adverse effects are mitigated in the medium to long term as the sect oral adjustment occurs and resources are diverted to more efficient export sectors of the economy. On the other hand, the removal of exchange rate distortions may help agriculture (much of the poor in the rural areas of the low income countries) as the producer incentives improve (Anwar, Tilat, 2005). How much they will gain from removing the distortions remains an empirical issue as several other factors are taken into account. In the last decade, global inflation has dropped from 30% per year to 4%. Rag off (2003) attributes this to a number of factors, especially globalization and deregulation. This disinflation channel has brought many benefits for the poor. The extent to which the effects of this channel act upon the less fortunate depends on the following: 1] How do they respond to lower prices? 2] Composition of tradable goods and non-tradable goods in their total consumption expenditures. 3] Their access to formal goods and credit markets 4] Their vulnerability to economic shocks, etc []

where the Indian manufacturers offered to supply Reilegh Bycle at Rs1100 against Pakistani price of Rs. 3000, Vaspa Scooter at Rs.35000 against Pakistani price of about 68000/- and Maruti car (our Suzuki Mehran) at Rs.250,000/- against Rs.375,000/- in Pakistan. They also offered steel and steel product at about 66 per cent of the prices being charged by the Pakistan steel mill. One wonders what would happen to whatever little industrial base we have in Pakistan if we enter into the race of globalization without any preparations to meet the global challenges. We will obviously be faced with numerous economic pulls and strings within the process of globalization, if we failed to prepare ourselves to face the emerging world scenario. We will, therefore, have to take tangible steps to safeguard our social, cultural and economic interests to resist the forces of pressure in the globalization process. []

Impact of Globalization on Pakistan GLOBALIZATION TO POVERTY


Globalization has several different connotations, meanings and perceptions (Hussain, I, 2000). To many it consists of trade openness, financial sector liberalization, financial integration, international labor flows and technological change. There are few subjects in the whole international community that are as much controversial as globalization. On one hand, there is a pro-globalization movement led by various international financial institutions and other countries successfully experiencing globalization. On the other hand, serious concerns shown by the rest of the world community are a sign of growing and widespread discontent with the globalization policies. The ongoing debate on this particular issue revolves around two questions: 1] How does globalization in some countries bring enormous benefits to the many, without bypassing the poor? 2] How does globalization, in other countries, bring huge benefits to a few by aggravating income inequalities, and increasing poverty? The answer to these questions requires a deeper insight into the channels through which globalization affects poverty. []


First of all I want to discuss that what is Culture & Globalization? Interconnection of whole world, increasing links or Interrelation b/w the countries is called as Globalization. Culture can be defined as our way of life. It can be classified on two groups, Material Culture: includes Arts, Architecture, Utensils, Dresses, Crafts, Sports etc. Symbolic culture: is a way of thinking that includes beliefs, values, language, Religion etc. While we look back we can see that culture is always being associated with the locality, means to say each country have its own cultural identity, which represents its specificity associated with that area or country. In the same way Pakistan have its own Culture .Lets discuss that what is Pakistani Culture & How is it being impacted by Globalization. The national dress of Shalwar Qamiz is originally of Central Asian origin derived from Turko-Iranian nomadic invaders and is today worn in all parts of Pakistan. The Sari is a regional dress that is worn by some women in Sindh and other parts of Pakistan. [Citation needed] Women wear brightly colored shalwar qamiz, while men often wear solid-colored ones. Globalization has a great impact on dress. In cities Western dress is popular among the youth and the business sector, which shows that how we are getting new ideas from other cultures. The variety of Pakistani music ranges from diverse provincial folk music and traditional styles such as Qawwali and Ghazal Gayaki to modern forms fusing traditional and western music, such as the synchronization of Qawwali and Western music

Impact of Globalization on Pakistan


by the renowned Nusrat Fateh Ali Khan. Other major Ghazal singers include Mehdi Hassan, Ghulam Ali, Farida Khanum, Tahira Syed, Abida Parveen and Iqbal Bano. In addition Pakistan is home to many famous folk singers such as the late Alam Lohar, who is also well known in the Indian Punjab. Hip-Hop is one of the categories in Pakistan that is rising very fast, especially rappers 2Pac, 50 Cent, and The Game are known throughout the whole country by many elementary scholars and teenagers. The arrival of Afghan refugees in the western provinces has rekindled Pashto and Persian music and established Peshawar as a hub for Afghan musicians and a distribution centre for Afghan music abroad. But now we can see that due to Globalization POP music is getting more and more fame among our people, even our Singers (e.g., Atif) are using Western instruments, lyrics etc.There are many other things that come under this broad term Culture. But due to some limits I would like to end my discussion that Globalization has strongly impacted Pakistani Culture some groups take it as negative and thought that our own culture is extinction due to it (e.g. Classical music), while some groups argue that our national culture is still same, only some new things are becoming a part of it (Dresses, Language etc).But I think its positive effect is dominating over negative. []


Impact of globalization on the education system in Pakistan in the context of its status as a third world country. The globalization calls for exchange of ideas and thoughts. Educationists can exchange their views and ideas with their counterparts around the world. Through a productive exchange of thoughts, the standard of education in Pakistan can be raised to the international level. There are certain genuine concerns about the relevance of alien thoughts but nothing should be accepted as a package. Local experts should carefully review such ideas before adopting them for the solution of their problems. The source of foreign funding is important because it might have a hidden agenda. Unless such an agenda is made public for discussion, the worth of such funding is difficult to assess []


Major benefit: increasing economic welfare/well-being Major cost: integration/sublimation of cultures and social values 1] Provide a higher income for people in third-world nations 2] Raise the standard of living of most of these people from extreme poverty to moderate poverty, so that they can eat more nutritious foods and have cleaner potable water. 3] With higher income also comes better education -- knowledge is being shared 4] With better knowledge, better understanding about health care, superstition, poor habits, and human rights

Impact of Globalization on Pakistan

5] Hopefully a better chance at world peace and less racial and religious hatred. []


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Opponents of globalization point out to its negative effects. Some of them are listed below. 1] Developed nations have outsourced manufacturing and white collar jobs. That means less jobs for their people. This has happened because manufacturing work is outsourced to developing nations like China where the cost of manufacturing goods and wages are lower. Programmers, editors, scientists and accountants have lost their jobs due to outsourcing to cheaper locations like India. 2] Globalization has led to exploitation of labor. Prisoners and child workers are used to work in inhumane conditions. Safety standards are ignored to produce cheap goods. 3] Job insecurity. Earlier people had stable, permanent jobs. Now people live in constant dread of losing their jobs to competition. Increased job competition has led to reduction in wages and consequently lower standards of living. 4] Terrorists have access to sophisticated weapons enhancing their ability to inflict damage. Terrorists use the Internet for communicating among themselves. 5] Companies have set up industries causing pollution in countries with poor regulation of pollution. 6] Fast food chains like McDonalds and KFC are spreading in the developing world. People are consuming more junk food from these joints which has an adverse impact on their health. 7] The benefits of globalization are not universal. The rich are getting richer and the poor are becoming poorer. 8] Bad aspects of foreign cultures are affecting the local cultures through TV and the Internet. 9] Enemy nations can spread propaganda through the Internet. 10] Deadly diseases like HIV/AIDS are being spread by travelers to the remotest corners of the globe. 11] Local industries are being taken over by foreign multinationals.

Impact of Globalization on Pakistan

12] The increase in prices has reduced the government's ability to sustain social welfare schemes in developed countries. 13] There is increase in human trafficking. 14] Multinational Companies and corporations which were previously restricted to commercial activities are increasingly influencing political decisions.


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Pakistans experience with economic liberalization has thrown up some important lessons and criteria to judge whether or not such liberalization would lead to higher economic growth. These can be summarized as follows: 1] unless the initial conditions and the international economic environment are favorable to attract foreign investment and to utilize the opportunities created by tariff and market reforms, these can become counter-productive. In the case of Pakistan, the reform process, launched in early 1991 coincided with economic sanctions imposed by the US from October 1990 as a result of Pakistans nuclear policy and by all G7 countries in June 1998, following the nuclear tests. Lower Tariffs weeded out some of the uneconomic industries and slowed down the industrial growth rate, but due to sanctions and recurrent political instability, this loss was not compensated by new investment in value added sectors. 2] The speed and sequencing of reforms must be carefully orchestrated. If tariffs are reduced drastically before expanding the tax base and improving tax administration, revenues will fall, thus accentuating the fiscal problems. Similarly, financial sector reforms to raise interest rates for government borrowing should follow and not precede sustained reductions in public sector expenditures because higher cost of borrowing does not automatically lead to lower expenditures. 3] All the components of globalization do not move in the same direction. While there is free flow of information and capital, labor movement is restricted. Even in trade, high tech products are traded freely, but simple manufactures like textile and leather goods continue to be protected and agricultural trade is heavily distorted by huge subsidies provided by the US, Europe and Japan ($390 billion in the year 2000). In such an unlevel playing field, countries like Pakistan, which are primarily dependent on agricultural or textile exports, cannot benefit much from globalization. In fact, successive devaluations lead to a progressive depreciation in export prices and therefore lower exports. 4] Excessive reliance on demand management, at a time when the process of growth is being adversely affected by several non-economic factors, can further slow down the pace of economic

Impact of Globalization on Pakistan


growth. With the reduction of tariffs, revenues from custom duties in Pakistan declined from 6% of GDP in 1989-90 to only 2.2% in 1999-2000. The reduction in tariffs also led to closure of many industrial units, which were previously functioning under heavy protection. This not only slowed down the rate of industrial growth from an average of 8% in the 1980s to 3.9% in the 1990s, but also led to a corresponding decline in revenues from excise duties and sales tax.


As globalization involves enterprises and workers of nearly all the world's countries in the goods as well as in the service sector. Consequently, the majority of the world's labor force is experiencing the effects of international competition. There is need for a coordinated and collaborative effort among the South Asian countries to expand trade in the region. Pakistan needs to diversify its exports base and shift from primary agricultural products to more value added and industrial products. Privatization will have to be placed at the top of the Government agenda. Pakistan should increase exports not only to earn more foreign exchange but also to join the world community in globalization. Similarly, direct foreign investment is crucial for resource mobilization. It is therefore, strongly recommended that the government of Pakistan must attract foreign direct investment by giving them various incentives. Furthermore, financial depth is also playing crucial role in the overall development of the country. It is important that we should strengthen our financial sector for capital flow. Of course, political stability is crucial for economic development of the country.

Impact of Globalization on Pakistan BIBLIOGRAPHY


[] [] [] [] [ pakistan&source=web&cd=2&sqi=2&ved=0CDIQFjAB&url=http%3A%2F%2Fwww.pi 0on%2520Poverty%2520Reduction.pdf&ei=kdAFT6bmI4jTrQe9hnzDw&usg=AFQjCNGP60lPuSFwMZHJZf4vDRLTZpsVDw&cad=rja] [] [] [] [] [] [] [] [] [ on_towards_a_country] [ on_on_third_world_countries] []