ECONOMIC DEVELOPMENT

FINAL TERM

PUBLIC PRIVATE PARTNERSHIP

Public-Private Partnership (PPP) is a contractual or memorandum-driven agreements between

public office and private enterprises. This is geared for both sectors to gain improved efficiency
and project implementation processes in delivering services to the public.

PPP emphasizes the VALUE FOR MONEY, focusing on reduced costs, better risk alleviation,
faster implementation, improved services and possible generation of additional revenue.

PURPOSES OF PUBLIC-PRIVATE PARTNERSHIPS (PPPs)

1. PPPs allow large scale government projects, such as roads, bridges, or hospitals, to be
completed with private funding.

2. These partnerships work well when private sector technology and innovation combine with
public sector incentives to complete work on time and within the budget.

3. Economists are mixed as to the net benefit of PPPs on economic.

Two Common Forms of PPP

1. Availability PPP - A form of PPP wherein the public authority contracts with a private
sector entity to provide a public good, service or product at a constant capacity to the
implementing agency (IA) for a given fee (capacity fee) and a separate charge for usage
of the public good, product or service (usage fee). Fees or tariffs are regulated by contract
to provide for recovery of debt service, fixed costs of operation and a return on equity.

2. Concession PPP - A form of PPP wherein the government grants the private sector the
right to build, operate and charge public users of the public good, infrastructure or
service, a fee or tariff which is regulated by public regulators and the concession contract.
Tariffs are structured to provide for recovery of debt service, fixed costs of operation, and
return on equity.
AGRI TRANSFORMATION AND ECONDEV

Agriculture Development
Agriculture is the art and science of cultivating the soil, growing crops and raising
livestock. It includes the preparation of plant and animal products for people to use and
their distribution to markets.
Providing assistance to the crop producers with the help of various agricultural resources.
Providing protection, assisting in the research sphere, employing latest techniques,
controlling pests
Develop “better” system of agriculture production.
Rural Development is the process of improving the quality of life and economic well-being of
people living in rural areas, often relatively isolated and sparsely populated areas
Role of Agriculture in Rural Development
Increases sustainability and productivity by investing in good practices of water
management, irrigation and strengthening systems for small producers so they can access
better seeds, pesticides and fertilizers it is possible to introduce production system that
pay off. This in turn leads to better revenue and high crop yields.
Reasons Rural CommunityDevelopment is hard to do:
Change is not comfortable.
Parochial attitudes shut themselves off from the outside.
Lack of resources and capacity.
Leadership capacity
Lack of education
Unemployment
Lower prices of agricultural products.
Workers with higher qualification migrates to the cities.
People remain mostly in retirement age
Key issues in Rural Development
Development of alternate occupations other than agriculture
Investment in Human Capital in rural areas
Land Reforms
Development of Infrastructure in rural areas
Availability to affordable credit

INDUSTRIALIZATION, POPULATION DYNAMICS, AND EMPLOYMENT &

LABOUR MOBILITY

INDUSTRIALIZATION is a process whereby individual labor is replaced by mechanized mass

production and specialized laborers, which boosts productivity.
Industrial production concentrated in 4 regions:

1. Northwestern Europe
2. Eastern Europe- Russia/Ukraine
3. Eastern North America
4. East Asia- S. Korea, Hong Kong, Taiwan and Singapore “Asian Tigers”
POPULATION DYNAMICS- looks at how the population of a country or a region or even the
world changes.

Three (3) Factors that Contributed to the Growth Rate

1. Fertility - increases the population; average number of children born to women during
their reproductive years
2. Migration is the movement of people from one permanent home to another
3. Mortality measures the number of deaths in a particular population, per unit of time;
decreases the population

EMPLOYMENT is an economic situation in which all available labor resources are being used
in the most efficient way possible.
Employment vs. Self-employment

Employment is the state of working for other people or for the company in exchange of
compensation or wages while Self-employment is the state of working for oneself rather than an
employer.

Types of Employment
Full-time employment – This is the most prevalent type of employment. Employees
under this category are considered regular and enjoy the usual benefits that come with
being officially part of the company.
Part-time employment – Workers under this category render less hours than their
regular, full-time peers. This allows more flexibility, but pays less and not all workers are
given the standard benefits that comes with being a full-time employee.
Fixed-term employment -Fixed-Term Employment is when the employee renders
service for a definite period of time and the employment contract must be terminated
after such period expires.
Probationary Employment - Those under probationary employment are either in
training or being assessed whether they fit the job role they’re occupying. This period can
be anywhere from three to six months depending on the employer. Once the candidate
passes this period, he or she is then offered the regular job position. Probationary workers
also don’t get the full benefits and perks of being a regular employee.
Project employment - is defined when an employee is hired for a specific project or
undertaking and the employment duration is specified by the scope of work and/or length
of the project. A project employee may acquire the status of a regular employee when
they are continuously rehired after the completion of the project or when the tasks they
perform are vital, necessary, and indispensable to the usual business or trade of the
employer.
Employees and Employers

Employee

Contributes labor and expertise to an endeavor of an employer.

A person who is hired to provide services to a company on a regular basis in exchange
for compensation.
Employers

Employer and managerial control within an organization rests at many levels and has
important implications for staff and productivity alike, with control forming the
fundamental link between desired outcomes and actual processes.
18 years old is the minimum age for employment, below that age is not allowed. Persons
of age 15 to 18 can be employed given that they work in non-hazardous environments.

HUMAN CAPITAL: EDUCATION AND HEALTH

Human capital is the term used to define increase in productivity levels and human
capacities due to Education and Health.
Initial investments in health or education lead to a stream of higher future income.
The present discounted value of this stream of future income is compared to the costs of
the investment.
Private returns to education are high, and may be higher than social returns, especially at
higher educational levels.

The Education Gender Gap

Females receive less education than males in LDCs.
The rate of return on education is higher for female than male
Female education increases productivity and lowers fertility
Educated mothers raise educated children
Female education helps break the vicious cycle of poverty andinadequate schooling for women

Determinants of Education Demand

Wage or income differential paid to workers with various levels of education
Probability of success in finding a job in the formal sector
Direct private cost of education (e.g., tuition)
Indirect or opportunity cost of education (i.e., foregone income)

DOMESTIC FINANCING AND ECONOMIC DEVELOPMENT: SAVING AND

FINANCIAL INTERMEDIATION

DOMESTIC FINANCING advises and assist in areas of domestic finance, banking, and other
related economic matters. This is a process and activity assisting domestic financial sectors,
banks and other related agencies by developing the economy of the country through savings and
financial intermediation.

Saving refers to money you put aside for future use rather than spending it immediately.
Financial Intermediation is a process performed by banks of taking in funds from a depositor
and then lending them out to a borrower. The banking business thrives on the financial
intermediation abilities of financial institutions that allow them to lend out money at relatively
high rates of interest while receiving money on deposit at relatively low rates of interest.

Importance of Financial Intermediation

Intermediaries can be converted savings into investment.

Intermediaries offer savings, loan, investment, insurance program other related activity
due of its wide storage facilities for cash, liquid assets and other assets measured at face
value.
Intermediaries offer investment in mutual fund or trust fund.
Intermediaries could regulate the monetary system and stand as middlemen of contracting
parties.
Intermediaries helps the country by developing the economy (reduction of poverty,
employment, capitalization, financial crisis).

Types of Financial Intermediaries

Banks
Mutual fund
Financial Advisors
Credit Union
Intermediaries for insurance, pension, investments and others.

ENVIRONMENT AND ECONOMIC DEVELOPMENT

The environment does not only mean surroundings. Environment refers to air, water and
land and the interrelationship of all these factors with human beings. Environment and
development cannot go against each other. They should be complementing each other. If all the
resources on earth are utilized for the development of the world, without the thought of
preserving them, soon the earth will turn into an uninhabitable place.

Direct and Indirect Benefits of Environment in Economic Development

Directly, by providing resources and raw materials such as water, timber and minerals
that are required as inputs for the production of goods and services; and
Indirectly, through services provided by ecosystems including carbon sequestration,
water purification, managing flood risks, and nutrient cycling.

The ENVIRONMENTAL POLICY is to manage the provision and use of environmental

resources in a way that supports improvements in prosperity and wellbeing. There are number of
reasons why government intervention is needed to achieve this. In particular, market failures in
the provision and use of environmental resources mean that natural assets would be over-used in
the absence of government interventions.

What Is Green Economy?

A new model of economic development that is in line with nature and the
environment.
It makes a positive connection between ecology and economics and thus increases the
well-being of society.
This aim is to achieve an economy that is in harmony with nature and environment.
It requires changes in the consumption of resources, emission reduction and funding
for innovations in the environment sector.

INTERNATIONAL TRADE THEORY AND DEVELOPMENT STRATEGY

Classical or Country-Based Trade Theories

1. Mercantilism

Mercantilism was an economic system of trade that spanned from

the 16th century to the 18th century. Mercantilism was based on the idea that a nation's
wealth and power were best served by increasing exports and so involved increasing
trade. Under mercantilism, nations frequently engaged their military might to ensure local
markets and supply sources were protected, to support the idea that a nation's economic
health heavily relied on its supply of capital.

2. Absolute Advantage

Absolute advantage states that the ability of an individual, company, region, or

country to produce a greater quantity of a good or service with the same quantity of
inputs per unit of time. This is when a producer can produce a good or service in greater
quantity for the same cost, or the same quantity at lower cost, than other producers.
Absolute advantage can be the basis for large gains from trade between producers of
different goods with different absolute advantages. By specialization, division of labor,
and trade, producers with different absolute advantages can always gain over producing
in isolation.

3. Comparative Advantage

The theory was first introduced by David Ricardo in the year 1817. Comparative
advantage suggests that countries will engage in trade with one another, exporting the
goods that they have a relative advantage in productivity. This introduces opportunity
cost as a factor for analysis in choosing between different options for production.
 4. Heckscher – Ohlin Theory

The Heckscher – Ohlin theorem states that a country which is a capital – intensive
good. Likewise, the country which is labor – abundant will export the labor – intensive
good. Each country exports that good which it produces relatively better than the other
country. In this model, a country’s advantage in production arises solely from its relative
factor.

Modern or Firm-Based Trade Theories

1. Country Similarity Theory

The idea that countries with similar qualities are most likely to trade with each
other. These qualities may include level of development, savings rates, and natural
resources, among others. The country similarity theory is based on the idea that economic
actors with similar qualities are going to want many of the same things. Most trade in
manufactured goods will be between countries with similar per capita incomes, and
intra-industry trade will be common.

Intra-Industry Trade – the exchange of similar products belonging to the same

industry.

2. Product Life Cycle

The Product Life Cycle Theory is an economic theory that was developed

by Raymond Vernon in response to the failure of the Heckscher-Ohlin model to explain
the observed pattern of international trade. The theory suggests that early in a product's
life-cycle all the parts and labor associated with that product come from the area where it
was invented. After the product becomes adopted and used in the world markets,
production gradually moves away from the point of origin. In some situations, the
product becomes an item that is imported by its original country of invention.

Product Life Cycle:

New Product
Maturing Product
Standardized Product

3. Global Strategic Rivalry

Focused on Multinational Companies (MNCs) and their efforts to gain a

competitive advantage against other global firms in their industry.
 Firms will encounter global competition in their industries and in order to prosper,
they must develop competitive advantages.
The barriers to entry refer to the obstacles a new firm may face when trying to
enter into an industry or new market.

4. Porter's National Competitive Advantage (Porter’s Diamond Model)

Michael Porter’s Diamond Model (also known as the Theory of National
Competitive Advantage of Industries) is a diamond-shaped framework that focuses on
explaining why certain industries within a particular nation are competitive
internationally, whereas others might not. orter argues that any company’s ability to
compete in the international arena is based mainly on an interrelated set of location
advantages that certain industries in different nations posses, namely: Firm Strategy,
Structure and Rivalry;  Factor Conditions; Demand Conditions; and Related and
Supporting Industries.