Econ 40163 Economic Development

ECON 40163 ECONOMIC DEVELOPMENT
Lesson 1: Introduction to Economic Development
Overview
In this lesson you will learn about the intricacies of economics, its definition and
objectives, the meaning of scarcity, and its connection with economics.
Learning Objectives:
After successful completion of this lesson, you should be able to:

• Define economics and identify its objectives;
• Define resources and enumerate its types;
• Identify scarcity and its connection with economics;
• Understand production possibilities including the assumptions in examining it;
• Recognize the concept and terms under economics and distribution;
• Differentiate economic efficiency and economic equity;
• Identify and understand the different market failures.
Course Materials:
Unit 1: Introduction to Economic Development
• Economics is a social science concerned with the production, distribution, and

consumption of goods and services.
• Resources is the basis for producing the food, shelter, medical care, and luxury
goods. There are three types of resources namely:
a) Natural Resources – raw materials
b) Capital Goods Resources – machineries, equipment, building etc.
c) Human Resources – labor
• Scarcity is when the means to fulfill ends are limited and costly.
The essential problem of economics:
The allocation of limited means to fulfill

unlimited wants and needs.
PRODUCTION POSSIBILITIES PRODUCTION POSSIBILITIES
CURVE
This shows the maximum amounts This shows the alternative

of two different goods that can combination of maximum quantities.
possibly be produced during any
particular time period using society’s Important concepts illustrated by
scarce resources. production possibilities curve:
Assumptions in examining
production possibilities
• There is some limit to what we can

produce.
✓ All available resources are used
Opportunity cost – the best
fully.
alternative that is forgone to
✓ All available resources are used
produce or consume something
efficiently.
else.
✓ The quantity and quality of
available resources are not • Unemployment
changing during our period of • Economies may grow, and the
analysis. variables that we assumed are
✓ Technology is not changing during unchanging certainly do change
our period of analysis. over time.
✓ We can produce only two goods Economic growth – may occur if the
with our available resources and quality or quantity of society’s
resources increases due to different
technology.
factors such as technology
development. It causes an outward
shift of the entire production
possibilities curve.
FUN FACTS ABOUT PRODUCTION POSSIBILITIES CURVE:
• The curve is a constraint because it shows the limit of attainable outputs.

• Points on the curve are attainable if the economy uses all of its resources i.e.
full employment.
• Points inside the curve are attainable but are less than ideal and do not
reflect full employment i.e. under employment.
• Points beyond the curve are unattainable, because there are not enough
resources.
OTHER TERMS AND
COMBINATIONS OF GOODS FOR
PRODUCTION POSSIBILITIES:
➢ Services - type of economic activity that is intangible, is not stored and does not result
in ownership
➢ Staple goods (x-axis) and luxury goods (y-axis)
➢ Agricultural goods and manufactured goods
➢ Consumer goods (goods that are purchased by consumers) and capital goods (goods
that are used to produce other goods)
➢ Military goods and civilian goods
➢ Private goods (goods provided by businesses) and public goods (goods provided by
the government).
References
International Monetary Fund, World Economic
https://www.imf.org/en/Publications/WEO
Lesson 1: Introduction to Economic Development
Overview
In this lesson you will learn about the intricacies of economics, its definition and
objectives, the meaning of scarcity, and its connection with economics.

• Define economics and identify its objectives;
• Define resources and enumerate its types;
• Identify scarcity and its connection with economics;
• Understand production possibilities including the assumptions in examining it;
• Recognize the concept and terms under economics and distribution;
• Differentiate economic efficiency and economic equity;
• Identify and understand the different market failures.
Course Materials:
Unit 2: Economics and Distribution
• Demand is the willingness and ability of consumers to buy products at certain prices
over a certain period.
FACTORS AFFECTING DEMAND

1. the number of consumers
2. the income of consumers
3. expected income changes
4. the prices of related goods
5. people’s taste
• Law of Demand states that there is a relationship between the price of a good and
the amount of it that people are willing and able to buy.
➢ Demand schedule – is a table showing the quantities of a product that would given time purchased
at various prices at a given time and place.
➢ Demand Curve is a graph showing how the demand for a commodity or service varies with
changes in its price; it is downward sloping.
• Supply is the willingness and ability of a producer to make goods and services available
at a variety of costs.
FACTORS AFFECTING SUPPLY
1. technology
2. input costs
3. price expectations
4. time
• Law of Supply – states that there is a relationship between the price of a good and the
amount of it that producers are willing and able to sell.
➢ Supply Schedule is a table showing the quantities of a product that would be sold at various prices
at a given time and place.
➢ Supply Curve a supply curve is a representation of the relationship between the price of a good
or service and the quantity supplied for a given period of time; it is upward slopping.
PUTTING DEMAND AND SUPPLY TOGETHER
❖ Equilibrium is a situation in which economic forces such as supply, and demand are
balanced.
❖ Market equilibrium is a market state where the supply in the market is equal to the
demand in the market.
❖ Equilibrium price is the price of a good or service when the supply of it is equal to the
demand for it in the market. If a market is at equilibrium, the price will not change unless
an external factor changes the supply or demand, which results in a disruption of the
equilibrium.
❖
SHORTAGE SURPLUS
Occurs when market prices are lower Occurs when market prices are above
than E price or when quantity E price and market demand are lower
demanded exceeds the E market. than E market; causes price to fall.
• For an instance, a student bids up • As the price decreases, the
to get the tutor service. As long as quantity demand increases,
shortage exists, and the price rises quantity supplied will decrease and
continuously, shortage will surplus will disappear.
disappear.
When Price Increase: When Price Decrease:
1. Buyers decrease the quantity they 1. Buyers increase the quantity they
demand. demand.
2. Sellers increase the quantity they 2. Sellers decrease the quantity they
offer for sale. offer for sale.
SHIFTS IN DEMAND AND SUPPLY
• The Equilibrium point E will remain the same unless some other factors affecting the
market changes. Because things rarely remain unchanged, it is important to consider what
might happen if the variables affecting the demand for or the supply of were to change.
Increase in Demand
• The old demand curve D becomes irrelevant, and a new equilibrium E1 exist at the
intersection of the new demand curve D1 and old supply S
Increase in Supply
• The new equilibrium E1 is found at the intersection of the original demand curve D and
the new supply S1.
Factors That Cause Real-World Demand Curves to Shift
1. Changes in the number of consumers who wish to purchase the product

2. Changes in the tastes of consumers in the market
3. Changes in the prices of complements or substitutes
4. Changes is consumers' incomes
5. Changes in consumers' expectation about the product's future price or availability
Factors That Cause Real-World Supply Curves to Shift
1. Changes in the number of sellers in the market

2. Changes in the prices of the resources used to produce the product
3. Changes in the technology used to produce the product
4. Changes in the prices of other products that could be produced with the same resources
5. Changes in government taxes or subsidies
6. Changes in sellers' expectation about the product's future price
EFFICIENCY AND EQUITY
• Economic efficiency is when every resource is optimally allocated to serve each

individual or entity in the best way while minimizing waste and inefficiency.
• Economic Equity is when the apportionment of resources or goods among the
people considered fair.
References
International Monetary Fund, World Economic
https://www.imf.org/en/Publications/WEO
Lesson 2: Overview of Development Economic
Overview
This lesson will discuss the history of economic development in different parts of the world.
The distinction of development economic and the measurement of its growth and development.

• Understand the differences between economic growth and development
• Practice the ways of measuring the GDP of between countries
• Appreciate economic development as branch of economic that focus on improving fiscal,
economic, and social condition in developing countries
Course Materials:
Unit 1: History of Development Economic
• Postwar Period is the interval immediately following the end of a war. It can
become an interim period or interbellum, when a war between the same parties
resumes at a later date (such as the period between World War I and World War
II).
• Post-war can have different meanings in different countries and refer to a period
determined by local considerations based on the effect of the war there. In Britain,
it refers to the period from the election of Clement Attlee in 1945 to that of Margaret
Thatcher in 1979, a period of so-called post-war consensus.
• Consensus encouraged nationalization, strong trade unions, heavy regulations,
high taxes, and a generous welfare state.
• Economic miracle is the period of rapid economic growth that exceeds
expectations. It is often applied to the economic growth of Germany and Japan
after World War II. In more recent times, it has been used to describe the rapid
economic expansion of China.
Problems encountered in Economic Miracle
• Widespread poverty
• Economic inequality
• Region's governments, international organizations, and the economic profession
are challenged to resolve these problems.
• East Asia stands out because of its dynamic economic growth and development
during the postwar period.
Countries under East Asia
•Japan (wherein the development process started. (Increased

in trade and investments)
•Asian "Tigers" - newly industrialized economies (South
Korea, Singapore, Taiwan, Hong Kong)
NEWLY INDUSTRIALIZED ECONOMIES
• Term used by political scientists and economists to describe a country whose level
of economic development ranks it somewhere between developing and highly
developed classifications.
• Because of the growth and industrialization experiences of Japan and Asian
"Tigers", the concept or basis of "East Asian development model" was made. This
is an accepted part of economic development literature (studies)
3 Models of NIE
1. Experience of laissez-faire Hong Kong

2. Lesser degree Singapore
3. Interventionist states of Korea, Taiwan, and Japan
References
UN Population Division From 1950 to 2015

https://population.un.org/wpp/
Lesson 2: Overview of Development Economic
Overview
This lesson will discuss the history of economic development in different parts of the world.
The distinction of development economic and the measurement of its growth and development.

• Understand the differences between economic growth and development
• Practice the ways of measuring the GDP of between countries
• Appreciate economic development as branch of economic that focus on improving fiscal,
economic, and social condition in developing countries
Course Materials:
Unit 2: Distinction of Development Economies
• Economic Development concentrates on economies that have low per-capita

incomes.
Tools of Analysis
• Growth theory
• Macroeconomics
• Microeconomics
• Labor
• Industrial organization
• International trade
• Fiscal and monetary policies
• Development Economics is a branch of economics that focuses on improving

fiscal, economic, and social conditions in developing countries.
MEASURING GROWTH AND DEVELOPMENT
• Economic Growth is the increase in goods and services produced by an economy

or nation, considered for a specific period of time. It can be measured as a
percentage increase in a real gross domestic product and Individual Income.
➢ As to Scope - Economic Growth is considered as a single
dimensional in nature as it only focuses on the income of the people
of the country.
➢ As to concept - Narrower concept than economic development
➢ As to term - short term process
➢ As to process tenor - in a certain period
• Economic Development is the process focusing on both qualitative and

quantitative growth of the economy. It measures all the aspects which include
people in the country become wealthier, healthier, better educated, and have
greater access to good quality housing. It can create opportunities in the sectors
of education, healthcare, employment and the conservation of environment.
Economic development can be measured can be measured through improvement
in the life expectancy rate, infant mortality rate, literacy rate, and poverty rates.
➢ As to concept - Economic development is a much broader concept
than economic growth (economic development = economic growth
+ standard of living)
➢ As to term - long term process; economic development can be
measured through improvement in the life expectancy rate, infant
mortality rate, literacy rate, and poverty rates
➢ As to scope - economic development is considered as a
Multidimensional phenomenon because it focuses on the income of
the people and on the improvement of the living standards of the
people of the country.
➢ As to measurement - both Qualitative & Quantitative Terms: HDI
(Human Development Index), gender-related index, Human
poverty index, infant mortality, literacy rate etc.
➢ As Process tenor - continuous process
NEW APPROACHES TO MEASURING ECONOMIC DEVELOPMENT
1. Gross Domestic Product - total market value of all final goods and services
produced by a country in one year.
2. Population Growth - In general, poorer countries have more rapid rates of
population growth.
➢ Rule of 70 - ESTIMATE the number of years it takes for
something to DOUBLE
3. Occupational Structure of the Labor Force

➢ Primary Activities - those that directly remove resources
from the earth. Generally they include agriculture, mining,
fishing, and lumbering. (Green GNP - an economic and
environmental accounting framework which measures the
national wealth by accounting for exhaustion of natural
resources and degradation of environment and investment
in environment support.)
➢ Secondary Activities - involve converting resources into
finished products. These are the manufacturing activities.
➢ Tertiary Activities - comprise the service sector of the
economy. The tertiary activities include retailing,
transportation, education, banking, etc.
4. Urbanization - the percentage of a country's population who live in urban
areas.
5. Consumption per capita - Consumption per person is a good indicator of

development. The richer a country is, the more its citizens consume.
6. Social Conditions
➢ literacy rate
➢ life expectancy
➢
7. Human Development Index – developed by the United Nations Development
Program (UNDP). This was created to emphasize that people and their
capabilities, especially in terms of life expectancy, education, and per capita
income should be the ultimate criteria for assessing the development of a
country, not economic growth alone.
References
UN Population Division From 1950 to 2015

https://population.un.org/wpp/
Lesson 3: Asian Crisis and Recent Developments
Overview
This lesson will discuss, Asian Crisis and Recent Developments especially in Asian
Countries. The cause why it happened and the steps for recoveries and reform. It will also
introduce its present status.
• Understand how economic crisis happened
• Formulate plans for market changes, to achieve the goal of recovery and economics
reform
• Benchmark on reported stronger economies in Asia after financial crisis
Course Materials:
Unit 1: Asian Financial Crisis

• Crisis – a time of intense difficulty, trouble, or danger
• Financial Crisis – situation where financial assets suddenly lose a large part of their
nominal value
• 1997 Asian Financial Crisis - a period of financial crisis that gripped much of East Asia
and Southeast Asia beginning in July 1997 and raised fears of a worldwide economic
meltdown due to financial contagion. ... Indonesia, South Korea, and Thailand were the
countries most affected by the crisis.
Why did it happen?
• Stock market, real estate, and bank credit bubble

• Series of developments in the external sector Spillover or contagion effect
THE BUBBLE ECONOMY
• Export performance is spectacular

• Stock market boomed
• Fixed exchange rate regime
• Inflation began to rise
• Real estate prices rose dramatically
• Wages began to rise
Factors in the financial sector that contributes to the severity of the Asian Crisis:
• Inadequate Fund Management System
• Ineffective Sterilization of Capital Inflows
o Sterilization – monetary action in which central banks seeks to limit the effect of
inflows and outflows of capital on the money supply.
• Restrictions on foreign banks' entry
• Nonperforming Loans
• High costs of Financial Services
• Balance Sheets
EXTERNAL SECTOR DIFFICULTIES

• Rapid Growth in Current – Account Deficits
• Current Account Deficit – measurement of a country’s trade where the value of the goods
and services it imports exceeds the value of the products it exports
• Overvalued Exchange Rates

• The Collapse in Exports
CONTAGION, GLOBALIZATION, AND FINANCIAL INTEGRATION

• Globalization linked the East Asian markets for goods and assets much more closely
to the markets of other countries
• Role of Institutional Investors – control over vast amounts of financial resources
• Contagion Effect – spread of market changes or disturbances from one regional
market to others.
Unit 2: Post-Crisis Experience
4.3.1 The World Economy

• There was a crisis on the world economy in 1997. Countries from the Organization for
Economic Cooperation and Development (OCD), except Japan and Korea, were not much
affected.
• The fall of output growth in 1998 was the result of the slowdown in the growth of U.S
economy.
• In 2001, the U.S Economy suffered a short and shallow recession from which it recovered
only on 2002 which reduced the demand for U.S imports.
o Recession- a period of temporary economic decline during which trade and
industrial activity are reduced, generally identified by a fall in GDP in two
successive quarters.
4.3.2 Economic Growth

• 1998 was a bad year for most countries in the Asian region but there was, however, a
strong recovery on 1999.
• We were greatly affected by the slowing down of U.S growth because we have linkages
with them. Specially Malaysia, Singapore, and Taiwan.
• Between 2002 and 2007, the growth accelerated, led by India and China.
• Domestic demand and foreign trade were both important factors in resumption of growth.
• Exchange Rates- the value of one currency for the purpose of conversion to another
o There was a depreciation in the Exchange Rates with US Dollar during the
economic crisis – about 6 percent for China, 9 for Korea, and 12 for Thailand.
• Equity Prices- The amount of money for which one may buy or sell a share of common
stock.
o Stock prices rebounded and was only recovered during 2002-2007. Stock prices
were mostly not only double, but it increased six-fold, tripled and some even nine-
fold.
• Restructuring- a reorganization of a company with a view to achieving greater efficiency
and profit, or to adapt to a changing market.
o Banks started to become more stringent about lending and took greater care to
evaluate borrowers.
o More transparency and on-going attempts in dealing with corruption.
o More effort to prevent the bubble that caused the past crisis.
4.3.3 Economic Recovery

• Recession may be avoided if borrowers and lenders brought together to reschedule short-
term debts. Because, the cause of crisis is not fall on exports but rather from the
withdrawal of funds by short-term lenders and bankruptcies.
• Recovery came from:
o Revival of domestic demand
o Exports
o Restoration of investor confidence
o Softer budget deficits
o Lower interest rates
• Huge surpluses were a result of the recovery.
4.3.4 Emerging Development Divide in Asia

• There is a development divide in Southeast and East Asia.
• Between 1996 and 2002, there was only 13.3 percent increase in GDP in the Southeast
Asian countries while the East Asia increased by 40.7 percent.
• East Asia grew rapidly because of China, Korea and Taiwan because they have the ability
to attract foreign investors and they continued reconstructing.
• Reforms on Southeast Asia have been less dramatic, particularly in Indonesia and
Philippines.
4.3.5 Social Impact of the Economic Crisis

• Economic Crisis resulted:
o Banks to be reluctant on lending
o Firms to starve for working capital
o Currency Depreciation
o Accelerated Inflation
o Fall of Purchasing Power
o Increase on Public Services prices
o Poverty
o Migration
o Unemployment
o Mental Health Problems
o Higher School Dropouts
o Greater Discrimination for Girls
• Some helped smoothen the consumption and made adjustments to minimize the impact
of economic crisis. (Working for longer hours, delaying purchases of durable goods,
substituting cheaper foods
Unit 3: Lessons and Prospects For The Future
Reform Agenda
1. Debt Restructuring – process allows a private or public company, or a sovereign entity
facing cash flows problem and financial distress to reduce and renegotiate its delinquent
debts to improve or restore liquidity so that it can continue its operations.
2. Private Sector Credit Lines – refers to the financial resources provided to the private
sectors by financial corporations such as through loans, purchases of non- equity
securities, and trade credits and other account receivables that establish a claim for
repayment.
3. Reform Exchange – Rate Regimes – A pure, flexible floating exchange rate allows
continuous adjustment to accommodate changes in relative price movements or
commodity markets.
4. Capital Account Reform – The regulation of short-term capital movements, such as

through the imposition of taxes, can be considered.
5. International Portfolio Controls – grouping of investment assets that focuses on

securities from foreign markets rather than domestic ones.
6. Establish Minimum International Standards of Financial Practice – create a poor

credibility which would also help to prevent national problems from spilling over into
national markets.
7. Information and Transparency – Lack of more general macroeconomic information,

such as that supplied through the IMF’s Special Data Dissemination Standard (SDDS)
system, contributed to the crisis.
8. Global Surveillance – refers to the mass surveillance of entire populations across

international borders.
9. Reform Financial Markets – the details will depend upon the existing system of
regulations in individual countries.
10. Greater Competition – Competitions has to be tempered with strengthened prudential

regulations.
11. Consolidation – close the worst- performing banks for good, and the number of mergers
were also small.
Some Policy Implications
1. They could have cut back on growth.
2. They could also have loosened the attachment of their currency to the U.S. Dollar
3. They could have put a tax on short-term capital inflows.
SUMMARY AND DEVELOPMENT IN THE NEW MILLENNIUM

Hong Kong & China are both suffering from a reduction of export competitiveness because
of exchange rate.
*China remain strong and even stronger
*Hong Kong has suffered from loss.
BUT less progress in Pakistan and Sri Lanka because of Political unrest and Social
tension.
2007 South Asia was growing as fast of East Asia which was 9.6 % vs 8.6% of South Asia.
Countries embraced:
• macroeconomic politics
• promote competition
• invest in its people
• wepcome technology
• ideas embodied new goods and equipment.
IN FACT some of major economies such as Japan, China and Hong Kong had their
downturn because of fall in prices
WHILE developing countries in Asia domestic demand is recovering.
BUT internal demand is the key to a more RAPID GROWTH.
CHINA is playing an important role in this continued search for export market and growing
influence of China in world trade.
There was an epidemic called SARS (Severe Acute Respiratory Syndrome) origin in China that
spread quickly to its neighbor countries (Hong Kong and Taiwan)
GLOBAL RECESSION IN 2008 & 2009 AND DEVELOPMENT IN ASIA

• All countries in region had ample foreign exchange rate
• Although India had a smaller export foreign rate exchange, it also had large fiscal deficit.
• Malaysia on the other hand, was the most exposed to foreign trade.
• Should boost export than high debt and fiscal stimulus that slow the economy.
VOLATILITY IN COMMODITY MARKET, GLOBAL RECESSION IN ASIA AND GROWTH.
• Global Recession deepened during the last quarter of 2008

• The prices was doubled between January 2006 and May 2008
• Price of oil peaked at US$140 a barrel but the fell to US$40
• Volatility caused sharp changes in balance of payment output chart.
References
Asian Crisis and Recent Developments

https://www.investopedia.com/terms/a/asian-financial-crisis.asp
Lesson 4: Agriculture
Overview
This lesson will explain the science of practicing farming. The challenges of agriculture in
the local economy in the Philippines and Asian region.

• Define agriculture in depth
• Give the factors affecting farming that contributes to the economic growth in the
Philippines and in Asia
Course Materials:
Unit 1: Agriculture
It is the science or practice of farming, including cultivation of the soil for the growing of
crops and the rearing of animals to provide food, wool, and other products. The Latin root of
agriculture is agri, or "field," plus cultura, "cultivation."
Agriculture is widely acknowledged as a crucial element in the process of structural
transformation. Agricultural productivity is important not only for a country's balance of trade but
the security and health of its population as well.
Ways of Assessing Agricultural Output
1. Sheer tonnage – transportation cost per tons

2. The monetary volume of the commodities produced – gain or income
Top Producers
➢ United States, China, India, and Russia - cereal and vegetable crops
➢ China - leading worldwide producer of rice, but it's also the leading producer of
wheat and the number two producer of corn, as well as the largest producer of
many vegetables including onions and cabbage
➢ United States - third in wheat and first in corn and soybeans.
Agriculture and Economic Development
Agricultural sector is a rich source of factor inputs to feed the growing industrial and
other modern sectors of the economy.
Factors affecting Farming
➢ Social and economic factors - These are human factors and include labor, capital,
technology, markets and government (political).
➢ Labor
In LEDCs, such as India and Java, farmers use abundant cheap labor instead of
machines. In Japan and the UK, where labor is expensive, they use machines. People working
on farms may be unskilled laborers or skilled and able to use machinery, e.g. tractors,
harvesters and milking machines.
➢ Capital (finance)
Capital, the money the farmer has to invest in the farm, can be used to increase the
amount of inputs into the farm, e.g. machinery, fences, seeds, fertilizer and renewing
buildings.
➢ Technology
Machines and irrigation are two types of technology that can increase yields.
➢ Markets
Farmers grow crops which are in demand and change to meet new demands, e.g.
rubber plantation farmers in Malaysia have switched to oil palm as the demand for rubber has
fallen.Markets vary throughout the year and farmers change their production to suit them.
➢ Government
Governments influence the crops farmers grow through regulations, subsidies and
quotas.Governments offer advice, training and finance to farmers and, in new farming areas,
may build the infrastructure of roads and drainage, e.g. Amazonia.
➢ Environmental factors
These are physical factors and include climate, relief and soil.
➢ Climate
Temperature (minimum 6°C for crops to grow) and rainfall (at least 250mm to 500mm)
influence the types of crops that can be grown, e.g. hot, wet tropical areas favor rice, while
cooler, drier areas favor wheat.The length of the growing season also influences the crops
grown, e.g. wheat needs 90 days. Some rice-growing areas have two or three crops per year.
Economic Growth Development

Lewis-Ranis-Fei (LRF) economic model of structural change
Understanding the pattern of development in many countries, how the industrial process
takes place and how inefficiencies can arise
Two main sectors of an economy
➢ Modern sector – primarily based in cities
➢ Traditional sector – based in countryside
Agricultural Transformation in Asia

At the beginning of the postwar era, economies in Asia were primarily dependent on agriculture.
➢ Between 70 to 80 % of the labor force was employed in the agriculture and more than half
of value-added tax was createrd by the sector.
Agriculture’s share of income to fall can be explained by two additional and powerful effects:
➢ Low-income elasticity of demand for agricultural products or Engel’s Law
➢ Agriculture in international markets begin to decline
➢
PRODUCTIVITY IN AGRICULTURE
➢ Agricultural productivity - measurement of production and inputs required for the
production of that output, it is an input-output ratio.
Unit 2: Agricultural Transformation in Philippines
Philippines - primarily an agricultural country. 4 sub-sectors: farming, fisheries, livestock,

and forestry (the latter 2 sectors are very small), which together employ 39.8 percent of the labor
force and contribute 20 percent of GDP
Philippines exports its agricultural products - in the United States, Japan, Europe, and ASEAN
countries (members of the Association of Southeast Asian Nations).
Major export products - coconut oil and other coconut products, fruits and vegetables, bananas,
and prawns (a type of shrimp)
CONCERNS OF THE AGRICULTURAL SECTOR

Rampant conversion of agricultural land into golf courses, residential subdivisions, and
industrial parks or resorts.
Environmental damage is another major concern. Coral-reef destruction, pollution of
coastal and marine resources, mangrove forest destruction, and siltation (the clogging of bodies
of water with silt deposits) are significant problems.
Agriculture sector has not received adequate resources for the funding of critical programs
or projects, such as the construction of efficient irrigation systems
According to the World Bank, the share of irrigated
Fisheries sector is divided into 3 sub-sectors: commercial, municipal, and aquaculture
(cultivation of the natural produce of bodies of water).
1. Commercial fishing is the activity of catching fish and other seafood for commercial
profit mostly from wild fisheries.
2. Municipal fishing is the activity of catching seafood for the consumption of the municipality
3. Aquaculture also known as aquafarming, is the farming of fish, crustaceans, molluscs, aquatic
plants,algae, and other organisms. Aquaculture involves cultivating freshwater and saltwater
populations under controlled conditions, and can be contrasted with commercial fishing, which is
the harvesting of wild fish.
Agricultural Development in Monsoon Asia

Five types of agricultural development in the monsoon lands
1. Wet Padi Cultivation - There are two main varieties, the wet padi, which is mainly grown
on lowlands in flooded fields or in terraced uplands, and the dry padi grown in regions of
lower rainfall. A minimum of 50 inches of rainfall is required during the growing season.
2. Lowland Cash Crops - The most important crop in this category is cane sugar. As much
as two-thirds of world’s sugar production comes from tropical countries.
3. Sugar is either grown on plantations or on small holdings wherever rainfall and sunshine
are abundant.Manila hemp (abaca) is a product of the Philippines, particularly of
Mindanao. It is used to make high quality rope.
4. Highland Plantation Crops - This is the cultivation of certain tree crops in tropical
plantations.
5. Lumbering - Wherever there are tropical forests which still have not been felled to make
way for the plough, lumbering is undertaken in the more accessible areas. This is
particularly important in continental South-East Asia.
6. Shifting Cultivation - This most primitive form of farming is widely practiced. Instead of
rotating the crops in the same field to preserve fertility, the tribesmen move to a new
clearing when their first field is exhausted. The clearing, or field, in the midst of the jungle
is usually made by fire, which destroys practically everything in its way. After planting, little
attention is paid to the field either in weeding or manuring.
7. Other terms - Ladang in Malaysia, taungya in Burma, tamrai in Thailand, Caingin in the
Philippines, Humah in Java, Chena in Sri Lanka and Milpa in Africa and Central America.
The Efficiency of Traditional Agriculture
➢ had been used in Asia for hundreds to thousands of years. India adopted and
refined their methods of cultivation, crop rotation, water use and the use of farm
animals to take into account differences in soil fertility, variations in weather factors
and availability and quality of traditional seeds.
➢ It is a matter of trial-and-error
➢ Efficient but improvements won’t occur without some changes in technology.
➢ Greater efficiency could be attained of factors were allocated equitably.
➢ Traditional agriculture is reasonably efficient, although some minor improvements
could be made.
Why Do Peasant Farmers Resist Innovation and Modernization?
Agricultural Risk and Return Trade Off Higher production capacities and output levels
= Improved income level and higher standard of living

Innovative approaches to farming and great improvements in technology are the key
elements to these increases in productivity.
There is one major obstacle that constantly faces those who introduce new farming
techniques and modern technology into a traditional agrarian society and that is the apparent
resistance to employ new production methods by most peasant farmers.
Justifiable explanation for this seeming rationality:
1. Subsistence farming is the main economic activity for about 80% of the rural sector in
developing countries.
2. The fact that change may be accompanied by uncertainty. Even if farmers have been assured
of a strong probability of achieving higher yields, they will continue to ask, “what if it fails?”
3. In such circumstances where threat of survival is real, the main objective of the farmer is not to
maximize income, but to maximize his family’s chances of survival.
4. When risk and uncertainty are high, a small farmer may be very reluctant to shift from traditional
technology and crop pattern that has served him well over the years to a one that promises higher
yields but may entail greater risk of crop failure.
5. Inadequate insurance and credit markets which could serve as fall-back institutions or
mechanisms in the event of crop failure.
Unit 3: Microeconomics of Agriculture in Asia
The primary aim is to translate:

Land, labor, fertilizer, pesticides, irrigation,
mechanizationinto higher levels of output.
Factors:
➢ size of the holding
➢ soil fertility
➢ weather conditions
➢ susceptibility to flooding and/or drought
➢ potential for natural disasters
➢ land tenure arrangements
➢ availability for storage and marketing
➢ transfer of technology
What Worked?
1. Green Revolution – the phenomena created by the development of new higher-yielding
varieties of rice at the IRRI. It shows the importance of education in implementing new
technology to understand the proper application of fertilizers, pesticides, and irrigation.
2. Application of fertilizers, pesticides and herbicides - Increased productivity and profitability
is affected by greater quantities of fertilizers.
3. Irrigation and Water Management – Contributed significantly to agricultural development
in Asia by regulating the flow of water. Water pricing is a relative issue.
Macroeconomic Aspects Agricultural Development
The first thing to recognize when considering macroeconomic policies is that, Agriculture in
Asia is primarily intensive rather than extensive. It is important to employ appropriate
labor-intensive technology. As labor moves from rural areas to the cities and incomes grow, the
introduction of more extensive capital-intensive technologies could be introduced.
➢ Labor-intensive Technology
industry or process where a larger portion of total costs incurred in purchase,
maintenance, and depreciation of capital equipment. Ex. Agriculture,
construction, coal mining industries.
➢ Capital-intensive Technology
need a high volume of production and a high margin of profit (as well as low
interest rates) to be able to provide adequate returns on investments. Ex.
Automotive, petroleum and steel industry.
Macroeconomic It is concerned with the operation of the economy as a whole.
Policies In broad terms, the goal of macroeconomic policy is to provide a stable
economic environment that is conducive to fostering strong and
sustainable economic growth.
➢ Fiscal Policy- operates through changes in the level and

composition of government spending, the level and types of
taxes levied and the level and form of government borrowing.
➢ Monetary Policy- decisions are implemented by changing the
cash rate, the rate is determined in the money market by the
forces of supply and demand.
➢ Exchange Rate Policy- concerned with how the value of the
domestic currency, relative to other currencies, is determined.
Modernizing Agriculture And Rural Welfare: Lessons And Policy Issues

Mechanization
to change so that it is done with machines instead of by people or animals.
Mechanized Agriculture
process of using agricultural machinery to mechanize the work of agriculture, greatly
increasing farm worker productivity.
Agricultural Labor
According to the National Commission, they are the one who is basically unskilled and
unorganized and has little for its livelihood, other than personal labor
Two General Types ➢ Owner Operator- mechanization tends to expand the

of Agricultural reach of owner-operator labor, resulting in larger farms;
Labor owner operator both own and operate their businesses
➢ Hired Labor- mechanization that replaces hired labor
focuses on replacing labor in high valued crops such as
fruits and vegetables
Technological Transfer, Growth, and Equity

How has New Technology affected income growth and distribution in Asia?
Modern Technology has certainly increased the average per capita income, it may have
had an adverse impact on income distribution because there are several forces at work.
Technology Transfer
also known as transfer of technology. It is the process of transferring, disseminating,
technology from the places and in groups of its origination to wider distribution among more
people in places. It occurs along various axes among businesses to other businesses.
It often occurs by concerted effort to share skills, knowledge, technologies, methods of
manufacturing, samples of manufacturing, and facilities among government and other institutions
to ensure that scientific and technological developments are accessible to a under range of users
who can develop and exploit the technology
Green Revolution
a large increase in crop production in developing fertilizers, pesticides, and high-yield crop
varieties.
References
Role of Agriculture in the Economic Development of a Country

https://www.economicsdiscussion.net/economic-development/role-of-agriculture-in-the-economic-
development-of-a-country/4652
Lesson 5: Industrialization and Structural Change
Overview
This lesson will introduce you to the movement of Industrialization, its metamorphosis and
sustainability.

• Discuss the good and bad effect of industrialization to labor sector
• Give and explain the program of the government in its action to move from agricultural
sector to industrialization sector
• Explain the importance of sustainability of industrialization sector
Course Materials:
Unit 1: Industry and Industrialization
An industry is the production of goods or related services within an economy. It is the

work and processes involved in collecting raw materials and making them into products in
factories. There are several types of industry: primary, secondary, tertiary, and quaternary
industries.
TYPES OF INDUSTRY
Primary Industries Secondary Industries

In primary industries they extract raw It is sometimes referred to as
materials (which are natural products) manufacturing industry. It involves the
from the land or sea e.g. oil, iron ore, manufacture of raw materials into another
timber, fish. Mining, quarrying, fishing, product by manual labor or machines.
forestry, and farming are all examples of
primary industries.
Tertiary Industries Quaternary Industries
Tertiary industries neither produce a raw It involve the use of high tech industries.
material nor make a product. It is People who work for these companies are
sometimes referred to as service often highly qualified within their field of
industry. work. The most common type of business

in this sector is the research.
WHAT IS INDUSTRIALIZATION?
Industrialization is defined as the large-scale introduction of manufacturing into a society. It shifts
an underdeveloped agricultural economy focused on human labor to an industrial economy based
on machine labor. It is a process whereby individual labor is replaced by mechanized mass
production and specialized laborers, which boosts productivity.
Model of Structural Change: Lewis-Fei-Ranis (LFR) Model

Lewis-Fei-Ranis Model was developed by W. Arthur Lewis, John Fei, and Gustav Ranis. It has
two sectors which can be defined as traditional and modern, agricultural methods in rural
organization with the modern industrial sector in urban areas where workers earn wages and
industrial goods are produced.
SOLUTION:
Transfer the excess labor from the agricultural
sector to the industrial sector
ASSUMPTIONS:
1. Labor surplus in
rural/agricultural
sector LIMITATION:
2. Opportunity cost If the terms of trade move too strongly
in this sector is against the agricultural sector, they will not
zero be able to buy enough equipment to fuel
3. Marginal product technological developments in the sector. By
of the last workers starving agriculture, industrialists will choke
is zero themselves to death in the long run. If the
terms of trade turn against industry, then
industrial investments will not be profitable
and investment will slow.
BACKWARD AND FORWARD LINKAGES

WHAT IS BACKWARD LINKAGES?
Backward linkages refer to inputs to the oil, gas and mining projects from the national economy,
which can include local community-focused procurement, such as security, clothing and food
supplies and high value-added items, such as capital machinery and equipment.
WHAT IS FORWARD LINKAGES?
Forward linkages are created by adding value to the commodities extracted by the industry by
processing and refining in order to locally to produce finished goods instead of exporting them in
their raw state.
STAGES OF INDUSTRIALIZATION
1. Division of Labor
It allows not only for the production of diverse array of product but also fro the development of
specialization. The operational level of this phase remains rather small.
2. Increase in Scale of Production
Specializations during the course of the first stage are gathered into a collective setting: factories.
The presence of factories in industrial process certainly increases the efficiency with which
workers finish their products. In addition, factories allow for much greater productivity. This stage
marks the large scale labor and industrial systems.
3. Introduction of Technology
This further increases productivity and efficiency, and the design of machinery also contributes to
the importance of specialization in industry. The presence of machines also marks the culmination
of large scale industries.
WHAT IS ECONOMIC EFFICIENCY?
Economic efficiency is when every scarce resource in an economy is used and distributed
among producers and consumers in a way that produces the most economic output and benefit
to consumers. It can involve efficient production decisions within firms and industries, efficient
consumption decisions by individual consumers, and efficient distribution of consumer and
producer goods across individual consumers and firms.
STRATEGIES MADE BY FIRM TO BECOME EFFICICIENT:

1. Reducing cost of production
2. Increasing number of production
3. Production in countries with cheap resources
CONTRIBUTIONS OF SMEs IN INDUSTRIALIZATION

1. While large scale industries are expected to increase the inequities of income and
concentration of wealth, SMEs are expected to help widespread equal distribution of
income and wealth.
2. Small sector may provide opportunities to a large number of capable and potential
entrepreneurs who are deprived of appropriate opportunities.
3. As small units can use resources more efficiently to the full capacity without any wastage,
they may have higher allocation efficiency.
WHAT IS FOREIGN TRADE?

Foreign/International Trade is the exchange of goods and services between countries. This type
trade gives rise to a world economy, in which prices, or suppy and demand, affect and are affected
by global events
TOTAL FACTOR PRODUCTIVITY

It is a measure of productivity calculated by dividing economy-wide total production by the
weighted average of inputs i.e. labor and capital. The Harrod-Domar growth model shows the
importance of saving and investment in a developing economy.
Reasons for the rapid growth, according to Krugman-Lau-Young:

1. Rapid population growth
2. High investment
3. Good policies
TFP contribution to overall growth was substantial in:
• Indonesia
• Malaysia
• Thailand
Requirements to sustain rapidly growing industrial sector in a quickly evolving global

environment:
1. Continuous process of learning

2. Innovation
3. Experimentation
4. Continuing structural chang
ELECTRONIC SECTOR
Research and Development was applied in the industry and moved toward indigenous
design in 1990s. This broad industrial category had become the most important export of NIEs
and Southeast Asia at the end of the 1990s.
S-Curve is a display of cumulative costs, labor hours or other quantities plotted against
time.
Unit 2: Different Patterns of Technological Transfer

Singapore and Hongkong
Most of the investment that came into these two countries was via the foreign investment
of transactional enterprise (TNCs). Also offering ownership, low taxes & access to modern
infrastructure and a well-educated workforce.
A transnational corporation (TNC) is any enterprise that undertakes foreign direct

investment, owns or controls income-gathering assets in more than one country, produces goods
or services outside its country of origin, or engages in international production
Korea and Taiwan

They were less open in the manner in which they obtained foreign technology.
4 BASIC FACTORS UNDERPLANNING THE SUCCESS OF NIEs

1. Low rates, low inflation, and high rates of saving
2. Open and outward-looking export-led strategies
3. Appropriate human resource development strategy
4. Government intervention was undertaken whenever it was needed
COUNTRY EXPERIENCES
TNCs were initially attracted by:
1. Low labor costs

2. Political stability
3. Good infrastructure
4. Attractive environment
The Economic Development Board (EDB) supported technical training, including
engineering and technical schools to ensure the growth of the industrial sector.The National
University of Singapore and Nanyang Technological University were able to supply a very large
number of engineers and other technical graduates and craftsmen.Singapore was the world’s
largest producer of disk drives in 1991 and extended into the 1990s. Moreover, it has
undertaken various measures to move up the technology value chain. They include the shift of
the manufacturing focus from low-end electronic components towards high-end electronic
components. International Corporation is an organization that has business operations in
several markets across.
References
Industrialization and Structural Change in Developing Countries

https://onlinelibrary.wiley.com/doi/abs/10.1002/jid.3380020302
Lesson 6: International Trade and Investment
Overview
This lesson will discuss the theory of International Trade and Investment, experiences in
Asia and the experience in intra-industry and intra-regional trade, the issue and the balance of
payments.
• know what is trade in terms of bartering
• identify the theories of international trade
• trade experience in East Asia
• issues or considerations in trade
• institutional frameworks that facilitates trade
• the Asian experience in intra-industry and intraregional trade
Course Materials
WHAT IS BARTERING?
Bartering is a system in which goods or services are exchanged for other goods or services instead
of for money; goods or services that are exchanged for other goods or services.
1
Subject: HRMA 40013 – Logistic Management
Prepared By: Magdalena D. Garcia, Ph.D.
THEORIES OF INTERNATIONAL TRADE
GAINS FROM TRADE RICARDIAN THEORY OF TRADE
Autarkic Economy – Such an economy can Ricardian Theory – difference in

consume only as much as it can produce. technology determine comparative
advantage
2 Main Avenues RICARDIAN MODEL
• CONSUMPTION GAINS – with gains from trade
trade, it's possible to reach higher ↓ ↓
indifference curves through gains exchange specialization
realized by consumers.
Main Finding-countries will benefit
• PRODUCTION GAINS – trade from in proportion to the degree to
enables the production and which their labor productivity is different.
reallocation of gains by allowing Trade will be beneficial if there are
countries to specialize in the favorable terms of trade to the home
production of commodities at a country.
relatively lower cost either because MAJOR POINT – trade patterns can be
of absolute advantage or explained by technological differences
comparative advantage. between countries. Trade is a positive-sum
game and therefore there are no losers
across or within the country
HECKSCHER-OHLIN THEOREM
Heckscher-Ohlin (H – O) Theorem – countries will specialize and trade in goods

which are relatively abundant .As the result, expected that poorer countries will
export labor-intensive products while the rich countries will export capital- or skill-
intensive products.
According to Heckscher-Ohlin theorem:
• Trade should be greater between countries that have the greatest differences in
economic structures.
• Factor prices will tend to level out as trade continues. This is called the factor
price equalization theorem.
2
OTHER THEOREMS IMPERFECT COMPETITION
Rybsczynski Theorem – if capital-labor Models of trade with imperfect competition

ratios differ between industries then, at –greater trade between countries with similar
constant commodity prices, an increase in factor endowments arises because of product
the supply of one factor alone will cause the differentiation and differences in consumer
expansion of the good I intensively using pReferencess. However, because of the
that factor and a decline in the supply of the existence of monopolies and the introduction
other good. of scale economies, the gains and direction of
trade are complex and difficult to analyze.
Stolper-Samuelson Theorem – an
increase in the price of any good raises the Intra-industry Trade – the more alike
nominal, relative, and real return to the countries are in terms of relative factor
factor in the production of that good and endowments, the larger the share of intra-
lowers the nominal, relative, and real return industry trade to total trade.
to the other factor.
RICARDIAN MODEL AND HOS MODEL LINKAGES
1. Economic efficiency 2.Factor endowments 3. Direction of international trade
TRADE EXPERIENCE OF EAST ASIA
PATTERN OF GROWTH IN ACTUAL EVOLUTION OF TRADE

INTERNATIONAL TRADE:
SOME FACTS
• The major part of trade takes place
• Conversely, trade between rich countries that have similar
in manufactured factor endowments and relative prices
goods has risen
dramatically – • The factor price equalization theorem does
Engle Curve not seem to hold. It does not seem to apply
Effects in developed countries’ labor markets, as
regional wage differentials have been
• Income elasticity of sustained over time.
demand for primary
products are has been
low and falling over time
IMPORT-SUBSTITUTION TRADE
• Terms of trade for
REGIMES
primary products
have deteriorated o country tries to stimulate the
quite dramatically production of a different array of
domestic goods by levying taxes,
• Natural consequence licensing, putting quotas on or
of economic banning imports.
development and o critically important during the early
growth -developing stages of development and
countries in general industrialization.
have reduced primary
exports and built up
manufactured exports 3
• Share
Prepared By: Magdalena of exports
D. Garcia, Ph.D.in
GDP – continued
Export promotion in Asia and in the newly industrialized
OUTWARD- economies (NIEs) of Latin America started with labour-intensive
ORIENTED products that had strong backward linkages, and then moved
TRADE into more skill and capital-intensive industries. These were product
categories where the income elasticity of demand in the
industrial countries had been high since 1980.
“FLYING GEESE” DEVELOPMENT PARADIGM By Kaname Akamatsu (1961)
• describes the industrialization process of trading nations

• developed to explain the characteristics of shifts in comparative advantage of
Japanese industries when Japan was still a developing country, it takes the
perspective of the less developed countries.
• it describes how a new product is introduced to the less developed
countries via imports and how less developed countries acquire the
necessary production technique to become exporters.
• Small foreign direct investment

STAGE interest.
1 Stage 3
• Growth of domestic demand
slows and imports diminish in
STAGE STAGE absolute terms.
5 LIFE CYCLE 2
• Production remains high as
OF A
exports begin.
TYPICAL
• FDI increases.
INDUSTRY
• Developed country loses
comparative advantage in this
particular product.
STAGE STAGE
Stage 4
4 3
• On maturity, production slows
down.
Stage 1 • Exports growth slows or even
• Product is introduced via imports from an declines.
industrialized country. • FDI declines.
• Consumers are responsive and raise Stage 5
demand, which induces domestic • Government reduces
production. protection.
Stage 2 • Declining industry must relocate in
• Import-substitution policies are order to survive
4
ISSUES/CONSIDERATIONS IN TRADE
• Australia and the United States- free trade of goods and services
• European Union- virtually free trade among the member countries of the Union
ACTUAL EVOL
UTION OF TRADE
I MPORT-SUBSTITUTION TRADE
5
education and timing have gaps to reach in how to adopt
EMPLOYMENT, differences in technology in some part of Asia
MIGRATION, • East Asia are already highly educated labour force that leads
to small amount of foreign investments
AND SKILLS
• Southeast Asia relied on primary export since they are less well-
ISSUES
trained labour force even they start to become industrialize
INSTITUTIONAL FRAMEWORKS THAT FACILITATES TRADE
CURRENCY EXCHANGE OTHER FACTORS

RATE
The rapid build-up of foreign inflows had
Currency Exchange Rate – by far implications for a number of stabilization issues.
the most important factor in deciding The most critical is the current-account deficit.
trade policy.
a) The Current Account Deficit-measurement
How to measure? of a country’s trade where the value of the
goods and services it imports exceeds the
There are many ways to measure
value of products it exports.
this. One way is to base on the
b) Absorptive Capacity- organization’s ability
market. If the market for foreign
exchange is free it will determine the to identify, assimilate, transform, and use
equilibrium rate. external knowledge, research and practice.
c) Price Stability and Competitiveness-general
CAPITAL MOVEMENTS level of prices in the economy
Funds could move freely
into the developing countries in
forms of loans.
THE ASIAN EXPERIENCE IN INTRA-INDUSTRY AND INTRAREGIONAL TRADE
As the level of development increases, the thrust of trade is toward exporting more
manufactured goods.
INTRAREGIONAL TRADE
As the level of development increases, the thrust of trade is toward exporting more
manufactured goods.
RAPID ECONOMIC GROWTH ANDOGRAPHICAL PROXIM
The shorter the distance, the more trade will take place.
SHIFTS IN THE DIRECTION OF TRADE
Direction of Trade – a study of the countries to whom the exports are made and from whom the
imports are made in other words, it tells about the commodities of imports and commodities of
exports of a country .Interregional trade is East Asia has expanded at a more rapid pace than
trade of the world
6
FOUR REASONS WHY HAS THE SHARE OF INTRA-ASIAN TRADE IN TOTAL
ASIAN TRADE INCREASED SO MUCH OVER TIME
1. The growth in income and the geographic proximity within the region have simulated
trade.
2. There has been rapid growth in different kinds of regional cooperation arrangements
that have facilitated trade.
3. Other factors, such as fluctuating exchange rates, technological development in
telecommunications, and lower transportation cost have helped to stimulate trade
within the region.
4. As incomes have grown and developing they are beginning to trade more in the
industrial products where there is a higher degree of product differentiation.
SHIFTS IN COMMODITY RESPONDING TO CHINA

COMPOSITION OF TRADE
The rapid rise of China both in terms of income
There has been a shift and international trade has dramatically changed the
in the commodity composition of landscape of Asia. China is now fifth – largest economy
international trade where in the world and the third – largest in trade behind the
exports have United States and Germany. Now China competes with
moved from light manufacturing. other Asian Countries in several dimensions.
ECONOMIC GROWTH,
EXPORTS,AND 8 REGIONAL AND SUB REGIONAL
PRODUCT VARIATION COOPERATION
Intense Formal and informal mechanisms for improving

competition for export relations between neighbouring countries within Asia can
markets within Asia has have simulating impact on the growth and trade within the
resulted to specialization in region.
high-
technology exports, which Regional Cooperation – refers to the political and
has generally raised the institutional mechanisms that countries in a general
level of comparative geographical region devise to find and strengthen common
advantage interests as well as promoting their national interests,
and economic efficiency. through mutual cooperation and dialogue.
Sub regional Cooperation – helps accelerate the process

of regional integration.
40
References
International Trade and Investment

https://www.investopedia.com/insights/what-is-international-trade/
41
54
Lesson 7: Savings and The Financial System
Overview
This lesson will discuss and appreciate the saving behavior of individulas, its effect in the
macroeconomics economy and its global impact in banking and credit market.
At the end of the chapter, the student should have been able to:
1. Know the importance of saving behavior.
2. Explore the implications for macroeconomic policy.
3. Summarize the impact of different variables on saving behavior.
4. Identify the different saving models.
5. Learn the banking and credit markets in developing countries.
Course Materials:
WHAT IS KEYNESIAN AND INCOME CONSTRAINED MODELS?
This model was overtaken by more plausible theories in the 1960s and
1970s that allow for consumption and income smoothing – that is, borrowing
to smooth consumption so that it does not depend completely on the current
level of income.
DEATON AND HALL There are possible reasons for this:
Hall argues that 1. Income smoothing is not possible because

expected future income of borrowing constraints and imperfect
is subject to random capital markets.
changes. Alternatively, 2. Income smoothing is not applicable since
income smoothing does many generations live together, weakening
not occur or is weak and the need for individuals to save.
this vitiates the life cycle 3. Future incomes are uncertain so it is
model. difficult to plan over a lifetime.
1
DETERMINANTS OF SAVINGS
Degree of Financial Liberalization and Stability

A general rule of thumb regarding saving would be that
financial stability and liberalization are positively related to the rate
of private saving, other things being equal.
DETERMINANTS OF SAVING IN DEVELOPING

COUNTRIES AND IN ASIA
Developing countries,
such as those in South Asia and
Latin America, generally saved
up to approximately 20-25
percent of GDP between the
1960s and 2000s.
East Asia had a saving
rate of about 47 percent of GDP
in 2006.
Savings rates in South
Asia has been rapidly increasing
since 2001 and is currently at 35
percent of GDP.
The Masson et a. (1995) study

reports a number of regressions.
The results show that the rate of
growth of GDP, the terms of trade, per- For Asia, there is
capita income, total wealth, the evidence imbedded in the study
dependency ratio, and the current- by Masson et al. for high- and
account surplus/GDP are all significant medium-income developing
explanatory variables for a large sample countries that suggests that the
of developing countries over a long variables explaining saving in
period of time. these countries are similar to
those that explain saving
behavior in all developing
countries.
2
3
THE FINANCIAL CRISIS OF 1997
Informal Finance
A Rationale for Informal Finance
In many developing
and a Simple Taxonomy of
countries, there are significant
sectors of the population that are Informal Financial Institutions
unable to obtain credit from Thomas (1993) six reasons:
institutions in the formal sector,
such as banks and credit unions. 1. Access to banking facilities is
limited for the squatters, slum
Credit Guarantee Scheme residents, and in some areas of
the rural economy.
primary method for
2. Banks led primarily for investment
addressing the lack of collateral
and not for consumption.
by the banking system.
3. Transactions and appraisal costs
Schemes in which the are high as a proportion of the
risks are shared by the potential loan or other transaction,
government and the banks have and this discourages lending.
also not been successful. 4. The banks lack information about
the credit worthiness of potential
borrowers.
5. These borrowers do not have
sufficient capital to submit a credit
report.
6. Banks believe that the borrowers
are too poor to repay at a
Group Finance commercial rate of interest.
o There are number of ways in

which individuals can form
groups to mobilize resources
to lend outside the formal
banking system.
Rotating Saving and Credit Associations (Roscas)

▪ Have a long history in many parts of the world and are found
in many countries.
▪ Members agree to contribute a specified amount each to a
general pot, or kitty, at specified intervals for a certain period
of time.
4
Money Lenders, Landlords, and Pawnshops
o All three of these forms of informal finance relate one lender to many borrowers.
o By tying the credit to the farmer, landlord reduces transaction costs while money lenders
depend on their local knowledge of the borrower and also the threat of "physical enforcement"
to keep down the rate of default.
o Pawnshops depend on reselling an item that is pawned.
Non-Governmental Organizations (NGOs)

▪ Can operate outside the formal banking system or become a member of the
formal banking community at a later date.
Examples of NGOs in the Asian region

1. Grameen Bank in Bangladesh
▪ most successful NGO
▪ owned primarily by its depositors, who are also its primary borrowers.
▪ able to assess credit worthiness efficiently without any need for collateral.
2. Bank Gadang Bali in Indonesia
▪ founded by a local shoemaker and his wife
▪ started as a small money-lending business which led to other successful microcredit
schemes in Bali.
▪ has blossomed into a local bank with many branches in Bali.
Informal Finance and Monetary Policy

The main effect of monetary policy on informal finance is through the inflation
tax that results from increasing prices.
Global Financial Crisis of 2008/2009 and its Impact on Asian Financial

Market
o has created additional financial stress on Asian financial systems.
o Stock markets have weakened considerably as th-e industrial sectors have
suffered from lower levels of production and manufactured exports.
5
References
Savings and The Financial System
https://www.investopedia.com/terms/f/financial-system.asp
6
Lesson 8: POVERTY AND INCOME DISTRIBUTION
Overview
This lesson will introduce you to poverty situation in the Philippines and the income
inequality in Asia, how alleviation was conducted and eliminate its vicious cycle.

1. Learn the different measurements of poverty and economic inequality
2. Define income inequality in the world and Asia
3. Determine what are reasons why people are poor, Markets that are affected
by poverty, Aspects of Rural and Urban poverty, and Aspects of Labor
Absorption and Unemployment
4. Assess the state or level of poverty in a country and to formulate policies to
alleviate the plight of the poor
5. Compare income distributions within countries in the world
Course Materials:
The Vicious Circle of Poverty and Inequality
• The alleviation of poverty and minimization of economic inequality is at the core

of all development policies.
• Those who are born to poor households will have lesser opportunities than those
in richer one.
• When the poor households are old enough, they begin to have children and the
cycle of poverty is repeated.
• Unless this cycle is broken, the result is perpetuation of poverty to succesive
generations.
Is Climate a Factor?
What is climate theory of development?
Climate Theory of Development tells that a temperate climate provides a more

conducive environment for economic growth.
• Most of successful and modern industrial economies are in temperate zone or

colder places.
• Most of developing economies are in tropical or subtropical climatic zones.
• Extreme heat and humidity - affect conditions of production.
Gallup, Sachs, and Mellinger – provides fresh evidence for Climate Theory of Development.
• The countries in the geographical are nearly poor
Through the latest data on GDP per Capita
• Most high-income countries are in the mid and higher latitudes.
*Climate and Geography constitutes to economic development.
Measuring Poverty and Inequality
WHAT IS POVERTY?
Poverty is the inability to access for a minimal or acceptable standard of living. It is

the identifying the poor based mainly on a universally accepted benchmark of physiological,
economic and social requirements for survival.
WHAT IS ECONOMIC INEQUALITY?
Economic Inequality is the uneven distribution of income or expenditure across

population groups.
WHAT IS INCOME GAPS?
Income gaps is the inevitable consequences of growth and development. It can be

avoided or minimized through government intervention.
WHAT IS ABSOLUTE POVERTY?
Absolute Poverty is the standard approach in development economicswhich works

well to operationalize the concept of poverty.
Poverty can be measured through: Issues on Poverty Measurement
1. Poverty line – chosen level of 1. There’s still remains a wide

income or consumption below degree of variation in what
which one is considered poor. individual’s find acceptable and
2. Based on purchasing power minimal
3. Using estimates of expenditures 2. Whether we measure poverty
on a household or the individual
level
3. Differences in the needs of
individual household members
1. Headcount Ratio (HCR) – proportion of poor people in the population.
𝑞
𝐻𝐶𝑅 =
𝑛
• Depth or severity of poverty is not reflected at all in HCR.
2. Poverty Gap Ratio – total income transfer necessary to eliminate poverty gross
income. It considers depth of poverty.
∑𝑦1<𝑝(𝑝 − 𝑦)
𝑃𝐺𝑅 =
𝑛𝑚
3. Income-gap Ratio – tells us the total income needed to remove poverty relative to
the total income of all poor if they are all raised to the point where they escape
poverty.
∑𝑦1<𝑝 (𝑝−𝑦)
𝐼𝐺𝑅 =
𝑝∙𝑞
p = poverty line m = mean income

q = no. of individuals below p nm = measure of total income of the
economy
n = total no. of individuals or
households in the population 𝑝 ∙ 𝑞 = total income of the poor if they
were all to have incomes at the
y = poor person’s income
poverty line
BASIC PROPERTIES OF INEQUALITY MEASURES

1. Mean or Scale Independence – when all income levels are increased (or decreased) by
the same proportion, the inequality measure remains unchanged.
2. Population-size Independence – an equal increase or decrease in population across all
income levels does not result in a change in the inequality measure.
3. Pigou-Dalton transfer sensitivity – an income transfer from a wealthier person to a poorer
person that does not make the latter welathier than the former brings about decrease in
the inequality measure.
INEQUALITY MEASUREMENTS
1. Range – difference between the highest and lowest income.
𝑅 = 𝑥𝑚𝑎𝑥 − 𝑥𝑚𝑖𝑛
2. Mean Absolute Deviation – takes advantage of the information on each income in the
entire distribution of incomes.
𝑛
1
𝑀= ∑|𝑥1 − 𝜇|
𝜇𝑛
𝑖=1
3. Coefficient of Variation – avoids particular weakness of insensitivity to transfers by
attaching greater weight to incomes which are futher from the mean.
𝑉𝑎𝑟(𝑥) 1 𝑛
𝐶𝑉 = √ 𝑤ℎ𝑒𝑟𝑒 𝑉𝑎𝑟(𝑥) = ∑ (𝑥 )2
𝜇2 𝑛 𝑖=1 1−𝜇
4. Kuznets Income ratio – considers the income shares of different income groups in the
population.
5. Gini coefficient – which effectively sums up all possibl pairs of incomes in the distribution.
𝑛−1 𝑛−1
𝐺 = ∑ 𝑛𝑡+1 𝜋𝑡 − ∑ 𝑛𝑡 𝜋𝑡+1
𝑡=1 𝑡=1
• Lorenz Curve – graphical representation of the relationship between the cumulative
shares of income and the cumulative shares of the population.
𝑥1 = income of any individual ∑𝑛𝑡=1 𝑥1 = sum of all incomes in the

population
𝑛 = no. of individuals
𝑛𝑡 = cumulative share of income
𝜋𝑡 = cumulative share of population
Poverty and Inequality in the World

Today, highly biased regimes of international trade, finance and taxation mean that at least ten
times as much finance flows from developing countries to the rich world than is provided by donor
governments as overseas aid.
As a result of these unjust arrangements of the global economy, the wealthiest 20 percent
of the world’s population enjoy nearly 83 percent of total global income, whereas the poorest 20
percent receive a mere 1 percent. In recent years, this concentration of wealth has become
increasingly extreme, with one percent of the richest people in the world owning $110 trillion - 65
times the total wealth of the bottom half of the world’s population
Poverty and Inequality in the Asia
Despite the region’s dramatic growth, income inequality across much of Asia is rising, and
poverty remains a stubborn issue to overcome. Some 700 million people across the region live
on less than $1 a day. In response, governments are taking on urgent policy reforms needed to
create jobs and foster inclusive growth, protect natural resources, and provide greater access to
education and public services
In contrast, a wealth gap, driven largely by wage disparity and differing levels of access to
education, has opened up. “Highly skilled workers with more education see their incomes rise,
while low-skilled workers see their wages reduced,” noted a recent report by the Asian
Development Bank. “This gap accounts for 25-35% of income inequality in Asia.”
Income Inequality Comparison
Gini index measures the extent to which the distribution of income (or, in some cases,
consumption expenditure) among individuals or households within an economy deviates from a
perfectly equal distribution.
POVERTY AFFECTS ALL MARKETS

1. Credit Markets- The poor cannot borrow from formal credit markets because of the lack
of collateral. Therefore, in case of an emergency or to smooth incomes, they have to go
to informal markets which charge higher rate of interest.
2. Good Markets- Since the poor have very low incomes and cannot afford the cost of
storage, they cannot buy in bulk. Thus, the cost of goods per unit is higher than when
purchased in bulk and stored.
3. Labor Markets- In urban areas, the poor tend to find themselves living in poor
communities called ghettos, in the fringe of cities. Employment opportunities in ghettos
are limited and it is necessary for them to find employment far from their place of
residence. Therefore, transportation expenses as a proportion of income incurred by the
poor may be much higher than for other income groups.
ASPECTS OF LABOR ABSORPTION AND UNEMPLOYMENT

Poverty and unemployment are closely related economic phenomena. There is usually a high
unemployment rate in areas where there is widespread poverty. This is because for most
households, labor is normally the only productive asset that people can depend on for their daily
existence, particularly in developing countries. If there are not enough opportunities to work, it
usually results in the impoverishment of the household and all it’s members.
Labor market dualism is prevalent in poor countries. Industrialization cannot be relied on to
solve the unemployment problem in many developing countries. Industrial growth cannot supply
enough jobs to absorb the underemployed and unemployed. The elimination of factor price
distortions can help to improve labor absorption, but this is limited by the small size of the formal
sector in some countries.
Policy: What Can Be Done?
Rapid economic growth, more than any factor, reduces poverty even if income distribution
worsens. Unless there is rapid growth, strategies that stress social spending on the poor may
work for a time but will eventually collapse under the burden of high spending.
- In the mid-1980s, the Sri Lankan government embarked on an ambitious social assistance
program which was helpful in alleviating the plight of many poor people in the economy. However,
it did not coincide with a significant growth of the economy.
46
SOME GENERAL POLICY PRESCRIPTIONS
Many policy options have been suggested for poverty reduction. Some of those policies have
been successfully implemented in a number of countries but that does not guarantee that a
particular measure will work in all countries.
FACTORS:
a. These measures are difficult to implement.
b. There are some pervasive discrimination against the poor throughout the entire economic
system.
Some measures that has been effective include:

1. Removal of distortions that stimulate capital-intensive production technologies.
2. Redistribution of assets in the form of lend and physical capital.
3. Development of a human capital base for those who are poor.
4.
5. Implementation of a progressive tax system and imposition of high taxes on transfers of
wealth within a family.
6. A program to increase subsidies and direct transfers to the poor.
SOME POLICIES FOR ADDRESSING RURAL POVERTY

1. Uplift the Status of Women
2. - There is a need to provide more land, or some land, to landless women and also some
employment during the slack season.
3. - For families with some land, improving agricultural efficiency can increase household
incomes.
4. - Greater emphasis on truck gardening and improvement on animal husbandry would help.
SOME POLICIES FOR ADDRESSING URBAN POVERTY

1. Accelerate Economic Growth
2. - Local business and domestic production need to be encouraged and promoted.
3. - The increased production activities will generate more employment and be much more
effective in raising
4. Provision of Social Services
5. - Education and health plays an important role in reducing urban poverty.
6. Dealing with Squatters
7. - Building heavily-subsidized housing for the poor.
8. - Finance for house construction could also be provided but so far, there has been little
success, mainly because the poor are so poor that they cannot afford to pay any rental or
mortgage.
9. Land Us.
47
Lesson 9: Human Resource Development: A form in Education and Health
Overview
This lesson will discuss Human Resource Development in line with education and the
impact it will bring to the communities for transformation.
• Explain Human Resource Development

• Give the impacts of HDR to communities
• Appreciate the importance of HDR in an individual transformation
Course Materials:
What Is Human Resources Development?
In this sense, human resources development is about identifying, nurturing, managing, and using
the abilities demonstrated by employees in order to help the company to attain its objectives. The
human resources development management office in a company is in charge of this function and
is there to create the right climate in the organization that the employees need to help them
develop so that they can help the company to develop.
In the modern world, the human resource function of the organization, an entire industry, and the
global workplace, in general, goes well beyond what happens in the office. While the human
resources department will do its fair share of training employees, coming up with career
development programs for them, planning for their success, and so on, there needs to be some
kind of support in the education system to prepare candidates for the process altogether.
Human Resource Development on Education
Obstacles Facing Potential Employees

There are two kinds of hurdles facing potential employees in the job market today. Either they do
not have enough exposure to technology or they have too much exposure to technology. In the
event that they do not have enough exposure to technology, they need computer education so
that they are more comfortable with the kinds of technology that will be used in the modern
workplace.
48
Human Resource Management in Schools
One of the greatest outcomes to come out of the economic recession of the years leading up to
2010 is the introduction of courses related to work readiness and human resource management
in schools, both high schools, and colleges, across the country. Millennials and subsequent
generations have grown up with
social media and text messaging an so they tend to lack the necessary interpersonal skills they
need in order to excel at interviews and when networking in social settings. Most HR departments
today require candidates to complete their applications online and so the new basics of education
are all about familiarizing students with computers and computer parts. Even government
agencies have joined in by creating educational programs that make candidates ready for work.
The Impact of Human Resources Development
• Readiness for the Workplace

• Training for Soft Skills
• Communication
Readiness for the workplace

Workplace
The students have to be ready to comply with a range of rules and policies set both within
the companies where they will be working and by regulatory agencies.
Training for Soft Skills
Soft skills are important in the workplace since they help you to effectively work with others
and achieve a common goal.
Communication
Being skilled in many different methods of communication gives one candidate an

advantage over another in the end.
49
Making Communities Work Ready
Local governments, as well as state governments, are using education as a tool to give
them a competitive edge. The state of Georgia, for example, has the Ready to Work program,
which it has used to assess the workforce in the state
as well as train it in order to provide a pool of skilled labor that encourages organizations and
businesses to move to the state for its talent
The Human Resources for Health (HRH) Action Framework
The Human Resources for Health (HRH) Action Framework is designed to assist countries in
developing and implementing strategies to achieve an effective and sustainable health workforce.
The HRH Action Framework contains six action fields (policy, finance, education, partnership,
leadership, and HR management systems) and four phases of the action cycle (situational
analysis, planning, implementation, and monitoring and evaluation).
POLICY FINANCE
Legislation, regulation, and Obtaining, allocating, and distributing

guidelines for conditions of adequate funding for human resources
employment, work standards, and
development of the health
workforce.
Areas of intervention Areas of intervention
1 Professional standards, licensing, and 1 Salaries and allowances
accreditation 2 Budget for HRH
2 Authorized scopes of practice for health cadres 3 National health accounts with HRH
3 Political, social, and financial decisions and 4 Mobilizing financial resources (e.g.,
choices that impact HRH government, Global Fund, PEPFAR,
4 Employment law and rules for civil service and other donors)
other employers
50
EDUCATION PARTNERSHIPS
Development and maintenance of a Formal and informal linkages aligning

skilled workforce key stakeholders (e.g., service
providers, priority disease control
Areas of intervention programmes, consumer/patient
organizations) to maximize use of
• Development and human resources for health
standardization of training
material
• Pre-service education tied to
health needs
• In-service training including
continuing education
• Capacity of training institutions Areas of intervention
• Training of community health
workers and non-formal care • Agreements in place between MOH
and other health providers to
providers
supplement the delivery of health
services
• Mechanisms in place to mobilize
HUMAN RESOURCE community support for health
MANAGEMENT SYSTEM services
• Mechanisms in place for
coordination of donors and other
Integrated use of data, policy, and practice to stakeholders
plan for necessary staff, recruit, hire, deploy, • Leadership
• Capacity to provide direction, align
develop, and support health workers
people, mobilize resources, and
reach goals
Areas of intervention • Areas of intervention
• Identification, selection, and support
• Personnel systems: workforce of HRH champions and advocates
planning (including staffing norms), • Leadership development for HRH
recruitment, hiring, and deployment
• Work environment and conditions: managers at all levels
employee relations, workplace safety, • Capacity for multi-sector and
job satisfaction, and career sector-wide collaboration
development • Modernizing and strengthening
• HR information system integration of professional associations
data sources to ensure timely
availability of accurate data required
for planning, training, appraising, and
supporting the workforce
• Performance management:
performance appraisal, supervision,
and productivity
51
References
Poverty and Income Distribution

https://www.wiley.com/en-us/Poverty+and+Income+Distribution%2C+2nd+Edition-p-
9780470620458
Human Resource Development: A Form In Education And Health
https://sourcey.com/articles/how-education-helps-in-human-development
52
Lesson 9: Human Resource Development: A form in Education and Health
Overview
This lesson will discuss Human Resource Development in line with education and
the impact it will bring to the communities for transformation.
• Explain Human Resource Development

• Give the impacts of HDR to communities
• Appreciate the importance of HDR in an individual transformation
Course Materials:
What Is Human Resources Development?
In this sense, human resources development is about identifying, nurturing, managing,

and using the abilities demonstrated by employees in order to help the company to attain
its objectives. The human resources development management office in a company is in
charge of this function and is there to create the right climate in the organization that the
employees need to help them develop so that they can help the company to develop.
In the modern world, the human resource function of the organization, an entire industry,
and the global workplace, in general, goes well beyond what happens in the office. While
the human resources department will do its fair share of training employees, coming up
with career development programs for them, planning for their success, and so on, there
needs to be some kind of support in the education system to prepare candidates for the
process altogether.
Obstacles Facing Potential Employees

There are two kinds of hurdles facing potential employees in the job market today. Either
they do not have enough exposure to technology or they have too much exposure to
technology. In the event that they do not have enough exposure to technology, they need
54
computer education so that they are more comfortable with the kinds of technology that
will be used in the modern workplace.
Human Resource Management in Schools

One of the greatest outcomes to come out of the economic recession of the years leading
up to 2010 is the introduction of courses related to work readiness and human resource
management in schools, both high schools, and colleges, across the country. Millennials
and subsequent generations have grown up with
social media and text messaging an so they tend to lack the necessary interpersonal skills
they need in order to excel at interviews and when networking in social settings. Most HR
departments today require candidates to complete their applications online and so the
new basics of education are all about familiarizing students with computers and computer
parts. Even government agencies have joined in by creating educational programs that
make candidates ready for work.
The Impact of Human Resources Development
• Readiness for the Workplace

• Training for Soft Skills
• Communication
Readiness for the workplace

Workplace
The students have to be ready to comply with a range of rules and policies set both within
the companies where they will be working and by regulatory agencies.
Training for Soft Skills
Soft skills are important in the workplace since they help you to effectively work with others
and achieve a common goal.
Communication
Being skilled in many different methods of communication gives one candidate an

advantage over another in the end.
55
Making Communities Work Ready
Local governments, as well as state governments, are using education as a tool to

give them a competitive edge. The state of Georgia, for example, has the Ready to Work
program, which it has used to assess the workforce in the state
as well as train it in order to provide a pool of skilled labor that encourages organizations
and businesses to move to the state for its talent
The Human Resources for Health (HRH) Action Framework
The Human Resources for Health (HRH) Action Framework is designed to assist countries
in developing and implementing strategies to achieve an effective and sustainable health
workforce.
The HRH Action Framework contains six action fields (policy, finance, education,
partnership, leadership, and HR management systems) and four phases of the action
cycle (situational analysis, planning, implementation, and monitoring and evaluation).
POLICY FINANCE
Legislation, regulation, and Obtaining, allocating, and distributing

guidelines for conditions of adequate funding for human resources
employment, work standards, and
development of the health
workforce.
Areas of intervention Areas of intervention
1 Professional standards, licensing, and 1 Salaries and allowances
accreditation 2 Budget for HRH
2 Authorized scopes of practice for health cadres 3 National health accounts with HRH
3 Political, social, and financial decisions and 4 Mobilizing financial resources (e.g.,
choices that impact HRH government, Global Fund, PEPFAR,
4 Employment law and rules for civil service and other donors)
other employers
56
EDUCATION PARTNERSHIPS
Development and maintenance of a Formal and informal linkages aligning

skilled workforce key stakeholders (e.g., service
providers, priority disease control
Areas of intervention programmes, consumer/patient
organizations) to maximize use of
• Development and
human resources for health
standardization of training
material
• Pre-service education tied to
health needs
• In-service training including
continuing education
• Capacity of training institutions Areas of intervention
• Training of community health
• Agreements in place between MOH
workers and non-formal care and other health providers to
providers supplement the delivery of health
services
• Mechanisms in place to mobilize
HUMAN RESOURCE community support for health
MANAGEMENT SYSTEM services
• Mechanisms in place for
coordination of donors and other
Integrated use of data, policy, and practice to stakeholders
plan for necessary staff, recruit, hire, deploy, • Leadership
develop, and support health workers • Capacity to provide direction, align
people, mobilize resources, and
reach goals
Areas of intervention • Areas of intervention
• Identification, selection, and support
• Personnel systems: workforce of HRH champions and advocates
planning (including staffing norms),
recruitment, hiring, and deployment • Leadership development for HRH
• Work environment and conditions: managers at all levels
employee relations, workplace safety, • Capacity for multi-sector and
job satisfaction, and career sector-wide collaboration
development
• HR information system integration of • Modernizing and strengthening
data sources to ensure timely professional associations
availability of accurate data required
for planning, training, appraising, and
supporting the workforce
• Performance management:
performance appraisal, supervision,
and productivity
57
References
Human Resource Development: A Form In Education And Health

https://sourcey.com/articles/how-education-helps-in-human-development
58
Lesson 10: Globalization and New Economy
Overview
This will discuss Globalization in relation to trading between countries in

international aspect. It will provide the present situation of the new economy in industrial
and its impact on developing countries.

• Identify the role of Globalization;
• Identify the role of trading in Asia;
• Discover how the financial flow works;
• To know The Nature of the New Economy in the Industrial Countries; and To know
The Potential Impact of the New Economy on Developing Country Experiences
Course Materials:
What is Globalization?
Globalization or globalization is the process of interaction and integration among people,

companies, and governments worldwide.
Advantages of Globalization
- Globalization allows us to pool all our resources together.

- Globalization would also reduce labor exploitation issues
- Globalization improves communication access.
- Globalization could create more employment opportunities.
International Trade
International Trade refers to the exchange of products and services from one
country to another. In other words, imports and exports. International trade consists
of goods and services moving in two directions:
1. Imports – flowing into a country from abroad.
54
2. Exports – flowing out of a country and sold overseas.
Why does international trade exist?
Nations trade internationally when there are not the resources or capacity to satisfy
domestic needs and wants domestically.
We import goods and services for several reasons. Below are some reasons:
– Price: a foreign company can produce something more cheaply.
– Quality: may be superior abroad. For example, Scotch whisky from Scotland, in most
people’s opinion, is superior to any local alternative. That is why Scotland exports about
37 bottles of Scotch every second.
– Availability: it might not be possible to produce the item locally. Therefore, the only way
consumers can buy it is by importing it.
– Demand: might be greater than local supply. To satisfy the difference, it is necessary to
import.
Financial Flows
Multinational Enterprises
A multinational corporation (MNC) or worldwide enterprise is a corporate organization that owns or

controls production of goods or services in at least one country other than its home country.
Labor Migration
A “migrant worker” is defined in the International Labour Organization (ILO)

instruments as a person who migrates from one country to another (or who has 55
Subject:
migrated fromHRMA
one 40013 – Logistic
country Management
to another) with a view to being employed other than on his
own account, and includes any person regularly admitted as a migrant for employment
Asian Trade
• Barter system – trading in ancient times

• Usually textiles, gold, silk etc.
• Japan emerged a trading power in the rest of the world because of Naval and
military power
• At the beginning of the 21st century nearly all countries were responding to
the globalization of production by promoting exports and opening domestic
markets to international competition to varying degrees
• East and Southeast Asia intraregional trade has grown in importance.
• Asia is the biggest producer of rice in the world, and rice remains an important
commodity of intraregional trade. It is an important export item for countries such
as Thailand, Pakistan, and Vietnam.
Organization helping trading System
• There has been an effort on the part of Asian countries to improve their trading
position by joining organizations of commodity producers. Among these are the
International Sugar Agreement, the Asian and Pacific Coconut Community, and the
International Tea Committee.
• The most prominent and occasionally successful of these groups is the
Organization of Petroleum Exporting Countries (OPEC), which is dominated by the
major oil-producing countries of Southwest Asia
• The Association of Southeast Asian Nations (ASEAN) has fostered joint economic
ventures among its member states and has worked to reduce trade barriers.
Rapid Rise in Capital Inflows
• Capital flows refer to the movement of money for the purpose of investment, trade or
business production, including the flow of capital within corporations in the form of
investment capital, capital spending on operations and research and
development (R&D). On a larger scale, a government directs capital flows from
tax receipts into programs and operations and through trade with other nations and
currencies. Individual investors direct savings and investment capital into securities,
such as stocks, bonds, and mutual funds.
56
Labor Migration and Remittances in Asia
• Asia and the Pacific has a significant rise in migration: about one in three
migrants comes from Asia according to the United Nations. Remittances from
migrants have provided foreign exchange earnings for many countries in the
region.
• Currently, over 80 million people from Asia and the Pacific live and work outside
of their countries of origin. Migration and remittances have both positive and
negative effects. For the countries, remittances became an important source of
foreign exchange.
Role of International Institutions
• International institutions can be defined as “behavioural regularities associated with a set

of rules, norms and routines” ( llegret and Dulbecco, 2002, p. 174)
International organisations (IOs) play a growing role as standard setting bodies in supporting
regulatory co-operation. Evidence shows that IOs contribute to International Regulatory Co-
operation (IRC) by:
• offering platforms for continuous dialogue on regulatory issues;

• facilitating the comparability of approaches and practices;
• providing member countries with flexible mechanisms to identify and adapt to new and
emerging regulatory areas or issues;
• contributing to the development of a common regulatory language
• developing international legal and policy instruments.
57
How does Asian Countries resolve issues about Globalization?
Nearly two years since Asia’s economic crisis began, the region has begun to express
doubts about the impact of globalization on regional societies. Although the term defies
simple definition, participants agreed that globalization has several core characteristics:
• Unprecedented economic interdependence, driven by cross-border capital

movements, rapid technology transfer, and "real time" communication and
information flows.
• Rise of new actors that challenge state authority, particularly non-governmental
organizations and civic groups, global firms and production networks, and even
financial markets.
• Growing pressure on states to conform to new international standards of
governance, particularly in the areas of transparency and accountability.
• The emergence of an increasingly Western-dominated international culture, a trend
which in many countries has sparked concern about the erosion of national identity
and traditional values.
• The rise of severe transnational problems that require multilateral cooperation to
resolve.
The Nature of the New Economy in the Industrial Countries
New economy
-buzzword describing new, high- growth industries that are on the cutting edge
of technology and are the driving force of economic growth.
-is the superior economic structure that is expected to arise as an outcome of the
two forces called globalization of business and the revolution in information and
communication technology.
-Commonly believed to have started in the late 1990s, as high-tech tools,
particularly the internet and increasingly powerful computers, made their way into
the consumer and business marketplace.
58
Asia and the “New Economy”
Features of New Economy
• More options for production No matter what your production processes,

the chances are that the same capabilities exist elsewhere. Be informed
where such services are located. How accessible are they? Could you
outsource production and reshape your business? Bear in mind there is often
a trade-off between the desire to control production and the interests of
efficiency.
• The chance to create new markets. Entrepreneurs have the power to
create new markets and often doing so requires very little in the way of
investment.
• Small firms can think big Small firms can be just as international as big
ones while we will still have multinational corporations, there will be more and
more opportunities for small and medium-sized firms – which is good news
for local economies as they employ more people. (Professor Liesch)
• A more level playing field opportunities are not limited to those in science
and technology. While there is potential to develop things, it’s also about
making better use of things, doing things in a different way that can give firms
a competitive advantage.
• Networks are important Networks help firms to get to know the market and
to be known within the market.
• Culture is no constraint cultural differences are more of a barrier for
consumer businesses rather than those in the business to business sectors,
it’s not beyond any firm to overcome them. Managers should not be culturally
blind – but likewise, they should not be culturally bound.”
References
Globalization and New Economy

https://www.thebalance.com/globalization-and-its-impact-on-economic-growth-1978843
59
60
Lesson 11: The Environment and Sustainable Development In Asia
Overview
This lesson will provide awareness and discussion about environment economics
not only in the Philippines but in Asia. It will also expose the economic value of the
environment and how the government mitigate in its sustainability.

• Identify the different classifications of environment in economics;
• Discover why the market for environmental goods often fails;
• Determine various government-established regulations that mitigates market
failure;
• Learn how human activities affects environmental changes in Asia;
• Know the importance of promoting sustainable development in Asia.
Course Materials:
Environment is a unique economic

resource as it provides a fully integrated
Environment life-support mechanism that makes
human existence possible.
- Acts as a waste receptacle for all wastes

generated by the natural system itself
Environmental degradation detracts

What is Environmental economies from the pace of economic
development by imposing costs on
Degradation?
developing countries through:
o health-related expenses; and,

o reduced productivity of resources
54
THE ECONOMICS OF THE ENVIRONMENT
The Economic Value of the Environment
A. Environment as economic functions
Inputs of Natural Resources:
• Forests provide timber for construction of building and houses

• Rivers and seas provide rich fish harvests and natural navigable waterways for
transport of goods
• Rainforests are the source of medicinal plants and chemicals
B. Environment as a waste receptacle
Environment’s Assimilative Capacity
When waste generated is below, it is naturally recycled and goes back into the
natural environment.
When waste level exceeds the tolerance level over extended period of time, the
damaged cause is often permanent and irreversible.
C. Environment as source of utility
Environments is a direct source of utility through provision of aesthetic services like:
• sunrise and sunset

• clean rivers for swimming
• fishing or recreational boating
• rich mountain forests for bushwalking or hunting
The Market for Environmental Goods
Exchange or trade system accords an economic value to any good and service that is
bought and sold.
Law of diminishing marginal utility consumers derive less and less benefit as more and
more units of goods are consumed
Equating marginal benefits and marginal costs will maximize total benefits.
Q+ is the point of production and consumption in the economy that maximizes producers’
and consumers’ gains from the exchange
Coase Theorem propose by Robert Coase, states that a market for public goods can be
created
Why the Market for Environmental Goods Often Fails
55
The level of overuse and overconsumption of environmental goods makes the market
failures.
Some evidence:
• polluted rivers
• polluted air
• overfished seas
• overgrazed lands
Market Failure (in the environmental sense) implies that the market-determined price and
output levels of environmental goods are not efficient and must be modified to achieve
optimum outcome for the society.
Thus, in the exchange of environmental goods/services, it is the inability of the
system to accord correct pricing for these goods.
Open-access resources are considered common property, having no well-defined
owners.
Property Rights Property Rights refer to a bundle of

entitlements defining the owner’s
right, privileges, and limitation of use
of the resources.
Characteristics:
• All resources are privately owned (universality).

• The system prevents non-owners from extracting any
benefits from any productive use of the property
(exclusivity).
• All property rights are transferable from one owner to
another in a voluntary exchange (transferability).
• The property and all benefits derived from there are
deemed secure from involuntary seizure or
encroachment by others (enforceability).
Property Rights
and Open-Access
Resources Any property rights system can be rendered inadequate. Overuse and abuse of
open-access resources defined property rights provide insufficient grounds for
excluding non-owners from accessing and using the resource. Use of resources
without accompanying incentives to look after it leads to destruction and damage.
56
PROVISION OF INFORMATION
It is believed that people were not well

informed of the true benefits of environment
preservation and the underlying costs of
environmental degradation which affects their
production and consumption behavior.
As a solution, we may engage in a public

information campaign. Using prominent figures to talk
to public forums or media outlets and to make public
statements to encourage general public to behave in
more environmentally friendly ways.
Activities of Government in Mitigating

Market Failure
• Planting of trees
• Stocking fish
• Treating sewages
• Cleaning up toxic sites
REGULATION
Regulation of pollution markets, using

Command and Control Restrictions (CCR), has
greater ability to modify environmentally degrading
behavior and improve or protect the quality of
environment.
CCR on Inputs
CCR on Outputs
57
CCR on Inputs
a. Requiring sulfur-removing scrubbers to
be installed on the smokestacks of coal-
burning utilities
b. Requiring catalytic converters on
automobiles CCR on Outputs
c. Banning use of leaded gasoline a. Emission limitations on the exhaust of
automobiles
b. Prohibitions against the dumping of
toxic substances
c. Prohibitions against littering
Regulation does not require an elaborate system of calculations of costs and

benefits, but it does require some kind of scientific basis for determining the
acceptable emission levels.
TAXATION
Tax is a way of inducing firms or

households to internalize the cost of their a. Allow the producer to
harmful production or consumption choose the method of
reducing access to
activities.
common resources
b. Generates substantial
revenues for the
Advantages: government
MARKETABLE PERMITS
These permits allow holders to harvest a

common resource up to a certain limit or
grant them a license to pollute the One major advantage of marketable
environment up to specified amount. permits is that once the initial allocation
of permits is made, polluters are free to
buy and sell their 'rights' to pollute.
58
Main Drivers of Environmental Change in Asia
Many countries in Asia derive their incomes from

A. Increased Production
export earnings, but much of the commodities
produced for export contribute to pollution and
other environmental pressures in the economy.
Improvements in a population’s
standard of living imply lifestyle B. Increased Household
changes that tend to be characterized Consumption
by energy-intensive and waste-
producing consumption patterns.
a. Rising incomes easily translate C. Poverty
into increased demand for:
• More cars and means of
transport Low current income makes it
• New and bigger housing very difficult for households to
• More television sets and other meet daily consumption
electronic equipment in the needs, and thus,
house environmental resources are
• More non-organic waste unwisely exploited to
production per person supplement their incomes. The
poor often live in places where
land and resource costs are
low or those areas of heavy
pollution or prone to flooding,
landslides, and volcanic
D. Population Factor eruption.
a. Unwise Decisions on the
Depletion of non-renewable resources is Use of Environment:
accelerated by rapid population growth • Poor Land
through deforestation. Management (Result:
a. Virtuous Cycle – Interaction of rapid Soil Erosion and Loss
economic growth and falling fertility of Soil Fertility)
b. Vicious Cycle – Interaction of • Overfishing
poverty and high fertility • Poor Forestry
accompanied by high rates of Management
sickness and death • Growing Air Pollution in
Urban Areas
E. Urbanization
Mostly felt in heavily populated areas characterized by
substandard housing and poor access to basic services
59
Promoting Sustainable Development in Asia
a. Market is not able to deliver efficient and socially optimal outcomes consistent with
sustainable growth and development.
b. New policy approaches and some government intervention are needed to stop
and reverse the rapid rate of environmental degradation in the region
Command and Control Policies
Command and Control Policy is the most popular

approach to environmental control.
Circumstances in which command and control policies are more

effective:
a. When monitoring costs are high

b. When zero-level emissions are the best
c. During emergencies
• Direct Control – tends to be highly reliable option in
emergency cases
Economic Incentives
Economic Incentive, such as taxes and marketable permits,

Economic Incentive do equate marginal abatement cost across polluters and
therefore, minimize the costs of obtaining the target level of
environmental quality.
Marketable Permits
A type of incentive that pays the
polluter a fixed amount of money for
each unit of pollution that is reduced.
Marketable permits can
generate the target level of
pollution with much more
certainty.
60
Energy and Water in Such subsidies have tended to
developing countries are often benefit only the producers but are
heavily subsidized. The usual harmful to the environment and
justification given for such the larger society in general.
policies is to make these Subsidies effectively set the prices
utilities more affordable and of resources below cost, and
therefore improve the lives of therefore encourage overuse.
the citizenry.
Improve Institutional Capacity
Asian governments have a very important role to play in resolving much of the
issues affecting the environment in the region. Addressing the challenges
presented by the continuing degradation of their environmental resources
requires the implementation of appropriate, effective and complementary
policies in several areas.
Asian Government must improve their capacity by implementing changes such as:
a. They must shift from top-down management strategy and engage in

the devolution of responsibility to local authorities.
b. They should use streamed environmental ministries that can serve
as coordinators rather than highly centralized regulatory agencies.
On Efforts by the Beijing Government to Save Water
Central Government can form partnerships with the private sector,

non-governmental organizations (NGO’s) and local communities in its effort to
conserve water.
In Asia, ASEAN (Association of Southeast Asian Nations) has
developed a plan of action regarding the environment and established a
number of working groups to address trans-boundary issues involving pollution
of air and water.
61
References
The Environment and Sustainable Development In Asia

https://www.unenvironment.org/regions/asia-and-pacific/regional-initiatives/poverty-
environment-action-sustainable-development
62

Econ 40163 Economic Development

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ECON 40163 ECONOMIC DEVELOPMENT

Lesson 1: Introduction to Economic Development

After successful completion of this lesson, you should be able to:

Unit 1: Introduction to Economic Development

• Economics is a social science concerned with the production, distribution, and

The essential problem of economics:

The allocation of limited means to fulfill

This shows the maximum amounts This shows the alternative

• There is some limit to what we can

FUN FACTS ABOUT PRODUCTION POSSIBILITIES CURVE:

• The curve is a constraint because it shows the limit of attainable outputs.

➢ Staple goods (x-axis) and luxury goods (y-axis)

➢ Agricultural goods and manufactured goods

➢ Military goods and civilian goods

After successful completion of this lesson, you should be able to:

Unit 2: Economics and Distribution

FACTORS AFFECTING DEMAND

PUTTING DEMAND AND SUPPLY TOGETHER

When Price Increase: When Price Decrease:

1. Changes in the number of consumers who wish to purchase the product

Factors That Cause Real-World Supply Curves to Shift

1. Changes in the number of sellers in the market

EFFICIENCY AND EQUITY

• Economic efficiency is when every resource is optimally allocated to serve each

After successful completion of this lesson, you should be able to:

Unit 1: History of Development Economic

Problems encountered in Economic Miracle

Countries under East Asia

•Japan (wherein the development process started. (Increased

NEWLY INDUSTRIALIZED ECONOMIES

1. Experience of laissez-faire Hong Kong

UN Population Division From 1950 to 2015

After successful completion of this lesson, you should be able to:

Unit 2: Distinction of Development Economies

• Economic Development concentrates on economies that have low per-capita

• Development Economics is a branch of economics that focuses on improving

MEASURING GROWTH AND DEVELOPMENT

• Economic Growth is the increase in goods and services produced by an economy

• Economic Development is the process focusing on both qualitative and

3. Occupational Structure of the Labor Force

5. Consumption per capita - Consumption per person is a good indicator of

UN Population Division From 1950 to 2015

Unit 1: Asian Financial Crisis

• Stock market, real estate, and bank credit bubble

THE BUBBLE ECONOMY

• Export performance is spectacular

EXTERNAL SECTOR DIFFICULTIES

• Overvalued Exchange Rates

CONTAGION, GLOBALIZATION, AND FINANCIAL INTEGRATION

Unit 2: Post-Crisis Experience

4.3.1 The World Economy

4.3.2 Economic Growth

4.3.3 Economic Recovery

4.3.4 Emerging Development Divide in Asia

4.3.5 Social Impact of the Economic Crisis

Unit 3: Lessons and Prospects For The Future

4. Capital Account Reform – The regulation of short-term capital movements, such as

5. International Portfolio Controls – grouping of investment assets that focuses on

6. Establish Minimum International Standards of Financial Practice – create a poor

7. Information and Transparency – Lack of more general macroeconomic information,

8. Global Surveillance – refers to the mass surveillance of entire populations across

10. Greater Competition – Competitions has to be tempered with strengthened prudential