Global Economic Prospects and the Developing Countries 1996Abstract: This year's study focuses on the effects of globalization on developing countries and the growing divide between fast and slow-integrating economies. The pace of global economic integration continues to accelerate dramatically. In the ten years from 1985 to 1994, the ratio of world trade to GDP rose three times faster than during the previous decade. During this same ten-year period, foreign direct investment (FDI) doubled as a share of global GDP. Developing countries also participated extensively in the acceleration of global integration. A closer look, however, reveals sharp disparities between countries. Though developing countries in the aggregate kept pace with the world rate of trade integration, the ratio of trade to GDP actually fell in some 44 out of 93 developing countries in the last ten years. There were similar disparities in the distribution of FDI: two-thirds of total FDI went to just eight developing countries; half received little or none. This trend is likely to continue. Projections indicate that trade and investment will accelerate in those countries which open up to the global economy, and stay stagnant in those that do not. At the same time, there has never been a better time for developing countries to integrate. Projected generally favorable conditions in the global economy, including stable energy prices, low interest rates and inflation, and improved communications and transportation technology, have created an environment conducive to market liberalization. Moreover, traditional obstacles to developing country integration, such as high tariff barriers, are falling rapidly. Many developing countries in every part of the world have successfully pursued policies of greater openness to the global economy, and there is much to learn from their experience. The report documents the evidence, provides case study analyses, and makes recommendations about best-practice approaches to market liberalization, especially in the areas of trade and commodities. For many developing countries, successful globalization depends on fundamental economic reform, requiring difficult policy decisions that often lead to real short-term dislocation. These costs must be acknowledged from the outset, and the effects carefully taken into account in the design of the programs. But the costs are manageable. In fact, openness to external trade and investment is often the necessary first step to solid, sustainable economic development. |
Contents
Disparities in global integration | 20 |
Obstacles and opportunities on the path to trade integration | 34 |
Integration and successful commodity producers | 47 |
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antidumping Argentina Asian average billion Caribbean Central Asia Chile China commodity prices commodity-dependent competition continued costs Côte d'Ivoire credit ratings data and staff debt decline developing coun developing countries domestic East and North East Asia Europe and Central European Union factors fast integrators fiscal deficits forecast foreign direct investment former Soviet Union growth rates high-income countries higher imports income increase Indonesia industrial countries inflation inflows infrastructure integration index interest rates Japan Latin America low-income macroeconomic Malaysia markets Median ment Mexico Middle East middle-income moderate North Africa OECD past decade percent in 1995 percent of GDP percentage points policies production projections real exchange rate region Republic sector slow integrators Source South Asia Soviet Union speed of integration staff estimates Sub-Saharan Africa Table tariffs Thailand tion trade liberalization trade ratios trade reform U.S. dollar United volatility World Bank World Bank data world trade