5.5 Evaluation of growth and development strategies

February 14, 2010 annay17

Natural Endowments are plentiful

5.5 Evaluation  of Growth and Development Strategies.

Pros and Cons of FDI

Potential to improve education, health and infrastructure

•Stimulate AD and investment

•Importation of capital and technology

Little evidence that aid result in development

•Increasing Indebtedness

•Inefficient use of aid money

•Dependency encouraged

•Corruption diverts aid to the powerful

In DRC, corruption is a major problem, and it is known that the government diverts the aid from the people of DRC to themselves. Therefore unless there is some way to make sure that the money goes to people in the most need, the allocation of the resources would be highly inefficient. Nonetheless, the country is highly reliant on FDI. For a limited period of time, FDI may be important for DRC’s productivity.

Classical vs Keynesian

Classical

•Minimize government intervention

•Let markets work

•Examples: export-led growth , FDI, privatization

Keynesian

•Active Government manipulation of the market

•Examples: Import Substitution, protectionism nationalization exchange rate manipulation

IMF

The purpose of the IMF is to monitor the balance of payments in the countires to detect signs of fundamental sisequilibrium, and to intervene on behalf of countries. However there have been many questions on the morality of their work. IMF is non-democratic, and tends to work towards the favor of richer countries. Additionally IMF lending has not shown to be very effetive at all.

Idealistically: Trade Justice  -> Debt Relief -> Free markets  -> Political stability -> Effective target aid

DRC’s problems:

• Around 2.5 million people in DRC have died since the war started, majority from preventable disease like malaria and aids.
• At least 37 per cent of the population, approximately 18.5 million people, have no access to any kind of formal health care.
• There are 2,056 doctors for a population of 50 million; of these, 930 are in the capital.
• Infant mortality rates in the east of the country have in places reached 41 per cent per year.
• Officially, between 800,000 and 900,000 children have been orphaned by AIDS.
• 40 per cent of health infrastructure has been destroyed in Masisi, North Kivu.
• Only 45 per cent of people have access to safe drinking water. In some rural areas, this is as low as three per cent.
• Of 145,000 km of roads, no more than 2,500km are asphalt.

All of these problems are so large, and so refusing FDI would be detrimental for the country.

The problem is that there is little international awareness of the situation in Congo. Not many people are aware of the war that happened internally and the corrupt rulers. Raising awareness of the country’s situation may increase the aid.

Get a better leader, that will show the country that it can be reliant and capable on their own production and not just on external aid, and reducing the violence that still remains. There are so many people affected by the war, and therefore the country is less productive. Additionally, improving people’s health would be one of the most beneficial uses of aid.

DFID’s main objectives in the Democratic Republic of Congo are:

-building a capable and accountable state

-delivering a peace dividend for poor people

-reducing the remaining violent conflict and its impact.

I believe that if these challenges are overcome, then since it is such a well endowed country, the development of the country would be easier. However it will most likely take a very long time. In mid-December 2009, the IMF agreed to a $550-million loan arrangement with DRC. I hope that the IMF would make sure that the money is allocated to the causes that need most attentions first: the people’s health.

Hilary Clinton in Congo.

Entry Filed under: Section 5

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