ce nomic Development in Pakistan-II (4660) Semester: Spring, 2020 Level: M.Sc (Pak Studies) ASSIGNMENT No.1 Q.1 Discu ymestic financial resources required for economic development? Answer: While re shave witnessed new interest in the finance-growth nex lationship betwee! tic resource mobilization and financial developme ins relatively However, issues related to domestic resource mi and. financial Int are central to the overall development process. Recentitfey have been raised tion with the attainment of the Millennium Develo} ;0als (MDGs). Financial ment, broadly defined to include not just finan, ase deepening but also vements in the efficiency of the financial seqtor, hance domestic resource bilization ~ which is vital for pro-poor growth. TI igenda has recently moved in Oy interesting directions partly because of the, Ye as well as the importance of gj domestic resource mobilization for accelerating in achieving the MDGs, and partly through the emergence of new initiatives. The the United Nations International Year of Microcredit (in 2005) and the ‘blue, b lolicy-makers, Building Inclusive Financial Sectors for Development, published in fe United Nations Capital Development Fund (UNCDF) and the UN Department omic and Social Affairs (UN-DESA), which emphasized in particular the issue ial access’ and the centrality of ‘inclusive financial sectors’. It is broadly recognized t ing economies often lack an appropriate financial sector that provides incentives fo! jals to save and acts as an efficient intermediary to convert these savings into cred) rowers. The financial liberalization experience of many low- income countries in, fears, although in the right direction in certain cases, seems to suggest that tra the financial structure of an economy is a complex process that assumes a degp tanding of the entire set of interactions between finang@sector reforms ani @Hiomy. At the same time, the experience of the Asian financ| arly ile financial liberalization may be desirable, the process ulated is requires the building of institutional capacity ~ a cost portant, ally fair to argue that, until very recently, orientating the: is domestic resource mobilization has been neglect development financing for the MDGs. However, there is s realized, can help to accelerate progress significantly t stressed that the above important route has the, communities directly in the overall developmes financial system as whole, it is also vital mechanisms for the poor. The above discussion suggests that, while subgghtial progress has been made in recent years on the research and policy front in this important area, a number of issues remain unresolved and require further atten} in regard, a recently published UNU-WIDER “VARTA? brings WTC aC: CONT, eNO ALOU Studio 9 Leb Uxiver iN financial system otential source of potential here, which, if DGs. It also needs to be ‘advantage of engaging local process. Further to building the icrocredit and to create insurance AIOU MALIK EDUCATION SUBCRIBE YOUTUBE CHANNEL:mestic resource mobilization nexus in an effort to delve more rtant relationship. The volume provides also a good balance of jpments in this area; the application of recent innovations in jogy; important case studies that discuss country experiences with 's - in both Africa and Asia (including China); and useful policy lessons. the financial develop deeply into the ab recent theoretic econometric financial sect The study ared as part of UNU-WIDER's research on Globalizatis ince and Growth, jo the project on Financial Sector Development for Gr. id Poverty sy QO sage that emanates clearly from the study is that pol incing domestic A cel res eon = for example, by mobilizing domestic saving nding the tax base ping countries (particularly in Sub-Saharan Africa), imereaging access to financial and deepening financial sector development) ~ hav nent role to play in the ging effort to use all available sources, both dowe: xternal, so as to accelerate a key priority in low income ve beyond financial deepening the financial sector. cial institutions (thereby increasing the tition and provide a broader variety of ier strengthen the overall saving mobilization substantial gains in the area of poverty-reducing it Ayers with the MDGs. In particular: + Deepening financial sector development is gj countries along with the challenge towards improving substantially the effic + Policies that attempt to build bett confidence of savers), encour’ instruments for saving. They process in low-income count growth and MDG achi * Most individuals, informal and non- makers need to all and medium enterprises, continue to depend on ssets for their savings facilities and arrangements. Policy- je microfinance institutions, which, with a relatively small cost base, are a fe way of delivering savings facilities to low income individuals and small ss, especially in rural areas. + On the gtht id, the challenge for microfinance institutionsis to create str s that hg “clients of successful microfinance-institutions to acces: longer-term sources of finance. But certainly not least, improving access to saving ins fF crucial tance for domestic resource mobilization, Rural lization, in afticular, requires an institutional network providing easy potential savers. hhe absence of saving institutions collecting deposits fr ral sector, especially in remote areas, may simply discourage savings rage consumption, and perhaps wasteful expenditure, or it may lead to inon-monetized form It is hoped that the volume will contribute in a forward looking way to the ongoing debate amongst the international nt community regarding the mobilization of domestic resources in develo les, and the crucial role that financial development can and should play in this “ey di “www.malikeduication.com ASE y MOU Studio 9 LL ele Kezyet Eu AIOU MALIK EDUCATION SUBCRIBE YOUTUBE CHANNEL:Capital alludes to th for commencing a can be of two ty, ny’s wealth in the form of money or assets that can be utilized ‘or investing in a running business, to generate more money. It cal capital or human capital. The physical capital implies the capital which is tangj ature, such as money, plant and machinery, furniture and fixture, building ete. On the cor 1an capital is relatively a new concept, which implies th ion of an individual abilities, talent, knowledge, etc, used by the company to Ut its long term g S not owned by the company, but by the employee: they rent to adequate consideration. of the article excerpt that attempts to shed light on \theSpiifferences between Ta ‘pital and human capital. e ison Chart @ PHYSICAL CAPITAL MAN CAPITAL eX gy isco cote MRE SSR Human capital refers to stock of lassets of the company, such knowledge, talent, skills and ‘Meaning machinery, tools and eq office 9% abilities brought in by the rocess of employee, to the organization AIOU MALIK EDUCATION ‘supplies etc. that help\i production RN INature Tangible NG Intangible Social process and conscious ‘Formation Economi ae at acess. % : " oh decision of the possessor. Formation It can in the market. JOnly. the: ‘services’ of human| capital can be sold, 7 It is not separable from its ‘Separability &- from its owner. pa owner, Financial 7 ” * Not shown ii ncial mn in financial statement. ‘Stateme! statement. Restrj ‘on, Occurs ot mality and (Occurs due to trade barriers. urs oY Y mol cu wes of ‘to depreciation, ‘Constant use, results in depreciation. prea depreciation minimized Definition of Physical Capital In economics, the term ‘physical capital’ is used to d man-made goods, which are owned by the equipment, tools and so forth. It is used in th raw material into finished goods, When one wants to start a company, a huga 3)nount of physical capital is invested in the initial stage, so that the company can mark its existence in the marketplace. On the basis of sufficient ahmed fe decision is taken to invest in the physical capital. For this "WWWIndlikeducationconr ” ASE MOU Studio 9 LL ee Hezyet Eu ts (factor of production) or juch as computers, machinery, lon process to enable conversion of SUBCRIBE YOUTUBE CHANNEL:then the one, geney physical capital is a Definition of H atively higher return is chosen. Therefore, the ownership of planned and conscious decision of the entrepreneur. ital s the experience which an employee takes to the organization in the Human Capital form of know ills, abilities, talents, intelligence, values etc. which he/she has accrued over time. t, the employees are perceived as an asset, whose value increased, by investi eir training and development, like any other asset of the c The coi kes it clear that all the employees at work, are not eq they differ in their cies, si , it portrays the aggregate value of the firm's intelleetua) capital, which is a an employee's skill set. Jan capital is not owned by the company rather gen} mains an uncertainty of being lost, when the empl Oy jerences between Physical Capital and Hi The substantial differences between physical capit 1. Physical Capital, is used to mean, the machinery, building, computers, offi goods and services. On the knowledge, talent, skills and employees working in an or: ‘source of creativity and innovation. It is a standard or the economic ‘employees, and so there ‘the organization. ital juman capital are outlined below: y's non-human assets like plant and lies etc. that assist in the production of uman capital is defined by collection of possessed by an employee or a group of jn. ture, i.e. it can be seen and touched. U! ly be experienced. ital is an economic and technical process. Conversely, the ital is a social process, but it is also a result of conscious ‘entrepreneur in this regard be sold in the market directly, whereas human capital cannot be ‘ket, rather the services are sold. e human capital is intangibl 3. The creation of phy 5. pital can be separated from its owner easily. On the other e: man « separable from its possessor. 6. capital is usually mobile, but some restrictions occurs barriers ed by different countries. However, when it comes t ity of human pital, it is not fully mobile between countries, as the nationality and culture. 7. While physical capital appears in the financial st fF the company, human capital is not shown in the financial statement. 8. Both physical and human capital undergo a but the reason is different, in for is restricted by the sense that physical capital is depreciat ‘of costant use. On the other side, human capital is depreciated out of r but can be reduced to a larger extent by making investment in heal ication t Q.3 Identify and explain the different patterns and types of foreign resource transfers? ~www.malikeducation.com AE y MOU Studio 9 LL ee eiyet Eu AIOU MALIK EDUCATION SUBCRIBE YOUTUBE CHANNEL:Foreign aid is defin voluntary transfer of resources from one country to another country. This trans fes any fiow of capital to developing countries. A developing country usually fave a robust industrial base and is characterized by a low Human Development | i). Foreign aid ca e form of a loan or a grant. It may be in either a soft or hard loan. This distinction \at if repayment of the aid requires foreign currency, thei ard loan, If itis in 1e currency, then it's a soft loan. The World Bank lends i joans, while the loa flliates are soft loans. Fore) one of the most significant sources of foreign exchan: re five different eign aid programs Spends roughly $50.1B in foreign aid each year “ee y 12% of the Federal ent's budget. of Foreign Aid Ayren aid may be given as a signal of diplomatic her reasons to give foreign aid include to reward, donor, to extend the donor's cultural influence, t donor for resource extraction from the recipies access. US Aid may often time buy assistance government laws or something similar Y that benefits US interests In the case of Peru back in the 199} conspicuously changed its policies of not allowing religious missionaries in the ven jailing them upon arrival. After a promise of aid to bail out the Peso, sud ns and other groups had access to the nation without harassment. Types of Foreign Aid 1. Bilateral Aid Assistance given ernment directly to the government of another country is Bilateral Aid, It is whength i r to strengthen a military ally. iment for behavior desired by the ide the infrastructure needed by the /,oF to gain other kinds of commercial ‘an citizens in that nation, alter the course of international Monetary Fund. Though this sector ns make up a significant ations like the World Bank, United Nations, and the Int funds are then used to reduce poverty in developin constitutes @ minority of the US's foreign aid, the nation’s céfi percentage of the donor funds received by the organi 3. Tied Aid Tied Aid is one of the types of foreign aid t ‘spent in the country providing support (the donor country) or in a group ‘countries. A developed country will provide a bilateral loan or grant to a “ony intry, but mandate that the government spends the money on goods or services prodtited in the selected country. 4. Project Aid Project aid is when the fund: ised to finance a ati project, such as a school or a AT ucation.com AAPA F_2y MOU Studio 9 2S eb ieyer iS i AIOU MALIK EDUCATION SUBCRIBE YOUTUBE CHANNEL:Military aid is never aid usually require the USA. In othe purchase the a The US. gave about $15 billion in Military Aid in 2011. Military ng nation to either buy arms or defense contracts directly from just simplifies the process by having the federal government only and ship them over on military transport 6. Voluntary Voluntary usually in the form of charity. For example, Médecins rontigres (Doctors, it Borders) is “is an international humanitarian vernmental sst known for its projects in war-torn regions and ing countries \demic diseases” fine the concept of jevelopment. os Ay fation is a quantitative measure of the rate at wh ected goods and services in an economy increa gj in the general level of prices where a unit of curre periods. Often expressed as a percentage, purchasing power of a nation’s currency, I occurs when prices instead decline. As prices rise, a single unit of curren the process of age price level of a basket of ‘ome period of time. It is the rise Fectively buys less than it did in prior n thus indicates a decrease in the can be contrasted with deflation, which Value as it buys fewer goods and services. This loss of purchasing power impacts feral cost of living for the common public which ultimately leads to a decaterdfi economic growth, The consensus view among economists is that sustaine®in ‘occurs when a nation's money supply growth outpaces economic growth. To combat this, a couny ropriate monetary authority, like the central bank, then takes the necessary meas, ep inflation within permissible limits and keep the economy running smooth! Inflation is megsul a variety of ways depending upon the types of rely an@&enices considered as@\isgtMe opposite of deflation which indicates a general “5 : in ind services when the inflation rate falls below 0%. 1@ process of development: fe the headlines, inflation is back after a long post-crisis s lation and, in stances, outright deflation. Since investors haven't seen si ice rises in years, (Orth brushing up on the most common effects — 1. Erodes Purchasing Power This first effect of inflation is really just a different w, Qos what it is. Inflation is a decrease in the purchasing power of currency du if prices across the economy. Within living memory, the average price of aN was a dime. Today the price is closer to two dollars. Such a price change could conceivably rhs oy a surge in the popularity of coffee, or price pooling by a cartel of g producers, or years of devastating drought/flooding/confiict in a a coffee-growing region. in those scenarios, the price of coffee brodlce os rise, rest ofgthe economy caso carry on largely unaffected. "HARRATUNE:' lication:conr ce _ fy + AInN Studio 9 2 Lee Szyer Gwe AIOU MALIK EDUCATION SUBCRIBE YOUTUBE CHANNEL: