Evaluate four ways in which economic growth and development might be promoted in developing countries.

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Define economic growth & development: Economic growth is the steady growth in the productive capacity of the
economy, and thus of GDP. Economic development is the increase in the standard of living in a nation’s population.

Decide on your four ways: Development of tourism, industrialisation, FDI, debt cancellation

1. Tourism: Some countries have grown and developed economically due to investment in tourism.

Advantages Disadvantages
 Source of foreign currency – can be used to  Increase in imports
develop  Profits leaving and going to TNCs
 Attracts investment from TNCs  Seasonal employment
 GDP will increase  Changes in fashion
 Tax revenues will increase  External costs to environment
 Helps preserve natural heritage
 Improvements in infrastructure
 Creates jobs

Example: Seychelles

 Tourism is the most important non-government sector of the Seychelles economy

 About 15% of the workforce is employed in tourism
 Provides money to be invested in health, education and infrastructure

2. Industrialisation: It has generally been assumed that development is synonymous with industrialisation.

Advantages Disadvantages
 Lewis’ model  Lewis’ model
 More competitive – improved infrastructure  Time lag – takes a long time
 Encourages FDI  Profits may not be invested locally
 Provides jobs – consumption increases, AD  Can be inward looking – import subsistition –
increases distorts comparative advatage

Example: Singapore

 One of the Tiger Economies, that developed as a result of industrialisation

 Industrialised to make electronics and then exported that
 Has made them develop

3. Foreign direct investment (FDI): mainly from transnational corporations (TNCs) into countries can be very
effective in achieving development.

Advantages Disadvantages
 Provides jobs – economic development and  Corruption can distort this
growth  Often profits can be moved abroad
 Provides infrastructure  Can be tied (avoid confusing with aid)
 Money can be used for healthcare etc  Sometimes TNCs bring their own workers

Example: de Beers diamonds in Botswana

 Have helped Botswana to develop massively

 Provided jobs and infrastructure

However: China in Zambia

 Chicken farms
  China brought their own workers
 Chinese and Zambian workers compete
 Profits go abroad
 China provided roads and hospitals though

4. Debt cancellation: the complete or partial relief of debt for a country – this can lead to significant gains in
development and growth

Advantages Disadvantages
 Debt burdened most those who had not caused it  Corruption is a problem
– the silent majority  Stops countries from honouring future
 Can pave the way for economic growth and agreements
development as a result of sound economic  Countries and banks may be unwilling to lend
policies again in the future
 May promote FDI as country will be more
appealing as it has less debt
 As less debt, the country can focus on boosting
economic growth and development

Example: Nicaragua

 Nicaragua’s debt repayments were twice what their spending on health and education was combined
 They qualified under the HIPC scheme – heavily indebted poor countries
 It was able to have some debt relieved
 Can now focus on sound macroeconomic policies – particularly supply side policies improving health and
education.