Slide Chap 1

ECONOMIC GROWTH & DEVELOPMEMT
Chapter 1: INTRODUCTION TO DEVELOPING COUNTRIES
Instructor: Luong Thi Ngoc Oanh (Ph.D)
1
Questions for warm-up
1. If you are asked to name some rich and poor
countries, which countries can you think of for each
of the two groups? Rich: USA, Quata, Macao, China
(USD10,000/cap), UK (USD42,000/cap), poor:
Burundi, South Sudan….
2. Do you know some kinds of development aids that
rich countries usually give to poor countries? If yes,
give some examples. Food, medical helps, industrial
equipment,
3. Do you know why rich countries support poor
countries in the form of development grants?
4. Do you think poor countries can catch up with rich
countries in the future? Why or why not
2
Do you know some kind of development aids that rich
countries usually give to poor countries? If yes, give some
examples.
• Free grants, low- no-interest loans, ODA: capital = financial

aids (low or no-interest loans)
• Technical support: after WW2, UN (+ gov’t) technical
supports to poor countries, or in peaceful time
• Fellowship or scholarships for students from poor countries
to study in rich countries
• Food, medical helps, industrial equipment, Japan: physical
items in case of diseases (USA helps Vietnam with hiv/aids
relief or prevention)
• Debt relief: repaying for poor countries 🡪 special case of
grants/loans
• Emergency aids (in the case of pandemic, for example…)
3
Do you know why rich countries support poor
countries in the form of development aids?
1. Support poor countries 🡪 improve poor countries’ purchasing power 🡪 expand
the markets for rich countries
2. Rich countries want to have some political impacts on the receiving countries’
gov’t + political ties + diplomatic relationship
3. Rich countries gain mutual economic benefits: pave the way for rich countries’
firms for doing business in the poor countries by improving the infrastructure and
human resources
4. Create a safer world because poverty can be avoided/redured (job creation and
infrastructure improvement for poor) 🡪 less international migration + terrorism
5. Solve international matters which need collective efforts: climate change,
6. Gains from trade is not fairly divided among trading partners/countries so gains
accruing to rich countries are usually bigger so rich countries want to
redistribute/compensate for the poor countries by creating “fair trade”
7. Rich countries repay the gains from exploiting natural resources during the colony
8. Loans must be returned, no free grant 🡪 train poor countries to be efficient in
capital use
9. Rich countries want previledge in trade with poor countries
4
10. Human rights (UN): everyone in the world is born equal
Questions to be addressed
1 How is the global income
distributed?
2 How are countries classified?
3 What is the brief history of

developing countries?
4 What are the characteristics

of developing countries?
5 How are they compared to

developed countries in their
earlier stages?
5
The global distribution of income
Classification of countries
MAIN
CONTENT The emergence of developing countries
Characteristics of developing countries
Comparing developing countries today and

developed countries in their earlier stages:
both internal and external factors 6
1 The global distribution of income
1.1 How are two halves of the world living?

• There is a sharp contrast between lives in North
America, Northern Europe, Western Europe
Australia and in Latin America, South and South
East Asia and Africa illustrated by two respective
typical families.
• Differences can be seen in various aspects, such
as...
• Contrast also be witnessed within a single country in
Asia, Latin America and Africa
• What’s more?
7
How are two halves of the world living? (cont.)
NORTH AMERICA RURAL AREA IN ASIA

A typical family in North America: - 8 or more people, including 3
- “nuclear” family with 4 members, generations and uncles, aunts, cousins…,
- USD 50,000/head/annum, - annual income (both in cash and in
kind) of USD300/head 🡪 self-sufficient
- comfortable house with garden
economy to some extent (crops for home
and two cars, use vs. cash crops)
- imported comfortable amenity, - simple house on tenant land, no or
specialty food imported from all unstable electricity supply, no fresh water
over the world 🡪 higher supply;
openness X+M/GDP + high - members suffering regular illness but
affordability to acquire specialty lacking qualified doctors (as they are in
imports Inequality cities taking care of wealthy families) 🡪
higher inequality (income, access to
- parents having sufficient
health care service)
education and hence, - children attending schools irregularly
- secure jobs and savings for later and for a few years,
life - food shortage, hunger,
- Children would be all going - children having to work with parents
8
school
A product vs. a good 🡪 a commodity economy
and a self-sufficient economy
• Paddy rice (North VN): a product vs. (South VN): a
good (cultivated for exchange in the market or for
export)
• A product is commercialized to become a good
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a commodity economy and a self-sufficient economy
Aspects a commodity economy a self-sufficient
economy
1. purpose Exchange in markets 🡪 Home/self –consumption:
ultimate goal: care profit care about volume
(production costs and Q
demanded + prices)
2. technology Modern Poor/backward/simple
3. labour productivity higher Much lower
3. size of production/farm Increasing and larger (in terms Limited/smaller (in terms
of cows in the eg.: 70) of cows in eg: 7)
4. diversity of final products (look from More diversified Less diversified
national view)
5. relationship between supplier and 1 seller- many buyers 1 seller-1 buyer (

producers (of main products)
6. Competition pressure 🡪 Higher lower
development of production to lower
production
7. Capital invested Larger smaller
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a commodity economy and a self-sufficient economy
Aspects a commodity economy a self-sufficient economy
8. Labour incomes 🡪 due to lower higher lower

production cost + higher labour
productivity
9. Quality of the product <-- quality control Higher (specialized cooling tank) Lower (no specialized/unclean
and stable??? container) and unstable???
10. Institutional relationship between Economically dependent Economically independent
supplier and buyers in input/output trade
11. Stability of output level/volume Quite stable Very unstable
12. Law enforcement and law conformity Higher No/low

(eg. Milk quota: stabilize quantity produced
in order stabilize prices due to highly
diminishing in quality
13. Operating manner More layers/more specialized simple
14. prices/production costs lower higher
15. Stability in case of emergency in food lower Higher (+)

supplies (peasant economics)
11
12
1.2. Some statistics on income distribution
13
Table: Global income distribution in 2020
(WB data 2021)
High income Medium and low

World
countries income countries
as a as a
absolute
absolute value percentage of absolute value percentage of
value
the world the world
GDP
(USD trillion)
87,706 53,225 60,68% 34,481 39.32%
Population
(millions)
7,753 1,214 15,66% 6,539 84,34%
Income per
capita 11,313 43,843 5,273
(USD)
14
Table: Annual per capita incomes in selected countries (WB data 2019)
(Unit: USD)
GNI per capita GNI per capita
Country Atlas Country Atlas

(official (official
exchange
PPP exchange
PPP
rates) rates)
Switzerland 87,950 73,620 Malaysia 10,580 28,780
Japan 41,580 43,760 Philippines 3,430 10,220
USA 65,910 66,060 Vietnam 2,660 7,890
UK 42,130 47,620 Bangladesh 2,010 5,190
Singapore 54,920 90,320 Uganda 800 2,220
Poland 15,270 35,940 Nepal 1,190 4,160
Mexico 8,480 19,860 Ethiopia 890 2,300
15
Table: Is the global income gap being narrowed or widened? Income of
the richest 20% /income of poorest 20%. (Source: Y.Hayami, 2006)
1960 30
1970 32
1980 45
1991 61
2000 70
16
🡪 severity of global poverty
How severe global poverty is?
17
1
Some more facts and figures on global poverty
(1/4)
1. A quarter of the world — over 2 billion people — live on less than
$3.20 a day (At least 40% of humanity lives on less than $5.50 a day)
(World Bank, Oct. 7, 2020)
2. More than 70 percent of the world’s population lives in countries

where income differentials are widening.(UN World Social Report
2020)
3. The poorest 56 percent of the world’s population accounts for 2

percent of global income. The richest 1 percent accounts for 44
percent of world income. (The Global wealth report 2020)
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1
Some more facts and figures on global poverty (2/4)
4. According to UNICEF, 14,000 children die each day due to
poverty. And they “die quietly in some of the poorest villages on
earth, far removed from the scrutiny and the conscience of the world.
Being meek and weak in life makes these dying multitudes even
more invisible in death. (UNICEF Child Mortality Report 2020)
5. The proportion of children who are underweight has been cut

almost in half between 1990 and 2015 => It is possible that the
Millennium Development Goals target has been achieved. Yet over
90 million children under age five—one in seven children
worldwide—remain underweight. Being underweight puts children at
greater risk of dying (UN MDGs Report 2015)
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1
6. Based on enrolment data, about 57 million children of primary
school age in the developing world were not in school in 2015; 55 per
cent of them were girls. => the pace of improvement has been
insufficient to achieve universal primary enrolment target by 2015.
(UN MDGs Report 2015)
7. Nearly a billion people entered the 21st century unable to read a

book or sign their names. In 2015, there are still estimated 103 million
illiterate youth.
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1
8. Less than one per cent of what the world spent every year on
weapons was needed to put every child into school by the year 2000
and yet it didn’t happen. (UN MDGs report 2007)
9. Infectious diseases continue to blight the lives of the poor across

the world. Covid-19 pandemic is still spreading and has cost over 1.5
million lives, with an unprecedented economic downturn- pushed 100
million people into extreme poverty. (UN Human Development Report
2020)
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2 Country classification
• WB
• UNDP
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2
2.1 WB classification: by income
• WB classify all 189 World Bank member countries, plus 28
other economies with populations of more than 30,000 by
annual GNI per capita
• Economies are divided according GNI per capita, calculated
using the World Bank Atlas method. For July 1, 2020, the
groups are:
⮚low income, $1,035 or less;
⮚lower middle income, $1,036 - $4,045;
⮚upper middle income, $4,046 - $12,535; and
⮚high income, $12,536 or more.
• The critical incomes levels used to group countries are
updated every year on 1 July and applied for the next year
23
Income groups by World Bank (WB data 2021)
2010 2012 2014 2016 2018 2020

($) ($) ($) ($) ($) ($)
Low < 995 < 1025 < 1,045 < 1,025 < 1,025 < 1,035
income
996 - 1,026 – 1,046 – 1,026 – 1,026 – 1,036 –
Lower
3,945 4,035 4,125 4,035 3,995 4,045
middle
income
3,946 - 4,036 – 4,126 – 4,036 – 3,996 – 4,046 –
Upper
12,195 12,475 12,745 12,475 12,375 12,535
middle
income
High > 12,195 > 12,475 > 12,745 > 12,475 >12,375 >12,535
income
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2
WB classification
• In general discussions in Bank reports, the term "developing
economies" has been used to denote the set of low and
middle income economies.
• Bank publications with notes on the classification of

economies state that the term "developing economies...
does not imply either that all the economies belonging to the
group are actually in the process of developing, nor that
those not in the group have necessarily reached some
preferred or final stage of development."
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2
2.2 UNDP classification: by HDI
The Human Development Index (HDI): a summary measure
of average achievement in the key dimensions of human
development: (1) a long and healthy life, (2) being
knowledgeable and (3) have a decent standard of living.
1. Health dimension: life expectancy at birth;
2. Education: mean of years of schooling for adults aged 25
years and more & expected years of schooling for children
of school entering age.
3. Standard of living: gross national income per capita (the
HDI uses the logarithm of income, to reflect the
diminishing importance of income with increasing GNI)
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2 HDI
27
2
Some more words on HDI
Each year since 1990 the Human Development Report
has published the human development index (HDI) which
looks beyond GDP to a broader definition of well-being.
However, the index is not in any sense a comprehensive

measure of human development. It does not, for example,
include important indicators such as gender or income
inequality and more difficult to measure indicators like
respect for human rights and political freedoms.
28
UNDP classification:
developed vs. developing countries
• Developed countries are countries in the top quartile of the

HDI distribution.
• Developing countries consists of countries in the high group

(HDI percentiles 51-75), medium group (HDI percentiles 26-
50), and the low group with bottom quartile HDI
• In 2021 (data updated till Jan. 31, 2019): Norway (0.957) ranks 1st,
Ireland (0.955) 2nd, Switzerland (0.955) 3rd, VN: 0.704, 117th/195
29
2
UNDP definition of developing countries
Developing economies have standards of living lower than

developed economies and economies in transition. Many
have deep and extensive poverty. Developing countries are
usually importers, rather than developers, of innovations in
science and technology. They also tend to be more
vulnerable to economic shocks.
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HDI composition
31
Different classification system compared
World Bank UNDP IMF

Name of High income Developed Advanced
Developed countries Countries Countries
Country
Name of Low- and Developing Emerging and

Developing middle-income Countries developing
Country countries countries
32
3 What is the brief history
3.1 History
• Most of the present developing countries were
colonies of Western European countries such Britain,
France, Belgium, the Netherlands, Germany,
Portugal and Spain
33
Ten imperial countries and their colonies
No Name of imperial countries Name of colonial countries

1 Britain Singapore
2 Belgium Democratic Republic of the Congo
3
Spain, Netherlands, France
America
and Britain
4 France Vietnam
5 Germany Namibia
6 Japan Korea
7 Netherlands Indonesia
8 Italy Ethiopia
9 Portugal Brazil
10 America the Philippines
34
Group discussion: Can you argue how this historical background of
developing can impact on the present development progress and prospects?
Gains for colonial countries:
(i) built infrastructures ,
(ii) technical legacy, management skills
(iii) infused culture and religions (bread… fashion)
(iv) created mutually beneficial relationship
Negative impacts:
(i) low educational attainment ( “ngu dan” policy = “mass ignorance” policy)
(ii) exploitation of natural resources
(iii) slowing down economic development because of national defense or fighting for
independence,
(iv) destroyed colonial countries’ environments (in many senses: orange agents by USA),
(v) little access to technological advancement and international markets
(vi) negative living styles/practices (“Xuan Toc do” 🡪 “fortunate fate”)
(vii) population division for easy governance
(viii) Later independence 🡪 absence in the voice/idea collecting in international forums
and institutions (for sure you read the materials) 35
3
Suggested Answer (1/3)
⮚ Formerly being exploited by the rulers and bearing the

negative effects 🡪 the same
⮚ Affected by colonial heritage: economic, educational and

social institutions culture are modeled or shaped or impacted
by the former colonial rulers. Evidence: Colonies of Spain
and Portugal share relatively similar economic, social and
cultural institutions and face similar problems, colonies of
Britain have progressed faster than those of France.
36
⮚ Obtaining late independence and emergence in international

arena -> their interests were not taken into account by major
international economic institutions: Bretton Woods Institutions (set
up by the agreements at Bretton Woods conference) WB, IMF,
GATT (WTO)
37
⮚ Facing “disadvantages of late comers” in technological

application, market access, natural resources...
⮚ Being induced/impacted by recent globalization process to

develop in the more competitive and interdependent context
internal and external context does not allow a country to be
isolated/ to close the economy and grow on its own feet. This is
severe in the case the countries are relatively weak.
38
3
Eg: 10 biggest players in world’s markets for consumer goods
39
3.2 Different terminologies: developing countries
vs. the rest of the world
backward/traditional advanced/modern
economy economy
under-developed country developed country
less-developed country more-developed country
The Third world the First & Second world
the South the North

developing country developed country
40
“Developing countries” is widely used
• No racism, no discrimination, no ranking with
pessimicstic view on the poor countries
• Show optimistic view on the prospects of the poor
countries
• The term sounds motivating to developing
countries so they will be induced or
encouraged/motivated to develop
• The term shows that poor countries are really on
the track of improving themselves nations, trying to
catch up with rich countries
41
3
Some more words on defining developing world
• The group of countries referred to as “developing
and transitional economies” is a combination of
several groups of countries defined by income and
non-income factors
• What most clearly identifies these countries is that
they do not belong to the group of countries that are
generally recognized as “developed”.
42
4.1 Common characteristics

4.2 Diversity
43
Characteristics
• Low living standards: low per capita income
• High rate of unemployment
• Abundant labour
• High population growth rate
• High agri pro & primary sector
• Low human development /capital (index) : low life expectancy
• Lack of technological progress
• High corruption
• Adverse geography
• Inequality and poverty
• Low productivity
• Dominance in international relation
• Low capital formation/low capital per labour
• Trade deficits
• Social division
44
4.1 Common characteristics

Developing countries demonstrate several common
attributes:
Low levels of living & low productivity
Lower levels of human capital
Higher levels of inequality (56) absolute poverty Higher population
growth rate + dependency rate
Greater social fractionalization Larger rural population & rapid
migration to cities (Ngọc Minh)
Lower levels of industrialization and manufactured exports
Adverse geography
Underdeveloped financial + other markets
Colonial legacies & unequal international relations: case
study (trade, investment….)
45
4.1.1 Low living standards
46
How to convince others to believe in what you say
or to get your ideas clearly?
• You should use concepts commonly understood
• Use cases/data to illustrate the commonly used indicators
• Have to invent indicators if not yet used:
education: indicators: SMART: Specific, Measurable, Achievable,
Relevant, Time-bound
“process” indicators : (i) number of schooling years/ percentage of students (number
of schooling population (6-18 as a percentage of total population), (ii) quality of
teaching materials, teacher/student ratios, schooling capacity (seats) /total schooling
students, percentage of students able to access to schooling facilities
and “output/outcome” indicators: literacy rate, knowledge/degree or certificate,
overall population percentage having basic education, student scores (average) or
number of university graduates/total population
FTU students learn very well: many FTU students work in big companies, earning well-
known second BA degrees, average GPA in comparison with students from other
uni., overall scores/ethical/ non-academic scores/achievement, FTU have ability or
adapt to new working or learning environment (average number of days that an
FTU students can get used to a working/learning procedure), number of scientific
works by students, percentage of FTU graduates are winners of prizes in academic
competitions, number of students getting scholarships for Master or other courses,
% of student getting jobs in the majors, FTU graduates having comprehensive
knowledge, skills (list some skills)
47
4
4.1.1 Low living standards
Let’s start with an easy Q:

• What indicators/measurement of national
living standard can you think of? Which of
them indicate means and which depict
ends?
48
4 Suggested answers
Nationwide, low levels of living means low income, inequality,

poor health and inadequate education, measured in different
aspects using different indicators:
• Income: GNI/head, caloric intake
• Health: Life expectancy, malnutrition rate, infant mortality rate,
access to clean drinking water, number of doctors or hospital
beds/100,000 citizens (4.4 vs. 217 in developed countries, in
1995), spread of diseases: HIV/AIDS
• Education: Education opportunities, Literacy rate, school drop-
out rate
• Inequality: Income inequality (by Gini, Lorenz), inequality in
49
access to health care and education service
Human Development Index and its components of Developing
countries in Asia in 2019
HDI Country Human Life Expected Mean Gross nation
rank Development expectancy at years of years of income (GNI)
Index birth schooling schooling per capita
(value) (years) (years) (years) (2017 PPP $)
62 Malaysia 0.810 76.2 13.7 10.4 27,534
79 Thailand 0.777 77.2 15.0j 7.9 17,781
85 China 0.761 76.9 14.0 8.1f 16,057
107 Philippines 0.718 71.2 13.1 9.4 9,778
117 Vietnam 0.704 75.4 12.7j 8.3f 7,433
107 Indonesia 0.718 71.7 13.6 8.2 11,459
Source: http://hdr.undp.org/sites/default/files/hdr2020.pdf
50
4
Table: Vietnam's HDI component indexes compared to other countries in the region
in 2018 (Source: www.undp.org)
Countries HDI Life Expected Mean years GNI per capita HDI
expectancy at years of of schooling (2011 PPP $) Ranking
birth schooling
Korea 0,906 82,8 16,4 12,2 36.757 22
Malaysia 0,804 76 13,5 10,2 27.227 61
Thailand 0,765 76,9 14,7 7,7 16.129 77
China 0,758 76,7 13,9 7,9 16.127 86
Philippines 0,712 71,1 12,7 9,4 9.540 106
Indonesia 0,707 71,5 12,9 8 11,256 111
Vietnam 0,693 75,3 12,7 8,2 6.220 118
51
4.1.2 Low levels of productivity
52
4
4.1.2 Low levels of productivity
Value added per worker (in relative terms) in developing countries
tends to be low in all sectors – agriculture, industry, services
and are reflected in lower wages
VIETNAMESE WORKER’S PRODUCTIVITY
= 2/5 compared to Thailand

= 1/5 compared to Malaysia
= 1/18 compared to Singapore
Vietnam ranked 11/12 among 12 Asian countries according to WB

Source: VTV1, 2018
53
4
Value added per worker of some Asia countries in 2019 (Source: WB)
(Unit: 2010 US$)
Sectors Countries Value added per worker

Industry Vietnam 4,719.14
China 25,271.88
Agriculture Vietnam 1,313.00
Thailand 3,324.56
Philippines 3,378.76
Singapore 109,912.45
China 4,191.34
Service Vietnam 3,936.73
Philippines 8,123.31
China 15,558.13
Singapore 82,647.81
4
Level of productivity of some Asian countries, 2016 and 2020 (Source: WB)
Unit: 2011 US$ PPP
Productivity in 2016 and 2020 Productivity growth in

2016 and 2020 Korea
Korea 2020 China
China 2016 Singapore

Singapore Thailand
Thailand
Indonesia
Indonesia
Malaysia
Malaysia
Myanmar
Myanmar
Philippin… Philippines
Vietnam Vietnam
0 50000 100000 150000 200000 0 2000 4000 6000 8000 10000
⇨ It can be seen that although Vietnam has medium productivity

growth, our productivity is quite lower than that of others in the area.
Simultaneously, productivity of some countries in Southeast Asia is low
compared to other countries, for example, Korea and Singapore.
55
4
What leads to low productivity?
self-reinforcing triangle
Low level
of
incomes
Low
Poor
producti-
health
vity
56
4.1.3 Low levels of human capital
57
4
Advanced countries have higher

human capital scores than emerging
market countries (Source: IMF 2020)
58
Human Capital Index of Asia countries in 2020
Human
Human Capital Index
Countries Countries Capital Index
(HCI)
(HCI)
Japan 0.8 Philippines 0.5
Kazakhstan 0.6 Turkmenistan -
Turkey 0.6 Vietnam 0.7
Malaysia 0.6 Iraq 0.4
Thailand 0.6 India 0.5
Armenia 0.6 Bangladesh 0.5
China 0.7 Laos 0.5
Azerbaijan 0.6 Timor-Leste 0.5
Mongolia 0.6 Cambodia 0.5
Uzbekistan 0.6 Myanmar 0.5
Indonesia 0.5 Pakistan 0.4
Source: https://data.worldbank.org/indicator/HD.HCI.OVRL
Developing countries usually have low Human Capital Index, on average

smaller than 0.7 while developed countries usually have this index equal or
greater than 0.8.
59
4.1.4 Higher levels of inequality
and absolute poverty
60
4
Countries with low per capita income often have high Gini coefficients.
Most countries with high Gini coefficients are developing countries.
Country GINI
UK 0,35
Korea 0,36
Russia 0,38
US 0,39
Mexico 0,46
Brazil 0,47
India 0,5
China 0,51
Vietnam 0.42
61
62
Source: 63
WorldBank
64
Impacts of inequality
in the case of other imbalances
65
4.1.5 High population growth rate
and dependency rate
66
Explain why in developing countries life expectancy is shorter but still
dependency rate is higher as compared to developed countries
Dependency group comprises of 2 components: retired population (from 60 till

death) + children under 15: in developed countries, old people (retired people) in
developing countries is higher but the birth rate, therefore percentage of children
under working ages in developing countries is sufficiently higher so the overall
DR rate in –ing countries is higher (net indicators)
(DR=non-working population/working population) DR= birth rate and death rate,

children (<15): 32% (_ing) 17% (_ed), DR in –ed is 50%, in –ing: 90%
67
-
4
Only few developing countries have
completed the demographic transition
(permanently low natural population
growth rates) whereas all developed
countries have.
- Most developing countries have high
population growth rates, on average> 1%.
Meanwhile, in developed countries, this
index is much lower, averaging <0.6%
(especially in countries with negative
population growth rates like Japan)
68
4
Population growth rate of Asian countries in 2018 (Source: World Development
Indicators, 2018)
Country Population growth (%)
Pakistan 2.06
East Timor 1.97
Cambodia 1.49
Viet Nam 0.99
Korea 0.48
Germany 0.3
Japan -0.2
69
4
High Rate of Population Growth
🡪 high dependency burden
Birthrates is sufficiently high as compared to

death rates 🡪 children under 15 make up
40% in developing countries as opposed to
20% in developed countries 🡪 overall
dependency is 45% in developing countries
as opposed to 33% in developed world
(Todaro M.P, (2006))
70
High Rate of Population Growth
🡪 High dependency burden
Country name Dependency Ratio (%)

Afghanistan 73
Bangladesh 60
Nigeria 69
Thailand 48
Mexico 54
Indonesia 51
Korea 37
United States 51
China 36
Singapore 39
⇨ dependency rates in developing countries are mostly higher than 50%

while dependency rates in developed countries are around 35-45%
71
4
Impacts of high rate of population growth:
(1) high pressure on natural resources (environment)

and facilities in residential regions,
(2) high dependency rate 🡪 workers feel less
encouraged to work hard,
(3) A number of negative social impacts
72
4.1.6 Greater social fractionalization
73
4
Ethnic and religion fractionalization of countries in 2018

Country Ethnic fractionalization Religion fractionalization
India 0.4182 0.3260
Iran 0.6684 0.1152
Phillipines 0.2385 0.3056
Netherlands 0.1054 0.7222
United Kingdom (UK) 0.1211 0.6944
United States (US) 0.4901 0.8241
Egypt 0.1836 0.1979
Source: The Historical Index of Ethnic Fractionalization (HIEF) dataset

4.1.7 Larger rural population & rapid
migration to cities
75
Larger rural population & rapid migration to cities
76
Larger rural population & rapid migration to cities or other countries
77
4.1.8 Lower levels of industrialization
78
4
Lower levels of industrialization
Table: Competitive Industrial Performance (CIP) ranking, 2015 (Source: UNIDO)
The majority of developing countries are middle-ranking. Less Developed

Couuntries are predominantly found at the lowest end of the ranking, representing
the less competitive industrial economies. 79
4.1.9 Lower levels of manufactured exports
80
4
Table: Distribution of primary commodity export-dependent and non dependent
countries within each group, 2013–2017 (percentage) (Source: UNCTAD State of
Commodity Dependence 2019)
Primary commodity export-dependent is almost exclusively a developing-country

phenomenon. 91 per cent of low-income countries are dependent on their primary
commodity exports, compared with less than one third of high-income countries.
81
• More Q for brain storming
• What are the disadvantages of (1) export of
primary products and (2) dependence on
agricultural production?
82
Your ideas:
1. dependent on weather
2. demand for agricultural products maybe less
elastic
3. Lower profitability
4. Diminishing soil (environment in general)
5. Quickly spoil/decrease in quality
83
4
Impacts of dependence on primary exports/
lower levels of manufactured exports (1/2)
(1) Dependence on weather (uncertainty vs. risk), (2) high

competition pressures 🡪 high risk of substitution, (3) target
revenue, depend on limited resources, (4) discourage
development of other sectors, unsustainable long term
development (low competitiveness) (5) low elasticity of demand
for primary products (higher income would bring less increase in
Q demanded) (6) low wages for workers due to high competition
in the world market (the only way to increase competiveness is
labour cost reduction) (7) highly perishable products 🡪 low
price elasticity of supply (8) labour force is less encouraged to
enrich knowledge and skills, (9) low value added (10) exporting
jobs to other countries, (11 agrees with 3) intensive exploitation
of natural resources (12) disadvantaged relative prices 🡪 low
saving for investment
84
4
Impacts of lower levels of manufactured exports (2/2)
- Successful developing countries have often pursued export-led economic

growth policies, diversifying from primary commodities to manufactured
goods. Following this pattern, today’s developing countries have increased
their presence in manufactured goods exports. China’s surpassed those of
both the United States and Japan in 2006, as its share increased from 3.2
percent in 1996 to 9.8 percent in 2006. The share of manufactured goods in
the exports of other developing countries has also increased, with that of
SSA rising from 7.1 percent to 18.7 percent.
- Largely due to higher prices, but also because of new natural resource
discoveries and increased efficiency in production, developing countries also
increased exports of mineral fuels and chemicals, the two product groups
that exhibited the highest growth rates from 1996 to 2006. In 2006, MENA’s
mineral fuels exports reached $360 billion, nearly ten times the $36.9 billion
in 1996. Over the same period, SSA’s mineral fuels exports rose from $14.5
billion to $80.9 billion.
85
4.1.9 Adverse geography
86
4
Adverse geography
(1) Location: Geographical location plays a part in access to
markets.
-Landlocked countries face challenges in coordinating infrastructure
costs with their neighbors. Sometimes, political or commercial issues
limit transit to the sea.
(2) Climate:
Developing countries are primarily tropical or subtropical where it is hot,
the land is less fertile, water is scarcer, where diseases flourish.
Conversely, Europe and North America profit from huge tracts of very
fertile land, a temperate climate, and good rainfall.
(3) Stability: economic growth needs the stability of country.

Poorer countries are often hardest hit because they are more vulnerable
to the effects of disasters and have a lower capacity to cope.
87
4 As can be observed on the map, developing countries
are primarily tropical or subtropical. They suffer more
from tropical pests and parasites, endemic diseases
such as malaria, water resource constraints,…
Adverse
geography
88
4.1.10 Persistent market imperfections
89
4 Persistent domestic market imperfections
Limited institutional development in areas such as:

• Banking and insurance
• Law and enforcement
• Standard setting institutions (engineering, medicine etc.)
• Information gathering and dissemination
• Information asymmetries
🡪 high transaction cost (costs incurred in negotiating or enforcing
a contract or agreement)
Markets that are commonplace in developed economies (bond

markets, mortgage markets) do not exist or work very imperfectly in
these economies🡪 Limit the ability of these countries to compete
in the production of certain goods and services due to limited
investment/mobilization of capital for investment
90
Persistent market imperfections: data (1/2)
Those are examples of countries with relatively sophisticated and deep

financial markets, for example with big pension funds and with sovereign
bond listings and a wide range of financial products.
91
Persistent market imperfections: data (2/2)
Countries such as Senegal, Cameroon, Ethiopia, and Angola are at the

bottom of this ranking. Their financial markets are shallow depth,
fragmented, and there’s a weak domestic investor capacity and essentially.
92
4.1.11 Lower bargaining power in
the world market
93
4
Low bargaining power in the world market
• Most of developing countries are small or

economically weak and have limited bargaining
power in international institutions and other forums
• Eg: despite being the no 1 coffee exporter,
Vietnam cannot decide the price of coffee.
Vietnamese farmers have to accept the low price
from New York or London coffee trading center.
94
4 Dependence on former
colonial markets
• Most of these countries remain in rather subservient

relationships with former colonial powers
• Often dependent on aid transfers and other historical
economic and cultural linkages
• Eg: A study in 2010 proved that colonial powers had
malicious effects on human development even centuries
after they were discontinued (Reading material Todaro,
Chapter 2, Box 2.3: The Persistent Effects of Colonial
Forced Labor on Poverty and Development )
95
4 Highly vulnerable due to ability
to cope with natural disasters or
facing “brain drain”
• Greater likelihood of financial and other economic crises and

limited ability to mitigate against these and more natural
disasters etc.
• Danger of “brain drain”
• Eg: LDCs suffer the most from COVID pandemic because
they are export-dependent and have underdeveloped health
system OR by the late 1980s, Africa had lost nearly one-
third of its skilled workers, with up to 60,000 middle- and
high-level managers migrating to Europe and North America
between 1985 and 1990. The Philippines lost 12% of its
professional workers to the United States, and 60% of
Ghanaian doctors came to practice abroad.
96
4
Suggested answer:
Economic dependence leads to:
• dependence in other aspects
• Low negotiation power in the global markets or
in any cooperation, which in turn, re-enforce the
economic dependence or disadvantageous
economic order
• Failure to attain sustainability in development
…
97
Colonial legacies &
unequal international relations:
case studies
98
Colonial legacies & unequal international relations:
case studies (1/2)
1. The United States imposed the embargo because according to the US,
Cuba nationalized the assets of American companies during the
Revolution. The United States embargo against Cuba prevents American
businesses from conducting trade with Cuban interests.
2. North Korea has been embargoed and sanctioned since the 1950s by the
United States and other countries such as Australia, China, Japan, etc.
North Korea is banned from all exports of coal, iron, lead, and seafood.
The sanction also imposed restrictions on North Korea's Foreign Trade
Bank and prohibited any increase in the number of North Koreans working
in foreign countries.
3. On 16 December 2020, the United States labeled Vietnam and 11 other
countries as currency manipulators. The Trump administration used the
“currency manipulation” label to gain several strategic benefits as part of
its sanctions diplomacy.
99
Colonial legacies & unequal international
relations: case studies (2/2)
4. Huawei - China’s biggest telecommunications company has been banned
from the US since May 2019. The US accused Huawei (without any hard
proof) of using its products to spy on other nations. The US also
announced that Huawei and several other Chinese companies were now
on something called the Entity List. Companies on this list are unable to
do business with any organization that operates in the United States.
5. The United States drops Vietnam off the developing countries list
although Vietnam’s GNI per capita for 2020 was $2,660. If Vietnam were
removed from the list, Vietnam would face stricter conditions on
environmental protection, labor rights, and human rights. Besides,
Vietnam would need to be more careful to avoid anti-dumping and anti-
subsidy investigations even if the government subsidizes less than 2%.
6. In 2016, the US imposed anti-subsidy duties on Vietnamese shrimp
because the US believed that Vietnam’s shrimp exporters have a subsidy
from the government to have lower prices than domestic shrimp. So
Vietnamese businesses that exported frozen shrimp to the US were hit by
the tax at a rate of 4.52 percent. This had a huge impact on the farming,
processing and exporting of Vietnamese shrimp.
100
4
To conclude: How severe is the poverty and
malaise in developing countries?
The common challenges that developing

countries are facing can be described as “a
vicious circle of poverty” from both demand
and supply sides
101
4 What are the characteristics of
Vicious circle from supply side...
Low
investment
Limited Low
savings productivity
Low
income
per capita
102
4 What are the characteristics of
Vicious circle from demand side...
Limited
size of
markets
Low Potential
productivity- investors are
>low income not
encouraged
No
incremental
investment
103
4
4.2 The diversity of developing countries
• The fact that these countries are all “less

developed” in some sense means that they all face
a common challenge of “development”
• However, this is by no means a homogeneous group

of countries and the nature of the challenges will
vary with the structural attributes 🡪 diversity come
shortly
104

The differences between developing countries (and, in a large
part, the nature of their growth experience) can be seen in
various aspects, including: diversity + developing countries
• Country size
• Historical background
• Resource endowment
• Ethnic and religious composition
• Public-private (FDI) mix
• Industrial structure
• Political and institutional structures
• Dependence on external economic and political forces
105

The differences between developing countries (and, in a large
part, the nature of their growth experience) can be seen in
various aspects, including: diversity + developing countries
• Country size
• Historical background
• Resource endowment (Đức Anh)
• Ethnic and religious composition
• Public-private (FDI) mix (cơ cấu nền kinh tế theo chủ sở hữu) Đức
• Industrial structure (cơ cấu ngành) Trà My: NN, CN, DV 10nc
• Political and institutional structures (VD nước cho slide 70) KLinh
• Dependence on external economic and political forces (Diệu
Hằng): case study (2 -4 cases) minh họa slide 71
106
4
4.2.1 Size differentials (1/2)
Country Surface area (thousand Population (million)

sq.km)
China 9,563 1,393
Brazil 8,515 209.5
India 3,287 1,353
Ethiopia 1,104 109.2
Nigeria 924 195.9
Paraguay 407 7
Vietnam 331 95.5
Nepal 147 28.1
Fiji 18 0.9 107
4
4.2.1 Size differentials (2/2)
• Large countries
• Tend to be more diverse (resources, ethnicity, religion etc),
more self sufficient and less trade dependent
• Diversity in production and consumption can be achieved
more easily.
• Economic growth is more internally driven.
• Ethnic and religious conflicts are more likely.
• Small countries
• Tend to be more uniform, less self-sufficient and more
trade dependent
• Less likelihood of internal discord.
• Openness becomes a necessary condition for
development (by any definition)
• Less economic diversity and therefore greater vulnerability
108
4
4.2.2 Historical experience: colonialism (1/2)
• Effects of colonialism varied with the colonial power, such as:

governance was administered by local people or expatriates:
the political and institutional structures were purely exotic or
impacted by local authorities/communities as well.
• The degree to which this process of adaptation has been
successful (or complete) has been also dependent on the
nature and length of colonization itself: the longer, the more
difficult to adjust after gaining independence
• The colonial heritage can also affect current economic
ideology: in spite of different geographical and demographic
diversity, Spanish and Portuguese colonies are sharing similar
economic and cultural institutions
109
4
4.2.2 Historical experience: colonialism (2/2)
Communism in Eastern Europe and Central Asia (as

well as parts of Asia) meant:
• The removal of basic institutions of capitalism (private
property, private banking etc.)
• Development of centrally planned economies
• Extremely large (and dominant) public sectors
110
4
4.2.3 Resource endowment (1/2)
• Mineral Exporters
• Mineral wealth is not easily translated into broad based economic
growth. These countries also tend to be more unequal.
• Oil Exporting Countries: Saudi Arabia, Venezuela
• Other Mineral exporters: Chile, Angola, Congo
• Land Resource Endowment

• Some countries are blessed with large tracts of fertile land while
others have either limited or poor land resources, such as:
Argentina – the pampas help the country have good cows and beef
111
Resource endowment: natural resources endowment
TOP 10 DEVELOPING COUNTRIES IN EXPORTING OIL (SOURCE: WB)

Indicator: Fuel exports (% of merchandise export)
INCOME DEVELOPING YEAR 1 YEAR 2
CLASSIFICATION COUNTRIES
Upper middle income Venezuela 98.7637295 (2012) 97.6778113 (2013)
Upper middle income Iraq 99.7872756 (2015) 99.9864851 (2016)
Lower middle income Iran, Isalamic Rep 71.0578867 (2017) 68.6777348 (2018)
Upper middle income Saudi Arabia 78.4307742 (2015) 77.5498204 (2016)
Upper middle income Kuwait 90.8951495 (2018) 94.3677881 (2019)
Lower middle income Nigeria 94.1137818 (2018) 87.0392933 (2019)
Upper middle income Kazakhstan 70.0328477 (2018) 67.0744158 (2019)
Lower middle income Angola 94.6912524 (2018) 92.4178099 (2019)
Upper middle income Quatar 86.1296229 (2018) 88.810566 (2019)
Lower middle income Congo 82.2174116 (2018) 83.939414 (2019)
112
4
4.2.3 Resource endowment (2/2)
• Human Capital Endowment

• Human capital endowment can come in various forms:
• A highly educated and skilled labor force
• India, Chile
• A large population
• China, India, Indonesia
• little of either
• Ethiopia, Chad
113
Resource endowment : labor force (1/2)
THE TOP 10 DEVELOPING COUNTRIES IN OWNING HIGH SKILLED LABOR
FORCE (SOURCE: WB)
Indicator: Labor force with advanced education (% of total working-age population with advanced
education)
INCOME DEVELOPING 2018 2019
Lower middle income Bolivia 79.5 82.599998474121
Upper middle income Brazil 81.120002746582 81.370002746582
Upper middle income Argentina 79.5800018310547 80.4100036621094
Upper middle income Dominican Republic 83.5199966430664 84.0899963378906
Lower middle income Honduras 86.3099975585938 83.4400024414063
Lower middle income Indonesia 81.9100036621094 84.1699981689453
Upper middle income North Macedonia 81.370002746582 81.0699996948242
Low income Mali 81.7200012207031 81.7200012208764

Upper middle income Panama 82.7600021362305 83.870002746582
Upper middle income Peru 87.1900024414063 85.8199996948242 114

Resource endowment: labor force (2/2)
TOP 10 DEVELOPING COUNTRIES IN OWNING HIGH SKILLED LABOR FORCE
(SOURCE: WB)
Indicator: Number of people
INCOME CLASSIFICATION DEVELOPING COUNTRIES 2019 2020
Upper middle income China 1.397.715.000.000 1.402.112.000.000
Lower middle income India 1.366.417.756.000 1.380.004.385.000
Upper middle income Brazil 211.049.519.000 212.559.409.000
Lower middle income Pakistan 216.565.317.000 220.892.331.000
Lower middle income Nigeria 200.963.603.000 206.139.587.000
Lower middle income Indonesia 270.625.567.000 273.523.621.000
Lower middle income Banladesh 163.046.173.000 164.689.383.000
Upper middle income Mexico 127.575.529.000 128.932.753.000
Low income Ethiopia 112.078.727.000 114.963.583.000

Lower middle income Vietnam 96.462.108.000 97.338.583.000
115
Resource endowment: fertilizer land
THE TOP 10 DEVELOPING COUNTRIES IN ACQUIRING FERTILIZER LAND
(SOURCE: WB)
indicator: Agricultural land (% of land area)
INCOME DEVELOPING 2018 2019

Low income Burundi 79.1666666666667 79.1666666666667
Lower middle income Ukraine 71.6191955808735 71.3306869175009
Low income Uganda 71.8880909634949 71.8880909634949
Upper middle Saudi Arabia 80.7694132642381 80.7693202275677
income
Low income Togo 70.2334988049274 70.2334988049274
Low income Syrian Arab Republic 75.8100528236127 75.8100528236127
Lower middle income Eswatini 71.046511627907 71.046511627907
Low income Somalia 70.3366595466573 70.3366595466573
Lower middle income El Salvador 71.1689189189189 71.3861003861004
Low income Rwanda 73.4373733279287 73.4373733279287
116
4
The mix of public and private sectors (1/2)
• Most developing countries have mixed economic systems but they have various
combinations of public and private sectors, and different degree of foreign
ownership in the private sector.
• A large foreign-owned private sector creates economic and political opportunities
but also cause potential problems
• A large private sector can allow for more rapid rates of economic innovation but
can perpetuate inequality
• A large public sector can be created based on the assumption that limited skilled
manpower can be best used by coordinating rather than fragmenting
administrative and entrepreneurial activities. A large public sallow for more rapid
resource mobilization and better income distribution but can lead to stagnation
and inefficiency.
• Large public sectors: Sri Lanka, Vietnam, Cuba, Tanzania
• Large private sectors: : Chile, South Africa, Colombia
• Latin American and Southeast Asia have larger private sectors than South Asia due
to historical circumstances and political ideology
117
4
4.2.4 The mix of public and private sectors (2/2) (source: WB)
China % India % Indonesia % Ukraine %
Public sector 242,000 1.5 71,035 6.2 115 1.4 3,300 0.18
Private sector 15,610,000 98.5 1,072,257 93.8 816,000 98.6 1,804,660 98.82
Total 15,852,000 100 1,143,292 100 816,115 100 1,807,960 100
Brazil % Thailand % Cambodia %
Public sector 418 0.1 56 0.1 150 0.25
99.7
Private sector 6,300,000 99.9 3,077,822 99.9 60,000
5
Total 6,300,418 100 3,077,878 100 60,150 100 118

4
4.2.5 Ethnic and religious diversity
Ethnic and religious diversity may make it more

difficult to develop a national consensus and, at worst,
lead to conflict
• Religious diversity:
• India
• Ethnic Diversity
• Kenya, Malaysia, Vietnam
• Both
• Nigeria, Indonesia
119
4
4.2.6 Industrial structure
• Developing Countries vary from highly industrialized

economies to many with no significant industrial
development:
• NIEs of Asia and Latin America: Malaysia, South Korea, Taiwan,
Thailand, Singapore, Argentina Brazil, Chile and Mexico
• Industrialized economies of Eastern Europe
• Besides, there are agrarian economies of Africa, Asia and Latin
America
• Ethiopia, Cambodia, Nicaragua etc.
• Several countries (China, India) have large industrial sectors but
these are still very small as compared to the agrarian sectors (in
terms of employment, though not necessarily output)
120
Industrial structure in developing countries (Source: WB)
Country Agricultural sector (%) Industrial sector (%) Service sector (%)
China 7.7 37.8 54.5
Vietnam 13.9 34.4 41.6
Panama 2.1 29.5 65.0
Angola 10.2 61.4 28.4
Iraq 3.3 51.0 45.8
Azerbaijan 6.1 53.5 40.4
Central African 43.2 16.0 40.8

Republic
Somalia 60.2 7.4 32.5
Chad 52.3 14.7 33.1
Sierra Leone 60.7 6.5 32.9

121
Economic structure of developed countries and
developing countries (Source:WB)
Industrial sector Service sector Agricultural sector
Switzerland 73.7 25.6 0.7
Singapore 24.8 75.2 0
United Kingdom 20.2 79.2 0.7
Germany 30.7 68.6 0.7
USA 19.1 80 0.9
Central African Republic 16 40.8 43.2
Vietnam 34.4 41.6 13.9
Angola 61.4 28.4 10.2
China 37.8 54.5 7.7
Iraq 51 45.8 3.3
122
4
4.2.7 Political and institutional structures
• Developing countries vary from well functioning

democracy to dictatorship
• Each of these political systems present their own challenges and
opportunities
• While the determination and implementation of policy may be
easier in non-democratic frameworks, the development of a
national consensus may be more difficult.
• Institutional endowment may vary from highly
efficient legal, administrative and financial systems
(Taiwan) to near anarchy (Somalia)
123
4.2.7 Political and institutional structures
Indicators of political and institutional structures of developing countries
Countries Asia economies Africa Economies Latin Economies Latin America

Economies
China India Taiwan Vietna Senegal Egypt Botswa Argenti Venezu Mexica Brazil Chile
mese na na ela n
Political 5,00 6,67 6,67 5,00 4,17 10,0 7,5 0,83 7,5 0.67 6,67 7,5
Stability
Legal 6,73 2,59 5,55 6,5 3,39 3,41 4,05 5,02 3,97 5,39 4,00 5,11
Enforcement
of Contracts
Government 3,63 6,37 7,45 8,04 5,40 7,27 5,03 6,29 4,96 7,18 6,63 7,87
Intervention
Political 3 2 1 7 3 6 3 2 5 2 2 1
Freedoms
Civil Freedoms 6 3 2 5 3 5 2 2 5 3 2 1
Source: Economic Freedom of the World Annual Report 2012
124
4
4.2.8 Dependence on external economic and
political forces (1/3)
• Extent of dependence on foreign economic, social and

political forces is related to size, resource endowment and
political history.
• Most small nations are dependent on the developed world
• Dependence is not confined to economic matters but also for
other aspects such as education, governance values, patterns
of consumption and attitude toward life, work and self.
125
4
• Extent of dependence on foreign economic, social and

political forces is related to size, resource endowment and
political history.
• Most small nations are dependent on the developed world
• Dependence is not confined to economic matters but also for
other aspects such as education, governance values, patterns
of consumption and attitude toward life, work and self.
126
Case study 1: Trade war US – China

Over the years, The US has been the largest market for Vietnam’s exports, while China
has been the largest source market for Vietnam’s imports. As the US-China trade war
intensifies, it has not only opened up economic opportunities for Vietnam, but also
highlighted the constraints that the country has to grapple with.
In term of economics, Vietnam can export these products directly to the United States,
and thus gain more market share from Chinese products subject to tariffs when
exporting to the United States. At the same time, it can attract more FDI into these
industries, thereby creating more jobs, increasing exports, and improving Vietnam’s
overall trade balance.
Another positive impact of the US-China trade war is that companies in certain sectors
are either relocating out of China or diversifying from the Chinese market to Vietnam. In
addition, as trade tensions between China and the United States are expected to
intensify, the trend of foreign investors turning to markets such as Southeast Asia and
India will be accelerated.
One key negative impact is about Vietnam’s ability to fully absorb and take advantage
of the increasing FDI inflow from the trade war, due to Vietnam’s limited production
infrastructure as well as its quality of raw materials.
🡪 When there is a trade conflict (external economic), developing countries'
economy are seriously affected as a result.
127
political forces
Case study 2: VietNam and Australia

VietNam is one of the countries which has advancing relationship with Australia.
Therefore, the development of VietNam has a significant dependence on Australia in
some below aspects.
In term of political forces, Vietnam has natural affinities with Australia in the security
sphere, from their independent foreign policies and emphasis of the ‘rules-based order’
to regional maritime security issues in the South China Sea. Both countries also have an
established relationship with key economic and strategic player Japan
In term of economics, two-way trade now exceeds A$10 billion. Vietnam is among the
largest users of tariff preferences under the ASEAN–Australia–New Zealand Free Trade
Area, an indication of its increasing trade with Australia.
In term of education, according to the Department of Foreign Affairs and Trade, there
are more than 22 000 Vietnamese students in Australia, the fourth-largest group of
foreign students. For example, RMIT University was the first foreign university to set up
a campus in Vietnam, and a growing number of Australian universities have partnered
with Vietnamese institutions
In term of Vietnamese local culture, there is rapidly growing demand for food (such as
high-end beef, wine, and dairy) which is imported from Australia’s market. These
producted are strongly recognized in VietNam’s market among increasingly affluent
consumers. 128
political forces
Case study 3: the United States and the embargo against Cuba
For nearly 60 years, the United States has enforced an embargo against Cuba, severely
restricting the flow of goods to the island. Most US companies are forbidden from dealing with
Cuba, and various US laws punish foreign companies that do business in Cuba. The restrictions
are meant to economically squeeze the island and create enough discontent within Cuba to
force the ruling Communist Party to either significantly reform or step down. This embargo has
made a serious effect on the development of Cuba. It is estimated that US had an embargo
against Cuba in 60 years made a loss of more than $1 trillion on Cuba’s economy.
In term of politics , developed countries through globalization also force developing countries
to depend on them. The fact that the US implements an embargo policy against Cuba as well as
other countries is a transparent evidence
129
5
5.1 How has the world been changing?
5.2 How are developing countries today compared
to developed countries in their earlier stages?
🡪 Whether developing countries can adopt
development path of the developed countries
130
5
5.1 How has the world been changing?
The world been changing dramatically:
globalization
What is economic globalization?
• “Globalization is the integration of national economies into the
international economy through trade in goods and services, direct
foreign investment, short-term capital flows, international
movement of people and flow of technology” (Perkins, 2006, p.9)
• “Globalization is the pervasive decline in barriers to the global flow
of information, ideas, factors (of production) (especially capital and
skilled labor), technology and goods” (Kaplinsky, 2001, p.14)
• “Globalization is much more than internationalization: it implies
functional integration between internationally dispersed activities”
(Gereffi, 2002, p.3)
131
5
More specifically, the world has been changed
as follows:
• Global trade increased rapidly, transportation & communication costs
fell sharply; global production networks emerged; higher extent of
integration with global markets
• Capital move more quickly and easily: developing countries can utilize
foreign capital (but danger of financial crisis in case local financial
institutions are weak and foreign capital is withdrawn quickly)
• Technology can make ideas and information spread more quickly and
developing countries can engage in service provision via internet or
telephone lines
• There have been substantial demographic shifts toward lower
population growth rates in many countries🡪 pressures on pensions
and other social programs
• Many low-income countries have adopted democratic political systems
since 1990s, but the impact of the move on economic development is
still controversial
• The spread of diseases, especially HIV/AIDS, threatens development
progress in many countries. Why? Answer:…. 132
5
5.2 How are developing countries compared to
developed countries in their earlier stages?
• The situation of developing countries today differ
significantly from that of developed countries when they
start their stage of modern economic growth. Nine
significant differences can be identified.
133
5
5.2 How are they compared to developed
countries in their earlier stages?
The nine aspects are...
• Physical and human resource endowments
• Relative levels of per capita income and GDP
• Climate differences
• Population size, distribution and growth
• The historical role of migration
• The growth stimulus of international trade
• Basic scientific and technological research and development
capability
• Stability and flexibility of political and social institutions
• Efficacy of domestic eco. institution
134
5
5.2.1 Physical and Human Resource Endowments (1/2)
• Developing countries today have less natural

resources as compared to developed countries
when they began their rapid economic growth.
Only a few are endowed with supplies of
petroleum and other minerals.
• Some countries having abundant natural resources
face limit of capital investments to exploit or to
sacrifice substantial control to get external
financing
135
5
5.2.1 Physical and Human Resource Endowments (2/2)
• There is substantial gap regarding HR endowments.
This weakness hamper the exploitation of natural
resources to sustain long-term economic growth.
• HR development gap (idea gap) + physical object
gap = technology gap🡪 low capacity to generate
economic value.
(HR are human characteristics that raise a worker’s
productivity; HR depends on worker’s knowledge, skills and
attitudes)
136
5
5.2.2 Relative levels of income per capita and GDP
• Present developing countries: having much lower levels
of real per capita income + having to grow and develop in
a more interdependent world = disadvantage become
more severe. (a metaphor of the income levels between
these two groups of countries…)
• Such economic difficulties make these poor countries
sometimes determine or desire to grow at any cost:
making a trade off between current survival and long
term improvement in levels of living
137
5
5.2.3 Climatic differences
• Most of developing countries are located in tropical zones.
Heat and high humidity discourage workers to work hard or
to be creative.
• Tropical climate bring about danger of spread of diseases

costs for remedy or prevention
138
5
5.2.4 Population size, distribution and growth
• Relatively higher population growth (2,5 to 3% as compared
to less than 2% for developed countries in the past).
• More importantly, population growth in developing
countries nowadays is exogenous (supported by foreign
aids in health care and others), while in developed
countries it was endogenous (induced by accelerated eco.
growth in the economy)
• Population concentration means low person to land ratios
🡪 low labor productivity
• Relatively bigger population size
139
5
5.2.6 The growth stimulus of international trade
• Previously, developed countries can use free trade as

engine of growth as: export markets were expanding,
consequential local market expansion🡪 larger scale
manufacturing industries🡪 cheap capital costs 🡪
production expansion🡪 increase in imports 🡪 more
diversifies industrial structure...
• Present developing countries are facing: Deteriorating trade
position, declining terms of trade, being unable to afford
advanced techno, low ability to compete internally
140
141
According to the figure, in the earlier stage, developed

countries, which is indicated by high-income countries, has
enormous amount of export quantity. The export boom was
largely recognized in the period of 1860 to 1920, left others
group far behind. The expansion of export in earlier stage
benefits developed countries in various aspects, which is
considered to be the base of later development. One of the
reasons why developing countries can not apply mechanism
of developed one in earlier stage because of the change in
international trade. Tariff takes one of the main account for
the change in free trade.
142
5
5.2.7 Basic scientific and technological research and
development capacity
• Previously, in developed countries: mass application of

technological innovations 🡪 high productivity 🡪 economic
growth 🡪 investment in further R&D 🡪 more techno.
innovations
• Present developing countries: (1) low financial resources for
investment in R&D and (2) dependence on rich countries for
technologies that do not match their resource endowments
143
5.2.7 Basic scientific and technological research and development
capacity
The above diagram has shown the percentage of R&D expenditure of 4 developed
countries and have developed from earlier stages. It was indicated that they have
increased and focused more on R&D to find out more new innovations and improve
productivity and speed up their development over years. 144
5.2.7 Basic scientific and technological research and development
capacity
Research and development expenditure (% of GDP) in some years (Source: WB)
Year US Japan Colombia Thailand Lithuania

1996 2,4418 2,7650 0,2992 0,1191 0,4915
1998 2,4967 2,9602 0,2774 0,1274 0,5237
2000 2,6205 3,0017 0,1060 0,2447 0,5848
2010 2,7404 3,2539 0,1957 0,2564 0,7834
2013 2,7252 3,4741 0,2554 0,4382 0,9508
In the above table which shows the percentage of R&D expenditure (% of

GDP) in some years, there are 2 developed countries: United States and Japan
and the rest are 3 developing countries: Colombia, Thailand, Lithuania. We can
see that, there is a dramatic increase of capital in investing R&D from 1996 to
2013 of all these countries. However, the gap of capital in R&D expenditure
between developed countries in the past and developing countries today is
quite big.
145
5
5.2.8 Social and political institutions
• Previously, developed countries: independent, politically

unified societies, fully devoted to economic development
• Present developing countries: being either distracted by
internal wars or externally influenced, no full concentration
on economic growth
146
5
5.2.9 Efficacy of domestic eco. institution
• Previously, developed countries: institutions are more

transparent; ensure property rights, low cost, effective and
rapid access to dispute resolution such as contract
enforcement through courts
• Present developing countries: unclear institutions, outdated
institutions imposed by former colonizers, and difficult to
change 🡪 discourage business development and
innovations; result in low investment and high transaction
costs
147
5
A very easy Q to close our class today

• Can historical economic growth experience of
developed nations in their earlier stage be applied
in developing countries today? Why or why not?
148
Revision Qs
1. How can you describe the disparity in global income distribution?
2. How countries are classified? Briefly explain
3. What terms are used to refer to the group of countries in the focus of development
economics?
4. Can you show the difference between a self-sufficient economy and a commodity
one?
5. What aspects can show structural changes in development process?
6. What should be the impacts of depending on agricultural sectors and primary
exports?
7. What can be the impacts of colonial background and late independence on current
and future development?
8. Describe the vicious circles of poverty from both demand and supply side
9. Describe the common characteristics and diversity of developing countries
10. Can developing countries adopt the development paths of developed countries?
Why or why not
149
Các khía cạnh thể hiện sự khác biệt giữa….
1. Quy mô (số lượng bò; vốn/chi phí đầu tư): lớn/nhỏ
2. Công nghệ sản xuất và bảo quản sản phẩm (ứng dụng): hiện
đại/thô sơ; Vệ sinh an toàn thực phẩm (làm vệ sinh trước khi
khai thác sữa): cao/thấp
3. Quy định của pháp luật (Law enforcement and law
conformity) và sự tuân thủ pháp luật liên quan trong quản lý
lượng cung (quota sữa, số lượng bò): có/không và cao/thấp
4. Lao động (tỷ lệ vốn/lao động): Cao/thấp
5. Năng suất lao động (số con bò/số sản phẩm trên 1 lao động):
2vc (70 con bò) vs. 7-8 lao động (7-8 con bò)
6. Giá thành sản xuất 🡪 giá cả thị trường: thấp/cao
Thuật ngữ: (i) kinh tế tự cung tự cấp vs. kinh tế hàng hóa; (ii) sản
phẩm vs. hàng hóa (cây hàng hóa=cash crop)
Kinh tế phát triển_T Việt

Một số câu hỏi liên quan đến Chương 1
1. Hãy so sánh doanh nghiệp/trang trại tại nước phát

triển và tại nước đang phát triển
2. Hãy nêu những thuận lợi/bất lợi của lịch sử là
thuộc địa và việc dành độc lập muộn đối với sự
phát triển của các nước đang phát triển
3. Hãy nêu bất lợi của việc (i) phụ thuộc vào sản xuất
nông nghiệp và (ii) xuất khẩu sản phẩm thô (chưa
qua chế biến)

Câu hỏi suy nghĩ thêm (BTVN)
4. Tại sao các nước thuộc đối tượng nghiên cứu của KTPT
lại thường được gọi là “các nước đang phát triển”?
5. Hãy mô tả vòng luẩn quẩn về nghèo đói tại các nước
đang phát triển
6. Tại sao cần môn KTPT? 🡪 môn kt học truyền thống có
những giả định gắn liền với hoàn cảnh, đặc điểm của
các nước phát triển, ko phù hợp với nước đang pt
7. Môn ktpt có mục tiêu và mô hình ntn: (i) mục tiêu
không đổi nhưng (ii) mô hình (chỉ ra cách thức các
nước đang pt thoát nghèo) luôn thay đổi kể từ môn
học ra đời.
Câu 1. Các khía cạnh thể hiện sự khác biệt
1. Quy mô (sản lượng (số lượng bò); vốn/chi phí đầu tư, lao động):
lớn/nhỏ
2. Công nghệ sản xuất và bảo quản sản phẩm (ứng dụng): hiện
đại/thô sơ; Vệ sinh an toàn thực phẩm (làm vệ sinh trước khi
khai thác sữa): cao/thấp
3. Quy định của pháp luật (Law enforcement and law conformity)
và sự tuân thủ pháp luật liên quan trong quản lý lượng cung
(quota sữa, số lượng bò): có/không và cao/thấp
4. Lao động (tỷ lệ vốn/lao động): Cao/thấp
5. Năng suất lao động (số con bò/số sản phẩm trên 1 lao động):
2vc (70 con bò) vs. 7-8 lao động (7-8 con bò)
6. Giá thành sản xuất 🡪 giá cả thị trường: thấp/cao
7. Kênh phân phối/bán hàng: kênh chính thức (cty, đại lý vs. người
thu gom, chính người sx

Câu 2. Hãy nêu những thuận lợi/bất lợi của lịch sử là thuộc
địa và việc dành độc lập muộn đối với sự phát triển của các
nước đang phát triển
Thuận lợi:
- Nhận được đầu tư vào cơ sở hạ tầng
- Bài học về quản lý kinh tế, phát triển kinh tế (so sánh với học từ xa)???
- Tiếp thu văn hóa của nước đến xâm chiếm
Bất lợi:
- Dập khuôn máy móc các chiến lược phát triển???
- Nước đến xâm chiếm khai thác TNTN tối đa dẫn đến ô nhiễm (động cơ
chính để đi xâm chiếm nước khác)
- Mất thời gian ổn định đất nước trước khi đầu tư phát triển
- Nhân công bị bóc lột với giá rẻ
- Chính sách bất lợi liên quan đến giáo dục (cs “ngu dân”)
- Thâm nhập thị trường thế giới muộn, thậm chí cơ hội thâm nhập là
không còn/rất thấp
- Gặp bất lợi của kẻ đi sau về công nghệ
154
Câu 3. Hãy nêu bất lợi của việc (i) phụ thuộc vào sản xuất nông nghiệp và (ii)
xuất khẩu sản phẩm thô (chưa qua chế biến) (1/2)
(i) -Không kiểm soát được giá, chất lượng??? của sản phẩm cuối
cùng vì chỉ kiểm soát được nguyên liệu (GVC + ví dụ cà phê)
- Ko ks được chất lượng và số lượng chính hàng hóa mình bán do
sxnn phụ thuộc thiên nhiên (đến mức môn kt nông dân (peasant
economics) gọi rủi ro sxnn là “uncertainty” vs. “risk”
- Gây ô nhiễm môi trường vì dùng quá nhiều tài nguyên thiên
nhiên (đặc biệt TH quốc gia đặt mục tiêu doanh thu/lợi nhuận từ
XK)
- Năng suất có giới hạn do ruộng đất thường manh mún (nước
đang phát triển)
- Do thị trường tiêu thụ (lượng cầu + giá) ko ổn định: bất lợi 🡪 e
ngại đầu tư KHCN
- Hàng nông nghiệp (mau hỏng) 🡪 đến một thời điểm phải cung
với bất kỳ giá nào (thậm chí cho không) 🡪 quota sữa
155
Câu 3. Hãy nêu bất lợi của việc (i) phụ thuộc vào sản xuất nông nghiệp và (ii)
xuất khẩu sản phẩm thô (chưa qua chế biến) (1/2)
(ii) - Thu được lợi nhuận thấp (dù hàng NN hay hàng phi NN)
- Khó bảo quản, khó vận chuyển (cả bán trong nước: NN)
- Bị áp đặt hàng rào mậu dịch khắt khe hơn 🡪 nguy cơ mầm bệnh
bị lan tỏa (TH các sản phẩm nông nghiệp….)
- Ko có cơ hội áp dụng công nghệ + lao động để tạo thêm GTGT
cho sản phẩm 🡪 thu được GTGT thấp (VD chè, sô cô la…: xuất
chè thô: TEA (chè khô đóng bao: gói chè Lipton: 1,3 USD/50 gam
=26 USD/kg thành phẩm, VN xuất khẩu chè thô (khô): 1,6-2,5
USD/kg (<10% VA cuối cùng); thanh socola ngon: Đức, Bỉ, Pháp,
Thụy Sĩ….(1,6-2USD/100 gam = 20 USD/kg) 🡪 Ghana, Indonesia:
2,3-3,0USD/kg cacao
- tính đồng nhất của sp so với sp đối thủ cạnh tranh là cao => mức
độ cạnh tranh (trên thị trường) cao + sức mạnh đàm phán (của
bên bán) là thấp (VD chè)
156

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ECONOMIC GROWTH & DEVELOPMEMT

Chapter 1: INTRODUCTION TO DEVELOPING COUNTRIES

Instructor: Luong Thi Ngoc Oanh (Ph.D)

• Free grants, low- no-interest loans, ODA: capital = financial

2 How are countries classified?

3 What is the brief history of

4 What are the characteristics

5 How are they compared to

Characteristics of developing countries

Comparing developing countries today and

1.1 How are two halves of the world living?

NORTH AMERICA RURAL AREA IN ASIA

3. labour productivity higher Much lower

5. relationship between supplier and 1 seller- many buyers 1 seller-1 buyer (

8. Labour incomes 🡪 due to lower higher lower

12. Law enforcement and law conformity Higher No/low

14. prices/production costs lower higher

15. Stability in case of emergency in food lower Higher (+)

1.2. Some statistics on income distribution

High income Medium and low

GNI per capita GNI per capita

Country Atlas Country Atlas

Japan 41,580 43,760 Philippines 3,430 10,220

USA 65,910 66,060 Vietnam 2,660 7,890

UK 42,130 47,620 Bangladesh 2,010 5,190

Singapore 54,920 90,320 Uganda 800 2,220

Poland 15,270 35,940 Nepal 1,190 4,160

Mexico 8,480 19,860 Ethiopia 890 2,300

2. More than 70 percent of the world’s population lives in countries

3. The poorest 56 percent of the world’s population accounts for 2

5. The proportion of children who are underweight has been cut

7. Nearly a billion people entered the 21st century unable to read a

9. Infectious diseases continue to blight the lives of the poor across

2010 2012 2014 2016 2018 2020

• Bank publications with notes on the classification of

However, the index is not in any sense a comprehensive

• Developed countries are countries in the top quartile of the

• Developing countries consists of countries in the high group

Developing economies have standards of living lower than

World Bank UNDP IMF

Name of Low- and Developing Emerging and

No Name of imperial countries Name of colonial countries

⮚ Formerly being exploited by the rulers and bearing the

⮚ Affected by colonial heritage: economic, educational and

Suggested Answer (2/3)

⮚ Obtaining late independence and emergence in international

Suggested Answer (3/3)

⮚ Facing “disadvantages of late comers” in technological

⮚ Being induced/impacted by recent globalization process to

less-developed country more-developed country

The Third world the First & Second world

the South the North

4.1 Common characteristics

4.1 Common characteristics

Let’s start with an easy Q:

Nationwide, low levels of living means low income, inequality,

VIETNAMESE WORKER’S PRODUCTIVITY

= 2/5 compared to Thailand