economic crisis malaysia
economic crisis malaysia
Managing Global Economic Challenges
MANAGING GLOBAL ECONOMIC CHALLENGES
INTRODUCTION:
The modern day global economy is a highly interconnected one. With the increased connectivity the challenges before the global economy has achieved an altogether new dimension. On one hand is the positive impact of instant access to the global information network. On the other hand, market volatility is using the economic inter linkage channels to spread like wildfire.
The International Monetary Fund revised down the estimated world growth rate for 2008. This was a fall out of the US sub prime crisis. At present economies through out the world are facing stock market volatility and rising unemployment figures as an after effect of the US crisis.
As per estimates, around one billion people worldwide survive on less than a dollar per day. Over one billion do not have access to clean water. Basic sanitation facilities are absent for around 2.4 billion people. Around 5 million children worldwide die from starvation.
CHALLENGES BEFORE THE GLOBAL ECONOMY:
To sum up, the challenges before the global economy are by no means simple. Timely intervention in the form of appropriate policies and fiscal help from the world bodies are needed to tide over the crisis. No less important is the political will needed for the seamless implementation of the policies.
1.Poverty
-
- Sub-Saharan Africa has been witness to the most severe form of poverty. Nearly 50% of the population survives on less than $1-a-day. Malnutrition, internal conflicts, dreadful diseases like AIDS and improper governmental measures are the main reasons behind this extreme poverty.
As far as poverty goes, it is the Southeast Asia that comes next to sub-Saharan Africa. Around 85% of the total population of the Southeast Asia survives on below $2-a-day.
Despite 50% of population living under $2-a-day, the number of poor people in Eastern Asia and Pacific has declined significantly in recent past. It is mainly due to the social and economic progress achieved by China over the passage of time.
When it comes to Latin America, inequality in income distribution resulting from poverty is a matter of great concern.
- Some 300 million of India’s people still live in abject poverty, and another 300 million hover precariously above the poverty line. One challenge is to reach the poor with programs and policies that work
- Sub-Saharan Africa has been witness to the most severe form of poverty. Nearly 50% of the population survives on less than $1-a-day. Malnutrition, internal conflicts, dreadful diseases like AIDS and improper governmental measures are the main reasons behind this extreme poverty.
2. Inflation
- Considering the failure of US sub prime market and the subsequent recession in US economy, controlling the increasing rate of inflation is the greatest challenge that the world is confronting for some time now.
- The Indian and Chinese governments are taking care of the inflationary situations very seriously. In Europe, interest rates have been maintained at higher side to keep inflation under control.
- Fiscal policy measures like reducing government expenditure and increasing rate of taxation can also be used to check inflation. Attempts are on to bring about regulatory changes to face the challenge of inflation.
3. Inequality
- Globalization is considered by many to be the main cause behind the perpetration of an increased income inequality in wide areas of the globe.
- However, an increased trade globalization has only worked towards the eradication of this inequality. The need of the hour is policies, which will ensure that the proceeds from technological innovation and globalization are distributed among the cross section of a country’s population.
- Developing countries are primarily agriculture based and they can promote agricultural exports for reaping the benefits of trade liberalization.
4. Climate change
- Environmentalists all over the world are trying their best to protect the planet from the adverse effects of climate change. The European Union has played a crucial role in these movements.
- The primary objective of the Convention has been to urge the developed nations to check the emission of greenhouse gas. The target regarding greenhouse gas emission that has been set in Kyoto Protocol needs to be achieved within the period of 2008-2012.
The European Climate Change Program or ECCP in another major initiative towards environment protection. - However, to control the emission of greenhouse gas it is necessary to create general awareness among the common people. Substantial change in energy system, use of environment-friendly technologies in production, alternative energy efficient fuels, minimum use of fossil fuels and change in the pattern of living are the key factors that can bring about positive changes in environment.
5. Rising food prices
- The urban poor will be affected the most due to this rising food prices. In most of the sub Saharan country, the common trend is that the farmers leave their land and head to other lines of production in the urban areas.
According to the World Food Program, the countries that are most affected are Eritrea, Gambia, Togo, Cameroon, Niger, Senegal, Zimbabwe, Haiti, Myanmar, Yemen, Cuba etc.
6.Trade”- key to lower food prices
- Opening up of economy or trade liberalization can help to reduce food prices.
- Different countries have adopted different measures of trade in order to deal with the escalating food prices. Saudi Arabia has resorted to import tax cuts on wheat from 25% to zero. Tariff is also decreased for dairy products, vegetable oil and poultry.
- India slashed its tariffs on maize and edible oils. Export of rice was also stopped leaving out the high value basmati.
- For the last 2-3years India has to fill the demand supply mismatch in food through imports. There are high exporting countries like Ukraine, which are also imposing export restrictions on its food products.
7. Agflation in the global economy:
- Structural changes within an economy are an important reason behind Agflation. There is a rise in per capita income in the populated countries like India and China. Consumption of food grains as feedstock has also increased.
- According to the International Grain Council, the world grain production would reach 1660m tones in 2008, which exceeds the previous year by 90m tones. Even then demand is likely to outdo supply.
- Inflation in the agricultural sector can be attributed mostly to crops like coffee, corn, wheat, and soybeans, sugar, cocoa and meat and poultry products.
8. Trend in demand for and supply of food grains:
It is estimated that the world population will rise by 800 million per decade till 2025. The production of food grains is expected to rise to 2.67 billion by 2025 so as match the demand level. It is also estimated that there will be a regional mismatch in the demand of food grains across different regions.
9. Role of internaitional organisations:
- The objective of international organization is to study, collect and propagate information, setting up of laws that are internationally accepted. The international organizations also help in cooperation between different countries by setting up negotiation deals between them. The international Organizations also help in technical assistance.
The International Organizations play an important role in collecting statistical information, analyzing the trends in the variables, making a comparative study and disseminate the information to all other countries.
There are some international organizations that perform certain supervisory functions. - The function of the international organizations is setting up multilateral or bilateral agreements between countries.
Another function, that has assumed importance in the recent times, is lending out technical cooperation to the member countries. - Amongst all the roles and activities of the international organizations, the most important is negotiating and setting up multilateral agreements. Minimizing the transaction costs can strengthen the cooperation between different countries.
10. Public health care and primary education:
The other challenge is to make public service providers, and the entire state apparatus, much more responsive and accountable to all citizens, especially the poor. Today, basic public services are deteriorating. These include such frontline services as public health care and primary education. And, the poor are the most affected
Response to the Challenges of the 21st Century:
- poverty reduction – providing opportunities for a better life for the poor. This challenge is particularly acute in Asia which is home to two-thirds of the world’s poor
- Ongoing globalization – Globalization opens up opportunities for developing countries, facilitating wider and faster access to capital, technologies, know-how and markets. On the other hand, globalization also comes with associated risks. Globalization may bring in financial volatility, and even economic and social disruptions. Asian countries should not, however, turn their backs to globalization. Instead, they should try to prepare themselves to ease the integration into the global market.
- Promotion of regional cooperation – Regional cooperation beyond national boundaries contributes to realizing economies of scale, enhancing complementarity among neighboring countries, and ensuring regional peace and stability.
Conclusion:
India’s GDP growth has soared from 5-6% a few years ago to 9% today. If this growth is sustained, as the 11th Plan hopes to do, average living standards will rise and poverty will be reduced. India will become a middle-income country in three years time instead of six, crossing the Bank’s current threshold of $875 per capita income to do so. Its per capita income will double in the next seven years, instead of ten. In fact, by 2025, India’s average per capita income could well surpass Thailand’s and reach where Malaysia is today. This will amount to creating fifty East Asian “miracles” within two decades. For a young Indian entering the work force today, this will be about the time she takes to reach her peak productive years.
Submitted By,
Ms. G.P.Divya
&
Ms. S.Padmavathi
Lecturers (M.B.A)
SSM Academy of Textile Management, Erode.
About the Author
G.P.Divya & S.Padmavathi
Lecturer,
SSM Academy of Textile Management, Erode.
Aren’t you people in Malaysia, Singapore, Brunei,Vietnam, most fortunate not troubled by natural disasters…?
…..poverty, and serious economic/political crisis?
Positive answer gets BA fast!
Actually NOT so.
Malaysia was recently troubled by political crisis between the ruling party, the UMNO, and the opposition parties led by Anwar Ibrahim. It also suffers from pervasive racism against the resident Chinese and Indians. It also had floods in Johor which killed lots of people.
Singapore was recently affected by the SARS and the Bird Flu.
Brunei was recently afflicted by their Prince Jefri’s lavish expenditures. As of now, the current government is somewhat scared for the future of Brunei, especially that forecasts predict that their oil reserves will be depleted within 25 years from now.
Vietnam is still recuperating from the Vietnam War, and its Communist government show to pity to those who are not members of the Party. Majority still live in deep poverty and their capital, Hanoi, is like a backwater to Southeast Asia. It also experiences several typhoons which lash the southern provinces from June to October.
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