Trade-centred Approaches to Poverty Reduction

Question:

In the context of the current race to meet the MDG goal of eradicating extreme poverty by 2015, what advantages and disadvantages does the global community face in advancing trade-centred approaches to poverty reduction, as opposed to an agenda focused on aid.

In the 2009 Millennium Development Goals Report released earlier this year, the Secretary-General noted that important progress has been made in the attempt to eradicate poverty, but yet there are still many successes on which to build. Furthermore, movement toward that goal was too slowly”. (website address)

`The world’s least developed countries hold 12 percent of the world’s population but account for less than one percent of global trade so expanding trade with and among developing countries is a critical driver of economic growth and poverty reduction because it encourages entrepreneurship, human resource development, technology transfer (including access to the internet) makes global partnerships easier, technological innovation and good governance all these which are necessary.

“A new global and regional trade environment presents the Caribbean countries with critical challenges, but also many opportunities to reposition itself as a growing and competitive region, translating into significant economic and social gains,” Trade must always be reciprocal

However, global integration is being conducted in a context of macroeconomic and financial imbalances. The region experienced large current account and fiscal deficits, as well as high levels of indebtedness, which in the past, slowed trade reforms and are currently a major concern in the evolving trade environment. These macroeconomic and financial imbalances are exacerbated by the current economic crisis.

A trade-centred approach to eradicating poverty thus takes into consideration using import and export strategies that include making sure those goods and services are in alignment with worldwide. Trade-centred takes into consideration the skills and the services of the entrepreneur, wholesaler, distributor and manufacturer.

The Webster’s dictionary defines as entrepreneur as : “One who undertakes to start and run an enterprise or business, usually assuming full control and risk” So that one has to recognize that there is an opportunity to find solutions for needs, wants, problems and challenges). Entrepreneurs must be empowered to believe that they can make the difference in advancement of their economy and that they are a part of the development process to form sustainable partnerships for the future. If trade links cannot be developed internationally then certainly attempts have to be made intra-regionally.

It is hoped that the greatest resource, the people, would become more independent in owning a business would make the individual more independent and the profits would not have to go back towards paying back not the loams but the exorbitant interest on the loans. Individuals feel empowered when they have sustainable employment. But this employment should not be done in a haphazard manner but should be done with such amenities as a business plan. Financial Management, Human Resource Management and Risk Management would have a lot to play even as market research is done.

Regional Institutions can be strengthened as a mechanism of trade by the coordination of regional objectives and activities with national bodies. National institutions are often those who are in charge of the trade we must try to reduce the trade costs. The Business and regulatory environment, the national Insurance and the Business levy situation must be willing to look at the changes in customer needs so that the reevaluation of the product life cycle must be regarded. The environment must continuously be one that there is going to be some investment.

While many Caribbean countries (most notably Trinidad and Tobago, Dominican Republic, and Jamaica) have undertaken policy measures to improve their trade policy, important weaknesses remain in five major areas is the proper establishment of customs procedures and administration. Additionally, the legal framework for businesses including taxation and monitoring must be properly in place because there is going to be active competition with other members of the society. Groups must be authorized by the government and regular training and workshops must be done to be able to reach to government standard (The Trinidad and Tobago Bureau of Standards) that again must be regulated so that there would not be any shady or illegal activity going on.

The training of youth is a factor which is critical if Micro Enterprise development is to be an issue. Micro Enterprises include very small businesses that employ about 1 to five persons. The establishment of Micro Enterprises is one strategy that is use by the MDGs in the eradication of poverty.

The sizes of micro enterprise businesses may be small but altogether they make up the fastest growing of the private sector that should be a vital contributor of the social and economic creating new jobs every day climate thus creating a large part of the GDP. They are engines of the creative capacity of our economy by creating internal trade which would ultimately lead to regional and global trade.

A person becomes more creative in order to be a step ahead of the competition and this uniqueness sets the entrepreneur apart while he seeks to align his products to quality standards. Competition, though, must be comprehensive and everyone must be willing to participate in competition policy. We would seek to capitalize on each individual’s strength and not their weakness although we know that the business environment is very competitive

The government takes the opportunity, as the strength of the economy increases, to want to encourage investments from international bodies so that technology from other countries could be included and that persons may even want to get in.

A country must decide which are there niche markets and using money management strategies could apply them to certain goods. Focus must be done on niche markets and knowing what other countries may have to offer when we do an analysis and know the competition. Create a workforce that is able to sustain that type of environment after thorough research has been done but we must be willing to work hard and not look for handouts.

However, failures that may be as a result of overinvestment, poor credit arrangements and poor inventory management must be avoided at all costs. A vision and a mission must be established.

The disadvantage of going into business would include taking along of risks, meaning that it is sometimes a lonely scene where invariably one has to work long hours. However, a company has to be careful as global competition that could be dangerous for the company. Next, one has to be wary of barriers to trade that could influence the profitability of entering a trade relationship with partners in a particular area. There are lots of risks that are involved in engaging in such an act that includes the loss of initial start-up capital.

Funding Options:

The whole idea of an aid focused agenda according to the Aid Guide comes with the idea of richer countries trying to do their ” moral duties)but instead they are really seeking their own strategic interest which can include the desire to have some say in a country’s political affairs. Thus in order for the Millenium Development Goals to be accomplished, they must be accompanied by the monitoring of donor’s intentions.

A lot of people clamour for aid for aid for impoverished nations but it only seems that aid has allowed the poor to get poorer where there is a situation of corruption and theft of government funds that creates a spiraling effect of inflation and a lack of investment into the country and thus a slower growth of the economy. Moyo’s idea of aid could entrap a country as the famous Bob Marley song quoted that we need to emancipate ourselves from mental slavery

Aid may come in many different forms inclusive of money that is usually a loan, or receiving country must spend the “gift” on buying the donor county’s products. Loans, though, come with many restrictions that are attached to getting the loan though you can raise capital even within a particular country without having to seek additional funding from outside sources.

Next, more than half of foreign aid is usually military, is often utilized to fight the donor’s enemies and terrorists or is given because there is that desire to buy that country’s vote in UN, likewise other future actions. Still, countries tend rather to go this way for many different reasons including the reason that it is an easy source of financing that is readily available to the public.

Additionally, though most African nations claim that aid is needed for countries to get a head start in achieving so many other factors inclusive of the development of aid, there must be proper allocation of resources and monitoring should also occurs to make sure that funds are used the way that they have been designated to be used. Then we could use what is known as the traditional method of the Sou Sou. This started as a part of the African tradition could even continue in our traditional society today as this starts with persons.

Aid should not only come in the form of money but it should also be in the form of making technology available and transferring technology to various groups so that the eventually the knowledge and the skills and the training could be transferred

Aid, whether or not it is given for any developmental purpose costs the taxpayer and raises national debt. Furthermore, it reduces the receiving country’s ability to produce the items they get from us (that means if we send them food, then their farmers wont be able to sell their crops for higher prices) Financing for debt and equity capital is that which is seen as an investment that does not incur any interest and this could be money. Contributors must be able to get something out of the financing that they are putting out according to Management Consultant Sajjad Hamid

Even using the Micro Enterprise Development Model, aid for individual business can take the form of venture capital may be another option that is available where management could have a say in how the company is run but this idea may not have a measure of enthusiasm for most who may be the recipient of such offerings.

Microfinance Institutions that are not usually regulated by the government and that are viable options for businesses for small loans, savings, insurance and other financial products for low-income families. This is where credit unions come into play. The evidence linking public investment to private capital formation and growth have grown significantly in the past few years

Young people, have to be motivated to engage in agricultural production in every country. There are approximately 6.1 billion people worldwide. The Agricultural Development Bank (ADB) covers the agriculture sector with low interest loans and financing for farm projects with little or no initial positive cash flow. Why don’t we encourage our populations to start planting rice and wheat since for our populations as required in the daily diet so that the global community could be fed and that each country would not have imbalances in trade?

Products however do not need to be a product that is manufactured itself although once this is done there could be more profits but this could also be a product that needs to be distributed. Each country must be clear on what the funds are to be used for if they are to assess aid and there must be a personal evaluation of ones financial position.

There must be that ability to negotiate the terms of a contract instead of just accepting that contract. If the whole idea and the entire concept of finding what must be traded needs to be discovered then the whole environment must be scanned for the product to that is to be sold to be discovered. Small changes could make big differences.

Some disadvantages of using foreign aid are that it forces an individual to remain in a dependent state meaning that instead of an individual seeking creating alternative they search out excuses to obtain more money. The acceptance of foreign aid can have the effect of opening a can of worms as it allows the international lending agency such as the International Monetary Fund (IMF) to interfere in the political matters of a country. Furthermore, if for some strange reason, the loan cannot be repaid that the country may have to give up some of its resources as collateral for the loan.

Many persons think that it is the humanitarian thing to do to offer aid but can this be more of a hindrance than anything else.

Thus in evaluating whether or not a trade-centred approach is better it can be said that a country will always be better off if this is if they can develop their trading capabilities instead of using more developed countries as their lifeboat. I am not saying that they should not advocate for help if this is going to happen then the legal framework must be strengthened ultimately for sustainable trade to continuebut at the same time this should not be a situation that lasts for an extended period of time.”if aid for trade was urgent in 2007 but it is essential today. It is the investment that will allow many developing countries to prepare to exit the crisis by enhancing their trade capacity.” He spoke on Jul 6 at the opening of the second Aid for Trade Review under the heading of “Maintaining Momentum”.

REFERENCES

Dambisa Moyo. DEAD AID: WHY AID IS NOT WORKING AND HOW

THERE IS ANOTHER WAY FOR AFRICA. London: Allen Lane, 2009.
188 pp. £14.99

WORLD: TRADE ALONE NOT A CURE FOR POVERTY, CLAIMS REPORT
Isolda Agazzi. Global Information Network. New York: Jul 9, 2009.

TRADE CAPACITY BUILDING- EXPANDING TRADE WITH, AMONG DEVELOPING COUNTRIES IS CRITICAL DRIVER OF ECONOMIC GROWTH AND POVERTY REDUCTION
US Fed News Service, Including US State News. Washington, D.C.: Jul 8, 2009

CARIBBEAN/NEW WORLD BANK STUDY: TRADE INTEGRATION, KEY FOR GROWTH AND POVERTY REDUCTION
US Fed News Service, Including US State News. Washington, D.C.: Apr 6, 2009.

Financing SMEs: Look & Ye Shall Find Business Day Newsday Thursday September 24, 2009 Pg 16, Sajjad Hamid
Roads out of Poverty? Assessing the Links between Aid, Public Investment, Growth, and Poverty Reduction Pierre-Richard Agénor,* Nihal Bayraktar,** and Karim El AynaouiThis version: December 23, 2004

http://online.wsj.com/article/SB123758895999200083.html By: Moyo, Dambira. Wall Street Journal – Eastern Edition, 3/21/2009, Vol. 253 Issue 66, pW1-W2, 2p, 2 color, 3 bw; (AN 37020959)
Database: Academic Search Complete

OneWorld.net Aid Guide http://uk.oneworld.net/guides/aid?gclid=CO2B8aSkmp0CFRpdswodORx12A