What Is Globalization?

This word is shorthand for how our lives are becoming increasingly interwined with
those of distant people and places around the world – economically, politically,
culturally.
History:
The history of new mineral based global economy falls into 3 phases, defined with
reference to the degree of global centralization of power.
• First Phase
 1800-1913. POWER Concentrated
The first phase, lasting from 1800 to 1913, concentrated power—and, with
it, capital, technology, science and manufactures—in a small number of
Core areas, notably Britain, France, United States, and Germany.
Conversely, the greater part of the Periphery—nearly all of Asia and Africa
—lost its sovereignty to a few Core countries, was forced to open their
economies to Core capital, specialized in primary goods, and scarcely
experienced any improvements in the living standards of the indigenous
population.
• Second Phase
 1917-1980 Power Decentralization.
The global economy slowly entered into a second phase in the late 1940s,
although this process was initiated earlier with the Russian Revolution of
1917, when power was decentralized from the Core to the Periphery. On the
level of the economy, this decentralization reversed the earlier
concentration of manufactures in the Core countries, and produced
dramatic acceleration of growth in the dependent Periphery.
• Third Phase
 1980- Onwards. Power Recentralize.
Starting in the 1980s, however, power was again re-centralized in the Core
countries. Already, by the mid-1990s, this re-centralization had exceeded
the previous peak in the global centralization of power attained during the
late nineteenth century.
ECONOMIC
ASPECTS
What are Economic
Aspects?
The Ways which enables us to stand in a
Global Market.
Ways:
These ways can be agriculture, import
& exports, industries, foreign
exchange and a long way to go on.

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 Agriculture

Food Supply & Industrial Raw Material.

Agriculture supplies food and provides raw material for factories. Textile industry is
dependant upon cotton, jute, flax & wool. Needless to say food processing industries
get their raw material from agricultural fields. Rubber industry uses large
quantities of natural rubber.
Labor Force.
Agriculture absorbs a large no of labor force. There was a time when agriculture
was the major employer in most countries. This envious position was challenged
soon after industrial revolution (1769). In developed countries, farming has become
a minor employer where less than 10% of labor force is accounted for; by
agriculture but in developing countries, ratio is still very high.
Promoting Trade.
Agriculture plays an important role in international trade. All countries are not self
sufficient in food. Therefore, they import foodstuff from the countries which have
SURPLUS. Wheat from USA, CANADA, ARGENTINA & AUSTRALIA find
market in EUROPE & some other ASIAN countries. Tropical products like sugar
cane, tea, coffee, cocoa and tropical fruits go to AMERICA, EUROPE & JAPAN.
Many raw materials like cotton, rubber, hides and skin are produced in tropical
countries. Therefore, the two regions have established trade relations.
Supreme in Competition.
As a supplier of food, agriculture is supreme. In future also it is not likely to have
any competitor.

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 Import & Exports
Export
An approach to going global that involves making products at home and
selling them overseas.

Import
An approach to going global that involves selling products at home that are
made overseas.

Importance:
During the last 50 years, volume of world exports has raised 20 folds and volume of
world manufactured exports almost 40 fold, world output, on the other hand, has
grown only 7 fold.

Global Perspective
Dependence on Domestic Market not sufficient.
If we depend on domestic markets, we won’t be able to generate any foreign
exchange needed for imports to provide raw materials, components, machinery,
equipment to our industry and pay for petroleum products to keep our transport,
electricity and other economic activities running.
China: Most aggressive developing country.
There is no doubt that china has been the most aggressive among the developing
countries to promote global markets and become 5th largest exporter of the world.
But we should not forget that CHINA is also one of the fastest growing economies in
the world with par capita income doubling every 10 years and the real effective
power rising significantly every year.
Target achievement in 6 years.
In almost 6 years, we will be able to double the value of exports to china to 5 billion
annually.
Key to Progress
-strong public private partnership is key to success.
-china’s progress is all about encouraging foreign direct investment and joint
ventures for establishing commercial presence. So adopting this way, we can better
move on to further improvements and progress.
-trade links are better because TECHNOLOGY has improved. So there is no harm
to get connected and transfer technology from one country to another country.

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 Dumping
It’s a form of price discrimination. It takes place when monopolist sells a portion
of his output at very low price in international market and high price in
domestic market. In fact, the home market is controlled and protected while
international market is free.
Assumptions:
- Total output is not fixed and it can be varied.
- International market is perfectly competitive and domestic market is
monopolistic.
Is price discrimination beneficial for SOCIETY?
-Raising economic growth.
Beneficial if it helps in raising economic welfare, economic development &
economic growth.
-Reducing inequalities of personal income.
Beneficial if it helps in reducing inequalities of personal incomes i-e high prices
from rich class and low prices from poor class.
- Beneficial, when goods are exported at cheaper prices
than sold at home.
Profitable & beneficial when goods are exported at cheaper prices than sold at
home. This will help not only increase in foreign exchange but also outlet of
surpluses.
-Harmful, when it leads to mal-distribution of resources.
Harmful, when leads to mal distribution of resources i-e output, employment &
income are not maximized.
-Wastage of resource when prices are charged for smaller
quantities.
Wastage of resources when higher prices are charged for smaller quantities.

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 Empowering the poor
A snap shot of poor;
When there is shortage of water, those in offices get 1st, others with money
buy it & the POOR have to struggle or fight for their bucketful of water. This is
poor.
Poverty reduction projects:
- “Making the global economy work for all” is the goal of IMF according to its
annual report for 2003 and making the services worth for poor people is the goal
of WORLD BANK according to world development report 2004.
- The 1st is to eradicate extreme poverty and hunger, and halving the proportion
of people living on less than one dollar a day by 2015 and achieving universal
primary education and also to promote gender equality and empower woman.

Education for all

Education is the light in the darkness of ignorance.
Perspectives:
Education has a wide range of advantages for economical, social & political
development of a country. The positive relationship between economic
development and education levels and the impact of investment in education on
economic growth are well established. The transiting of world toward a
knowledge based economy is adding to the importance of human resources in
general, and of education in particular.
Where we stand???
-Figures obtained from survey reveal that PAKISTAN has been placed at the
144th position out of 175 countries in terms of human development index.
-PAKISTAN is among the 12 countries in the world that spend less than 3%
of GDP on education. In other words, PAKISTAN is ranked at the bottom 30
countries of the world. Net primary enrollment rate in PAKISTAN is at 46%, the
lowest in SOUTH ASIA. Even BANGLADESH, BHUTAN & NEPAL fare better
than PK in almost all key educational indicators.
Key to success:
The role of private sector needs to be better appreciated by the community.
Rather than be perceived as rivals, private sector should be considered as
partners in the domain of higher education. The GOVT. with its severe financial
constrains, is not in a position to carry the entire delivery system of quality
education all by itself. This situation is not likely to change in the foreseeable
future.

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 Industries
Textile & clothing is the largest industry and major foreign exchange earner of any
country. Its performance is directly dependant on cotton availability and its prices
in the domestic and international markets.
It must be kept in mind that the garment manufacturing is on continuous
RELOCATION. Investment goes to those countries where raw material & skilled
manpower are available and GOVT. follow market oriented policies. The countries
presently considered suitable for made up manufacturing are BANGLADESH,
VIETNAM, THAILAND & PAKISTAN. CHINA has already attracted the largest
investments.
To face global challenges
Exporters have to concentrate on the following basic fundamentals.
1. Increasing volume production
Increasing volume of production to cut down cost of production through ec9onomy
of scale using MASS PRODUCTION.
2. Integration of small units
Integration of smaller units through mergers and acquisitions.
3. Collective approach
Instead of working in isolation as an individual, collective mental approach would
be prerequisite.
4. More business & less profit
Industries are used to enjoy huge profits of their products. They would have to
compromise on the principle of MORE BUSINESS & LESS PROFIT.
5. Consumer demand & FASHION TRENDZ
Consumer demand also does matter. Most of the garments units produce for men
while a huge portion of the garment exporters comprise over women fashion
apparels. They have to bring in change for the ladies garments according to market
requirements.
6. Attractive foreign investors
The idea of developing textiles cities and garment cities aims at attracting foreign
investors.
7. Count strengths & remove weaknesses
In order to face emerging challenges, it is necessary to count the strength & remove
weaknesses. To remove all the smaller irritants and then come up with all the
stakeholders. A good effort was made in recent past by preparing “VISION 2005”.

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 Foreign exchange
The system by which one currency is exchange for another, enables international
transactions took place. Through foreign trade, developing countries can earn
foreign exchange by exporting surpluses & use this foreign exchange for the
import of those goods which promote economic development.
Recently STATE BANK OF PAKISTAN (SBP) has decided to replace the
existing money changers business by foreign exchange companies. The objective
of converting MC into EXCHANGE COMPANIES will not only make
remittance transaction fully documented but this will help curb the activities of
unauthorized money changers & HUNDI business.

E-business
E-business is any form of business exchange in which the parties interact using
electronic linkages. (Net based)
Tele shopping:
Tele shopping or home shopping is day by day becoming very popular with the
upper and a significant section of middle strata of the society. Big manufacturers
and traders are vigorously promoting it. Buyers can place orders for desired
goods from their cozy homes on telephone or e-mail. They do not have to stir out
of their homes and waste time and energy on traveling and going round shops.
Desired goods are promptly delivered.
Credit society:
An important feature of present-day globalization is the advent of consumer
credit society. Till the arrival credit cards, the purchasing power at a
person’s disposal and his ability to raise loans limited the extent of his
consumption. Credit cards have played a vital role in tremendously extending
this limit. A person can now buy goods and services even if he does not have
sufficient purchasing power at his disposal and the prospect of raising a loan
without difficulty. Credit cards have given enormous boost to consumerism and
pushed many a household into indebtedness.

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 Media
In global age, media is the biggest source to convey information from one part of
the world to another.
Forms:
Media have many forms to glue the world over all. it includes TV, FILM,
RADIO, PRINT MEDIA, CABLE & so on.

Aspects of media
Broader demographic audience reach.
In terms of category shifts, the current economic environment favors media with
a broader demographic audience reach.
More attractive to advertisers.
The above factor makes broad cast TV networks more attractive to advertisers
who will some resources away from cable even though collectively, cable now
attracts a larger audience. However, as cable networks begin to produce more
original programming, they will draw larger audience and vie for greater
ADVERTISING DOLLARS. According to a survey, it is guessed that US
broadcast and cable television advertising will grow at a 5.7% AVG annual rate,
reaching $37.4 billion by 2007.
Communications frontier covers the whole globe.
World has now covered up into a global village, so communication have crossed
borders now. You by sitting in home get news from all over the world with latest
reports, issues and also through analysts. So then communication frontier covers
the whole globe.
Newspapers, TV can improve living standards.
Electronic and print media also plays its role in changing living standards. New
fashion, styles all are play on these media contents. So these also help in
improving and changing the living standards to stand in a global age.
Media Success is on their independence.
Success of media all depends getting INDEPENDENT. Freedom will make them
to work without any stress and get on achieving the required success.
ASIA is the culture of future. (Indian domination)
This is the prediction made by SHEKHAR KUMAR, India’s famous film
Producer, in a recent interview took by British magazine; Indian frontiers
dominate South Asia and also entered to other parts of planets because of
BOLLYWOOD, and of country’s willingness to be part of a contemporary global
culture. The expanding INFOTAINMENT MARKET estimated to grow to more
than a trillion dollars in 10 years has profound implications for INDIA & ASIA.

Culture

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The values and attitude shared by individuals from a specific country that shape
their behavior & belief.
Global culture & commercial culture:
Global culture entails the promotion of a specific kind of life-style,
consumption pattern, products, and identities. High-voltage advertisement
campaign is deployed by TNCs to penetrate local markets in non-Western world
in order to create an ever-expanding market for their products by crushing local
resistance. Growing reach of private cable and satellite television network has
strengthened the grip of commercial culture. The “global
culture” is actually “western culture” or “American culture”. The direction of
any transnational media effects is always from richer to poorer, larger to
smaller, which entirely corresponds to the unbalanced structure of global
economic relations. The concept of “cultural imperialism” implies these unequal
international processes, and suggests certain degree of coercion, invasion, or
repression. The unequal information flow increases the global power of large
and wealthy countries and hinders the growth of an appropriate national
identities and self-images in the receiving nations. The imbalance in the global
cultural production undermines cultural autonomy and holds back the
development of the disadvantaged cultures. The "cultural hegemony" leads to an
absolutely aggressive form of dominant culture that has no specific connection
with real experience for most people in poorer countries. The disadvantaged
cultures are deprived of their ability to describe themselves.”

Border tensions
Globalization is related to the “opening of frontiers”. So border tensions can
prove a big hurdle in a way to stand in global market.
Restrictions:
Crises like Iraq war, Kashmir tension and 9/11; these impose restrictions on
certain countries. It was actually loss in terms of import exports and also to raise
the slogan of globalization. So this should give an end because it is not only
destroying the human being as well as the true picture of world.

Economic fluctuations

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Fluctuating currency & exchange rates.
A global firm’s profit can vary dramatically depend on the strength of its HOME
CURRENCY and the currencies of the countries in which it is operating.
Any devaluation of a nation’s currency significantly affects the level of a
company’s profit. The strength of a foreign nation’s currency can also affect.

Inflation rates.
Economic inflation rates can vary widely in different regions of the world. For
example, in late 1999, the annual inflation rate in TURKEY had decreased to
100%. Between september1999 and April 2000, the exchange rate for TURKISH
LIRA went from 462,000 per U.S dollar to 611,000! Even larger and more
industrialized countries such as BRAZIL and RUSSIA have suffered from high
inflation rates. For instance, it has sometimes reached 2,700 % in Brazil. The
inflation rate influences price that a company can charge for its goods and
services.

Diverse tax policies.

Diverse tax policies are also a major worry. Tax rules differ from countries to
countries in which they operate to minimize their business’s overall tax
obligation.

Law rules in a certain country.

Global organization must stay informed of the specific laws in countries where
they do business. The legal political environment does not have to be
UNSTABLE.

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 What is WTO???
Definition:
WTO (World Trade Organization) is the only global
international organization dealing with rules and trade
between the NATIONS. It is rule based, member driven
organization. All decisions are made by member countries.

GOAL:
The goal is to help producers of goods and services,
importers and exporters conduct their business and to
improve the welfare of people of the member countries.
By lowering the trade barriers, the WTO’s system also
breaks down other barriers b/w PEOPLE & NATIONS.

Why WTO was necessary in the presence of

GATT?
The GATT was a provisional arrangement arrived after the
world wars period, which had no institutional standing.
GATT did not extend the coverage and intellectual property
rights. The WTO extended coverage to all these areas in
addition to bringing the trade back into normal trading
system and institutions of effective dispute settlement
mechanism.

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 Benefits

-To promote Peace.

The system helps to promote peace.
-To handle the disputes.
The system allows disputes to be handled constructively.
-Rule Based Society.
Rules make the life easier for all.
-More choice of products and quality.
It provides more choice of products & qualities.
-Free trade cuts the cost of buying.
Free trade cuts the cost of living.
-Trade raises income.
Free trade raises income also.
-Trade stimulates economic growth.
Trade stimulates economic growth & development.
-Basic principle makes life more efficient.
The basic principle make life more efficient.
-Governments are shielded from lobbying.
Govts. are shielded from lobbying.
-Encouragement of good Government.
The system encourages good governments.

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 CONCLUSION
In conclusion, we are taking example of MALAYSIA who stood from
underdeveloped country to developed country.

Malaysia: Economic Growth in 2002 within

Expectations
The Malaysian economy grew by 4.2 per cent in 2002, although it slowed in the
fourth quarter. Government spending remained the engine of growth, with the
budget deficit significantly exceeding forecast. Mining activity, especially for
crude oil and gas, and agriculture, benefited from higher prices. Manufacturing
growth, while an improvement on 2001, slowed in the fourth quarter. There was
also a downturn in net exports. Prospects for 2003 remain uncertain. Heavily
dependent on trade, prospects for Malaysia's major markets are not
encouraging. Nevertheless, growth of 4-5 per cent appears achievable this year.
Overview

Real economic growth in Malaysia in 2002 expanded by 4.2 per cent year-on-
year (YOY). Growth in the fourth quarter - 5.6 per cent YOY- while down
slightly on third quarter growth, managed to push Malaysia over the 4 per cent
most analysts had forecast.

Domestic consumption growth in the fourth quarter slowed somewhat

compared with the third quarter. But private sector consumption improved and
for 2002 almost doubled the previous year's outcome. Still, public sector
consumption remained the engine of growth for the year, despite spending
slowing considerably in the fourth quarter.

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The federal government budget deficit blew out by RM3.5 billion to RM20.3
billion (equivalent to 5.7 per cent of GDP). While the deficit in the fourth
quarter was significantly reduced compared with the same period in 2001,
cumulative quarterly results pushed the government further into the red. Both
operating and development expenditure exceeded the budget forecast.
Government debt increased by RM17 billion to RM162.7 billion, or 46 per cent
of GDP.

Gross fixed capital formation turned positive in 2002, albeit marginally, after
contracting in 2001. The improvement was due in large part to the
government's development expenditure especially for housing and public
utilities. Fixed investment picked up significantly in the fourth quarter, growing
by almost 10 per cent, due mostly to a favorable base year.
Agriculture

Agriculture output slowed considerably for the year. Growth turned positive in
the second half of the year, ending a year long slump in the sector. But lower
yields for crude palm oil saw a
large fall in growth in the fourth quarter compared with the third quarter of
2002. Prices for Malaysia's major agricultural commodities continued to
improve in the fourth quarter of 2002, rising 50 to 70 per cent compared with
the same period in 2001.
Mining

Output in the mining sector increased significantly in 2002, as higher prices for
crude oil and gas encouraged higher production. Exports of mining sector
products increased almost a third in the fourth quarter, reflecting the higher
prices. The construction sector was still affected by the reduction in guest
workers. Growth in value added for the sector slipped to 0.5 per cent in the
fourth quarter, and 2.3 per cent for the year.
Manufacturing

The manufacturing sector picked up considerably in 2002, but growth slowed

in the fourth quarter. The export sector picked up during the year, although
electrical and electronic products growth moderated in the last quarter of 2002.
Growth in the domestic-oriented sector halved in 2002, reflecting lower output
in transport equipment (falling 7.4 per cent in the final quarter) and petroleum
products (down 6.5 per cent at the same time). Capacity utilization rates in the
manufacturing sector ended up on the 2001 levels, but down on third quarter
2002 highs. Transport equipment capacity utilization was down 10 percentage

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points on its second quarter 2002 highs, reflecting slower output of passenger
motor vehicles.
Services

Services sector growth slowed in 2002 compared with 2001, although it picked
up in the fourth quarter of the year. Output in the transport sector recorded
higher growth, reflecting improved performances in air transportation and
increased port activity. The latter most likely reflected the move by Evergreen
(a Taiwanese-owned shipper) to Port of TanJung Pelepas (PTP) in Malaysia.
Trade performance

Malaysia's exports and imports both recorded positive growth in 2002, although
the rate of growth slowed considerably in the fourth quarter: seasonally
adjusted exports fell in both November and December, ending the year at the
lowest level since February. Imports grew faster than exports, leading to a
reduction of RM3.2 billion in the trade balance in 2002. While imports of
capital goods grew by double digits for the year, there was a significant
moderation in growth in the fourth quarter. Similarly import growth of
intermediate goods dropped significantly in the final quarter. This suggests that
exports in the first quarter will be down significantly. Exports to Asian
countries grew strongly throughout the year, but this may not be enough to
compensate for a fall in exports to Malaysia's major markets in 2003. Further,
most of these countries tend to rely on the United States as a major export
destination and may also be affected by any slow down there.
Foreign exchange reserves

With interest rates in Malaysia's favor, foreign exchange reserves increased by

around RM14.3 billion (USD3.8 billion) over the year to RM131.5 billion. But
external debt increased by USD4 billion to USD48.8 billion by the end of 2002
- 52 per cent of GDP. Most of this increase was attributed to a rise in short term
debt.
Inflation

Inflation was moderate throughout the year, and the unemployment rate
remained below 4 per cent. Inventories fell in the fourth quarter after being
built up throughout the year, possibly reflecting business perceptions of a
slower first half in 2003.

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