Question

Compare and contrast the different views on the role of foreign capital in the development and growth of a less developed country. What is the consensus view about the role of foreign capital inflows in the case of the Asian NIEs?

Answer 1

There are different views that focuses the different roles played by the foreign capital for the development of a less developed country. The first view is that the foreign capital is good for the less developed country and it contributes in infrastructure development, industrial growth and employment creation. As a result, the resources available to the country are utilized for the benefits of the economy. The second view is that foreign capital is not good for the less developed country as foreign capital is used to exploit the resources, spread the agenda of the developed countries and destroy the domestic industrial structure. It causes the less developed country to be the economic slave of the country who has brought in the capital. So, both the views are of contrasting nature. One view finds the foreign capital good, but another view finds it bad that brings volatility. The third view focuses upon the step by step use of foreign capital for the less developed country and focus should be given to the development of a regulatory framework, political stability and proper law & order. It will create the scope of the bargain with the domestic governance.
The Asian NIEs or South Korea, Taiwan, Singapore and Hong Kong are the developed industrial countries that have effectively used the foreign capital for their own growth and development. The focus of the foreign investment is to utilize the resources and the core competencies of the area and develop the country. Here, it is a consensus that foreign capital has played a good and vital role in the development and transformation of these NIE countries.