Question

Self-financing Economic Development

Synopsis:

Borrowing from external sources (iii) exporting non-renewable resources (iv) improved trading terms and (iv) increasing the capacity and productivity of producing goods and services.

Terms of trade and remove reliance on aid, borrowing or the export of non-renewable resources.

The only way citizens or their community can increase output without working harder or longer is through using more productive tools, equipment, machines, facilities and knowledge.

Procreative assets increase output. After they have generated sufficient revenues before interest and tax to pay all costs procreative assets will produce a net cash surplus that I will describe as “surplus value”.

-Surplus is the “free lunch” created by the development process.

-The degree to which consumption increases and/or the stock of consumption assets are increased depends upon the aggregate net increase in surplus value.

-Consumption assets are the physical manifestation of living standards.

-To avoid excess borrowing or reliance on other transfer payments a community, region or nation must keep the creation of degenerate assets and its stock of consumption assets in balance with its ability to pay for them from the surplus values generated by procreative assets.

Discussion Questions:

1. How would you use self-financing as an Economic Developer?

2. Give an example of self-financing BOOT projects.

Answer 1

1.Self-financing plays an important role as an economic developer.It lessens the need to borrow externally the export of development values,reduced interest payment will accelerate the development process.It becomes quite easy to increase the import of technology,if there is no export of foreign exchange as interest payment.It helps the nation or region to be self sufficient by avoiding depending on World bank and other prominent financial institutions or any other nation .Due to this, they can take better decisions for their own development without any interference whether it is economical or political.

It helps in increasing productivity,which is the most prominent factor to maintain economic sustainability.It also improves the terms of trade ,which is an important factor for the development and removes the requirement for aid ,borrowing and export of non-renewable resources.

By using more productive tools,machines or ideas ,facilities and knowledge a nation or a region or an community can produce more output,which will create a surplus and consumption will also increase.

2.The example of self financing boot project is infrastructure project where a public sector partner made contract with a private developer who has expertise in designing and proper implementation skills.During that time,the private developer charges its customer a fees for using its expertise to complete its project.