Foreign Investment in Poor Countries

Vincenzo Patrinostro

0910078

Foreign Investment in Poor Countries

Intro to Economics

Essay

International aid for foreign countries is usually seen as celebrities giving large sums of money to help out countries in need. They do this to make fans happy so at least they're doing something with all their extra money. The reality is that this money is being used to help areas that are miserable and are in dire need of necessities. Instead of money being thrown at the poor countries as a temporary Band-Aid, money could be routed into these countries in different ways so that the problem does not keep happening. The state of poor areas in Africa have been seen all over the world. There is need to raise awareness on how to control the unstable economy. "In the last half-centaury developed countries have poured more the 2.3 trillion into international assistance". All this money poured into a country and it still has not seen much economic growth. Using GDP and a PPC curve to demonstrate, we can see how foreign investment, the changing of foreign policies and the issue of Microcredit, could be beneficial to the development of poor countries.

Nathalie Elgrably 's article "INTERNATIONAL AID: HOW TO ENCOURAGE DEVELOPMENT IN POOR COUNTRIES? " speaks about how certain African polices have shown to hold back the economy by keeping their own GDP low. Also how International aid has not been a solution to help bring up their GDP. Different aspects can help increase the growth in Africa, such as "opening markets to foreign trade, facilitated exports, keeping key import tariffs very low, eliminating quotas" if these aspects were to be fulfilled, GDP per capita should increase and develop. Corrupted governments in Africa create an effect on the population's GDP due to the illegal activities, which are not factored into the GDP. Opening markets for trade with other countries is what's missing in Africa's economy. Having an open market could increase economic growth and rise up as other third world countries have done, that have been in the same situation as Africa. Property rights have been an issue as well, since nobody wants to invest money if no one owns anything. Investors do not know if they can or will make any money due to the lack of property rights.

To help increase slow development in African businesses, small loans could be given out loans to entrepreneurs, as "It enables individuals to find ways of improving their lives on their own in addition to easing social mobility and the expansion of an entrepreneurial class". These small loans are known as Micro Loans or Microcredit.

As the addition of foreign investment in poor countries would