International and Regional Trade

 Trade is sometimes loosely

called commerce or financial transaction or
barter.
 Trade exists for man due to specialization and
division of labor, in which most people
concentrate on a small aspect of production,
trading for other products.
 Trade exists between regions because different
regions have a comparative advantage in the
production of some tradable commodity, or
because different regions size allows for the
benefits of mass production.

2
 In economics, the principle of absolute
advantage refers to the ability of a party (an
individual, or firm, or country) to produce more of
a good or service than competitors, using the same
amount of resources.

 Adam Smith first described the principle of

absolute advantage in the context of international
trade, using labor as the only input.

3
 For example if one unit of labor in Australia
can produce 80 units of wool or 20 units of
wine; while in France one unit of labor makes
50 units of wool or 75 units of wine, then
Australia has an absolute advantage in
producing wool and France has an absolute
advantage in producing wine.
 Australia can get more wine with its labor by
specializing in wool and trading the wool for
French wine, while France can benefit by
trading wine for wool.

4
 Comparative advantage refers to the ability of a
party to produce a particular good or service at a
lower marginal and opportunity cost over another.
Even if one country is more efficient in the
production of all goods (absolute advantage in all
goods) than the other, both countries will still gain
by trading with each other, as long as they have
different relative efficiencies.

 The basic theory of comparative advantage

was developed by David Ricardo.

5
COUNTRY A COUNTRY B PRODUCTS UNIT OF WORLD
LABOR OUTPUT

200 50 WHEAT 1 250

100 50 TV 1 150

WHICH COUNTRY HAS AN ABSOLUTE ADVANTAGE IN

THE PRODUCTION OF BOTH WHEAT AND TVS?

WHY IS COMPARATIVE ADVANTAGE AND

SPECIALISATION IMPROTANT?
6
 In the given time frame Country A can produce four times as
much wheat or twice as many TV's. If Country A were to
devote half of its time to each good, it would produce 100
wheat and 50 TV's.

 If Country B were to devote half of its time to each good it

would produce 25 wheat and 25 TV's. This would be a
combined total of 125 wheat and 75 TV's.

 Now we must look at the opportunity costs. Country A must

give up 2 wheat to produce each additional TV, so the
opportunity cost of 1 TV is 2 wheat for country A.

7
 Country B only has to give up 1 wheat to
produce an additional TV, so the opportunity
cost of 1 TV is 1 wheat for country B.

 Hence Country B can produce TV's cheaper (in

terms of wheat) than country A. Alternatively
we could also say that Country A can produce
wheat cheaper (in terms of TV's) than Country
B.

 This means that Country B should specialize in

producing TV's while Country A should
specialize in producing wheat.

8
 International trade is concerned with the
buying and selling of goods and services
(commodities) between different nations.
Industrialization
advanced transportation, globalization, mul
tinational corporations, and outsourcing are
all having a major impact on the
international trade system.
 Increasing international trade is crucial to
the continuance of globalization.

9
 1. A country can produce some commodities
but not others.
 2. A country can produce one commodity
better than another. The advantage of
specialization.
 3. A country can produce both commodities
better than another country. One nation may
be able to produce two (or more) commodities
better than another country. However, it will
only produce the commodity in which its
comparative advantage is greater and allow the
other country to produce the other product.

10
 International trade means a larger market for
home-produced commodities. Because of the
larger market, commodities can be produced on a
larger scale. The economies of scale can be
enjoyed.
 Competition and efficiency: International trade
leads to more competition and more efficiency.
 Political and friendship reasons: This argument
suggests that countries will have more
understanding, and sympathy towards countries
with whom they trade. This argument is often put
forward in favour of international sporting events,
such as the World Cup or Olympic Games

11
 Economies of scale: are the cost advantages that
enterprises obtain due to size, with cost per unit of
output generally decreasing with increasing scale
as fixed costs are spread out over more units of
output.
 Diseconomies of scale: are the forces that cause
larger firms and governments to
produce goods and services at increased per-unit
costs.
 Constant returns to scale: A production function
exhibits constant returns to scale if changing all
inputs by a positive proportional factor has the
effect of increasing outputs by that factor.

12
13
 The World Trade Organization (WTO) is an organization that
intends to supervise and liberalize international trade.
 FUNCTIONS OF WTO:
 1. It oversees the implementation, administration and
operation of the covered agreements.
 2. It provides a forum for negotiations and for settling
disputes.
 The WTO is also a center of economic research and analysis:
regular assessments of the global trade picture in its annual
publications and research reports on specific topics are
produced by the organization. Finally, the WTO cooperates
closely with the two other components of the Bretton Woods
system, the IMF and the World Bank.

14
The Great Depression was a major economic recession that ran
from 1929 to the late 1930s. During this period, there was a
great drop in trade and other economic indicators. The lack of
free trade was considered by many as a principal cause of the
depression.

FREE TRADE: Free trade is a policy by which a government does not

discriminate against imports or interfere with exports by
applying tariffs (to imports) or subsidies (to exports) or quotas.

Free trade advanced further in the late 20th century and early
2000s. In1992, European Union lifted barriers to internal trade
in goods and labour.

15
 ADVANTAGES:  DISADVANTAGES:
 1. To let infant  1. Misallocation of
industry grow. resources.
2. Protection of

 2. Potential for
employment.
corruption.
 3. Overcome a
balance of payments  3. Reduced export
disequilibrium. competitiveness.

16
 Free Trade Area (FTA)
◦ All barriers to trade of goods/services are removed
◦ No internal tariffs among members, but each country imposes
its own external tariffs to the third country.
 Customs Union
◦ No internal tariffs
◦ Adopts common external tariff policy for other countries
 Common Market
◦ No internal tariffs and common external tariffs
◦ Allows factors of production to mover freely among members
 Economic Union
◦ Common market plus common currency
◦ Requires common currency, harmonization of tax rates,
common monetary & fiscal policy
 Political Union
◦ Central political system coordinates economic & foreign
policies.
 North American Free Trade Agreement [NAFTA]
◦ Canada, Mexico & USA
 European Free Trade Agreement [EFTA]
◦ 25 states of EC, Iceland, Liechtenstein and Norway
 Southern African Development Community [SADC]
◦ Angola, Botswana, Congo, Lesotho, Madagascar, Malawi,
Mauritius, Mozambique, Namibia, South Africa, Swaziland,
Tanzania, Zambia and Zimbabwe
 Closer Economic Relations [CER]
◦ Australia, New Zealand
 European Commission [EC] has entered into
separate agreements with many countries
◦ Lebanon, South Africa, Morocco, Israel, Mexico, Syria, etc.
 Major regional trade unions:
1. European Union (EU)
2. North American Free Trade Area ( NAFTA)
3. Association of South East Asian Nations (ASEAN)
4. South Asian Association for Regional Cooperation (SAARC)

 The South Asian Association for Regional

Cooperation (SAARC) is an organization of South
Asian nations, which was established on 8 December
1985 for the promotion of economic and social progress,
cultural development within the South Asia region and also
for friendship and cooperation with other developing
countries.

19
20
❖ OBJECTIVES:

❖ To strengthen cooperation with other developing

countries

❖ To strengthen cooperation among themselves in

international forums on matters of common
interests; and

❖ To cooperate with international and regional

organizations with similar aims and purposes

21
22
• In 1995 SAARC preferential Trading Agreement (SAPTA) was
inaugurated for bilateral reductions in tariffs and non-tariff barriers on
specified commodities on a reciprocal basis, but with special treatment
given to the least developed countries (LDC).

• The eventual objective was for SAPTA to become, by 2001, a

South Asian Free Trade Area (SAFTA) based on multilateral tariff
reductions.

• SAPTA failed to yield the desired benefits to the members, particularly the
LDCs, due to the following reasons: (a) The tariff cuts were not deep
enough (b) The actively traded goods were not given the tariff
preferences.(c) Modalities of removal of non-tariff and para-tariff barriers
were not well articulated in the agreements. (d) The rules of origin criteria
acted as a hindrance
23
 SAFTA (South Asian free trade
area) TREATY
• SAFTA was signed at the Islamabad summit in January 2004 to go into
effect from January 1, 2006.

• The SAFTA agreement would be fully implemented within December 31,

2016, in two phases.

• The members, under the trade liberalization programme, agreed that Non-
Least Developed States (NLDS) -including India, Pakistan and Sri Lanka
would reduce their tariffs from existing levels to 20% by January 1, 2008
in equal proportions annually.

• In case the tariffs would already be less than 20% when the agreement
comes into force on January 1, 2006, the NLDS should reduce the actual
tariff by 10% each during two years between January 1, 2006 to January 1,
2008.
24
 SAFTA TREATY (cont…)

• Therefore, under SAPTA, tariffs were reduced only for goods specified
in the agreement. Conversely, under SAFTA, tariffs will be reduced for
all products except those on each country’s sensitive list.

• It was also agreed that the four Least Developed Countries (LDCs), as
defined by the UN, including Bangladesh, Nepal, Maldives Afghanistan
and Bhutan-will reduce their existing tariff rates to 30% within two years
after the agreement comes into force on January 1, 2006.

• If actual tariff rates in these four least developed member states are
already below 30% on January 1, 2006, the agreement comes into force,
there will be an annual reduction of 5% for each of the two years. That
will be the end of phase 1.

25
 SAFTA TREATY (cont…)

• In phase 2, the NLDC members, with the exception of Sri Lanka, will
have to reduce their tariffs from 20% or below, as may be the case, to
0-5% within five years by January 1, 2013.

• Sri Lanka, however, shall be given an additional year till January 1,

2014, to reduce tariff to prescribed level of 0-5%.

• The 4 LDC members, however, will be given 8 years from January 1,

2008 to reduce tariff from 30% or below, as may be the case, to 0-5%
at par with the rest of the SAARC member states.

26
 Characteristics of Trade in SAARC
Region
❖ Geographical proximity

❖ High pre-FTA tariffs

❖ High intra-regional trade levels:

❖ Trade complementarities

❖ Low political tensions

❖ Streamlined market access for goods produced

❖ Low non-tariff barriers (NTB)

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❖ Infrastructure and efficiency in ports

❖ cross border transit points

❖ Border crossings

❖ Poor management at customs

❖ Streamlining the market access

28
 Steps To Improve Trade Situation

❖ The political environment needs to be improved by the regional

governments and political leaders. The governments, private sector,
academia, professionals and social sector organizations have to work in
unison.

❖ Development of tourism can yield substantial benefit through a multiplier

effect.

❖ The region should widen its export base by diversifying into capital-
intensive exports.

❖ Areas of comparative advantage should be identified.

29
 Steps To Improve Trade Situation
(cont…)
• Customs clearance, border crossing should be developed

• A strong and supportive capital market should be formed

• Human resources should also be developed in the region for

managerial, entrepreneurial and technical skills

• Economic reforms policies and institutional arrangementshouldbe

conducive to the agreement.

30
 Explain The Theory of Absolute and
Comparative Advantage using the following
numerical example:

Item USA Japan World
Output
Labor output labor output
Computer 1 80 1 30 110

1 80 1 60 140
Automobiles

31
 DEVELOPMENT STRATEGY FOR ERADICATING
MASS POVERTY

WHY NEED AN APPROPRIATE STRATEGY?

❖ In the year 1979, lone, about 50 million people literally died starvation and
another 800 million were in the grip of poverty

❖ Man can afford to spend three million US dollars a minute on the arms
race, only a fraction of that could adequately solve the problem of mass
poverty

❖ 'World Food Day' was observed by FAO in Rome in 1974 with the
pronouncement “No child should go to bed hungry within a decade”
But, in the year 1984; UNICEF estimated that around 15 million
children of the world died of malnutrition and preventable illness in the
same year.
 Theoretical Spectrum of Development

❖ Adam- Smith and Ricardo who conceived the idea of a laissez

faire economy, where a rational individual would be trying to
maximize his profit in an open and free competition.

❖ Karl Marx saw the rising trend of capitalism and identified its
unstable and disequilibrium condition that led to advocate the
idea of socialism and communism

❖ Keynes identified the chronic tendency of the laissez-fare

market economy to generate involuntary unemployment and
he prescribed governmental intervention for boosting effective
demand to avert the tendency.
 Development Economics and Conventional Strategy

During the 1950s, quite a number of development models emerged:

❖ Hans Singer ( 1952);

❖ Lewis (1954);

❖ Rosenstein Radan (1957);

❖ Hirschman (1958).

❖ In addition to this, (i) Harrod-Domor model, (ii) Leontief model,

(iii) Sollow-Sown model contributed a great deal to implement
the traditional strategy.
Conventional Strategy
Objectives were viewed in economic terms and
economic factors to achieve results. It emphasizes
higher economic growth, to be accomplished
through the accumulation of capital and its
investment in industrialization and urbanization
through a "top- down" process central planning
and control. Recognized increased per- capita
GNP as the main objective and yardstick of
development. Distributive Justice taken care
through the “trickle down” process.
 Success Stories

❖ In the year 1980, gross product per capita reached US$ 1220 and it
was expected to increase at an annual rate of about 3%. On this
basis, real goods per capita would double every 23 years

❖ Life expectancy at birth in developing nations rose from an

average of 42 years in 1950 to 59 years in 1982

❖ Measured globally there has been enough food to feed its entire
population with more than 3,000 calories and 65 grams of protein
daily

❖ In the year 1987, 475 million tons of food grain was estimated as
surplus
 What was wrong with conventional strategies?

❖ Global figures have very little meaning because they conceal

tremendous inequality. The world population already exceeds
6 billion and more than 80% of them live in the developing
nations. Around 50% of the world populations dwell in 36
countries with average per capita income below US$ 380.

❖ Today after more than 35 years of concerted effort; there is

more hunger and poverty than before.
 What was wrong with conventional strategies?

❖ A study was made by Adelman and Morris, which showed

that instead of any improvement, the income of the poorest
40% had declined in real terms and in the case of extreme
dualism even income had declined among the poorest 60%.

❖ None of the assumptions of conventional strategy turned

out to be universally applicable.

❖ GNP growth is a necessary means it may not be considered

as an end in itself.
 What was wrong with conventional strategies?

❖ There is no automatic tendency for income to become widely spread

through "the trickle down process" and reduce poverty. Rapid or
moderate growth was not helpful in alleviating poverty.

❖ What Kerala, achieved in terms of longevity, literacy, infant mortality

and as on, with only around 200 US $ per capita income, countries like
Brazil with more than 2000 US$ did not achieve, China and Sri Lanka,
with less than a seventh of GNP per head in Brazil or Mexico have the
similar life expectancy figure
 What was wrong with conventional strategies?

❖ Developing countries accepted foreign aid as an unmixed

blessing. As a result, they sank deeper and deeper into debt

❖ Western concept of "development' with preconceived ideas

through a "top- down process of central planning and
control did not work as expected.
The new streams of development
thought.
(1) A Blueprint for Survival (The Ecologist 72)
(2) Redistribution with growth (IBRD & Sussex
Institute of Development Studies; (1974) (3) New
International Economic Order (UNO 1974); (4)
Mankind at the Turning Point ( Club of Rome,
Mesarovic and pestel 1974); (5) Cocoyoc
Declaration (UN0 1974);(6) What Now-Another
Development (Dag Hammarskjold Foundation
(75) (7) .Employment Growth and Basic Needs
(IL0 76);(8) Catastrophe or New Society
(Bariloche Foundation 76); (9) Reshaping the
International Order (Club of Rome 76);
 The new streams of development thought

BASIC NEEDS ARE:

❖ Food

❖ Clothing

❖ Shelter

❖ Basic range of household equipments

 The new streams of development thought

❖ Health

❖ Education

❖ Safe drinking water

❖ Contraception.
 The new streams of development thought

❖ ‘Basic- needs' approach precisely aims at increasing the income

❖ Ensures the supply of a stipulated level of Basic- needs level of

personal Income (BNI)

❖ Ensures the supply of a stipulated level of goods and services

through income distribution, production policies
 Limitations of basic need approach

❖ Everybody must attained BNl- it did not specify in detail how

the disadvantaged group would eventually achieve this.

❖ The approach did not identify the causes of the very low
income of the poor people.

❖ It did not specify the nature of organizations / institutions,

which would be necessary to its success.
 Limitations of basic need approach

❖ It considered production planning without going into the

details of who is controlling the production mechanism
and under what terms and conditions they would act in
the desired way.

❖ Successful implementation of the ' basic- needs' approach

requires cultural enlightenment and the promotion of new
social political and moral values.
 WORLD BANK PLOCIES FOR LDCs

❖ Increase food production through providing incentives by raising

food prices.

❖ Reduce all kinds of subsidies to agricultural inputs and food

items.

❖ Minimize balance of payment deficits and enhance local

employment opportunities.

❖ Reduce population growth by taking family planning measures.

❖ Devalue local currency to boost up export.

Millennium Development Goals
(MDGs) Achievements and
Sustainable Development Goals
(SDGs)
 Why the MDGs ?
The 1990s: a decade of faltering progress
❖ progress continued
❖ … but too slowly to reach agreed targets
❖ … and progress slowing down
❖ ….. need more care on  Under-5 mortality rate
 Maternal mortality rate
 Child malnutrition
 Water and sanitation
 Income poverty
 Primary education

MDGs are meant to accelerate progress

• In Sep 2000, representatives of 189 countries met in New
York at the U.N. Millennium Summit.
• The agreed binding outcome of the Summit was the
Millennium Declaration.
• Rich countries are held accountable for providing greater
support, i.e. providing more debt relief and allowing greater
access to their markets
• So developing countries are motivated to adopt MDG
development strategies
• A U.N. working group later supplemented the Declaration by
devising a set of 8 Goals, which were eventually formulated
as 21 Targets, which were measured by 60 Indicators.
• Out of total 8 MDG goals, Bangladesh has
achieved remarkable success in 7 goals
despite of political unrest and natural
calamities.
 GOAL 1: ERADICATE EXTREME
POVERTY AND HUNGER
• Bangladesh has made commendable progress in
respect of eradication of poverty and hunger. It has
sustained a GDP (gross domestic product) growth rate of
6+ per cent in recent years that has played a positive
role in eradicating poverty.
• The estimated poverty headcount ratio for 2015 is 24.8
per cent and it suggests that the MDG target of halving
the population living below the poverty line was achieved
by 2012, that means, three years ahead of the 2015
deadline
• GOAL 2: ACHIEVE UNIVERSAL PRIMARY
EDUCATION

Significant progress has been made in

increasing equitable access in education (Net
Enrolment Ratio or NER: 97.7 per cent),
reduction of dropouts, improvement in
completion of the cycle, and implementation of a
number of quality enhancement measures in
primary education. Bangladesh has already
achieved gender parity in primary and
secondary enrolment.
 GOAL 3: PROMOTE GENDER
EQUALITY AND EMPOWER WOMEN
• Bangladesh has already achieved the targets of gender parity
in primary and secondary education at the national level.
• Bangladesh has made significant progress in promoting the
objectives of ensuring gender equality and empowerment of
women. There has been steady improvement in the social
and political empowerment scenario of women in Bangladesh.
• The Bangladesh Government is committed to attaining the
objective of the Convention on the Elimination of all Forms of
Discrimination Against Women (CEDAW), Beijing Platform for
Action and MDGs in conformity with the fundamental rights
enshrined in the Bangladesh Constitution.
 GOAL 4: REDUCE CHILD MORTALITY

• Bangladesh is on track in meeting the target of this goal

measured in three different indicators like under-five
mortality rate, infant mortality rate and immunization
against measles. The under-five mortality rate was 151
per 1000 live birth in 1990 which has come down to 41
per 1000 live birth in 2013 and hence achieved the MDG
target before the stipulated time.
• Likewise, the infant mortality rate was 94 per 1000 live
birth in 1990 which has reduced to 32 per 1000 live birth
in 2013 and hence on the verge of achieving the target
of 31 by 2015.
 GOAL 5: IMPROVE MATERNAL
HEALTH
• According to Bangladesh Maternal Mortality Survey (BMMS), The
Maternal Mortality Ratio has declined from 574 per 100,000 live
births in 1990 to 170 per in 2013, showing a 70 per cent decline in
the last 23 years. The average rate of decline from the base year
has been about 3.06 per cent per year, compared with the average
annual rate of reduction of 3.0 per cent required for achieving the
MDG in 2015.
• The overall proportion of births attended by skilled health personnel
increased by more than eight-folds in the last two decades, from 5.0
per cent in 1991 to 42 per cent in 2014. In the same duration, the
antenatal care coverage (at least one visit) has increased 51
percentage points; 27.5 per cent in 1993-94 to 78.6 per cent in
2014.
 GOAL 6: COMBAT HIV/AIDS, MALARIA
AND OTHER DISEASESG
• Bangladesh has performed well in halting communicable diseases
under this goal. Available data show that the prevalence of
HIV/AIDS in Bangladesh currently is less than 0.1 per cent and thus
is still below an epidemic level.
• According to National AIDS/STD Programmes (NASP), condom use
rate at last high risk sex was 43 per cent in 2013. Proportion of
population aged 15-24 years with comprehensive correct knowledge
of HIV/AIDS is 17.70 per cent in 2013.
• There was a significant improvement in the reduction of malarial
deaths in the country over the years. The prevalence of malaria per
100,000 population was 776.9 in 2008, which has come down to
434 in 2014.
GOAL 7: ENSURE ENVIRONMENTAL
SUSTAINABILITY

• At present there is only 13.40 per cent of land in

Bangladesh having tree cover with density of 30 per cent
and above and the area having tree cover is much lower
than the target set for 2015 (20 per cent).
• Since 1991, there has been a steady increase in CO2
emission in Bangladesh because of increasing
development interventions and activities.
• However, access to safe water for all is a challenge, as
arsenic and salinity intrusion as a consequence of
climate change fall out will exacerbate availability of safe
water especially for the poor.
 GOAL 8: DEVELOP A GLOBAL
PARTNERSHIP FOR DEVELOPMENT
• During the last 24 years, Bangladesh, on an average, received US$
1,736 million ODA (official development assistance) per year
(Grants: US$ 635 million, Loans: US$ 1,101 million).

• The encouraging factor is that the MDGs sectors like education,

health, social welfare, labour, public administration and social
infrastructure together with agriculture and rural development was in
an increasing trend in getting net ODA and it constituted around 51
per cent of the total ODA outlay received from 1990-91 to 2013-14.

• Apart from domestic source of financing, the development partners

should have generously supported Bangladesh's endeavour for
achieving the targets set under the MDGs and also for forthcoming
SDGs.
Sustainable Development Goals
 SDGs
• The formal name for the SDGs is: "Transforming our
World: the 2030 Agenda for Sustainable Development."
That has been shortened to "2030 Agenda.“
• On 25 September 2015, the 193 countries of the UN
General Assembly adopted the 2030 Development
Agenda titled "Transforming our world: the 2030 Agenda
for Sustainable Development".
• These 17 Goals build on the successes of
the MDGs while including new areas such as climate
change, economic inequality, innovation, sustainable
consumption, peace and justice, among other priorities.
The goals are interconnected – often the key to success
on one will involve tackling issues more commonly
associated with another.
 GOALS ARE
1) End poverty in all its forms everywhere
2) End hunger, achieve food security and improved nutrition, and promote sustainable
agriculture
3) Ensure healthy lives and promote wellbeing for all at all ages
4) Ensure inclusive and equitable quality education and promote lifelong learning
opportunities for all
5) Achieve gender equality and empower all women and girls
6) Ensure availability and sustainable management of water and sanitation for all
7) Ensure access to affordable, reliable, sustainable and modern energy for all
8) Promote sustained, inclusive and sustainable economic growth, full and productive
employment, and decent work for all
9) Build resilient infrastructure, promote inclusive and sustainable industrialization, and
foster innovation
10) Reduce inequality within and among countries
11) Make cities and human settlements inclusive, safe, resilient and sustainable
12) Ensure sustainable consumption and production patterns
13) Take urgent action to combat climate change and its impacts
(taking note of agreements made by the UNFCCC forum)

14) Conserve and sustainably use the oceans, seas and marine
resources for sustainable development
15) Protect, restore and promote sustainable use of terrestrial
ecosystems, sustainably manage forests, combat desertification and
halt and reverse land degradation, and halt biodiversity loss
16) Promote peaceful and inclusive societies for sustainable
development, provide access to justice for all and build effective,
accountable and inclusive institutions at all levels
17) Strengthen the means of implementation and revitalize the global
partnership for sustainable development
“World leaders have an unprecedented
opportunity this year to shift the
world onto a path
of inclusive, sustainable and resilient
development" - Helen Clark, UNDP
Administrator.
• The MDGs, adopted in 2000, aimed at an array of issues that included
slashing poverty, hunger, disease, gender inequality, and access to
water and sanitation.
• Enormous progress has been made on the MDGs, showing the value of
a unifying agenda underpinned by goals and targets.
• The Sustainable Development Goals, otherwise known as the Global
Goals, build on the MDGs, eight anti-poverty targets that the world
committed to achieving by 2015.
• The SDGs follow and expand on the Millennium Development
Goals(MDGs), which were agreed by governments in 2001 and are
expired in last year (2015)
• They have identified 17 Sustainable Development Goals, associated
169 targets with 304 indicators.
• Now these countries want to build on the many successes of the past
15 years, and go further. The new set of goals, the Sustainable
Development Goals (SDGs), aims to end poverty and hunger by 2030.
• The new SDGs, and the broader sustainability agenda, go much
further than the MDGs, addressing the root causes of poverty and
the universal need for development that works for all people.
• That future is one where everybody has enough food, and can work,
and where living on less than $1.25 a day is a thing of the past.
• The Sustainable Development Goals (SDGs) are a new, universal
set of goals, targets and indicators that UN member states will be
expected to use to frame their agendas and political policies over
the next 15 years.
• The SDGs will be officially adopted at a UN summit in New York in
September, and will become applicable from January 2016. The
deadline for the SDGS is 2030.
• In total, 5 million people from across 88 countries in all the world’s
region took part in the consultation and shared their vision for the
world in 2030.
• Achieving the SDGs requires the partnership of governments,
private sector, civil society and citizens alike to make sure we leave
a better planet for future generations.
 Limitation of MDGs
• The eight MDGs failed to consider the root causes of poverty and
overlooked gender inequality as well as the holistic nature of
development. The goals made no mention of human rights and did
not specifically address economic development.
• While the MDGs, in theory, applied to all countries, in reality they
were considered targets for poor countries to achieve, with finance
from wealthy states. Conversely, every country will be expected to
work towards achieving the SDGs.
• As the MDG deadline approaches, about 1 billion people still live on
less than $1.25 a day – the World Bank measure on poverty – and
more than 800 million people do not have enough food to eat.
Women are still fighting hard for their rights, and millions of women
still die in childbirth.
MICROCREDIT PROGRAM
 Feature of Microcredit

❖ No collateral is required to get loans

❖ Group based approach

❖ Small amount loan (100-150 US$)

❖ Weekly attendance in the group meeting

❖ Intensive credit monitoring

❖ Participatory approach

1
Delivery System & Delivery Methods :

There are two approaches applied by Microfinance

Institutions(MFIs):
•Minimalist or only credit approach
•Integrated or credit plus approach

•Delivery Methods : It varies from country to country. In

the context of South Asian countries like Banglasesh and
India,Subrahmanyam(1999) pointed out that there are three
methods of delivering microcerdits to the clients. There are:

•Direct Approach Model

•Delivery through cooperatives
•Delivery by NGO’s
 Eligibility

There is no Hard and Fast Rule For Selecting Target Group:

Land ownership of the household: For example, landless and marginal

farmers owning or cultivating less than 1.50 acre (0.6ha) of land on
share-cropping including homestead can become members of ADIP
credit program.

Age of the individuals : For example, in case of BRAC, individuals

applying for credit must be aged between 18-54 years.

Income of the households: For example, household having a maximum

monthly income of up to 3000 taka (equivalent to 44.44 USD) can
become members of marginal and landless group of ADIP.

Residence of the individuals: The individual should be a permanent

resident of the village.
2
 Eligibility (cont…)

Marital Status of the individuals. For example, married people were

encouraged in ADIP rather than singles.

Affiliation: The individual cannot be affiliated with other NGOs or any

other microcredit program at the same time.

Health status of the individuals: Individuals must be physically active

having no serious diseases like cancer or disabled.

Focus on poor and destitute women. For instance, BRAC gives priority
on widowed or divorced women with children.
3
 Types of Loan

A. Agricultural Loan:

❖ Crop production

❖ Poultry

❖ Livestock

❖ Fisheries

❖ Small-scale agribusiness

❖ Nursery raising

❖ Social forestry
4
 Types of Loan (cont…)

B . Non -Agricultural Loan:

❖ Rickshaw-Pulling

❖ Small-scale non- agricultural trade

❖ Handy-crafts

More Focus on Agricultural Activities

5
 Who Provides?

❖ NGOs : Local and Foreign e.g BRAC

❖ Governmental Organization: Commercial Bank ( Sonali Bank), PKSF

❖ Door Agencies: IFAD, FAO, USAID, CIDA etc

 Role of Microcredit Program

❖ Increases household income, saving and consumption

❖ Increases nutritional status of the poor family

❖ Creates more job opportunity for rural people

❖ Increases social , legal and political awareness

❖ Reduces gender disparity

❖ Increases agricultural production

❖ Increases health care facility

❖ Reduces environmental pollution

6
❖ Increases education facility for poor
 Weaknesses

❖ Credit discipline failed to be established among members due to

flexibility and simplicity of NGOs rules and regulations

❖ Lack of standard techniques of saving mobilization,

❖ Training was limited in saving and loans

❖ Transparency was often questionable,

❖ No regulatory supervision was received by the program providers from

the government such as auditing of account, and

❖Existence of subsidies might have negative impact.

7
 Problems of Access To Formal Credit

❖ Lack of information regarding credit program

❖ Inflexible repayment schedule and complex procedure

❖ Collateral requirement by the formal credit institutions not

fulfilled by the poor

❖ Gender stereotype beliefs about women’s ability to effectively

utilize only small loans

❖ Resistances and interferences from male relatives

❖ Inappropriate bank credit for the needs of micro-entrepreneurs

❖ Cultural factors. 8
 What Needs to Do To Improve ?

❖ Loan amount should be extended as per the IGA (s)

❖ Create more diversified employment opportunities

❖ Ensure rural infrastructural facilities such as market

❖ Enhance non-formal education facilities for borrowers

❖ Provide effective and adequate training facilities

❖ Awareness building about taking non-institutional loans

❖ Provide more input support from the government

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 Social Business
Social Business is a cause-driven business. In a social business,
the investors/owners can gradually recoup the money invested,
but cannot take any dividend beyond that point. Purpose of the
investment is purely to achieve one or more social objectives
through the operation of the company, no personal gain is
desired by the investors. The company must cover all costs and
make profit, at the same time achieve the social objective, such
as, healthcare for the poor, housing for the poor, financial
services for the poor, nutrition for malnourished children,
providing safe drinking water, introducing renewable energy,
etc. in a business way. is a cause-driven business.
Types of Social Businesses:
Type I: focuses on businesses dealing with social objectives only.
Type II: can take up any profitable business so long as it is owned by
the poor and the disadvantaged, who can gain through receiving direct
dividends or by some indirect benefits.
World’s first multinational social business: Grameen Danone
[Source: Yunus Centre]
To Get Credit Is A Human Right…
POVERTY

1
POVERTY
 WHY DO WE STUDY POVERTY?
 IMPACTS OF POVERTY
 CHARACTERISTICS OF POVERTY
 COMPARING A LEAST DEVELOPED COUNTRY
WITH A DEVELOPED COUNTRY
 MEASURES OF REDUCING POVERTY

2
POVERTY
❖ Poverty depends on multi-dimensional aspects

❖ It varies time to time, culture to culture, and space to space

❖ Thus, it is difficulty to define poverty universally.

 However,
 It can be viewed as the condition characterized by the Severe Deprivation of
Basic Human Needs such as:

 (i) Food (ii) Shelter (iii) Clothing (iv) Education (v) Health-care

4
Types of Poverty
 Broadly classified as: Poverty is usually measured as
either absolute or relative (the latter being actually an index of income
inequality).

 ABSOLUTE POVERTY: Absolute poverty refers to a set standard which is

consistent over time and between countries.
 Income between above 1US$ and 2 US$ / Day/ Person
 Hard-core Poverty : Income 1 US$ or less than 1US$ / Day/ Person

 RELATIVE POVERTY: Relative poverty views poverty as socially defined

and dependent on social context, hence relative poverty is a measure of
income inequality. Usually, relative poverty is measured as the percentage
of population with income less than some fixed proportion of median
income. There are several other different income inequality metrics, for
example the Gini coefficient or the Theil Index.
Causes of poverty
❖ Lack of productive resources such as agricultural land, financial capital etc

❖ Lack of food production and mal-distribution of food

❖ Lack of employment opportunity

❖ Illiteracy

❖ Lack of healthcare facility

❖ Lack of modern technology of crop cultivation

❖ Lack of access to the financial facilities for pursuing income

generating activities

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Causes of poverty
❖ Political and social unrest such as war, revolution, terrorism etc

❖ High rate of inflation

❖ Corruption, lawlessness and nepotism in the socio-political

system of the country.

❖ Environmental hazard

❖ Lack of infrastructural facilities

❖ Gender disparity
7
CONSEQUENCES OF POVERTY
❖ Low rate of GDP growth

❖ Obstacles for innovation and modern technique of

production system

❖ Increases unskilled labor force

❖ Increases the probability of political instability

❖ Reduces life expectancy

8
CONSEQUENCES OF POVERTY
❖ Increases the chance of gender disparity

❖ Increases the chance of corruption, nepotism, exploitation

and racialism

❖ Creates obstacle for increasing social, political and

environmental awareness

❖ Increases the probability of social insecurity and vandalism

❖ Leads to lower level of living-standard.

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 Indicators of Poverty
❖ Percentage of population earning less than 1USD/Day

❖ Per capita GDP

❖ Life expectancy

❖ Literacy rate of the population of a country

❖ Mother and infant mortality rate

❖ Access to Health care facility ( such as number of doctors, nurse,

hospitals per person )
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Indicators of Poverty (cont…)
❖ Prevalence of malnutrition (%)

❖ Access to infrastructural facilities of a country (such as

roads, number of vehicles)

❖ Access to safe drinking water and sanitation (%)

❖ Percentage of consumption of energy (such as electricity

and gas)

❖ Per capita consumption of cereal food

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The poverty threshold, or poverty line, is the minimum level
of income deemed adequate in a given country. In practice, like the definition
of poverty, the official or common understanding of the poverty line is
significantly higher in developed countries than in developing countries. The
common international poverty line has in the past been roughly $1 a day. In
2008, the World Bank came out with a revised figure of $1.25 at 2005 purchasing-
power parity(PPP).

PURCHASING POWER PARITY: PPP is a component of some economic

theories and is a technique used to determine the relative value of
different currencies.

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Income inequality metrics or income distribution metrics are used by
social scientists to measure the distribution of income, and economic
inequality among the participants in a particular economy, such as that of a
specific country or of the world in general. While different theories may try to
explain how income inequality comes about, income
inequality metrics simply provide a system of measurement used to determine
the dispersion of incomes.

The Theil index is a statistic used to measure economic inequality. It has

also been used to measure the lack of racial diversity.

13
The Gini coefficient (also known as the Gini index or Gini ratio) is a measure of
statistical dispersion developed by the Italian statistician and sociologist Corrado
Gini.

The Gini coefficient measures the inequality among values of a frequency distribution.

A Gini coefficient of zero expresses perfect equality, where all values are the same (for
example, where everyone has an exactly equal income.

A Gini coefficient of one (100 on the percentile scale) expresses maximal inequality
among values (for example where only one person has all the income).

14
AN EXAMPLE OF URBAN POVERTY IN THIS SLUM IN JAKARTA,
INDONESIA.

15
Steps of Reducing Poverty
 Step 1. Acceleration of pro-poor growth

❖ A stable macroeconomic framework

❖ Development of private sector

❖ Sound and effective financial system

❖ Strengthening institutional financial capability

❖ Rural development

❖ Expansion of productive sector

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Steps of Reducing Poverty (cont…)
 Step 2. Promotion of good governance

❖ Judicial reforms to infuse dynamism in judicial

process,

❖ Reforms in police administration

❖ Ensure transparency and accountability in the use of

public resources.

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 Steps of Reducing Poverty (cont…)
Steps 3. Investment in human development

❖ Strengthening the health-care program

❖ Enhance educational activities

❖ Ensure food-security and nutritional programs

Allocation more resources to these sectors reducing military

expenses
Steps of Reducing Poverty (cont…)
 Step 4.Women Empowerment

❖ Policies and institutional actions to close the gender gap

❖ Reduce violence against women

❖ Remove hindrances to women’s employment

❖ Reduce high maternal mortality

❖ Implement policies to ensure formal equality

❖ Create women friendly institutional environment

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Steps of Reducing Poverty (cont…)
 Step 5. Ensuring social security

❖ Safety net for the poor such as food for work and old age pension schemes in
rural areas.

❖ Give emphasis on the social solidarity

❖ Risk insurance covering following aspects:

 (i) providing access to credit to the poor during natural disaster

 (ii) strengthening disaster preventing and mitigating mechanisms

 (iii) measures to minimize suffering from violence and personal

insecurity.

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 Organizations Working for Poverty Alleviation
❖ Grameen Bank ( Specialized Bank)

❖ PKSF (Government Organization)

❖ BRDB (Government Organization)

❖ BARD (Government Organization)

❖ ASA (Local NGO)

❖ Proshika (NGO)

❖ BRAC (Local NGO)

 Organizations Working for Poverty Alleviation
Donor agencies such as :

❖ IFAD

❖ CIDA

❖ FAO

❖ UNDP

❖ JICA

❖ SIDA
LIST OF SOME LEAST DEVELOPED COUNTRIES AND DEVELOPED
COUNTRIES ACCORDING TO UNITED NATIONS
 A LEAST DEVELOPED COUNTRY (LDC) exhibits the
lowest indicators of socioeconomic development with the
lowest human development index ratings of all the
countries in the world. Some names are given below:
 1. ANGOLA
 2. ETHIOPIA
 3. UGANDA
 4. COMOBODIA
 5. NEPAL

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LIST OF DEVELOPED NATIONS
 1. GERMANY
 2. FRANCE
 3. UK
 4. ITALY
 5. USA
 6. SOUTH KOREA

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 COMPARING DEVELOPED AND DEVELOPING NATIONS
 CHARACTERISTICS OF A DEVELOPED COUNTRY:
 1. ADVANCED TECHNOLOGICAL INFRASTRUCUTRE.
 2. BETTER STANDARD OF LIVING.
 3. HIGH GDP IN TERMS OF PURCHASING POWER PARITY.
 4. HIGH LITERACY RATE.
 5. SERVICE SECTOR PROVIDES MORE WEALTH THAN
INDUSTRIAL SECTOR.

 CHARACTERISTICS OF LEAST DEVELOPED COUNTRIES:

 1. CONDITIONS OF EXTREME POVERTY.

 2. ONGOING AND WIDESPREAD CONFLICT
 3. POLITICAL CORRUPTION
 4. OVERPOPULATION

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