What role are newly industrialising countries (NICs) playing in

globalisation?

How many NICs can you name?

Objectives for 3 lessons:

• All will know reasons for the growth of economies in NICs and apply concepts to 21st century examples

• Most will assess the role of NICs in globalisation

• Some will consider the future for economic growth in NICs

• STRIPE: Self manager

Starter

• Watch the Malaysia clip from the World 2000 DVD.

• What has changed since this DVD was made?

What are NICs?

• The economies of NICs are usually growing very fast, and there has often been a recent move from a mostly agricultural economy to one involving manufacturing and exporting.

• The term NIC was originally used for the ‘Asian Tiger’ economies of Singapore, Hong Kong, South Korea and Taiwan, although some people argue they’re fully developed and so shouldn’t be referred to as NICs anymore.

Countries which are consistently thought of as NICscontinent country GDP

(Millions of $US, 2007)

GDP per capita ($US, 2007)

HDI 2007 GDP growth rate (% per year)

Africa South Africa 467,089 5,906 0.674 (med) 4.50

North America

Mexico 1, 346,009 8,478, 0.829 (high) 3.00

South America

Brazil 1,835,642 6,937 0.800 (high) 5.40

Asia China 6,991,036 2,460 0.777 (med) 11.10

India 2,988,867 977 0.619 (med) 9.70

Malaysia 357,391 6,947 0.811 (high) 5.40

Philippines 299,626 1,624 0.771 (med) 7.50

Thailand 519,362 3,736, 0.781 (med) 4.40

Europe Turkey 360,985,492 1,463,632,361 0.775 9med) 5.20

Why do NICs out perform factories in countries like the UK?

This is mainly due to the following in NICs: • Lower cost of living • Lower wages • Lack of unions • Lack of legal protection for workers • Lack of environmental controls

Common features of NICs:

• A large population that provides a big internal market and is a resource that attracts investment.

• An openness to globalization, involving movements of capital, labour and trade.

• A recent switch from agricultural to industrial economies. • Large national corporations based there but also operating

in several continents. • Strong political leadership and some elements of state

planning to ensure development. • An education system that is strong enough to produce a

core of well educated people.

Case Study: India

• Globalisation of services, with particular reference to India.

• Watch http://news.bbc.co.uk/1/hi/business/8634932.stm - ‘Entrepreneurs flourish in India’s changing job market’

India’s service sector…

• Is not just about call centres- these are only a tiny part of a rapidly growing industry

Offshore outsourcing

• The practice of hiring an external organisation to perform some business functions in a country other than the one where the products or services are developed or manufactured.

Some examples of offshore outsourcing are:

• Call centres to deal with sales and customer enquiries for companies like British Airways, Lloyds TSB, Prudential, HSBC, Barclays, BT, British Gas and Aviva (insurance).

Advantages to firms locating in India

• The large English speaking workforce (estimated to be over 50 million). • Investment friendly and supportive government policies. • New technologies• World class infrastructure similar to that of developed countries for power,

transport and data communication. • The world’s 3rd largest brain Communication. Bank, with around 2.5 million

technical professionals. • A stable democracy with over 50 years of independence. • A large market size with a middle class population of 250-350 million, with

increasing purchasing power reflected by a huge increase in the purchase of consumer durables in recent years.

• Special investment and tax incentives given for exports in certain sectors such as electronics, telecom, software, and research and development activities.

• Legal protection for intellectual property rights

Why has the state of Karnataka and its capital Bangalore developed into India’s leading centre for ICT?

Karnataka

Reasons

• The state was the 1st to set up engineering colleges. • The 1st to set up a technology university. • Introduced a statewide policy to promote the IT

industry with grants and tax incentives. • In 1991 it established a software technology park in

Bangalore which covers 140,000m². • It now has 6 further technology parks with an area of

560,000m². • It has the best telecom structure in the country.

Aiming to build

• A Green Park to research environmentally friendly building construction and design.

• A NanoPark (technology dealing with matter on a molecular scale)

• A Biotech park for research into new medical, vetinary and plant technology.

Task

• Using the information from this presention, your textbook and the information in your packs, produce two mind maps to show the reasons for and impact of the growth of the economies in China and India.

Reflection…

• In 2003 the RAND corporation (a non-profit making think tank) identified eight major risks to the continued rapid growth of China’s economy over the next decade. These are shown on page 22 in your pack.

• Are you aware of any of these ‘risks’ having an impact on China’s economy today?

• Have any additional risks emerged?

What does BRIC stand for?

Objectives for 3 lessons:

• All will know reasons for the growth of economies in NICs and apply concepts to 21st century examples

• Most will assess the role of NICs in globalisation

• Some will consider the future for economic growth in NICs

• STRIPE: Self manager

Who are they?

• Brazil• Russia• India• China

• fast-growing developing economies• Jim O'Neill, global economist at Goldman Sachs

coined the phrase BRICs in 2001

What is their position?

• Account for more than a quarter of the world's land area and more than 40% of the world's population.

• Among the biggest and fastest growing emerging markets.

• Not likely to come together in a trade alliance (like the EU) BUT they did have their first BRICs summit June 09

• The economies of the BRICs are rapidly developing and by the year 2050 will eclipse most of the current richest countries of the world.

• In less than 40 years, the BRICs’ economies together could be larger than the G7 in US dollar terms. By 2025 they could account for over half the size of the G7. Currently they are worth less than 15%.

Where will their global power come from?

• China will be the biggest supplier of manufactured goods

• India will be the dominant global suppliers of services

• Brazil and Russia would become similarly dominant as suppliers of raw materials.

• Brazil is dominant in soy and iron ore • Russia has enormous supplies of oil and natural gas

The path to 2050• 2016: China’s economy will be the 2nd biggest economy,

following U.S.

• 2032: Indian economy will be larger than Japan’s, being the 3rd biggest economy.

• 2041: China’s economy is the biggest economy.

• 2050: Brazil, Russia, India, and China become among the six most dominant economies.

India

• Goldman Sachs report 2007:• "India's influence on the world economy will be

bigger and quicker than implied in our previously published BRICs research".

• Significant areas of research and development, and expansion that is happening in the country, which will lead to the prosperity of the growing middle-class.

Likely to be a shift in the centre of global economy. By 2050, four of the six biggest economies in the world (China, India, Japan, Russia) will be in greater Asia.Of the current G7 only the US and Japan may be among the six largest economies in US dollar terms in 2050.

Reasons BRICs overcome G7• Important part of world’s population

• Alliances between BRIC countries, political cooperation to extract political concessions from the United States

• Aging working population and falling productivity in G7countries

• India and China as major suppliers of manufactured goods and services

• Russia and Brazil as commodities suppliers to India and China

BRICs’ political and economic changes

Command & mixed economies

Free markets

• development of economically sensible policies, open trade and domestic markets

• stable institutions that support a long-standing economic growth

• Those measures lead to economic growth with a stronger currency.

• Political systems changed to embrace capitalism.

BRICs’ impact on global markets• Transition period will be in the next 20 to 30 years: long term

companies’ strategy must take into account these countries.

• Stages:

– Commodity markets » great demand driven by the BRICs’ economies

– Consumer markets » rise in middle class demand» Increase in demand for durable products

– Capital markets» high returns» capital demand will increase» stronger national currencies

What about the global recession?

• The International Monetary Fund predicts that the overall economic growth rate of the developing countries will reach 5.1% in 2009. Of the developing countries, Brazil, Russia, India and China (BRICs) will enjoy growth rates of 3.0%, 3.5%, 6.3% and 8.5% respectively.

• That is better than the economic growth rates of developed countries!

Conclusions• By 2050 BRICs’ citizens are still likely to be poorer on average

than the individuals in the G7 economies.• India will have the fastest growth on the next 30 to 50 years,

due to its rising in working age population• The pillars of the economic decisions will be shifted from

North America and Europe to Asia• High Asian growth will probably induce a growth on their

neighbours.• BRICs are an important market for almost all kind of

companies, given the high growth potential.• BRICs are calling for a multi-polar economic order, one less

dominated by the US.

Task• Next lesson you will complete an exam question

considering the growth of NICs and their impact on the global economy.

• Today you should carry out research into the BRICS to explore their impact on the global economy.

• You could divide the four BRIC economies between different members of your class and each produce a resource to share.

• There is useful information about Brazil’s role as a BRIC in your pack.

• Use Bloom’s taxonomy mats to help pose your research questions. Review the information on this topic in your text book, then start using other sources for your research.

Reflection…

• How easy was it to decide upon your questions?

• Is it a good idea to give students choice like this?

Homework

• Produce resource and print copies to give to class at the start of next lesson.

What are NICs? What are BRICs?

Share the outcomes of your research. What key issues have been raised?

Objectives for 3 lessons:

• All will know reasons for the growth of economies in NICs and apply concepts to 21st century examples

• Most will assess the role of NICs in globalisation

• Some will consider the future for economic growth in NICs

• STRIPE: Self manager

Reflection…

• How did you find the exam question? Note any concerns in your pack.

• To what extent have you achieved the objectives for these three lessons?

Objectives for 3 lessons:

• All will know reasons for the growth of economies in NICs and apply concepts to 21st century examples

• Most will assess the role of NICs in globalisation

• Some will consider the future for economic growth in NICs

• STRIPE: Self manager