Developing Countries in the Global Economy: A Forward Looking View

This paper discusses what the next few decades could bring for the developing countries in terms of the size and composition of their trade and inward investment flows, as well as a possibly changing policy framework within the global economy in which they have to operate. Both the prospects and implications are clearly different from country to country, but given the breadth of the paper the focus is more on impacts on groups of countries rather than on specific countries. The bottom line of the paper, is a cautious one. Three nagging questions are repeatedly re-emphasized. Can trade growth really be high enough on the import side in the OECD if now 100 or more developing countries see globalization and increased exports as their primary route to growth, industrialization, and development. Can barrier reductions in OECD markets and future WTO negotiations be relied on to fuel this, as in the past; and is there a more sinister scenario that new barrier increases could even choke off some of the trade growth? And what is to happen to development strategies if this course fails, as it seemingly has done so already for the low income countries? Having posed these questions, there are bright spots; the more rapid growth of South-South trade, even more rapid growth of least-developed to mid-developed country trade; higher growth rates of FDI than trade, and more and more developing country trade being investment driven. The papers’ overriding message is perhaps that the world is not static, and country strategies toward the global economy need to reflect this.