Chapter 10:

Pollution in LDCs is in form of:

 Waste disposal
 Hygiene problem
 Health disease
 Sewerage
 Maintenance problems
 Pollution

Pollution in MDCs is in form of:

 Pollution
 CO2 emission
 Noise
 High level of consumption
 High energy consumption
 Ozone layer

Sustainability:
It is meeting the needs of the present generation without compromising on future
generation’s consumption. Sustainability is possible if and only if environmental
capital remains constant or increases. Quality of light depends on the quality of
environment.

Sustainable National Income:

NNI ¿∗¿=GNI −D m −Dn ¿

Dm=depreciation of manufactured capital

Dn=depreciation of environmental capital

−Dn− R− A ¿
NNI ¿∗¿=GNI −D m

Dm=depreciation of manufactured capital

Dn=depreciation of environmental capital

R =Expenditure required to restore destruction of environment

A =Expenditure required to avert destruction of environment

Chapter 13:
This chapter focus on Debt crisis of 1980 and 1970.
Main factors affecting flow of financial resources are: FDI, Private investment,
Remittance
BOP consist of 2 things:
1) Current account 2) Capital account 3) Cash account
It focus on three things:
1) Balance of import and exports 2) Debt services 3) Remittance or
transfers
It shows the net FDI and foreign debt inflow into a country.
It shows the error that present in current account and capital account. Hard
currency means that currency of financially strong countries such as US, etc.
Balance of current account and Capital account is off-set by balance in cash
account. IMF & World Bank did structural adjustment to stabilize a country by
lowering import (through local demand) and by reducing inflationary pressures
(through devaluing currency). SDR (Special drawing rights) is a reserve set by a
basket of strong currencies such as Dollar, Euro, Sterling, Pound, etc. Member
countries of IMF can draw reserve a/c their contribution in the reserve. It can be
converted into convertible currencies
Due to oil crisis, Developing countries were facing negative current account
surplus. Due to low-interest rate, few loans were given to developing countries.
But petro-dollars were available a high interest rates so debt services of these
countries increased. Thud, these countries are trapped in a poverty trap.
Basic transfer: The net transfer of financial resources through debt
BT=dD−rD=( d−r )D
Since, d deceased due to size effect and r increase due to introduction of Private
Banks and due to presence of petro-dollars. Thus basic transfer is negative for
these countries. Capital flight was also taking place due to economic uncertainty.
Macroeconomic instability: a condition in which there is high inflation, BOP
deficit, budget deficit, a rapidly expanding money supply. Stabilization policies
aims to restrict monetary policy to control inflation, devaluing exchange rate,
reduce budget deficit, etc. However, due to low price elasticity and low income
elasticity, inflation and under-valued exchange rate doesn't impact export and
import significantly. Restructuring means changing terms of debt such as changing
interest rate or maturity, etc. Debt for equity swaps means that if a country is
unable to pay its debt then it would give its equity (shares, stocks, etc.) to the
financing institutions in place of its debt.
Debt for nature swaps means that if a country is unable to pay its debt then it
would give ownership of natural asset such as road, etc. to the financing
institutions in place of its debt. In debt-repudiation, alternative policies are
designed for developing countries who are unable to pay debt. Odious debt are the
ones taken by a dictator and are not used for the well-being of people. Therefore
they are right-off. Countries with least economic conditions are given relief to pay
their debt, this group is HIPCs
Chapter 14:
Global factories means production facilities distributed spread around the world to
take advantage of price and wage differential. MNCs lower saving because they
substitute savings for consumption. Since, a major chunk of profits is extracted to
the origin country of MNC. So it worsen Forex situation. They show low revenues
in high tax country and high revenue in low tax country, this is called transfer
pricing
Captures local sector resources and inhibits local industry to grow. Shift resource
allocation from food to sophisticated goods, thus creating imbalances between
rural and urban sectors causing migration. MNCs usually produce products for
Elite class and change consumption pattern through marketing. They employ
capital intensive technology providing little or no employment. They get excessive
socials and economic concessions such as TAX REBATE from government.
Despite these profits they do transfer pricing, Causing negative return to Host
Country, Political influence over the government, manipulating the political system
of host country. FDI an important stimulus for development if government policies
are in place. Portfolio means a packages comprising of stocks, bonds, etc. Middle
income countries are favored for such investments. Well-functioning local stock
and bond market attract foreign investor to get higher returns. Financial system
also help local investors also. An efficient financial system means a SCREENING
and MONITORING device. Portfolio investments are volatile, meaning that it
creates instability instead of stability. Therefore, portfolio investment doesn't help
that much. Really helpful is LONG-TERM INVESTMENT. Volatility of portfolio
investments depends on Interest Rate DIFFERENTIAL.
Migration of skilled worker causes BRAIN DRAIN. However, when unskilled
worker migrate, it is better for the country. It also lead to Poverty reduction. Since,
no of migrants in developed world are increasing so financial cost of sending
remittance is decreasing. Therefore, remittances are increasing. Aid is either
bilateral (such as US aid) or multi-lateral (e.g. World Bank). Two conditions for
aid, (1) non-commercial (2) Concessional Terms. Giving loans and grants on
concession basis or soft terms. This was known as ODA. Aid provide donor with
political, economic and strategic benefits. Aid also contains also contains
economic rationale as well. If a country have saving gap (i.e. its savings are less
than investment opportunities) then this lack of saving lead to import of ready-
made goods which means use of Foreign reserves. It means that foreign reserve
can be used as a supplement to local saving. Skill gap must also be mitigated to
ensure conversion of Aid into economic growth. Capacity to use these funds to
convert into growth is Absorptive Capacity. Tied-aid (comprising mainly of soft
term debt) increases import costs and also reduces export avenues. Conflict is due
to combo of economic and political inequality along with cultural one.
Letter to Malik Ashtar
 Fear of Allah- priority to His worship. Obey his commands.
 Follow the commandments of The Holy Book and His Prophet
 Head, heart, hands and tongue to help His creatures
 Make your mind the source of fountain head of good thoughts, intentions
and deeds.
 Create kindness, love and compassion
 Same religion- brothers
Others- Humans
Help them and show mercy through forgiveness
 Ruler-Caliph- Allah
 Do not feel ashamed to forgive and forget
 Policy is neither too severe nor too lenient
 Fair, impartial and just in your dealings
 Pay no heed to backbiters and scandalmongers
 Donot accept the advice of
1. misers-away from kindness, frightened of poverty
2. cowards- make you timid
3. greedy-exploit community
 Worst ministers
1. Ministers to despotic rulers
2. No sinful mentality
3. Helped tyrants
 Find people who are equally wise and learned- speak out the bitter truth
without fear of power- honest, truthful and pious
 Not treat good and bad alike
 Not give up practices that good muslims have created before you- united
 United
1. Soldiers
2. Secretaries of state
3. Judges and magistrates
4. Officers
5. Common men
 Equity, justice and fairplay be your motto
 Sin of blood shedding
 Self-admiration and self-appreciation
 Do not boast
 Do not be hasty
 Do not reserve yourself with anything that is a common property of all