Economic Development?

1. Economic Development is the creation of wealth from which community benefits are
realized. It is more than a jobs program, it’s an investment in growing your economy and
enhancing the prosperity and quality of life for all residents.
Economic development means different things to different people. On a broad scale, anything a
community does to foster and create a healthy economy can fall under the auspice of economic
development.

From a public perspective, local economic development involves the allocation of limited
resources – land, labor, capitol and entrepreneurship in a way that has a positive effect on the
level of business activity, employment, income distribution patterns, and fiscal solvency.

2.Economic development is a concerted effort on the part of the responsible governing body in
a city or county to influence the direction of private sector investment toward opportunities
that can lead to sustained economic growth. (insert commentary) Sustained economic growth
can provide sufficient incomes for the local labor force, profitable business opportunities for
employers and tax revenues for maintaining an infrastructure to support this continued growth.

3. Economic development is a process through which the overall education, well-being, health,

income and living standards of the general population improves. This is where the economy will
gradually grow, change and become advanced. In other words, a nation achieves economic
development when emerging economies become advance economies and you can see a
gradual shift from agriculture to industry to services that will result in economic growth.

Types of Economic Development Indicators and Indices

How can economic development be measured? Economists use different types of economic
development indicators and indices or metrics, to assess the growth and development of a
country or a region.

Some of the most popular types of economic development indicators or indices available are as
follows-

1. Human Development Index (HDI)

Human Development Index (HDI) is one of the most popular types of economic development
indicators and indices that help to measure the average achievements of a country. It takes into
consideration three variables related to human development standard of living, knowledge and
longevity. The HDI measures standard of living by GDP per capita income, knowledge by
combining literacy rate of adults and total tertiary, secondary and primary gross enrolment
ratio and longevity by life expectancy at birth. This composite indicator keeps track of changes
in the level of economic development of a country over time.

2. GDP per capita – growing development population

GDP per capita is a type of economic development indicator and indices that can be calculated
by dividing domestic product with midyear population. This global prosperity measure is used
by economists to find and analyze the economic productivity and prosperity of a country. It is
easy-to-use as its components can be tracked on a global scale.

As of now, USA has the largest GDP in the entire world

3. Introduction of The GDI and GEM

The UN has created the Gender-Related Development Index (GDI) and the
Gender Empowerment Index (GMI) to measure gender equality of a country. Both are common
types of economic development indicator and indices that were introduced in the 1995 UNDP
Human Development Report.

4. Gender Development Index

The GDI measures the gender gap in human development achievements by accounting for
disparities between women and men in 3 basic dimensions of human development: a long and
healthy life, knowledge, and a decent standard of living. The ratio is calculated as female HDI to
male HDI.

This index is important because it can help policymakers identify areas where more work needs
to be done in order to improve the lives of women and girls. Countries that rank high on the
GDI tend to have less gender inequality, while countries that rank low often have high levels of
gender inequality.
5. Gender Empowerment Measure

The GEM puts the focus on professional, political and economic gains made by females. This
type of economic development indicator and indices know about gender inequalities through
variables like a share of parliamentary seats, share in managerial and professional jobs and
income-earning power.

Economic empowerment aims to raise the capacity of women and men to participate in,
contribute to and benefit from growth processes in ways which recognise the value of their
contributions, respect their dignity and make it possible to negotiate a fairer distribution of the
benefits of growth.

6. Modern transportation

Economists have argued in favour of transportation networks and believe that these networks
like high-speed rail structure are an important type of economic development indicator and
indices of the economic advancement of a country. Some important and related modern
transportation network indicators and indices are BRTI Index (Basic Transportation
Infrastructure Index) and RTI (Rail Transportation Infrastructure Index).

Transportation plays a vital role in the economy; it makes economic activity possible (e.g.,
connecting producers to raw materials) and is a major economic activity in its own right.
These ties to production and consumption make transportation a useful indicator about the
status of the economy.
Features and Characteristics of Economic Development

Important features/characteristics of economic development are as follows

1. Economic Development is a continuous process

Every developing economy tries to put in place economic plans and programs for economic
growth and economic development. It is not a onetime deal but a continuous process for long
term as it will lead to better using of financial and human resource,
increased demand and supply of goods and services, a better quality of life and growth in
national income.

2. Economic Development boosts national income

An important characteristic of economic development is that it will help to raise per capita
income that will result in a boost of national income. It is a fact that when the income of a
person will increase the national income of a country will also increase.

3. Economic Development improves the standard of living

A rise in per capita income will lead to an increase in the purchasing power of a person. An

important characteristic of economic development is that better consumption of products and
services will be reflected in a better quality of life, growing economies, expansion in the
business industry and an improved standard of living of individuals.
4. Economic Development helps to utilize national resource property

(commentary)

An economy that believes in economic development is the one that will exploit national
resource property to its fullest and keep up with the world economies.  It will use human,
natural and physical resources to the fullest potential and would provide its people and
communities incentives and opportunities like best education, labor support, business
expansion and more jobs.

5. Economic Development results in structural changes

An important characteristic of economic development is that the process will help in structural
changes and more opportunities from agriculture to manufacturing to the service sector. There
was a time when agriculture was the dominant occupation of a developing country but with
new jobs and opportunities in business, it has been replaced by the services sector which
contributes to more than half of total national income.

6. Economic Development leads to social-economic equality

Development in the economy has resulted in both social and economic equality in income,
wealth, status, quality of life and standard of living of people

Obstacles to Economic Growth and Development

The various obstacles to economic growth and development are

1. Market imperfection

Economists find that ignorance of market condition, not enough labor support, no clear plans of
expansion and not enough jobs often result in market imperfection and is one of the most
important obstacles in economic growth and development

2. Underutilization of resource

Some economies are not using their national resource to the fullest potential and this becomes
an important obstacle to economic growth and development
3. Lack of demand

Poor income, small purchasing power and low standard of living will prove an obstacle to
economic growth and development.

SO HOW CAN WE ACHIEVE ECONOMICAL DEVELPOMENT?

The economic structure of a city, region or country is continuously changing. Shifting economies
at a global scale, increasing competition between regions and technological and labor market
developments within economic sectors accelerate these changes and raise new challenges for
policy makers.

So, economic renewal and a tailor-made economic development strategy are essential for
regions and cities to cope with all these challenges. The key starting point for such a strategy is
a profound understanding of the changes ahead in relation to the specific cluster capabilities
and qualities of the region or city. A successful local or regional economic development strategy
consists of a mix of policies. This mix includes improvement of the economic structure (key
sectors and actors), development of attractive business and living environments, building
(ecological and energy) sustainability and human capital development (talent and education).

Next, six groups of trends can be identified which have an impact in the future on the economic
performance of a city or region:

 Structure of the Economy

 Economy in Relation to Technology
 Economy in Relation to Demography
 Economy in Relation to Social Cultural Trends
 Economy in Relation to Politics and Society
 Economy in Relation to Ecology
Economic development has evolved into a professional industry of highly specialized
practitioners. The practitioners have two key roles: one is to provide leadership in policy-
making, and the other is to administer policy, programs, and projects.

Here in the Philippines for us to attain , ED, Economic development practitioners generally work
in public offices on the state, regional, or municipal level, or in public–private partnerships
organizations that may be partially funded by local, regional, state, or federal tax money. These
economic development organizations function as individual entities and in some cases as
departments of local governments for example in the Philippines, NEDA. Their role is to seek
out new economic opportunities and retain their existing business wealth.

NEDA is involved in the formation of national and sub-national policies, plans and programmes.
The agency reviews, monitors and evaluates infrastructure projects, in addition to undertaking
short-term policy reviews that provide critical analyses of development issues and policy
alternatives to decision-makers. NEDA has also been instrumental in stimulating the generation
and use of evidence in policy-making. It plays a central role in mobilising and coordinating other
government departments in stimulating impact evaluation.

During the Duterte Administration, October 11,2016, Pres. Digong Signed the EO. # 5

AmBisyon Natin 2040 represents the collective long-term vision and aspirations of the Filipino
people for themselves and for the country in the next 25 years. It describes the kind of life that
people want to live, and how the country will be by 2040. As such, it is an anchor for
development planning across at least four administrations.

• The NEDA through a series of nationwide public consultations composed of focus group
discussions and survey, has concluded that the Filipinos’ vision for themselves is
"In 2040, we will all enjoy a stable and comfortable lifestyle, secure in the knowledge that we
have enough for our daily needs and unexpected expenses, that we can plan and prepare for
our own and our children's future. Our family lives together in a place of our own, and we have
the freedom to go where desire, protected and enabled by a clean, efficient and fair
government”

On the Section3 of the executive order, it is stated that the four medium term Philippine
Development Plans, hereafter to be referred to as Philippine Development Plans (PDPs), to be
crafted and implemented until 2040, shall be anchored on the Ambisyon Natin 2040 and overall
goals. The PDPs shall ensure sustainability and consistency of strategies, policies programs and
projects across political administrations.

The Philippine government through economic development and urban planning practitioners
have come up with this 25 year long plan to achieve economical growth and development by
the year 2040, this is something that we can look into.

Conclusion

Every government in the world work towards achieving economic development for its country.
It is a long term goal that will help emerging economies to become developed countries one
day. The year 2020 has proved a challenge because of the pandemic covid 19 but it is a fact that
despite so much turbulence the world has managed to stay strong and move towards further
growth and development.

Amartya Kumar Sen, an Indian economist and philosopher, who received the Nobel Memorial
Prize in Economic Sciences, once said:

“Economic development is about creating freedom for people and removing obstacles to
greater freedom. Greater freedom enables people to choose their own destiny.”

“Obstacles to freedom, and hence to development, include poverty, lack of economic

opportunities, corruption, poor governance, lack of education and lack of health.”

Economic development – example

Let’s suppose there are two countries, Fairland and Unfairland. The two countries have exactly
1,000 people each. These countries are fictitious extremes.
Looking just at GDP
Unfairland’s GDP is $40 million, while that of Fairland is $21 million.

Unfairland’s and Fairland’s GDP per capita are $40,000 and $21,000 respectively.

If we just look at GDP per capital, Unfairland appears to be a richer country. However, we do
not know whether it is more economically developed.

Taking into account other features

Mr. Greed, Unfairland’s richest person, received $39 million of the country’s $40 million GDP.
Mr. Posh, Fairland’s richest person, received $1 million of the country’s $21 million GDP.

If we take out the richest person in each country, GDP per capita is:

 Unfairland: $1,000
 Fairland: $20,000

In Fairland, 99% of the population is literate, while in Unfairland it is 60%. Fairland has free
universal healthcare. In Unfairland, on the other hand, only half the population has access to
affordable health care.

For every mile of road and railway track in Unfairland, Fairland has 6 miles and 11 miles
respectively.

Average life expectancy is Fairland is eight years longer than in Unfairland.

Therefore, as far as economic development is concerned, Fairland is way ahead of Unfairland.

Economic development policies[edit]

In its broadest sense, policies of economic development encompass three major areas:

 Governments undertaking to meet broad economic objectives such as price stability,

high employment, and sustainable growth. Such efforts
include monetary and fiscal policies, regulation of financial institutions, trade,
and tax policies.
 Programs that provide infrastructure and services such
as highways, parks, affordable housing, crime prevention, and K–12 education.
  Job creation and retention through specific efforts in
business finance, marketing, neighborhood development, workforce
development, small business development, business retention and expansion,
[25]
 technology transfer, and real estate development. This third category is a primary
focus of economic development professionals.
Contractionary monetary policy is a tool used by central banks to slow down a country’s
economic growth. An example would be raising interest rates to decrease lending. In the United
States, the use of contractionary monetary policy has increased women’s unemployment.
[26]
 Seguino and Heintz uses a panel dataset for each 50 states with unemployment, labor force
participation by race, and annual labor market statistics. In addition, for contractionary
monetary policy they utilize the federal funds rate, the short-term interest rates charged to
banks. Seguino and Heintz Seguino concludes that the impact of a one percentage point
increase in the federal funds rate relative to white and black women’s unemployment is 0.015
and 0.043, respectively[27]
One growing understanding in economic development is the promotion of regional clusters and
a thriving metropolitan economy. In today's global landscape, location is vitally important and
becomes a key in competitive advantage.[citation needed]
International trade and exchange rates are a key issue in economic development. Currencies
are often either under-valued or over-valued, resulting in trade surpluses or deficits.
Furthermore, the growth of globalization has linked economic development with trends on
international trade and participation in global value chains (GVCs) and international financial
markets. The last financial crisis had a huge effect on economies in developing countries.
Economist Jayati Ghosh states that it is necessary to make financial markets in developing
countries more resilient by providing a variety of financial institutions. This could also add to
financial security for small-scale producers.[28]
Organization[edit]
Main article: economic development organization

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There are numerous other organizations whose primary function is not economic development
that work in partnership with economic developers. They include the news media, foundations,
utilities, schools, health care providers, faith-based organizations, and colleges, universities, and
other education or research institutions.
Economic Development Planning: Where To Start

Economic development planning starts with a look at your community to answer the following
questions:

 Where are we now?

 Where do we want to be?
 Why aren't we there now?
 What needs to be done to get us there?
 Who is going to get us there?
 When is it going to be done?
 How will we know when we get there?

What Model Should I Use For My Plan?

An economic development model is a basic structure or foundation of rules and responsibilities

that an economic development plan works within.

The economic development model helps determine:

 Who an organization is accountable to

 How they are funded
 The kind of economic development activities they can do
Once you decide on a model for the foundation of your economic development organization,
you can choose an organization structure.

Economic Development Models

There are three main models for economic development organizations:

 Public
 Private
 Public-private partnership
Below is a description of each of these economic development models and the general
advantages and disadvantages associated with each.

Public Model

Public model organizations are part of a local, regional, or First Nations government. These
organizations can be:

 A government department 
 A cluster of government departments 
 An arm’s-length public entity including:
o Commissions 
o Societies 
o Corporations 
Expand All | Collapse All
 
Advantages of the Public Model
 
Disadvantages of the Public Model
 
Public Model BC Ideas Exchange Success Stories

Private Model

Private model organizations are not a part of or directly linked to local government. They are
often set up as societies or corporations. They are flexible organizations and are usually
designed to address specific local economic development needs.

Expand All | Collapse All

 
Advantages of the Private Model
 
Disadvantages of the Private Model
 
Private Model BC Ideas Exchange Success Stories

Public-Private Partner Model

In a public-private partner model, the costs, governance, and operations for the organization
are shared between a local, regional, or First Nations government and the private sector. In this
model, the organization is not part of the government and has some degree of independence
but is still linked to local government.

This model can reduce some of the disadvantages found in the private and public models by
sharing strengths from each. For this to work, all partners must have a clear, agreed-upon
understanding of the organization’s purpose and how it will operate.

Public-private partner organizations require:

 A clear, shared mission that all partners agree upon

 Defined governance and funding streams
 Freedom to organize their internal structure and operations independently from their
partners
 Agreed-upon accountability structures, performance measures and ways to evaluate
success for the organization
Expand All | Collapse All
 
Advantages of the Public-Private Partner Model
 
Disadvantages of the Public-Private Partner Model
 
Public-Private Partner Model BC Ideas Exchange Success Stories

Organization Structure

Once you decide on a model for the foundation of your economic development organization,
you can choose a structure to help set the shape, powers, and functions of the organization.
Structures have different legal and operational considerations. Common structures include:

 Commissions
 Societies 
 Service Agreements
 Corporations

When making the decision on what model and structure to choose you should ask the following
questions:

 What model and structure should I choose?

 What are our goals?
  What resources do we have to develop and run an organization?
 Who do we need to involve for the organization to be able to do its work?
 What has been done in the past and did it work?
 What is going to work long-term for the organization and those it serves?

https://caled.org/economic-development-basics/

https://www2.gov.bc.ca/gov/content/employment-business/economic-development/plan-and-
measure/economic-development-basics/where-to-start/model/commissions

https://en.wikipedia.org/wiki/Economic_development

https://www.marketing91.com/economic-development/

https://pidswebs.pids.gov.ph/CDN/EVENTS/2_carreon_presentation_sti.pdf

https://www.officialgazette.gov.ph/downloads/2016/10oct/20161011-EO-5-RRD.pdf

https://www.3ieimpact.org/about-us/members/national-economic-and-development-
authority-philippines
Development finance is the efforts of local communities to support, encourage and catalyze
expansion through public and private investment in physical development, redevelopment
and/or business and industry.
So in other words, Development Finance, this is when financial insitutions grants local
communities raise to invest in businesses, industries in order to encourage development.
Whatever development projects that they have planned for, development finance would make it
happen by granting financial supports.
It is the act of contributing to a project or deal that causes that project or deal to materialize in a
manner that benefits the long-term health of the community.

So in larger scope, development finance is when financial instiruions grant loans and capitals to
the government for the implementation of infrastructure projects, properties, establishments that
would benefit the local community.

And the word itself, it financies developpments.

Development finance requires programs and solutions to challenges that the local business,
industry, real estate and environment creates.

https://www.cdfa.net/cdfa/cdfaweb.nsf/pages/df.html

Development financing can be defined as sources of finance separate from the

domestic private sector.  It can be broken down into four components, each of which
contributes to both objectives of meeting needed public finance and external financing
for growth:

o Revenues of developing country governments themselves (these also reduce

external financing needs when public savings go up);

o Development projects

o Concessional development assistance, both external grants and concessional

credits, that may fund public or philanthropic expenditures, or catalyze growth-
enhancing private financing;

o Concessional loans: These are loans that are extended on softer terms

than market loans, either through interest rates below those available on the
market or by grace periods, or a combination of these. Concessional loans
typically have long grace periods.

o Non-concessional loans taken out by (or guaranteed by) developing country

governments, from international financial institutions or private sources,
typically used for infrastructure or other revenue generating projects;

o Non-concessional loans: These are loans, typically used in relation to

MDBs, with a market-based interest rate and substantially less generous
terms than concessional loans.
o Private external finance, in the form of foreign direct investment (FDI) and
other portfolio flows, mostly targeted to growth objectives rather than social
objectives.

o Low income countries relied on external financing for just under one-half of
their total development financing, and the share gets progressively lower as
countries get richer;  

o CDA is of considerable importance in low income countries, but becomes

progressively smaller as a share of finance as countries get richer;

o About half of CDA goes to low income countries; but even upper middle-
income countries receive substantial amounts of CDA ($11 billion in 2011);

o All country groupings receive significant amounts of private finance. There is

no indication that relative shares of private finance change much as countries
get richer over time;[3]
o Within private finance, FDI is the most important component for all countries,
and most countries, including many low income countries, receive significant
flows of FDI;

o Public and publicly guaranteed loans from all international financial institutions
and other sources are comparatively small in every income category.
Government revenues are the
largest source of development
financing and prospects for
continued increases are good.

How does development finance work? CANCEL

Development finance works by the lender providing money to
purchase the property and the money to complete the building
work.
Most development finance lenders will offer an initial loan
based on the purchase price. The lender will subsequently fund
100% of the cost of works but will be provided in arrears.
Once the construction work commences, the client must fund the
first part of the costs.
The following month, the developer will provide an invoice to
the bank surveyor who will make sure it is all correct and upon
confirmation, the bank will then fund the client. This is what in
arrears means. This ensures that the works are completed, and
the development is finished and ready to be sold or refinanced.
Unlike traditional loans, development finance works by taking
the value of the completed property into consideration. This
enables builders and investors the opportunity to fund schemes
that would usually be out of reach or budget.
The development finance institutions or development finance companies are organizations owned
by the government or charitable institution to provide funds for low-capital projects or where their
borrowers are unable to get it from commercial lenders. Development finance institutions (DFIs)
occupy an intermediary space between public aid and private investment, facilitating international
capital flows.
https://newable.co.uk/what-is-development-finance/

Important Functions of
Development Banks
Development banks have been started with the motive of increasing the pace of
industrialization. The traditional financial institutions could not take up this challenge
because of their limitations. In order to help all round industrialization development
banks were made multipurpose institutions. Besides financing they were assigned
promotional work also. Some important functions of these institutions are discussed as
follows:

1. Financial Gap Fillers

If may gap han finance , hra an nag fifill

Development banks do not provide medium-term and long-term loans only but they
help industrial enterprises in many other ways too. These banks subscribe to the bonds
and debentures of the companies, underwrite to their shares and debentures and,
guarantee the loans raised from foreign and domestic sources. They also help
undertakings to acquire machinery from with in and outside the country.

2. Undertake Entrepreneurial Role

Developing countries lack entrepreneurs who can take up the job of setting up new
projects. It may be due to lack of expertise and managerial ability. Development banks
were assigned the job of entrepreneurial gap filling. They undertake the task of
discovering investment projects, promotion of industrial enterprises, provide technical
and managerial assistance, undertaking economic and technical research, conducting
surveys, feasibility studies etc. The promotional role of development bank is very
significant for increasing the pace of industrialization. Tagan opportunity mag
encourage entrepreneurial
3. Commercial Banking Business

Development banks normally provide medium and long-term funds to industrial

enterprises. The working capital needs of the units are met by commercial banks. In
developing countries, commercial banks have not been able to take up this job properly.
Their traditional approach in dealing with lending proposals and assistance on securities
has not helped the industry. Development banks extend financial assistance for meeting
working capital needs to their loan if they fail to arrange such funds from other sources.
So far as taking up of other functions of banks such as accepting of deposits, opening
letters of credit, discounting of bills, etc. there is no uniform practice in development
banks.

4. Joint Finance

Another feature of development bank’s operations is to take up joint financing along

with other financial institutions. There may be constraints of financial resources and
legal problems (prescribing maximum limits of lending) which may force banks to
associate with other institutions for taking up the financing of some projects jointly. It
may also not be possible to meet all the requirements of a concern by one institution,
So more than one institution may join hands. Not only in large projects but also in
medium-size projects it may be desirable for a concern to have, for instance, the
requirements of a foreign loan in a particular currency, met by one institution and under
writing of securities met by another.

5. Refinance Facility

Development banks also extend refinance facility to the lending institutions. In this

scheme there is no direct lending to the enterprise. The lending institutions are provided
funds by development banks against loans extended’ to industrial concerns. In this way
the institutions which provide funds to units are refinanced by development banks. In
India, Industrial Development Bank of India(IDBI) provides reliance against term loans
granted to industrial concerns by state financial corporations. commercial banks and
state co-operative banks.

6. Credit Guarantee

The small scale sector is not getting proper financial facilities due to the clement of risk
since these units do not have sufficient securities to offer for loans, lending institutions
are hesitant to extend them loans. To overcome this difficulty many countries including
India and Japan have devised credit guarantee scheme and credit insurance scheme. In
India, credit guarantee scheme was introduced in 1960 with the object of enlarging the
supply of institutional credit to small industrial units by granting a degree of protection
to lending institutions against possible losses in respect of such advances. In Japan
besides credit guarantee, insurance is also provided. These schemes help small scale
concerns to avail loan facilities without hesitation.

7. Underwriting of Securities

Development banks acquire securities of industrial units through either direct

subscribing or underwriting or both. The securities may also be acquired through
promotion work or by converting loans into equity shares or preference shares. So
development banks may build portfolios of industrial stocks and bonds. These banks do
not hold these securities on a permanent basis. They try to disinvest in these securities
in a systematic way which should not influence market prices of these securities and also
should not lose managerial control of the units.

Development banks have become world wide phenomena. Their functions depend upon
the requirements of the economy and the state of development of the country. They
have become well recognized segments of financial market. They are playing an
important role in the promotion of industries in developing and underdeveloped
countries.

https://www.mbaknol.com/business-finance/important-functions-of-development-banks/

In the Philippines, development financing institutions play a pivotal role in the

quest for sustainable growth and development. And at the helm of the country’s
march toward progress is the Development Bank of the Philippines. As the
country’s pre-eminent development financial institution, DBP has taken upon
itself the strategic task of influencing and accelerating sustainable economic
growth, through the provision of resources, for the continued well-being of the
Filipino people.
https://www.dbp.ph/about-dbp/