Reviewer For Economic Development

Importance of Economic Development
 Economic development icomponent that drives economic growth in our economy, creating high
wage jobs and facilitating an improved quality of life.
 The business development team at the Orlando Economic Partnership works to attract, and
retain jobs for the Orlando region. While the work of economic developers often falls under the
radar, creating and sustaining jobs for a region is a critical component to a successful economy
and community.
Core of economic development

 Job Creation-Economic developers provide critical assistance and information to companies that
create jobs in our economy. We help to connect new-to-market and existing companies with the
resources and partners they need to expand.
 Industry Diversification-A core part of economic development works to diversify the economy,
reducing a region’s vulnerability to a single industry. While tourism plays an important role in
creating jobs in the Orlando region, economic development efforts help to grow industries
outside of tourism, including Innovative Technologies and Digital Media, Life Sciences &
Healthcare, Aviation, Aerospace & Defense, Advanced Manufacturing, and Business Services.
 Business Retention and Expansions- A large percentage of jobs in the Orlando economy are
created by existing companies that are expanding their operations. Our economic development
team executed 73 business retention and expansion visits to local companies just last year to
assist with their operational needs.
 Economy Fortification- Economic development helps to protect the local economy from
economic downturns by attracting and expanding the region’s major employers.
 Increased Tax Revenue- The increased presence of companies in the region translates to
increased tax revenue for community projects and local infrastructure.
 Improved Quality of Life-Better infrastructure and more jobs improves the economy of the
region raises the standard of living for its residents.
Policies for Economic Development

 Policies for Economic Development- Economic development implies an improvement in
economic welfare through higher real GDP, but also through an improvement in other economic
indicators, such as improved literacy, better infrastructure, reduced poverty and improved
healthcare standards
Policies for economic development could involve:
 Improved macroeconomic conditions (create stable economic climate of low inflation and
positive economic growth)
 Free market supply-side policies – privatization, deregulation, lower taxes, less regulation to
stimulate private sector investment.
 Government interventionist supply-side policies – increased spending on ‘public goods’ such as
education, public transport and healthcare.
For developing economies, other issues could involve:
 Export oriented Development – Reduction in tariff barriers and promoting free trade as a way to
improve economic development.
 Diversification away from agriculture to manufacturing as a way to promote economic
development.
 Policies for Economic Development: Macroeconomic Stability, Privatisation/de-regulation,
Foreign Aid, Development of Manufacturing, Effective Tax Collection, Investment of public
services.
 Macroeconomic Stability-would involve a commitment to low inflation. Low inflation creates a
climate where foreign investors have more confidence to invest in that country. High inflation
can lead to devaluation of the currency and discourage foreign investment. To create a low
inflationary framework, it requires:
 Effective monetary policy. E.g. given a Central Bank independence to control inflation through
using monetary policy.
 Disciplined Fiscal Policy – i.e. avoid large budget deficits.
 For example, if you look at the current situation of China and India – they both have high rates
of economic growth, but the concern is that their economies could easily ‘overheat’ and cause
inflationary pressures. Therefore, to keep a lid on inflation is an important underlying factor in
sustainable economic development.
 A potential problem of macroeconomic stability is that in the pursuit of low inflation, higher
interest rates can conflict with lower economic growth – at least in the short term. Sometimes,
countries have pursued low inflation with great vigour, but at a cost of recession and higher
unemployment. This creates a constraint to economic development. The ideal is to pursue a
combination of low inflation and sustainable economic growth. It depends on the economic
situation, some
 Less Restrictive Regulation Tackle Corruption- Some developing countries are held back by over-
restrictive regulation, corruption and high costs of doing business. To attract both domestic and
inward investment, it is necessary to remove these costs and create a climate which is
conducive to business. To tackle corruption may not be easy, but it is often one of the biggest
constraints to economic development. Also, in the effort to reduce levels of regulation, it is
important that useful
 Privatisation/De- regulation- An important aspect of China’s rapid economic development was

the decision to move from a Communist economy to a mixed economy. Several state-owned
industries were privatised. This gives firms a profit incentive to cut costs and aim for greater
efficiency. De-regulation involves making state-owned monopolies face competition. This
greater competitive pressure can help to create incentives to cut costs. Greater competitive
pressures may also be gained through liberalising trade and opening
 Effective Tax Structure and Tax Collection- One of the challenges developing economies often
face is to effectively tax and collect what they are supposed to. If the government is unable to
collect sufficient tax from the richest aspect of the economy (e.g. production of natural
resources) there will be little funds to finance necessary public sector investment in services
with a high social benefit. For example, the average tax rate in Sub-Saharan Africa is only 15% of
GDP – compared to an average of 40% of GDP in the developed
 Investment in Public Services- In areas such as education, healthcare and transport, there is
often market failure – the free market doesn’t provide sufficient levels of education. A key factor
in improving economic development is to increase levels of literacy and numeracy. Without
basic levels of education and training, it is very difficult for the economy to develop into higher
value-added industries. Evidence on returns from investing in education are mixed. Often
investment takes a
 Diversification away from Agriculture-A constraint developing economies may face is that their
current comparative advantage is in the production of primary products. However, these limit
economic development due to volatile prices, a low-income elasticity of demand and finite
nature. Therefore, economic development may require government encouragement of new
industries in different sectors, such as manufacturing. This may require a temporary
commitment to tariffs. Attempts to diversify away from agriculture
Role of IMF ( international Monetary Fund)in economic development

 The IMF can play a role in dealing with
 These free market supply-side policies have arguably often harmed economic development, e.g.
reducing access to basic necessities and lower government spending on the poor.
 However, the IMF often point out that they are usually asked to help only in crisis so there is
often a difficult choice to make
World bank and Economic Development

 The World Bank is a financial body committed to the reduction of poverty in developing
countries. It offers long-term loans for capital programs.
 The World Bank is committed to achieving its aims through the promotion of international
trade, capital investment and foreign investment.
 The World Bank has often been criticized for its promotion of structural adjustment policies.
These free market-oriented policies have often
Other Issues in Economic Development
 Role of foreign aid Foreign aid can help boost capital investment in schemes which improve
economic development. However, it depends on the type of foreign aid. Does Aid increase
economic welfare?
 Harrod Domar – model of economic growth – the role of savings and capital in promoting
economic development
 Economic development and tourism
 The role of MNCs in developing economies

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Reviewer For Economic Development

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Importance of Economic Development

Core of economic development

Policies for Economic Development

 Privatisation/De- regulation- An important aspect of China’s rapid economic development was

Role of IMF ( international Monetary Fund)in economic development

World bank and Economic Development

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