Geography Past Paper Question: June 10 * Discuss the impact of Newly Industrialised countries (NICs) on the global economy. The NICs originally attracted a lot of inward investment such as FDI from TNC’s which originated from MEDCs. The reasons were that NICs had a large labour force which worked for cheap wages. They also had cheap land, friendly govt legislations, cheap available raw materials and reduced import and export tariffs. The manufacturing industry was first to move and so the NICs became more focused on the secondary sector while the source countries (MEDCs) became tertiary sector economies.
This is a disadvantage for most of the MEDCs as they will face periods of structural unemployment where the unskilled workers who could only do manufacturing work will be unable to find jobs. The NICs will have reduced unemployment since a lot of jobs will be made available; requiring low levels of work based skills. On the other hand, due to the lower costs of production for the TNCs, they will be able to sell products for cheaper prices and so this will benefit the global economy.
It will also benefit the NICs as they will face increased demand for their services and their population would face glowing job prospects. After a while, the NICs tend to become countries where TNCs originate from. Examples of this could include “TATA” from India which operates in many sectors such as communications and information technology, engineering, energy, consumer products and chemicals. TATA are now trying to move out of India as it is becoming increasingly expensive to operate in the country. They are moving to other developing countries such as Brazil and Mexico who are now considered as NICs themselves.
According to Rostow’s model, we can see that most NICs will go through the stages of specialisation and industrialisation after which they will start to not rely on investment and imports from other countries. The Asian tigers have already gone through the stages and now are able to provide for themselves rather than relying on investment. China and India are currently receiving growing investment but a few TNCs from those countries have started to outsource from other countries who are in the transitional stages such as Brazil.
China and India will soon become developed countries such as the Asian Tigers and the focus will then shift to the other ‘BRICS’ countries. To conclude, NICs have a largely positive impact on the global economy as they enable TNCs to provide goods and services for cheaper prices to international markets. On the other hand TNCs cause increased unemployment in the country they move production from. However, most of the affects are positive as NICs are allowed to become developed countries in the long term and new countries can then go through the same process such as India and Brazil respectively.