Gone are the days when reliance was placed on various forms of foreign aids for boosting economy. The situation has changed dramatically and now it is the trade of a country that boosts its GDP, improves balance of payment position and increases its foreign reserves.

The same thing has been heard during the annual meeting of the World Bank in Dubai, September 20-24,03, where developing countries demanded more market access and enhancement of trade with the developed countries to improve their economy and to alleviate poverty.

The gap between rich and poor countries has widened tremendously over a period of two decades. A growing divide between the ‘haves’ and the ‘have-nots’ has left increasing numbers in the least developed countries in dire poverty, living on less than a dollar a day. The failure of Cancun talks is likely to take the world towards finding new solutions for trade liberalization. If we examine the global economy, the annual GDP forecast for 2003 is as follows:

World economy 3.2 per cent

Developed countries 1.8 per cent

Euro zone 0.5 per cent

Developing countries 5.0 per cent

Countries-in-transition 6.0 per cent

The above chart clearly illustrates the moving force behind the global economy. It is the developing countries zone that is taking the lead with China in the forefront. But developing countries are not getting their due share in the world trade. With over 6 billion people on earth and more than 2.5 billion living below the poverty line, the world is witnessing a disequilibrium: one billion people of the rich world, enjoying 80 per cent of the global income, while the rest of the world of five billion souls to remain content with just 20 per cent.

The world is going through a recession, threatening the world economy. Since the World War II, countries like the USA and the UK have fewer shorter-lived downturns and longer expansionary runs than previously. This situation can only be improved through trade and business. However, trade and assistance from the developed countries to developing countries should focus on three areas:

*Firstly, good governance, which means consistent and liberalized trade policies by successive governments without making basic changes that would hurt international investors and donor agencies in general. If the government is stable and is accountable for all funds that it receives from the donor agencies\financial institutions, trade would flourish in that country.

Take the case of Malaysia. How good it has done for the region and for itself. The country is beaming with confidence and economic health.

* Secondly, stable exchange rate mechanism which is crucial in the international financial markets in order to eschew any default situation that might arise. During the Asian crisis in 1997-98, most of the countries suffered huge blows to their economies because of the unstable exchange rate mechanisms and unsecured dollar loans.

Most of the countries in the Asean region devalued their currencies against US dollar to about 30 to 40 per cent on the average. The Indonesian rupiah lost its value by more than 80 per cent. Global capitalism is now truly continental. Investors and entrepreneurs focus on regions having strong economic fundamentals. Malaysia and Singapore are the best examples for investors with strong economic indicators and stability of exchange rates.

Last but not the least, skilled human resources and proper infrastructure of the developing countries that would lure international investors to pour in resources to make investment plans not only for the short run but also for the long run. If a country has an excellent network of roads, bridges, telecommunications, highways, railways and skilled labour force, it is bound to move ahead.

Many countries which have invested heavily in education, especially female education, are moving very fast, namely India, Bangladesh, Vietnam, Malaysia, Taiwan, Singapore, South Korea and of course, China. The reason why so many countries are willing to trade with China is that it has strong, skilled educated, cheap labour force with high productivity, efficiency and marketability. The cost of production in China is very low as compared to the region. This provides with strategic competitive advantage over its rival countries including India, Singapore, Japan and Korea. Many companies are closing down their operations in Japan and Singapore and are moving to China to get the market share and take the first mover advantage.

Meanwhile the squabbling between the American government and the Chinese government over the under-valuation of yuan is likely to continue. Although the US’s economy has picked up this year, employment has continued to shrink in that country and that is why the dollar has become such a hot political issue. Exporters blame the cheap Yuan for America’s large trade deficit. The emphasis on trade illustrates the importance countries place in pursuit of sustained growth, financial stability and strong economic fundamentals.

However, a key risk for the world economy remains its heavy dependence on growth in the USA, and related large global current account imbalances. These imbalances are unsustainable over the medium and long term, creating a danger of a disorderly adjustment that would be disruptive to the world economic growth. America’s current-account deficit was then only around 3 per cent of GDP, half as big as it is likely to be by next year. A further decline in the dollar seems all but inevitable.

What needed are the policies for sustainable, equitable and democratic growth. Development is helping a few people or countries getting rich and powerful or creating a handful of protected industries that would only benefit the elite. It is not about bringing in Prada and Benetton, Ralph Lauren or Louis Vuiton, for the urban rich and leaving poor in their misery. Being able to buy or purchase a Gucci Bag in Moscow departmental stores did not mean the country had become a market economy. Development through trade is about transforming societies, improving the lives of the common man, enabling everyone to have a chance at success and access to health care and education.

Trade remains the most significant pillar of a strategy to promote global economic growth and poverty alleviation. It is well worth mentioning over here that the tremendous expansion in the global prosperity was possible only in the context of broad-based, multilateral trade liberalization, within the framework of reciprocity and rules.

Asia has been the main beneficiary of this multilateral trade and investment. In recent decades, Asia has become an increasingly important force in the global economy. Its contribution to the world output has tripled since 1940, and it now accounts for over 20 per cent of the world exports and attracts a third of the foreign direct investments to all emerging markets. Emerging market countries in Asia have clearly benefited through one strategy that is trade. Emerging Asia’s economic dynamism is a valuable asset for the world economy. With their strong economic fundamentals and prosperity will continue to benefit the international economic integration. These countries have increased their exports, creating an investment friendly climate, provided international financial systems to boost their economies and sustained economic growth.

The bottom line is ‘economics and trade everywhere’. Developed world must focus on more trade and sustainable economic policies for the betterment of the region and it needs to ensure that policies/ strategies are positive for the development of continued economic growth to alleviate poverty and suffering of the poor.