Part 1 of a 3 part series
Author: Paula Jones FCMA

Much has been written and debated about the issues of global poverty and the possible solutions. There have been many examples of dependencies created by the long term provision of humanitarian aid and much lobbying of governments to relax the trade restrictions on developing countries with the aim of creating a more sustainable solution to eliminating poverty. Both of these viewpoints are complex and have their own issues attached….. read more by clicking on the continue reading link below.

Look out for our next fortnightly blog: Outsourcing and it’s impact on growth in developing countries

Aid money is without a doubt extremely valuable in providing emergency relief to disaster or poverty stricken areas, however it is when the funding continues for long periods of time, or the same area continually receives funding, that problems arise. These days aid money is big money and not only can that create little incentive for the recipients to take back control of their lives, it can also be tempting to divert some of the aid money away from the projects it was intended for. This can happen both within the organisations handling the money and within the host governments. During the Tsunami recovery period in 2005 the Sri Lankan government brought in a tax on aid money coming into the country, despite the majority of the money having already been taxed from donor’s salaries before being donated to the aid agencies in their home countries. The tax rule of 0.9% of funds is still in place although most aid agencies are still challenging it. Within organisations themselves, although nearly all of the aid agencies in the UK have robust financial controls and audit frameworks in place, corruption is still rife in certain regions making aid work more difficult.

For a number of years now governments of the developed world have been lobbied to lift trade restrictions on goods from the developing world, and in recent years some progress has been made, whether it be reductions in EU farm subsidies or US gestures on steel imports. However, lifting trade barriers often isn’t as easy as it seems as many governments are worried about the impact that it will have on home producers. It is often politically easier for governments to pledge aid money, which they control, than lift the trade barriers and lessen their hold on global wealth.

However with high profile organisations such as the IMF and the World Bank mediating better trade arrangements with the developed world, the benefits of globalisation have become more accessible to the poorest regions. “Policies that make an economy open to trade and investment with the rest of the world are needed for sustained economic growth. The evidence on this is clear. No country in recent decades has achieved economic success, in terms of substantial increases in living standards for its people, without being open to the rest of the world.” IMF, Global trade liberalisation and the developing countries (Nov 2001).

Trade in the services industry has increased considerably in recent years, particularly with companies in the developed world outsourcing their back office functions to places like India and Sri Lanka. This increase in service trade has provided the host countries with the ability to play on the world stage, bringing in much needed profits and creating job opportunities that are the bedrock of economic development.

For more information on outsourcing for SMEs, contact: Outspan. www.outspan.co.uk, 0845 838 1965