Methods of encouraging economic growth

Methods of encouraging economic growth

Introduction

Hong Kong and Singapore are recognized as newly industrialized countries. The nations are categorized as second world states. The countries according to Waters (2006) have moved from developing or third world nations that are agricultural based into industrialized economies. Singapore was recognized as second world country in the 1970’s and Hong Kong in the 1980’s. The duo are still growing and World Bank has provided financial assistance to the two, to encourage the growth rate and stabilization of the economy. As Douidich, Douidich, Ezzrari, Van and Verme (2013) state, World Bank is an important provider of monetary and technical help to the developing nations all over the world. The aim of the World Bank is to eradicate poverty through application of professionalism with passion in order to obtain results that last for a long time. The agency also aims at motivating people to have self-help and assist the surrounding through the provision of required resources and forming partnership relationship with private and public sectors in the world. According to Lanjouw, McKenzie, Luoto, Lanjouw and World Bank (2011) property rights, taxation and trade alliances are aspects of concern in Singapore and Hongkong.

Methods

Trade associations

            According to Douidich et al., (2013) the developing countries should make the decision of entering into trade associations with other countries in order to benefit from the world trade grouping. With respect to Hongkong and Singapore, the World Bank provides assistance to motivate and encourage the nations to join other organizations in the world such as Southeast Asian Countries. Through trade association, the developing countries benefit as a result of being members to the largest world trade grouping (Waters, 2006). A study by Lanjouw et al., (2011) shows that the ability of a country to be part of such a conglomeration would boost the nation’s economy. Trade association that the World Bank encourages Singapore and Hongkong to join benefits the member nations especially through reduction or elimination of tariffs on trade for given goods and services with other member countries. Tariffs are imposed by countries to control trade of certain goods and services with other countries. Elimination or reduction of tariffs would play an important role in encouraging trade between Singapore, Hongkong and other members of the organization that help in opening up more wider trading opportunities that may not exist without trade organization with other countries.

Laws of taxation

            Douidich et al., (2013) notes that to increase the growth and economic development, both Hongkong and Singapore must keep in touch with the taxation laws. If the two do not tax enough, the nations will face a limitation in supplying the services and infrastructure resources that are important for maintaining the existing ventures and citizens and or attract others. According to Waters (2006), Singapore is considered as having light taxation laws that help in realization of the development goal. The World Bank plays an important mandate in advising the two countries on the appropriate tax laws that can help improve the development. Lanjouw et al., (2011) clearly point out that the tax regime for Singapore is relatively fair to the individual residents. Singapore charges tax on capital gain in minimal circumstances. Gift taxes do not exist and in 2008 estate tax was neglected. Personal interest rates of Singapore also are relatively light where the country charges a progressive interest rate to the residents up to 20 percent on the income earned. According to Waters (2006), low net tax recorded in 2011 in Hongkong indicates that the country also had low taxes. According to the advice from the World Bank, the two countries should raise the taxes to a level that will not discourage foreign investors in the country and will lead to a positive growth of the two economies. The World Bank maintains that low tax rate will act as an incentive to the firms. Tax laws will motivate more countries to start operating in the developing countries. Increase in the number of companies’ results to higher employment rate within the country thereby improving the taxes to the government because of the large number of people paying levies.

Property Rights

            Another method of improving the growth rate of typical firms in Hongkong and Singapore is through establishment of property rights by the government. Research by Douidich et al., (2013) indicate that Hong Kong that holds the second position in the world in terms of opening new businesses. Eleven factors were considered in positioning list including technology, property rights, performance of stock market, protection of the investors, trade freedom, monetary freedom, burden of the tax, personal freedom, performance of the market and red tape.  Waters (2006) records that Singapore holds the first position in trade freedom and property rights. The argument is that both the firms and the operators want to have it in mind that the duo are the owner or they hold ownership in particular properties rather than the government holding the entitlement. Property rights encourages investment and establishment of new branches or companies in a country because of ownership right given an individual ultimately encouraging economic development in growing countries resulting from growth of the typical companies.

Method to be adopted by a typical company in Singapore and Hongkong

            I would suggest the use trade association method by the typical company. The decision by the countries to associate with other corporations and organization worldwide would result in a faster growth. The formation of association with other companies in other states would result in lowering the tariff rates that would boost the trade between the firms consequently aiding in access to new markets by the typical company through new markets opened by the member organizations.

Conclusion

            In regard to improving the growth of either Singapore’s or the Hongkong economy, the countries should employ the above discussed methods in combination. The application of the method should be done together to impose economic growth.  Employment of trade association helps in trading freely with other developing countries. Tax laws assists the states to maintain the tax rates at a level that will encourage more firms to do operations in the country resulting in high tax collection because of high level of employment. Property rights encourage investors by giving individuals a sense of ownership of resources and businesses.

 References

Douidich, M., Douidich, M., Ezzrari, A., Van W., & Verme, P. (2013). Estimating Quarterly Poverty Rates Using Labor Force Surveys: A Primer. Washington, DC: The World Bank. N.p.

Lanjouw, P., McKenzie, D., Luoto, J., Lanjouw, P., & World Bank. (2011). Using repeated cross-sections to explore movements in and out of poverty. Washington, DC: The World Bank. N.p.

Waters, B. (2006). The Hongkong Bank HQ. Facilities, 3(9), 12-15. Doi: 10.1108/eb006343 N.p

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