Vietnam and Kenya mini case studies

Vietnam flows impacting

Transition from primary to secondary (agriculture to manufacturing)

FDI from TNCs- catalyst e.g. NIKE

NIKE:

Higher productivity due to investment in skills and machinery and technology

Higher wages- Nike pay 3x minimum wage

Vietnam Multiplier effect

More children in school due to higher family incomes (each generation has higher skills that the previous

Highest paid workers consume more- stimulates demand e.g. TV, building materials

Highest paid workers save money- banks recycle domestic savings as investment

New domestic businesses emerge to satisfy domestic demand (borrow from local banks)

Technology transfer and competition improves domestic industries overtime

Kenya

Agriculture remains main form of employment 2/3 population, only producing 1/3 GDP

Low wages

No property rights, cannot borrow to invest (Low domestic savings as little domestic capital available for investment)

Barriers to trade and FDI (little catalyst for change)

Poverty trap (e.g. extensive informal housing, poor services)

Population has poor health and skills

Kenya black and grey market

Weak tax revenues

Weak government (corruption and Kleptocracy)

Crime (mafia)