The text offers two reasons why private investment might be better for poor coun

Question

The text offers two reasons why private investment might be better for poor countries than assistance tendered by foreign governments or international agencies. One is that technical assistance often comes along with private investment as part of the package. The other is that private investors may be more determined to see their funds invested profitably and therefore less likely to subsidize projects that do not promote economic growth. Can you think of any reasons for the opposite view: Why governments assistance or assistance by international agencies would be better for poor countries than private investment?

Explanation / Answer

Why governments assistance or assistance by international agencies would be better for poor countries than private investment?

Yes, there are three main reasons or pros for assistance by international agencies.

First, international agencies already have a system in place that works and it is proven. By using their system and adapting it to the smaller country will result in lower implementation costs and quicker implementation. After all, why re-create the wheel if it already exists and works elsewhere?

Second, Smaller countries my not have the level of resources needed to implement their own unique system and it may also have short comings when communicating with the existing international systems. Basically, smaller countries do not have the economies of scale that a larger company will have when implementing a system like this on a large scale.

Third, by having it done through an established third party (international) there is less opportunity for corruption or skimming. If the smaller company allows the wealthy to contribute to and investing in the technical infrastructure, the trading system may be skewed for the larger investors and the smaller every day investors like you and me will not have a fair shot or be treated equally in the process.

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