Impact of globalization on economic stability

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 Impact of globalization on economic stability

Globalization is a fascinating phenomenon that transformed the world in numerous ways. Globalization results in increasing interlinked and mutual reliance of countries in terms of the trade of goods and services, innovation, and information. Globalization has a remarkable impact on the world economy. As stated by the World Bank, the proportion of global trade compared to GDP has increased since 1970. In 1970, the total value of the global merchandise trade was $19.5 trillion. Foreign direct investment (FDI) has also increased, with global FDI flows reaching $1.54 trillion in 2019. Due to its significance, in recent years, Bhutan has taken a step towards globalization as it provides employment opportunities and increased trade which helps to generate revenue. However, it also leads to income inequality and increases in economic imbalances.

Globalization plays an important role in creating job opportunities in Bhutan. Technology transfer and skills development help in the creation of job opportunities. Bhutan benefits from advancements in technology and knowledge transfer as a result of globalization, which helps in the development of new businesses and job possibilities. For instance, the expansion of the Information Technology (IT) sector in Bhutan has been motivated by globalization. The increase in registered IT companies from 62 in 2015 to 137 in 2020 (Bhutan InfoComm and Media Authority) indicates the growth of this sector, creating job opportunities for IT professionals. Moreover, Bhutanese workers have also been able to learn new skills and knowledge because of globalization's support of skills development through global relationships along with education programs, boosting their job opportunities. Owning to globalization, small and large industries such as cement, hydropower, industries, carbon carbide, and tourism industries were established.  As stated in Bhutan Economic Review (2020), the hydropower sector employed around 7,000 people in 2019. Globalization has enabled this industry to expand by opening up access to global markets for Bhutan's hydropower exports. As a result, there has been an increased demand for skilled workers in this sector, leading to job opportunities for Bhutanese citizens. Furthermore, Foreign Direct Investment (FDI) also contributes to the creation of job opportunities as globalization attracts foreign direct investment, which contributes to job creation in Bhutan. When foreign companies invest in Bhutan, they establish new industries or expand existing ones, creating employment opportunities for the local workforce. For instance, the increase in FDI inflows from USD 93 million in 2015 to USD 275 million in 2019 has led to the establishment of new businesses and industries, generating jobs for Bhutanese citizens(Bhutan Economic Review 2020). Therefore, technology and skills transfer, industries, and foreign direct investment play an important role in promoting employment opportunities which helps reduce the rate of unemployment in Bhutan. 

Globalization indeed played a significant role in increasing trade. It has improved the exchange of goods, services, and ideas across borders, leading to economic growth and development. As per the World Bank, Bhutan’s total merchandise exports increased from $261 million in 2000 to $623 million in 2019. This increase in exports can be attributed to globalization’s facilitated access to new markets. Bhutan has successfully entered global markets and exported a variety of goods, including hydropower, minerals, agricultural products, and handicrafts. Furthermore, globalization has also expanded existing markets for Bhutan. For instance, Bhutan has been able to diversify its export destinations beyond its traditional trading partners like India. According to the Bhutan Trade Statistics 2019 report, Bhutan’s exports to countries such as Bangladesh, Nepal, and Thailand have been steadily increasing over the years. This expansion of export markets has allowed Bhutan to reduce its independence on a single market and mitigate the risks associated with fluctuations in demand. In addition to merchandise trade, globalization has also facilitated the growth of services exports for Bhutan. For example, tourism plays an important role in generating revenue for the country. As stated by the Tourism Council of Bhutan, a total of 40,665 tourists have arrived in Bhutan from 23rd September 2022 until 15 April 2023. This growth can be attributed to the increased connectivity and accessibility brought about by globalization. As a result, it is evident from the statistical study of Bhutan's trade data that globalization has a positive effect on growing and opening up new markets. Bhutan has been able to grow exports and produce money for economic development by taking advantage of these opportunities.  

 

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