Reducing the Development Gap – Investment and Industrial Development - OMG Revision – GCSE Geography

This video from OMG revision looks at how investment and industrial development can reduce the development gap. Investment is when money is put into a business or project with the aim of developing economic gains for everybody involved. For example, a HIC may give money to a LIC to develop a new industry with the promise of a share of the profits. Loans can also be given to LICs by HICs, but these have to be paid back in full and with interest on top. However, not all investments and loans lead to successful outcomes and many LICs struggle to pay back the interest on loans. There are many different projects that can be invested in such as infrastructure projects such as new road networks and energy developments such as power plants. Many big companies have invested in LICs in Africa with the Caterpillar who make large mechanical diggers being a great example. In terms of industrial development, many Newly Emerging Economies have seen massive growth in their manufacturing industry. For example, Malaysia’s manufacturing sector now contributes 26% of their total GDP. Investments lead to the multiplier effect and this creates more wealth, more tax revenue and more jobs for the country that is receiving the investment. To revise this topic, it is probably best to think about the multiplier effect. You could create a comic strip that starts with the opening up of a new factory due to foreign investment and then consider the jobs it creates, the extra wealth this creates, the money these people spend on local services, more government tax revenue, further investment etc.