Poverty Reduction in Developing Countries


The causes of poverty in developing countries involve culture, climate, gender, markets, education, public policy among other things. The worst affected areas are the rural settings where majority of the population resides. In this report we are going to look at the causes of poverty in developing countries especially the rural areas, what accounts for its persistence and measures to be taken to eliminate and reduce poverty.

Poverty reduction is a primary goal of development policy. In developing countries people live on meager incomes and lack established infrastructure services such as main roads, power suppliers, clean water and telephone services. Private investments and regulatory instruments from various parts of the world have stepped in aid in development of various projects to uplift living standards of the people and create employment opportunities.

This report deals with the role of infrastructure regulation in poverty reduction in developing countries. The paper looks at different projects funded by foreign investment, the objective of improving the actual regulatory policy and benefits of the project in developing countries. The key focus of international development policy formulated by different organizations emphasizes on privatization, market liberalization and regulatory reform. Can donor funding help in poverty alleviation in developing countries?

Literature review

Public Policy in poverty reduction

Donor funding alone can not help in reducing poverty in developing countries. Economical stability, public investment in physical and social infrastructure as well as competitive markets are widely recognized devices to stimulate economic growth and poverty reduction strategies. Public policy in its role should focus on issuing land and credit facilities, support services, education and health care facilities and designing public works programs to deal with food problems.

Approximately one fifth of the world’s population is affected by poverty, developing countries contributing to the bigger percentage. These people live on less than a dollar a day. The poor try to adopt ways to alleviate and cope with poverty. Social and economic issue such as households, communities, markets and institutions provided my state are the backbone of poverty in developing countries. Poverty levels differ in gender, location i.e rural and urban, age and ethnicity.

In household context, women and children are the worst affected by poverty as compared to men. In a community set-up, ethnical disparity favors the majority of the group and discriminates against the minority group in the community becomes the worst hit in terms of poverty. Majority ethnic have more people in the parliament and often secure more employment opportunities and more space for land settlements as compared to the unspoken minorities. These disparities among poor reflect intricate interactions of public policies, trading markets and interaction of different cultures (Khan 2001).

Rural poverty accounts for 63% of worldwide poverty. Bangladesh represents 90% and 65% in sub-Sahara Africa and a few cases in Latin America poverty is concentrated in urban areas. Rural poverty has contributed to rapid population growth and high migration to urban areas. Urban areas are lagging behind economic development due rural poor efforts of trying to curb poverty by moving to urban areas. Poor government policies such as not offering incentive to agricultural sectors and neglecting social and physical infrastructures in rural areas have contributed highly to rural and urban poverty. Poverty in these areas can completely be mitigated if the mean of income rise on a sustainable basis, this could be realized with financing educational sectors (Khan 2001).


Economic growth should be neutral to reduce income inequality. It would be hard to realize poverty reduction if income levels remain at a constant levels. Sustainable levels of poverty depress the process of economic growth while equal distribution of it reduces poverty at great levels. Developing countries should provide incentives and sound investment systems that will assure better health and education in turn leading to higher incomes. The poor population would benefit if education and health facilities are increased. The available measures for poverty reduction employed by developing countries such as import-substituting, traditional capital investment and poor urban growth strategies induced by government by pricing trade and poor plan of public expenditure have not helped in reducing poverty.

These measures have been there for years but little development has been realized. Non-profits organizations need to step in to draw new policies and fund various projects to upraise the living standards of people living in poor conditions. Agricultural sectors need to employ labor-intensive technologies to increase food for local consumption as well as for importation (Khan 2001).

People living rural areas depend on agriculture, forestry, fishing and small-scale activities for survival. Rural poverty was created due to civil strikes and political instability, disparities in gender, race, ethnicity and religion, inadequate allocation of agricultural and natural resources rights, corruption, economic policies that exclude rural areas in the development, unequal allocation of land ownership and unbalanced tenancy arrangements.

Rapid and rapid growing families with high dependency ratios also contribute to poverty, external shocks attributed by climatic changes, conditions on international economy and market imperfections caused by perverted public policies. Excluding the rural poor from national economic and social policies intensifies the imbalanced regional development hence poverty creating process. Policy issues that exclude rural population from benefiting from urban development programs include;

  1. taxing agricultural exports and import subsidies which is the backbone of rural source of livelihood
  2. Not offering subsidies for capital intensive technologies that would double agricultural put hence poverty reduction
  3. Offering better chances to export crops over food crops
  4. Investing in infrastructure in urban areas and excluding the rural areas
  5. favoring large land owners (the rich) and commercial producers in agricultural sectors by allocating rights of land ownership and tenancy and access to credit extension leaving out the poor (Khan 2001).

Policies for reducing poverty in rural areas

Policies should be developed to effectively deal with rural poverty to realize balanced economic development. Concentrating on urban development would not permanently alleviate poverty in developing countries since there will be high migration of people from rural areas to urban centers to look for employment opportunities and a better life. The policies should concentrate on small land owners who cultivate the land, landless tenants who cultivate other people’s land, landless laborers who depend on farming for casual and long term employment and women who belong in any of these three categories.

Macroeconomic management would benefit these groups by helping in checking inflation and maintaining constant prices because its equipped with facilities that offer private investment and competitive markets therefore able to maintain sustainable growth in the economy. Fair laws should be provided or the reinforcement of new laws that will include the poor in decision making. Corruption in public sectors oppresses the well being of the poor and to the overall economic development. Agricultural growth can be attained by applying new technologies therefore mitigating rural poverty.

New technology would need to be accompanied by strong institution such loan lenders and incentive offer to the farmers. In sub –Sahara for instance, food shortages and high prices have been caused by agricultural stagnation therefore choking the population’s ability to buy food and fins work. Green Revolution reports revealed that rapid agricultural progress helped in poverty reduction in parts of Asia. Based on research, higher crop yield reduce the number of rural poor and levels of rural poverty (Khan 2001).

Agricultural output in the rural settings can be increased if

  1. public policies on exchange rates, pricing and taxes are well regulated to avoid penalizing agriculture and l promote labor placement
  2. Agricultural research should be encouraged and made available to small scale farmer that would in turn increase agricultural output
  3. Education and health provision should be emphasized as a literate farmer in good health increases farm productivity
  4. Land and capital markets should not be privately owned. Tenancy contracts should be fairly distributed and small scale farmers should not be restricted from accessing finance
  5. Physical capital such as irrigation schemes and road access should be maintained adequately to enable easy access to the markets
  6. Rural population should be directly involved in research, design and implementation of programs to ensure the measures are effectively incorporated in the farming activities and equitable distribution of resources (Khan 2001).

Macroeconomics change and policies would affect the rural poor through infrastructure, market and transfers. The rural population participates in market products through fiancé and input. Whereas infrastructure is stimulated by microeconomics through economical factors such as transport, communication, irrigation, and extension services and social benefits through education, sanitation, water and healthcare.

Quality services, improved infrastructure, high levels of education and public services are crucial elements in stimulating regional development, productivity in rural areas and raising the living standards of the rural population. Transfers in both private and public sectors are also effective in macroeconomic development since they provide insurance against unanticipated economic shocks. Key components in poverty reduction and economic growth stimulation in rural areas would require public investment in physical and social infrastructure, macroeconomic stability and providing competitive markets. Enabling environment and provision of resources would require for agricultural production and distribution system to international markets (Khan 2001).

The government, private sectors and civil society have also established national strategies to deal with poverty in rural areas. All these groups need to help in gathering information that will be used in research and other ways of improving agricultural input since communities living in the rural areas are not homogeneous. The government should focus on building assets for the poor such as irrigation pumps to improve agricultural output, avail credit facilities and improve sectors of health and education.

Economic development depends on raw labor, without construction of this facilities poverty will not be alleviated. Otherwise how would illiterate, sick and hungry population contribute to national building? The government should allocate the right to allocate land and water to people of all classes in the community. Land redistribution, titling, fair tenancy contracts are vital tools in poverty reduction. Basic health care should be provided to rural communities such as clean water, immunization and family planning to help them get out of poverty and contribute to the economy. Education in terms of literacy, schooling and technical training for children and women are important for economic development.

If people in the rural areas are involved in planning, designing, monitoring and accounting of infrastructure services associated with health and education then the services will be well maintained. Infrastructure services such as good roads, communication and irrigation and social services such as research and extension should be funded and well maintained to help in rural development. Public works need to invest their services in the rural areas to solve land dispute and strengthen bargaining power of agricultural produce of the poor in the rural areas. Food supplement programs, health care clinics, cash transfers and food assistance provision in public schools need to be decentralized in the rural areas to help the poor (Khan 2001).

Rodrigo de Rato the Managing Director of the International Monetary Fund at the Extraordinary Summit of the African Union on Employment and Poverty Alleviation in Africa recommended that the only way to reduce poverty in the region is to create job opportunities. Economic programs are the only key to creation of employment opportunities and IMF has set its programs in various parts of Africa to realize this dream and fight poverty.

IMF among its Millennium Development Goals in Africa includes tackling challenges hindering growth of economical sectors and poverty reduction schemes. Rodrigos calls upon African leaders and international community to commit their efforts to address these challenges. At the United Nations Conference on Financial for Development in Monetary 2002, members agreed that partnership was the best strategy to fight poverty in Africa.

Developing and industrialized countries need to work together to realize this dream; develop sound economic policies, good governance of donor funds and regional development that is inconsistence with that of international community. International community needs to support Africa’s development projects through overseas assistance and offer more trade open policies. IMF is serving as an example in partnering and supporting African development projects, for example the New Partnership for African Development (NEPAD) (Rodrigo 2004).

Macro economic stabilization in Africa

Rodrigos continues to say that the problem facing Africa poverty is lack of macroeconomic stability to build foundation for economic stability that would enable building a future with more growth, reduce poverty, secure employment opportunities and raise the living standards. Poverty reduction on Africa will depend entirely on high levels of economic growth. Economic growth is stimulated by a healthy (poverty reduction) and well-educated population achieved by partnership with industrialized countries to developing the economy such as the NEPAD.

A well educated population will have the knowledge to pursue economic and social activities in a conflict free environment. World Commission on the Social Dimension of Globalization reported that the only effective way of poverty alleviation requires dynamic partnership between developed countries and developing countries and also partnership of poor countries with private sectors, civil society and a strong government (Rodrigo 2004).

For the achievement of high and sustainable levels of economic growth, Africa requires vibrant private investor from both domestic and international sources. For a sound and healthy business and investment climate, a country requires steady institutions that provide and effect a projectile legal and regulatory framework. Foreign assistance will also be highly required to help in the economic growth. International community is an example of foreign assistance to developing countries by maximizing their efforts to attain the Millennium Development Goals mostly in health issues such as curbing HIV/AIDS.

Africa will need to take up responsibilities to realize this goals, it is required to put up a strong expenditure management system that will ensure a well planned budget to avoid overcrowding such as the much needed public infrastructure. IMF in its position will ensure that the programs put in place are fully supportive of higher levels of aid. Rodriges in his speech pointed out that Africa is rich in minerals but poorly managed. He cautions natural resources sectors to avoid boom-bust circles that were brought about by poor policies. He advises this sectors to save the money acquired from minerals in revenue windfalls from high prices and incorporate them into medium-term fiscal framework that would help the country pay off its debts (Rodrigo 2004).

To achieve economic stability, African countries require enabled access to their markets for exports and demolish trade barriers. Greater trading opportunities such as global trading need to be accompanied by stable and high levels of aids. Africa can not rely only on donor funding since they are often insufficient and unpredictable and on most cases donors do not coordinate with each other making them unreliable.

In Doha Development Agenda goals for Africa seeks to provide better aid coordination and commitments that will ensure development assistance are effective. International Monitory Fund (IMF) is committed to assisting African member states in dealing with poverty and economical development (Rodrigo 2004).

Case selection

IMF has played an important role in fighting poverty in Africa by funding various projects that have created employment opportunities however, there are current instruments employed by the inadequate sector. IMF needs to steer in new objectives, goals and proactive instruments to achieve economic growth and poverty reduction. Rodriges proposes three areas that IMF need to improve on to provide workable projects to reduce poverty in Africa.

Flexible and responsive financial assistance

Trade Integration Mechanism has been launched to provide quick support to developing countries facing trade shocks brought about by Doha Round liberalization. The new mechanism agenda is to deal with economic shocks within IMF programs in developing countries. Rodriguez proposes the need for IMF and other multilateral and bilateral creditors to first assess the nature of debt relief under the Highly Indebted Poor Countries Initiative to ensure effective relief in the debited countries and avoid future build up of unsustainable debt.

High-quality and timely financial assistance is needed for technical assistance and capacity building to enable economic development hence poverty reduction. IMF in its position need to explore more ways it could assist African members by assessing and signaling good economic performance outside the established program involving financing investment.

IMF needs to reinforce and assist in integrating initiatives in African countries to stimulate economic growth in the region. In supporting Africa’s regional integration initiative, IMF needs to provide concrete peer review mechanism and also promote good macroeconomic policies and also good and stable investment climate. Conducting regular surveillance in the set up projects in developing countries would help IMF achieve poverty alleviation objective among others in a timely manner (Rodrigo 2004).

How IMF can help Africa

Renewable promotion in Africa

Africa is enriched with substantial renewable energy resources such as wind, biomass, solar, geothermal, wind, hydro in massive and extensive capacities. Renewable economic activities should be promoted in Africa to protect them against the high oil prices and hydropower problems caused by drought. Renewables should also be promoted in Africa to reach the poor people living in the remote areas, provide a competitive environment for agro-industries and create more employment opportunities. Geothermal renewables in construction, installation, manufacturing, operation and maintenance would employ approximately 5.70% people where as Wind power would employ 2.78%, natural gas 1.10% and coal 1.01 percent. Karezi, Kithyoma & Oruta 1)

Non-Electrical options for Poverty Alleviation

Biomass-based combustion is examples of low cost energy saving projects and is used for fish smokers, charcoal kilns, brick making kilns, tea dyers and wood dyers and improved stoves for use of households and institutions. Hydro is used for shaft power to process agricultural produce and pump water for irrigation such as the Treadle pump that is used for small scale irrigation therefore increasing productivity in agricultural produce for rural settlements. Ceramic Jiko is a stove used in Kenyan rural communities in Africa has reduced charcoal consumption by 50%, generated employment opportunities and bettered living standards of the people.

Other countries using ceramic jikos include Uganda, Mali, Tanzania, Senegal, Rwanda and Burundi. Use of solar dyers reduces post-harvest losses and enables rural farmers to get their farm produce to the market faster when prices are high. Solar water heaters are also used to reduce electricity bills in heating water. Solar panels are fits or roof tops or water can be heat directly from the solar. Solar water pasteurizers are also used to provide clean water therefore reducing water bone diseases and also increasing agricultural output hence poverty reduction (Karezi, Kithyoma & Oruta 2).

Irrigation pumps

Treadle irrigation pumps are simple and easily affordable technology for pumping water for consumption and land irrigation. Farm irrigation increases farm produce therefore increasing earnings. Since the launching 45,000 Treadle irrigation pump in Kenya and Tanzania, 29,000 job opportunities were created in the agricultural sector, 200 more vacancies in pump retailers in both countries and 4 manufacturing pump industries were developed (Karezi, Kithyoma & Oruta 3).

Data analysis

Children’s rights and child poverty issues are neglected from debate on the impacts of globalization and trade liberalization. International trade stresses that trade liberalization is the most important tool for fighting poverty but it should emphasize on child poverty. UN world summit in 2005 stresses that international community should establish a universal, equitable multilateral trading system, non-discriminatory and rural based that will establish meaningful trade liberalization therefore stimulating economic development in developing countries.

UN World Summit reassures its commitment to ensuring trade liberation is achieved in promoting economic growth, secure employment opportunities and overall development of the country. Normally trade liberalization does not benefit the whole population, it could pick out some section of the country like in the rural areas and its effects on poverty reduction are realized in the long run. Government policies need to partner unions to assuage the inequalities caused by trade liberalization and generate homogenous benefits. Child poverty can only be reduced when trade liberalization provides sound structural policies that would effect changes on macro variable such as consumer prices on basic commodities such as food.

Children represent a big portion of population striven by poverty in developing countries, it is therefore important for trade liberalization to discuss ways of reducing poverty from child-sensitive perspective. It is also important for trade liberalization to develop different strategies in fighting poverty in developing countries due to the disparity of market integration, composition of their economies, the degree of comparative advantage in different sectors and their disparity in trade and bargaining power in the world economy (1)

Policy Implications

Policy interventions should ensure that trade liberalization transforms it efforts to reduce poverty with more emphasize to children. Child-focused policies should be steered on supporting sustainable livelihoods such as food and shelter and conform to the broad economic policies. On child focused policies, trade liberalization should improve quality of schooling such as good learning structures and also provide more opportunities of post-school such as technical training that would secure them employment opportunities in future. These policies would encourage children to stay at home, complete their pre-schooling with hopes of getting better jobs in trade–related sectors.

Such incentive was offered in Ethiopia where young men and women were trained in the trade-related sectors therefore securing them a chance in manufacturing sectors with better pays in return improving their living standards. Skills attained from trade related sectors would avail inexpensive skilled work force in the economy that would strengthen the country’s comparative advantage making it an attractive place for investment therefore more providing more employment opportunities (Fereder 2005).

Child focused policies should also pay attention to children’s health in the context of trade liberalization in ensuring that adequate measures are taken to stabilize prices of basic medicine. The government should play its part by providing affordable health care by developing compensatory measures to offer medicine at low prices to the less fortunate in the society especially the children. Trade liberalization should also finance children’s healthcare to better their health status hence poverty reduction.

Ethiopia government for instance has reduced expenditure on the health sector because of the declined government revenues resulting from reduced tariff income. WTO object is to privatize health organizations, stepping in to finance Ethiopian health sector would help in bettering the lives of the less fortunate in the society especially the children (Paola & Jones 9).

Children in rural areas are often used as labor-intensive asset leading to school dropout. The government should help stop this by offering incentives such as sponsorships to enable the children continue in schooling. The incentives can be offered through providing families with other ways of acquiring income such as cash transfer programs like the one in Peru that has helped parents keep children in school. Also supporting women in joining workforce and promoting child care services reduces child care responsibilities. Wawa Wasi and PRONOEI are one of the Peru financed public child-care programs dealing in early childhood and offering subsidies in private and community child care services.

These services reduce the burden of older children depending on their parents for support hence reducing child labor. Trade liberalization would only reach the poor families if infrastructure is improved. Good infrastructure would enable greater access to the markets therefore enabling direct connection to international markets and reducing transportation costs that would have otherwise been doubled by middlemen. With all these benefits, good infrastructure stimulated business growth in the area and reduce poverty in the rural areas therefore overall economic development (Paola & Jones 9) (Escobal & Ponce 2005).

Hon Hillary Ben, the secretary of State for international development in his meeting proposes strategies to be adopted by developing countries to fight poverty. He takes lessons from UK government as a developed country to be transferred developing countries for economic development. He emphasizes that sharing knowledge and expertise between developing and developed countries was the only way to realize successful development. He explains that by UK financing education in poor countries was the best way to improve living conditions and fight poverty. DFID is one of the UK programs set up to finance 10 year education plans in developing countries.

Good education, support and training facilities have helped UK government improve the welfare of its people a strategy it is willing to pass on to developing countries. He emphasizes that education will help the population attain working skills therefore earn livings that would drain away poverty. Charities and aids would temporarily solve the problem but education has long term effects in fighting poverty (Hon. Benn 2007).

DFID objective in fighting poverty in developing countries is to closely assess how growth is set out, levels of security, governance and how the country deals with conflicts. UK through DFID seeks to finance educational sectors in developing countries but it needs the government to provide a good climate for private investment, stability and growth otherwise the education would not have served its purpose. Trade unions and civil society helped improve working conditions of UK people, so it also expected to use the same strategy in developing countries (Hon. Benn 2007).

Mr. Benn also emphasizes that the need for developed and developing countries to learn from each other in terms of asset building and micro-finance. For example UK has developed a UK Child Trust Fund that allows them to have financial assets at the age of 18. This strategy would change young people’s perspective about the future. Micro-finance has helped in fighting poverty by issuing loans for various institution and people therefore helping them better their living conditions.

An example of this is the Bangladesh micro finance established in 1974 that has helped swipe out poverty. Other developing countries need financial inclusion in alleviating poverty. Financial Inclusion in the UK has helped it open up around 2 million basic bank accounts since its invention in 2003. If the same could be done in developing countries then poverty levels would reduce drastically (Hon. Benn 2007).

Education and Training in the context poverty reduction

Education and training play a vital role in reducing poverty and enhancing economic development. European Commission sets out priorities for developing countries communities for provide basic education for primary children, teacher training and technical training related to work. It also bids to provide higher education in regional levels to ensure balanced education at all levels that would secure them better opportunities in employment sectors afterwards. To realize basic education dream;

  1. resources allocated primary education needs to be increased
  2. Free and compulsory primary education needs to be provided and more opportunities of the same need to be established, the commission would not offer free primary education without built up structures like classrooms and libraries to accommodate the children
  3. Improving the efficiency of educational system by drawing up strategies to be implemented in each country
  4. The commission would ensure developing countries budget cover the most urgent needs for the poor people in the society such as the rural dwellers, women, disabled adults, children and the indigenous people
  5. basic education will also be achieved by reducing gender-based inequalities by promoting involvement of women in education and providing equal chances in work places
  6. the commission also seeks to emphasize on the importance of quality and quantity education by ensuring teaching materials are readily available and that teachers receive better training
  7. Restoring and protecting education in conflict stricken areas that have left schools vandalized
  8. Upgrading knowledge on development programs (Commission Act 2002: Europa 2006).

The commission second priority is offering education in work related training by introducing structural policies that would ensure

  1. secured partnership between training and employment
  2. Introducing educational approaches in the informal sector that deals particularly with women in educating on self employed strategies and ways of acquiring capital such as land and loan
  3. Provision of education through vocational training would provide the population an opportunity to learn more on technical skills therefore development of the economy. Specialist centers and apprenticeships help nurture skills that would offer direct assistance to job placement.
  4. the commission seeks to support educational strategies, system and processes to raise demand for education therefore increasing the need to acquire higher qualifications and in return stimulating economic development. Higher education can be attained by offering higher training to teachers and development if the institution. For higher education to be achieved communicational technologies and information development need to be incorporated into the educational system such as use of internet, telephone services, fax and many others. Partnership of developing countries and Europe need to be emphasized to encourage cooperation at regional levels. Provision of higher education would enhance institutional capacities of developing countries and able to keep up the current development strategies that would develop the economy. It will also minimize brain drain when developing countries send their students for further studies in developed countries (Commission Act 2002: Europa 2006).


To implement educational and work related training in developing countries, European Union and developing countries need to inject a lot of capital in the developing economy. European Community has already provided funds to sponsor education and training through macroeconomic and budgetary support. The commission promises to ensure cooperation and coordination among all donors sponsoring developing countries and by taking up development activities in poor countries.

Commission’s objective in implementation of higher education and work related activities are supporting budgetary and macroeconomic activities, including the poor in development programs, providing concrete political and strategic dialogue with developing and developed countries and ensuring that higher education and work related policies are strategized to reduce poverty. Also in the objective is to support the institutional developing and encourage capacity building and monitoring development activities through assessing the indicators (Commission Act 2002: Europa 2006).

Projects that address poverty reduction in South Africa

The South South North (SSN’s) project was set up in 2004 in South Africa to engage donors and partners interested in investing in the project pipeline. The Dutch Government (DGIS) is the major donor of this project. SSN’s is also found in Helio, Bangladesh, Indonesia and Brazil countries. It aims to maximize southern benefits, ensure sustainable development, climate for poverty reduction and implement innovative ways to fight poverty.

The methods employed by SSN’s projects include program led, climate project/intervention and partnership. South Africa mitigation program was aimed at constructing low cost housings that are energy and water efficient and also use renewable energy. The houses provided in the project are directed to low and middle income earners in the region. The intervention programs on low cost housing targeting low and middle class income earners will be constructed on cost effective materials such as energy efficient design, dry sanitation, insulation and solar water heating. The project will help in providing decent housing therefore poverty alleviation and it will be able to meet CDM and Gold housing standards (Malga 10).

Technology employed in the project incorporates a variety of locally available technology, institutional framework that coordinated development information, it is also computer driven to reduce web interface emissions and seeks to coordinate various government departments, civil society initiatives and private developers. The project time frame provides monitoring and maintenance plans to be integrated into project design with already set up 40 houses samples per months. SSN innovative project benefits include designing houses to be replicable, employment of local power therefore improving their living conditions, seeking to coordinate various funding streams and government initiatives and providing a programmatic approach to project development (Malga 15).

Water sustainable project

Adaptation Project for sustaining water demand for the poor urban communities of Khayelitsha and Capetown was created to promote sustainable livelihood, increase adaptive capacities of different communities living in the area and to stimulate urban development. The goal for this project was to enhance the capacity of poor urban communities’ in South Africa rural region, Khayelitsha to adapt to the negative impacts caused by climatic change so that the poor population in the rural areas have ownership and control over the water they use (Arendse 53-60).

Tanzania Mitigation Project

Bio-diesel fuel Production for transportation in Tanzania is a project set up to reduce greenhouse gas emission through the use of bio-diesel from Jatropha curcas oil and to install its plant for producing the oil at an average of 12,000 liters a year. First, the projects proposes to establish Jatropha carcass farms covering 10,000 hectares divided into 5000 ha by SEECO and KAKUTE and 5000 for out growers. The benefits of include increased income generation, job creation, reducing the country’s expenditure of foreign currency, providing energy security and saving the country from escalating fuel prices.

Environmental benefits include provision of clean environment saved from greenhouse gas emission, soil conservation and Jatropha provides carbon sink. There is a high potential of producing bio-diesel in Tanzania however the unpredictable weather pattern such as prolonged drought may become a barrier towards the achievement of the project objectives. The initial cost of setting up the plant is very high from seed production, oil extraction and plant installing would require adequate funds. Bio-diesel project was intended to kick off 2009 and seeks to reduce amount of foreign currency used to import oil in Tanzania therefore saving the money other projects that will stimulate economic development (Semiono 27).

Shifting water wells affected by salt inundation

This project was set up in the coastal regions of Tanzania to shift water shallows affected by salt inundation that would in turn improve agricultural output by promoting drought tolerant crops therefore improving food security.

Climatic changes will be adopted through rain water harvesting and conservation and Aforestation Kilimanjaro rural areas and enable access to clean water. The project was established to improve food security that was deprived from climatic changes resulting from Sea level rise and unpredictable climatic changes. The projective goal was to alleviate socio-economic problems associated with unsafe drinking water to the rural communities such as outbreak of water borne diseases, high water costs, low agricultural produce and women having to look for long distances looking for water. The objective of shifting water wells are to provide new fresh water sources for both domestic and development projects such as irrigation and provision of tap water or bore halls (KIbazohi 41-46).

Mozambique Mitigation Project

Biogas for Household Energy project was set up in Changara to uplift the living condition of the population in terms of health, environmental and social standards. The projects will also provide modern energy source and methane avoidance. High forest depletion will also be minimized since biogas energy will be deprived from abundance livestock therefore cheaper alternative environmental friendly sources of energy.

The causes of poverty in Mozambique that led to implementation of the project are high rate for forest clearing that has led to land degradation, high demands for household energy, there is no modern fuel for healthy environment, no measures put in place to preserve degradable goods and unavailability of medicine and kerosene is the only source of lighting in the rural areas. For effective implementation of the project, climate and local weather conditions need to be innovated, community labor will be required to sustain and expand the program, government incentives to overcome development barriers and engaging the local in the training programs and local companies to work in the project there economic development (Tsamba 30-40).

Mozambique clean water project

Water availability in the rural parts of Mozambique prove to cyclic drought is very crucial. Bore holes would provide water solution to this arid and semi arid areas. This project has already set up around 8,000 boreholes throughout the country and proved to be beneficial to the rural population Mozambique government has also stepped up to provide water sources, a strategy for poverty reduction. This is a great move since relying on donor funding would not cover all the rural areas.

The major barrier of introducing water reservation technology in rural settings is that awareness, operation and maintenance. This problem can be overcome by campaigns in raising awareness on how to use, operate and maintain. The projects seeks to create initiatives in water pumping projects using PV known for energy saving and involve the community and authorities in implementation of the projects.

The project objective was to transfer South-South technology and creation of technological cooperation between Mozambique and Brazil regarding PV pumping for water use therefore improving the livelihood of people living in the rural areas by providing clean water and for irrigation farms that would increase agricultural produce hence poverty reduction. SSN projects in Tanzania, Mozambique and South Africa has created an enabling environment for adopting new technological transfer through building on the existing problem, indigenous knowledge, practicing existing choices, tangible experiences and constructing projects that lead to ownership (Cuamba 66) (Thorne 2).

Promoting development

European Union is a global partner in developing countries contributing to 55% of all international aids and is the biggest trader and foreign investor compared to other developed countries. It offers developing countries non-reciprocal trade preferences for developing and the least develop countries. Its union has formulated economic and trade cooperation arrangements such as free trade areas covering Latin America, Africa, Mediterranean, Pacific and the Caribbean.

European union in its agenda seeks to reduce poverty in the world, provide better environment, disable effects of migration and curb natural disasters and its pandemics. EU new strategy is to incorporate developing countries into international economic system by encouraging regional stimulation and offering financial support for development projects especially the transport sector. It emphasizes on ownership and sustainable, capacity building, empowerment and state cooperation (Europa 2002).

To realize poverty reduction, administrative procedures must be transparent to increase speed and efficiency of program delivery, division of labor between European Union development programs and those of donors accompanied by good coordination. Uniform development policies and EU activities in economic development such as trade, agriculture and fisheries need to be formulated.

Cotonou Agreement which is part of EU’s development policy binds with developed and developing countries such as Africa, Caribbean and Pacific (ACP) countries in offering aid-trade agreements that would promote and speed up economic, social and cultural development. The partnership development agreement that was signed in 2000 sought to provide comprehensive approach to development, reduce and do away with poverty, provide trade and political dialogue in conflict zones, promote human rights and provide channels for dealing with democratic issues such as migration.

The new EU agreement has provided methods and procedures that improve the current market accessed based partnership to a more comprehensive and improve government to government partnership between developed and developing countries to a more inclusive process involving all parties of civil society. Civil society takes part in shaping the country’s future and allocation of funds on assessment needs and review of country’s record on policy implementation (Europa 2002).

European Union drew new procedures for handling human rights violation and issues of corruption. Also in the policy includes the implementation of immigration and asylum policy that partners with third country’s citizen in the Union to make arrangements for repatriation of illegal immigrants found in other countries territory. Regional economic partnership within Cotonou agreement was designed to promote trade liberalization in the European Union and ACP countries and states.

The role of trade agreements in EU to developing countries was to make them ACP members become active participants in the international economic and trade system that would afterwards stimulate economic development. EU strategy in active involvement in ACP development will encourage other countries to establish relationship in these developing countries by transferring technology and investments therefore improving the country’s competitiveness.

This move will help the economic development of the ACP countries as tariffs will be reduced globally. EU agreed on special trade concession program to be applied to least developed countries. The trade agreement would guarantee exporters free access to EU markets and ways to alleviate effects of fluctuations in export earnings from ACP countries (Europa 2002).

European Union in Africa

EU initiative in Africa aims at strengthening international awareness of Africa’s important potential in economic development, encouraging integration in World economy and construction of concrete partnership to promote peace, democracy and development. The meeting held in Cairo of EU-Africa Summit also dealt in ways relieving Africa from debt that would stimulate economic development. The summit also proposed to promote future cooperation that will provide concrete and corruption-free environment that will attract foreign investment. Regional development will stimulate better crisis management that will help in solving conflicts between and within countries.

A peaceful country means sound economic system therefore reduction of poverty its population. A conflict country can destroy in short time countless lives and efforts of country’s economic development over the years in a short span of time therefore destroying development. EU seeks to promote heath and welfare conditions by tackling disease such as AIDS, fighting social exclusion and reducing levels of unemployment. EU emphasizes that reduction of poverty would rely entirely on sound democratic foundation supported by rule of law and protection of human rights (Europa 2002).

South Africa

South Africa and EU in 2000 entered into trade, development and cooperation agreement that granted them 86% of EU duty free exports and EU in turn offered 95% duty free goods traveling to South Africa. EU was also promised to offer chemicals, clothing, food vegetable and textile to South Africa as a form of aid and another agreement on transfer of science and technology, fisheries and wine and annual financial assistance of 125 million euros. EU helped South Africa in the transition to a democratic government; an example of EU benefits in supporting human rights. Without EU intervention South Africa would have lost many lives in the struggle and deprived the country of economic development and increased poverty (Europa 2002).

Human rights

European Union is committed to establishing concrete human rights and legal framework in developing countries as well as providing social security in the development of cooperation program. EU makes efforts to include human rights clause in every developing country it partners with. This cooperation allows third country to enjoy trade benefits and EU stands as a watchdog to suspend any country that abuses human rights. Target sanction in EU penalty clause includes denial of visas to senior members, freezing assets held in EU countries like what it did to Serbia and Burma. EU classifies human right abuse as torture, political arrest in any of the member countries.

To strengthen and promote human rights democracy, the union has budgeted for several million euros for funding projects that aim to strengthen the rule of law and democratization such as sponsoring programs that aim at training lawyers and supporting electoral reform. Also funding projects to improve infrastructure of transport and water supplies creates more employment opportunities and help reduce tension and threats that would lead to abuse of human rights. EU has been sending international observer to monitor elections in developing countries and also offered humanitarian aid t bettering the living standards of poor people (Europa 2002).

As we have seen on the SSN’s project in three countries, privatization, market liberalization and regulatory reform would be the major keys in poverty reduction in those areas as well as other places in developing countries. UN millennium goal requires improvement of public health, education and environment as well as a 50% reduction in poverty by 2015. The challenge is very huge and it would require state cooperation to realize this goals.

Developing countries lack adequate communication tools and availability of electricity supply limiting economical development. Regulatory challenges such as inadequate access of the poor to vital services and affordability of public services are among the challenges facing poor people living in developing countries. Privatization is another important factor in fighting poverty in developing countries. Privatization by foreign countries will introduce better management skills and inject more capital in the sector therefore improving services that will stimulate economic growth. Public sectors are poorly managed and employ less killed man power to in the management that cannot adequate stimulate economic growth.

Privatization will raise economic efficiency in corruption prone institutions. Privatization of the firms has directly stimulated profit growth and benefited shareholders. The quality and quantity of services have also risen. The government on the other hand has benefited from high taxes and has reduced subsidies unprofitable firms therefore using the funds for economic developing therefore fighting poverty (Estache et al 1190) (Chong & Lopez 370) (Bortoloti 260).

Privatization stimulates development other services such as telephone services and electricity. Fisher (2005) noted an improvement in quality telecommunication services in Chile since privatization took place in the region. (Estache 1187) also reported drop of electricity of prices in Argentina since privatization of its companies. Electricity prices dropped due to increased number of power generators creating competitive environment that would have led electricity companies to reduce electricity prices.

Plane (358) on the other hand reported that after privatization of Ivory Cost Electricity Company, new technologies were employed which resulted to higher productivity and availing electricity to the poor at a cheaper price. From this evidence we can see that the poor population benefits more in the most increased productivity brought about by privatization. Privatization of electricity led to development to other related services like roads, opening of banks therefore providing employment opportunities. Also the new technologies employed in electricity production brought literacy to the people employed in the sectors therefore resulting to long term benefits.

Education is the foundation of poverty reduction and when that was transferred to developing countries through privatization, poverty levels will be reduced at greater levels. Private sector established in Argentina for water conservation led to increased number of household supplied with water by 116% thereby reducing child mortality progressively from 5%, then to 5% and 24% in the poorest municipalities.

Poverty mostly affects the children and women in a society, especially the rural settings. Leipzinger (2003) confirmed this report by saying that better access to infrastructure services results to economic development therefore improving child health and reducing children labor. Without water access children and women are made to walk long distances looking for water hence leading to school drop out that would later result to poverty.

Privatization has stimulated growth of competitive environment therefore benefiting all consumer groups. Argentina benefited from quality services, efficiency and access improvement resulting from privatization of its public utilities (Chisari 370: Chisari 2003 ). This measure should not be applied to all developing countries since each one of them has different ways of dealing with poverty. The results of reforms depend on nature and form in which a country takes especially supportive regulatory environment and local economics. Privatization and market liberalization cannot be achieved without quality state regulatory regimes.

Poor people in the economy are the consumers and suppliers of labor and the reforms should deal with how to improve their lives in terms of job creation, better working conditions through recognizing trade unions and improving the wages. A study conducted on Latin America on effects of privatization revealed that, privatization of public utilities would not necessarily affect commodity prices but greatly have a positive effect on the poor because of the redundancies in privatized companies. Increased access to better quality services improves welfare transfers between gainers and losers.

Privatization with not have immediate effect in price reduction as many would expect. Studies reveal that privatization has worsened the distribution of assets and income but this will only be experienced in the short term as long term benefits such as improved telecommunication and electricity are proven to reduce poverty at great levels. (McKenzie & Mookherjee 200) (Kessides 28) (Birdsall &Nellis 1617).

IMF role in financial crisis

Developing countries are usually the worst affected in financial global crisis with dwindling capita flows, huge withdrawals by donors and rise in interest rates. GDP was expected to rise by 6.4 % in 2009 but it only rose by 4.5%. Food and fuel prices have left over 100 million people in extreme poverty and the numbers are still increasing if nothing is going to be done. The worst affected by this are the poor in developing countries. World Bank is working with other donor bodies such as IMF, regional development banks, UN agencies, Equity investment, safety net programs, private lending sectors and innovative new tools to save developing countries from this disaster.

Together with this institution, World Bank seeks to grant long term interest free loans to the 78 poorest countries. Private sectors in developing countries are also included in the program by providing them with much needed liquidity through Multilateral Investment Guarantee Agency (MIGA). Danush, Director Development Prospectus Group commented that the poorest countries are the hardest hit by financial crisis. The slower export growth in these countries was among other contributors of increase of poverty in the affected areas (The World Bank 2008).

World Bank strategy in preventing financial crisis into turning to human problem is by increasing the gap between trading finance in the developing countries. The World Bank has expanded a trade finance facility of $1.5 billion to boost developing countries export. Financial crisis led to people selling their household assets like livestock for survival, increase of malnutrition and school dropouts.

Financial crisis could be turned to human crisis if the poor people are left to fend for themselves. World Bank believes that well designed social safety net programs with constructive plans can bail out developing countries financial crisis. Social safety net programs are affordable and contribute to about 0.4% of GDP as seen in Oportunidades in Mexico and Bolsa Familia in Brazil. Safety net programs targets conditional cash programs transfers such as food and community initiative groups are proven to effective reduce poverty in developing countries.

Cash transfers are given to those people who cannot work like the disabled and food programs in school to minimize dropouts hence more children staying in school tool for future economic development. Community projects will also offer low wage relief to the rural dwellers and reduce malnutrition and poverty in the area (The World Bank 2008).

Lessons from World Bank research on financial crisis revealed that microeconomic stabilization, social protection, financial sector policies and trade policies will help in short term responses to alleviating poverty in developing countries as well as long term effects such as economic development and preparing the country for future crisis a strategy for alleviating poverty completely. Dermirguc, Senior Research Manager in the World Bank Development Research Group recommended that changes need to be done on certain principles and practices in the financial sector policy making in developing countries.

One of the changes will require developing countries to provide underwriting of banking system deposit to prevent shifts of deposit to state owned banks. Insurance firms should be well designed to enable large scale fiscal resources to stream in. Incentive should also be introduced for excessive borrowing but this could hurt developing countries. If for instance financial institutions charge high interest rates to countries who borrow more often then this means that their debit will increase and lower economical growth (The World Bank 2008).

A strong financial institution would require a well established payment and settlement system, designed corporate governance structure and subservient registration and enforcement systems. Developing country government will also be required to take part in maintaining a balance between financial stability and encouraging motivating financial innovation among its population. Without government support, World Bank efforts in fighting poverty will not be realized (The World Bank 2008).

Social safety net programs for poverty reduction in South Asia

Social safety net programs have been successfully used in developing countries as a tool for poverty alleviation. To realize broad benefits of social safety net programs, established economic policies are needed to benefit from both short term and long term implications in poverty reduction (Coady 2005). Other programs such as institutional design, targeting, evaluation, political process are needed to be incorporated in the social safety net program to enhance development.

Before the program is introduced in developing country, design and education of the same are needed to fully understand and evaluate benefits and outcomes attributed to the program in terms of poverty alleviation. Social safety nets will be designed to suit each countries special needs through income transfers such as public works program, micro credit, informal insurance programs, human capital, cash programs, food programs, public works program and price subsidiaries

Cash Transfer Programs

Cash programs provide funds to the poor households to reduce the existing poverty levels. Most of the programs provide community based projects that would generate employment opportunities. Cash transfer programs could also be in form of income directed to poor household on basic commodities. Cash transfers come in form of emergency services in crisis period, statutory programs or can be voluntary (Tabor 2002).

Food Based Safety Net Programs

South Asia safety net programs use food as a way of helping the poor in the society. Green revolution technologies that took place in 1960s and 1970s in South Asia increased availability of food in the country thus extending the help to rural and urban poor in called for circumstances. Food based program are poorly managed therefore unable to control increasing food prices that hit the poorest the most.

Political economy issues should be incorporated in food program in the process of designing and implementing the transfer programs. Food transfer programs should be incorporated in Supplementary Feeding Programs which target school feeding programs operating in the rural parts of South Asia. These programs reduce over dependency on donor funding. The program targets school going children through their lunch programs initiative proven to increase school attendance. Pregnant and lactating mothers are also included in the feeding program through primary heath centers. Supplementary food programs remain one of the attractive programs in reaching the grass root of poverty in developing countries (Suresh 3).

Food for work program is another food social safety net program that uses food as a wage for people employed in rural areas to attract labor. Food-work –program come from food surpluses or could be purchased at subsidized prices to be supplied in public works programs. This measure is effective in reducing hunger and malnutrition therefore reducing poverty levels. The benefit of this program is that food supplied through this program as a wage can be of good quality compared to one in the markets. For work programs need to be well designed to provide storage facilities that could be used in lean seasons of crop cultivation.

Workers that need food will participate in the program therefore more labor supply and better harvest are expected to uplift poverty levels Food stamps programs are also used in South Asia and Sri Lanka to help the poor living in the communities. In some circumstances food stamps are intended for the poor up benefit the more fortunate in the society. They end up selling the food to the poor people instead of giving them for free.

These programs should target the less fortunate in the society and restrict the use to only the deserving ones. Good governance and strong administrative setup are required to be set up in public sectors to ensure food stamps are adequately distributed. The economic benefit of food stamps is that it reduces transportation costs from one region to the other thus reducing costs of transferring food to beneficiaries and using the money to other development projects (Dev et al 2004).

According to international report on comparison of the leakage of food supplied for subsidiary to the poor people revealed that food subsidy programs do not reach the targeted group was intended for. India, Pakistan, Egypt and Brazil showed a leakage rate of 50-80% going to the privileged people in the country. Donors and the government need to identify cost effective ways by comparing food-based transfers and cash based programs in transferring subsidies to the poor in the community. All these transfers should be focused on particular objective like helping sustain children in school therefore reducing poverty (Rogers &Coates 2002).

Ravillio (p.342 and p.40) and Subbarao (p.679) claims that well designed features of public work program will reduce poverty at high levels. Food wage rate should be set equivalent to that of the community’s rates to attract large number of poor segments and increase participation in economical activities. Food program is effective to the rural population because the work involved is labor intensive and requires less skill. Food subsidies and ratios are timed to slack agricultural seasons when majority of the population in the rural areas are unemployed in farm activities.

Hunger would reduce participation of the poor in farm activities therefore hindering future food supply that would take the next season. Food supplements included in lunch programs especially for child care and preschool services improve women participation in public works program therefore economic development. Assets maintenance component should be included in the program to sustain impact on development activities in rural areas and poor urban areas.

Insurance Programs as Safety Nets fro Poverty Reduction

Savings programs and insurance schemes are safety net program that encourages the poor household to save their earnings for future developments. Insurance scheme will help them insure against economic shocks an important element in strengthening public nets. Mardoch and Sharma (2002) identified various strategies that could be used by safety nets in helping the poor save for their future such as Ex-ante management or ex-post risk coping mechanism intended for helping them share risks through inter temporal smoothing mechanism. Intra household transfers should be set up to identify risks faced by the poor before setting up safety net program.

Policy designed to address poverty reduction using savings and insurance schemes should take into account the nature and magnitude of household savings. Micro finance schemed from South Asia have already designed new types of savings and insurance schemes that involve community participation therefore providing them assurance against economic shocks.

Safety net programs should effectively assess problems affecting developing countries and target worst affected population to reduce leakage as well as increase effectiveness of safety net programs and the poor people. Targeting will require setting up resources to screen, deliver and monitor the intended beneficiaries to reduce the inefficiency associated with leakages and stamp foods going to the privileged in the society (Coady 2004).

UNDP in Poverty Reduction

UNDP is working to provide macro and structural policy options dialogue between Macroeconomics and Adjustment policies to promote poverty reduction and the achievement of Millennium Development Goals (MDGs). To achieve the policy adjustments, UNDP has developed research all over developing countries that focuses on economic policies and poverty reduction strategies. It seeks to establish a link between monetary and exchange rate [policies, financial policies, economic policies and poverty reduction and commercialization as well as privatization of some utility services. UNDP policies also seek to provide a link between economic policies and MDGs in relation to macroeconomic effects on dramatic rising of Official Development Assistance to developing countries in helping them reach the MDGs. Macroeconomic policies help in economic growth, employment and in poverty reduction. Other benefits include increasing on HIV/AIDS financing (UNDP 2004).

Global agenda of the UNDP research was to find income models and world trade policies that would evaluate global imbalances causing poverty in developing countries and suggest a development policy program that would focus on directing capital flows in their developed countries to developing countries to help them achieve the MDGs millennium development goal. The research also intends to provide global training initiative through Bureau for Development Policy and Regional Bureau for Africa in offering training modules in sub-Sahara Africa on Fiscal and Monetary, Employment and training on Pro-Poor Growth.

An example of the already developed initiative is the International Poverty Center that focuses on financial policies, monetary and fiscal policies in developing countries to help them in economic developing hence poverty alleviation. UNDP research is also working on the consequences of privatization and commercializing public services to help developing countries reach the MDGs goal that strategizes at poverty reduction. Asia-Pacific Regional Programme is an example of Regional initiative on macroeconomics of poverty reduction set up in 2000 based on research founded by UNDP that sought to find collaboration between the poverty group and Regional Bureau of Asia and Pacific on Macro economics of poverty reduction (UNDP 2004).

China Solutions for poverty eradication

China is the world largest population and is designing strategies to eradicate poverty and hunger, exclusion and injustice a fight for economic stability. It recognizes the importance of collaboration between government, civil society and business sectors in realizing its development objectives. Liu, minister in charge of poverty alleviation in Chinese State Council laments that poverty is born from political, economic, historical and social factors that have brought about unbalanced development. Poverty and hunger cause global problems that jeopardize world peace and human development.

Measures for alleviating poverty include partnership international environment and developing countries for poverty reduction. Chinese government points out that purpose and principles of Charter of the United Nations and international laws must be recognized internationally to maintain world peace and stability. Economically, a country needs to establish fair, transparent, open and reasonable international rules for world trade and also in finance and investment for developing countries to take part in the development of dividends.

Liu also emphasized that countries need to maximize their efforts through self-reliance and hard work to change their state from underdeveloped to developed country. Developed countries are called upon to honor their commitments on debt relief, technology transfer, international market access and financial aid in helping developing countries to reach millennium goals of poverty reduction (GlobNet3 2004).

Developed countries need also to follow up on financed projects in developing countries to monitor their progress and explore new ways to better understand the underlying cause of poverty through engaging the country in initiating, designing and implementation of poverty reduction programs. Available resources should be mobilized to achieve maximum benefits and collaboration between civil society, government and business sectors are explored to diversify modalities through expansive dialogue and consultation (GlobNet3 2004).

IMF in helping Africa fight poverty

There is too much poverty and little economic growth experienced in Africa. IMF under its economic development strategy implements ways to accelerate growth and raise living standards of people living in Africa through provision of cooperative approach that aims at tackling poverty and providing assistance to other poorest countries. Since the multilateral framework in the second half of twentieth century economic development was stimulated everywhere in the world.

Rapid development of trade was also experienced in industrialized countries as well as developing countries that reduces illiteracy rates, reduced infant mortality, uplifted living standards and raised life expectancy in developing countries. Africa benefited from global growth but AIDS pandemic, corruption, civil war, conflict and bad government undermined its economic progress. Long term sustained growth requires stable macroeconomic framework. Without stable macroeconomic environment, economic development will not be realized and poverty reduction will be weakened. Developing countries with aid transfers and other forms investment projects have failed to be effective without stable economic policies (Fereder 2005).

Developing stable macroeconomic framework

Developing a stable framework requires sound public finances, legal framework that protects property rights, government and institution market friendly environment and an independent judiciary. In Kenya for example the government has committed itself to reforms that would facilitate smooth flow from macroeconomics stability. The Kenyan reforms are aimed at eliminating corruption and administering good governance. IMF supports this move by funding the program to ensure that the proposed challenges are met therefore improving living standards. Benefits macroeconomic stability will be achieved if the government continually nurtures the reforms continually develop the economy.

Even in developed countries, policies are constantly adjusted, so developing countries need to the same to achieve sustainable long term benefits. As economy change, the policies and legal framework also change. Poverty reduction will need developing countries to adapt more rapidly with institutional and legal processes. Government reforms are also required for sustainable economic development by stimulating higher payoffs. For instance if trade liberalization and labor market reforms are implemented then bigger payoffs will be achieved. Developing countries need to restructure their economies to enjoy macroeconomic stability by creating market friendly policies (Fereder 2005).

The government should stop interfering with trade activities and enable competitive environment. It could offer incentive to the needy small scale businesses to achieve economical balance at the same time offering free marketplace. Other positive incentives such as free education, infrastructure such as good roads are important activities that the government could offer to stimulate growth and entrepreneurial activity. Institutional and legal frameworks are crucial tools in aid of stable market economy.

The government should also look into proving property rights that would attract foreign investors. Entrepreneur will be encouraged to go on about developing their business by provision of bankruptcy laws, independent courts and commercial codes a good business environment that will create more jobs and raise living standards. The state should discourage monopolies development whether privately or government owned because they only benefit the minority. When private companies believe that they can benefit from government favors, they spend most of their time seeking those favors a time they would have used in project development thus reducing economic development (Fereder 2005).

The government offer incentives to new business for survival but other forms of market distorting protection should be discouraged. Introducing a competitive environment, infrastructure development and providing a playing field level for all business actors will raise productivity and stimulate economic growth in developing countries far more than any donor funding would do. When such competitive environment is established, private sectors are encouraged to enter the markets and more employment opportunities will be created. For example large scale reform that took place in India in 1990s stimulated growth rates at higher levels. Reduction of poverty was reduced significantly (Fereder 2005).

Trade Liberalization

Flexible trade liberalization in developing countries accompanied by open market opportunities need to be established. Trade liberalization is required to be multilateral since no country has bale to sustain rapid economic growth without opening its economy. For example Korea growth rates increased from 1960s and 1970s due to trade liberalization. Chile has currently adopted the trend and it’s enjoying impressive economic growth performance. Developing countries need to learn from this and open their markets and quickly cut on agricultural subsidies to be included in Doha initiatives (Fereder 2005).


Developing countries need to establish economic reforms to set a good environment for foreign aids and other forms of assistance for realizing faster growth and poverty reduction. Foreign countries on their hand should honor their commitment to delivering aids to countries they promised to. Funds will help in reforms. IMF formulated Fund supported program structured around poverty reduction in developing countries, Kenya for instance. Developing countries will need to formulate policies that will favor foreign investment as well as survival of private companies while the Fund work program will provide monitory indicators to assess its achievements in the set up objectives.

IMF Fund’s work program seeks to reduce poverty levels in developing countries by assisting regions affected by AIDS. Fighting AIDS is an important target for fighting poverty in Africa as this pandemic has undermined economic progress and weakened communities in many countries. World Bank and other development partners have put efforts to improve health care and reduce stigma for those living with HIV. A community through supply of labor has a determining power in the driving forces of market formation. It can reduce transaction cost (Fereder 2005).

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