Chapter 1

Introduction

Historically, Third World was a term that evolved out WWII. The allied countries

under NATO (i.e. USA, Great Britain, Canada, Australia etc.) were referred to as the

First World countries while the communist countries (i.e. the Soviet Union, China, etc.)

became known as the Second World countries. Back then, the term Third World

countries simply referred to all remaining non-aligned countries including the

Philippines.

In more recent years, and long after WWII, the term Third World country began to

take another meaning. I’m not sure if there was ever an official definition for the term but

Third World started to refer to countries with developing economies as opposed to those

with well-established and developed economies. In fact today, because of the negative

quo-notation of the Third World, the world has adopted a term “Developing” country.

Economists will often even add adjectives to define whether a “Developing” country is

either “Less” or “Least” developed.

As a society, the term “third world country” refers to countries with high mortality

rates, especially infant mortality rates. They also have an unstable and inconsistent

economy. These are countries that contain massive amounts of poverty and in some

cases have fewer natural resources than other nations throughout the world. These

countries often have to rely on more industrialized countries to aid them and help

stabilize their economy.

 These countries usually lack economic stability because of the lack of a

functioning class system. Usually, the country will have an upper class and a lower

class. Without a middle class to fill the gap, there is almost no way for a person to

escape poverty because there is no next step for them on the economic ladder. This

also allows the wealthy to control all the money in the country. This is detrimental to the

economy of the country, and both increases and helps to sustain the poverty running

rampant throughout the country while allowing the upper class to keep their wealth to

themselves.

These countries often accrue a copious amount of debt from foreign countries

because of the constant aid they need from other countries to keep their economy afloat

and provide some financial stability to the citizens of the country. The definition of a third

world country has evolved from the political meaning during the Cold War to the

economic meaning of today. Today’s meaning refers to countries that are in financial

trouble and need help from other countries to keep their economy sustainable, at least

for a short time.

Most third world countries do not enjoy a democratic political system.

Dictatorships, of one kind or other, are a common feature of most countries. There are a

few notable exceptions, such as India, that have managed to maintain an unbroken

record of democratic governments. In an undemocratic system there are no checks on

corruption or unilateral decision making. Dictatorships often distort the economic

system. Efficiency and the need for quick decision making are reasons given by

dictators for seizing power. Dictatorships rarely live up to their promise. Political stability
and consistent government policies are preconditions for businesses to operate

successfully. In the absence of these conditions in many third world countries, doing

business involves added risk.

Background of the Study

“How is the Philippines a Third World country”, well simply put, the economic

performance has everything to do with the label. Things like wages for instance,

although the Filipino worker with minimum wage may earn nearly 8 times more than an

average Chinese worker, Philippines minimum wage is nearly 8 times less than its

counterpart in most developed countries.

There are several factors that determined the level of development of an

economy from the level of the population, social programs and government assistance

to its level of industrialization and dependence of agriculture. There are many economic

indicators economists use to evaluate the performance of a country and GDP or the

Gross Domestic Product is one of the most important. CPI or the Consumer Price Index

is another just like the Balance of Trade and the currency strength are another.

Philippines is considered as underdeveloped or one of the developing countries,

as in the conditions in our poorest rural areas resemble those in third world. This

expression is originated in the mid-1990s, at first denoting those countries in Asia and

Africa that were not aligned with either the Communist bloc nations or the non-

Communist Western nations. Because they were for the most part poor and

underdeveloped, the term was transferred to all countries with those characteristics, and

later still to poorer groups within a larger prevailing culture.

Statement of the Problem

Our study’s objective is to guide and prepare first time entrepreneurs and other

previous business owners that wants to re-enter the market to the not so good

possibilities and problems that a third world country like the Philippines can give to new

businesses as of today.

Significance of the Study

The significance of our research is it will be a guiding light to entrepreneurs that

wants to open up a business here in the Philippines, because our research focuses on

what is the current standing of the businesses in the Philippines. This would tackle

different situations that a new entrepreneur should consider before entering the

business world. This could also help the existing businesses forecast and prepare on

the future situations or problems that could affect the stability of their businesses in the

Philippines in the near future.

Scope and Delimitation

This study is only limited to the businesses categorized as SME’s in the

Philippines. It focuses on the advantages and disadvantages of putting up a business in

a third world country like the Philippines, that could help the new emerging

entrepreneurs to decide whether to invest in a business in our country.

Theoretical Framework

There are many reasons why Filipinos are poor. We can attribute poverty with

the rapid population growth that our economy cannot cope with. We can blame it to

unemployment, inflation, inequality and corruption as a direct cause of why Filipinos are

poor. According to an SWS survey, the ratio of poverty in Luzon is at 45 percent, 74

percent in the Visayas, and 71 percent in Mindanao, and because of the poverty crisis

and the unstable economy of the Philippines businesses also suffers from its effects.

Businesses is also affected by the condition of the economic environment where it is

established in, that’s why this study further shows what are those factors and how those

factors affect the businesses here in the Philippines, so that it could serve as a

guidance among new entrepreneurs on the future.

Conceptual Framework

https://education.seattlepi.com/make-conceptual-framework-thesis-7029.html
https://www.academia.edu/33521267/POVERTY_AND_THE_FILIPINO_MINDSET-

_RESEARCH_PAPER_-_Autosaved_.docx

https://borgenproject.org/definition-of-a-third-world-country/

www.quora.com