Gbm unit-05 (global political-legal environment)
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This document discusses the importance of understanding global business management and political-legal environments for students pursuing an MBA. It notes that graduates may find themselves working in foreign countries, so global knowledge prepares them. The document then outlines the topics to be covered in a Global Business Management course, including globalization, trade, technology, economics, politics, and law. It focuses on political and legal environments, defining different political systems like democracy and totalitarianism. It also covers assessing and managing political risks internationally.
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Gbm unit-05 (global political-legal environment)
- 1. 07/06/10 1 By : Prof. Amit Kumar
- 2. 07/06/10 2 “A student pursuing management education from IILM- Graduate School of Management, for example may find himself or herself placed in a firm located in a totally different country. Knowledge about international business keeps the youngster mentally prepared to accept assignment in an alien environment. Forewarning is definitely forearming, for the fresh management graduate”. IILM-GSM Importance of this course Global Business Management
- 3. 07/06/10 3 Course: Global Business Management 1. Globalization 2. Global Trade & Theory 3. Global Technological Environment 4. Global Economic Environment 5. Global Political-Legal Environment 6. Foreign Direct Investments 7. Regional Economic Integration 8. Strategy and Structure of International Business IILM-GSM Global Business Management
- 4. 29/07/10 4 IILM-GSM Global Business Management Global Political-Legal Environment
- 5. 29/07/10 5 Contents • Environment of International Business • Political Systems- Democracy & Totalitarianism • Types of Political Risk & Assessment • Strategies for Managing Political Risks • Legal Environment-System of Law • International Dispute Resolution • Presentation on: Areas of Concern for MNCs IILM-GSM Global Business Management Global Political-Legal Environment
- 6. 29/07/10 6 • Political environment refers to the influence of the system of government and judiciary in a nation on international business. • The type and structure of government prevailing in a country decides, promotes, fosters, encourages, shelters, directs & controls the business of that country. ‘A country with a stable and honest government ensures satisfactory state of economic progress’. Political Environment IILM-GSM Global Business Management Global Political-Legal Environment
- 7. 29/07/10 7 • The legal system refers to the rules and laws that regulate behaviour of individuals and organizations. Failure to comply with laws means that penalties will be inflicted by courts depending on the seriousness of offence. • The legal system in a country is also influenced by its political system. The government of a country defines the legal framework within which firms conduct business and often the laws that regulate business reflect the rulers’ political ideology. Legal Environment IILM-GSM Global Business Management Global Political-Legal Environment
- 8. 29/07/10 8 • Democracy refers to a political arrangement in which the supreme power is vested in the people. • Democracy maintain stable business environments. The private sector enjoys ‘Freedom-DES’. • Democracy does not guarantee economic growth. The so- called Asian Tigers, built strong market economies in the absence of democratic practices. Across the world, 60% of the nations have functioning democratic systems, others are under TOTALITARIANISM. Political Systems- Democracy & Totalitarianism Democracy IILM-GSM Global Business Management Global Political-Legal Environment
- 9. 29/07/10 9 • Individual freedom is completely subordinated to the power of authority of state and concentrated in the hands of one person or in a small group, which is not constitutionally accountable to the people. • Societies ruled by a pressure clique- political, economic or military or by a dictator, plus most oligarchies and monarchies- belong to this category. Political Systems- Democracy & Totalitarianism Totalitarianism IILM-GSM Global Business Management Global Political-Legal Environment
- 10. 29/07/10 10 • During the First & Second World Wars the authoritarian governments began to appear in most mature economies. Even after the Second War, the totalitarian system became most common in newly independent nations. • Nazi Germany (under Adolf Hitler) and the former Soviet Union (under Joseph Stalin) are historic examples. Today, Cambodia, Myanmar, China, Cuba and Iraq are prominent examples. • Many Latin American countries have registered impressive economic growth under the iron rule of military dictators. So is the case of Korea and fastest growing economy China. Political Systems- Democracy & Totalitarianism Totalitarianism IILM-GSM Global Business Management Global Political-Legal Environment
- 11. 29/07/10 11 Political Systems- Democracy & Totalitarianism Types of Totalitarianism 1. Theocratic IILM-GSM Global Business Management Global Political-Legal Environment 1. Theocratic 2. Secular 3. Tribal 4. Right-Wing Totalitarianism When a country’s religious leader are also its political leaders, the political system is called a theocracy. Religious leaders frame and enforce laws and regulations that are based on religious beliefs. Afghanistan, some Sheikhs of the Middle East and Iran are examples which have such a political dispensation.
- 12. 29/07/10 12 • A political system in which political leaders are guided by military and bureaucratic power is called secular. • In such system, military controls the government and makes decisions which it deems to be in the best interest of the country. Like, Pakistan, Common throughout Latin America and Asian countries like South Korea, Singapore, Indonesia. • Tribal totalitarianism occurs when a political party that represents interests of a particular tribe monopolizes power. • This exists principally in African countries such as Zimbabwe, Tanzania, Uganda and Kenya. Political Systems- Democracy & Totalitarianism 3. Tribal 2. Secular IILM-GSM Global Business Management Global Political-Legal Environment
- 13. 29/07/10 13 • Here, private ownership of property is endorsed by government, market forces are also allowed free play, but political freedoms are rarely granted. • Argentina, Brazil, Chile and Paraguay were under right-wing totalitarian governments in the late 1980s. Political Systems- Democracy & Totalitarianism 4. Right-Wing IILM-GSM Global Business Management Global Political-Legal Environment “ China is a classic example of polity which though communist by the definition, is pursuing right-wing polices. The country is privatizing state-owned enterprise, attracting FDI, pursuing pro-business policies and is registering a hefty growth rate. The country appears to be an open and free society, but is essentially totalitarian”.
- 14. 29/07/10 14 • Political risk is any governmental action or politically motivated event that could adversely affect the long- term profitability or value of a firm. • Corporate face political risk when they conduct business with outside world. 1. It is very high in countries like Yugoslavia, Turkey, Iraq, Sudan, Nigeria, Afghanistan, Somalia & Indonesia. 2. It is almost non-existent in the US, Canada, Australia and Western European countries. 3. Distinction is often made between macro and micro risks. Political Risk IILM-GSM Global Business Management Global Political-Legal Environment
- 15. 29/07/10 15 Types of Political Risk Macro Risks: (A macro political risk affects all the participants in international businesses in the same way.) IILM-GSM Global Business Management Global Political-Legal Environment RISKS IMPACT 1 Loss of technology or other intellectual property Loss of future profits 2 Campaigns against foreign goods Loss of sales and increased costs of public relation campaigns 3 Mandatory labour legislations Increased operating costs 4 Civil wars Destruction of property, loss of sales, disrupted production run 5 Inflation Increased operating costs
- 16. 29/07/10 16 Types of Political Risk Micro Risks: (It affects specific foreign business.) IILM-GSM Global Business Management Global Political-Legal Environment RISKS IMPACT 1 Kidnappings, Terrorist, Threats etc. Disrupted production, higher security costs, reduced productivity 2 Increased Taxation Reduced after tax profits 3 Officials’ dishonesty Loss of business, Increased operating costs
- 17. 29/07/10 17 • Risk assessment by international businesses usually takes two form: 1. One is through the use of experts or consultants familiar with the host country or region under considerations. 2. Second is through the development of their internal staff and in-house capabilities. Whatever the method, timely information from the people in the front line should not be missed. Political Risk Assessment IILM-GSM Global Business Management Global Political-Legal Environment
- 18. 29/07/10 18 Eurasia Group, a political and economic risk analysis firm, has composed Global Political Risk Index (GPRI). The index is a composite measure of the state of a country’s government, security and economy. All indicators are scored on a scale of 0 to 100. The higher the number , the greater the political stability. Political Risk Assessment IILM-GSM Global Business Management Global Political-Legal Environment
- 19. 29/07/10 19 Political Risk Assessment IILM-GSM Global Business Management Global Political-Legal Environment
- 20. 29/07/10 20 Political Risk Assessment Ranking of countries on GPRI by Eurasia Countries 2011 2012 Hungry 78 77 S. Korea 76 75 Poland 74 72 Bulgaria 70 69 Mexico 67 67 China 66 61 Brazil 66 64 Argentina 66 66 S. Africa 64 65 Russia 63 61 India 62 62 ------- -- -- Iran 51 49 Venezuela 50 52 Nigeria 48 47 Pakistan 45 50 Assesses political risk associated with doing business in foreign countries, firms should evolve suitable strategies to manage such risks. IILM-GSM Global Business Management Global Political-Legal Environment
- 21. 29/07/10 21 • International businesses employ FIVE different methods / strategies for managing political risks. 1. Avoiding Investment 2. Adaptation 1. Local Equity and Debt 2. Developmental Assistance 3. Insurance 3. Threat 4. Lobbying 5. Terrorism Consultants Strategies for Managing Political Risks IILM-GSM Global Business Management Global Political-Legal Environment
- 22. 29/07/10 22 1. Avoiding Investment • The simplest way to manage political risks is to avoid investing in a country ranked high on such risks. • Where investments has already been made, plants may be wound up or transferred to some other country which is considered to be relatively safe. • This may be a poor choice as the opportunity to do business in a country will be lost. Strategies for Managing Political Risks IILM-GSM Global Business Management Global Political-Legal Environment
- 23. 29/07/10 23 • MNCs incorporate risk by means of the following three strategies: 1. Local Equity and Debt • This involves financing subsidiaries with the help of local firms, trade unions, financial institutions and government. • As partners in local businesses, these groups ensure that political developments do not disturb operations. • Localization entails modifying operations, product mix to suit local tastes and culture. • When McDonald’s commenced franchisee operations in India, ensured sandwiches did not contain any beef. Strategies for Managing Political Risks IILM-GSM Global Business Management Global Political-Legal Environment 2. Adaptation
- 24. 29/07/10 24 • MNCs incorporate risk by means of the following three strategies: 2. Developmental Assistance • Offering development assistance allows an international business to assist the host country in improving its quality of life. Since the firm and the nation become partners, both stand to gain. • In Myanmar, the US oil company Unocal and France’s Total have invested billions of dollars to develop natural gas fields and also spent $6 million on local education, medical care, and other improvements. Strategies for Managing Political Risks IILM-GSM Global Business Management Global Political-Legal Environment 2. Adaptation
- 25. 29/07/10 25 • MNCs incorporate risk by means of the following three strategies: 3. Insurance • This is the last means of adaptation. Companies buy insurance against the potential effects of political risk. • Some policies protect companies when host governments restrict the convertibility of their currency into parent country currency. Others insure losses created by violent events, including war and terrorism. • Most developed countries have created agencies to insure the firms against risks. Strategies for Managing Political Risks IILM-GSM Global Business Management Global Political-Legal Environment 2. Adaptation
- 26. 29/07/10 26 • MNCs incorporate risk by means of the following three strategies: 3. Insurance • Most developed countries have created agencies to insure the firms against risks. Strategies for Managing Political Risks IILM-GSM Global Business Management Global Political-Legal Environment 2. Adaptation “ The Overseas Private Investment Corporation (OPIC), insure US overseas investment against nationalization, revolutions and foreign exchange inconvertibility. Similarly, Multilateral Investment Guarantee Agency (MIGA), a subsidiary of World Bank, provides insurance against political risks. Private insurance firms, such as Lloyd’s of London, also underwrites political risk insurance”.
- 27. 29/07/10 27 Strategies for Managing Political Risks Overseas Private Investment Corporation (OPIC) IILM-GSM Global Business Management Global Political-Legal Environment
- 28. 29/07/10 28 Strategies for Managing Political Risks Multilateral Investment Guarantee Agency (MIGA) IILM-GSM Global Business Management Global Political-Legal Environment
- 29. 29/07/10 29 3. Threat • Political risk can also be managed by trying to prove to the host country that it cannot do without the activities of the firm. • This may be done by trying to control raw materials, technology and distribution channels in the host country. • The firm may threaten the host country that the supply of materials, products, or technology would be stopped if its functioning is disrupted. Strategies for Managing Political Risks IILM-GSM Global Business Management Global Political-Legal Environment
- 30. 29/07/10 30 4. Lobbying • Influencing local politics through lobbying is another way of managing political risks. • Lobbying is the policy of hiring people to represent a firm’s business interests as also its views on local political matters. • Lobbyists meet with local public officials and try to influence their position on issues relative to firm. Their ultimate goal is getting favourable legislation passed and unfavourable ones rejected. • Lobbyists render variety of services for fees. Strategies for Managing Political Risks IILM-GSM Global Business Management Global Political-Legal Environment
- 31. 29/07/10 31 Lobbyist Universe 1. Owner-Promoters – From Ratan Tata to Mukesh Ambani to N.R.Narayana Murthy to Azim Premji to Sunil Mittal, everyone has lobbed for better policies in telecom, oil & gas, education & retail – They meet key policy makers personally – Effectiveness is very high, since they bring a lot of personal credibility and heft of their business empires to weigh on the issues they champion 1. Consultants – Typically, retired bureaucrats themselves such as Pradip Baijal former TRAI Chairman & C.M.Vasudev for Secretary in Ministry of Finance. 1. PR Firms – Perfect Relations, Genesis & IPAN are some such firms. 2. Professional Employees – Reliance Shankar Adawal, ITC’s Vidyanathan are some senior executives who have extensive domain knowledge and champion in specific issues. 1. Politicos – Usually member of parliament, Salman Khurshid, S.Gurumurthy 2. Agents – these are largely fixers and do not have domain knowledge Strategies for Managing Political Risks IILM-GSM Global Business Management Global Political-Legal Environment
- 32. 29/07/10 32 5. Terrorism Consultants • To manage terrorism risk, MNCs hire consultants in counterterrorism to train employees to cope with the threat of terrorism. Strategies for Managing Political Risks IILM-GSM Global Business Management Global Political-Legal Environment
- 33. 29/07/10 33 There are Four Basic Legal Systems prevailing around world: System of Law Legal Systems Islamic Law Civil or Coded Law Common Law Marxist/Socialist Law IILM-GSM Global Business Management Global Political-Legal Environment
- 34. 29/07/10 34 • Legal disputes can arise in three situations: 1. Between governments 2. Between a firm and a government 3. Between two firms • Disputes between governments are resolved through the intervention of the World Court at the Hague and the International Court of Justice, the principal judicial organ of the United Nations. • Disputes of the other two situations must be handled in the courts of the country of one of the parties involved or through arbitration. International Dispute Resolution Which country’s court should handle a dispute is a relevant question. IILM-GSM Global Business Management Global Political-Legal Environment
- 35. 29/07/10 35 Principal means (methods) of resolving international disputes are: International Dispute Resolution Conciliation Litigation Arbitration IILM-GSM Global Business Management Global Political-Legal Environment
- 36. 29/07/10 36 • If the mutual talks do not bring any agreeable solution to both the parties then they resort to conciliation which means authorizing a common mediator to interfere in the matter so that both the parties can be in win-win situation. • Mediator hears carefully to both the parties and recommends the possible way out. • This is the least expensive and quick way to come to the mutual understanding if compared to arbitration and litigation. • As the discussions happen only between the parties (though through mediator) matter remains confidential. Conciliation way is widely used by Chinese firms incase of disputes as they believe it’s non-threatening. International Dispute Resolution Conciliation IILM-GSM Global Business Management Global Political-Legal Environment
- 37. 29/07/10 37 International Dispute Resolution Arbitration • The second way towards dispute resolution, incase the first one (conciliation) fails, is arbitration. • Under this, disputes are the taken to the formally designated authorities. These authorities constitute of experienced arbitrators and their decisions legally bound both the parties to stand by it. • Examples of such authorities are – • The Inter-American Commercial Arbitration Commission, and • The International Chamber of Commerce. • Arbitrator’s role can be played by anyone including lawyers, engineers or doctors depending on industries. • For example architect or construction engineers can an Arbitrator in case of an international dispute between two construction companies. IILM-GSM Global Business Management Global Political-Legal Environment
- 38. 29/07/10 38 • Litigation is the third and last way out to the solution of a conflict. • If any one or both the parties don’t agree to the arbitrators decisions, they move to the court of jurisdiction. • This is the most expensive and lengthy process of finding a solution. • Most of the companies try to avoid Litigation because of many factors like- • Fear of creating a poor image in public • Fear of unfair treatment in a foreign court • Loss of confidentiality etc. International Dispute Resolution Litigation IILM-GSM Global Business Management Global Political-Legal Environment
- 39. 29/07/10 39 Areas of Concern for MNCs M N C Environmental Laws Protection of IPRS Product liability & safety Competition laws Bribery and Corruption Advertising and Sales promotion Contracts Shipping of goods Labor Laws IILM-GSM Global Business Management Global Political-Legal Environment
Editor's Notes
- To arm or prepare in advance of a conflict The part of the arm between the wrist and the elbow.
- The environment of international business is regarded as the sum total of all external forces working upon the firm as it goes about its affairs in foreign and domestic markets. For the sake of clarity , divide environmental forces into: Political-Legal Economic Cultural Technological Political environment refers to the influence of the system of government and judiciary in a nation on international business. The type and structure of government prevailing in a country decides, promotes, fosters, encourages, shelters, directs and controls the business of that country. A political system (another name for the type of government) that is stable, honest, efficient and dynamic and which insures political participation to the people, and assures personal security to the citizens, is a primary factor for economic development “ No country with a stable and honest government that does not have or has not had a reasonably satisfactory state of economic progress”. The judiciary (also known as the judicial system or judicature) is the system of courts that interprets and applies the law in the name of the sovereign or state. The judiciary also provides a mechanism for the resolution of disputes. Under the doctrine of the separation of powers, the judiciary generally does not make law (that is, in a plenary fashion, which is the responsibility of the legislature) or enforce law (which is the responsibility of the executive), but rather interprets law and applies it to the facts of each case. This branch of government is often tasked with ensuring equal justice under law. It usually consists of a court of final appeal (called the "supreme court" or "constitutional court"), together with lower courts.
- Legal environment refers to the legal system obtaining in a country. The legal system then refers to the rules and laws that regulate behaviour of individuals and organizations. Failure to comply with the laws means that penalties will be inflicted by the courts depending on the seriousness of the offence. A country’s laws regulate business practice, define the manner in which business transactions are to be carried out and set down the rights and obligations of those involved in business deals. The legal system in a country is also influenced by its political system. The government of a country defines the legal framework within which firms conduct business and often the laws that regulate business reflect the rulers’ political ideology. ------------------------------------------------ The legal system prevailing in India should be emulated by all the countries. The legal resource is available to all- Indian or foreigners. Justice is meted to any petitioner, depending on the merits of the case. “ GE, for example, got back the entire investments of $115 million from Dabhol once the letter vent bust. Scott Bayman, the CEO, admitted that nowhere else this would have been possible”. Dhara 377 Emulated..means other system must support indian system To distribute by or as if by measure; allot: mete out justice. Archaic To measure. A formal written document requesting a right or benefit from a person or group in Petitioner, Party requesting action in the court. A taxpayer is quite often the petitioner (plaintiff) in a tax dispute to appeal an IRS position. The Dabhol Power Company was a company based in India, formed to manage and operate the Dabhol Power Plant. The Dabhol plant was built through the combined effort of Enron, GE, and Bechtel. GE provided the generating turbines to Dabhol, Bechtel constructed the physical plant, and Enron was charged with managing the project through Enron International. The infrastructure development Starting in the mid 1990s, Unocal and its partners planned to build a 1,000 mile gas pipeline from Turkmenistan to Multan, in Pakistan. Cost: about $2 billion. Also considered was a route from Iran to Multan which was seen as feasible due to Iran's huge oil and gas reserves. However, In 1996 when the Sanctions against Iran were imposed, the FBI blocked the plan, and it was forcibly cancelled. A proposed 400 mile extension from Multan to New Delhi would bring some of the gas into India's network of gas pipelines. Cost: $600 million. The HBJ pipeline carries most of India's liquid natural gas. Hazira in Gujarat, north of Mumbai, would have been the terminal end of the HBJ pipeline. But in 1997, Enron announced plans to link Dabhol, about 100 miles south of Mumbai and 300 miles south of the Hazira terminal. Dabhol had existing power generation facilities. Enron also said they were going to add to about 1500 miles to the HBJ pipeline. Costs: $300 million and $900 million, respectively. Any gas pipeline across Pakistan could have an economic impact at the seaport terminal at Gwadar, Pakistan, where LNG tankers could take gas to Korea and Japan, the largest consumers of natural gas in the world. A sea route from Gwadar to Dabhol was never considered despite both locations being coastal towns. Dabhol Power Station Main article: Dabhol Power Station The plant was to be constructed in two phases. In March 1995, the ruling Congress Party in Maharashtra lost to a nationalist coalition that had campaigned on an anti-foreign investment platform. In May, hundreds of protesting villagers swarmed over the site, and a riot broke out. Human Rights Watch and Amnesty International eventually charged the security forces guarding Dabhold for Enron with human-rights abuses; Human Rights Watch blamed Enron for being complicit. On August 3, the Maharashtra ordered the project to be halted because of "lack of transparency, alleged padded costs, and environmental hazards." Construction ground to a halt. By then, Enron had invested about $300 million into the project. [edit] Phase One Phase one was set to burn naphtha, a fuel similar to kerosene and gasoline. Phase one would produce 740 megawatts and help stabilize the local transmission grid. The power plant's phase one project was started in 1992 and finally completed in two years behind schedule. [edit] Phase Two Phase two would burn liquefied natural gas (LNG). The LNG infrastructure associated with the LNG Terminal at Dabhol was going to cost around $1 billion. In 1996 when India's Congress Party was no longer in power, the Indian government assessed the project as being excessively expensive and refused to pay for the plant and stopped construction. The Maharashtra State Electricity Board (MSEB), the local state run utility, was required by contract to continue to pay Enron plant maintenance charges, even if no power was purchased from the plant. The MSEB determined that it could not afford to purchase the power (at Rs. 8 per unit Kwh) charged by Enron. The plant operator was unable to find alternate customers for Dabhol power due to the absence of an open free market in the regulated structure of utilities in India. From 1996 until Enron's bankruptcy in 2001 the company tried to revive the project and spark interest in India's need for the power plant without success. The project was widely criticized for excess costs and deemed a white elephant. Socialist groups cited the project as an example of corporate profiteering over public good. Over the next year Enron reviewed its options. On February 23, 1996, Maharashtra and Enron announced a new agreement. Enron cut the price of the power by over 20 percent, cut total capital costs from $2.8 billion to $2.5 billion, and increased Dabhol's output from 2,015 megawatts to 2,184 megawatts. Both parties committed formally to develop the second phase. The first phase went online May 1999, almost two years behind schedule, and construction was started on phase two. Costs would now ultimately climb to $3 billion. Then everything came to halt. The MSEB refused to pay for all the power, and it became clear that getting the government to honor the guarantees would not be an easy task. Although Maharashtra still suffers from blackouts, it says it does not need and cannot afford Dabhol's power. India's energy sector still loses roughly $5 billion a year. Today, Dabhol, in which Enron had invested some $900 million, sits silent. This plant was taken over by Ratnagiri Gas and Power Private limited in July 2005. [edit] Dabhol Today The power plant Phase I which was re-named Ratnagiri Gas and Power Pvt Ltd (RGPPL) started operation in May 2006, after a hiatus of over 5 years. However, the Dabhol plant ran into further problems, with RGPL shutting down the plant on 4 July 2006 due to a lack of naphtha supply. Qatar based RasGas Company Ltd. started supplying LNG to the plant in April 2007. The Dabhol Power plant consists of 3 blocks, each consisting of two GE make frame 9 gas turbines and one GE steam turbine. Block 2 commissioning work and Gas turbine 2A trial runs started on 25 April 2007. The Dabhol Power Plant Project is operational as of April 2009 with 900 MW RLNG fired running capacity but there are problems due to non-availability of operational insurance, also the decision is largely dependent upon political developments in the country as well as performance of newly repaired rotors. As 1 each of the combined cycle generator unit (total 3) is under shutdown.
- Asian Tigers- Hong Kong, Singapore, South Korea and Taiwan Two basic political systems are in existence all over the world, namely democracy and totalitarianism. Democracy refers to a political arrangement in which the supreme power is vested in the people. Democracy maintain stable business environments primarily through laws protecting individual property rights. In theory, business prospers when the private sector enjoys freedom to decide, freedom to earn and freedom to spend (F-DES). Democracy does not guarantee economic growth. The so-called Asian tigers- Hong Kong, Singapore, South Korea and Taiwan- for example , built strong market economies in the absence of democratic practices. Across the world, 60% of the nations have functioning democratic systems, others are under TOTALITARIANISM.
- Subordinated means dependent In totalitarianism, also called authoritarianism, individual freedom is completely subordinated to the power of authority of state and concentrated in the hands of one person or in a small group, which is not constitutionally accountable to the people. Societies ruled by a pressure clique- political, economic or military or by a dictator, plus most oligarchies and monarchies- belong to this category. During the First & Second World Wars the authoritarian governments began to appear in most mature economies. Even after the Second War, the totalitarian system became most common in newly independent nations. Nazi Germany (under Adolf Hitler) and the former Soviet Union (under Joseph Stalin) are historic examples. Today, Cambodia, Myanmar, China, Cuba and Iraq are prominent examples. Many Latin American countries have registered impressive economic growth under the iron rule of military dictators. So is the case of Korea and fastest growing economy China A clique is an inclusive group of people who share interests, views, purposes, patterns of behavior, or ethnicity. A clique as a reference group can be ... The oligarchy (from Greek ὀλιγαρχία, oligarkhía[1]) is a form of power structure in which power effectively rests with a small number of people. These people could be distinguished by royalty, wealth, family ties, corporate, or military control. The word oligarchy is from the Greek words "ὀλίγος" (olígos), "a few"[2] and the verb "ἄρχω" (archo), "to rule, to govern, to command".[3] Such states are often controlled by a few prominent families who pass their influence from one generation to the next. A monarchy is a form of government in which all political power is pased down to an individual,(usally handed down to generation to generation) known as a monarch ("single ruler"), or king (male), queen (female).
- Totalitarianism, in itself is of four types:
- Check pakistanpakistan president asif zardari,, PM is yusuf gallani
- Pro men proactive business…hefty in a sence of fast, quick "Right wing" simply means being conservative, as opposed to being liberal. It used to be far more common for both parties in the U.S. to have lots of "liberals," ... "conservatives," ... and "moderates" in them. That is to say, there used to be a lot of "conservative Democrats" and "liberal Republicans." But the ranks of the latter two have thinned out a great deal. And there are fewer "moderates" in both parties, too. Most Republicans are "right wing" and most Democrats are "left wing."
- Political risk is any governmental action or politically motivated event that could adversely affect the long-term profitability or value of a firm. Political risk arises when the host government makes a decision adverse to the subsidiary. It also arises when laws and government policies instituted by the firm’s home country, adversely affect the firms that do business in a foreign country. Corporate face political risk when they conduct business with outside world. Political risk is common. It is very high in countries like Yugoslavia, Turkey, Iraq, Sudan, Nigeria, Afghanistan, Somalia & Indonesia. It is almost non-existent in the US, Canada, Australia and Western European countries. Distinction is often made between macro and micro risks. A macro political risk affects all the participants in international businesses in the same way. Expropriation, the seizure of privately owned assets, as for example, a firm or a factory, by government with little or no compensation to the owners, is a macro political risks. Taking of ownership of an entire industry that had been generated privately, as a part of a plan to restructure an entire economy, is called nationalization, again a macro political risks. Field Marshall Ayub Khan nationalized four hotels of M.S.Oberoi without paying any compensation. Political boycotts also results in macro political risk. Since 1955, a number of Arab countries have boycotted firms with branches in Israel or companies that have allowed the use of their trade name there. In all these cases, international businesses were hard hit. Expropriation: The taking of private property for public use or in the public interest Expropriation is the act of a government taking private property; Eminent Domain is the legal term describing the government's right to do so. In the United States, this right is granted, indirectly, by the Fifth Amendment to the Constitution, which states, in part, that "private property [shall not] be taken for public use, without just compensation." The courts have interpreted this clause's limitation of the power to expropriate as implying the existence of the power itself. Two well-known cases of the U.S. government's expropriating private property occurred during labor troubles after World War II. In the spring of 1946, President Harry S. Truman found it necessary to seize control of the nation's railroads to postpone an imminent strike. He justified this action by declaring that the welfare of the country was at stake. Five days after the president's action, the workers went on strike for three days, until union and management reached an agreement. Truman hastened the agreement by threatening to draft all railway employees who refused to go back to work. In 1952, faced with an impending strike by steelworkers, President Truman signed Executive Order No. 10340, 17 Fed. Reg. 3139, expropriating eighty-eight steel mills across the country. Again, the president defended his action by declaring that the welfare of the country was at stake. He supported this argument by stressing the demands of the war in Korea. He believed that a steel strike would endanger the lives of U.S. soldiers. This time, Truman's action caused a constitutional crisis that went to the U.S. Supreme Court. In youngstown sheet & tube co. v. sawyer, 343 U.S. 579, 72 S. Ct. 863, 96 L. Ed. 1153 (1952), the Supreme Court ruled 6–3 that the president did not have the power to take private property to settle a labor dispute. The steelworkers' strike began the same day as the ruling and lasted seven weeks. International Law recognizes the right of countries to seize private property to further national welfare, but it requires that both citizens and Aliens be treated in the same manner. The issue of just compensation in return for expropriated property differs from country to country. The United States and most Western countries maintain that the expropriating country should pay prompt, adequate, and effective compensation. U.S. businesses were expropriated by the governments of both Cuba and Chile during socialist movements in those foreign countries. In May 1959, after Fidel Castro took over the Cuban government, the seizure of many large U.S. properties began. Before the revolution, U.S. corporations had controlled most of Cuba's resources and over half of its sugar production. In 1960, the first shipment of Soviet oil arrived in Cuba. Under the advice of the U.S. Treasury Department, U.S. oil companies on the island refused to refine it. These refineries were then taken over by the Cuban government. The expropriation of U.S. property in Cuba and Cuba's alliance with the Soviet Union eventually led to the United States' breaking off all diplomatic relations and instituting an embargo. In 1971, the Chilean people elected a socialist president, Salvador Allende. Soon afterward, the Chilean government began to expropriate U.S. businesses located in Chile. The primary U.S. business in Chile at this time was copper mining. When U.S.-owned mines were seized, in most cases, their owners were provided with adequate and prompt compensation. The El Teniente mine of the Kennecott Company was seized by the government for a much higher price than the book value. In 1970, government control over the industrial sector in Chile had been at 10 percent. One year after the election of President Allende, it was at 40 percent. By 1973, private banks; U.S. copper mines; the steel, cement, and coal industries; and all other vital areas of industry were in the hands of the Chilean state. In both Cuba and Chile, the seized properties remain under the control of the foreign
- 6. Currency devaluations.. Reduced values of repatriated earnings 7. Confiscation of properties,.. Loss of assets & future profits Confiscation, from the Latin confiscatio 'joining to the fiscus, i.e. transfer to the treasury' is a legal seizure without compensation by a government or other public authority. The word is also used, popularly, of spoliation under legal forms, or of any seizure of property without adequate compensation. Scope and history As a punishment, it differs from a fine in that it is not primarily meant to match the crime but rather reattributes the criminal's ill-gotten spoils (often as a complement to the actual punishment for the crime itself; still common with various kinds of contraband, such as protected living organisms) to the community or even aims to rob them of their socio-economic status, in the extreme case reducing them to utter poverty, or if he is condemned to death even denies them inheritance to the legal heirs, thus punishing the entire bloodline (in the primitive logic of the blood feud). Meanwhile limited confiscation is often in function of the crime, the rationale being that the criminal must be denied the fruits of their fault, while the crime itself is rather punished in some other, independent way, such as physical punishments or even a concurring fine. Such rich prizes often proved too much temptation for the authorities to refrain from abuse out of greed, especially when taxation was relatively low-yielding, not permanent (often requiring assent from estates etc. at a political cost) and aroused far more resistance than 'making criminals pay'. Often, police will auction confiscated items, and the profits will often go to charities. Theoretically, it is possible for owners to buy back confiscated items. In airports, potentially dangerous items (such as hazardous chemicals, weapons, and sharp objects) are usually confiscated at inspections. Other items, such as certain food, may also be confiscated, depending on importation laws. Depending on the nature of the items, some may be returned at the end of the flight, while most are discarded or auctioned off. However, customs officers have a disreputable reputation, exercising arbitrary power. The musical comedian Anna Russell had an Irish harp confiscated by the U.S. Customs Service. Originally, in Roman law, it was the seizure and transfer of private property to the fiscus by the emperor; hence the appropriation, under legal authority, of private property to the state. In modern, e.g. English law, the term embraces forfeiture in the case of goods, and escheat in the case of lands, for crime or in default of heirs (see also Eminent Domain). Goods may also be confiscated by the state for breaches of statutes relating to customs, excise or explosives. In the United States among the "war measures" during the American Civil War, acts were passed in 1861 and 1862 confiscating, respectively, property used for "insurrectionary purposes" and the property generally of those engaged in rebellion. For legal confiscation in the United States, see search and seizure. [edit] Modern trends There was from the late 1980s onwards a resurgence of interest in confiscation as crime prevention tool, which went hand in hand with the interest in the criminalization of money laundering. A number of international instruments, starting with the 1988 Vienna Convention, have strongly suggested the enactment of legal provisions enabling confiscation of proceeds of crime. The 40 recommendations of the FATF have also stated its importance as a crime prevention tool. A further trend has been the reversal of the burden of proof for the purpose of facilitating confiscation.
- Ceo kidnapped..terrorist attack on a particulear company or factory… A micro political risk affects specific foreign business. It includes industry regulations, taxes, kidnapping and terrorists threats. India’s decision in 1975 to reduce foreign equity to 40% and Peru’s decision to nationalize its copper mines are examples. US decision to tax textile imports is another instance. Yet another example is bombing of the Chinese embassy in Belgrade by NATO forces in 1997. In retaliation, demonstrators in China thrashed KFC stores but did not touch Pizza Hut stores though both were owned by US based company. Chinese protectors did not attack Pizza Hut thinking that it was Italian-owned. The firms which have high visibility in host countries are target of this risk. To retaliate is to take revenge.
- Another way of managing political risk is adaptation. Adaptation means incorporating risk into business strategies.
- In case of mou between tata coffe and starbucks..jointly they started working on few social projects
- Hedging …in a sence ..in order to lower down the currencu coinversion risk..might u learned in financine paper
- Rita nadia in telecom industry…in 2 G Lobbyists render variety of services for fees. Different types of lobbyists are Owner-Promoters, Consultants, PR Firms, Professional Employees, Politicos and agents.
- One of our governing member…also worked as lobbyist.
- Arbitration, a form of alternative dispute resolution (ADR), is a technique for the resolution of disputes outside the courts, where the parties to a dispute refer it to ... In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching ...