ROLE OF NATIONAL GOVERNMENTS

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ROLE OF NATIONAL GOVERNMENTS

• BA 447
• Day 5 6

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Virgin of Guadalupestatue made in China

• Contrast three countries what is the
  significance of the Virgin of Guadalupe statue
  being made in China
• Mexico
• China
• Egypt
• What makes one country succeed faster than
  another?

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Chapter 10

• What are major conclusions?
• Assumptions?
• Your opinion?

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Exercise

• As we go through each type of reform . . .
• wholesale reform
• retail reform
• Let us know if your article is related . . .
• Brief description
• Country
• Your thoughts? questions?

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Reform

• Macro-economic approach to reform
• Privatization
• Deregulate financial markets
• Entry of foreign banks
• Allow repatriation of foreign company earnings
• Float currency
• Encourage FDI
• Shrink subsidies, force competition
• Reduce tariff barriers
• Flexible labor laws

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IFC/WB prescription

• Simplify and deregulate, allow market forces to
  manage economy
• Enhance property rights
• Use ICT, including internet, to implement
  regulation. One benefit reduces human
  interference and therefore corruption
• Reduce court involvement
• Continuous process
• Lately, reduce corruption

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Discussion

• Privatization benefits, social issues
• Example Japan Post, Callao port (Peru)
• Opportunities for global business
• Shrink subsidies, reduce tariff barriers
• Impact on domestic economy
• Opportunities
• Others?

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Success stories

• Mexico to some extent, although he really forgets
  that 40 of the revenues of the Mexican
  government comes from oil
• India, but is development limited to pockets?
• Reduction in poverty rates in China however the
  numbers are still staggering
• discuss numbers on p 315

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Infrastructure issues

• Roads, bridges, electricity
• Communications facilities
• Access to computers and internet
• Government issues
• Priorities -
• Availability of support industries, including
  educational facilities

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Reforming regulatory institutions

• Sources of rent
• Those who work within these agencies
• Politicians, etc.
• Large, e.g. 11,000 employed in Philippine IRS
• Person oriented rather than system
• Find a way to work with the system

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Reform retail

• Micro-enterprise development
• Visit from Mercy Corps
• Focus on facilitating enterprise in devastated
  areas
• Reducing or removing bottlenecks, etc.
• Idea is to facilitate or encourage the formation
  of enterprises, which in turn creates jobs
• Infrastructure
• Regulatory institutions
• Education
• Culture

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Reform retail

• How easy is it to start a business?
• Number of steps
• Number of days, e.g. 168 days in Jakarta, 19 days
  in Panama, 2 days in Australia
• Ability to hire and fire, e.g. more than a year
  in UAE, company usually lost under a particular
  Labor secretary in the Philippines
• Enforce a contract, e.g. collection procedures,
  bribe sheriffs, etc.

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Reform retail

• Get credit
• Close a business

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In class writing

• Would reform wholesale and retail have been
  sufficient for a country like China to be the
  manufacturing power house it is now?

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Discussion

• Examples of how these governments actually work?
  
• Egypt (based on student reports)
• Mexico (based on student reports)
• Additional notes on India
• Myth of China, Inc.
• HongKong as Chinese economy evolved

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Egypt

• 4.95 growth rate
• Perceptions of corruption state capture
• WB/IFC ranking on ease of doing business
• Hiring and firing workers 165th
• Ease of doing business worst among Middle east
  countries
• Some hope Egyptian Education Initiative, a
  partnership between public and private sector

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Mexico

• Maquiladoras
• Refers to a millers portion of flour as payment
  for grinding the wheat
• Manufacturing plants along Mexico-US border
• in general wholly owned by US corporations
• exporting to the US
• Started in the 1960s
• By mid 80s, 2nd largest export next to oil
• NAFTA (1994) accelerated this growth

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Mexico

• Recession in 2000 affected growth
• Attempt by Mexican government to induce
  relocation of these factories to south
• 20 of maquiladoras closed around this period
• A third relocated to china
• 2006 China overtook Mexico as US second largest
  trading partner (next to Canada)

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Mexico

• Oil remains a major export
• New president wants to focus on tourism
• Rules and regulations have changed at the expense
  of maquiladoras
• Labor practices
• Child labor, long hours, hazardous conditions
• Lack of regulatory protection
• a godsend to Mexico, meaning jobs

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India article

• Role of multinationals in pushing development of
  India outsourcing
• Role of government
• End regulation, e.g. satelite dishes require
  presence of government official
• Allow foreign investment
• Some evidence of overheating
• Lack of infrastructure
• Inflation pressures

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Discussion

• Examples of how these governments actually work?
  
• Egypt (based on student reports)
• Mexico (based on student reports)
• Additional notes on India
• Myth of China, Inc.
• HongKong as Chinese economy evolved

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Focus on China

• Prior to accession to WTO 95
• 1970s mechanisms to allow foreign investments -
  Foreign Invested Enterprises
• 1980/1990s Special Economic Zones
• Shenzhen, Guangdong, Pudong
• Initial request to enter GATT(WTO) 1986
• 1992 US PROC Trade Agreement

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Tank Man and Friedman

• Reconcile conclusions in Friedman with those in
  Tank Man
• Role of the Berlin Wall? In relation to Tienamen
  Square and Tank Man
• Reason for China opening up
• Issues not raised or papered over in Friedman,
  for example, poverty? Freedom and justice?
• Implications for global business?

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China Info

• BBC News on China
• Reforms in China

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Effect on HongKong

• One of the first states to actively export
  manufacturing to China

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Current HK facts and figures (I)

• Population 7 million
• Age structure median age 39
• Under 15 (14), 65 (12)
• Malefemale ratio 9211000
• Nationalities 95 Chinese descent
• Philippines 130,000 Indonesia 114,000 US
  28,000 Canada 22,000 Australia 16,000 UK
  13,000
• Religions mainly Buddhism and Taoism
• Employment 3.4 million
• Average Wages HK10,797 (US1400) per month
• Unemployment rate 4.4
• Economic growth 6.8
• 98 Small and Medium Enterprises (lt50
  Non-manufg or lt100 Manufg people)

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Hong Kongs History Economic Milestones
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Foreign Exchange Regimes
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African Global Competitiveness Initiative

• From a presentation by
• Molly Loomis
• Andrew Stephens
• Mike Radic
• Brain Westerberg

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Introduction

• U.S. Government spent over 19 Billion in Foreign
  Aid in 2004
• USAID is the primary agency to administer foreign
  aid
• Managed 12.65 Billion in 2004
• Outline
• USAID and AGCI in Kenya
• 2 projects that are in progress
• What the Kenyans think about aid
• Conclusion Is aid helping?

Source CRS Report for Congress, 2004
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USAID

• Objectives
• Economic, agriculture and trade growth
• Global health
• Promoting democracy, conflict prevention
• Humanitarian assistance

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African Global Competitiveness Initiative

• Established 3 hubs throughout Sub-Saharan Africa
  to increase trade competitiveness
• 200 million, 5-year project
• 2 main projects
• Customs Software Interface
• COMESA Regional Customs Transit Guarantee

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Customs Software Interface

• Form trade relationships between border
  countries.
• In 2005, telecommunications survey of customs
  border posts.

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Lunga Lunga, Kenya

• 22 customs officers
• No landline
• No internet
• No computers
• Totally manual process

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Revenue Authorities Digital Data Exchange
(RADDEx)

• RADDEx Committee
• KRA and URA
• Communication is key!
• - Customs data will be communicated instantly
  from point of transit
• Two tier approach

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Transport Infrastructure

• Essential for economic and social growth
• Improved transportation spreads knowledge and
  goods alike
• Kenya is the key
• Development of Infrastructure pivotal to region
• Problems and Potential
• Kenyan roadways
• Mombasa Sea Port

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COMESA Regional Transit Customs Guarantee

• Common Market of Eastern and Southern Africa
• Made up of 18 African countries
• Large area for foreign investment
• Regional Transit Customs Guarantee
• Focus on reducing security issues of goods in
  transit within COMESA

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Summary of Ch 10

• Facilitate entry of 3 billion into global
  economy by making countries more accessible to
  business
• Macro-economic reforms
• Reform retail