Tài chính doanh nghiệp - Chapter 15: Doing business in developing countries

Chapter 15:Doing Business in Developing countries TOPIC PLANDefinition of Developing Countries (DCs)Import markets in DCsTrade issues in DCsExport marketing aspects in DCsConsiderations for Investing in DCsDefinition of Developing CountriesAlternative names: Less developed countries (LDCs)The Third World;The SouthWTO:Statistical emphasis on geographic criteriaLatin AmericaAfricaMiddle EastAsia(incl.Australia)General Features of Developing CountriesHigh levels of rural populationRelatively high population growth ratesHigh proportion of population living in absolute povertyNot well developed banking/credit facilitiesGeneral Features of Developing CountriesRelative lack of financial capital (esp. FX)Relatively low level of infrastructure(roads, telecommunications,education institutions)Low marketing facilities(e.g.storage,distribution,)Government Sector in Developing CountriesBigger size government sector than in IC's(Lower tax base)However, more government regulation than in IC'sBig concern:Control over the national economy.More development planning than in IC's e.g.Indonesia:"Repellita"(5-year plans)Malaysia,TaiwanTrade and DevelopmentTrade as engine of growthImport substitution versus Export OrientationDevelopment strategiesStage 1:Exports of natural resources/ Imports of manufacturesStage 2:Import substitutionStage 3:Export-led growthThe Import market of Developing Countries by main regions(%); 1999 Total: $US 1,631.5 BillionFig.15.1Merchandise Imports of Low& Middle Income Regional Groupings by source, 1999,%SourceE.Asia&PacificLatinAmericaM.East&N.AfricaSouthAsiaSub-Saharan.AfricaE.U11.518.545.523.139.7Japan17.25.64.511.57.9US11.546.313.611.511.9Other ICs4.61.94.57.70.8Other High Income26.43.74.515.47.9Low&Mid.Income27.624.127.330.831.7Imports of Low& Middle Income Regional Groupings by product, 1999,%SourceE.Asia&PacificLatinAmericaM.East&N.AfricaSouthAsiaSub-Saharan.AfricaTotal100100100100100Food591211Farm RawMaterials3242Fuels1071810Ores and Metals5252Manufact’s74805671Changes in Merchandise Imports composition in Low and Middle Income countries,%, 1990, 1999Imports of Singapore and Hong Kong, China by Product, 1999, % ManufacturesSingaporeFoodManufacturesFuelsOres andMetalsFoodFarm Raw MaterialsFuelsOres and MetalsHong KongManufacturesTrade Policy IssuesTARIFFSGenerally higher than in IC'sA lower proportion of tariffs are BOUNDRegional economic groupings(e.g.AFTA, MERCOSUR) discriminate against non-members (See impact of AFTA’s intra-regional tariff cuts on next slide)Comparison of 1999 MFN simple tariff rates and average CEPT rates,in selected AFTA countries 1999, 2003 Trade Policy IssuesNon-tariff MeasuresSouth Korea : "Pigs is pigs !"Malaysia : Import licences (Plastics raw materials)Barriers to Trade in ServicesExport Marketing IssuesCultural differencesLanguage Cultural restrictions on consumption/importsPrice strategiesDifferentiated prices (on the low side)“Price markets”Export Marketing IssuesDistributionLonger distribution channels than in IC'sPromotionLess spending required compared to IC'sHowever,growing promotion expenditure in Asia and Latin America (See Table 15.9 in the textbook for data on advertising expenditure)Direct Investment in LDC'sAsia-the largest beneficiary of inward FDI among LDCs. Hong Kong -top attraction in 2000.FDI in the Service sector is growing fast, but manufacturing still takes about 55 % of inward FDI.Political stability-key consideration for FDIGovernment controlsGovernment attitude to FDI(The "obsolescing bargain")Joint venture-preferred form of FDI(?)