Tài chính doanh nghiệp - Chapter 16: Doing business in transition economies

Chapter 16:Doing Business in Transition Economies FSUFSUC&E EuropeVietnamPRChinaLECTURE PLAN:Definition of Transition Economies (TEs)Import marketsTrade issues in TEsExport marketing issuesFDI in TEs, including ChinaGlobalisation and China’s economyBenefits and implications Transition EconomiesCurrent and former Centrally Planned Economies in transition to a market-based economyFormer Soviet Union countries;Central &Eastern Europe;PR China and Vietnam China-the world's 3-rd largest economy (PPP method)Government sector-still the leading sector in FSU;However, in 1998 it accounted for less than 50% in most C&E European countriesPrivatisation of state enterprisesFormer Soviet Union(FSU)Most developed Commonwealth Independent States(CIS) marketsRussia,Ukraine,Belarus,KazakhstanThe Baltic statesEstonia,Latvia,LithuaniaCIS Islamic RepublicsAzerbaijan,Turkmenistan,Uzbekistan,Tajikistan The Share of China and Eastern Europe* in world merchandise imports, 1948-2000* Eastern Europe= Former Soviet Union and C&E EuropeFig.16.2:China’s share of world merchandise imports, by product, 1990,%%Merchandise import markets in Transition economies, 2000,US$B and %Region/CountryImportsUS$BillionShare ofWorld Imports Major sources of ImportsIn 2000(% of total imports)China2253.5Japan(24%), W.Eur.(15),US(15) C.I.S82.21.3CIS(41%), Japan(1%)Baltic States12.90.2Baltic States(7.4%), all otherSources(92.6%)C&E Europe1462.3European Union(48-62%), C&Europe, Asia, Russian Fed.VietnamImports of selected Transition Economies by Product, 1999, US$ Billion and %ChinaEstoniaCzech RepublicHungaryRomaniaTotal ImportsUS$ Billion165.84.128.828.010.4Total %- Food-Agricultural Raw materials FuelsOres&Metals Manufactures10044558010013373741006273821003162861007110377Trade Issues in Transition EconomiesDecentralisation of foreign trade(China since 1985)From central plan to tariff protectionMembers of WTO:Czech Republic, Hungary,Poland, Slovak Rep., Romania, China(November, 2001)Abolition of import licences /quotasOver 1992-2001, China has undertaken a number of 8 reductions of non-tariff measures.Export Marketing Issues in Transition EconomiesMore marketing efforts requiredLack of information about end-usersLack of hard currencyCounter tradeCommercial bank lending up againAdvertising expenditure up(See next slide)Advertising expenditure, total(US$ Million)and % by medium, 1999 CountryTotalUS$M.TV%Print%Radio%Cinema%OutdoorChina3,40348.447.14.5Czech Republic59849.545.84.6Estonia5025.262.911.9Hungary71367.128.23.80.20.7Lithuania5947.543.21.33.44.2Poland1,43556.027.37.50.29.0Russia397418.31.8Ukraine6780.215.14.7Australia’s position in the import markets of Transition EconomiesBest position in China:A$ 6.5 Billion in 2000/2001; 2% of China’s imports; 8th rankSmall exports to other markets:the share of Australian exports varies between 0.1% and 0.7%(Romania)Exports include primary products, but also some Elaborately Transformed Manufactures( e.g. telecom equipment, measuring and controllingInstruments, medicinal & pharmaceutical goodsFDI in Transition EconomiesEmerging FDI marketsLabour cost advantages (Czech Rep. 1/10 of German costs in car manufacturing)Political stability ? - Finance issues - Hard currency problems Motor car industry, Food processing in ChinaFDI Inflows and FDI Inward Stock in transition economies, 2000, US$B. and % EconomyFDI Inflows US$ Billion% of worldFDI inflowsFDI InwardStockNo. ofaffiliatesChina38.53.0346.7364,345Vietnam2.10.217.91,544C&E Europe-RussiaCzech R.HungaryPoland Romania25.42.74.61.79.31.02.00.20.40.10.70.1124.719.221.119.936.56.4236,8297,79371,38528,77235,84071,318Sectoral Trends in FDI Inward Stock inTransition Economies,1999 Leading Sector: Tertiary (US$ 49.3 Billion, 50.1% of total)Finance; Trade; Transport, storage & communications. Secondary Sector:US$ 43.5 Billion (43.5%)Food, Beverages; Motor Vehicles & Other Transport Equipment; Machinery and Equipment;Primary: US$ 2.4 billion (2.5%) Investment considerationsPolitical stability:High grade:Central Europe; Medium grade (E.Europe); Low grade (CIS)Local content requirements are on the way outSome degree of foreign exchange controls Cost of labour:major consideration for FDI in the area