Globalization is the integration of regional economies through trade by reduction of international trade barriers in order to increase material wealth of the people and improve the economies of the nations through good global relations, competition and specialization. The objective of globalization is to enhance the interdependence, business operations and connectivity on an international level with respect to the socioeconomic, cultural, religion, biological, environmental and scientific aspects (Fiss, & Hirsch, 2005, p. 46).
Globalization started in a primeval form especially after the first human settlement in various parts of the world. However, today global economy comprises not only economic aspects or global marketplace but also communication revolution, which is the driving force. For instance, the turning point was the late 1960s and early 1970s, when Nora Quebral set up the first effective communications satellite, which made possible direct communication from one part of the world to another.
According to Clark (1998), that changed more or less the whole of late 20th century history (p. 488). In addition, Soviet Union declined because it could only compete in the old industrial economy but not in the new global electronic world. Communication transformation has enhanced interaction among the regions and has brought a paradigm shift of handling issues especially in the 20th century (Alexander, & Korine, 2008, p. 76).
Advancement in technology has made the current globalization be very much intense, steady and rapid. It has become international dynamic with all the continents either affected or engaged. Primarily, there was less trade in the global money markets compared to the current situation, where about trillion dollars turned over daily. While globalization has its own merits and demerits, the paper tables the many benefits and costs of globalization as depicted in the late nineteenth and early twentieth century global economy.
Specification of an Economic model
In comprehending the benefits and costs of globalization, economic modeling gives a coherent and abstract pattern of isolating and arranging complex causes and effects within various interrelated elements in an economy. Although economists have used empirical, visual, mathematical models among others, simulation model provides a more clear relationship between globalization, poverty and inequality, and the factors for high Gross Domestic Product (GDP) (Stulz, 2009, p. 375).
Since simulation modeling exemplifies the best elements of mathematical, empirical and other quantitative models, its manipulations do not require proficiency in mathematics.
Therefore, in my view, computer simulation is most appropriate in determining nations economic changes due to globalization as it allows a person to test for short-term and long-term effects, and to alter a whole range of variables at his or her convenience compared to other models, which suffer from lack of precision and reliability (Routledge, & Francis, 2001, p. 120).
What benefits did the globalization affect?
Globalization has helped to shatter the regressive customs responsible for discriminating against people based on sex, race and/or religious beliefs. As such, it has influenced the lives of women in the world positively. It is an antidote to the intolerant fundamentalism that oppresses millions of the worlds poorest-majority women (Clark, 1998, p. 492). In the globalized world where competition is paramount, people value the roles of women.
Traditionally, majority of the cultures never recognized the participation of women in development. However, globalization has rapidly improved the social and economic status of women in the developing world to an extent that those countries that exclude women from participating in the major development project fall ever behind (Kose, 2009, p. 7). In addition, a society, which embraces education for women, has the benefit of remarkable social advancement.
As a result, any literate women have a tendency of giving birth to fewer children as well as contributing significantly towards improving her country economic outlooks (Fiss, & Hirsch, 2005, p. 37). Financial independence of women enhances their stature in their communities. Comparably, women are economical in their spending than their spouses as they focus on important areas for social development such as, the education, health, and nutrition of their families (Jean, & Ferry, 2009, p. 3).
Globalization has resulted into integration of developed and developing nations. Rapid democratic system of information and technology and economics are the major driving force for globalization, which has turned out to be an extremely progressive and liberating strength (Routledge, & Francis, 2001, p. 92).
As such, globalization presents some hope for the poor nations that they would, one day, benefit from the fruits of Western liberal traditions (Kose, 2009, p. 2). Even though some ague that globalization has resulted into exploitation of the poor nations by the rich ones, in my view, that is total confusion between corruption and globalization.
According to research conducted during 1990s on national incomes around the world, the income of rich globalized nations increased by two percent each year (Armstrong, 2000, p. 470). Strategically, practicing global trade allows poor countries to continue developing economically and socially by increasing national incomes to fund innovation and development (Mouhammed, 2009, p. 50).
In addition, a country that capitalizes on production at a lower opportunity cost than other countries receive the maximum benefits of the trade resulting into higher Gross Domestic Product (GDP). Comparably, poor, more globalized nations had a higher increase in income per year than poor, less globalized nations (Fiss, & Hirsch, 2005, p. 42). Therefore, if all countries have a relative advantage, it means that all of them can gain from the trade.
The introduction of advanced technology in the global market result to a steady boost in the demand for commodities as well as maximum utilization. As per statistics, people exchange more than $1.5 trillion in the worlds currency markets daily while around one-fifth of products and services are generated per year are bought and sold (Fiss, & Hirsch, 2005, p. 33). As a result, child labor has dropped with an increase in a countrys income.
Since trade enhances economic growth, globalization results in minimal child labor. For instance, from 1960, about thirty-two percent of the children in low-income countries participated in the labor force. However, forty years later, especially after the massive expansion in international trade, child labor in the same countries had declined to nineteen percent (Armstrong, 2000, p. 464). Globalization has also lifted the poor towards wealth-alleviated poverty especially in the developing nations.
According to UNDP, the last fifty years, has shown a faster global poverty reduction than it had been in the past five hundred years. Notwithstanding, the average income in developing nations has been doubled in the last thirty years (Jean, & Ferry, 2009, p. 7).
Therefore, globalization enables the poor nations to benefit from the rich ones because when trade and capital movement link the countries, the poor ones seem to gain most. Moreover, wealth also dictates and/or improves the quality of the environmental quality and its resources.
Globalization has also lowered the inflation of participating nations. Since 1970s, rising international competition has necessitated the industries to improvise progressively more. The expansion and vitality of capital markets has contributed significantly to the prosperity of most nations. Technological development has enabled the industries to improve their productivity in order to survive the global competition (Jean, & Ferry, 2009, p. 10).
Accordingly, the integration of technologies has developed new financial instruments leading to an upsurge in productivity in the financial sectors. Because financial globalization has substantially integrated global economy, it has given international investors several options of investments opportunities while borrowers access a much wider market for savings in order to reduce their cost of capital.
For instance, in the past twenty years, the stock of foreign direct investment resources has increased rapidly as a percentage of gross world product (Alexander, & Korine, 2008, p. 74).
Therefore, globalization has encouraged expansion of local capital markets and financial sectors through technological transfer and employment openings. In addition, market competition has also stopped the businesses from unnecessarily increasing prices for their commodities (Kose, 2009, p. 4). Due to integration of the global market, countries have minimized the effect of inflation.
Globalization benefits the nations through multinational corporations and business outsourcings. Globalization minimizes the international trade barriers thereby, giving both the developed and the developing countries equal participation in the free trade in the free markets (Fiss, & Hirsch, 2005, p. 44).
Multinational tend to invest in the developing nation due the availability of cheap labor and in turn bring new machinery, better technology, new management skills and production ideas, a larger market and education of workers (Armstrong, 2000, p. 476), consequently, raises output, and wages.
The income can eventually enable families to send their children to school and to provide some health care. For instance, during the last forty years, wages in third world nations rose from ten percent to thirty percent of the American industrial wage (Routledge, & Francis, 2001, p. 117). As growth occurs due to globalization, child labor will definitely diminish over time.
At what costs did the globalization occur?
International Capital Mobility is one costs of globalization. Several participants in the globalized economies so and many economists suggest that globalization causes them to feel that their economy is in an unstable situation (Mouhammed, 2009, p. 44). The nation can suffer a loss in its share of the worlds capital at the hands of the global capital market. Furthermore, there is no global control to intervene for compensation (Fiss, & Hirsch, 2005, p. 39).
Several individuals believe that globalization is very unfair because it gears the worlds capital towards the commercially advantaged economies. Moreover, many of the catch-up countries, for example, China have increased their national investment rate as much as their domestic savings rate (Jean, & Ferry, 2009, p. 5). Therefore, the high investment levels in the emerging economies are not sucking capital out of the frontier economies.
Globalization does force the workers- adults and children-in poor nations into hard labor as a necessary means for endurance. For instance, in some developing countries, sending children to work is a step towards family survival. Comparably, there are no enough schools and medical care in developing nations as in the wealthier countries (Fiss, & Hirsch, 2005, p. 42). Traditionally, adequate education and proper health care was available for only better-off families who could afford them.
Due to hard conditions of living in the developing countries, some of the female children find themselves into prostitution as a means of getting income (Kose, 2009, p. 3). In addition, globalization has resulted into global warming, which has adversely affected the climatic conditions of the world. Consequently, farmers in the developing countries with inferior agricultural methods and tools are in constant fear of a failure of their crops, as that would result into starvation (Mouhammed, 2009, p. 48).
Terrorism act in another cost of globalization. Terrorism activities have been a major problem to worlds stability. The proponents capitalize on free movement across borders and uses internet and mobile phones for recruit and communications among themselves. Nevertheless, they have access to dangerous weapons, which enhances their ability to cause destruction and loss of lives (Alexander, & Korine, 2008, p. 73).
The free movements do not only result into terrorism but also result to the spread of deadly diseases such as HIV/AIDS among others, increase human trafficking, undesirable foreign culture through televisions and the Internet as well as the spread of junk food, which adversely affects the lives and health of the developing nations. As Daly points out, &people are consuming more junk food from these joints, which have adverse impact on their health (1999, p. 36).
A disadvantage of global marketing is inconsistency in consumer needs. If global market is not able to address the uniqueness of customers, then consumers are disadvantaged as they might get their preferences (Stulz, 2009, p. 373). For instance, a customer in one country may be different and/or react differently from those in another country in terms of their countries specific brand and product (Armstrong, 2000, p. 468).
In addition, there are infrastructural differences and conflicting laws and policies that make global approach difficult to devise (Jean, & Ferry, 2009, p. 13). Otherwise, infrastructure may be obstructing the process in one nation while accelerating the same process in another. In such case, international strategy becomes inconsistent and inadmissible.
Another cost of globalization is inequality. Anti-globalists argue that globalization result into an unequal distribution of goods and capital in the world. Accordingly, few individuals enjoy the wealth from the natural resources while most people in the developing nations are yet to receive the perceived benefits of globalization. Therefore, those who have capitalism grow rich as those who do not stay poor (Daly, 1999, p. 35).
Although, in the 18th century, poverty level was the same on both continents with Europe slightly wealthier than the rest, capitalism in Europe made gave them freedom to escape poverty. The developing nations have unequally distributed the benefits from economic growth making poverty remain stubbornly high (Mouhammed, 2009, p. 34). However, in the last ten years, inequality has increased in both the advanced and emerging economies.
Globalization has resulted into loss of million jobs. For instance, it has created a different situation in America. The poll conducted for Wall Street Journal and NBC news indicates that, its impact has been so great on jobs and career in the financial sector, and securities, commodities and other investments (Armstrong, 2000, p. 462).
Globalization has also created economic liberalization where workers can emigrate and take jobs in industrial countries and/or work in outsourced industries in their home countries. More US nationals have lost jobs due to cheaper labor provided by these emigrants, some whom are political refugees (Clark, 1998, p. 496). The mobility of highly skilled professionals is so high that US opportunities attract the attention of professionals from almost all the nations in the word.
How did that affect the global economy today?
Globalization has integrated the worlds economies because mobile phones and the Internet have brought human beings closer by making the world become a smaller place. Such products were once confined to only western countries (Daly, 1999, p. 34). However, with globalization, they are nowadays available across the globe.
Todays developments in traffic communication and transportation make people reach their destination in a somewhat short span of time. In addition, advancement in technology use in media coverage has improved human rights as it draws awareness of the world to human right and freedom abuses (Fiss, & Hirsch, 2005, p. 51). Technologies such as computer and the internet have made it easier for work outsourcing to any part of the world that has an internet connection.
The concept of outsourcing has influenced the economy of both the developing and developed nations. Developed countries have outsourced manufacturing and white-collar jobs to developing countries like China and India, leaving less opportunities for nationals (Alexander, & Korine, 2008, p. 72).
For instance, most companies outsource manufacturing jobs and software development, editing, customer support, insurance, marketing, and accounting job to China and India respectively where the costs of production are cheaper.
Therefore, companies that outsource the job reap the maximum benefit due to lower costs of production (Mouhammed, 2009, p. 32). As a result, outsourcing improves the economy of the developing nations because their workers learn how to use latest technologies while it hampers the economic growth of the developed nations.
Globalization acts as a gain to the world economy. It has created free trading environment for the mutual benefit of the countries. As such, it has influenced the financial state and the industrial sector of the nations (Tomohara, & Takii, 2011, p. 513). Globalization has given birth to global market, which in turn has widened the accessibility to a variety of both local and foreign commodities based on industrial productions (Fiss, & Hirsch, 2005, p. 35).
Through the formation of a common global market, competition has forced the firms to lower their prices thereby benefiting the consumers. Politically, globalization has helped in the formation of a world government to normalize the existing interactions among countries by ensuring that rights emerge out of economic and social globalizations (Clark, 1998, p. 482). Therefore, it has initiated somewhat amicable interactions among the nations.
The Economic Impact on Developed Nations Globalization (EIDNG) forces companies and businesses to acclimatize to diverse strategies based on new principles, which tend to stabilize the rights and interests of the people and the community (Daly, 1999, p. 33).
In addition, the fact that globalization allows businesses to compete internationally, means that there is a remarkable change for business leaders, labor and management by legally accepting the input of workers and government in developing and implementing company policies (Armstrong, 2000, p. 472).
The involvement of community and the government can help the company to reduce it risks through diversification. Notwithstanding, globalization provides initiatives for reducing macroeconomic instability on output and spending through risk diversification. Moreover, World Bank reports that globalized nations have reduced government outlays, taxes, and levels of corruption.
However, globalization has negatively influenced some economies, which depend on agriculture as the backbone of their economic development. Climate changes caused by global warming and pollution adversely affect agricultural outputs (Tomohara, & Takii, 2011, p. 520). Globalization has increased utilization of non-renewable resources, at the same time contributing to the increase in pollution and global warming that raises the global temperature (Stulz, 2009, p. 366).
Conclusion
The current state of the world economy is due to the factors of globalization. While some sectors and/or nations have absolutely benefited out of globalization, it has badly hit some countries (Mouhammed, 2009, p. 38). Globalization has benefited the global economy by bringing reformation at the international, national and sub-national levels, integrating financial markets hence hindering entrepreneur economic and social relations through multilateralism and microeconomic phenomena (Daly, 1999, p. 32).
Globalization has also enhanced global trade, short and long-term investments, technological advancement, competition and diversification- leading to reduced prices, greater efficiency and greater economic growth. The negative impacts of globalization are attributed to lack of proper management of the globalization process. It was the main cause of the Great Recession in the US and many other nations.
Many Americans considers the relative decline in US power as being due to its high trade imbalance caused by globalization (Alexander, & Korine, 2008, p. 71). Accordingly, globalization has opened the world boundaries- exposing people to harm of terrorism, human trafficking, drugs and pornography.
In addition, it has marginalized the uneducated and low-skilled employees; caused high salary of capital and has destroyed national industry and jobs as claimed by reformists and revolutionists who argued that income inequality of the nations is due economic globalization (Clark, 1998, p. 490). There is, therefore, little doubt that globalization has both benefits and harms towards people and the world. However, responsible authorities can provide the best solution to reduce the harms of globalization.
Reference List
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Clark, I. (1998). Beyond the Great Divide: Globalization and the Theory of International Relations. Review of International Studies, 24(4), 479498.
Daly, H. (1999). Globalization versus Internationalization-Some Implications. Journal for Ecological Economics, 3(1), 3137.
Fiss, P., & Hirsch, P. (2005). The Discourse of Globalization: Framing and Sense Making of an Emerging Concept. American Sociological Review, 70(1), 2952.
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Stulz, R. (2009). Securities Laws, Disclosure, and National Capital Markets in the Age Of Financial Globalization. Journal of Accounting Research, 47(2), 349-390.
Tomohara, A., & Takii, S. (2011). Does globalization benefit developing countries? Effects of FDI on local wages. Journal of Policy Modeling, 33(3), 511-521.
The Gulf Cooperation Council (GCC) has six member countries. The countries are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. These economies have developed as promising markets. Bahrain has many foreign investors; the remaining five countries are not so much popular among the foreign investors (Balaz and Londarev 510; Neaime 235). The long run examination demonstrates that aside from Bahrain, there is no proof of a long run connection between the oil costs and securities exchanges in the GCC nations. The GCC offers a market that is dissimilar to the markets of the developed countries and other emerging markets because the GCC separates from the entire equity market of the world and is highly affected by the local political instabilities in the region. An investor gets access to have foreign ownership of stock in Saudi Arabia if and only if he invests in mutual funds.
This is different in Bahrain, Qatar and Kuwait, where a foreign investor gets access to own stock without having to invest in mutual funds. There is always a constant flow of capital in and out of the GCC markets (Neaime 236; Ciner 205). This capital flow is not responsible for speculative attacks like in the emerging markets across the world. Speculative attacks occur in the GCC if there is over-heating in the domestic market. Because there are restrictions on the foreign ownership of stock, there is a limited flow of capital in the GCC market. The turnover of capital inflow is higher in Saudi Arabia and Kuwait. This is because there are many publicly traded companies present. The publicly traded companies have an effect on the stock market. These companies include real estate companies, banks, construction companies and communication companies. These companies are responsible for the volatility in the market (Balaz and Londarev 512).
Kingdom of Saudi Arabia
The Kingdom of Saudi Arabia is the leading in production and exportation of oil in the world and this makes it be an important member of the Group of Twenty (G20) countries (Cologni and Manera 860). Actually, the Kingdom of Saudi Arabia is the only OPEC country in the G20. Moreover, Saudi Arabia has the largest economy among the countries in the Middle East. The other members of the G20 have more stable international financial markets as compared to the Kingdom of Saudi Arabia. However, of late, the Kingdom of Saudi Arabia has amassed enough revenue from the oil business to strengthen its international financial market (Ciner 205). The Kingdoms authority is completely aware of the obligations intrinsic in being a superpower on the planet oil market. They comprehend the immediate effect of high and unstable oil costs on world monetary development. The high cost of oil is not, obviously, the main issue upsetting the world economy and thwarting development, yet it constitutes one of the essential elements that add to insecurity on the planets economy. In this way, as an individual from the G20, encouraging the sound development of the world economy constitutes the foundation of Saudi Arabias oil approach (Balaz and Londarev 510).
It has turned into a standard practice for Saudi governments policy-makers to demonstrate occasionally the imprint or a particular reach for what they consider a sensible or reasonable cost for a barrel of raw petroleum. The Saudi practice is uncommon, as oil costs are controlled for particular arrangement goals. Cost is an element of supply and demand (Cologni and Manera 860; Ciner 205). The obligation of Saudi Arabia, the worlds pre-famous oil power, and swing maker, is to keep up the supply-demand equalization. The part of swing maker has given the Kingdom impressive impact in the oil market (Neaime 236). Actually, oil value dependability and the upkeep of sensible costs lie at the heart of Saudi Arabias oil approach.
The Kingdoms administration perceives that rising rough costs could wreck worldwide financial recuperation and leads the best approach to steep decline and that short-run pick up from high oil costs balances by decreased deals later on (Cologni and Manera 862). Saudi Arabia delivered 13.3 for every penny of worldwide oil in 2012, and at present has a normal creation limit of 10 million barrels for every day. With its assumed 2 million or more barrels for each day of extra limit (out of an assumed 6 million barrels for every day of OPEC aggregate extra limit), it is resolved to hold its part as the worlds swing maker and the political and business sector impact that this gives (Ciner 205; Neaime 236).
The Kingdoms initiative additionally demonstrated some worry about the impact of high oil costs on future oil utilization and the likelihood that high oil costs could prompt interest annihilation (Cologni and Manera 865). This could, thus, result in a lasting movement on the interest bend toward lower interest, leaving the significant oil delivering nations, particularly Saudi Arabia, with impressive unmoving overabundance limit. To a great degree low oil costs, then again, influence the development capability of the creating nations and the stream of venture to the business, which would at last undermine oil supply security, with negative effect on the hobbies of both creating and devouring nations. A few authorities of the Kingdom have contended that $100 a barrel would be a reasonable cost for rough. In fact, Saudi value targets, which lie in a band around $100 per barrel, are not out of line with the hobbies of numerous mechanical nations (Balaz and Londarev 514; Cologni and Manera 868).
Bahraini
For the Bahraini securities business sector vacillation and oil value instability, the short run analysis revealed slight hints of high connection between the variables over the period under study, for instance, 2009 and 2010. The variables had a lag of 8 to 16 days. Over the long run, the variables had a lag of 128 days and the results revealed that there is a high relationship between the two variables (Cologni and Manera 870). Considering the Bahraini economy, the outcomes are to some degree in line, as Bahrain is an administration-based economy, with immaterial dependence on hydrocarbon trade (Neaime 236). Notwithstanding this, Bahraini securities exchange is moderately open to global speculators, and has been making a decent attempt over the past decade to create itself as the portal to the Middle East for western speculator (Ciner 207). With this framework of capital markets and economy, the oil value fluctuations are negative since the worldwide economies shift to the Bahraini economy. This aims at lessening the global venture portfolios or exchange to more secure securities. This assists with the comprehension that any value unpredictability in oil markets would affect the Bahraini Stock Market with a short slack of 4 to 8 days, yet that impact ceases to exist over that slack, and the enduring effect of that persists over the long run (Neaime 237; Cologni and Manera 870).
Kuwait
Kuwait is one of the biggest oil makers in the region, just behind Saudi Arabia. In regards to the capital markets sector, it has as of late freed to pull in outside speculators (Cologni and Manera 872). The correlation between Kuwait securities exchange changes and oil value vacillations are limited in the short run. This correlation is high in the end when the oil value is highly fluctuating. This perception of no short run lead slack relationship is reasonable, since it has been just the later past when Kuwait opened up its capital markets to outside portfolio directors who may be touchy to worldwide oil stuns (Neaime 238). The long haul impact of oil value stuns transmits through the macroeconomic channels of the entire economy straightening out to oil value stuns, since Kuwait as Saudi Arabia is intensely subject to oil trade (Cologni and Manera 871).
Oman
Oman is one of the most special economies in the district. It has in the course of the most recent decade kept up a level of no national obligation with sensibly estimated sovereign trust having exposures internationally. Contrasted with its partners in the GCC, the oil creation of the nation is lesser. However, lately it has found much oil holds and the oil riches have definitely expanded. Oman has avoided the worldwide financial specialists as far as securities exchanges (Neaime 238). There is confirmation of a high connection between the variables amid the short run period at stopped interims between the 2007 and 2009 oil cost downslide. Likewise, there is a high relationship as time goes on. This prompts the argument that the oil value stuns do not have a current relationship to money markets unpredictability in Oman, which is a discerning contention, attributable to low base of global speculators (Balaz and Londarev 514).
Qatar
Qatar economy has seen a sensational development in the previous decade upheld by oil and gas trade incomes. Qatar occupies part of the main 3 nations as indicated by GDP per capita, though it is an exceedingly subordinate economy on hydrocarbon. Oil and gas represent about half of GDP deciphered into around 85% of fare income and 70% of government incomes (Cologni and Manera 872). There are slight hints of high connection between oil value instability and the securities business sector costs in the short keep running between March and April 2009. There is an immediate relationship of oil unpredictability and the share trading system instability. There is a high connection between the variables over the long run. The economy goes by the substantial dependence on the hydrocarbon sector (Ciner 208).
he United Arab Emirates
The United Arab Emirates is one of the innovative cases of hydrocarbon development based changes. In the previous 3 decades, UAE has changed itself from a ruined desert state to a standout amongst the most financially stable states in the Middle East (Neaime 238). Over the previous decades, the UAE has effectively changed it economy to decrease reliance on hydrocarbon area. Only 25% of the GDP depends on oil and gas as indicated by late results (Cologni and Manera 873). The UAEs Economy albeit dependent on oil to a quarter of its GDP suffered in the late oil value crisis of 2008, which harmonized with the world monetary stoppage. Out of the 7 part states, Dubai was the most exceedingly hit. It was an economy principally in light of service industry. It endured radically coming to a close sovereign default state before relying on Abu Dhabi, which are its neighbor and a part of the UAE (Cologni and Manera 874).
Literature review
Production of oil
Notwithstanding being honored with enormous oil and gas stores, the GCC or if nothing else some of its part states will most likely come up short on its valuable dark gold in one period. While general gas stores appear to be still copious as reserves-to-creation proportion surpasses 100 years, we ought to remember that the reserves are not just as spread through the area (Ciner 208). Bahrain, for instance, will suffer unavoidable exhaustion in somewhat more than two decades. However, in spite of their firm duty to enhancement, the GCC economies are yet handing-off intensely on their hydrocarbon generation division. The Middle East oil creation and stores assume an urgent part in the worldwide economy (Neaime 238). Just as imperative, the GCC states have the potential and capacity to put enormous money related assets into oil and gas investigation and generation, taking care of the ever-bigger demand for petroleum and petrochemicals of economies on the ascent, for example, China and India (Ciner 207).
GCC states together created 24 percent of the worlds aggregate raw petroleum generation in 2013, with Saudi Arabia ahead of the pack, pumping 11. 5 million barrels for each day as per the British petroleum (BP) statistical review of world energy report in 2014. Likewise, a large portion of the worlds demonstrated oil stores are situated in the Middle East (47.9%) trailed by South and Central America (19.5 percent) and North America (13.6 percent) (Ciner 208). All the more accurately, the GCC states control around 30 for every penny of the worlds raw petroleum stores and that without a doubt adds to the relative worldwide significance of the Gulf petroleum division. Saudi Arabia alone holds around 16 percent of worldwide oil saves while other GCC states additionally hold huge unrefined stores: Kuwait 6 percent, UAE 5.8 percent, Qatar 1.5 percent and Oman 0.3 for each penny (Balaz and Londarev 510; Neaime 239).
The Gulf Region nations, overall, have about 54% and 40% of the worlds routine oil and gas demonstrated stores, and substantial extra measures of unproved and unfamiliar stores. In 2010, the Gulf Region produced more than 25.2 million barrels of oil for every day, and 44.6 billion cubic feet of normal gas every day, representing more than 30% of the worlds oil generation, 15% of gas creation, and 32% of Liquefied Natural Gas (LNG) trades (Cologni and Manera 860). As indicated by the international energy outlook projections, the worlds vitality utilization anticipates expanding by more than half by 2030, a normal increment of 1.6% per year (Ciner 205). Oil, gas and coal will keep on supplying a great part of the vitality utilized around the world. Worldwide interest for fluid energies is required to develop by just 1.0% per annum over this period, and the aggregate offer will decay from 34% (in 2008) to 29% (in 2035). We anticipate that that will meet the worlds developing vitality request, the Gulf Regions offer of world oil creation will increment above 30% as Iraq comes back to full generation in the coming years (Neaime 238).
This will meet the worlds developing vitality request, the Gulf Regions offer of world oil generation will increment above 30% as Iraq comes back to full creation in the coming years. Worldwide interest for characteristic gas has ascended at a rate considerably more prominent than that of raw petroleum, encountering a normal increment sought after of 2.7% every year over the 1973-2010 periods contrasted with 0.9% for unrefined petroleum over the same period (Neaime 238). Common gas utilization worldwide is determined to keep expanding at a normal rate of 1.6% every year up to 2035, as contrasted and a proceeding with 1.0% every year for fluid powers (Ciner 206). The gas development industry in the Gulf Region itself will keep on being tremendous, because of the quickly developing force prerequisite of the GCC populace and expanding substitution of gas as an essential fuel for force era around the globe because of lower expense of normal gas on a proportionate premise, effectiveness contemplations, and natural contemplations (Cologni and Manera 874).
Notwithstanding higher oil generation and fares, the effect of lower oil costs are obviously adding to financial weights in various GCC nations, as per market analysts. Spending plans in the GCC stay underweight, with net outside resources in Saudi Arabia and Bahrain declining strongly since the beginning of the year, and forcefully lower oil incomes in Oman and Kuwait in the first quarter of 2015 (Ciner 207). Talk about diminishing state sponsorships has expanded. Oman and Bahrain remain the most helpless regarding their financial plans in the present low oil value environment. Experts said bigger economies, for example, Saudi Arabia and the UAE have generously amassed stores to help pad the effect of lower oil costs, and can keep up moderately expansionary financial approaches in the close term, however confronted with monetary strains a large portion of these nations are underweight to diminish spending (Cologni and Manera 874).
As a component of financial solidification endeavors Kuwait, Oman, and Abu Dhabi have decreased a few appropriations on fuel and utilities, and the UAE Ministry of Energy is liable to prescribe further diminishments in fuel sponsorships in the UAE going ahead. Bahrain has thought about cutting nourishment and different dies down and supplanting these with money presents to nationals, while Oman has proposed forcing duties on exile settlements and brought common gas costs up in an offer to spare cash (Ciner 208). Kuwait aims to record a deficiency without precedent for over decade, however once more; generous stores imply that spending increases. In Saudi Arabia, official information demonstrated the monetary allowance recorded a shortfall of 2.3 for every penny of GDP in 2014, the first spending plan deficiency in over 10 years (Neaime 239). Examiners anticipate that the monetary allowance deficiency will extend to just shy of 12 for every penny of GDP this year, on lower oil incomes and moderately high use. Oman and Bahrain are relied upon to run the biggest monetary shortfalls in the GCC this year, keeping in mind that the financial plans can be financed; these nations are confronting the most weight to support spending (Balaz and Londarev 515).
The researchers have resuscitated the levelheaded discussions on the impacts of oil value changes on the financial development of hydrocarbon economies. The reason may be the huge relationship between oil cost and times of retreat if one can see monetarily, the oil sending out nations incorporate with the worldwide economy and have a major effect on the worlds biggest economies that are subject to oil. In this way, any worldwide emergency has a major impact on their economies (Cologni and Manera 876). A progression of money related emergencies in the most recent three decades has apparent results of the impact of oil value vacillations on financial improvement. As oil costs vacillate over a long run, oil trade nations confront high salary unpredictability at a residential level.
It recommends that oil exporters have a high proportion of a sparing to GDP in light of the fact that there are risks that salary stuns (Neaime 239) might unfavorably influence them. This high instability affects resultants preparatory strive to make sizable reserve funds however generally low venture. There could be the reasons e.g. demographics and low assimilation limit for high sparing and low venture rates. Legislatures of oil sending out nations need to confront a few monetary difficulties when there is a high unpredictability of oil costs in the universal market in this manner forces profoundly dubious fare incomes (Cologni and Manera 877). In view of this contention, repeatedly the inquiry emerges that how much this legislature need to spare out of oil income, the amount to spend on infrastructural ventures, and the amount to devour out of it (Ciner 209).
Similarly important is the gas generation in the Middle East locale. The US Energy Information Administrations (EIA) international energy Outlook 2013 report expresses that four noteworthy normal gas makers in the Middle East together represented 85 percent of the regular gas delivered in the Middle East in 2010. In the interim, Middle East is additionally the biggest holder of gas stores (40-43.2 percent relying upon source) (Ciner 208; Neaime 235). Qatar is unquestionably the GCC pioneer in the gas area as the Peninsula holds around 13.4 percent of worldwide characteristic gas stores, holding a third place on the planet directly after Iran with 18.2 percent and Russias 16.8 percent. The open deliberation, whether the GCC nations ought to differentiate and create elective vitality sources is progressing.
The International Monetary Fund (IMF) evaluates that the GCC nations have taken after a large portion of the standard approaches that advance more enhanced economies, including changes to enhance the business atmosphere, the advancement of the household foundation, budgetary developing, and upgrades in instruction. Nevertheless, the accomplishment to date has been restricted. It is not astute to accept that in the end the economy changes and adjusts to another circumstance when the primary thing it produces is existent. The monetary writing is loaded with cases in which the economy has fallen because of exhaustion of normal assets (Balaz and Londarev 510; Neaime 235).
There are enormous move costs (for example, a human capital concentrated on a part no more beneficial) that require a tremendous part from an open approach. Most of the nations in the area depend vigorously on the oil division. In spite of the lasts endeavors decade, oil keeps on ruling the GCC areas fares, representing almost 70% of all stock fares. Whats more, the amount to expend alongside these fundamental inquiries, policymakers need to go to few issues like smooth utilization, cushioning so as to fit organization of oil value instability cradle load of investment funds as safety oriented courses of action, and most critical is to guarantee enough commitment towards GDP by enhanced areas if common assets are expendable. Actually at whatever point in future hydrocarbon income will come up short on stock, the government ought to put more in non-oil segment commercial ventures and advance differentiated improvement (Ciner 208).
The surplus in the present record adjusts effortlessly advances infrastructural ventures and feasible development of GDP because of the abnormal state of funds. Despite the fact that worldwide oil value stuns are sudden and capricious, in this way, causes a more prominent effect on endogenous financial variables for oil trading economies depending principally on oil incomes. In this way, the high vulnerability in oil value development, and thus in oil incomes impel the GCC nations to spare many of their oil incomes for preparatory purposes (Neaime 239; Ciner 205). There are no shocks in the late British Petroleum report, which gives insights relating to principle vitality assets. The report, which is a principle reference in this field, affirms that Saudi Arabia is the top oil maker and exporter, dislodging Russia from postposition, with the normal Saudi petroleum generation coming to 11.5 million barrels a day in 2013.
Absolutely, Saudi Arabia has been and still is; the greatest exporter of raw petroleum yet what is new is that it is currently likewise the greatest producer (Cologni and Manera 878). More comprehensively, the Gulf Cooperation Council (GCC) states together delivered 24 for every penny of the worlds aggregate unrefined petroleum generation in 2013. There is nothing huge about this except for on top of that, it is trusted that Saudi Arabia can possibly improve its oil generation when important. The capacity of Saudi Arabia to remunerate worldwide oil markets was evident unmistakably amid the previous couple of years when oil trades from Libya and Syria emerged on and because of the Western blacklist of Iranian oil (Balaz and Londarev 510; Neaime 235).
The reality of the situation is that the GCC states have the craving, the potential and the capacity to put colossal measures of cash in oil generation. This is viewed as essential in light of the rising worldwide monetary development and the ensuing ascent popular for petroleum and petrochemicals, particularly by the worlds greatest economies, for example, those of the US, China and India. It suffices to bring up that the GCC states control 36 for every penny of the worlds sovereign riches and along these lines have the ability to upgrade the level of petroleum generation. Concerning oil reserves, Venezuela and not Saudi Arabia has the biggest unrefined petroleum holds, with 17.7 for every penny of the worldwide stores contrasted with Saudis 15.8 for each penny (Neaime 240; Neaime 240). Indeed, even along these lines, Venezuela is down in the rundown of oil makers because it delivers just 2.6 million barrels a day, 3.3 for each penny of worldwide oil generation and much lower than Saudi Arabias 11m barrels (Ciner 210). What is sure is the presence of such enormous oil saves that it is superfluous to investigate for any more.
While Saudi Arabia and Kuwait hold the record of most inadequately enhanced economies, in a few expresses the commitment of non-hydrocarbon GDP to the general GDP has altogether expanded in the course of recent decades; territorial collaboration is required. Chipping away at making local financial reconciliation inside of the GCC is a reality that would encourage the move (Neaime 242). Non-vitality divisions could profit by this broadened basic business sector and higher interest. UAE (and quite Dubai) is model in monetary broadening, speaking to a sample to follow in creating approaches of expansion running from the lessening of pay bills, spread of free zones, occupation and instructive activities, support of business and solid budgetary frameworks (Cunado and Garcia 70). Qatar has likewise gained critical ground in the previous decade, with a noteworthy piece of the non-hydrocarbon income originating from speculation salary, which comprises of exchange of benefits from open undertakings, and represented 16.9% of the GDP and just about 44% of aggregate incomes in 2013-14. Furthermore, Qatar with its little populace holds hearty stores of gas that would keep going for a few eras an extravagance others do not have (Neaime 242; Ciner 209).
Table 1.1 Top 10 holders of oil reserves
Revenue of oil
In spite of the fact that the GCC nations have seen a drop in the offer of oil incomes to the genuine GDP, they have had constrained accomplishment in broadening the income base significantly. The vast majority of the financial broadening arrangements started in the GCC nations. The financial expansion suffers from business open doors for the nearby populations, instead of their long run monetary attainability and desirability (Neaime 242). The GCC nations remain profoundly reliant on hydrocarbon incomes, making them powerless to changes in worldwide vitality request and costs (Ciner 208). After the worldwide financial meltdown, the GCC economies have reliably beaten their worldwide associates, developing by around 24.0% over the five-year period to 2013, bolstered by vigorous oil incomes (Neaime 242). Sanctions against Iran dissents in Libya and Nigeria, late aggressor action and the developing interest from the developing economies have all served to support oil costs at raised levels (Cunado and Garcia 71). Oil costs saw an increment from $62 per barrel in 2009 to about $105 a barrel in 2013, helping the inlet economies to produce high monetary surpluses. Then again, the moderately stable oil costs in 2013 have brought about a slowdown in the GCC economies from the earlier years (Balaz and Londarev 516; Neaime 243).
Hydrocarbon incomes in a larger part of the GCC nations represent near 60% of the aggregate incomes. The individual income contribution from Saudi Arabia and Kuwait are 90% and 93% respectively. This is interesting with other asset rich economies, for example, Norway, where incomes from oil represent pretty much 30% of government incomes (Cunado and Garcia 70; Neaime 242). A special case to this is the emirate of Dubai, some piece of the UAE, where oil division incomes frame just a little extent of the emirates income, with the rest originating from areas, for example, transportation, tourism and others. Financial specialists in the area trust that Dubai, which has moderately littler oil stores, has been in the bleeding edge of monetary enhancement. The Dubai sample is a benchmark to settle monetary and social conditions and enhance monetary development; however, there is a sure level of alert as the last budgetary emergency drove the emirate near default (Balaz and Londarev 517).
Looking at the budgetary income patterns, it can be unmistakably seen that separated from Qatar and the UAE, the commitment of non-oil open income is far lower in different states. As far as general incomes, Qatar has enlisted a twofold digit development of 19% every year throughout the most recent five years, a long way in front of others, mirroring an in number ascent in both hydrocarbon and non-hydrocarbon divisions (Cunado and Garcia 74; Neaime 242). Qatars income pattern is additionally one of a kind as in the nation figured out how to maintain a strategic distance from the huge drop in hydrocarbon incomes that affected other GCC nations because of the long haul nature of its gas contracts, rather than spot costs for oil applicable for other countrys hydrocarbon incomes. In any case, the offer of hydrocarbon income to the aggregate wage for Qatar has stayed reliable at around 60% for the 5-year period under audit. For the money related year 2014-15, the Qatari government anticipates that aggregate incomes will reach about QAR 225.7 billion. The aggregate incomes for the budgetary year 2013-14 remained at QAR 346.6 billion, much higher than the initially planned level of QAR218 billion. It ought to be remembered that the greater part of the GCC governments are moderate in anticipating their incomes, accepting lower oil costs (Balaz and Londarev 516).
Fluid Nitrogen Gas generation in Qatar is normal to stay at current levels because of the willful ban on gas generation from the North Field. The ban, at first booked to end in 2008, expects to last until the end of 2016 after a few expansions. Nevertheless, Qatars financial income still anticipates that would surpass spending plan use, giving agreeable monetary headroom (Neaime 244; Cunado and Garcia 73). Qatar has likewise outpaced other GCC nations as far as non-hydrocarbon division development, posting an 18% CAGR in the course of the most recent five years. A noteworthy piece of the non-hydrocarbon income originates from speculation salary, which comprises of exchange of benefits from open endeavors (counting Qatar Petroleums subsidiaries), and represented around 16.9% of the Gross domestic product and right around 44% of aggregate incomes in the monetary year 2013-14. Custom obligations and corporate pay duty compensate for whatever is left of the non-hydrocarbon government income.
The administrations long haul target is to back its budgetary operations through non-hydrocarbon income by 2020 (Ciner 205). In accordance with this vision, Qatar is focusing on financial broadening and has allotted noteworthy capital towards the advancement of the foundation, wellbeing, and training. Appraisal of the general financial circumstance in the UAE entangles by the absence of consistency amongst the seven emirates that frame the UAE (Cunado and Garcia 75). Abu Dhabi is the overwhelming emirate, having the most astounding hydrocarbon reserves and producing more than half of the GDP in the UAE. The commitment of hydrocarbon income to the aggregate income remained at around 63.8% in 2013 much lower contrasted with Kuwait and Saudi Arabia. In parallel, the non-oil economy has likewise been picking up quality and anticipates extending by more than 4% every year throughout the following couple of years on the back of Dubais solid non-oil development and enhancement endeavors by Abu Dhabi (Balaz and Londarev 517).
Objectives, scope and coverage
The primary target of this paper was to inspect the effects of unpredictability in oil costs in the GCC economies. Not at all like past studies that utilized low-recurrence information (yearly, quarterly, or month to month), this study utilized week by week information, which can all the more sufficiently catch the connection between oil and stock costs in the region (Cunado and Garcia 75). The study did not utilize day-by-day information, keeping in mind the end goal to maintain a strategic distance from time contrast issues with the universal markets. The stock markets usually close the business on Thursdays and Fridays in the GCC nations, while the created and universal oil markets close the trade on Saturdays and Sundays. Notice additionally that, on the regular open days, the GCC markets close just before the US stock and goods markets open. In like manner, the study utilized week-by-week information and picked Tuesday as the weekday for all variables in light of the fact that it falls amidst the three normal exchanging days for all business sectors (Cunado and Garcia 75).
Normally, the data utilized as a part of every different analysis originate before the end of 2005, and therefore they missed the stupendous varieties that have happened in the GCC and oil markets in the course of the most recent three years. The period for this study accordingly starts from June 2012 to October 2014 for the six GCC countries and the world securities exchange as measured by the MSCI (Morgan Stanley Capital International) business records. Securities exchange files are in the MSCI database. For oil, the study utilized the week after week Brent spot cost acquired from the Energy Information Administration (EIA). The Brent oil costs are the reference costs for unrefined petroleum, including oil delivered by the GCC nations. All costs are in US dollars (Balaz and Londarev 515; Ciner 205).
Hypothesis, methodology and data requirement
The methodology is the process of instructing the ways to do the research. It is, therefore, convenient for conducting the research and for analyzing the research questions. The process of methodology insists that much care accompanies the kinds and nature of procedures to stick to in accomplishing a given set of procedures or an objective (Zhang 2382). The purpose of this research proposal is to create a room for further research that will assess the relationship between the employees pay and their level of performance. Consequently, the research study is exploratory. Exploratory research studies provide researchers an opportunity to assess areas that have not been extensively researched (Zhang 2382). Therefore, engaging in exploratory studies contributes to the development of additional knowledge on the issue or phenomenon under investigation. Testing the stipulated hypotheses will achieve this goal. The integration of a comprehensive research methodology helps to undertake the research study.
Quantitative and Qualitative Approach
Quantitative research approach refers to the use of statistical techniques, mathematical methods and calculation techniques for data analysis (Zhang 2383). The quantitative methodology aims at utilizing mathematical and statistical theories and models to analyze the data. The quantitative method validates the hypotheses and conclusions that stem from the qualitative methodology. The scientific procedures and processes of the quantitative methodology encompass deriving models and theories; designing instruments for data gathering; controlling the variables empirically and analyzing data using models.
The qualitative approach is mostly concerned with the human motives and the reasons behind such motives (Zhang 2382). The main questions that come with qualitative approach are why? and how? in addition to what?, where? and when? Concerning this, a researcher utilizing the qualitative approach will tend to use smaller samples rather than larger samples. Qualitative approach strictly generates only information that applies to the designated case study; any additional information is guessed. Upon drawing the hypotheses from a qualitative approach, they go through a test using the quantitative approach.
Advantages and disadvantages of primary research
Primary research is relevant for categorizing the observations or variables, examining the variables and generating statistical representations to analyze the observations. A researcher who utilizes the primary research design has a predetermined knowledge of what to expect. In addition, the researcher employs data collection instruments like questionnaires or other relevant data collection equipment. The kind of data handled through primary research is mainly in numerical or statistical format. A strong feature of the primary research is that it is the most efficient design to test hypotheses. Its limitation is overlooking the relevant details of the variables or observations (Zhang 2385; Cunado and Garcia 73).
On the other hand, primary research does not give a full detail in terms of the description of the research process. Unlike qualitative research, the researcher has no idea of what results to expect because he/she mainly relies on observations. Primary research approach consumes a lot of time and demands many resources in terms of money and expertise (Zhang 2385).
Population and Sampling
There are two popularly used procedures for sampling. The sampling procedures include prospect sampling and non-prospect sampling. In a probability sampling procedure, the samples are representative of the population. This is because all the entries have a chance of selection. On the other hand, items in the non-probability sampling do not have an equal chance. In this scenario, not all the items in the population have equal chances of selection. The primary target of this paper was to inspect the effects of unpredictability in oil costs in the GCC economies. Not at all like past studies that utilized low-recurrence information (yearly, quarterly, or month to month), this study utilized week by week information, which can all the more sufficiently catch the connection between oil and stock costs in the region.
The study did not utilize day-by-day information, keeping in mind the end goal to maintain a strategic distance from time contrast issues with the universal markets. The stock markets usually close the business on Thursdays and Fridays in the GCC nations, while the created and universal oil markets close the trade on Saturdays and Sundays. Notice additionally that, on the regular open days, the GCC markets close just before the US stock and goods markets open. In like manner, the study utilized week-by-week information and picked Tuesday as the weekday for all variables in light of the fact that it falls amidst the three normal exchanging days for all business sectors (Zhang 2388; Cunado and Garcia 75).
Normally, the data utilized as a part of every different analysis originate before the end of 2005, and therefore they missed the stupendous varieties that have happened in the GCC and oil markets in the course of the most recent three years. The period for this study accordingly starts from June 2012 to October 2014 for the six GCC countries and the world securities exchange as measured by the MSCI (Morgan Stanley Capital International) business records. Securities exchange files are in the MSCI database. For oil, the study utilized the week after week Brent spot cost acquired from the Energy Information Administration (EIA). The Brent oil costs are the reference costs for unrefined petroleum, including oil delivered by the GCC nations. All costs are in US dollars.
Reliability and validity
The validity of the data represents the data integrity and it connotes that the data is accurate and much consistent. The validity of the data is a descriptive evaluation of the association between actions and interpretations and empirical evidence deduced from the data (Zhang 2382). Reliability of the data is the outcome of a series of actions, which commence with the proper explanation of the issues to be resolved. This may push on to a clear recognition of the yardsticks concerned. It contains the target samples under investigations, the proper sampling strategy and the sampling methods to be employed (Zhang 2386; Cunado and Garcia 70). Reliability of the data suffers from four main challenges. These are the respondents having insufficient knowledge on the area of the research, the mental or physical shape of the respondents at the time of data collection, biases in observation by the researcher, and error in making observations.
Limitations of the study
There have been a considerable measure of concerns on extra-budgetary costs of gathering of the information, paying little mind to whether the accumulated information is truly genuine or not and whether there may be an unequivocal conclusion when translating and breaking down the information. Whats more, a few representatives were hesitant to offer some data that was private and perilous in the hands of their rivals. This represented an extraordinary test in the examination as the specialist needed to take more time to discover to gather the essential data.
Data tabulation and analysis
This section covers the analysis of the data, presentation and interpretation. The analysis of the results utilized the statistical tools of regression and correlation analysis.
Data analysis
The primary objective of this paper was to inspect the effects of unpredictability in oil costs in the GCC economies. Not at all like past studies that utilized low-recurrence information (yearly, quarterly, or month to month), this study utilized week by week information, which can all the more sufficiently catch the connection between oil and stock costs in the region. The study did not utilize day-by-day information, keeping in mind the end goal to maintain a strategic distance from time contrast issues with the universal markets. The stock markets usually close the business on Thursdays and Fridays in the GCC nations, while the created and universal oil markets close the trade on Saturdays and Sundays. Notice additionally that, on the regular open days, the GCC markets close just before the US stock and goods markets open. In like manner, the study utilized week-by-week information and picked Tuesday as the weekday for all variables in light of the fact that it falls amidst the three normal exchanging days for all business sectors.
Normally, the data utilized as a part of every different analysis originate before the end of 2005, and therefore they missed the stupendous varieties that have happened in the GCC and oil markets in the course of the most recent three years. The period for this study accordingly starts from June 2012 to October 2014 for the six GCC countries and the world securities exchange as measured by the MSCI (Morgan Stanley Capital International) business records. Securities exchange files are in the MSCI database. For oil, the study utilized the week after week Brent spot cost acquired from the Energy Information Administration (EIA). The Brent oil costs are the reference costs for unrefined petroleum, including oil delivered by the GCC nations. All costs are in US dollars.
Figure 5.1 portrays the authentic time-ways of the log costs of raw petroleum and stocks in the GCC nations. Their developments are extensively characteristic of the long haul conditions that may exist between them. In like manner, standard unit root tests are helpful for looking at the stationary properties of the series. Both the ADF (Augmented Dickey-Fuller) and PP (Phillips-Perron) tests depend on the invalid theory of a unit root, while the KPSS (Kwaitowski-Phillips-Schmidt-Shin) test considers the invalidity of no unit root. The outcomes are in Table 4.1 below. Every one of the arrangement has all the earmarks of being integrated order, which is a standard result in the writing for this kind of series.
Figure 5.1 Log of oil prices and stock market indicesTable 5.1 Summary of the unit-root test results
The outcomes showed in Table 5.1 are instrumental in inspecting the long run conditions between the variables and the series in the first distinction when considering the transient linkages. Table 5.2 gives the summary of the statistical properties of the series.
Table 5.2 Statistical properties of return series
Contrasted with the World market, the GCC securities exchanges have higher instability, but not automatically significant yields. Kuwait has the most elevated week-by-week returns and then Oman and Qatar. Saudi Arabia encounters the most elevated risk and then Qatar and the UAE in that order. Largely, oil value changes are more unstable than all GCC securities exchange returns over the period under study. Skewness is negative as a rule and the JB (Jarque-Bera) test measurement firmly rejects the null hypothesis of normality, with the exception of Kuwait. The second panel reports the genuine connections among the GCC markets, MSCI list, and oil revenue. As should be obvious, cross-market connections of GCC stock and oil returns are not high, but rather they are higher than the relationships between oil value fluctuations and MSCI. Bahrain and Kuwait are two nations showing a negative relationship with oil value fluctuations. The connections between the GCC markets and the world business sector are low and negative, with the exception of Oman and Saudi Arabia. This is a characteristic of the way that the GCC securities exchanges separate from the world business sector and those worldwide investors can in any case get significant advantages by including monetary resources from the Gulf area to their universally broadened portfolios.
Short term analysis
This segment presents the fleeting linkages between oil value changes and securities exchange returns utilizing the first logarithmic contrasts. First, an examination with a worldwide resource-evaluating model researches the sensitivities of the GCC stock market revenue of oil cost and world business sector changes, and after that perform a Granger causality test to analyze the cause-effect relationship.
Returns in the GCC securities exchanges, oil value changes, and world business sector sensitivities
The worldwide multifaceted model that inspects whether the GCC securities exchanges are responsive to oil cost and world business fluctuation is as below:
Short term analysis
Where rit represents the week-by-week stock returns, for a country denoted by i. roilt represents the oil prices. msciit represents the week-by-week return on the world business sector. The returns are distributed normally with a zero average and a restrictive variance represented by a standard GARCH (1, 1) process. The model utilizes the QML (Quasi-Maximum Likelihood) strategy. Table 5.3 provides the summarized results.
Table 5.3 Summary of the results of the multifunctional model
The coefficients for the series of the world returns are insignificant aside from Saudi Arabia. This demonstrates that the GCC securities exchanges differ from the world business sector, which is reliable with the investigation in light of the correlations. In addition, the coefficients of the oil value fluctuations are non-negative and factually significant for Qatar, Saudi Arabia, and the UAE. This implies that securities exchanges in these nations move together with oil value fluctuations. There is, however, no transient relationship between oil value changes and stock returns in Bahrain, Kuwait and Oman. The proposed model appears to fit the information acceptably since the ARCH and GARCH coefficients are significant as a rule. The results further reveal that the restrictive unpredictability does not change acutely since the ARCH coefficients are generally little in size. By complexity, it has a tendency to vary systematically after some time due to the substantial GARCH coefficients. A granger causality test normally tests the short-term relationship between the variables. The results are in Table 5.4 below.
Table 5.4 Results for the granger causality test
The Granger causality test examines the flow of short-run connections between oil value changes and stock returns in the GCC nations. Since a few variables and additionally their respective impacts are extremely delicate to the chosen number of lags in the examination, the study chose to actualize this test for different lags. Table 5.4 above reports the outcomes acquired. The outcomes demonstrate that, in the short-run oil value stuns Granger-cause fluctuations in the securities exchange returns in Qatar, the UAE, and to some degree in Saudi Arabia (5%) and Bahrain (10%). They verify those of the past table in that the GCC securities exchanges correlate with the price changes on the worlds oil market. There is likewise proof of causality from the world securities exchange to oil costs.
Results of the cointegration test
The results of the cointegration test the of unit root variables suggest that a direct mix of them produces a stationary variable and that some long-run balance connection binds the variables together. To test for cointegration for every nation under study, there was a regression analysis of the logarithm form of the securities market price on the logarithm form of the oil cost and a constant. There was then a test of the generated residual series from the regression analysis using the Augmented Dickey-Fuller test, Phillips-Perron test, and Johansen. These measurable tests depend on the invalid theory of no cointegration. The outcomes are in Table 4.5. The generated residual series are non-stationary, with the exception of Bahrain. In this manner, just the Bahraini securities exchange has all the earmarks of cointegrating with oil costs. Estimation of the long-run relationship between Brent oil costs and securities exchange costs in Bahrain creates the accompanying cointegrating mathematical statement as indicated by which an increment in oil costs of 10% prompts an uptick in the Bahraini securities exchange of 4.19%.
Table 5.5 Results of the unit root test of the variables
6.0 Conclusion
This paper augments the comprehension of the linkages between the volatility oil costs and the economies of the GCC nations. Since these nations are real world players in the energy sector, their securities exchanges are prone to be defenseless to the impact from oil value fluctuations. The study tested for both short run and long run conditions. In regards to the short run investigation, solid positive correlations between oil price volatility and the securities exchanges are in Qatar, the UAE, and to some degree Saudi Arabia. Weak correlations are for Bahrain and Oman, yet no short run connections between oil costs and the Kuwaiti securities exchange. Nevertheless, the survey outcomes show that when causality exists, it largely keeps running from oil costs to securities exchanges.
The long run examination demonstrates that aside from Bahrain, there is no proof of a long run connection between the oil costs and securities exchanges in the GCC nations. In the Bahraini analysis, the relationship between oil value and securities exchange is direct and the heading of long-run causality keeps running from oil cost to securities exchange. The GCC offers a market that is dissimilar to the markets of the developed countries and other emerging markets because the GCC separates from the entire equity market of the world and is highly affected by the local political instabilities in the region. An investor gets foreign ownership of stock in Saudi Arabia if and only if he invests in mutual funds.
The results of the investigation should be of incredible enthusiasm to analysts, controllers, and business sector members. Specifically, the GCC nations as policymakers in OPEC ought to watch out for the impacts of oil value volatility for the individual economies and securities exchanges. For financial specialists, the huge connections between oil costs and securities exchanges infer some level of consistency in the GCC stock exchanges. The studys discoveries offer a few streets for future examination. To start with, the connection between oil prices and securities exchanges in the GCC nations can be required to shift to the other financial divisions of the economy. A sectoral investigation of this connection would be enlightening. In addition, proof from worldwide equity markets is relevant to look at the strength of the discoveries. Moreover, the approach connected in this study is important to inspect the impacts of other products that come from the energy sector, for example, gas and other petroleum-related items. At last, additional research could outline causality in the oil and thee securities market in the GCC nations and in other oil trading nations.
Works Cited
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Ciner, Cetin. Energy Shocks and Financial Markets: Nonlinear Linkages. Studies in Non-Linear Dynamics and Econometrics. 5.1 (2001): 203-212. Web.
Cologni, Alessandro and Matteo Manera. Oil Prices, Inflation and Interest Rates in a Structural Cointegrated VAR Model for the G-7 Countries. Energy Economics. 30.1 (2008): 856-888. Web.
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Foreign Direct Investment (FDI) refers to the investment made by an investor from a different country in relation to the country where the individual makes their investment. It involves establishing a company in the foreign country, buying shares and assets of an existing company in the investee economy or making a joint venture with the existing company. FDI seeks to have a large influence and control in the operation of the country since it plays an important role in the world economies and brings immense benefits to the economy of the host country, especially in terms of finances. There are varying views on FDI depending on the political ideologies of the particular country as listed below:
Radical View
This view was influenced by Marxist political and economic theory. It believes that a multinational enterprise is an imperialist dominion tool which takes advantage of the host country. It uses its resources and takes all the profits and benefits back to their home country. They employ their own nationals in key positions and in the process leaving nothing to the citizens of the host country. They also control the technology thus adding no value to the country.
Free Market View
This view is traced from Adam Smith and David Ricardos economics and trade theories believes that countries must concentrate in producing goods and services they can produce effectively.
Pragmatic Nationalism
Here, FDI is seen to have costs and benefits. The host country gets the finances in terms of capital while their citizens benefit from job opportunities as well as gain skills. There is also an advancement of technology although it comes at a cost since the profits are taken back to their home countries. FDI is allowed only when the host country is getting more than it is using in terms of the cost.
The benefits of FDI to the host country include
There is exploitation of untapped natural resources since developing and underdeveloped countries have untapped resources which require the competence of developed countries to help exploit.
FDI helps get the needed capability bringing income to country. Employment opportunities are created since FDI generates jobs for the citizens.
Development of Technology as the host country benefits from the advanced in technology of the foreign country since they have high level technology.
Improvement in management- since the companies have experienced managers from their home countries and local managers can learn from them a lot because they will run the companies in future since they understand the market better.
Profits from FDI improve the economy of the host country.
The costs of FDI to the host country include
It is a threat to small industries since FDIs have large capital and are well established across the globe. Due to their large production and cheaper prices, they can push the smaller players out of the market
There is a high tendency of FDI exploiting and utilising the resources of the host countries and taking their profits to their home countries
The FDIs also tend to employ their own people thus leaving the citizens of that host country poor and jobless
FDIS may not convey the modern technology to the host country to avoid losing its competitive edge
EPZ
Export Processing Zone is a form of promotion tool put in place by the government to encourage foreign investment and aid in exports of industrial goods. These zones are characterized by the exclusion of tax.
The benefits of EPZ include:
Promotion of foreign investment thus bringing funds to the economy
Creation of job opportunities for both skilled and unskilled labourers
Attraction of foreign direct investment which lead to rapid development of industries and advancement of technology
The firms benefit from tax exclusion thus able to produce goods cheaply and maximise the profit
Women are better placed in terms of salaries and working conditions and can easily get employment with EPZ
There is improved infrastructure like roads, electricity and water
There are also costs involved which are:
Due to tax exemptions, revenues and income is lost by the government
There is a large capital requirement for building infrastructure like the roads, sewage systems, electricity and buildings
There might be less job opportunities creation compared to money invested
There is also the cost of promoting and advertising the EPZ in foreign countries which involves a lot of funds
EPZ firms lack contact with the domestic economy due to the following reasons: Technology Transfer
Modern technology needs to be brought to the local firms because they lack the expertise. The EPZ firms do no fully give the advanced technology to the domestic firms because they fear losing out due to competition. If the local firms get the modern technology the EPZ firms will be driven out of business. The domestic firms does not benefit technologically hence there is no improvement in domestic economy.
Linkages
EPZ firms import goods instead of using the local raw materials. The local products are not of the standard quality hence EPZ interaction with local firm is very small compared to foreign companies. Local firms only have inputs in the packaging materials. This benefits them and the economy minimally.
Wages and Working Conditions
Developing countries use low wages and cheap labour to attract EPZ. The EPZ takes advantage of these and exploit the workers with very minimal pay and poor working conditions especially women who work long hours which could pose health risk to them which further degrades the domestic economy. Reasonable pay should be given to improve the living standards of the citizens.
Oil is an essential commodity that humanity cannot do without, and it has brought about a big change in the global environment. Peak oil is a situation where the extraction of oil from the existing oil reserves is at maximum, and from this point onwards, the production of oil dwindles. During this period, the demand will either remain constant or go up, but with high demand and few new oil discoveries, the supply will go down to the point of exhaustion.
The main issue
The main issue with peak oil is the depletion and dwindling of oil reserves. Since the Industrial Revolution, people have discovered new ways of doing things and even improving their health, which has led to a rapid increase in populations all over the world. The ever-growing populations require food, energy, transport, and manufacturing industries to support their living standards. Oil use is high in the transportation field, which sees a gradual increase in demand for oil due to the growing number of a personal vehicle, airplanes, trains, and ships. For example, this sector consumes approximately 68% of oil in the United States. The modern society entirely relies on petroleum for food production, transportation and travel, heating, lighting, and running of industries, among others. Due to this scenario, the supply of oil has been over stretched, which might lead to oil depletion (Herold 81). There is a need to develop hybrid engines and electric vehicles, thus encouraging the use of renewable energy in industries and for lighting at homes to reduce the consumption of oil.
Implication
The need for economic growth has led to the consumption of oil at a very high rate, which is much higher than what it is being supplied. There are fears that with the escalating depletion of oil resources, human activities may come to a deadlock. The increase in demand for oil without matching new oil discoveries caused the rise in prices for petroleum. For instance, in 2011, oil demand had increased to 85 million barrels, with a price of $100 per barrel (Greer 101). The increase in oil prices increased the cost of production, hence the rise in commodity prices and any other services that depended on petroleum products. This aspect has caused a global economic recession, which has greatly hindered international development. Furthermore, with the rise in the cost of living across the world, people are likely to resort to riots and strikes. The world governments have been under pressure to act swiftly to bring down the cost of living.
The cost of transportation and traveling has gone up, and people have been forced to pay more to sustain their simple lifestyles. Transportation and traveling via road, air, railway, and water have been a major contribution to economic development across the world. Also, through these forms of transport, tourism has flourished greatly. Commercial exchange of goods and services solely depends on transportation with trucks, ships, and cargo planes at the center of ferrying heavy loads across the continents. Rising oil prices causes a reduction in international business and lack of some commodities in various parts of the world. Finally, people will have to incur increased costs in heating and lighting their homes (Aleklett 73). In conclusion, peak oil is an energy crisis that has to be addressed by all stakeholders, viz. oil-producing companies and governments.
Works Cited
Aleklett, Kjel. Peeking at Peak Oil, New York: Springer, 2012. Print.
Greer, John. Not the Future We Ordered: The Psychology of Peak Oil and the Myth of Eternal Progress, London: Karnac Books, 2013. Print.
Herold, David. Peak Oil, Munich: Hurstelung und Verlag, 2012. Print.
South Korea is one of the fastest growing economies in the world and especially in Asia. Today, South Korea is among those countries with a middle-level economy. This significant growth began in the mid 1970s after the realization of the need to create a strong industrial base (Horikane 390).
Although various factors have facilitated this trendy growth and success in the general export portfolio, few factors remain critical. Firstly, the eminent and significant political will demonstrated during the early 1970s acted as an impetus in redefining the political scenario capable of harnessing from the then existing potentials. During this momentum, South Korea felt threatened about its political sovereignty and as such, the need for the creation of international relations acted in its favor (Horikane 390).
Discussion
During the early 1960s, export promotions became the fundamental objective of the Korean government. Subsequently, to improve the quality of international balance of payments, the government mobilized every policy agenda that could boost the nature of its exports. According to Horikane (2005), the government pursued these policy measures with extensive patriotism through the application of orthodox tax system, credit breaks and incentives (309).
Relying on these impetuses, the Korean exports received much promotion thus recording phenomenal growth. According to Economic Planning Board (EPB), the country registered an annual export value of about $55 million in 1962 Horikane (2005).
Although studies reveal no strict relationship between the Korean exports and the growth of GNP, records indicate that the ever-growing annual export rate of about 23% came with an average annual per capita income of 6.4% during the period of 1965-87 (Krueger 108).
The faster growth in the general export in the Asian countries gains from the underlying lack of restrictions that prevailed within the export regimes. This support proved as a formidable strategy in South Korea in which exporters were exempt from export restrictions necessary for the promotion of exports. Therefore, the government interventions implied an outright assurance of the profiting period (Krueger 108).
Contrary to the export strategies adopted by South Korea and other Sian countries, countries that exhibited quantitative controls over the importation with slow potential growth lagged behind in terms of the value of their exports and the resultant growth in the Gross National product (GNP). Increased GNP is an assurance for the increase in the overall per capita income since GNP is a function of Per Capita Income.
As GNP increases, while assuming constancy or slow growth in population, the resultant per capita income continues to grow significantly. This scenario explains why South Korea has registered a successful growth in its export portfolios on an international scale (Westpha 41).
For a successful production process, skilled labor must be present in order to yield possible results. During this growth, South Korea benefited from the existing and skilled labor force, which necessitated the growth of domestic production to serve the expanded foreign export markets (Krueger 109).
Conclusion
Although the strategies adopted had no express capacity to fuel continued export growth, it is worth noting that the base created by this momentum modeled a self-fulfilling trend. In this case, any policy that could sabotage the growth of exports had little or no influence based on the strengths gained from the initial phases. In essence, the political will coupled with proper harmonization of economic and human resources may account for the phenomenal growth experienced by South Korea as demonstrated by its growth in GNP and annual per capita income.
Works Cited
Horikane, Yumi. The Political Economy of Heavy Industrialization: The Heavy and Chemical Industry (HCI) Push in South Korea in the 1970s. Modern Asian Studies 39.2 (2005): 369397.
Krueger, Anne. Asian Trade and Growth Lessons. The American Economic Review 80.2 (1990): 108-112.
Westpha, Larry E. Industrial Policy in an Export- Propelled Economy: Lessons from South Koreas Experience . The Journal of Economic Perspective 4.3 (1990): 41-59.
Al Bilad is a private bank in Saudi Arabia. The bank began its operations in 2004. Al Bilad started with a capital of 4 billion Saudi riyals. The bank provides financial services to customers in Saudis major cities. Al Bilads business model is based on Islamic banking system. Al Bilads business strategy seeks to reach clients through innovation. This paper will seek to analyze Al Bilads banking system (Bank Albilad, 2014, pp.1-4).
Analysis of Business Environment
Al Bilad bank is located in Riyadh, Saudi Arabia (Middle East). Middle East is an increasingly competitive market for banks. Saudi Arabia is especially attractive for investors due to its prime location and economic viability. The country is the largest in the Middle East with more than 30 million residents. Moreover, the country is rated among the fastest growing economies in the world with an income per capita of $24,246 (as of 2013). Saudi Arabia has one fifth of confirmed global oil reserve. The country has also encouraged private investment through privatization of its public companies. Macro environment for private business is thriving in Saudi Arabia, especially in Riyadh, which is the headquarters.
Business environment in Saudi Arabia is conducive for development of banking services. Al Bilad enjoys a dynamic as well as engaging business environment, which provides stability for its emergence. Some of the factors that influence business environment for Al Bilad bank include socio-cultural influences, competitiveness, economic factors, technological issues, natural issues as well as political influences (Britton, 2003, pp. 15-26).
Saudi Arabia has a conservative social environment, which arises from its Islamic socio-cultural influence. Socio-cultural issues in Saudi Arabia are drawn from Islamic and Sharia law. Sharia law is the most influential in banking services. Because more than 97% of Saudis are Muslims, all banks that serve the locals must follow Islamic banking system. Al Bilad works within the Islamic financial regulations. This has enabled it to survive in the market. Another factor that influences macro environment of the business is competitiveness. Saudi Arabia thrives in its oil export; this has attracted foreign investment, which has also acted to spur economic growth in the country.
Saudi Arabia is offering potential investors a red carpet offer to go into full private banking. This has increased competitiveness among banks. In fact, Al Bilad seeks to increase its branches throughout Saudi Arabia. Banks that offer competition include public and private banks such as Al Rajhi (which is the largest private bank in Saudi Arabia) and Riyad bank, among others.
Saudi Arabia is among the few countries that did not experience the full repercussions of the global financial crisis of 2007 and 2008. Financial sector has contributed greatly to the countrys economy, which relies heavily on oil export. Besides, the countrys healthy economy has also helped to improve macro environment for Al Bilad. Al Bilad bank values innovations and initiatives. This has helped it to embrace technology. The bank has managed to comply with technological requirements for its operations. In essence, the banks macro environment has been excellent and conducive for business. However, it should be noted that challenges are arising due to increasing demand for consumers as foreign competitors and local banks scramble for the countrys population.
Analysis of the Industry structure and attractiveness
Financial sector in Saudi Arabia is attractive as well as competitive. The financial service industry in Saudi Arabia comprises of various market segments such as insurance sector, commercial banks and non-bank financing institutions. Saudi Arabias financial sector was not affected widely by the 2007/2008 financial and credit crisis. This helped to shape the sector for foreign competition. In fact, Saudis insurance sector has received massive growth due to the opening up of the sector to foreign competition. Additionally, the government has been forefront in promoting private banking. Saudi government has also engaged in acts that have contributed to the deepening of the sector such as privatization of public companies, among others. Moreover, financial sector has increased its contribution to the GDP from 3.5% to 10% over the past three decades. In essence, Saudis financial sector is both attractive and competitive (CBM, 2009, pp. 1-13)
Application of Porters Five Forces of Competition framework to the industry
Banking industry is highly competitive. Moreover, private banking is even more competitive as it depends on the number of customers and entrants as well as government policies. In particular, private banks have increased in Saudi Arabia due to governments policy of encouraging privatization. Porters model of analyzing competition displays an industrys attractiveness. The following five forces can be utilized to assess the industry (Aubin, 1979, pp. 45-67).
Supplier power
Suppliers in the industry include customers who bring deposits as well as loans from other financial institutions. Banking industry in Saudi Arabia has customers with adequate resources for deposits and investments banks. The industry enjoys benefits of a conservative social environment, which encourages citizens to deposit money in Islamic banks. To this extent, it can be said that supply bargain power is moderate.
Buyer power
These include customers who take loan and customers who deposit money at a fee. Factors that influence buyers power include technology, customer loyalty, banking fees and competition from other banks. Buyers power is quite moderate since they follow Islamic law, which ensures their savings are kept and returned safely at a fee. Fees are regulated by a Sharia abiding body. In this regard, buyers power is considered moderate based on other factors like technology, among others
Competitive rivalry
As mentioned earlier, Saudi Arabias financial market is competitive as well as attractive. The market is still up for grab as companies increase their competitiveness. Banks such as Al Rajhi and Riyad have introduced various products, which targets the same market as Al Bilad. However, based on the number of banks in Saudi Arabia, competitive rivalry is still growing. Moreover, private banks are not numerous although this is expected to change in the next decade.
Threat of substitution
Banking industry faces little challenge concerning the threat of substitution. In fact, the industry is controlled by Sharia law, which determines the products, allowed in the industry. This ensures that substitutions are controlled. In essence, stability of the industry is long term.
Threat of new entry
Because of the industrys competitiveness as well as the governments goodwill, the industry faces a threat of new entrants from both local and foreign market. Banks such as HSBC are already in the market, while others are also considering entry and expansion. Government policy has promoted new entrants to improve its financial sector.
Application of game theory on the case
Game theory helps economists to come up with the best possible strategies or outcomes for businesses. Financial industry in Saudi Arabia is quite competitive and attractive as has been shown by porters five forces. In order to survive in such a competitive field, businesses need to utilize game theory and hence reap the best outcomes. Game theory has been utilized extensively to determine the best strategies to be utilized in managing business practices. Game theory applies well in banking industry. In fact, it is quite essential in establishing the best business practices since it leaves no stones unturned in its analysis. Game theory would benefit Al Bilad bank since it still has limited resources with an aim of conquering the market. Other banks like Riyad and Al Rajhi have dominated the market for a long period while Al Bilad is just about a decade old in the business (Csoka, Herings & K oczy, 2009, pp. 266 276.
Therefore, Al Bilad needs to utilize game theory to increase its competitive advantage in the market. Game theory shows all sides of a business strategy. In fact, it provides complete information based on evidence and logic. Game theory offers a reality check on the industry, it provides both the positive possibilities and negative possibilities that can be encountered whenever certain business decisions are taken. Unlike other models, game theory helps businesses to make the best possible and realistic ways of surviving in a competitive market. For instance, Al Bilad needs to intensify its management strategies to reflect their mission and values. This will give them a positive image among other competitors (Acerbi & Tasche, 2002, pp.14871503).
Recommendations
Al Bilad bank is still small and growing, it therefore needs to ensure its image brand is strong in the market to attract more customers and hence enable it expand throughout Saudi Arabia and beyond. This would be possible if they keep up with the pace of competition in the market. Nonetheless, one way of achieving competitive advantage is to ensure the brand of the company is strong in the macro environment.
Secondly, Al Bilad bank needs to conduct regular checks on its management strategies to ensure that it is relevant in the market. This is essential since the financial market is dynamic. The bank states clearly that it seeks to be innovative in its business activities. Additionally, Al Bilad states that it values initiatives with its stakeholders. These strong points should be promoted and pursued to remain relevant in the banking industry (Barnes, 2001, pp. 12-18).
Finally, Al Bilad bank also needs to develop and maintain a strong organizational culture, which would work to propel its business strategies. In a strong conservative social environment, survival depends on a strong culture that promotes conservative values of the environment. In essence, as much as the business remains innovative and as much as the business embraces technology, it needs to ensure that conservative values of its stakeholders are maintained. For instance, methods of advertisements need to match the expectations of customers in order to achieve response. In this regard, the business should ensure that customers values are given first priority in every endeavor (CGMA, 2014, pp. 13).
Conclusion
Al Bilad is a private bank, which started in 2004 with a capital of 4 billion Saudi riyals. The bank is still young given it has only operated for about a decade. However, it has experienced tremendous growth due to its attractiveness and management strategies that have targeted growth and competitiveness. However, more needs to be done to achieve results, which would help expand it to the level of Al Rajhi, which has branches both within and beyond Saudi Arabia.
Reference List
Acerbi, C & Tasche, D 2002, On the coherence of expected shortfall, Journal of Banking and Finance, vol. 26, no. 1, pp.14871503. Web.
Aubin, J 1979, Mathematical methods of game and economic theory, North-Holland press, Amsterdam. Web.
Bank Albilad 2014, About The Bank. Web.
Barnes, J 2001, Secrets of Customer Relationship Management: Its All About How You Make Them Feel, McGraw-Hill, New York. Web.
Britton, C 2003, The Business environment, 4th edn, Prentice hall, New York. Web.
CBM 2009, What is Islamic Banking? Web.
CGMA 2014, Porters Five Forces of Competitive Position Analysis. Web.
Csoka, P Herings, J & K oczy, L 2009, Stable allocations of risk, Games and Economic Behavior, vol. 67, no. 1, pp. 266 276. Web.
Georgias economy is emerging from the 2008 internal displacements and is currently being supported by the international community to improve its economy, thus, providing potential investment opportunities to investors. This document discusses investment opportunities in the tourism and agricultural sector in Georgia.
Introduction
Agriculture plays a significant role in Georgias economy, and according to FAO, Georgia and the Ministry of Agriculture, Georgia, the agriculture sectors contribution to Georgias economy was 12.5% in average 2006-2009 (FAO Georgia 4). On average, the agricultural sectors contribution to the countrys foreign exchange earnings between 2006 and 2010 was 21% (FAO Georgia 4). Georgias tourism sector has also been on the rise recording a 16% increase in 2009 (Georgian National Investment Agency 1).
Agriculture
The government acknowledges the importance of agriculture in ensuring food safety and poverty reduction and therefore is investing massive resources and engages in partnerships to promote agriculture in the country. The future of Georgias agricultural sector is positive given the countrys lots of fertile soils, subtropical climate, diverse agricultural species (National Investment Agency 2), and support from the international community such as the European Union.
There are several investment opportunities in Georgias agricultural sector. Animal production presents a great opportunity for investment in the country. FAO (24) notes that the total meat, milk as well as egg production have declined as compared to the levels recorded in 2009.
In contrast, a new slaughterhouse, IberMeat Geogia, was established in the country in 2010 (FAO Georgia 9). Besides, meat processing enterprises have been established in Kakheti, Gurjaanitwon and in Telavillage funded by the Millenium Challenge Georgia Fund (FAO Georgia 9). These present an opportunity for investing in beef cattle. Again, dairy cattle have been on the decline opening an opportunity for investment in dairy production.
Georgia has also become a member of the Wine World Trade Group opening opportunities for investment in production of vine and wine manufacturing to be exported without additional barriers to the US, Canada, New Zealand, Australia and Argentina (FAO 9). Besides, many agricultural manufacturing plants have been opened or revived to open up associated agricultural activities in the country. These include Sugar plant in Agara, New Nuts Works in Zugdidi and Geoplant tea production in Guria and Samagrelo (FAO 10).
Again, export opportunities for Georgian persimmons, bay oil, and lemonade have been on the rise. Lemonade is currently exported to 14 countries, while persimmons is exported to Ukraine, Armenia, Belarus and Moldova (FAO 12). Georgian Bay Oil is in high demand in Australia (FAO 12). These present investment opportunities in production of bay, lemonade and persimmons.
Tourism
Georgian National Investment Agency (1) reports that there is an increasing interest in the number international tourists who are seeking to experience Georgias unspoiled nature as well as quality service. The country has numerous tourism opportunities which include high snow-capped mountains in the Caucasus range, Black Sea sub-tropical lushness, hot thermal waters, and nine climate zones which matches the desires of diverse tourists who travel to the countries among other opportunities.
Georgia had more than 1.5 million visitors in 2009, an increase of 16% compared to 2008 (Georgian National Investment Agency 1), and the number continues to increase. Georgia is ranked as the most competitive tourism destination country by the World Economic Forum (Georgian National Investment Agency 1).
Georgian National Investment Agency (1) reports that Georgias hotels are becoming crowded and therefore more hotels are needed to accommodate tourists who visit the country. In May this year, a US-based research company, STR global, reported that high-end hotels in Tbilisi reached 100% occupancy (Georgian National Investment Agency 1). This presents a great opportunity for investment in Georgias tourism infrastructure especially hotels.
Conclusion
The agricultural and tourism sector in Georgia provides numerous potential investment opportunities. These two sectors receive the greatest government support which makes them more suitable for investment.
Georgian National Investment Agency. Hotel occupancy reaches 100% in Tbilisi. Invest Today 4 (June 2011). Web.
National Investment Agency. Panel Discussion & Presentations: Opportunities in the Georgian Agribusiness Sector. Invest in Georgia, 11 October, 2011. Web.
If we imagine that American scientists managed to develop a workable concept of a flying automobile, even if it flies at a lower elevation, numerous consequences for various spheres of life can be predicted. Such spheres as consumption, housing, transport, healthcare, education, defense, and many others would face serious changes.
The Impact on Consumption, Supply and Demand, and Prices
The invention of flying automobiles has lead to notable changes in this sphere. Of course, customers prefer flying cars to non-flying ones for the superior benefits of the former. The fact that many models of flying cars come at available prices makes their choice even more obvious. For these reasons, the overwhelming majority of automobile companies had to switch to producing flying cars. A serious advantage of flying automobiles is that they can be transported quickly to the selling point; quick distribution allows companies to ensure the greater satisfaction of the customers ( Distribution Channels par. 5).
The described changes have influenced other sectors of industry and business as well since flying automobiles are used for delivery purposes. Now that necessary equipment, detail, or even pizza can be delivered in a few minutes, people have become more likely to order something they need. The growing demand has lead to an increase in the rates of production.
The outcomes of the revolutionary invention for the regular automobiles are not flattering. No new models are in supply, the firms that do not switch to producing flying automobiles face a serious decline, and their popularity has decreased significantly. However, the conservative individuals repulsed by changes and those, who cannot stand flying, are at perfect liberty to buy whatever land car they want, for the prices have dropped dramatically. It can be said for sure that flying automobiles have literally changed the global economy.
Housing Sector
The sector of real estate is also strongly influenced by the invention of flying cars. Due to the changes in transport and commutation, which are described further, more people start living in suburban or rural areas. Living in a separate house with a yard and domestic facilities is preferable to living in an apartment for many people. In previous years, the problem of getting to the workplace and places of entertainment and going shopping prevented many individuals from renting or buying a house in suburbia or rural area. Now that the problem of transportation is sold, the demand for suburban and rural houses increased remarkably; so did the prices. Conversely, the prices for apartments in urban areas have dropped because of the decreased demand. Companies are more interested in building and owning houses in suburban and rural areas than in urban ones.
Transportation
The airline industry has had to face severe competition with flying cars. Airline companies had to focus on transoceanic and large flights rather than minor flights, which have become the domain of flying automobiles. Airbus has gone bankrupt, and now Boeing has nearly monopolized the production of aircraft. In addition to this, the relationship between consumers and producers in the sphere of airline services has changed completely. Before flying cars, consumers had little power over service providers (Investopedia Staff par. 13). Now that consumers can choose to fly by car anytime, the providers of airline services have to look for new ways of increasing customer satisfaction.
As it was already mentioned, it has become much easier to commute. A flying public transportation system has also been developed. For some people, it is a cheaper and more convenient choice. At the same time, the demand for land public transportation has decreased, which led to the bankruptcy of railway companies. Multiple firms providing the services of flying taxi have been created.
The changes in the mode of transportation have also caused changes in the surrounding forms of business. Repair services, details production, and other related things have changed completely. Garages and parking lots can now be build anywhere, even on the second floor, which allows to free more space outdoors.
Traffic regulations, road rules, and driving etiquette have also been altered. The government officials have become extremely concerned about this matter once flying automobiles were launched. In the air, the driving conditions are completely different from those of the land: no such things as road marking or traffic lights can be established, there are three dimensions rather than two, and there are no pedestrians. Flying traffic police has been created to control the situation. Similarly to land driving, the doctrine of last clear chance (the rule, according to which a driver is expected to avoid damages at all costs) ( Last Clear Chance par. 1) is employed in the air. New safety measures have also been developed. In flying cars, closing the door without blocking it is not an option; opening doors require pressing a combination of buttons to prevent accidental openings; and safety belts are mush stronger than in regular cars, especially in flying cabriolets.
Healthcare
In the sphere of healthcare, significant changes are present as well. Healthcare specialists now have to pay attention to an increased number of people, who have suffered in air accidents, face various disorders connected with frequent flying or are concerned about the impact of flying on their health. Furthermore, they have to find ways to make air trips easier for infant children. A flying ambulance has been created, which allows to transport patients to clinics much faster than before. Thanks to this, more people manage to survive after accidents or sudden breakdowns. However, car accidents have become much more horrific than it was earlier. Flying cars can hit buildings, people can fall off despite the safety measures, and when cars hit one another, the details may fall down and injure someone on the ground.
Medical professionals have to develop the official regulations that drivers and passengers of flying automobiles have to keep in mind and occasionally update these regulations based on the latest research results. These regulations explain what speed is preferable for the human health, how to deal with sudden dizziness, what illnesses require that a patient postpones an air trip, how long should be the time gap between a meal and a trip, etc. Therefore, medical professionals need to perform research in this direction constantly. Mental health workers now have to deal with individuals, who have disorders or fears connected with flying. Since flying is now an integral part of the lifestyle, people have to overcome their fears.
Defense
It is known that the achievements of industry have a direct and immediate impact on defense (Watts 2). The new concept has been employed by defense firms as soon as the product was launched. Since flying cars unite the advantages of a car and a helicopter, the Army has gratefully accepted it. Flying cars were found to be especially useful in guarding borders. Since the concept has gone global, defense firms are now developing special weapons that are able to take down flying automobiles.
Education
Similarly to other spheres of life, education has been affected by the influence of the new invention. Both the infrastructure and content of education have changed. Before flying automobiles, the problem of students, who could not afford to leave on campuses, has been plaguing education (Simmons par. 1-10). Nowadays, the situation has improved significantly. With the help of flying cars, students from remote areas can get to their schools quickly, and they do not need to live on campus. The situation has affected the faculty as well. Thanks to flying cars, one professor can work at several colleges or universities at the same time.
To ensure that new flying cars would be produced and further developed, new directions of education were created, as well as new subjects and topics were added to the curricula of the existing directions. For instance, healthcare students and psychology students now have an option of studying the problems connected with flying. Students can major in air public transportation, flying automobiles production, etc. At business classes, the case of flying automobiles and their immense impact on the global economy will be presented in textbooks, studied, analyzed, assigned as an essay or research paper topic, and discussed in different ways. At military educational institutions, students have to study the issues connected with the use of flying cars in defense. Driving classes, of course, are focused on flying automobiles. At schools, students are taught basic safety measures and the rules of first aid during a flight.
Other Implications
The invention of flying cars has lead to significant consequences in other spheres. Food habits have changed since fresh food has become easy to deliver. Retaining workforce has become easier thanks to the facilitation of commuting. Young people started socializing in real life rather than online due to the fact that flying cars and cheaper air tickets allowed them to get to their numerous Internet friends (Quinn par. 1-3) quickly and often. Business negotiations have also been facilitated, for flying cars and cheap airplane tickets allow business partners to get to each other quickly. The invention has triggered alterations in laws regarding the production and use of flying automobiles; a different punishment for drunk driving had to be established since air driving is more dangerous than land driving. Ecologists have become seriously concerned about the impact of flying cars on climate, agriculture, and the behavior of birds.
Culture has also been affected by the invention. The worlds languages had to accept new expressions related to the use of flying cars. New idioms have emerged from the lexicon of flying car drivers. Specific jokes appeared regarding these cars. Numerous websites with funny stories about flying car driving were created, as well as TV shows and radio broadcasts for flying automobilists. Flying cars had to appear in movies. The actors, who were unable to fly for health reasons, had to cope or use stunts, which has increased the chances of a skilled driver to be hired as a stuntman or stuntwoman.
Conclusion
Overall, the invention of flying cars may have a significant impact on the economy. Not only would business be affected but also lifestyle, health, defense, law, and culture.
Watts, Barry D. The US Defense Industrial Base: Past, Present, and Future. Washington, DC: Center for Strategic and Budgetary Assessments, 2008. Print.
The Federal Reserve System proposes Debit Card Interchange Fees and Routing which is to be effected by 21st July, 2011. This proposal is of great interest to me since it affects my ability to take advantage of debit card services as well as my business investments in the financial sector.
Debit Card Interchange Fees and Routing
The regulation policy is meant to create standards that would help regulate the interchange fee system. The rates proposed would apply to firms whose assets average above $10 billion (Federal Reserve System, 2010). However, it would not apply to government-administered payment programs as well as prepaid debit cards which are for general use.
The Federal Reserve System also proposes a regulation for controlling the maximum interchange fee to be charged or received by each issuer who is covered by the regulation for every debit card transaction.
The regulation proposes two alternative standards for the interchange fee which would apply to all the debit card issuers. The stand-alone caps are to be based on the issuers costs and they are set at 7% and 12% per cost respectively (Federal Reserve System, 2010).
The alternatives are designed to thwart circumvention as well as evasion. The policies forbid the issuing firm getting any net compensation from other network except for the fee it collects for transactions which pass through its network.
The Federal Reserve System Board proposes to create standards for assessing the fee so as to determine the proportionality of the fee charged in relation to the cost incurred by the issuing firm.
It also bans debit card firms as well as networks from limiting the number of networks for carrying out debit card transactions. It also prohibits the issuing firms as well as networks from limiting the merchants control over the card routing (Federal Reserve System, 2010).
Comments
The proposals are likely to have detrimental effects on us the consumers and even to banking industry where some of us have invested.
The Federal Reserve System would better serve the US citizens and its business people if it were to implement more sound interchange regulation policies which would ensure that even small debit card issuers are also effectively protected from the lower chargers on the interchange fees.
The Federal Reserve System need to critically consider all the costs incurred in operating the debit interchange system. It should take into consideration the cost of fraud prevention since fighting would require adoption of new, more modern technology. I suggest that the Federal Reserve System implement mechanisms which exempt small issuers from rates applied to large issuers.
The provisions governing routing of debit cards transactions exclusively allows merchants to solely determine processing of debit card transactions. I suggest that the Federal Reserve System implement its first alternative for routing regulation which only requires that the debit card issuing firms provide cards which can be used in two unaffiliated networks.
Besides, the requirement by the Federal Reserve System for unlimited cross network transaction is inconsistent with the statutory requirements and as such, it is bound to place unfair regulatory burden on credit card issuers hence reduce the quality of service to consumers (King, 2010).
The other reason as to why I feel that serious adjustments should be made on the proposed law is that lowering the rates to 12% would mean that issuers would have to adjust to meet the costs of operating the interchange system.
Even though some financial institutions are excluded, merchants may refuse to take some debit cards as well as government-benefit debit cards such as Social Security, State Unemployment among other benefits.
This regulation may force banks to implement or increase the fees for checking accounts and interest rates on the debit cards or impose debit card fee usage. Some banks may even stop offering debit card services to their clients. This law also deprives consumers from choosing the networks they would want their cards to run on.
In my view, I would therefore propose that the Federal Reserve System consider lowering the costs to a level which can enable the issuers to cover the cost of operating the debit card interchange systems without having to increase the cost of their services.
Proposal Deadline
As a US citizen, I expect that the reviewed proposals be made available to the public exactly two months after closure for receiving the comments which would be on 22nd February, 2011.
Thus the reviewed draft should be presented to the public by 22nd April, 2011. This would give us humble time evaluate and provide more proposals to the reviewed draft before it is finally approved and implemented by the board.
Alternatives for Challenging the Proposal
As a patriotic US citizen and honest businessman, I expect that these are just proposals and therefore the Board remains receptive and open-minded to explore my concerns. I believe that the board is committed to improving the proposals by including substantive suggestions such as the ones I have made above.
The board has to realize that the proposed regulation is against its mission of ensuring safe and sound participation of capitalized financial institutions. The proposals only benefit the merchants who play very little role in debit card transaction process and has less benefits to the consumers.
It does not address the financial concerns of the issuers which it is also mandated to protect. Any decision by the board to ignore my concerns which represents the views of most Americans including the business community would seriously undermine the integrity of the Federal Reserve Systems rulemaking process.
This means that I together with other like-minded persons would have no option but to challenge the new policies in a court of law. As members of the Credit Union National Association, we may consider sabotaging the whole process of debit card transactions by stopping our debit card provisions to customers.
Theories of Price Regulation
I strongly believe that the proposal to control the interchange fee that is charged by issuers is not consistent with the Free market Principle.
The attempts by the Federal Reserve System to interfere with the free market mechanism through price-fixing of the interchange fee on debit card transactions is against the principle of free market and is bound to suppress free-market competition (Armstrong, Cowan, & Vickers, 1994).
The Federal Reserve System should reconsider its proposal to implement policies that give merchants such advantages and rewards. The market prices should be left to be decided by the dynamics of the free markets.
Disregarding the concerns of the business community would imply that the Federal Reserve System is inconsistent with the requirements of the Theory of Economic Regulation which states that such decision-makings should involve all stakeholders.
Instead, it would only mean that the board only considered the Capture Theory Regulation which supports the advantages which the proposal is bound to offer to the merchants (Armstrong, Cowan, & Vickers, 1994).
The regulations would only serve to reduce the net returns of the issuers and also reduce advantages to the consumers. Chicago Theory of Regulation is also against regulation of scale economies of productions of organizations.
It states that governments should not regulate the prices and outputs so as to encourage healthy competition (Armstrong, Cowan, & Vickers, 1994).
Implementing these regulations as they are would also mean that the board would have gone against the Principles of Price Cap Regulation which requires that cost for providing services should reflect the efficiency in its operations and that the company should be able to balance the cost of its savings without adversely affecting the consumers ability to utilize the services.
Finally, the proposed policy regulations are also against the Applied Theory of Regulation which also supports non-competitive arrangements in achieving economic efficiency (Moore, 1982).
In my view, challenging the regulations in a court of law would be more appropriate since it is legal and as patriots, we have the right to defend fellow Americans and businessmen and women.
The court of law would help overturn the laws so that we all come back the drawing and find better alternatives for regulating the interchange fees and routing processes (Jennings, 2009).
Reference List
Armstrong, M., Cowan, S. & Vickers, J. (1994). Regulatory reform: economic analysis and the British experience, MIT Press, Cambridge.
Jennings, M. (2009). Business: Its legal, ethical, and global environment, 8th Edition. New York: Prentice Hall
King, S. P. (2010). Principles of price cap regulation. Melbourne: The University of Melbourne Press.
Moore, T. G. (1982). The applied theory of regulation: Political economy at the Interstate Commerce Commission, 39(1), 29-32. Hague: Martinus Nijhoff Publishers.
Report On Evaluation Of Any Sector Of Management With Relevance To Saudization And Nitagat Policy. Saudization and, Nitagat policy is a policy that is employed by the government of Saudi Arabia with a purpose of increasing the employment rate. This applies to the Saudi Arabians citizens and in deployment of the foreigners working in Saudi Arabia who have greatly increased in number for the past years in Saudi Arabia. The Saudi Arabian government has been importing expertise labour from abroad to put their respective skills to the intended development in Saudi Arabia. This action, which the Saudi Arabian government decided to choose, has become a problem to the nationals, of Saudi Arabia because they are remaining unemployed. The Saudi Arabian government has recognized this advancing problem and has implemented measures that will solve it (Blythe 39).
Findings. One of these measures is the establishment of the saudization and nitagat policy that the government of Saudi Arabia is usually pushing hard to ensure that the respective companies in Saudi Arabia uphold this policy at all cost. One of their ways that they are implementing saudization and natigat policy is by putting penalties to those companies that do not comply with this policy and giving incentives to the companies that comply with the policy. Saudi Arabia is an established kingdom that is really looking for development in the future and that is why they thought acquiring expertise outside their country would help. However, the saudization and natigat policy has really changed the views of the government of Saudi Arabia and even of the other countries that were being given contracts in Saudi Arabia (Blythe 33).
The saudization and natigat policy is calling for the companies in Saudi Arabia to ensure that they employ the nationals of Saudi Arabia and deploy the expertise foreigners working in their firms. The companies in Saudi Arabia are under four categories in respect to their size and performance in relation to how they comply with the saudization and natigat policy in increasing the Saudi Arabian employment rate to its nationals and decreasing the overgrowing rate of the foreign expertise working in Saudi Arabia. These four categories include the blue also referred to as the excellent, the yellow, and the red and lastly the green.
The saudization and natigat policy has prevented the companies found in the red and yellow category from renewing the visas of the foreign expertise working in their companies and hence having no option than for these companies deploying them. This will make the company to have some vacancies that ought to be filled by human labour where the government of Saudi Arabia encourages the respective companies to employ the Saudi Arabian nationals. They usually give these companies a period that does not exceed 11 months to have recruited and selected the Saudi Arabian nationals to fill the respective vacancies that have been left empty after the foreign expertise have been deployed. Companies in Saudi are competing with one another to comply with the saudization and natigat policy because of the incentives that they derive from the Saudi Arabian government as briefly mentioned above in the report. Some of the incentives that the Saudi Arabian companies are getting from the government include gaining governments contacts that definitely are highly beneficial to the respective company. There are some sensitive professions such as doctors and engineers that the government of Saudi Arabia had decided the saudization and natigat policy would exempt. However, even them they are being affected by the saudization and natigat policy because each company including private hospitals are not renewing visas of their foreign doctors, nurses so that they can deploy them, and in turn get the government incentive.
Most of the companies in the private sector are majorly known to be profit-making organization all over the world and not in Saudi Arabia alone. These private companies have one common strategy of minimizing their cost of production and maximizing their profit ratios. This is the reason why the private companies in Saudi Arabia are finding that the foreign expertise that they have been employing is even adding their cost either in the production of goods or services. Majority of them do consider this saudization and natigat policy as a corporate strategy for them to attain their goals and objectives, which mainly is profit maximization. This is a true fact because when they get the government incentives which also may include subsides it will automatically cut their cost of production and also when they do employ the Saudi Arabian nationals in their respective firms they will also automatically cut the high cost that they used to incur in labour. These two aspects will eventually cause the respective companies to start realizing high levels of profits that are attractive to all companies that are in the private sector in Saudi Arabia. Among the key areas in Saudi Arabia, that demand foreign expertise is the nursing field.
A Saudi Arabian hospital have thousands of nurses working in their respective hospitals and is still in need of others but the private hospitals are ignoring this demand for foreign nurses to work for them and instead deploying them and employing nurses that are Saudi Arabian nationals. The countries that have their nationals working in study in Saudi Arabia are facing the effects of the saudazation and natigat policy because they are losing the contracts that they were previously enjoying. They were not getting problems such as unemployment for its citizens but because of the large numbers that are being deployed in Saudi Arabia and returning to their original country; these countries have started to face this problem of unemployment. They have instead started to give capital to these deployed experts so that they can open their own business to find a living for themselves. They are using this strategy to deal with the scarce job opportunities in their respective countries and the high demand for employment. If it is professional doctors that were working in Saudi Arabia who have been deployed and returned to their original countries, they are been given incentives to start their own clinics, dispensaries or even hospitals in their respective countries to ensure that their skills do not go into waste but rather benefit their countries. One of the countries that Saudi Arabia had given contracts to offer their expertise in their country includes Pakistan. It had approximately 1.8 million foreigners working in Saudi Arabia, Egypt that had approximately 1.3 foreigners working in Saudi Arabia and lastly Philippians, which had approximastely1.2 foreigners working in Saudi Arabia (Brassington & Pettitt, 138).
The total number of the foreign expertise that is working in Saudi Arabia is approximately eight million. This means there are eight million Saudi Arabian nationals that are unemployed and if the saudization and natigat policy will be implemented these eight million of the unemployed Saudis will eventually get a job. Even though the saudization and natigat policy has enabled the Saudi Arabian government to solve the problem of unemployment, there are also some negative implications that do accrue from this particular policy. Saudi Arabia as earlier mentioned is a kingdom that is looking forward for major developments such as construction of major modern cities that require high expertise if by any chance the Saudi Arabian government has to archive their set goals and objectives. If they do deploy the experts that they already have and even not employ those that they actually need then they will lack the skilled labor to perform professional task. This will in turn make their country to remain undeveloped or attain slow development. That is why the saudization and natigat policy has categories. Some companies fall under the green category as mentioned earlier in this report where these companies have a chance to sponsor and renew the visas of those expertise that have been deployed in those companies that fall under the red and yellow categories. This stance is enabling the Saudi Arabian government to remain with at least little foreign expertise that can help the country at large to archive its anticipated plans, goals and objectives that require high skills (Brassington & Pettitt 129).
The few remaining foreign expertise that have been retained by those companies that fall under the green category assist the Saudi Arabian nationals to acquire the expertise skills by taking them through the training and development programs. This in the long-term will make the Saudi Arabian nationals to be able to run and head key areas in their country that will assist the achievement of the Saudi Arabian development. The saudization and natigat policy will have no major negative implications because of deploying the foreign expertise. This is the plan of the Saudi Arabian government and the strong facts and evidence obtained from various sources of research second and supports this plan (Blythe 41).
Recommendation. The saudization and natigat policy is highly recommended even to other countries worldwide that have majority of the their countries affairs being run by foreigners because a good, effective governance does not only consider economic growth, infrastructure development, political stabilization but also has to look at the wellbeing of its citizens because that is why they are in governance. The well-being of the citizens of the given country cannot be achieved until the citizens are employed and paid salary that improves their wellbeing. Therefore, their government should not deny them those opportunities and give them to foreigners (Brassington & Pettitt 146).
Conclusion
Saudization and natigat policy can be considered to be a marketing strategy that the Saudi Arabian government is employing in its plan to increase the employment of the Saudi Arabian nationals and decrease the employment of the foreign expertise in Saudi Arabia. It is considered as a marketing strategy because of the incentives that the Saudi Arabian government is giving to the respective companies that are found in Saudi Arabia that are very attractive as discussed this report. Therefore, the Saudi Arabian have taken an effective move to giving good governance to its citizens and they should work tirelessly to ensure that the saudization and natigat policy are being observed by any sector of retail management in Saudi Arabia (Blythe 37).
Works Cited
Blythe, Jim. (2001). Essentials of Marketing. Harlow: prentice hall. Print.
