Crackdown on Indian Credit Rating Firms
Credit rating industries are part of a closely held industry. For years, this has worked in favor of these agencies since they have to face less competition. However, these agencies are also the first ones to get blamed after every financial crisis. It is a known fact that no one can really predict a market […]
Going From People Driven To Process Driven
A process driven organization has certain obvious advantages over a people driven organization. Many old fashioned entrepreneurs still prefer to be people driven for the fear of losing control over their organization. However a large majority still aims as process oriented as the ultimate way to create an organization. Many have tried and failed because […]
Vendor Managed Inventory (VMI) – A collaborative Supply Chain Concept
As the name suggests, VMI stands for Vendor Managed Inventory. VMI involves a collaborative and continuous inventory supply owned, managed and replenished by the Manufacturer right up to the last stocking point or point of sale to end customer. VMI concept is widely being used by companies both as procurement business model and FG supply […]
Implications of Emerging Trends in Tourism for Developing Countries and Societies
Profitable Tourism and the Implications for Corporates and Societies It is a known fact that Tourism is a money spinner for any country that has abundant tourist destinations. The market for worldwide tourism runs into the Billions of Dollars and all nations are eager to grab as much market share as possible. Further, Tourism is […]
What is a Project Schedule ?
What is a Project Schedule ? A Project schedule is a document that contains vital information about the beginning and ending of the each of the five phases of the DMIAC Six Sigma methodology. The project schedule is an important document because it contains information about the project team, risks that have been identified and […]
It is debatable whether the reforms in emerging and developing markets drive the entry of international businesses into those markets or whether the international businesses with their strategies drive reforms in these markets. Of course, the bottom line requirement for any international business to enter the emerging markets is that the market economy in that country must be open to foreign investment. Hence, this is the b basic requirement that drives the entry of the international business. However, many emerging markets stop at this reform and do not make their economies friendly to foreign investors beyond a certain extent.
In other words, once a country allows foreign businesses in some sectors, it does not automatically follow that it would open all the sectors to international businesses.
On the other hand, many international businesses once they gain entry into developing countries push for further liberalization of the economy in terms of investment friendly policies related to profit repatriation, increase in stake of the international business in the joint ventures, tax breaks, and convertibility of the local currency.
Indeed, as the experience of India shows, the country initially opened up some sectors to foreign investment, then stopped shy of full convertibility and is now at a stage where it is taking a gradated approach to opening up its economy.
Further, the entry of the multinationals in India was accompanied by these companies putting pressure on the government to liberalize the economy further and hence, in the case of India it can be said that both aspects of the question posed in the topic are true.
However, the case of China is different. It went in for full liberalization and made its investment climate so friendly that multinationals just started to flock to the country.
Further, the reforms in China were not halfhearted like in the case of India. Moreover, the Chinese government was free to implement reforms unlike India that is hamstrung by political considerations and the fact that policy paralysis has set in because of bad governance. Of course, this is not to say that one example is better than the other and vice versa because each country has its own set of factors in the political economy of development.
Apart from these considerations and drivers, it needs to be mentioned that once the genie is out of the bottle, it is difficult to undo the reform process. This has been the experience of countries like the Maldives where once foreign investment was allowed by a particular government, it was not possible for the successor government to go back on its commitment. This is also the case with India where despite opposition to foreign investment, the broad policy framework is supportive of foreign investment.
Finally, as mentioned earlier, the specifics of development are unique to each country because of historical, cultural, societal, and political factors apart from the baseline factor of economics. Hence, the approach to reforms and which aspect drives the other has to be done in a manner that suits the country.
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Cross Border Mergers and Acquisitions and Some Recent Trends in this Field
February 12, 2025
