Warehouse and Materials Management – Need and Scope
Introduction Purchase of raw materials is an integral part of any business, i.e. manufacturing organization or service organization. Purpose of raw material is to be converted into finished goods for selling, but after purchase and before selling, they need to keep in safety and good care. The timeframe of storage can be short period or […]
What is Commercial Arbitration and How Firms Use it to Settle Business Disputes
What is Arbitration and why it is so important and how does It Take Place? We often hear the term, Arbitration, or Commercial Arbitration, used in multiple contexts in business literature. As the name implies, Arbitration, is a process of settling disputes that arise from differing interpretation of contracts between businesses as well as a […]
Planning for System Implementation
Planning is the first step involved in system implementation. It is the very basic function which describes effectively the very basic questions of how, where and when the objectives can be realized or it serves as a guiding framework. Planning equally involves a careful assessment of the available resources and the challenges which the team […]
The Impact of COVID-19 on Start-ups
Startups had become an important part of the modern economic system. Most of the companies which have achieved billion-dollar valuations in the past few years have come out of the startup ecosystem. Companies like Uber, Twitter, Facebook, and Airbnb are testimony to this fact. The startup system has often been viewed as a risky place. […]
Historical Origins of the Present Global Economic Crisis
The Roots of the Present Economic Crisis The global economic crisis that started in 2008 has its origins in the events of the 1970s. That was the time when the United States reneged on its commitment to work under the Bretton Woods Agreement, which stipulated that countries must peg their currencies to gold and must […]
The previous articles have discussed how international businesses need supporting ecosystems and business friendly policies if they are to succeed in emerging markets. Of particular importance is the role of governments in deciding whether they would allow international businesses to setup their operations and encourage them to grow and succeed.
Often, the governments of many countries do not have a choice but to welcome international businesses as they need the “hard cash” or the Dollars, as they are also known. For instance, the difference between exports and imports is known as the Current Account Deficit or CAD.
Since many emerging markets (except China which has a positive CAD) have deficits that need to be financed with Dollars. Then, the governments can either borrow these Dollars at high rates or finance the deficit through FDI or Foreign Direct Investment and Equity flows into the stock markets from FIIs or Foreign Institutional Investors.
Apart from this, the domestic industry might not have the capabilities to succeed in a particular sector nor the expertise to develop that sector. Therefore, FDI becomes necessary for the growth of that sector.
Moreover, opening up of the economy is needed for admission into the WTO or the World Trade Organization, which means that in order to export to other countries, emerging and developing market economies have to open up. These are some of the reasons why many governments in developing countries encourage foreign investment and allow international businesses to setup operations in their countries. However, whether the successive governments continue the same policies or not depends on a host of factors that include the ideological bent of the governments, the compulsions of politics, and the fact that foreign investment might not have succeeded in kick starting the economy as planned.
The key aspect here is that many governments of the emerging economies often welcome the international businesses with open arms because of the reasons listed above. However, midway through the process, some of them develop cold feet because of policy paralysis, and the factors listed above.
It needs to be understood that allowing international businesses to enter into the emerging economies must be bipartisan meaning that there must be broad consensus on the issue from all stakeholders. Only then would the international businesses thrive in the emerging market economies.
Further, the competition for foreign capital is so intense that any let up in the process adversely affects the economy and hence, the process must be continued and the international businesses given due encouragement.
Finally, the examples of China, Brazil, South Africa, and Vietnam (which is still emerging) illustrate the need for consensus on opening up of the economies and following through the process.
On the other hand, the examples of India and Russia are the other way around as these countries opened up their economies due to compulsions and then with open arms but failed to keep up the momentum. This means that the integration into the global economy would happen only when the reforms process is done wholeheartedly and without pauses or U-turns.
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Cross Border Mergers and Acquisitions and Some Recent Trends in this Field
February 12, 2025
