Saturday, August 31, 2019

Accounting statements and ratios Essay

Accounting statements and ratios provide a great deal of information about a company’s financial stability. Some of the concepts to be discussed in further detail include horizontal analysis, current ratio, quick ratio, and cash to current liabilities ratio. A horizontal analysis is used to compare data from two or more periods side by side. The current ratio reveals the relative amount of working capital by dividing current assets by current liabilities. A quick ratio is calculated by dividing the assets by the current liabilities. This paper will examine the financial standing of Apple, INC and provide recommendations on how to better improve their financial gains in the future. Apple was founded in April of 1976 to develop and sell personal computers. It was incorporated as Apple Computer, Inc. on January 3, 1977, and was renamed as Apple Inc. on January 9, 2007 to reflect its shifted focus towards consumer electronics. Apple Inc. is headquartered in Cupertino, California and designs, develops, and sells consumer electronics, computer software, online services, and personal computers. Its best-known hardware products are the Mac line of computers, the iPod media player, the iPhone, and the iPad. Its online services include iCloud, iTunes Store, and App Store. Its consumer software includes the OS X and iOS operating systems, the iTunes media browser, the Safari web browser, and the iLife and iWork creativity and productivity suites. Apple is the world’s second-largest information technology company by revenue after Samsung Electronics, and the world’s third-largest mobile phone maker after Samsung and Nokia. Below is the horizontal analysis and balance sheet of Apple, INC for 2011 through 2013. This analysis shows that while Apple has consistently seen an increase in revenue, they have also seen an increase in administrative and operating expenses each year. Also, there has been a steady increase in the cost of goods sold. Minimizing these costs could drive the revenues for Apple, INC even higher. Below are the liquidity ratios for Apple, INC. These ratios can be used as a tool to determine a company’s ability to pay off its short-terms debts obligations. The current ratio is computed as follows: Current Ratio = Current Assets/Current Liabilities. The quick ratio: Quick Ratio = (Cash + Accounts Receivable) / Current Liabilities. The liquidity ratios as they apply to Apple, INC suggest that the company is becoming more liquid the longer they are operational. â€Å"Liquidity is the ability to meet near-term obligations as they mature,† (Bridgepoint Education, INC, 2012, p. 229). Based on the information provided, Apple, INC is doing very well and are overly-capable of meeting their near-term financial obligations. Reference Apple, INC company financials. (2014). Retrieved, AUG, 2014, Retrieved from http://www.nasdaq.com/symbol/aapl/financials Principles of Accounting: Volume I. (2012). San Diego, CA: Bridgepoint Education, Inc

Friday, August 30, 2019

Questions On David Crystal Essay

Questions on David Crystal’s article â€Å"2b or Not 2b?† 1. David Crystal begins his article with some strong â€Å"they say† arguments, quoting writers who argue that text messaging is destroying the English language. At what point in the article do you begin to see that his own perspective is very different from that of such critics? – Crystal’s perspective on texting is displayed many times throughout different paragraphs in the article. In paragraph six Crystal states â€Å"texting has added a new dimension to language use. Although there are some who see texting as a modern tool that is ruining â€Å"proper English†, Crystal sees it as a way for society to enhance thee language skills. 2. Summarize Crystal’s arguments in favor of text messaging. In what ways have the dangers of this phenomenon been vastly overstated, in his opinion? How does he organize his argument? What are his main points, and what kinds of support does he offer? – Most arguments state that text abbreviations have replaced proper English. On the other hand, Crystal states that these abbreviations go back to centuries. For example †IOU goes back to 1618† A book written by Eric Partritch in 1942 called â€Å" Dictionary of Abbreviations† contained sms examples and was published 50 years before texting. 3. Crystal wrote this article for a British newspaper read primarily by adults. What might he have done differently if the piece had been for, say, an audience of middle or high school students? – If Crystal’s audience were middle school students he might have written this article from there point of view . Crystal would most likely include more examples that could relate to them. Also, Crystal could include how texting can help with school and be an asset rather than a distraction. 4. Reread the two text message poems in the article. Which one do you prefer? In what ways do these poems support his argument? – The second poem supports Crystal’s argument, because the author abbreviated words and replaced letters with numbers just as most people who text do. Although the author has written the poem differently the reader is still  able to interpret the poem and the words makes sense.

Thursday, August 29, 2019

Internal Customers Essay

The people in this department need to know what deliveries are to be made and what products are to be delivered.  Staff Office  The Human Resources department need to know hours worked by employees and if there are any positions to be filled.  Staff Training  They need to know which members of the department will need training and which areas need to be covered in the training exercises.  Cash Office  The cash office needs to know what transactions were made at all the tills in the department and how much money there is in the tills at the end of the working day. This is so they can tally up the stores figures and see how well the shop has performed on that particular day. CCP (Customer Collection Point)  Many goods are collected from the shops CCP such as microwaves. The people at the CCP need to know what is being collected and the transaction number so they can tie up the paperwork, customer and the goods.  Service Desk  When customers have a problem with an appliance they have to go through the service desk so the large electrical department has to get information from the service desk regarding the outcome for instance an appliance may have to be replaced. The large electrical department already employs a number of different customer service techniques to help improve the running and efficiency of the department, which also importantly improves the relationship with the customers. There are however occasions when these strategies don’t work the way that they should and customers can become dissatisfied with the level of service that they feel they are receiving.  Here are some examples of techniques that have recently been introduced in the department to help improve customer services. When staff join the Large Electrical Department the must complete questionnaires to ensure they understand procedures that are carried out in the department. A copy of which can be found in appendix 1. The Introduction of Ticketing system for waiting customers  The department recently introduced a fairly simple but effective ticketing system so that customers are served at the correct time instead of customers just grabbing a selling Partner when they see one that is free. When a customer enters the department they are now greeted by the customer service manager who stands at the Customer Service Podium. The Customer Service Manager gives the customer a ticket with a number on it and records down on the copy of the ticket that the manager keeps some details.  These are:  The customers name.  This creates a personalised service when the sell partner approaches the customer  What they want help on. This is so the Customer Service Manager can send over the right Selling Partner with the right knowledge.  A brief description of the customer.  The description helps the Selling Partner identify the customers easily.  When a selling Partner becomes free they must report back to the podium where the manager will hand the Partner the ticket of the next customer to be served.  This system is much improved from the previous queuing system, which involved the Customer Service Manager patrolling the floor and recording customers name down on a list. This meant that the Manager was never in one place and people may not have been put on in the correct order that they arrived in the department. When speaking to the Customer Service Manager of the Large Electrical department to enquire how successful the new system had been I was also informed of the one major problem there had been with it.  The problem was that when a customer took a ticket they would ask how many people there were before them. If the number was fairly high, for instance five people then it would put people off waiting. It was then up to the Customer Service Manager to reassure the customer that it wouldn’t be too long. I also learned that on leaving the department previous customers who were used to the old system commented on how much better they thought the new system was.  The Introduction of Electrical Telesales at Watford  About two years ago the Branch opened the Electrical Telesales Department, which is part of the Large Electrical Department. The team is based at the branches warehouse, which is down the road from the store at Greatham Road. It is all linked telephonically and by computer to the main store. Customers can phone telesales and place orders for large electrical appliances over the phone by calling the store on 01923 244 266 and connecting to extension 4880. This service is very handy for many customers as they will often come into the store and get information on various appliances and then go home to check that it will fit in the desired space. They can then phone up and order it over the phone by credit or account card to save them making another trip into the store. Some people that have done research on the internet or another media will also use telesales to save them having to come into the store at all, especially people that have very busy lives. It is also designed to take some of the pressure off the actual department so that more time can be spent with each customer in the store. On average there are six partners manning the phones down at telesales. Which isn’t really enough as they are also share with the Television and Audio department. So customers are put on hold, which can be for quite a long time, which frustrates the customers. Pre recorded messages are randomly played to the customers to reassure them that their call is important and will be answered by the next available partner. The telephonists can tell how long a customer has been waiting, and they will answer in a way that will reflect the length of time the customer has waited. Other problems with the telesales team are that there is a weak communication flow between the actual department and telesales. This means that mistakes can be made by telesales as they haven’t received information on changes made in the Large Electrical Department which in turn can have an affect on the customers.  An example of this was when EU legislation can into place saying that the collection of old refrigeration can not be continued because of the gasses inside. Telesales weren’t informed of this and continued to arrange for refrigeration to be taken away. When the deliverymen told customers that they couldn’t take away the old refrigeration this angered customers who had prepaid the 9 collection charge. These mistakes are usually dealt with by offering a goodwill gesture for inconvenience and where appropriate a refund.  On the whole this venture has proved to be a major success as figures shown in the Annual General Meeting showed an increase in Large Electrical Goods with a major percentage going through the telesales team.  This is the information flier that is handed out to customers when visiting the Department if the wish to order over the phone. It give the phone number and extension number as well as a little information on the different services that they offer such as the 2 year warranty and Never Knowingly Undersold motto. Ways of paying at John Lewis  The use of credit cards at John Lewis  Until recently John Lewis didn’t accept payment for goods by any credit card. This was to avoid paying the transaction fees to the banks that is added on when a customer pays using EFT (Electronic Financial Transaction). Apart from this customers were quite prepared to pay for any goods purchased using a John Lewis or Waitrose Account card that offers a low rate of interest. However to give the customer more flexibility John Lewis introduced the use of Credit cards in the Partnership. One of the main reasons for allowing this take place was because of where the transaction fee would go.  Ã¢â‚¬Å"From 5 November 2001, all card payments with the exception of the John Lewis and Waitrose Account Card, are processed for you by John Lewis Card Services Ltd for a 2.5% fee included in the cost of your purchase. The balance is paid to John Lewis plc. The total amount you pay is the same regardless of the payment method.† Source taken from http://www.johnlewis.com  The transactions fee that would normally have to be paid to the bank on any transaction that take place in either the department stores or Waitrose using EFT is retained by John Lewis. This means that John Lewis don’t loose 2.5% of the sale that they have made but keep it as profit.  This move has meant that more customers are attracted to coming into the stores and paying by plastic, which many people prefer to do.  However there is one card that John Lewis still doesn’t accept and that is American Express. This is because of the extremely high level of interest that is associated with this form of payment. John Lewis would still have to pay part of transaction fee if this card was used. These methods of payment can also be used to purchase over the phone using the stores telesales teams and via the Internet. This has all been designed to help create an easier way of shopping for it customers and improve customer services.  Computerised Ordering System  The introduction of the computerised ordering system a year ago has changed the face of the department and the way things are done, within the department. It was also a major turn around for the standard of customer services offered by department. The new system meant that orders could be processed a lot quicker as paper work didn’t have to be sent via the post and orders we received at the warehouse instantly. A lot more options have been opened with this new system, all to the customers advantage, as well as making the whole ordering process a lot easier for the Selling Partner.  Customers can now reserve goods for longer periods of time, place an order for delivery in another part of the country and a lot more. Queries and problems can also dealt with by keeping record of points raised on the on the notepad of the actual order on the system so issues are dealt with much more effectively. Each customer gets a reference number when they place an order so information can be recalled instantly from the system should the need arise.  The quicker service makes buying Large Electrical goods less stressful meaning customers go away from the department happy with the level of service they have just received.  There have, however been a number of occasions when the system has gone down causing absolute chaos in the department as all orders have to be placed manually which is much more time consuming than using the computers. This angers customers who expect a reliable system then works quickly and effectively. With these events the need for the Customer Service manager pays off, as they are someone who can defuse difficult situations. All selling Partners are also trained in dealing with problems but the CSM is there as someone with higher authority.

Marketing plan development Essay Example | Topics and Well Written Essays - 500 words

Marketing plan development - Essay Example Also there is still perception among some of the customers that fast-food are rich in fat and are not healthy. As far as specific is concerned, sandwiches are treated as the most favorite as it holds over 30 % of the market share. Research has shown that, people mainly love sandwiches due to the trend of short lunch breaks triggering the demand for light snacks and lunches. At this point of time Hotdog doesn’t top the menu list of the people of UK when it comes to Fast Foods (Mintzberg and Quinn, 1996, p. 67). After analyzing the market scenario, business and product life cycle it is believed that out of the four probable strategies market development strategy could be best suited. Market development strategy is used when an existing product is launched in a new market. The risk factor in this case is medium. It is suggested that American Hot Dog Cart should focus on designing an efficient distribution network and repositioning strategy. One of the most famous ways to expand market reach is to setup franchisee network. Most of the major food chains follow this strategy. As mentioned in before, fast foods especially non vegetarian fast foods are still perceived as high-fat unhealthy products. This something the American Hot Dog has to change. Certain degree of augmentation can help the company in creating product differentiation. For example providing salads along with hot-dog can help the company successfully reposition the product. Also social media channels can be used to directly engag e with the customers. Social media can be used to show the target customers the way the food is being made. The main USP of the marketing campaign is the healthy ingredients and low fat content to change the perception (Palepu and Bernad, 2007, p. 65). Out of the four strategies Cost Leadership seems best suited for American Hot Dog Cart. The UK fast food market is a broad one. Hence the company may use the industry

Wednesday, August 28, 2019

JB-Hi Fi Limited Essay Example | Topics and Well Written Essays - 2000 words

JB-Hi Fi Limited - Essay Example A brief analysis of the notes to the financial statement pertaining to the trade payable figure presents the fact that the trade payable figure also comprises of other figures such as GST payables, deferred income and other creditors and accruals. All of these items have shown significant increase over the financial year 2012, but the most significant increase is represented by the increase in the figure of trade payables which has shown an increase of about $100,371 thousand or about 38% of the prior year balance. The trade payable balance amounts to around 91% of the total ‘Trade and other payable’ line item in the balance sheet of the company. Other balances of current liabilities line items include other financial liabilities, provisions and other current liabilities which all have shown inclining movement in the current financial year. This increase is offset to a certain extent by the increase in the figure of current tax liabilities which have decreased by ,69 0 thousand during the current financial year of 2012. The company might have decided to pay more in respect of its current tax liabilities in order to maintain a lower balance of payable for the current year. The liabilities which are likely to be settled within 12 months form the end of the financial year date are classified under the heading of current liabilities.... Question 2 The total liability balance of the company JB-Hi Fi Limited amounts to $ 626,648 thousand as at financial year ended 2012. Out of this figure, $439,481 pertains to current liabilities and the other $187,161 pertains to the non-current liabilities portion of the balance sheet. At the end of the financial the first and foremost major liability that the company has is in terms of trade payables which represent around 64% of the total liability balance of the company. Trade payables represents the balance that the company has to pay to its creditors in the normal course of the business and is usually on account of the purchase of the raw material, unassembled goods and other services. Other balance which represents a significant portion of the total liabilities of the company is borrowings which represent about 24% of the total liabilities of the company. These borrowings consists of secured bank loans which is secured by ‘a fixed and floating charge over the Groupâ€⠄¢s assets, the current market value of which exceeds the value of the loan’. Other liabilities of the company include balance such as current and non-current provisions on account of defined benefit plan and leases provisions. Question 3 The balance of the provision as represented in the ‘current liabilities’ portion of the balance sheet of the company comprises of employ benefits and lease provision. The employee benefit plans usually comprises of a defined benefit plan or a defined contribution plan. These plans are usually made for the benefit of the employees of any company and the provision balance represents a liability balance that the company has to contribute towards the particular

Tuesday, August 27, 2019

Employee Negative Habits and Attitudes Essay Example | Topics and Well Written Essays - 750 words

Employee Negative Habits and Attitudes - Essay Example Unfortunately, bad workplace habits and negative employee attitudes create serious problems: poor workplace performance, workplace conflicts, and failure to achieve strategic organizational outcomes are just some of the numerous effects caused by bad workplace habits on organizations and their members. Bad habits make suffer both employees and employers. Workers may loose their job and the reputation of the company may suffer greatly. Bad workplace habits are numerous and varied. No one knows what exactly can fire the flame of conflict and disobedience within an organization. At times, employees can be extremely sophisticated in their negative habits and attitudes. Yet, in most instances, bad habits can be easily detected and addressed. Absenteeism and sick list abuse is, probably, one of the worst employee habits. Dozens of workers miss work intentionally, since they are unwilling to attend their workplace and are pretty satisfied with getting their sick list payments on time. Other s are convinced that spending half of the work day in a smoking room is absolutely normal and even necessary for their emotional stability. Such employees will not rush to deal with their obligations. Most probably, they perceive their work as some kind of entertainment and do not understand that the success of business and its profitability largely depends upon the contribution each and every worker makes on a daily basis. Other bad habits include gossiping and unnecessary sarcasm: some employees cannot be serious even when it is crucial for the organization’s survival. Employees may tend to withhold important information or will make excuses every time they fail to cope with their responsibilities. These are further supplemented by the negative attitudes, which employees hold about their work: it is no secret that not all employees like their job and these negative attitudes have far-reaching implications for strategic performance within organizations. Bad habits and negati ve attitudes of employees affect all aspects of organizational performance. Employees who miss work, fail to cope with their obligations, find excuses, and do not assume responsibility for their acts cannot be useful for the organization. Instead, they increase the burden of organizational problems and concerns. Moreover, their presence in organizations always comes at a cost: they receive salaries and benefits for doing nothing. It should be noted, that bad habits and negative attitudes work like an infection – they can infect other employees, who slowly learn a valuable lesson of laziness and non-productivity. As a result, one employee can negatively affect the whole organization and cause a chain reaction of bad attitudes toward work. Eventually, bad habits and negative attitudes of employees may threaten organizational safety. Gossiping may lead to information leakages. Withholding important information may disrupt the stability and operation of the organization’s security systems. Employees who do not share information with others will not let their colleagues and co-workers cope with their job tasks. Consequentially, other employees may fall victims to the bad habits and negative attitudes of their co-workers. What to do with employees and their bad habits depends upon the situation. No matter the seriousness of the problem, firing an inefficient employee should always be a measure of

Monday, August 26, 2019

Social Status wk 3 Essay Example | Topics and Well Written Essays - 500 words

Social Status wk 3 - Essay Example status is inclusive of all societal positions one holds, a hostess may be seen to be lower in airplane position but back to the society she may be holding other influential positions such as being a pastor or a business leader, hence at the end of the day many people outside her hostess career will accord her a higher status than that of a pilot. Being in a certain status whether ascribed, achieved or master may be beneficial or detrimental to a person. A person born on a higher social status enjoys a higher degree of honor and prestige. Achieved status can be acquired by everyone, while an ascribed status may give an advantage to the race or gender believed to be superior and competent by the society. A good case for example describing the importance of social status that enables a person to have more life chances is being a Caucasian in a country like Unites States. National statistics have revealed that there is a higher probability that African American children are more likely to experience poverty than white children (Saunders, 1989). Ascribed status which includes gender, race or family relationships may be used by people to give them mileage over their competitors (Saunders, 1989). People in male gender for example may use their orientation to procure jobs requiring a lot of energy as the society believes that men are strong. In politics at many parts of the world men are preferred to be leaders than women thus a man even though does not have robust traits than a woman competitor has a higher probability of ascending to power in the society will first value the gender before other qualities. Another benefit of being is a superior status is that if you come from a rich family the society nowadays we value you a lot as you have a high chance of inheriting that wealth (Belkaoui, 2009). A person born by a highly placed politician always has an upper hand than a person whose family has never came across power, this is because these people from royal family

Sunday, August 25, 2019

Seeking Treatment In Houston Essay Example | Topics and Well Written Essays - 1250 words

Seeking Treatment In Houston - Essay Example The center is ranked number 1 in cancer care by the U.S. News and World report. The center is also the best ranked in the number of grants and research, having invested more than $647 million in 2002 (M.D. Anderson 1). The M.D. Anderson Cancer Center receives as many inbound patients as outbound patients in its cancer center. An independent body dealing with international patients traveling to the M.D. Anderson is necessary to deal with the issue arising from medical tourism. The hospital needs to set up a center that welcomes international patients, while offering consultancy services from skilled personnel not directly related to the center so as to not compromise advice given to patients. The center should also have interpreters and people whose main duty is to find accommodation and to explain the different types of services that can be offered. Challenges of Medical Tourism One of the main challenges of medical tourism is language barriers. According to Hodges, Turner and Kimbal l (256) most of the patients who seek medical tourism in the United States come from less developed countries that do not use English as the main language. This causes problems in interaction between the patients and medical practitioners. According to a study reported from the Center for Studying Health System Change in 2010, almost 50% of American Doctors stated that language differences can be the reason for hampering high quality care (Reschovsky and Boukus 2). Without dealing with these problem, doctors may be unable to correctly identify the problem hence introduce an inappropriate cancer treatment method. Patient may also be unable to choose between the various treatments available as they do not fully understand the advice given by healthcare practitioners. International patients may also be faced with lack of full disclosure about all the possible treatment techniques from the doctors (Stolley and Watson 46). This may not be due to malice but due to lack of understanding of the patient capabilities or want. Doctors may also decide to choose a particular course of treatment for the patient without consulting the patient fully. Patients, especially those from poor countries, may lack enough knowledge about treatment techniques available thus following the advice they received from doctors in their home countries without fully appreciating the advanced systems of M.D Anderson Cancer Center. Another problem patients from abroad face is difficulty in managing resources especially finances (Stolley and Watson 126). Due to the time taken by cancer treatment courses, patients have to live temporarily in the United States. This means they have to find housing, food, utilities and other needs in a country that is foreign to them. Patients also have to contend with medical bills that range from treatment courses to medicine during this time. While the patient may have saved some money for the treatment, it is usually very likely that they undermine other expense s involved in living in a foreign country. A suitable solution for this problem has to be availed so as to ensure that the patient is able to smoothly maneuver during the cancer treatment period. With help in the management of finances, patients may drop

Saturday, August 24, 2019

Healthcare Fraud Resulting in Fewer Referrals to Homecare Services Research Proposal

Healthcare Fraud Resulting in Fewer Referrals to Homecare Services - Research Proposal Example In fact, considering that the data on direct losses that is available regarding health care fraud today quite significantly underestimate the real value of the cost. While the healthcare fraud may not be very pronounced in the public domain currently, it may not be ignored as it has a potential of growing to astronomic levels given time and left unattended. Fraud has undermined the value of studies on healthcare practices, organization, and financing. In the healthcare sector, fraud has presented itself as a multi-faceted demon involving both individuals and corporate organizations. While some officials engaging in the provision of fraudulent or inaccurate data with an aim of getting corporate approval, some organizations engage in the withholding of data that may damage their reputation, the reputation of their products or researchers. The effects of health care fraud have far-reaching effects on the overall performance of the sector. Cases of fraud have for example impacted negatively the relationship between physicians and patients, and by extension, their relatives. In a bid to curb the problem of health care fraud, a number of measures have been introduced by the US government. The new measures have also impacted the way physicians provide services to patients – both in-patient and out-patient. This being the case, it may be postulated that healthcare fraud has had an impact on referrals to healthcare services. This research seeks to establish the existence of a correlation between health care fraud and the referral to home care services. Homecare caters for a wide range of social, medical and support services. Homecare services are entitled to people such as; the elderly, disabled people, those with long-term health conditions, terminally ill, chronically ill and to people who are recovering (Piper, Roberto, and Wacker, 2002).  

Friday, August 23, 2019

Satire in Shakespeare Essay Example | Topics and Well Written Essays - 2000 words

Satire in Shakespeare - Essay Example The true satirist is conscious of the frailty of institutions of man's devising and attempts through laughter not so much to tear them down as to inspire a remodeling" (Thrall, et al 436). There are many examples of satire in literature and media today. In literature, William Shakespeare has maintained a special place in satirical prose. He has satirized almost every folly and superficiality that he came to know of through his observations and interactions with people, yet his plays contain so many other features, that one couldn't label Shakespeare as a satirist. "There is satire, as there is everything else, in Shakespeare. The pseudo-statesman is satirized in Polonius, the courtier in Osric. Both Touchstone and Feste have caustic tongues. Malvolio shows that Shakespeare had no more liking for the Puritans than his fellow-players. Yet for all this, and for all that might be added, it would be absurd to rank Shakespeare among the satirists; and the same is true of the dramatists in general. Except when they fall into feud with one another, or with some class peculiarly obnoxious to them, they rarely make satire the staple of their plays". (Walker 114) "As you like it" is one of Shakespeare best comedies with a very high satirical tone. This play exposes the absurdity of human world, far more than any of Shakespeare's plays. In fact, it was first of its kind where the entire play 's main purpose was to ridicule certain people and situations. Pastoral romance is the focal point of his satire. On 1st July 1599, the government passed an order to suppress satirical work. This led to flaring struggles between the authorities and writers. Shakespeare closely observed this contest and created a satirical comedy on its bases. However, the dismayed and chaotic social conditions of England provided the main inducement for satirical work. In "As you like it", Jacques is the main character that fulfills the duty of a satirist. He belongs to the group of people who are discontent about life in general and are very vocal about their discontentment and dissatisfaction with life. He finds all happy people as foolish and so he finds all people in Arden and their happy temperaments as ridiculous. It includes some very hilarious pieces of prose, which are basically attempts at satirizing romance of country folk. Some of them are scenes such as those of heroine being kidnapped by robbers and saved in a heroic way by the hero and his brother. Some central characters of satire are Orlando who is a perfect lover, Rosalind and Celina who are perfect friends and Adam who is a perfect loyalist of conservative ideas. (Campbell, 44) Shakespeare in his play has tried to mock the romantic dreams of love-stricken couples, which take refuge in the countryside. However, when they reach there, they find that it is not so. In fact, it is far from the image, the people of city have of country. This is what Rosalind and Orlando had on their mind when they ran away from the injustices and atrocities of city, which were keeping them apart. Much to their surprise, they found out that this Forest of Arden was a land of terror. It wasn't where people who could live peacefully with each other in lap of nature. The country presented its own set of problems and challenges, in some cases more challenging than the city. Some characters were pure mockery of country folk, such as Silvius, Phebe, William and Audrey who are far from picture perfect image of their kind. The foolish,

Thursday, August 22, 2019

Implementation and Challenges of Lean Concept in Human resources Essay Example for Free

Implementation and Challenges of Lean Concept in Human resources Essay Going lean is the talk of the season. Almost all the big organizations are adopting lean practices; not only manufacturing but management. In this write-up I am going to discuss how HR as an organization’s function can help in lean transformation. A critically important issue in lean success, just now coming into clear view, is the relationship between the human resources (HR) function and lean transformation. It turns out that the HR function, even at its best, is often considered as only a passive supporter of lean transformation. At its worst, it is said to be a barrier to progress. There are two facets to the relationship between lean and HR. First, it is self-evident that the HR function—just like any other department in a company—needs to apply lean practices and principles toward process improvement in its own work. Second, the HR function needs to actively support and enforce lean transformation throughout the company. The HR function, by virtue of its interactions with virtually every part of a company, is actually in an ideal position to be a powerful ally in lean transformation, IF lean leaders make the effort to enlist its aid. Here we are discussing how HR makes a significant contribution to lean success with active support in several key areas. What is Lean (concept) Lean principles come from the Japanese manufacturing industry. The term was first coined by John Krafcik. From its inception Lean was considered as manufacturing tool but today lean has evolved from just a tool to a philosophy of success. The core idea of Lean philosophy is to maximize customer value while minimizing waste. Simply, lean means creating more value for customers with fewer resources. A lean organization understands customer value and focuses its key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect value creation process that has zero waste. To accomplish this, lean thinking changes the focus of management from optimizing separate technologies, assets, and vertical departments to optimizing the flow of products and services through entire value streams that flow horizontally across technologies, assets, and departments to customers. Eliminating waste along entire value streams, instead of at isolated points, creates processes that need less human effort, less space, less capital, and less time to make products and services at far less costs and with much fewer defects, compared with traditional business systems. Companies are able to respond to changing customer desires with high variety, high quality, low cost, and with very fast throughput times. Also, information management becomes much simpler and more accurate. Lean for production and services A popular misconception is that lean is suited only for manufacturing. Not true. Lean applies in every business and every process. It is not a tactic or a cost reduction program, but a way of thinking and acting for an entire organization. Businesses in all industries and services, including healthcare and governments, are using lean principles as the way they think and do. Many organizations choose not to use the word lean, but to label what they do as their own system, such as the Toyota Production System or the Danaher Business System. Why? To drive home the point that lean is not a program or short term cost reduction program, but the way the company operates. The word transformation or lean transformation is often used to characterize a company moving from an old way of thinking to lean thinking. It requires a complete transformation on how a company conducts business. This takes a long-term perspective and perseverance. The term lean was coined to describe Toyotas business during the late 1980s by a research team headed by Jim Womack. Lean Thinking Lean transformations think about three fundamental business issues that should guide the transformation of the entire organization: Purpose: What customer problems will the enterprise solve to achieve its own purpose of prospering? Process: How will the organization assess each major value stream to make sure each step is valuable, capable, available, adequate, flexible, and that all the steps are linked by flow, pull, and leveling? People: How can the organization insure that every important process has someone responsible for continually evaluating that value stream in terms of business purpose and lean process? How can everyone touching the value stream be actively engaged in operating it correctly and continually improving it? Just as a carpenter needs a vision of what to build in order to get the full benefit of a hammer, Lean Thinkers need a vision before picking up lean tools, said Womack. Thinking deeply about purpose, process, people is the key to doing this.

Wednesday, August 21, 2019

How Social Media is Transforming Events Marketing Management Essay Example for Free

How Social Media is Transforming Events Marketing Management Essay It is believed that social media began prior to the evolution of the internet. The telephone was the first tool of social media that gave people the chance to socialize and gather information. However, at the turn of twentieth century, online communication became popular among various groups of society. People began to get into virtual communication with the use of cellular phones and computers. Social networking became popular because it was a venue to draw people towards one another. This was also very universal and its popularity was not limited to a certain age group. Amazingly, social networking and social media â€Å"become part of mainstream culture and the business world† (â€Å"History†). It was observed that social media became very valuable not only in socializing and information gathering but also in business where there has been greater dependence on the use of internet in promoting and marketing of products and/or services. Social media has provided the modern world with easy access to information, socialization and entertainment in the fastest way possible through the advancement of technology. Interestingly, the networks have become highly interactive and user-friendly that even a neophyte could easily learn to operate it in a short period of time. Social media has transformed into a powerful means of communication using numerous gadgets which have caught the interest of a larger number of people, the business practitioners take advantage of it to broaden the scope of their marketing. Truly, with the emergence of social media where people can communicate interactively with one another regardless of distance, business has been given a special place and opportunity to advertise or promote their business to a much bigger populace. Most authors have recognized the definition of social media provided by Wikipedia as the initial source of information about it. Gradually, different definitions have been formulated to increase people’s awareness of its definition. Safko and Brake mentioned that social media â€Å"refers to activities, practices, and behaviors among communities of people who gather online to share information, knowledge, and opinions using conversational media† (2009: 6). On the other hand, Evans has an expanded definition of social media. He stated that â€Å"Social media is the democratization of information, transforming people from content readers into content publishers. It is a â€Å"shift from a broadcast mechanism to a many-to-many model, rooted in conversations between authors, people, and peers†¦Ã¢â‚¬  (2008: 33). The author acknowledged various forms of communication utilized in social media such as â€Å"internet forums, message boards, weblogs, wikis, podcasts, picture and video† (2008: 33). Later on, it expanded to include â€Å"blogs, picture-sharing, blogs, wall-postings, email, instant messaging, music-sharing, group creation and voice over IP. † Social media has a vast potential as a channel through which promotional activities will be forwarded to its users. Social media’s unique features make it very usable and functional in marketing events. Evans stated that it is â€Å"fundamentally different from traditional media† (2008: 33) known as newspaper, television, books, and radio. Social media is interactive media. This is one advantage of social media over traditional media. Other advantages include: (1) it has different social online channels, (2) it changes over time, and (3) it is participative. The power to influence the audience is what makes social media appealing to business practitioners. Social media is real. Existing right in front of the computer communicating genuinely in a personal way to the customer about a product is very advantageous for those who are using social media in marketing or in public relation campaign. Given the real nature of social media, event marketing has come to its new shape. At the same time, event marketing has begun to utilize the services of social media in marketing and promotion. Though at some point, they cater to similar interests; that is, individual interaction and the participation of people with the company’s representatives. Pomer, on the issue of integrating event marketing and social media, described event marketing as a strategy â€Å"which focuses on face-to-face interaction by attending, sponsoring and speaking at trade shows, industry meet-ups, etc† (par. ). Bowdin, Allen and O’Toole described strategic event marketing as â€Å"the process by which an event organization aligns business and marketing objectives and the environments in which they occur, with marketing activities that fulfill the needs of event consumers† (2006:184). Event marketing has come to its new shape through social media influence No one could deny how soci al media, being a vehicle of information and communication, has transformed event marketing into a more meaningful and highly strategic promotional activity. In Bulmer’s article on the impact of social media on business, he stated that the trend today is to â€Å"build a network or use social media to deepen customer intimacy† (par. 1). Social media has been used these days without acknowledging this fact as Bulmer put it. He emphasized that, the ability of social media to â€Å"change behavior †¦ and †¦ to impact a professional’s decision-making processes† is the real essence of success in using this in business. Practically, social media’s approach in dealing with the audience in a genuine and an interactive manner somehow influences the approaches of event management to its customers. Event marketing management therefore becomes livelier, customer-oriented, interactive, personal, and dependent on audience feedback. There are several reasons for this. First, admittedly, as Shone and Parry pointed out that â€Å"human society is complex and interactive† (2004: 50). It means that regardless of culture, different societies celebrate in diverse ways, from the ancient period to the modern times, from a traditional way to a technological way; it makes no difference as long as events involve people and celebration or activities. Shaping event management following the principles behind social media will help draw a lot of people to the message because there is interaction and exchange of communication. Secondly, various events such as festivities, wedding, etc. serve to â€Å"strengthen social bonds as well as to spread enjoyment around† (Shone Parry, 2004: 51). People’s primary intention for celebrating events publicly is to satisfy their longing for socialization and enjoyment. Thus, involving the community in events in such a way that they express inner satisfaction for socialization and enjoyment can make events management very successful. Shone and Parry stressed that without the â€Å"social contact that event often give, the feeling of isolation in society†¦ can be great† (2004: 51). Hence, event management must be in the context of the community’s perception of event celebration which is socialization and enjoyment. Given this, certain changes have been observed in conducting event marketing. Borges noted how businesses nowadays acknowledge social media as an â€Å"effective mechanism for reaching a target market† (2009: 57). He even emphasized that â€Å"myopic attitude† that a business executive has on social media will eventually lead him to lose the business. Moreover, a business executive having event marketing founded on social media will ultimately be â€Å"transparent, forthcoming, honest, sincere, and also to contribute something of worth† (Borges, 2009: 63). Since the events for the purpose of marketing require a group of community participation, the activities involved have had considerable improvement in terms of acceptable approaches in dealing with the community. The company’s marketing arm learns to be transparent, forthcoming, honest and sincere in everything they present before their audience. It is different from traditional marketing wherein its objective is purely making people buy or patronize a product using various ways to manipulate their decision-making. Hence, marketing an event for a product, presents live and active interaction and participation from the community online or offline. Event marketing management facilitates Social Media Marketing The great global financial crisis has brought to the mind of marketing managers the idea of utilizing social media in their promotional activities. The Twitter, Facebook, Flickr, Youtube, and many other social networking channels have been utilized for the purpose of marketing. The good news for marketing managers is that it is free. From the research findings presented by Bulmer in his article, he mentioned several impacts that social media has on business which helped transform event marketing to social media marketing. With such, he recognized the following findings: (1) decision making in the business world today is more social; (2) many professionals are using social networking sites particularly Facebook, LinkedIn, and Twitter; (3) many decisions have been drawn from information gathered through active users of social media; (4) many professionals trust the information they gather from the sites; (5) social media users have significantly increased in three years; and (6) many professionals collaborate well outside preferably using social media sites than within the organizational intranet (Bulmer). Hence, there is widespread recognition of the impact of social networking in business from the business world’s perspective. The growing business community participation in the online world proves the fact that â€Å"When you join a group online, you are joining a community† (Borges, 2009: 63). Social media started to become popular among groups of people for personal use primarily for communication purposes. Eventually, this became a good tool to interact, send greetings, and share information to friends. Most importantly, it had become a powerful instrument recognized to support the marketing arm of any business. Through social media, the way people do the business has transformed into ‘social sales’ because people believe in the power of online communication in mobilizing sales teams by building good relationship with customers. Shih recognized that social network marketing talks about the â€Å"breakthrough new marketing techniques made possible by online social networks†¦Ã¢â‚¬  (2009: 6). Some of these that she mentioned are: hypertargeting, enhanced ability to capture passive interest and conduct rapid testing and iteration on campaigns, social community engagement, and automated word-of-mouth marketing (Shih, 2009: 6). Furthermore, Tobin and Braziel emphasized that social media marketing plan is â€Å"based on engagement not traffic† (2008: 79) which means that this type of marketing focuses on â€Å"web events† or the interactions users have with features which could be in form of blogs, comments, post, video views, and many others. Importance of social media in marketing event Availing the use of social media for marketing purposes has a lot to offer to a business. Borges mentioned several benefits of social media aside from the fact that larger potential buyers who are receptive to new information and trend can be met through social network sites. Some of the benefits named are: low cost, brand building, staffing advantages, loyalty, level playing field, building trust, convergence of PR and social media for viral marketing, positive SEO benefits, quantifiable metrics, and educational (2008: 131-140). In terms of costs, social media requires a low budget which is almost free, for a service that values relationships. Brands are being built through a good content using the internet platform. Thus, it is simpler and appealing to consumers. Few, yet highly talented staff, who can work in an enjoyable work environment are needed when using social media because content is more important here. Using social media builds loyalty among internet users because of its being user-friendly. This is impossible to establish using advertisements and other promotional activities. Besides, all types of people can make use of it like anyone else regardless of economic or social status. Likewise, through a sincere voice in the content, the company can easily acquire trust from the people. In effect, social media as a PR tool can be an integral part of marketing activities. Furthermore, links attached to marketing in social media creates a bridge connecting to the company’s website thus increasing the chance of the customer browsing of the webpage. Learning is considered as one of the benefits of social media. Not only do the internet users learn but companies also learn. Armed with this information, social media has evolved from purely socialization and enjoyment to something highly beneficial to businesses. For this reason, there is no doubt for business executives to resort to using social media in one of the tools in marketing an event. Conclusion  Social media has begun existing without clear importance rather than for socialization and personal or group enjoyment. However, with the increasing popularity of social networking when the internet was introduced to the public in 1990, this form of social interaction gained remarkable importance not only among the general public but also among business groups locally and internationally. Indeed, the ability of the social media to satisfy the users with its personalized features, has led to the discovery that it could be a potential instrument in shaping the mind of the audience. Social media has unique characteristics. It can change perception, it is very appealing, and it is effective in marketing an event. However, any business executive who wants to use its service must understand how it serves the public. Its special features that draw people together from all walks of life are derived from an honest, transparent, forthcoming and sincere way of dealing with one another. This same way is expected among event marketers in order that marketing of events will be appropriate to users’ expectations.

Development of the Caspian Oil and Gas Sector

Development of the Caspian Oil and Gas Sector Caspian Oil Gas Role of FDI in Economic Development of Azerbaijan, Kazakhstan and Turkmenistan Abstract This paper underlines the foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and its role in economic development of each country. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. The first part of this paper overviews the Caspian region and its oil and gas reserves. More specifically this part summarises the role of foreign direct investment in oil and gas industry and how it promotes economic development of Caspian basin countries, namely Azerbaijan, Kazakhstan and Turkmenistan. The second part presents the theoretical framework of foreign direct investment. This part also reviews the previous empirical findings on types, determinants and motives of foreign direct investment. The part 3 comparatively analysis foreign direct investment performance in selected countries and factors which may influence the ability of a country to attract foreign investment. This part also overviews the investment climates in Azerbaijan, Kazakhstan and Turkmenistan. Part 4 concludes. Key Words: FDI, Caspian Sea region, Oil and Gas, Azerbaijan, Kazakhstan, Turkmenistan. 1 Introduction The Overview of the Caspian Sea Region It is wide recognized that foreign direct investment (FDI) can play an important role in the development process of many countries and it is much required. Economies in transition, such as those in Central Asia and the Caucasus, are no exception as they realize the important role of FDI in strengthening their transition process. While some of them have sizable deposits of oil, gas and minerals which are major attractions to foreign investors, others, being less endowed, have more difficulty to attract FDI to their fledgling industrial and service sectors. But in even those countries which are well endowed with natural resources, there is a thrust to diversify their economies away from over-dependence on those resources and to develop viable value-added manufacturing industries and services. FDI can play a major catalytic role in this process. Just a decade years ago the areas on each side of the Caspian Sea – Central Asia to its east side and the Transcaucasia to its west were largely unknown. These regions were provinces of the Soviet Empire important to the outside world neither politically nor economically. Now its is well known that the Caspian Sea is largest land-locked body of water on Earth, bordered by Azerbaijan, Russia, Kazakhstan, Turkmenistan and Iran – the Caspian basin countries (see Map 1). Amongst the five countries only Iran is a member of the Organization of Petroleum Exporting Countries. Kazakhstan, Azerbaijan and Turkmenistan became independent after collapse of Soviet Union in 1991. Once a centre of global commerce, the Caspian Sea region has languished in obscurity ever since the rise of the sailing ship rendered the Silk Road obsolete a half millennium ago (Olcott, 1998). After discovery of oil and gas resources in the Caspian offshore and shore areas, this region became very important oil and gas sector in global context. Moreover, owing to energy security and geopolitical reasons, the Caspian region became very attractive for the West. Azerbaijan became one of the world’s first oil sectors after crude oil production started in Baku in the middle of 19th century. The oil production in Central Asia started in the beginning of the 20th century. Azerbaijan recorded about 70% of Soviet oil production by end of 1940. The former Soviet Union controlled almost all natural resources in Soviet Republics. At the time of their independence, Soviet republics were quasi-states (Olcott, 1998). Each republic has its own president and prime minister, local and national legislatures. The political and economic liberalisation of the Soviet Union in the mid-1980s attracted foreign investors and oil and gas companies interested in exploration and production prospects. The collapse of the Soviet Union gave further opportunities for the liberalisation of investment regulations. By the late 1990s the Caspian region was comparatively politically stable region, and a number of countries significantly improved investment regimes to their oil and gas sectors. Historically, energy industry in Azerbaijan, Russia, Kazakhstan, Turkmenistan and Uzbekistan is very important sector for the economy growth of these countries. However, poor management of natural resources and poor investment climate in these countries lead to disparities emergent between the countries in socio-economic terms. Nowadays, it is well recognized that foreign investment plays a vital role in the development of the oil and gas sector for such countries as Azerbaijan, Kazakhstan and Turkmenistan and significantly stimulates social and economic development of each of these countries. 1.2 Research Questions The presence of potentially vast oil and gas reserves is a part of the foreign investment attraction into the Caspian Sea region. On the other hand, it is important to note that while the quantity of proven reserves undoubtedly plays a significant role in estimating a region’s production and export potential, the other decisive factors for attraction foreign direct investment into this region are undeveloped market, cheap labour and cheap inputs and weak competition. This paper focuses on foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan; and on what foreign direct investment strategy in each country are based. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and performance by each country. The significant number of researches in regard to foreign direct investment mostly explains the investment strategy in the developed countries, when limited study has done on investment in less-developed countries or emerging countries. The selected countries Azerbaijan, Kazakhstan and Turkmenistan are transition countries and to a certain extent new participants in the competition to attract foreign investment. These countries can offer many potential advantages to foreign investor, especially in oil and gas sector of business. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. There is no much research which explores the determinants of investment in Azerbaijan, Kazakhstan and Turkmenistan, the stereotypes and perceptions that foreign investors have about these countries and what could be done to increase the foreign direct investment flow into these countries. This paper surveys these parts by investigating the multinational oil companies operating in Azerbaijan, Kazakhstan and Turkmenistan. The data from different energy agencies were gathered for comparative analysis of oil and gas data as well as foreign direct investment in different countries. This would not only let one to have a picture of various state strategies related to foreign investment, but could also provide the valuable outlook of the most advantageous approach for transition countries in doing business with foreign investors. 1.3 The Legal Status of Caspian Sea A large share of oil and gas reserves in Central Asia and Caucasus are thought to lie under he Caspian Sea. The question of the ownership of those resources, including the right to license and tax their development, is being argued by the Caspian littoral countries. The legal debate over the Caspian Sea can be tracked back to the 1921 Treaty to Moscow, reaffirmed in 1935, which declared that the inland Caspian Sea belonged to Russia (Kemp, 2000). Later Russia sent a note to the United Nations dated from 5th October 1994, where Russian Ministry of Foreign Affairs stated that the Caspian Sea should not be subject to the provisions of international maritime law (International Energy Agency, 1998). The importance of the application of international law is that a â€Å"sea† under the 1982 Law of the Sea Convention would be subject to separation into national zones for the development of its mineral resources. Russia stated that until all five of the Caspian littoral states (Azerbaijan, Russia, Kazakhstan, Turkmenistan, and Iran) came to a common decision on some other arrangement, the legal status of the Caspian Sea was subject only to the provisions of the more general (Treaty of Friendship between Iran and the USSR of 26 February 1921 and Treaty between Iran and the USSR on Trade and Maritime Navigation of 26 March 1940). Nevertheless, the ongoing legal uncertainty does not seem considerably decreased foreign investment in the Caspian Sea region. Advantageous geological prospects, with potential of a major oil and gas resource base, show significant motivations for companies to invest in this important producing region, preferably from the beginning of its development. 1.4 Current Production and Proven Reserves in Caspian Region Caspian oil presents a lot of opportunities for world oil markets and for the region itself (Energy Charter Secretariat, 2008): The appearance of new production sources would expand world oil supplies. Major quantities of Caspian oil would ease the pressure on the Persian Gulf production capacity and provide an additional hedge against oil supply disruptions Profits from oil exports could stimulate economic growth and improve the standard of living in the Caspian energy-rich counties. The availability of Caspian energy supplies in world markets will likewise improve the prospects for economic growth and political stability in the Caspian basin countries. Nowadays the Caspian Sea region is important, but not major supplier of crude oil to world markets, based upon estimates by British Petroleum (BP) and the Energy Information Administration (EIA). In 2005 the Caspian region produced 2.1 million barrels per day, or 2 per cent of total world production (see Table 1). Kazakhstan’s production rapidly increased since the late 1990s, accounted for 67 per cent and Azerbaijan for 22 per cent of regional crude oil production in 2005. The Caspian Sea region’s comparative contribution to world natural gas supplies is larger than that for oil. Gas production of 3.0 trillion cubic feet per year in 2005 was 3 percent of world production (Energy Information Administration, 2006). Turkmenistan is the largest producer; with production of 2.0 trillion cubic feet per year, it accounts for almost two-thirds of the region’s gas production. (see Figure 1). Unlike oil, the region’s proven reserves of natural gas are a higher proportion of the world total than is its natural gas production. The estimate of proven reserves of natural gas in the Caspian Sea region for the end of 2006 published by Energy Information Administration is 232 trillion cubic feet per year, which represents 4 per cent of the world total (see Table 2). Table 1Oil Production in the Caspian Sea Region 1. Proven reserves are defined by the EIA 2. Possible reserves 3. Other estimates (EIA/IEO 2006) 3.45 million barrels per day, (World Oil, 10 March 2004) 3 million ^Only Caspian area oil and gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Table 2Gas Production in the Caspian Sea Region ^Only Caspian area gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Figure 1 Gas Production in Caspian Sea region (1992-2004) Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. 1.5 Role of Oil and Gas in the Economic Development of Caspian Region The development of oil and gas resources in the Caspian region is mostly important for the development of economies in the Central Asian and Transcaucasia. In 1995 the energy sector’s share of gross domestic product (GDP) was an estimated 14.6 percent in Azerbaijan, 10.1 percent in Kazakhstan, 10.2 percent in Turkmenistan (International Energy Agency, 1998). Foreign investment attracted to the oil and gas sector in Caspian region could offer significant profits for the region’s governments and stimulate investment in other economic sectors. The attract foreign investment the host Governments should take discreet measures to ensure the development of an sufficient legal and administrative infrastructure, including institution building and personnel training, to handle the inflow of oil related revenues and to help ensure the countries’ efficient and equitable development. International Monetary Fund (2003) expressed concerns that unless regional governments introduce further administrative reforms, they risk being overwhelmed by new oil wealth. Particularly, corruption is a peril. Economic development motivated by foreign investment in the oil and gas industry helps to guarantee the financial independence of the Central Asian and Transcaucasian states. The transition to the market economy and the economic dislocations originated by collapse of Soviet Union left Azerbaijan, Kazakhstan and Turkmenistan without adequate funds to develop oil and gas resources. Governments of these countries are looking for private investment (mainly from foreign companies) that would play significant role in the development of oil and gas industry. Besides financial capital, a foreign investor brings a modern technology to local industry, including environmentally sound production techniques and modern management approaches. The Caspian Sea region countries are competing with each other for foreign investment. Oil and gas companies have a wide choice of where to make investment. The foreign investor considers the opportunities that offer the best financial returns. However, the investment climate is vital for company’s decision on where to invest. As a result, Kazakhstan and Azerbaijan took considerable steps in creating attractive investment climates. Kazakhstan concentrated on building a body of law applicable to all projects, while Azerbaijan focused primarily on modified production sharing agreements (International Monetary Fund, 2003). By the beginning of 1998, cumulative foreign direct investment in the oil and gas sectors of Central Asia and Transcaucasia had reached an estimated 3 billion of American dollars, nearly one third of which was placed in 1997. Future investment commitments in the region from contracts already signed total over 40 billion of America dollars (International Energy Agency, 1998). So far most foreign investment has been in Kazakhstan and Azerbaijan. Gas-endowed Turkmenistan started to attract foreign investment later than the others due to Government dictatorship and poor investment climate. Caspian oil development has gained a great deal of political and commercial momentum since the first foreign companies came there at the end of 1980s (Ruseckas, 2000). Since then the most important external factor influencing Caspian oil development is the price of oil. Principally if oil prices remain at present high level it is possible the more optimistic projects will be started. The Caspian Sea region could possibly produce approximately 4 million barrels per day by 2010. In any case, the Caspian Sea states require a stable legal regime to develop, produce, transport and market its natural resources. 1.5.1 Summary data on Azerbaijan Owing to extensive oil reserves, Azerbaijan is a major oil producer since the middle of the last century. Between 1990 and 1995 Azerbaijan’s gross domestic product dropped 58 percent (International Energy Agency, 1998). Oil production fell by only 25 percent mainly because of continuing oil product exports to neighbouring countries and an increasing use of heavy fuel oil in domestic power stations to alternative for imported gas. Due to the tightening of monetary and budgetary policies, the fiscal deficit dropped from 11.4 percent of gross domestic product in 1995 to less than 2 percent in 1996. In 2006 Azerbaijans real gross domestic product grew by 31 percent when the oil production in this region significantly increased. Azerbaijans anticipate for sustained economic growth is in its managing of large oil and natural gas resources in the Caspian Sea region, through effective management of the resulting revenue stream, and non-oil sector diversification (Energy Information Administration, 2006). During the beginning of transition most Azerbaijan onshore oil fields were in decline and required momentous new investment to develop large-scale offshore projects and to reconstruct existing fields. Since independence Azerbaijan signed several agreements with foreign oil companies. While maintaining full state ownership over energy companies, Azerbaijan was quick to invite foreign investors to assume a direct role in the development of its hydrocarbon reserves (Thompson, 2004). In 1992 most of the Azerbaijan oil sector assets were merged in two state oil companies – Azerineft and Azneftkimiya. The new merger was called the State Oil Company of the Azerbaijan Republic or SOCAR. While Government organizations handle production and exploration agreements with foreign companies, SOCAR is body to all international companies developing new oil and gas projects in Azerbaijan. After the first commercial oil flows through the Baku-Tbilisi-Ceyhan pipeline during summer 2006 and the increasing oil production from the Azeri-Chirag-Guneshli project, oil revenues are expected to contribute to a doubling of Azerbaijan’s gross domestic product by 2008 (Thompson, 2004). Energy Information Administration (2007) reports that though the oil sector represented around 10 percent of Azerbaijan’s gross domestic product in 2005, it is already projected to double to almost 20 percent of gross domestic product in 2007 (see Table 3). To manage the revenues, former President of Azerbaijan Heydar Aliyev formed a State Oil Fund in 1999, which is designed to use money obtained from oil-related foreign investment for poverty reduction, education and raising rural living standards. As of the end of 2006, the State Oil Fund reported assets of almost 2 billion US dollars, but the fund’s assets are expected to increase to 36 billion US dollars by 2010 (Energy Information Administration, 2006). Table 3Azerbaijan: Economy and Energy (in millions US dollars) 2003 2004 2005 2006 2007 2010 Oil Production (thousand barrels per day) 320 319 441 648 860 1,300 Oil Exports (thousand barrels per day) 215 204 314 521 721 N/A Foreign Direct Investment 3,285 3,556 1,680 -219 -4,750 476 FDI in Oil Sector 3,246 3,461 1,459 -573 -5,198 366 Oil Sector Revenue 886 946 1,337 2,921 5,272 19,417 As share of total rev (%) 42% 38% 39% 51% 59% N/A As share of total GDP (%) N/A N/A 9.8% 15% 19.7% 43.3% Oil Fund Assets 816 972 1,394 1,936 3,093 36,387 Source: Energy Information Administration: Short Term Energy Outlook, 2007; International Monetary Fund (IMF), Article IV Consultation, Staff Report, No 07/191, June 2007 1.5.2 Summary Data on Kazakhstan As it was the case in most other former Soviet Union countries, Kazakhstan’s first attempts at economic reform were effectively taken in response to Russias one-sided price reforms in 1992. After Kazak oil production had suddenly declined for two years in the end of 1993, inflation had out of control. The efforts to create an economic union with Russia and other former Soviet Union countries didn’t meet expectations of the Kazakh Government. Looking at the dynamic Asian economies as a model, the Kazakh Government turned to market style policies. However, the government increased hard budget constraints and restrictive monetary policies due to attempts to solve non-payment problem through state financing. The remained net debts after netting out inter-industry arrears were financed from Government budget and the central bank. In 1993 International Monetary Fund (IMF) granted Kazakhstan a one-year standby package. To maintain IMF collaboration and to stop the decline in gross domestic product, the Kazakh government implemented a second stabilisation program in 1995. But this time hard budget constraints and monetary policy were strengthened by excluding of government financing of net positions in inter-enterprise debts and retreating government guarantees for loans granted by foreign and domestic banks. In the middle of 1996, the International Monetary Fund approved an Extended Fund Facility (EFF) of 446 million US dollars for three years (IMF, 2003). According to International Monetary Fund (2003) the decision was made in light of a wide-ranging three-year reform programme submitted by the government, as well as the positive longer term prospects for production and exports of energy and non-ferrous metals. In 1996, Kazakhstan experienced its first positive economic growth since 1989. 1.5.3 Summary Data on Turkmenistan Preceding the collapse of the Soviet Union approximately 8 percent Turkmenistan’s gross domestic product was generated by gas exports to the rest of the USSR mostly to Belarus, Ukraine and the Caucasus. Another 5 percent of gross domestic product was earned from cotton exports. Gas and cotton exports continue to be used to cover the import of considerable amounts of grain and capital equipment from other former Soviet Republics. While estimates for the fall of gross domestic product between 1990 and 1995 vary depending on how adjustments to official gross domestic product are made, International Monetary Fund and European Bank of Reconstruction and Development agree on about -35 percent (IMF, 2003). This is much less than the 58 percent drop in Turkmen gas production. The rest of the economy is basically agricultural. The cotton industry has been less affected by the downfall of the Soviet Union. The government gradually liberalised some prices beginning in 1992. A presidential decree of 1995 removed price controls on all products except for about 50 items, including energy. The government introduced the manat as the national currency in 1993. In 1995 it unified the previously separate official and commercial exchange rates, which subsequently became determined by inter-bank auctions for foreign exchange. Between 1992 and 1995 the government compensated for the shortfall in revenue from taxes on gas production and exports by cutting expenditures and replacing subsidies to the economy with additional allocations of credit at largely negative interest rates. Controlled prices were adjusted repeatedly but declined in real terms for natural gas and for oil products through 1994. The share of gas related revenues in the central budget declined from 60 percent in 1992 to under 20 percent in 1995, which lowered the share of total budgetary revenue in GDP from 40 percent to 10 percent during this period. Due to drastic expenditure cuts in government wages and investment, including maintenance, the central budget deficit remained fairly stable over this period. It also helped that new excise taxes were introduced in 1995 on petrol (55 percent) and diesel (60 percent). This resulted in some recovery of government capital spending. The easy money policy was changed slowly in 1995 and 1996. During this time foreign exchange surrender requirements of state-owned enterprises to the Foreign Exchange Reserve Fund (FERF) were increased to 50 percent for gas and oil exports, and the money allocated directly to the central budget. Prior to that, this fund had been used to award credits to the economy, contributing to monetary expansion. In 1995 and 1996, bank credit allocation was reduced, real interest rates rose (due to credit auctions with deregulated interest rates), and reserve requirements for banks were increased. However, the pursuit of these policies was not smooth, in part due to the limited political autonomy of the Central Bank. Nevertheless, inflation decelerated by 50 percent towards the end of 1995 and is estimated to have been 445 percent in 1996, and 21 percent in 1997. Despite plummeting gas exports in recent years, Turkmenistan’s current account was slightly positive in 1994 and 1995, as long as arrears owed to the country are not taken into account. If such arrears are counted the 1995 balance swings from an estimated surplus of 54 million US Dollars to a deficit of 289 million US Dollars. The situation has probably continued to deteriorate due to weak gas exports. 2 Theoretical Frameworks 2.1 Overview of Foreign Direct Investment Theories There is variety of empirical studies on theoretical models explaining foreign direct investment (FDI) and its determinants. The various approaches from different disciplines such as economics, international business, organisation and management explain numerous characteristics of this phenomenon. The following dissimilar methods, explaining foreign direct investment as the location decision of multinational enterprises are mostly acknowledged in empirical literature on FDI: Ownership advantages as determinants of foreign direct investment (including monopolistic advantage and internalisation theory) based on imperfect competition models and the view that multinational enterprises (MNEs) are firms with market power (Hymer, 1960; Buckley and Casson, 1979; Kindleberger, 1969; Caves, 1971 for ownership advantages) Determinants according to the Neoclassical Trade Theory and the Heckscher-Ohlin model, where capital moves across countries due to differences in capital returns (for example Markusen et al, 1995,pp. 98-128; Aliber, 1970); Determinants of foreign direct investment in Dunning’s ownership-location-internalization (OLI) framework, which brought together traditional trade economics, ownership advantages and internalisation theory (Dunning, 1977; 1979); Determinants of foreign direct investment according to the horizontal FDI model or Proximity- Concentration Hypothesis (Krugman, 1983; Markusen, 1984; Ethier, 1986; Horstmann and Markusen, 1992; Brainard, 1993); Determinants of foreign direct investment according to the vertical FDI model, Factor-Proportions Hypothesis or the theory Development of the Caspian Oil and Gas Sector Development of the Caspian Oil and Gas Sector Caspian Oil Gas Role of FDI in Economic Development of Azerbaijan, Kazakhstan and Turkmenistan Abstract This paper underlines the foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and its role in economic development of each country. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. The first part of this paper overviews the Caspian region and its oil and gas reserves. More specifically this part summarises the role of foreign direct investment in oil and gas industry and how it promotes economic development of Caspian basin countries, namely Azerbaijan, Kazakhstan and Turkmenistan. The second part presents the theoretical framework of foreign direct investment. This part also reviews the previous empirical findings on types, determinants and motives of foreign direct investment. The part 3 comparatively analysis foreign direct investment performance in selected countries and factors which may influence the ability of a country to attract foreign investment. This part also overviews the investment climates in Azerbaijan, Kazakhstan and Turkmenistan. Part 4 concludes. Key Words: FDI, Caspian Sea region, Oil and Gas, Azerbaijan, Kazakhstan, Turkmenistan. 1 Introduction The Overview of the Caspian Sea Region It is wide recognized that foreign direct investment (FDI) can play an important role in the development process of many countries and it is much required. Economies in transition, such as those in Central Asia and the Caucasus, are no exception as they realize the important role of FDI in strengthening their transition process. While some of them have sizable deposits of oil, gas and minerals which are major attractions to foreign investors, others, being less endowed, have more difficulty to attract FDI to their fledgling industrial and service sectors. But in even those countries which are well endowed with natural resources, there is a thrust to diversify their economies away from over-dependence on those resources and to develop viable value-added manufacturing industries and services. FDI can play a major catalytic role in this process. Just a decade years ago the areas on each side of the Caspian Sea – Central Asia to its east side and the Transcaucasia to its west were largely unknown. These regions were provinces of the Soviet Empire important to the outside world neither politically nor economically. Now its is well known that the Caspian Sea is largest land-locked body of water on Earth, bordered by Azerbaijan, Russia, Kazakhstan, Turkmenistan and Iran – the Caspian basin countries (see Map 1). Amongst the five countries only Iran is a member of the Organization of Petroleum Exporting Countries. Kazakhstan, Azerbaijan and Turkmenistan became independent after collapse of Soviet Union in 1991. Once a centre of global commerce, the Caspian Sea region has languished in obscurity ever since the rise of the sailing ship rendered the Silk Road obsolete a half millennium ago (Olcott, 1998). After discovery of oil and gas resources in the Caspian offshore and shore areas, this region became very important oil and gas sector in global context. Moreover, owing to energy security and geopolitical reasons, the Caspian region became very attractive for the West. Azerbaijan became one of the world’s first oil sectors after crude oil production started in Baku in the middle of 19th century. The oil production in Central Asia started in the beginning of the 20th century. Azerbaijan recorded about 70% of Soviet oil production by end of 1940. The former Soviet Union controlled almost all natural resources in Soviet Republics. At the time of their independence, Soviet republics were quasi-states (Olcott, 1998). Each republic has its own president and prime minister, local and national legislatures. The political and economic liberalisation of the Soviet Union in the mid-1980s attracted foreign investors and oil and gas companies interested in exploration and production prospects. The collapse of the Soviet Union gave further opportunities for the liberalisation of investment regulations. By the late 1990s the Caspian region was comparatively politically stable region, and a number of countries significantly improved investment regimes to their oil and gas sectors. Historically, energy industry in Azerbaijan, Russia, Kazakhstan, Turkmenistan and Uzbekistan is very important sector for the economy growth of these countries. However, poor management of natural resources and poor investment climate in these countries lead to disparities emergent between the countries in socio-economic terms. Nowadays, it is well recognized that foreign investment plays a vital role in the development of the oil and gas sector for such countries as Azerbaijan, Kazakhstan and Turkmenistan and significantly stimulates social and economic development of each of these countries. 1.2 Research Questions The presence of potentially vast oil and gas reserves is a part of the foreign investment attraction into the Caspian Sea region. On the other hand, it is important to note that while the quantity of proven reserves undoubtedly plays a significant role in estimating a region’s production and export potential, the other decisive factors for attraction foreign direct investment into this region are undeveloped market, cheap labour and cheap inputs and weak competition. This paper focuses on foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan; and on what foreign direct investment strategy in each country are based. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and performance by each country. The significant number of researches in regard to foreign direct investment mostly explains the investment strategy in the developed countries, when limited study has done on investment in less-developed countries or emerging countries. The selected countries Azerbaijan, Kazakhstan and Turkmenistan are transition countries and to a certain extent new participants in the competition to attract foreign investment. These countries can offer many potential advantages to foreign investor, especially in oil and gas sector of business. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. There is no much research which explores the determinants of investment in Azerbaijan, Kazakhstan and Turkmenistan, the stereotypes and perceptions that foreign investors have about these countries and what could be done to increase the foreign direct investment flow into these countries. This paper surveys these parts by investigating the multinational oil companies operating in Azerbaijan, Kazakhstan and Turkmenistan. The data from different energy agencies were gathered for comparative analysis of oil and gas data as well as foreign direct investment in different countries. This would not only let one to have a picture of various state strategies related to foreign investment, but could also provide the valuable outlook of the most advantageous approach for transition countries in doing business with foreign investors. 1.3 The Legal Status of Caspian Sea A large share of oil and gas reserves in Central Asia and Caucasus are thought to lie under he Caspian Sea. The question of the ownership of those resources, including the right to license and tax their development, is being argued by the Caspian littoral countries. The legal debate over the Caspian Sea can be tracked back to the 1921 Treaty to Moscow, reaffirmed in 1935, which declared that the inland Caspian Sea belonged to Russia (Kemp, 2000). Later Russia sent a note to the United Nations dated from 5th October 1994, where Russian Ministry of Foreign Affairs stated that the Caspian Sea should not be subject to the provisions of international maritime law (International Energy Agency, 1998). The importance of the application of international law is that a â€Å"sea† under the 1982 Law of the Sea Convention would be subject to separation into national zones for the development of its mineral resources. Russia stated that until all five of the Caspian littoral states (Azerbaijan, Russia, Kazakhstan, Turkmenistan, and Iran) came to a common decision on some other arrangement, the legal status of the Caspian Sea was subject only to the provisions of the more general (Treaty of Friendship between Iran and the USSR of 26 February 1921 and Treaty between Iran and the USSR on Trade and Maritime Navigation of 26 March 1940). Nevertheless, the ongoing legal uncertainty does not seem considerably decreased foreign investment in the Caspian Sea region. Advantageous geological prospects, with potential of a major oil and gas resource base, show significant motivations for companies to invest in this important producing region, preferably from the beginning of its development. 1.4 Current Production and Proven Reserves in Caspian Region Caspian oil presents a lot of opportunities for world oil markets and for the region itself (Energy Charter Secretariat, 2008): The appearance of new production sources would expand world oil supplies. Major quantities of Caspian oil would ease the pressure on the Persian Gulf production capacity and provide an additional hedge against oil supply disruptions Profits from oil exports could stimulate economic growth and improve the standard of living in the Caspian energy-rich counties. The availability of Caspian energy supplies in world markets will likewise improve the prospects for economic growth and political stability in the Caspian basin countries. Nowadays the Caspian Sea region is important, but not major supplier of crude oil to world markets, based upon estimates by British Petroleum (BP) and the Energy Information Administration (EIA). In 2005 the Caspian region produced 2.1 million barrels per day, or 2 per cent of total world production (see Table 1). Kazakhstan’s production rapidly increased since the late 1990s, accounted for 67 per cent and Azerbaijan for 22 per cent of regional crude oil production in 2005. The Caspian Sea region’s comparative contribution to world natural gas supplies is larger than that for oil. Gas production of 3.0 trillion cubic feet per year in 2005 was 3 percent of world production (Energy Information Administration, 2006). Turkmenistan is the largest producer; with production of 2.0 trillion cubic feet per year, it accounts for almost two-thirds of the region’s gas production. (see Figure 1). Unlike oil, the region’s proven reserves of natural gas are a higher proportion of the world total than is its natural gas production. The estimate of proven reserves of natural gas in the Caspian Sea region for the end of 2006 published by Energy Information Administration is 232 trillion cubic feet per year, which represents 4 per cent of the world total (see Table 2). Table 1Oil Production in the Caspian Sea Region 1. Proven reserves are defined by the EIA 2. Possible reserves 3. Other estimates (EIA/IEO 2006) 3.45 million barrels per day, (World Oil, 10 March 2004) 3 million ^Only Caspian area oil and gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Table 2Gas Production in the Caspian Sea Region ^Only Caspian area gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Figure 1 Gas Production in Caspian Sea region (1992-2004) Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. 1.5 Role of Oil and Gas in the Economic Development of Caspian Region The development of oil and gas resources in the Caspian region is mostly important for the development of economies in the Central Asian and Transcaucasia. In 1995 the energy sector’s share of gross domestic product (GDP) was an estimated 14.6 percent in Azerbaijan, 10.1 percent in Kazakhstan, 10.2 percent in Turkmenistan (International Energy Agency, 1998). Foreign investment attracted to the oil and gas sector in Caspian region could offer significant profits for the region’s governments and stimulate investment in other economic sectors. The attract foreign investment the host Governments should take discreet measures to ensure the development of an sufficient legal and administrative infrastructure, including institution building and personnel training, to handle the inflow of oil related revenues and to help ensure the countries’ efficient and equitable development. International Monetary Fund (2003) expressed concerns that unless regional governments introduce further administrative reforms, they risk being overwhelmed by new oil wealth. Particularly, corruption is a peril. Economic development motivated by foreign investment in the oil and gas industry helps to guarantee the financial independence of the Central Asian and Transcaucasian states. The transition to the market economy and the economic dislocations originated by collapse of Soviet Union left Azerbaijan, Kazakhstan and Turkmenistan without adequate funds to develop oil and gas resources. Governments of these countries are looking for private investment (mainly from foreign companies) that would play significant role in the development of oil and gas industry. Besides financial capital, a foreign investor brings a modern technology to local industry, including environmentally sound production techniques and modern management approaches. The Caspian Sea region countries are competing with each other for foreign investment. Oil and gas companies have a wide choice of where to make investment. The foreign investor considers the opportunities that offer the best financial returns. However, the investment climate is vital for company’s decision on where to invest. As a result, Kazakhstan and Azerbaijan took considerable steps in creating attractive investment climates. Kazakhstan concentrated on building a body of law applicable to all projects, while Azerbaijan focused primarily on modified production sharing agreements (International Monetary Fund, 2003). By the beginning of 1998, cumulative foreign direct investment in the oil and gas sectors of Central Asia and Transcaucasia had reached an estimated 3 billion of American dollars, nearly one third of which was placed in 1997. Future investment commitments in the region from contracts already signed total over 40 billion of America dollars (International Energy Agency, 1998). So far most foreign investment has been in Kazakhstan and Azerbaijan. Gas-endowed Turkmenistan started to attract foreign investment later than the others due to Government dictatorship and poor investment climate. Caspian oil development has gained a great deal of political and commercial momentum since the first foreign companies came there at the end of 1980s (Ruseckas, 2000). Since then the most important external factor influencing Caspian oil development is the price of oil. Principally if oil prices remain at present high level it is possible the more optimistic projects will be started. The Caspian Sea region could possibly produce approximately 4 million barrels per day by 2010. In any case, the Caspian Sea states require a stable legal regime to develop, produce, transport and market its natural resources. 1.5.1 Summary data on Azerbaijan Owing to extensive oil reserves, Azerbaijan is a major oil producer since the middle of the last century. Between 1990 and 1995 Azerbaijan’s gross domestic product dropped 58 percent (International Energy Agency, 1998). Oil production fell by only 25 percent mainly because of continuing oil product exports to neighbouring countries and an increasing use of heavy fuel oil in domestic power stations to alternative for imported gas. Due to the tightening of monetary and budgetary policies, the fiscal deficit dropped from 11.4 percent of gross domestic product in 1995 to less than 2 percent in 1996. In 2006 Azerbaijans real gross domestic product grew by 31 percent when the oil production in this region significantly increased. Azerbaijans anticipate for sustained economic growth is in its managing of large oil and natural gas resources in the Caspian Sea region, through effective management of the resulting revenue stream, and non-oil sector diversification (Energy Information Administration, 2006). During the beginning of transition most Azerbaijan onshore oil fields were in decline and required momentous new investment to develop large-scale offshore projects and to reconstruct existing fields. Since independence Azerbaijan signed several agreements with foreign oil companies. While maintaining full state ownership over energy companies, Azerbaijan was quick to invite foreign investors to assume a direct role in the development of its hydrocarbon reserves (Thompson, 2004). In 1992 most of the Azerbaijan oil sector assets were merged in two state oil companies – Azerineft and Azneftkimiya. The new merger was called the State Oil Company of the Azerbaijan Republic or SOCAR. While Government organizations handle production and exploration agreements with foreign companies, SOCAR is body to all international companies developing new oil and gas projects in Azerbaijan. After the first commercial oil flows through the Baku-Tbilisi-Ceyhan pipeline during summer 2006 and the increasing oil production from the Azeri-Chirag-Guneshli project, oil revenues are expected to contribute to a doubling of Azerbaijan’s gross domestic product by 2008 (Thompson, 2004). Energy Information Administration (2007) reports that though the oil sector represented around 10 percent of Azerbaijan’s gross domestic product in 2005, it is already projected to double to almost 20 percent of gross domestic product in 2007 (see Table 3). To manage the revenues, former President of Azerbaijan Heydar Aliyev formed a State Oil Fund in 1999, which is designed to use money obtained from oil-related foreign investment for poverty reduction, education and raising rural living standards. As of the end of 2006, the State Oil Fund reported assets of almost 2 billion US dollars, but the fund’s assets are expected to increase to 36 billion US dollars by 2010 (Energy Information Administration, 2006). Table 3Azerbaijan: Economy and Energy (in millions US dollars) 2003 2004 2005 2006 2007 2010 Oil Production (thousand barrels per day) 320 319 441 648 860 1,300 Oil Exports (thousand barrels per day) 215 204 314 521 721 N/A Foreign Direct Investment 3,285 3,556 1,680 -219 -4,750 476 FDI in Oil Sector 3,246 3,461 1,459 -573 -5,198 366 Oil Sector Revenue 886 946 1,337 2,921 5,272 19,417 As share of total rev (%) 42% 38% 39% 51% 59% N/A As share of total GDP (%) N/A N/A 9.8% 15% 19.7% 43.3% Oil Fund Assets 816 972 1,394 1,936 3,093 36,387 Source: Energy Information Administration: Short Term Energy Outlook, 2007; International Monetary Fund (IMF), Article IV Consultation, Staff Report, No 07/191, June 2007 1.5.2 Summary Data on Kazakhstan As it was the case in most other former Soviet Union countries, Kazakhstan’s first attempts at economic reform were effectively taken in response to Russias one-sided price reforms in 1992. After Kazak oil production had suddenly declined for two years in the end of 1993, inflation had out of control. The efforts to create an economic union with Russia and other former Soviet Union countries didn’t meet expectations of the Kazakh Government. Looking at the dynamic Asian economies as a model, the Kazakh Government turned to market style policies. However, the government increased hard budget constraints and restrictive monetary policies due to attempts to solve non-payment problem through state financing. The remained net debts after netting out inter-industry arrears were financed from Government budget and the central bank. In 1993 International Monetary Fund (IMF) granted Kazakhstan a one-year standby package. To maintain IMF collaboration and to stop the decline in gross domestic product, the Kazakh government implemented a second stabilisation program in 1995. But this time hard budget constraints and monetary policy were strengthened by excluding of government financing of net positions in inter-enterprise debts and retreating government guarantees for loans granted by foreign and domestic banks. In the middle of 1996, the International Monetary Fund approved an Extended Fund Facility (EFF) of 446 million US dollars for three years (IMF, 2003). According to International Monetary Fund (2003) the decision was made in light of a wide-ranging three-year reform programme submitted by the government, as well as the positive longer term prospects for production and exports of energy and non-ferrous metals. In 1996, Kazakhstan experienced its first positive economic growth since 1989. 1.5.3 Summary Data on Turkmenistan Preceding the collapse of the Soviet Union approximately 8 percent Turkmenistan’s gross domestic product was generated by gas exports to the rest of the USSR mostly to Belarus, Ukraine and the Caucasus. Another 5 percent of gross domestic product was earned from cotton exports. Gas and cotton exports continue to be used to cover the import of considerable amounts of grain and capital equipment from other former Soviet Republics. While estimates for the fall of gross domestic product between 1990 and 1995 vary depending on how adjustments to official gross domestic product are made, International Monetary Fund and European Bank of Reconstruction and Development agree on about -35 percent (IMF, 2003). This is much less than the 58 percent drop in Turkmen gas production. The rest of the economy is basically agricultural. The cotton industry has been less affected by the downfall of the Soviet Union. The government gradually liberalised some prices beginning in 1992. A presidential decree of 1995 removed price controls on all products except for about 50 items, including energy. The government introduced the manat as the national currency in 1993. In 1995 it unified the previously separate official and commercial exchange rates, which subsequently became determined by inter-bank auctions for foreign exchange. Between 1992 and 1995 the government compensated for the shortfall in revenue from taxes on gas production and exports by cutting expenditures and replacing subsidies to the economy with additional allocations of credit at largely negative interest rates. Controlled prices were adjusted repeatedly but declined in real terms for natural gas and for oil products through 1994. The share of gas related revenues in the central budget declined from 60 percent in 1992 to under 20 percent in 1995, which lowered the share of total budgetary revenue in GDP from 40 percent to 10 percent during this period. Due to drastic expenditure cuts in government wages and investment, including maintenance, the central budget deficit remained fairly stable over this period. It also helped that new excise taxes were introduced in 1995 on petrol (55 percent) and diesel (60 percent). This resulted in some recovery of government capital spending. The easy money policy was changed slowly in 1995 and 1996. During this time foreign exchange surrender requirements of state-owned enterprises to the Foreign Exchange Reserve Fund (FERF) were increased to 50 percent for gas and oil exports, and the money allocated directly to the central budget. Prior to that, this fund had been used to award credits to the economy, contributing to monetary expansion. In 1995 and 1996, bank credit allocation was reduced, real interest rates rose (due to credit auctions with deregulated interest rates), and reserve requirements for banks were increased. However, the pursuit of these policies was not smooth, in part due to the limited political autonomy of the Central Bank. Nevertheless, inflation decelerated by 50 percent towards the end of 1995 and is estimated to have been 445 percent in 1996, and 21 percent in 1997. Despite plummeting gas exports in recent years, Turkmenistan’s current account was slightly positive in 1994 and 1995, as long as arrears owed to the country are not taken into account. If such arrears are counted the 1995 balance swings from an estimated surplus of 54 million US Dollars to a deficit of 289 million US Dollars. The situation has probably continued to deteriorate due to weak gas exports. 2 Theoretical Frameworks 2.1 Overview of Foreign Direct Investment Theories There is variety of empirical studies on theoretical models explaining foreign direct investment (FDI) and its determinants. The various approaches from different disciplines such as economics, international business, organisation and management explain numerous characteristics of this phenomenon. The following dissimilar methods, explaining foreign direct investment as the location decision of multinational enterprises are mostly acknowledged in empirical literature on FDI: Ownership advantages as determinants of foreign direct investment (including monopolistic advantage and internalisation theory) based on imperfect competition models and the view that multinational enterprises (MNEs) are firms with market power (Hymer, 1960; Buckley and Casson, 1979; Kindleberger, 1969; Caves, 1971 for ownership advantages) Determinants according to the Neoclassical Trade Theory and the Heckscher-Ohlin model, where capital moves across countries due to differences in capital returns (for example Markusen et al, 1995,pp. 98-128; Aliber, 1970); Determinants of foreign direct investment in Dunning’s ownership-location-internalization (OLI) framework, which brought together traditional trade economics, ownership advantages and internalisation theory (Dunning, 1977; 1979); Determinants of foreign direct investment according to the horizontal FDI model or Proximity- Concentration Hypothesis (Krugman, 1983; Markusen, 1984; Ethier, 1986; Horstmann and Markusen, 1992; Brainard, 1993); Determinants of foreign direct investment according to the vertical FDI model, Factor-Proportions Hypothesis or the theory