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1 INTERNATIONAL CONFERENCE ON INTERNATIONAL BUSINESS MAY 2010 PROCEEDINGS EDITED BY VASILEIOS A. VLACHOS

2 INTERNATIONAL CONFERENCE ON INTERNATIONAL BUSINESS Thessaloniki, May 2010 Proceedings edited by Vasileios A. Vlachos ΠΑΝΕΠΙΣΤΗΜΙΟ ΜΑΚΕΔΟΝΙΑΣ UNIVERSITY OF MACEDONIA

3 2010 Πανεπιστήμιο Μακεδονίας, Θεσσαλονίκη Εγνατία 156, Θεσσαλονίκη Τμήμα Διεθνών και Ευρωπαϊκών Σπουδών Τηλ Fax: ISBN Απαγορεύεται η με οποιονδήποτε τρόπο αναπαραγωγή του συνόλου ή μέρους του παρόντος με οποιοδήποτε μέσο, μηχανικό, ηλεκτρονικό, φωτοτυπικό, ή άλλο, χωρίς την γραπτή άδεια του συγγραφέα, σύμφωνα με τον Νόμο 2121/1993 και τους κανόνες του Διεθνούς Δικαίου που ισχύουν στην Ελλάδα.

4 INTERNATIONAL CONFERENCE ON INTERNATIONAL BUSINESS Organizers Department of international and European Studies, University of Macedonia (Thessaloniki, Greece). Faculty of Political Science, University of Messina (Messina, Italy). CRIISEA, University of Picardie (Amiens, France). Chair Dr. Aristidis Bitzenis Organizing Committee Dr. Aristidis Bitzenis, University of Macedonia (Thessaloniki, Greece). Dr. Konstantinos Hazakis, Democritus University of Thrace (Komotini, Greece). Mr. Charisios Kafteranis. Dr. John Marangos, University of Crete (Rethymno, Greece). Dr. Ioannis Papadopoulos, University of Macedonia (Thessaloniki, Greece). Ms. Christina Sakali, University of Macedonia (Thessaloniki, Greece). Dr. Ioannis Tampakoudis, University of Macedonia (Thessaloniki, Greece). Mr. Vasileios A. Vlachos, University of Macedonia (Thessaloniki, Greece). Scientific Committee Dr. Aristidis Bitzenis, University of Macedonia (Thessaloniki, Greece). Dr. Mario Centorrino, University of Messina (Messina, Italy). Dr. Konstantinos Hazakis, Democritus University of Thrace (Komotini, Greece). Dr. Dimitrios Kalimeris, Alexander Technological Educational Institute of Thessaloniki (Thessaloniki, Greece). Dr. John Marangos, University of Crete (Rethymno, Greece). Dr. Darko Marinkovic, Megatrend University (Belgrade, Serbia). Dr. Ioannis Papadopoulos, University of Macedonia (Thessaloniki, Greece). Dr. Georgios Rizopoulos, Univeristy of Picardie (Amiens, Frence). Dr. Andrea Romano, University of Messina (Messina, Italy). Ms. Christina Sakali, University of Macedonia (Thessaloniki, Greece). Dr. Bruno Sergi, University of Messina (Messina, Italy). Dr. Ioannis Tampakoudis, University of Macedonia (Thessaloniki, Greece). Dr. Ljiljana Viducic, University of Split (Split, Croatia). Mr. Vasileios A. Vlachos, University of Macedonia (Thessaloniki, Greece). ICIB 2010

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6 Contents Preface 1 Budgetary Crisis and Recession Page The new budgetary architecture of the EU in the view of the financial and economic crisis. Efficiency of budgetary crisis management by EU mechanisms: Lessons from the Greek case Eurozone crisis: Is Greece to blame alone? 14 Albania and the recent world crisis: Economic growth or political illusion? 21 Market/Sector Analysis Corporate governance, social responsibility and corporate reputation: An empirical analysis of the situation in the republic of Croatia. 34 Regulatory barriers to entry in industrial sectors. 36 Analysis of apple production of EU-Balkan states based on PC time series database. The market for corporate control in Greece: A critical assessment of the wealth effects to bidding-companies' shareholders. An accounting comparison of the post-merger economic performance of Greek acquiring listed firms in domestic vs. international M&As at south-east Europe. The financial crisis and the prospects for investments in the energy sector in Bulgaria. Crisis management: A contemporary constant need for business continuity in the tourism industry Increasing the managerial capabilities in Indonesia. 71 Human Resources Issues in International Business The influence of the human resource capacity on the level of foreign investments in countries in transition: The case of Serbia. Wage system in Albania: An integral part of the human resources management system. An exploratory comparison of intended behaviors in ethical business reporting situations between US and Bulgarian university students i

7 HR related ethics: US vs. Bulgaria. 83 Effects of European Union Membership The main determinants of inflation of the EU and the US economy: A panel timeseries analysis. The macro-economic dimension of the future EU membership for Turkey in comparison with other CEE member countries. Labour relations policies in Greece during the period : The developments in the European Union EU membership and transition: International business in Bulgaria. 105 Foreign Direct Investment FDI and cross border acquisition activities in emerging markets: Turkey as the case study. 106 What kind of theory for FDI in Bulgaria? 122 A stochastic frontier analysis of foreign direct investment and growth. 124 Foreign direct investments in western Balkans: The case of Albania. 127 Innovation and competitiveness of Asian companies in facing globalization. 128 The study of possible ways to attract foreign direct investment in order to promote exports in Imam Khomeini trade zone. FDI determinants and its impact on economic growth: A comparative study between Kenya and Malaysia Competitiveness and FDI effects on development and GNP in Iran. 177 Pattern to capture FDI absorptive capacity. 178 Economic Development and International Trade Global competition, productivity, and trade: An alternative model of comparative advantage. From market economics to institutional embeddedness of economic development: Key ethical issues for transition states International trade entrepreneurship in the context of price risk exposure. 182 The establishment and formulation of the D-8 preferential trade agreement; the strategies by developing eight of economic co-operation organization (D-8) amongst Muslim countries towards successful trade policy formulation and implementation process. 199 ii

8 Papers in Greek Η αμοιβή ως μέσο παρακίνησης των εργαζομένων. 217 Η λήψη αποφάσεων και οι επιχειρησιακές συμπεριφορές στις ελληνικές επιχειρήσεις. Η αντίληψη της νέας τεχνολογίας των ERP συστημάτων από τις επιχειρήσεις: Το κλειδί για την επιτυχία. Αντιλήψεις σχετικά με την εφαρμογή συστημάτων περιβαλλοντικής διαχείρισης στις σύγχρονες ελληνικές επιχειρήσεις Ποιότητα υπηρεσιών και ικανοποίηση τραπεζικού πελάτη. 241 Η συναισθηματική νοημοσύνη στην πανεπιστημιακή διοίκηση. 251 Συστήματα ελέγχου και περιβαλλοντική πολιτική των ελληνικών επιχειρήσεων μεταποίησης. Η Μεταβλητή της ικανοποίησης του δικαιοδόχου ως απόρροια της ενημέρωσης και της καθημερινής συνεργασίας με την εταιρεία Franchising. Τυπικά και ουσιαστικά προσόντα στελεχών πληροφορικής στις ελληνικές επιχειρήσεις Η διάσταση της πρόσληψης ανωτάτων στελεχών στις επιχειρήσεις. 297 Οργανωσιακές αντιλήψεις και επίλυση προβλημάτων στη ελληνική τουριστική βιομηχανία. Οι πρόσφατες δημοσιονομικές ανισορροπίες της Ελλάδος και τα μέτρα αντιμετώπισης αυτών. H πολιτική οικονομία της παγκοσμιοποίησης: Η θεωρητική προσέγγιση του Αστερίξ και Οβελίξ. Η διάδραση κράτους αγοράς στις υπό μετάβαση οικονομίες των δυτικών Βαλκανίων Plenary Lectures Shadow Economies in Greece and other European Countries: What Do We (Not) Know? 327 Globalization and Governance for Sustainable Wealth Creation. 329 iii

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10 Preface Preface by Vasileios A. Vlachos The International Conference on International Business (ICIB) aims to bring together academics and practitioners in order to share ideas and methods for the exploration of foreign direct investment (FDI), the role of multinational corporations (MNCs) and the complexity of the globalized business environment. ICIB 2010 took place on May 2010 and was organized in parallel sessions of English and Greek. The conference focused on but not limited to empirical research in the following fields: Entrepreneurship and international business environment; Global crisis and financial management; Global budgetary crisis management by the European Union (EU) institutions; Global crisis and international business climate; Global crisis and international policy agenda; Globalization, MNCs, competitiveness and development; MNCs and political strategies; Mergers & Acquisitions; Impact and determinants of FDI; FDI and European economic integration; FDI and transition; FDI, trade and regional integration; Prospects towards EU membership; ICIB is supported by a number of participating journals and follows a specific publication procedure (for details the reader should refer to The papers included in the proceedings were presented at ICIB 2010 and have completed the final stage of the publication procedure. The papers are grouped according to the general themes of ICIB 2010 sessions. The pluralism of ICIB 2010 is reflected in the volume at hand, which covers major interlinked issues of international business: global recession, EU budgetary crisis, EU membership, market and sector analysis, human resources, FDI, international trade, economic development. Some papers do not appear in full text as their full versions (copyrights) are property of participating journals or edited volumes committed to ICIB. The organizing committee of ICIB 2010 would like to thank all participants organizers, members of the scientific committee, presenters, keynote speakers, sponsors, etc. and aims for an even more successful and stimulating ICIB

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12 Budgetary Crisis and Recession The new budgetary architecture of the EU in view of the financial and economic crisis Dr. Dimitrios V. Skiadas, LL.B (Athens), M.Jur, Ph.D (Durham) 1 Summary: Usually the EU is accused of slow reflexes. However, the EU budgetary reaction on the global financial crisis indicated that there is scope, room and potential for improvement. The unprecedented economic and financial crisis experienced throughout the globe has created the need for integrated actions to meet the short-term and long term challenges for the national financial, economic, social and political structures and systems. Within the EU framework, the most promising option, given the nature and the characteristics of the EU legal order, has been the re-structuring of the budgetary architecture of the Union, thus allowing for the modification of the overall cohesion policy developed and financed by the Union s member states. This paper discusses the various parameters of this reaction and its importance in the EU budgetary architecture. Setting the new scenery It was the 15 th of September 2008 when one of the biggest banks worldwide, Lehman Brothers Holdings Inc., filed for Chapter 11 bankruptcy protection, thus signifying the start of a till then dormant financial and economic turmoil, with enormous social and political implications. This has been the culmination of a dramatic situation developing since 2002, as the inflow of funds in the U.S. economy allowed for low interest rates, thus facilitating loans of various types with easy credit conditions, and motivating consumers to assume unprecedented debt loads. The U.S. housing market developed the scheme of mortgagebacked securities, deriving their value from mortgage payments and housing prices, which attracted investors from all over the world. But as housing prices declined, reaching values below those of the mortgage loans, those participating in such schemes suffered significant losses, causing a foreclosure wave, which hit both consumers and financial institutions. It was not difficult for the crisis to expand to other sectors of the economy throughout the world, reaching pandemic proportions. 2 EU Budgetary Architecture before the crisis 1 Assistant Professor at the Department of International and European Studies; University of Macedonia, Greece. 2 B. S. Bernanke, Four Questions about the financial crisis, Speech on April 14, 2009, Morehouse College, Atlanta, Georgia, P. Krugman, (March 2, 2009), "Revenge of the Glut", New York Times, 02krugman.html. 3

13 closely. 5 The second largest part of EU expenditure refers to the support of cohesion and This crisis found Europe in a rather strange budgetary status. The balance achieved through the financial perspectives as agreed on December 15, 2005, was to be reassessed. 3 According to the agreement reached during the meeting of the European Council in Brussels, the total appropriations available to the EU budget, for the period , were set to 862 billion Euros, which represent 1.045% of EU GNI. Out of this sum, the Structural Funds were allocated 308 billion euros, while the Common Agricultural Policy, along with actions supporting the environment, were allocated 371 billion euros. 4 This agreement maintained the two major components of EU spending. The first is the cost of the Common Agricultural Policy. Although there was much criticism for this choice, the fact that most of the new Member States of the Union demonstrated a very high percentage of employment in the agricultural sector, did not allow for a reduction of CAP expenditure. This was reinforced by the international economic environment, as it had been demonstrated during the workings of the Doha Round, which indicated a tendency of increasing agricultural subsidies in the interest of development in poor countries. Furthermore, the protection of food sufficiency and quality calls for investment, especially in an age where food related health hazards are quickly spread across the globe. Consequently, it was deemed that there was not much scope for changing the 2002 agreement on agriculture, as reached by the European Council in Brussels, before the end of the current programming period. Alternatively, there were considerations of either changing the policy itself, i.e. reorienting the payments in a direction of rural development, in which all payments would not be direct but proportionate to the size of the farms, and the income capacity of the farmers, or even abolishing the entire common agricultural policy, in order to make room for free agricultural markets, in which any state subsidies would be monitored and evaluated regional policies. Despite all efforts, there are still criticisms about the effectiveness of the support provided by the Structural Funds, a support which lead to an increase of income in some regions, but only through a redistribution of resources instead of the implementation of a more substantive structural policy. For the period, the introduction of the Lisbon Strategy as an element of preparing the various intervention may result in more positive outcomes. 6 The result of the European Council s summit on December 2005 has been a temporary solution, which created a tangled web of regulations and conditions, based 3 I. Begg, Fr. Heinemann, New Budget, Old Dilemmas, Centre for European Reform, Briefing Note, , pp European Council, Presidency Conclusions, Brussels June 2005, Doc 15914/1/2005 and Doc 15915/ I. Begg, The 2008/9 EU Budget Review, EU-CONSENT, EU-Budget Working Paper No 3, March 2007, I Begg, The 2008/9 EU Budget Review, EU-CONSENT, EU-Budget Working Paper No 3, March 2007,

14 Budgetary Crisis and Recession mainly on agreements of previous programming periods. Even the European Parliament rejected it initially and it took six months of long negotiations before reaching the current Interinstitutional Agreement on budgetary discipline and sound financial management. 7 The final compromise has not been so radical, as it still gave relatively more weight to the financing of agriculture (CAP) and reduction of development disparities (cohesion policy) and less weight to the Lisbon strategy objectives (competitiveness policy), other internal policies (freedom, security, justice and citizenship) and external policies (enlargement and development aid to non-eu and non-candidate countries). 8 Reviewing the Architecture For some, the most important element of the new Financial Perspectives agreement, has been the commitment undertaken by the Union s Institutions to reassess the financial framework of the period, by reviewing all aspects of EU spending and resources, and prepare a relevant report in 2008/2009. This review clause allowed for mutual concessions to be made during the negotiations and it also demonstrated that the Member States have, at last, realised the need for further budget reform. 9 Others have adopted a more pessimist approach, noting that there have been in the past very well documented studies on reforming the European budget, without, however, resulting in an effective solution. 10 The financial crisis created a new scenery in which the EU had to operate in a method and spirit which would put its potential as a financial as well as political mechanism to the test. The European cure for the pandemic financial problem was to introduce a mixture of measures and policies, based on both the monetary approach inspired by Μilton Friedman s ideas on reducing state action and consequently government expenditure, 11 and the interventionist approach inspired by John Maynard Keynes s views on using taxation and public expenses in order to improve the demand in the market, thus controlling the effects of the crisis. 12 In that respect, the European Commission presented its proposal for a new architecture, as a recovery plan for Europe. This proposal is based on three pillars: a new 7 For the use and the importance of the Interistitutional Agreements see D. Skiadas, Reforming the European Budget: An Ongoing Tale, Karamanlis Working Paper No 5 in Hellenic and European Studies, May 2008, The Constantine Karamanlis Chair in Hellenic and Southeastern European Studies, The Fletcher School of Law and Diplomacy, Tufts University, M. Mrak, V. Rant, Financial Perspective : Domination of national interests, EU-CONSENT, EU- Budget Working Paper No 1, July 2007, I. Begg, Fr. Heinemann, New Budget, Old Dilemmas, Centre for European Reform, Briefing Note, , 4 10 T. Szemler, EU Budget Milestones: From Fundamental Systemic Reforms to Organised Chaos, EU- CONSENT Conference, Budapest , Μ. Friedman, Capitalism and Freedom, Chicago University Press - 40th Anniversary Edition, J. M. Keynes, The General Theory of Employment, Interest and Money, Harourt, Brace & World,

15 financial market architecture at EU level, tackling the crisis impact on the real economy and providing a global response to the crisis. 13 Out of these three pillars, the third falls beyond the scope of this analysis. It entails an interactional approach and the need for action on behalf of international financial organisations, such as the International Monetary Fund, the World Trade Organisation, the Transatlantic Economic Council, as well as the renewal of bilateral negotiations between key players at world economic stage (i.e. USA, China, Brazil, India, Russia, etc). The first pillar, falls also beyond the scope of this analysis, as it refers to actions related to the banking and credit markets, at EU level and the role of the European Central Bank on this issue. However it is interesting to note that until May 2009 the governments of the member states has approved an overall amount of 3,7 trillion euros to support the banks in Europe, including 311,4 billion euros in capital aid, 2,92 trillion euros in guarantees, 33 billion euros for the acquisition of problematic assets and 505,6 billion euros for liquidity aid of the banks. In a relevant initiative, the EU has established a mechanism to provide financial support to its member states. On the 25 th of March 2010, the Euro area member states established a package involving substantial International Monetary Fund (IMF) financing and a majority of European financing, through coordinated bilateral loans. This mechanism has to be considered ultima ratio, meaning in particular that market financing is insufficient. Any disbursement on the bilateral loans would be decided by the euro area member states by unanimity subject to strong conditionality and based on an assessment by the European Commission and the European Central Bank. The objective of this mechanism will not be to provide financing at average euro area interest rates, but to set incentives to return to market financing as soon as possible by risk adequate pricing. Interest rates will be nonconcessional, i.e. not contain any subsidy element. All decisions under this mechanism will be taken in full consistency with the Treaty framework and national laws. 14 This is the core of the so called European stabilisation mechanism. The mechanism is based on Art. 122 para 2 of the Treaty on the Functioning of the EU and the above mentioned intergovernmental agreement of euro area Member States. Its activation is subject to strong conditionality, in the context of a joint EU/IMF support, and will be on terms and conditions similar to the IMF. The overall amount made available through this mechanism will be 500 billion euros. 15 Another development in that respect was the proposal of the European Commission to establish a monitoring mechanism of the financial policies of the eurozone Member States, according to Art. 136 the Treaty on the Functioning of the EU, which will be in a position to 13 European Commission, From financial crisis to recovery: a European framework for action, COM (2008), 706 final, Statement by the Heads of State and Government of the Euro Area, Brussels, 25 March Council of the European Union, Extraordinary Council Meeting, Economic and Financial Affairs, Brussels, 9/10 May 2010, Press Release, 9596/10 (Presse 108). The legal instrument for this mechanism is Regulation (EU) 407/2010, OJ 2010, L 118/1. 6

16 Budgetary Crisis and Recession analyse these policies and provided recommendations for improvement. 16 This monitoring mechanism will operate at a semester basis (called European Semester ), during which the basis financial and economic policies of the Member States will be reviewed prior to their inclusion in the national budgets and the EU Institutions will prepare relevant recommendations which the national authorities must respect. 17 The obligatory nature of this mechanism and the sanctions to be imposed on those Member States that do not comply with the recommendations have been the object of several negotiating procedures. 18 The second pillar, i.e. supporting the real economy, entails the various budgetary measures for tackling the crisis. The assessment of this scheme is made at two levels: the procedural and the substantive. In terms of process, there has been severe criticism on the entire existing process of selecting a policy for funding. This process has been structured on certain stages which have become more of a formality, instead of substantive elaboration of political choices and opinions. The usual sequence, including initial debates on the objectives of the budgetary settlement, the Commission s proposals and the Council s reactions, the exchange of views which can never be reconciled, the intensive efforts of the various Presidencies of the Council in order to reach a complex political agreement in which nobody really understands what they have actually agreed upon, and the indifference of the peoples of Europe, in the name of which all these take place, effectively blocks any prospect of reform. 19 In dealing with the crisis, the institutions of the Union demonstrated a somewhat different approach and behaviour, being more result-oriented instead of process-focused. The Commission reacted immediately to the above mentioned events of September 2008 by presenting several consecutive proposals in October and in November The European Council, during its meeting in December 2008, approved these proposals, thus setting a new framework for action. It is noteworthy that perhaps for the first time in the long history of the EU and its budgetary and cohesion policy, the various decisions were adopted without the long delays caused by the various layers of consultation and the workings of the various bodies involved in such procedures. It is interesting to note that while the process for reaching agreement by all interested parties for the financial perspectives of the period lasted for twenty seven (27) months (February May 2006), the new budgetary architecture was agreed upon within only three months (October - December 2009). 16 European Commission, Reinforcing economic policy coordination, COM (2010) 250 final, European Commission, Reinforcing economic policy coordination, COM (2010) 250 final, European Central Bank, Reinforcing Economic Governance in the Euro Area, June 2010, Council of the European Union, Economic and Financial Affairs, Brussels, 7 September 2010, Press Release, 13161/10 (Presse 229), European Council, Presidency Conclusions, Brussels 16 September 2010, EUCO 21/ I. Begg, The 2008/9 EU Budget Review, EU-CONSENT, EU-Budget Working Paper No 3, March 2007,

17 In terms of substance, the contents of the new architecture have been set by the European Council. The measures referring to EU action entail an increase in intervention by the European Investment Bank of 30 billion Euros in 2009/2010, especially for small and medium-sized enterprises, for renewable energy and for clean transport, the simplification of procedures and faster implementation of programmes financed by the Cohesion Fund, the Structural Funds and the European Agricultural Fund for Rural Development, the mobilisation of the possibilities, in the context of the Community budget, for strengthening investment in sectors and geographical areas identified by the Commission, the mobilisation of the European Globalisation Adjustment Fund in order to promote employment in key sectors of the European economy, the possibility, for the Member States that so wish, of applying reduced VAT rates in certain sectors, a temporary exemption of two years beyond the de minimis threshold for State aid in respect of an amount of up to Euros, the use for 2009 and 2010 of the accelerated procedures in the public procurement directives, which is justified by the exceptional nature of the current economic situation, in order to reduce from 87 to 30 days the length of the tendering process for the most commonly-used procedures for major public projects. These elements form a coherent framework for actions, which set a new, accelerated rhythm for the Union s budgetary policy. 20 The European Economic Recovery Plan has two aspects, one regarding measures financed by the national budgets of the Member States and one regarding measures cofinanced by the Union s budget, through the cohesion financial instruments. While the former is to be conducted within the limits set by the Stability and Growth Pact, the latter is closely connected to the priority areas of the Lisbon Strategy (i.e. people, business, infrastructure, and energy, research and innovation). The combination of funds and policies is seen as a catalyst for actions meeting the challenges set by the crisis and improve the perspectives for future investments. 21 The new budgetary architecture described in the European Economic Recovery Plan has a very strong element of investment in human capital, in the form of a European Employment support initiative. This initiative aims at activating flexicurity strategies by promoting employment and long term employability rather than particular jobs through adaptation to change and easing transition between jobs while at the same time matching 20 European Council, Presidency Conclusions, Brussels December 2008, Doc 17271/1/08 21 European Commission, A European Economic Recovery Plan, COM (2008), 800 final,

18 Budgetary Crisis and Recession skills to labour market needs. These measures are supported financially by the European Social Fund (ESF) in the form of specialised training, personal job counselling, apprenticeship, subsidised employment, grants and credits for self employment and business start ups. The funding criteria are being simplified and the advance payments have been accelerated. 22 Furthermore, new schemes for supporting entrepreneurship have been developed. Improving access to finance has been indentified as a major need, therefore there has been an increase of the leverage of EU investments for the period, through launching new schemes such as JEREMIE ( Joint European Resources for Micro to Medium Enterprises ), which targets new business creation and SME expansion, and JASMINE ( Joint Action to Support Micro-Finance Institutions in Europe ) which channels various forms of technical and financial assistance to primarily help non-bank micro-credit providers to improve the quality of their operations, to expand and to become sustainable. Innovative cluster creation and maintenance has been selected also as a business support measure, especially by exploiting the potential of ICT applications, low carbon technologies and eco-friendly products, production techniques and energy efficient processes. Strengthening the institutional and administrative capacity of the EU member states has been identified as a major goal. The creation of a stable business environment will promote structural adjustments and foster growth and jobs, especially by reducing regulatory and administrative burdens on businesses (i.e. ensuring starting up a business anywhere in the EU within three days at zero costs and via a single access point) and thus contributing to increasing productivity and strengthening competitiveness. Special attention is paid to the areas of transport and energy as sources of sustainable development through new environmentally friendly infrastructure. In that respect two new instruments have been developed: JASPERS ( Joint Assistance in Supporting Projects in European Regions ) providing assistance to managing authorities in the new member states of the EU to prepare major projects in priority EU infrastructure investments, and JESSICA ( Joint European Support for Sustainable Investment in City Areas ) accelerating and enhancing sustainable investments in energy efficiency, urban transport, ICT infrastructures, regeneration, etc. in the urban context. 23 These new elements of the EU budgetary architecture necessitated the adoption of a new legislative framework, which has been included in a series of Regulations: Council Regulation (EC) 2008/1341 of 18 December 2008, OJ 2008, L 348/19 and Council Regulation (EC) 2009/284 of 7 April 2009, OJ 2009, L 94/10 amending Council Regulation (EC) 2006/1083 of 11 July 2006, OJ 2006 L 210/25, on general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund, 22 European Commission, Cohesion Policy: Investing in the real economy, COM (2008), 876/3 23 European Commission, Cohesion Policy: Investing in the real economy, COM (2008), 876/3. 9

19 Council Regulation (EC) 2009/397 of 6 May 2009, OJ 2009, L 348/19 amending Council Regulation (EC) 2006/1080 of 5 July 2006, OJ 2006 L 210/1 on the European Regional Development Fund, Council Regulation (EC) 2009/396 of 6 May 2009, OJ 2009, L 126/1 amending Council Regulation (EC) 2006/1081, of 5 July 2006, OJ 2006, L 210/12 on the European Social Fund. These provisions include a) measures to improve cash flow of the public authorities charged with delivering the national and regional programmes by allowing for an additional tranche of prefinancing in 2009 and accelerating the reimbursement of expenditure incurred under major projects and within the framework of state aid schemes, b) measures facilitating the launch of financial engineering instruments with a view to accelerating the use of access to finance measures, c) measures simplifying the use of flat rates and lump-sums costs to allow public authorities to more quickly prepare projects and measures and d) measures expanding the possibilities for support to investments in energy efficiency improvement and renewable energy in housing in favour of low income households in the EU 27. Putting the new Architecture to work If setting the new Architecture was considered to be a difficult task, the completion of which is still to be achieved, in some respects, putting this Architecture to work has been a real challenge. The Member States, in compliance with the European Economic Recovery Plan, prepared national recovery plans, in which they included targeted measures, at short and medium term perspectives. These measures focused on structural reforms, while at the same time they included the provision of financial support to sectors of the national economies that needed to be reinforced in order to underpin growth and employment. The provided European budgetary support is estimated at over 600 billion euros for 2009 and Furthermore, steps have been taken in order to simplify the business environment, especially for small and medium sized enterprises, by reducing social charges and administrative burdens. 24 It is interesting to note that out of the total budgetary support, a quarter was provided to help industry save and job creation or keeping workers in employment, by supporting short time working arrangements, investing in skills and retraining, etc. Half of the budgetary support has been used to support the unemployed, households and vulnerable social groups. The last quarter of the budgetary support was allocated towards investments of a more long term nature, such as infrastructure, energy efficiency, innovation, etc) European Commission, Progress on the Implementation of the European Economic Recovery Plan, June 2009, European Commission, Progress on the Implementation of the European Economic Recovery Plan, June 2009, 3. 10

20 Budgetary Crisis and Recession The main structural reforms put forward by the Member States, within the framework of the European Economic Recovery Plan, have focused on three main objectives: i) easing labour market conditions and supporting vulnerable groups, ii) strengthening competitiveness and the business environment, and iii) investing in a greener and more knowledge based economy. 26 In a preliminary effort to assess the impact of these measures, the European Commission noted that they had significant effect in limiting the rise in unemployment, at EU level. Involving the social partners in these schemes allowed the Member states to support flexible work organisations (especially with regard to short time working), equip people with skills and incentives to progress in their working lives, and facilitate transitions in employment. All these efforts prevented substantial falls in the incomes of those worst affected by the crisis. 27 OECD estimates that the various financial support schemes provided at world level have saved between 3.2 and 5.5 million jobs, with the EU accounting for over half of those. 28 In the field of business support, the measures adopted by the Member States facilitated access to finance at EU level, without resulting in protectionist tendencies. However restoring credit flows to the corporate sector is a conditio sine qua non for the recovery to take hold. 29 As for the infrastructure and the greening of the economy, there have been variations of performance, given that, despite isolated successful measures for energy efficiency, a lack of provision of strong incentives in various Member States was noted. This is not surprising as the impact of public investment in infrastructure will be felt only in the long term and does not have immediate results. The comforting aspect is that many existing projects have been accelerated and a rapid absorption of funds was realised. 30 With regard to innovation and research, the overall effort focused on supporting private spending on innovation, while the main concern is to make R&D spending an catalyst for an accelerated post crisis recovery, within the framework of continuing the implementation of the European Research Area. 31 In order to achieve these results, the EU made significant advance payments from the Structural Funds, allowing more money to be spent rapidly on priority projects. Total advance payments of billion euros have been approved for 2009, including 5 billion euros of advance payments already foreseen for 2009, plus a further 6.25 billion euros as a 26 For a detailed overview of these measures, see European Commission, Progress on the Implementation of the European Economic Recovery Plan, June 2009, European Commission, Progress report on the Implementation of the European Economic Recovery Plan, December 2009, OECD Economic Outlook, No 85, OECD Paris, European Commission, Progress report on the Implementation of the European Economic Recovery Plan, December 2009, European Commission, Progress report on the Implementation of the European Economic Recovery Plan, December 2009, European Commission, Progress report on the Implementation of the European Economic Recovery Plan, December 2009,

21 crisis response measure. Of this total, ESF advances for 2009 amount to approximately 2.4 billion euros. 32 The European Parliament and the Council agreed to fund major energy and broadband infrastructure projects amounting to a total of 5 billion euros (4 billion for energy and 1 billion to help rural areas get broadband internet access, create new jobs and help businesses to grow). Disappointingly however, only around 35% of the available funding is currently devoted to high-speed internet investments. 33 Conclusion The global financial crisis has provided the impetus for a much needed re-appraisal of the budgetary architecture of the European Union. The speedy amendment of the relevant legislative provisions, as well as the establishment of new financial schemes within the EU Cohesion Policy and Lisbon Strategy frameworks, demonstrated that there is potential for change in the EU. The implementation of the new schemes, despite its teething problems, looks promising. Before the crisis it seemed that the Union could not decide whether it wanted a budget that redistributes money from one set of Member States to another or a budget that supports financially the implementation of certain EU-wide policies. Now there is an increased demand for budgetary efficiency. This efficiency can be described as the timely and flexible allocation of resources in order to ensure the appropriate provision of the main public goods required. The response to the crisis is an indication of such efficiency. It remains to be seen if the lessons learned from this process will be useful in the future attempts of the Union to set new financial perspectives and mechanisms of economic governance. 32 European Commission, Progress report on the Implementation of the European Economic Recovery Plan, December 2009, European Commission, Progress report on the Implementation of the European Economic Recovery Plan, December 2009,

22 Budgetary Crisis and Recession Efficiency of budgetary crisis management by EU mechanisms: Lessons from the Greek case Ioannis Papadopoulos 1 Abstract: This paper deals with issues of economic governance in the European Union, and particularly with the structural problems of the EU Economic and Monetary Union, as these were revealed during the Greek sovereign debt crisis in To that effect, a comparison is made between the architecture of the Maastricht Treaty and the Stability and Growth Pact, on the hand, and federal systems instruments of budgetary crisis management, on the other. The main problems identified are the following: Lack of secondary economic rules allowing decision-makers to determine the true nature of a budgetary crisis and thus the type of rules that should apply; lack of sufficiently coordinated debt management mechanisms at EU level; deficient account of underlying comparative competitiveness problems between the EU member states; inchoate tools to obtain growth and jobs through the Lisbon Strategy. These are the most urgent problems the EU has to deal with in order to prevent, and if necessary to correct, similar crises in the future. 1 Department of International and European Studies, University of Macedonia; Thessaloniki, Greece. 13

23 Δημοσιονομική κατάσταση στην Ελλάδα: Φταίμε τελικά για όλα; 1 Παπαδημητρίου Πύρρος 2 και Γιάννης Χατζηγιαννάκης 3 Εισαγωγή Την τελευταία περίοδο η χώρα μας διέρχεται τη μεγαλύτερη, ίσως, δημοσιονομική κρίση στην ιστορία της. Μία κρίση, που όπως προκύπτει από την ανάλυση του παρόντος άρθρου, η Ελλάδα θα έφτανε αργά ή γρήγορα, ανεξάρτητα από την παγκόσμια κρίση, λόγω της ουσιαστικής ανυπαρξίας δημοσιονομικών κανόνων και διαδικασιών και γενικότερα τρόπων αποτελεσματικής δημοσιονομικής διαχείρισης, όπως αυτές εφαρμόζονται πλέον σε πολλές άλλες χώρες. Σκοπός του παρόντος άρθρου αποτελεί να καταδείξει ότι για την δημοσιονομική κατάσταση στην οποία έχουμε περιέλθει και για την μη τήρηση μεθόδων και διαδικασιών αποτελεσματικής δημοσιονομικής διαχείρισης, φέρουν τεράστια ευθύνη οι κυβερνήσεις των τελευταίων τριάντα ετών. Παράλληλα όμως έχει μεγάλη ευθύνη και η ίδια η Ευρωπαϊκή Ένωση. Η δημιουργία μίας νομισματικής ένωσης χωρίς την καθιέρωση δημοσιονομικών κανόνων αργά ή γρήγορα θα οδηγούσε σε αυτά τα αποτελέσματα. Η εμμονή σε γενικούς ποσοτικούς στόχους, όπως αυτοί της Συνθήκης του Μάαστριχτ ή του Συμφώνου Σταθερότητας χωρίς διακρίσεις των επιμέρους κατηγοριών δαπανών και εσόδων και χωρίς σχεδιασμό διαδικασιών δικαιολόγησης και παρακολούθησης των δημοσιονομικών μεγεθών, ήταν αναπόφευκτο και προβλέψιμο ότι θα επέφερε αυτά τα αποτελέσματα. Στην πρώτη ενότητα του παρόντος άρθρου γίνεται επισκόπηση της διεθνούς βιβλιογραφίας σχετικά με τη σημασία ύπαρξης κανόνων στην δημοσιονομική διαχείριση και ιδιαίτερα διαδικασιών στην σύνταξη, κύρωση και υλοποίηση του προϋπολογισμού. Στη δεύτερη ενότητα παρουσιάζεται η ελληνική εμπειρία στο ζήτημα αυτό και παρουσιάζονται τα εμπειρικά αποτελέσματα έρευνας ως προς τις αποκλίσεις κατά υπουργείο στην υλοποίηση των προϋπολογισμών της χώρας την περίοδο Στην τρίτη ενότητα διερευνάται η επίδραση των όρων του συμφώνου δημοσιονομικής σταθερότητας, στα δημοσιονομικά των επιμέρους κρατών μελών της ΟΝΕ. Τέλος, στην τέταρτη ενότητα παρουσιάζονται τα συμπεράσματα της παρούσας μελέτης καθώς και προτάσεις για περαιτέρω έρευνα. 1 "Eurozone Crisis: Is Greece to Blame Alone?" is not available in the proceedings. A similar version in Greek is available instead. 2 Ο Πύρρος Παπαδημητρίου είναι Επίκουρος Καθηγητής στις Διεθνείς Οικονομικές Σχέσεις, στο τμήμα Πολιτικής Επιστήμης και Διεθνών Σχέσεων στο Πανεπιστήμιο Πελοποννήσου. 3 Ο Γιάννης Χατζηγιαννάκης είναι Οικονομολόγος, Σύμβουλος σε θέματα Διαχείρισης Δημοσίων Οικονομικών. 14

24 Budgetary Crisis and Recession 1. Προϋπολογισμός και αποτελεσματική δημοσιονομική διαχείριση: Επισκόπηση της βιβλιογραφίας Το σύνολο των κανόνων και των διαδικασιών που εφαρμόζονται σε μία χώρα προκειμένου να γίνει αποτελεσματική διαχείριση των εσόδων, των δαπανών και του δανεισμού, ορίζουν το βαθμό αποτελεσματικής δημοσιονομικής διαχείρισης. Κεντρικό στοιχείο στην όλη διαδικασία έχει ο τρόπος σύνταξης, κύρωσης και παρακολούθησης των επιμέρους στοιχείων του Προϋπολογισμού. Στην διεθνή βιβλιογραφία υπάρχουν επαρκείς εμπειρικές ενδείξεις που δείχνουν ότι η δημοσιονομική αποτελεσματικότητα ενισχύεται σημαντικά όταν τηρούνται διαδικασίες στη σύνταξη, κύρωση και παρακολούθηση του προϋπολογισμού (βλ. Schiavo- Campo και Tommasi 1999, Von Hagen 1992, Gleich 2003 και Ylaoutinen 2004). Παράλληλα υπάρχουν επίσης επαρκείς εμπειρικές ενδείξεις που δείχνουν ότι η δημοσιονομική αποτελεσματικότητα ενισχύεται όταν το Υπουργείο των Οικονομικών ασκεί πραγματική εποπτεία επί των δαπανών των άλλων υπουργείων και όταν η δυνατότητα τροποποιήσεων στην εκτέλεση του προϋπολογισμού ακόμη και μέσω της Βουλής είναι περιορισμένη (βλ. Von Hagen 1992 και Baldwin, Gros and Laeven, 2010). Για τις περισσότερες χώρες που ακολουθούν τρόπους αποτελεσματικής και πειθαρχημένης δημοσιονομικής διαχείρισης, ο Προϋπολογισμός αποτελεί το απόλυτο εργαλείο πολιτικής. O Προϋπολογισμός που αποτελεί σύνθεση των επί μέρους προϋπολογισμών όλων των υπουργείων και φορέων της γενικής κυβέρνησης, πρέπει να αναφέρει τους στόχους, για τη μέτρηση της αξιοποίησης των χρημάτων του φορολογούμενου πολίτη, ξεκάθαρη μέθοδο για την κοστολόγηση των δράσεων σε σχέση με τους δημοσιονομικούς περιορισμούς, παρακολούθηση των παρεκκλίσεων κατά τη διάρκεια του οικονομικού έτους κλπ. (βλ. Lee, 2005, Marr, 2008). 2. Η κατάρτιση και υλοποίηση του προϋπολογισμού στην Ελλάδα: Εμπειρικές ενδείξεις Η σημασία του προϋπολογισμού ως «απόλυτου» εργαλείου πολιτικής δεν έγινε ποτέ αντιληπτή στην Ελλάδα, όπου όλη η συζήτηση εξαντλείται στην πολιτική συζήτηση κύρωσης του Προϋπολογισμού και χωρίς ουσιαστικά κανείς να ασχολείται με την ορθότητα της κατάρτισής του και με τον τρόπο υλοποίησής του. Οι περισσότεροι από τους κυρωθέντες προϋπολογισμούς της χώρας μας, τα τελευταία χρόνια, ήταν στην ουσία μία απλή αποτύπωση προσδοκώμενων εσόδων εξόδων, δεν είχαν δεσμευτικό χαρακτήρα και συνεπώς σε μεγάλο βαθμό ήταν ενδεικτικοί. Σε πολλές περιπτώσεις το ύψος των επιμέρους δαπανών προσδιοριζόταν απολογιστικά με βάση τις αποφάσεις της πολιτικής ηγεσίας για επιπλέον παροχές ή τα ελλείμματα που κάθε φορά δημιουργούνταν στις επιμέρους υπηρεσίες και στους επιχορηγούμενους φορείς. Στο Πίνακα 1, παρουσιάζονται οι αποκλίσεις στην εκτέλεση των προϋπολογισμών την περίοδο , ανά υπουργείο, στη χώρα μας. Για την εκτίμηση των αποκλίσεων αναζητήθηκαν στοιχεία από τους εγκριθέντες από τη Βουλή προϋπολογισμούς κάθε έτους και 15

25 συγκρίθηκαν με τα απολογιστικά στοιχεία, δηλαδή τις ετήσιες εκταμιεύσεις όπως αυτές αναγράφονται στα Δελτία Εκτέλεσης του Προϋπολογισμού που εκδίδονται από το Γενικό Λογιστήριο του Κράτους και συγκεκριμένα τη Γενική Διεύθυνση Θησαυροφυλακίου & Προϋπολογισμού. Με θετικό πρόσημο προσδιορίζονται οι υπερβάσεις στην εκτέλεση του Προϋπολογισμού ανά υπουργείο ενώ με αρνητικό πρόσημο παρουσιάζονται οι περιπτώσεις που τα δαπανηθέντα ποσά ήταν τελικά λιγότερα από τα προϋπολογισθέντα. Από τα στοιχεία του Πίνακα 1 προκύπτουν ισχυρές ενδείξεις για το επιχείρημα της ενδεικτικότητας των προϋπολογισμών της χώρας μας. Χαρακτηριστικά αναφέρεται η περίπτωση του Υπουργείου Μεταφορών και Επικοινωνιών που καθ όλη την περίοδο οι δαπάνες του υπερέβησαν σημαντικά τις προϋπολογισθείσες. ΠΙΝΑΚΑΣ 1: ΑΠΟΚΛΙΣΕΙΣ ΜΕΤΑΞΥ ΠΡΟΫΠΟΛΟΓΙΣΘΕΝΤΩΝ ΚΑΙ ΚΑΤΑΒΛΗΘΕΝΤΩΝ ΔΑΠΑΝΩΝ Φορείς Προεδρία ηµοκρατίας -3% -7% +5% -4% -2% -3% -4.9% Βουλή +3% 0% +8% -1% 0% +2% -3% Υπ. Εσωτερικών Δημόσιας Διοίκησης και Αποκέντρωσης +16% +12% +11% +1% +2% +2% -1.5% Υπ. Εξωτερικών +23% +6% -8% +4% -3% -11% -13.9% Υπ. Εθνικής Άμυνας +8% +9% +4% -5% +9% +2% -0.2% Υπ. Δικαιοσύνης 0% 0% 0% -2% -4% -4% -1.9% Υπ. Παιδείας και Θρησκευμάτων +2% +3% +10% +3% -1% 0% +1,6% Υπ. Υγείας +4% +8% +5% +59% 4-1% +3% +1.4% Υπ. Πολιτισμού +8% +6% +8% +4% +13% +14% +3.4% Υπ. Οικονομίας και Οικονομικών πλην Γεν. Κρατικών Δαπανών -3% +18% +19% +7% +13% +6.2% Υπ. Οικονομίας και Οικονομικών Γενικές Κρατικές Δαπάνες +1% +1% +11% -3% -2% -4% -3.9 Μακεδονίας Θράκης -1% +19% -2% -10% -8% -7% -12.8% ΥΠΕΧΩΔΕ +8% +6% +12% +2% -3% -3% +3.5% Υπ. Μεταφορών Επικοινωνίας +31% +31% +53% +32% +25% +27% -0.5% Υπ. Εμπορικής Ναυτιλίας +1% +10% +25% +5% +3% +7% Υπ. Επικοινωνίας και Ενημέρωσης +5% +19% +62% +18% +13% +13% -4.5% Υπ. Απασχόλησης και Κοινωνικής Προστασίας -3% +2% +12% +5% +6% -3% -1.6% Υπ. Ανάπτυξης +5% +12% +16% +16% +18% +45% 5 +3,1% Υπ. Δημόσιας Τάξης +3% +3% +21% -1% -3% +2% Πηγή: Ανάλυση στοιχείων από τους ψηφισθέντες προϋπολογισμούς κάθε έτους και τα Δελτία Εκτέλεσης του Προϋπολογισμού που εκδίδονται από το Γενικό Λογιστήριο του Κράτους / Γενική Διεύθυνση Θησαυροφυλακίου & Προϋπολογισμού. Είναι σαφές ότι για να μπορεί κανείς να εξάγει ασφαλέστερα συμπεράσματα, ως προς τις υπερβάσεις του προϋπολογισμού, τους λόγους της υπέρβασής τους και κατά πόσο αυτή 4 Περιλαμβάνονται και οι δαπάνες για την προεξόφληση νοσοκομείων προηγούμενων ετών ύψους εκατ. 5 Περιλαμβάνονται στις πληρωμές και οι δαπάνες του Ενιαίου Προγράμματος Προμηθειών όλων των Υπουργείων 16

26 Budgetary Crisis and Recession ήταν ήδη από την περίοδο κατάρτισης του προϋπολογισμού σε επίγνωση των σχεδιαστών του, πρέπει να αναλύσει σε πολύ πιο βάθος τα στοιχεία. Ενδεικτικά αναφέρεται η περίπτωση των αμοιβών προσωπικού με σχέση εργασίας ιδιωτικού δικαίου ορισμένου χρόνου (Κωδικοί 0342 και 0352) την περίοδο Από τα στοιχεία του Πίνακα 2 είναι εμφανές ότι οι δαπάνες για εποχικό προσωπικό συστηματικά υποεκτιμώντο. Πίνακας 2: Αμοιβές προσωπικού (συμπεριλαμβάνεται και το εποχικό προσωπικό) Αμοιβές προσωπικού με σχέση εργασίας ιδιωτικού δικαίου ορισμένου χρόνου (Κωδικός 0342) Προβλέψεις Διαμόρφωση Καταβολές , , , , , , , , , , ,69 Εισφορές σε ασφαλιστικούς οργανισμούς προσωπικού με σχέση εργασίας ιδιωτικού δικαίου ορισμένου χρόνου (Κωδικός 0352) Προβλέψεις Διαμόρφωση Καταβολές , , , , , , , , , , ,47 Πηγή: Τακτικοί Προϋπολογισμοί, Περιφέρεις, Διάφορα Έτη Με τέτοιες μεθόδους είναι προφανές ότι έχουμε φτάσει στο σημείο να μη ξέρουμε τι δαπανά το κράτος, πως κρίνει και αξιολογεί μια δαπάνη ειδικά σε σχέση με το κόστος ευκαιρίας (δηλαδή τη δυνατότητα να χρησιμοποιήσει τα χρήματα αυτά με άλλο τρόπο για την ίδια ή άλλη δραστηριότητα), και εν τέλει γιατί ξοδεύει αυτά που ξοδεύει εκεί που τα ξοδεύει. Είχε άραγε ανάγκη η χώρα μας να προσλάβει νέους εργαζόμενους στον ευρύτερο δημόσιο τομέα μεταξύ των ετών 2001 και 2009 (αύξηση 18,1%, από σε άτομα σύμφωνα με την ΕΣΥΕ) αυξάνοντας έτσι το κόστος μισθοδοσίας από 15,2 δισ. ευρώ το 2001 σε 30,6 δισ. ευρώ το Ήταν άραγε ορθολογική η απόφαση του υπερτριπλασιασμού της επιχορήγησης των ασφαλιστικών ταμείων από τον τακτικό προϋπολογισμό το 2009 (ύψους 13,6 δισ. ευρώ ή 5,7% του ΑΕΠ) σε σχέση με το 2002 (3,93 δισ. ευρώ ή 2,5% του ΑΕΠ) χωρίς ουσιαστικά μέτρα αντιμετώπισης της εισφοροδιαφυγής, όταν όλη τη δεκαετία του 2000 σημειώθηκε εντυπωσιακή αύξηση (μέση ετήσια αύξηση 9,2%) των εισφορών, λόγω της αύξησης των ασφαλισμένων στα ταμεία, με τη νομιμοποίηση περισσοτέρων των μεταναστών 7. Τα παραπάνω παραδείγματα είναι ενδεικτικά μίας γενικότερης αντι-οικονομικής διαχείρισης των δημοσίων οικονομικών. Η ελληνική κυβέρνηση δεν έχει ουσιαστικά καθιερώσει καμία διαδικασία μελέτης του κόστους ευκαιρίας κάθε δαπάνης που αναλαμβάνει ούτε κάποια διαδικασία που θα παρουσιάζεται στο κοινό και θα αξιολογείται η σκοπιμότητά της. Αντίθετα, 6 Πηγή: Τακτικοί Προϋπολογισμοί, Διάφορα Έτη 7 Πηγή: ΙΚΑ 17

27 αντί της καθιέρωσης τέτοιων διαδικασιών, στην πολιτική απόφαση ανάληψης κάθε δαπάνης, επισυνάπτεται μία γενικόλογη και προαποφασισμένα να υποστηρίξει τη συγκεκριμένη δαπάνη, έκθεση σκοπιμότητας, που υποβάλλεται στο Γενικό Λογιστήριο του Κράτους. Σε ένα τέτοιο πλαίσιο. έχει ουσιαστικά περιορισμένη σημασία να συζητάμε που πήγαν τα λεφτά αφού οι προϋπολογισμοί υπήρξαν πάντα πρόχειροι και ενδεικτικοί, εκτός αν πρόκειται για περιπτώσεις εξόφθαλμης διαφθοράς και νομικού καταλογισμού. Ζητούμενο είναι το αν σχεδιάστηκε ποτέ ξεκάθαρα το που θα πάνε τα λεφτά. Γιατί αν δεν υπάρχει σχεδιασμός είναι ξεκάθαρο ότι ακόμα και όταν δεν συντρέχει κακοδιαχείριση, τα λεφτά θα χανόταν, με την έννοια ότι η επίπτωση της δαπάνης στην οικονομική ανάπτυξη και στην κοινωνική ευημερία θα είναι πολύ λιγότερη από αυτή που θα μπορούσε να ήταν. Κατά την άποψη μας η ανυπαρξία σχεδιασμού και η απόλυτη προχειρότητα, και όχι τόσο η διαφθορά, έχουν τη μεγαλύτερη ευθύνη για το σημερινό κατάντημα. Άλλωστε η διαφθορά κατά κανόνα ευδοκιμεί σε ένα περιβάλλον ανυπαρξίας κανόνων και διαδικασιών. 3. Το σύμφωνο δημοσιονομικής σταθερότητας: Κίνητρα και αντικίνητρα για τα κράτη μέλη της ΟΝΕ Για τη μη δημιουργία ενός πλαισίου αποτελεσματικής δημοσιονομικής διαχείρισης και διαχείρισης δαπανών είναι προφανές ότι ευθύνεται η χώρα μας. Αποτελεί όμως τουλάχιστον υπερβολή να αποδίδεται στην Ελλάδα - ή οιαδήποτε άλλη χώρα της ευρωζώνης - η ευθύνη για το αδιέξοδο που τείνει να δημιουργήσει το δημοσιονομικό αλαλούμ στην Ευρωπαϊκή Ένωση. Η απουσία δημοσιονομικών κανόνων, πολύ πιο συγκεκριμένων από τις γενικότητες της προευρώ Συνθήκης του Maastricht και του Συμφώνου Σταθερότητας, σε μία νομισματική ένωση αναπόφευκτα οδηγεί σε παρεκκλίσεις. Οι εμπνευστές της νομισματικής ένωσης, πιθανώς λόγω συγκυρίας, δεν άκουσαν ή δεν ήθελαν να ακούσουν, τις προειδοποιήσεις σημαντικών οικονομολόγων για την ανάγκη θέσπισης δημοσιονομικών κανόνων για τις χώρες του ευρώ (βλ. Eichengreen and Wyplosz, 1997, Easterly, 1999, Wyplosz, 2002). Οι φωνές αυτές υποστήριζαν, πολύ ορθά όπως φαίνεται πλέον ξεκάθαρα πως το καθεστώς νομισματικής ένωσης δεν θα μπορούσε να είναι βιώσιμο χωρίς ουσιαστικούς δημοσιονομικούς κανόνες. Από τη στιγμή που πλήρης δημοσιονομική ένωση ήταν πρακτικά αδύνατο να εφαρμοστεί, το ζητούμενο ήταν πως θα μπορούσε να διατηρηθεί η ισορροπία στην ευρωζώνη δεδομένων των ασυμμετριών μεταξύ χωρών με μεγάλες διαφορές στην ανταγωνιστικότητα των οικονομιών τους αλλά και στις αντιλήψεις ως προς τι συνιστά δημοσιονομική πειθαρχία. Ήδη από το 1999 ο W.Easterly, προειδοποιούσε ότι η εξωγενής επιβολή των γενικών στόχων σύγκλισης ( 3% για το έλλειμμα και 60% για το χρέος) σε χώρες που οι κυβερνήσεις δεν είναι σε θέση να φερθούν δημοσιονομικά υπεύθυνα θα δημιουργούσε λάθος κίνητρα. Οι γενικοί αυτοί στόχοι αποτελούσαν, και εξακολουθούν να αποτελούν, επιφανειακή και επικίνδυνη προσέγγιση λόγω των κινήτρων που έχουν οι κυβερνήσεις χωρών με περιορισμένη 18

28 Budgetary Crisis and Recession παράδοση σε θέματα δημοσιονομικής πειθαρχίας να προκρίνουν υψηλότερα επίπεδα τρέχουσας κατανάλωσης εις βάρος αυτής των επόμενων γενεών ή εις βάρος των επενδύσεων της τρέχουσας περιόδου. Επίσης η έλλειψη τυποποιημένων λογιστικών προτύπων για τα δημόσια οικονομικά, όπως αυτά υπάρχουν για τις ιδιωτικές επιχειρήσεις, συνιστούσε ακόμα πιο επιτακτική την θέσπιση κανόνων για την ουσιαστική δημοσιονομική παρακολούθηση των χωρών μελών της ευρωζώνης. Ο Easterly αποδεικνύει, μελετώντας τη συμπεριφορά των χωρών που βρίσκονταν στο προθάλαμο του ευρώ, ότι για να πετύχουν τους στόχους της σύγκλισης, η πλειονότητα των χωρών μείωσε συστηματικά τις αναπτυξιακές δαπάνες μειώνοντας έτσι την αναπτυξιακή προοπτική και τα μελλοντικά έσοδα για το δημόσιο, προέβη σε σημαντικές περικοπές απαραιτήτων δαπανών λειτουργίας και συντήρησης, διογκώνοντας τις μελλοντικές υποχρεώσεις που αναπόφευκτα απορρέουν όταν περιουσιακά στοιχεία κακοσυντηρούνται, και υλοποίησαν ιδιωτικοποιήσεις για εισπρακτικούς απλά λόγους. Αυτή η πρακτική δεν είχε κανένα αντίκτυπο στον περιορισμό περιττών λειτουργικών δαπανών (και κατά συνέπεια του δομικού ελλείμματος), συσσώρευε δαπάνες για τα επόμενα χρόνια και διόγκωνε το χρέος. Τα κριτήρια σύγκλισης του Maastricht είχαν ακριβώς το αντίθετο αποτέλεσμα από αυτό που προσδοκούσαν να έχουν, και αυτό συνεχίστηκε και με το Σύμφωνο Σταθερότητας. 4. Συμπεράσματα Η σημερινή κατάσταση στην Ελλάδα αποδεικνύει περίτρανα την πρόβλεψη του Easterly. Η δημοσιονομική προσαρμογή της χώρα μας θα περάσει μόνο μέσα από μία διαφορετική θεώρηση του τρόπου σύνταξης, κύρωσης και παρακολούθησης του Προϋπολογισμού. Ο Έλληνας πολίτης έχει «χορτάσει» από μεγάλα λόγια για διαθρωτικές αλλαγές, εκσυγχρονισμούς, προγράμματα μεταρρυθμίσεων και επανίδρυση του κράτους, όταν στην πραγματικότητα έχουμε ένα Υπουργείο Οικονομικών το οποίο ουσιαστικά δεν λειτουργεί. Η ιστορία έχει δείξει ότι οι πραγματικές αλλαγές βασίστηκαν στην απλότητα. Η λύση βρίσκεται στην ορθολογική διαχείριση των δαπανών-εσόδων του κράτους, στην αξιολόγηση κάθε επιμέρους δαπάνης και στον καθορισμό μιας ξεκάθαρης δημοσιονομικής πολιτικής. Μία ενδελεχής μελέτη ως προς το κόστος ευκαιρίας κάθε επιμέρους δαπάνης για κάθε επιμέρους κωδικό του προϋπολογισμού, αναμφίβολα θα αποκάλυπτε μία άλλη διάσταση του προβλήματος στην Ελλάδα. Και στο βαθμό που αυτό δεν υλοποιείται από τους σχεδιαστές της οικονομικής πολιτικής στη χώρα μας, η συμβολή της ακαδημαϊκής έρευνας, σε όποιο βαθμό αυτό είναι δυνατό να επιτευχθεί, θα είναι καθοριστική. Παράλληλα, σημαντικό πεδίο έρευνας υπάρχει ως προς το είδος, το περιεχόμενο και το βαθμό αυστηρότητας που θα πρέπει να περιβάλλει τους όποιους δημοσιονομικούς κανόνες και τις όποιες διαδικασίες θα πρέπει να εφαρμόσουν οι χώρες - μέλη της ευρωζώνης 8. Η ιστορία έχει δείξει ότι κατά κανόνα τα 8 Για μία επισκόπηση της βιβλιογραφίας στο ζήτημα αυτό βλ. Von Hagen and Harden (1995), Wyplosz (2002) και Baldwin, Gros and Laeven (2010) 19

29 διαφορετικά χαρακτηριστικά των επιμέρους κρατών απαιτούν διαφορετικές λύσεις. Σε ένα τέτοιο πλαίσιο μία μεγαλύτερη έμφαση στις διαδικασίες και στη θεσμούς σε σχέση με τους κανόνες ίσως αποτελεί καλύτερη λύση για το ευρωπαϊκό οικοδόμημα. Βιβλιογραφία Baldwin Richard, Daniel Gros and Luc Laeven, (2010), Completing the Eurozone Rescue: What More Needs to Be Done, Centre for Economic Policy Research. Gleich, H. (2003) Budget Institutions and Fiscal Performance in Cental and Eastern European Countries, ECB Working Paper, 215. Easterly, W. (1999), Fiscal Illusion: Taking the Bite Out of Budget Cuts, Economic Policy, April Eichengreen Barry and Charles Wyplosz, (1997), The Stability Pact: Minor Nuisance, Major Diversion? Economic Policy, 26, pp Hagen, von J. (1992), Budgeting Procedures and Fiscal Performance in the European Communities, European Economy Economic Papers, 96, European Commission, Directorate general for Economic and Financial Affairs (DG ECFIN). Hagen, von J. and Ian Harden (1995), Budget Processes and Commitment to Fiscal Discipline, European Economic Review, 39 (3), pp Lee Mordecai, (2005) Public Reporting, in Encyclopedia of Public Administration and Public Policy, edited by Jack Rabin, Taylor and Francis Group. Marr Bernard, (2008), Managing and Delivering Performance How Government, Public Sector and Not For Profit Organisations Can Measure and Manage What Really Matters, Elsevier. Schiavo-Campo Salvatore and Daniel Tommasi, (1999), Managing Government Expenditure, Manila: Asian Development Bank (ADB). Wyplosz Charles (2002), The Stability and Growth Pact: Time to Rethink, Briefing Notes to the Committee for Monetary and Economic Affairs, European Parliament. Ylaoutinen, S. (2004) Fiscal Frameworks in the Central and Eastern European Countries, Finnish Ministry of Finance, Discussion Paper

30 Budgetary Crisis and Recession Albania and the recent world crisis: Economic growth or political illusion? Lindita Rova, Alketa Bejko & Ilirjana Zyberi 1 Abstract: The recent economic crisis which started in USA in the year 2008 was rapidly spread in almost the whole world. Over the last decade many countries around the world were hit painfully by such events, but global economy was not affected by such crisis since 1929 (The Great Depression). The early examples of financial crisis are Mexico ( ) and Argentina ( ). Few years later several countries in Europe ( ), Mexico again ( ), East Asia and Russia (1998) followed by Brazil (1999). The years after Turkey suffer a financial crisis ( ) and Argentina ( ). The nature and the characteristics of this crisis due to the major developments in the last decades and the high globalization level make it different from all previous world ones. All the countries in the world which were affected or threatened by it, took immediate actions in order to avoid the bankruptcy of their financial institutions, particularly the second level banks (despite their accepted limits concerning state interference in the countries economy). During the transformation of the financial crisis into economic crisis, the question weather Albania has been affected by this crisis or not? still remains unanswered. For as long as the Albanian economy is organically connected to the economy of other European Countries (more than ¾ of Albanian foreign trade is made with European Union countries), for as long as the Albanian economy has not yet clearly defined the main development axes (there is a Strategy for National Development and Integration but it is far from its implementation), for as long as 1/3 of Albanians live and work abroad the Albanian economy is absolutely vulnerable to the world economic crisis. Some of the consequences of this crisis on the Albanian economy could probably be: a decrease in GDP, a decline in export and import activity, increase in the inflation rate, decline in FDI level, decrease in emigrant remittances, increase in the bad loans level, decrease in the level of bank deposits, decline in the mortgage level etc. The aim of this paper is to study the economic situation in Albania based on the figures released by Albanian institutions and answer to the question is Albania suffering from the recent world economic crisis? Financial crisis and Albania The economic crisis was officially accepted on 14 September 2008, in USA, in the house mortgage sector, and its impact was rapidly spread in many parts of the world such as 1 Economics Department, University of Gjirokastra, Albania. 21

31 Europe, Asia etc. Global economy has not been affected by such a crisis since 1929 (Great Depression). The nature and the characteristics of this crisis due to the major developments in the last decades and the high globalization level make it different from all previous crises. All the countries in the world which were affected or threatened by it, took immediate actions in order to avoid the bankruptcy of their financial institutions, particularly the second level banks (despite their accepted limits concerning state interference in the countries economy). Table 1 - The GDP real growth in some countries of the world for 2008 and Countries The GDP real growth in 2008 (%) The GDP real growth in 2009 (%) Unemployment rate in 2008 (%) USA China Japan UK Germany France Italy Greece European Union Graph 1 - Real GDP growth in some countries of the world. Unemployment rate in 2009 (%) Year 2008 Year 2009 The beginning of 2009 shows very negative indices for all developed countries, but some improvements of the situations were noticed in the second half of the year, as shown in table nr 1. Albanian economy was not affected by the financial crisis, owing to the fact that the financial market in Albania is virtually inexistent (in Albania there operates only a crude and rudimentary form of the financial market were only treasure bonds are marketed). Financial operations of the banks of the second level are limited to offering credit to individuals, businesses and the Government. During the transformation of the financial crisis into economic crisis, the question weather Albania has been affected by this crisis or not? still remains unanswered. Regarding the answer to this question there are two approaches, which surprisingly are not based on concrete economic evidence or official data, but on political attitudes of the political force in office (which does not accept that Albania has been affected by the economic crisis) as well as the opposition forces (which not being part 22

32 Budgetary Crisis and Recession of the decision making institution overemphasizes the negative effects of this crisis that has gripped Albania). Judging from real economic indices and referring to indisputable figures standing above any political attitude 2 we can openly admit that the resent world economic crisis has expanded its impact on Albanian economy as well. At the outset of the crisis, Albania faced a decline in the individual and institutional faith towards the banking system. This resulted in deposits withdrawal from the banks causing liquidity difficulties in the fourth quarter of 2008, a situation which was normalized in the following months. For as long as the Albanian economy is organically connected to the economy of other European Countries (more than ¾ of Albanian foreign trade is made with European Union countries), for as long as the Albanian economy has not yet clearly defined the main development axes (there is a Strategy for National Development and Integration but it is far from its implementation 3 ), for as long as 1/3 of Albanians live and work abroad the Albanian economy is absolutely vulnerable to the world economic crisis. Some of the consequences of this crisis on the Albanian economy could probably by: a decrease in GDP, a decline in export and import activity, increase in the inflation rate, decline in FDI level, decrease in emigrant remittances, increase in the bad loans level, decrease in the level of bank deposits, decline in the mortgage level etc. The aim of this paper is to study the macroeconomic indices of the Albanian economy, on the bases of official data released by national institutions. A detailed study of these indicators will give us a clear overall picture of the economic situation in Albania and the impact the recent world crisis upon it. Accepting the fact that the Albanian economy is facing a crisis is the first major step towards finding the best ways to overcome the difficulties arising from it. Our research is based on data provided by Bank of Albania and Albanian Institute of Statistics up to the third quarter of the year This is due to the fact that these official institutions have not released figures for the period that goes beyond that point in time. The analysis of some macroeconomic indices In our paper we have analyzed those macroeconomic indicators that are impacted more quickly and more seriously from the economic crisis. We couldn t include all the indices in our paper but we think that certainly the indices we choose to study can give us an evaluation about the economic situation in Albania. Bank deposits 2 The figures released by the official institutions in Albanian are in discordance with the same figures released by the international institutions. All this make you come to the conclusion that political attitudes have interfered with official data. 3 Ministry of trade, economy and energy: Inter-sector strategy for regional development, final draft, September,

33 The beginning of the crisis was immediately reflected in the decrease in the level of bank deposits. The Albanian authorities did not take immediate action to protect the level of deposits and as a result of this the last quarter of 2008 saw a serious decline in the deposit level. Comparing the deposit accounts in domestic and foreign currency at the end of September with their level at the end of December, the result shows a decline of more than 10%. The USA authorities reacted immediately to this phenomenon by increasing deposits insurance limit from 100 thousand dollars to 250 thousand dollars whereas the European Commission increased it up to 100 thousand euro in October Six months later the Albanian authorities increase the deposits insurance limit from 700 thousand leks in 2.5 million leks (approximately euro), which was a decision taken later than the proper time and resulting in negative consequences in their level. The year 2008 saw an increase in the total deposit amounts both in domestic and foreign currency. However if we compare the growth in the level of deposits with the previous year ( ) it results to be 21.42% whereas in the period the figure is only 3.4%. This slight growth is attributed to capital inflows during summer time. In the last quarter of the year 2008 the rate of deposit growth decreased by half compared with the same period of the year This situation clearly reflects the panic caused by the world crisis. Table 2 - Current and deposit accounts level in foreign and domestic currency. Source: Bank of Albania, annual report 2008 Period Current Deposits in domestic Deposits in foreign accounts (in currency currency million leks) (in million leks) (in million leks) September October November December The money supply structure during 2008 had a tendency towards long term financial means; with the exception of the fourth quarter where there was a clear tendency towards the short term ones, a fact which once more confirms the crisis effects i.e. in the presence of a crisis the individual tends to shift from long term financial means into short term ones. If we analyze the rate of the deposit and current accounts from September 2008 to December 2008 we notice that the current accounts increased by 15.6%, while the deposit accounts decreased by 10%. On average, the proportion of current accounts to deposits accounts in the fourth quarter of 2008 was 30.7% that is 1% higher compared with the previous months of the same 24

34 Budgetary Crisis and Recession year. The proportion of the total amount of deposits to M3 in 2008 appears to be on the increase by 2% compared with The rapid decline in the amount of deposits came because of the increase in the public sensitivity to the safety of their savings, resulting from international developments in the financial markets. This unfavorable situation showed the first signs of improvement in December The decline in the amount of deposits was moderate during the first half of In the first quarter of 2009 the total amount of deposits was reduced on average by 3.6% annually. The proportion of the total amount of deposits to the money supply was 75% at the end of May 2009, which was a slight decline by 7% compared to the end of September The second quarter of the same year was marked by a deceleration in the deposit withdrawal phenomenon. In monthly terms, the total deposit amount in April was finally increased, after months of continuous reduction. The credit for this goes to the increase of the business deposit accounts, mainly those in foreign currency. Individual deposits continued to show a slight decrease despite the deceleration in the serious declining tendency manifested in the previous period 4. The monthly developments concerning the deposit level in the following month was marked by improvements. The passing of the law, according to which, the deposit insurance limit was extended to 2.5 million leks should have had its impact on the situation improvement. The total deposit amount in the period between April and May rose by 11 billion leks. The deposits in domestic currency were the ones that dominated the total amount increase of 6.5 billion leks in absolute value. Foreign trade During the transition period the foreign trade sector has been the most problematic sector of the Albanian economy. In the year 2007 the imports were 3.7 times higher than the exports and the figures remain unchanged during the year According to the Bank of Albania the value of import of goods was 3.3 billion euro, while export of goods reached the figure 900 million euro. Thus, the trade balance deficit reached 2.4 billion euro i.e. 28% of GDP. Imports and exports in their total amount have increased by approximately 17%. Despite this tendency the figure is apparently lower than last year figure (i.e. in 2007 exports increased by 24.7% and imports by 26.2%). Graph 2 - The imports, the exports and the trade balance level during years. Source: Bank of Albania Balance of Payments bulletin Bank of Albania: Monetary Policies Statement for the first half of

35 Table 3 - Data regarding the level of imports, exports and trade balance for 2007 and Source: Bank of Albania, annually report 2008 Indicator Unit Year 2007 Year 2008 Exports Million euro Imports Ml euro (2,890.4) (3,348.9) Trade balance Ml euro (2,104.0) (2,431.5) Exports/GDP % Imports/GDP % Trade balance/gdp % As it can be seen in the analysis of the import-export level in Albania during the third and fourth quarters of 2008, the figures are almost the same as those forecasted by most economy analysts. Thus, a considerable decline is noticed in the export level from 242 million euro in the third quarter to million in the fourth. This phenomenon, which alongside with an increase in the import level with almost 100 million euro, deepened the trade balance deficit with 140 million euro (Graph 3). Graph 3 - The level of imports and exports in 2008 and 2009 in million euro. Source: Bank of Albania, Balance of Payments bulletin 2008 The situation continues to worsen over the first quarter of In the second and third quarter of the year 2009 a slight improvement is noticed in the export level. However this does not reach the level of the fourth quarter of the year The level of imports has also 26

36 Budgetary Crisis and Recession begun to increase gradually still being far from the figure of the fourth quarter of the year Following a decrease of 150 million euro in the first quarter of 2009 the third quarter saw an increase with 100 million euro (from the first to the third quarter). In order to understand these changes let s analyze table nr 4 which compares import and export levels in the first quarter of several successive years. Table 4 - The first quarter level of trade balance and current account for few successive years. Source: Bank of Albania Q Q Q Q Trade balance (364.2) (443.0) (527.3) (516.4) Imports (508.6) (625.0) (733.9) (692.5) Exports Current account (117.9) (178.0) (267.3) (334.2) The current account deficit for the first quarter of the year reach the cumulative value of million euro, showing an increase of 25% compared with the same period of the previous year. This high level of the current account deficit was brought about by: A high level of trade balance deficit (29% of GDP), A decrease in the current account transfer surplus (12% annually) A marked shift in the income account balance from surplus to deficit A sharp increase in the service account balance (from 3.3 to 26.8 million euro). As it can be noticed from the table nr 4 there is a significant difference in the export level, thus confirming once again the impact of the economic crisis on the weakest point of the Albanian economy. This goes to show the low level of commercial competitiveness for the Albanian products. The most important countries which Albania is involved in international trade with are Greece and Italy. In the year 2008 the level of exports with these countries was respectively 8.8% and 61.8% of the total export amount. During the period the amount of exports with Italy has dropped off by 9% whereas the amount of exports with Greece has gone up by 6%. The level of import-export in 2009 is almost the same as that of the previous year. Emigrant remittances Labor force is the major export of Albanian economy and the main compensation for this export are remittances. Remittances have had a very significant effect, maybe even greater than traditional foreign aid, towards the alleviation of household poverty in developing countries (Nicas 1991). Remittances appear to be less vulnerable to economic fluctuation than other sources of external funding to developing countries such as foreign direct investments or official development assistance (Buch and Kuckulenz, 2004).Is very difficult to make a realistic assessment to the remittance flows in Albania for a lot of reasons. Sixty percent of Albanian remittances are made by informal channels and Bank of Albania 27

37 use to register only remittances transferred by the official networks, when the other part is only estimated. This means that the data about remittance flows in Albania are for a large part estimates. Emigrant remittances have been huge both in absolute and relative terms. Their dimension could be compared with that of an economic sector, practically three times higher than the FDI amount in Albania. Graph 4 - Emigrant remittances amount during years. Source: Bank of Albania, INSTAT Up to the year 2007 emigrant remittances have been on the increase, specifically the year 2007 saw a slight increase of 1.3% compared with the previous year. As it was expected, there has been a steep fall in the emigrant remittances, both in absolute and relative terms in the year 2008, 16% less than the year before (in 2007 the emigrant remittances were equal to 12% of GDP while in 2008 there level was only 9.2% of GDP). Graph nr 4 shows the amount of emigrant remittances during The emigrant remittances have fluctuated wildly during 2008 plummeting down in April and August, but showing a tendency toward stabilization in the last two months of the year. Graph 5 - Emigrant remittances during Source: Bank of Albania, Balance of Payments bulletins, INSTAT Graph 6 - Emigrant remittance as percentage of GDP Source: Bank of Albania, Balance of Payments bulletins, INSTAT 28

38 Budgetary Crisis and Recession The decrease of emigrant remittances in the year 2008 is brought about by two main factors: Financial and economic crisis in the countries where the emigrants live and work. The naturalization process of these emigrants. The same situation can be noticed even in the first quarter of the year Emigrant remittances marked a decline of 7.7% per year. Emigrant remittances equalled to 196 million in the first quarter of 2009 and this declining tendency is going to continue in the following months due to the difficult economic situation in Greece and Italy, countries which host the majority of Albanian emigrants. Thus emigrant remittances in the third quarter of 2009 amounted 188 million euro, showing an annual decrease of 6% compared with 200 million euro in the preceding year. Inflation rate and exchange rate The performance of the inflation rate over the years in Albania is positive demonstrating the success of the Inflation Targeting Regime (inflation between 2-4%) implemented by Bank of Albania. From 2001 until 2008 inflation rate has been between 1.7 and 3.7%. The year 2008 reflected mainly the effect of the global price rise in primary commodities (foods and fuels). Annual inflation oscillated sharply throughout the year. In the first half of the year, it marked rates above the upper limit of the tolerance band set by the Bank of Albania, reaching 4.6 percent in May, the highest rate in the last five years. In the second half of 2008, annual inflation eased to low rates in all items that fuelled the sharp price rise over August 2007 to June Subsequently, at end 2008, the inflation rate stood close to the lower limit of the tolerance band. Relative to the first quarter of 2008, average inflation rate for the last quarter was 1.2 percentage points lower. The fall in food prices -triggered by the performance of domestic agricultural production and grain prices in the global market- and fuel prices gave rise to the shift in the annual inflation rate trend in the second half of At the end of the year 2008 inflation rate was 2.2%. In the first three quarters of 2009 the inflation rate was from 1.9 to 2.1% Table 5 - Inflation rate in Albania during the years. 29

39 Period Inflation rate Table 6 - Inflation rate in Albania in three quarters on 2008 and 2009 Period Q Q Q Q Q Q Inflation rate Graph 7 - Exchange rate during the years (ALL/USD, ALL/EUR) Analyzing the exchange rate dynamics in the domestic market, it comes out that in the last decade ( ) Albanian lek is appreciated against the two main currencies, the US dollar and euro. The exchange rate ALL/USD in 1999 was when in 2008 was 88, a depreciation of the UDS with 36%. The exchange rate ALL/EUR in 1999 was 147 leks when in 2008 was 123.8, a depreciation of the euro with 16%. In the year 2009 the situation is different: Albanian lek is depreciating against both currencies. Thus, the USD costs now 96 leks (14.4% higher than in 2008) when euro costs (12.5% higher than in 2008). Foreign Direct Investments The Albanian Government seeks to attract foreign investments as they have an important impact on the economic growth of a country. Albania's economic freedom score in 2009 was 63.7, making Albanian economy the 62nd freest in the 2009 Index5. Its level of economic freedom increased by 1.3 points during the past year, and it has improved in three of the 10 freedoms. Albania is ranked 27th freest among the 43 countries in the Europe region. Comparatively, Albania's freedom level is on par with that of other developing Balkan countries like Croatia and Macedonia. Fiscal freedom, investment freedom, and financial freedom all rate significantly higher than the typical country's levels. Nevertheless FDI in Albania are the lowest in the region. Albania ignored by foreign investors is an article published on March 2008 by Premier global property news service. Until 2005 Albania was the 5 30

40 Budgetary Crisis and Recession country with the lowest cumulative foreign direct investment flows in SEE region. The situation has been on the improve the years later. According to the World Investment Report 2008, the Albania country sheet in 2007 Albania had $656 million (454.2 million euro) FDI inward flows, and 2264 FDI inward stock or 12.3% of gross fixed capital formation and the FDI stock in 2007 is just 21.3% of GDP. Graph 8 - FDI level in Albania from 2004 to Source: Bank of Albania, World Investment Report The level of FDI in the year 2007 and 2008 is high because the large part of FDI comes from privatization. In 2007 the privatization of Albtelekom raises the level of FDI and not the favorable investment climate for foreign investors in the country. The same situation is even the following year due to the privatization of OSSH and ARMO. During the half year of 2009 the FDI have been million euro. Almost all of this income flows are due to the privatization process6. This shows ones more the effect that the global crisis has upon Albania. Gross Domestic Product Albania is one of the post communist countries facing high levels of GDP growth. From 2000 until 2008 the average growth of GDP was 6%. In the first half of 2009 according to the data provided by the INSTAT, the GDP grew by an average annual growth rate of 5.35 percent, relative to about 6.8 percent the previous year. In the first and second quarter of 2009, the GDP grew 5.4 and 5.3 percent, respectively, in annual terms, down by 1.3 and 1.6 percentage points from the same period the previous year. Quarterly growth rates featured a similar tendency, attesting to the slower economic activity during January to June Albanian Government release 6% the growth of 2009 but international institutions do not agree. IMF estimates that Albania has grown by some 3 percent in It is quite a high level if we compare it with other European economies. Graph 9 - Albanian GDP real growth during the years. 6 Bank of Albania: Monetary Policies Statement for the first half of

41 But despite the good outlook there were many risks, including external ones, developments in other countries, including Albania's neighbor Greece, and financial markets. The budget-supported demand had resulted in a large decline in revenue and also a major expenditure increase and as a result of this, the budget deficit swung from 3 percent of GDP in 2007 to 7 percent of GPD in That was one fact that was driving public debt now up to almost 60 percent of GDP and current accounts balance of up to 15 percent. The Albanian government stimulated growth by focusing on public projects, mainly road building and has spent more than billion euros. These trends and levels are fairly high and they risk, if not corrected, to crowd out private investment, but also to undermine future debt and macroeconomic stability. Conclusions and recommendations. Judging from the macroeconomic indicators it can be clearly seen that the economic crisis that has affected almost the whole world has extended its influence upon the Albanian economy. In the conditions of limited official statistics (the Bank of Albania has released official data up to the third quarter of 2009 and Albanian Institute of Statistics up to 2008 and in some cases 2007) we could not provide a full picture of the situation, which would even include the beginning of However, we have managed to demonstrate that the progression of macroeconomic indices is a clear indicator of a situation of crisis. According to a survey we conducted in the Southern Region of Albania based on 200 questionnaires, the answer to the question Do you think Albania is facing a crisis? 84% of the interviewees answered positively. Only 12% of them think that Albania is not influenced by the recent economic world crisis. This demonstrates ones more that the ordinary citizens are filling the crisis. As to the questions: Is this crisis going to develop into depression, How long is it going to last, What will its financial cost be very few people could have been able to give an adequate answer. What is our most immediate and serious concern here has to do with the question: How should the decision making and financial authorities react in order to minimize as much as possible the consequences of the economic crisis to the Albanian economy and ordinary Albanian citizens. 32

42 Budgetary Crisis and Recession At a time when almost all the countries in the world have been bringing forward policies to keep the crisis under control in their respective countries, Albanian authorities are far from introducing such policies. We arrived at this conclusion based on the reason analyzed in this paper: the Albanian Government has not yet accepted the fact that Albania has been affected by the recent world crisis. Under such circumstances we suggest that the Albanian financial and decision making authorities take into consideration the following recommendations: The Albanian government should accept the unfavorable economic situation despite the willingness to name it a crisis or otherwise. The official institutions should release more transparent and realistic figures; they should avoid delays and political interference with them as factors which both result in releasing misleading data. The Albanian authorities should take immediate action to introduce new economic and social policies which would be able to prevent the further deterioration of the economic situation. The Albanian government should increase the level of cooperation with the References international institutions such as: IMF, World Bank and the like. Albanian Human Development Report, 2000 Bank of Albania, Annual Reports 2005, 2006, 2007, 2008 Bank of Albania, Economic Bulletin, September 2009 Bank of Albania: Monetary Policies Statement for the first half of Fullani A, 2005: Key policy issues for remittances in transition economies - a view point from a recipient country Fullani A, 2006: Remittances: An opportunity for growth - the Albanian migration to Italy as a case study Inter-sector strategy for regional development, final draft, September, 2007, Albania Ministry of Trade, Economy and Energy. King R. (2003) Across the sea and over the mountains: documenting Albanian Migration, School of Europian Studies, University of Sussex Press, Kring T, (2007) Rritja e ndikimit te remitancave te emigranteve ne Shqiperi. Shahollari L. (2009) Ndikimi i krizës financiare botërore në treguesit makroekonomikë të Shqipërisë. 33

43 Corporate governance, social responsibility and corporate reputation: An empirical analysis of the situation in the republic of Croatia Golja Tea & Morena Paulisic 1 SUMMARY The world we live in is rapidly changing. In this kind of environment, companies are faced with the necessity for further and deeper adjustment to the challenges brought upon by globalization forces - dynamic population growth, growing emission of greenhouse gases, global climate change, biodiversity loss, and poverty. The ever so big difference in development between the North and the South, with almost 3 billion people living on less that 2 USD a day has also very strongly influenced the change in ordinary behaviour of each and every responsible actor in the global domain. Bearing in mind that there should be some cause of the huge difference in wealth and per capita income, some things have to be changed. The above mentioned are unintended consequences of the wrong global governance and bad business practice as well as a call for global action to bring the world on a more sustainable pathway. New balance between businesses, governments and society should be formed in order to reach decent human conditions in the future within the limits of the planet. The contribution from the business side to the achievement of sustainable development should go through responsible business practices. Responsible business behaviour becomes a must in the everyday business practice not only because of the business will to contribute to the achievement of sustainable development, but more because of the huge pressures from different stakeholders in the society, as well as of the need to successfully compete on the global market. Products and their quality could no longer be considered main competitors. Main competitors are becoming companies and their brands, and more importantly their reputation. The company is operating in the society and thus directly and indirectly under the influence of different stakeholders and vice versa. That is why it has a number of reputations because of different perceptions of different stakeholders. Companies should strive to build good reputation but this is not an easy task as it has to conform to the expectations of different stakeholders. Reputation is not only financials success but the whole spectrum of activities which company performs. One 1 Department of Economics and Tourism "Dr.Mijo Mirković", Juraj Dobrila University of Pula, Croatia. 34

44 Market/Sector Analysis important aspect of the reputation is its behaviour, especially in the developmental moments as the one we are facing today. Corporate social responsibility influences on the company s reputation as it involves a huge array of activities difficult and hard to imitate. CSR contributing to enhancement of company s reputation is a source of competitive advantage. The purpose of the paper is to offer an explanation how social responsibility influences corporation s reputation. The theoretical aspect of corporate governance, social responsibility and corporate reputation is provided. Furthermore, as a result of our theoretically research, we created questionnaire and conducted an empirical analysis in the Republic of Croatia (within a corporate governance context) with the aim to enlighten the current state of corporate social responsibility as one of the aspects of corporate governance in the Republic of Croatia and managers perception regarding the importance of CSR in building better reputation and hence competitive advantage. The sample covered Croatian corporations regardless of the size. This paper demonstrates the relevance of including social responsibility in leading and corporate governance on any organization in today s economy. 35

45 Regulatory barriers to entry in industrial sectors Panayotis Kotsios 1 Abstract: The entry of new competitors has been recognized as a balancing force against high levels of industrial concentration and the abuse of dominant position by firms with large market shares. Entry increases supply, lowers prices, intensifies innovation and brings equilibrium to the markets that don t operate in a socially desirable manner. This paper examines the impact of regulatory restrictions to the entry of new competitors in industrial sectors. It provides a short description of the 13 most important sources of regulatory barriers and assesses their role and importance as entry barriers. The conclusion is that regulatory restrictions can be a very important, almost insurmountable barrier to the entry of new competitors, but their role is not always socially harmful. The use of certain sources of regulatory barriers is effective in protecting social welfare instead of harming it. Barriers that promote new competition or are applied in order to protect consumer welfare are socially useful, while barriers that restrict competition and limit new competitor entry, in cases other than natural monopolies, are socially harmful. Introduction This paper s goal is to examine the impact of regulatory restrictions to the entry of new competitors in industrial sectors. Firstly barriers to entry and then regulatory barriers to entry are defined. Following is a description of the most important sources of regulatory barriers and next there is an analysis of the various arguments for and against their application in relation to social efficiency. Next is a brief outline of empirical studies on the topic. Policy recommendations regarding each source of regulatory barriers are made in the final part of the study. Definition of a barrier to entry The entry of new competitors relates with the appearance of a new producer in a market (OECD, 2005) and can take many forms such as foreign direct investment, trade licenses, joint ventures, strategic alliances, acquisitions, direct export or greenfield investments in new industrial facilities. The entry of new competitors operates as a balancing force against high levels of industrial concentration and the abuse of dominant position by firms with large market shares. Entry increases supply, lowers prices, intensifies innovation and brings equilibrium to the markets that don t operate in a socially desirable manner. The ease of entry is adjusted according to the number and height of barriers to entry. Various 1 Economist, Ph.D.; 36

46 Market/Sector Analysis definitions of barriers to entry have been proposed in the economic literature, as the ones from Bain (1956), Stigler (1968), Caves & Porter (1977), VonWeizsacker (1980), Demsetz (1982), Baumol & Willig (1981), Gilbert (1989) and McAfee et al (2004). The definition adopted in the present study is a mixture of the definitions proposed by Fisher (1979) and OECD (2005). A barrier to entry is defined as anything that restricts competition in a sector, when competition would be socially beneficial. This definition can include a large number of possible barriers to entry, covers intra- and extra-sector mobility situations and clearly points out the aim of the analysis, which is social welfare enhancement. In regard to the categorization of barriers to entry, the most practical separation that has been proposed in the literature is the one from Geroski et al (1990), followed also by Oustapasidis (2003) and OECD (2005). They distinguish between structural and strategic barriers to entry. Structural barriers arise from the exogenous demand, cost and technology conditions of an industry and are the same for all firms, new or incumbent, while strategic barriers are created from the actions and strategic choices of incumbent firms. Even though this separation is far from perfect, as many barriers fall in both categories, however it is a good starting point for a thorough analysis of the barrier to entry theory. Examples of structural barriers are economies of scale, sunk costs, capital costs, product differentiation and diversification, while examples of strategic barriers are limit pricing, predatory pricing, investments in capacity, patent hoarding and collusion. The present study will focus on regulatory barriers to entry. Regulatory barriers belong to the category of structural barriers to entry, but they could as well be treated as strategic barriers. They belong to structural barriers because they constitute a part of the fixed, exogenously determined conditions that a new firm will have to face during it s entry in an industry. However, they also belong to strategic barriers because their height is sometimes strategically affected by firms actions. Incumbent firms can raise the power and influence to affect government policies and regulations in their favor. Definition of regulatory barriers Regulatory barriers are considered by many authors (such as Geroski, 1991; Parker & Stead, 1991; Church & Ware, 2000; European Commission, 2004; OECD, 2005; Bitzenis, 2009) as very important barriers to the entry of new competitors, mainly due to the fact that they are created from government action and they have the support of the law for their application. Regulatory barriers include laws and regulations as well as the state industrial policy. These two are mentioned together because they both derive from a country s government. The difference between legal restrictions and economic policies that are applied by a government lies mainly on their time duration: laws usually have long time duration, while economic policies can be adjusted relatively quickly according to the general economic environment. 37

47 A distinction that has to be made is according to the effects that regulatory barriers have to various types of entrants. The number and height of entry barriers that a foreign firm will face while trying to enter in a national industrial sector, may be more compared to those that will be faced by a new domestic firm that wishes to carry out entry in the same sector. This is why regulatory barriers are one of the factors that affect the choice of foreign firm entry mode. The sources of legal barriers to entry are many and these will be mentioned in the following part. Sources of regulatory barriers to entry The most important sources of regulatory barriers to entry are the following: i. Natural monopolies, monopoly rights and licenses In many cases governments grant monopoly rights in certain firms though legislation. These firms acquire exclusive rights in the supply of products or services for a limited or unlimited period of time. This situation is met more frequently in industries known as natural monopolies. A natural monopoly exists when the attainment of the minimum efficient scale of production is achieved only if the entire production of an industry is concentrated in the hands of a single firm. In these sectors the minimum efficient scale is equal or almost equal to the size of the entire market and the long run average cost curve decreases significantly as production quantity increases. The presence of other competitors in sectors that constitute natural monopolies is not considered useful, on the contrary it is considered as a waste of economic resources. In other cases governments intervene legally in sectors through the issuing of licenses. This occurs when the number of those that provide a good or service is regulated externally by the government. The entry of new competitors is allowed only with the purchase of an existing license or through an increase in the number of licenses by the government (eg taxis). ii. Tariffs Legal restrictions in imports can be observed from tariffs. A tariff is the most usual protective barrier imposed by a state in the import of products of foreign origin. It consists in the collection, by the border authorities responsible for the custom clearance, of a percentage on the value of the imported quantity of products (Gklavinis, 2009). The height of the tariff differs from product to product depending on the degree of protection that the government wants to offer in the domestic industry (Krugman & Obstfeld, 1994). The tariff raises the costs of imported products and automatically renders them less competitive from the domestic ones, since it increases their final prices to the consumers. The main objectives of tariffs are the increase of state revenues and the protection of domestic industries and products against foreign competitors. 38

48 Market/Sector Analysis iii. Quotas Quotas are limitations imposed by a state in the imported quantities of a product. The most usual way of imposing quotas is the obligation of the importer to receive a special permit by the government. This permit allows the import of specific quantities of a product during its valid period and restricts the import of further quantities during that period. Quotas, however, can also be imposed in the exports of a domestic product by blocking a producer to expand in foreign markets where he could possibly earn higher profits. Moreover, in many cases quotas are used by governments as a means of pressure, with embargos being the most characteristic example of trade restrictions of this kind. Embargos in trade are forced between countries with political, financial, territorial or security disputes (Gklavinis, 2009). iv. Subsidies The term subsidy refers to the state financial allowance of public organizations or private firms in order to support their operation and competitiveness. Subsidies can take many forms, such as the payment of sums in the form of donations, loans or shares, the elimination of debts, the granting of credit in the payment of taxes and the granting of energy, water, or telecommunication services in prices lower than normal market prices. A separation has to be made between two subsidies schemes, the general and the specific subsidies schemes (Carlsson, 1983). In general subsidy schemes all the companies of a sector, new or incumbent, can be subsidized, while in the specific ones only particular companies or persons are subsidized. v. Taxes A state s taxation can also affect the entry of new competitors. The height of taxes like income tax, property tax, profit tax and value added tax increase the operating cost of a firm and can play an important role in the final entry decision of a possible newcomer. Taxation can also determine the structure of a sector, since the differences in tax rates can affect concentration levels. A low tax rate in high profits, for example, can lead in merger waves among small firms. Very important is also the issue of double taxation. Double taxation occurs when a firm has to pay taxes both in its country of origin as well as in the foreign markets that it operates. Double taxation raises firms costs and can have a negative impact on the viability and profitability of companies that enter new geographical sectors. Also important is the issue of special consumption taxes, which again can negatively affect competition in a sector. vi. Loans Governments can also intervene in the structure of an industrial sector through the loans that they administer to firms. The term loan refers to the lending of monetary sums on interest. Government intervention can play a role in the process of a loan s approval, in the 39

49 size of the loan, as well as in the height of the paying off interest and time duration. In other cases the role of governments is limited in providing the guarantees for the approval of the loan. vii. Government procurement Many authors (such as Geroski et al, 1990; Scherer & Ross, 1990; Geroski, 1991; Kovacic, 1992; Duggan & Scott-Morton, 2006) claim that government procurement can also play a role in the determination of market structure and consequently in the ability of new firms entry. The contracts that accrue from government procurement agreements taking under consideration the fact that the government is usually the largest domestic consumer can provide incumbent firms the financial resources they need in order to achieve economies of scale in production and survive for a long period of time. These companies can win large market shares in the industries that they operate. Important is also the fact that foreign companies are in many cases excluded from these contracts for national security (etc defence industries) or state revenue reasons. viii. Intellectual property rights Another form of legal barriers to entry are intellectual property rights. Intellectual property rights are administered by governments in the creators of new ideas in order to protect them from imitation and competition (Church & Ware, 2000). The three most important types of protection for intellectual property are patents, copyrights and trademarks. The three types of protection differ in their content and valid time period. A patent provides an inventor with exclusive rights for a new product, process, substance or design. New products include machines (mechanisms with moving parts) or manufactured objects (without moving parts) such as tools. New processes or methods include chemical processes for metals or for the manufacturing of drugs, mechanical processes for the manufacture of goods or electric processes. New substances include chemical compounds and mixtures, but can also include species of animals and plants. New designs include the shapes of products that serve a functional purpose. Moreover, improvements in products, processes, and substances can also be granted with a patent, as well as computer software inventions (Carlton & Perloff, 2000). With the issuing of patent rights the law grants a legal monopoly in the company that has received the patent, as it protects the company from copying and competition in production for a constant period of years. The years of patent validity differ from country to country, although patents are not accepted in all the countries around the globe. Copyrights give their creators the exclusive production, publication and sale rights to artistic, dramatic, literary or musical works. Examples are articles, books, drawings, maps, musical compositions, distinctly designed items and photographs. Copyright law also covers 40

50 Market/Sector Analysis the original "work of the author's profession" provided that they are fixed" in a "tangible medium" such as a book (Carlton & Perloff, 2000). While patents protect the function and the purpose (ideas, appliances, mechanisms, methods, and means), copyrights cover artistic expression. An important distinction between patents and copyrights is that copyrights protect the particular expression of an idea, while the patents protect any tangible incorporation of that idea. Trademarks are words, symbols or other marks that are used in order to distinguish a company s product or service from those that are provided by other firms. A commercial trademark is a mark as a word or a logo that represents a product. A service trademark is a mark for a service. A common law trademark is a mark that is not registered formally, but has acquired minimal rights through use. The state registration of a trademark or service trademark provides better protection than the common law, but is only useful in the state of issuance. A trade name is the name that a company uses in order to do business. Contrary to copyrights and patents, brand names do not expire after a predetermined period, although a company can lose the protection of its brand name, if its name ends up stating all the products in the industry (Carlton & Perloff, 2000). ix. environment Sanitary and phytosanitary protection measures and measures for the The term sanitary and phytosanitary protection measures refers to every measure that is imposed by the law of a state in relation to the attributes of a product but also concerning the conditions of its production, storage, transport, maintenance and consumption. The aim of these measures is the protection of the life and health of the population, of animal and plant production and more generally the flora and fauna, from the spreading of illnesses or pollution (Gklavinis, 2009). The application of these measures must be based on scientific principles and their usefulness must be proved by scientific data. In most cases countries comply in their requirements with international specifications and recommendations, it is however likely for certain countries to issue stricter measures, provided that such measures are justified scientifically or constitute a consequence of the level of sanitary or phytosanitary protection that the state considers suitable. These measures also include measures for the protection of air and water from industrial facilities, as well as measures for employee safety. x. Technical Barriers Technical barriers refer to barriers that result from the adoption and application of technical regulations, that determine the technical characteristics of a product or the processes of its production (Jacobson & Andreosso - O' Callaghan, 1996; EC, 2009). A technical regulation can also concern the nomenclature, the symbols, the labeling or the packaging of product. Technical barriers can also result from the use of technical 41

51 specifications (standards) that are published by recognized certification organizations, and contain rules, guidelines, directives and characteristics of common and repeated use for products or processes of production that are not obligatory for the producers or the tradesmen of such products (Gklavinis, 2009). Thus the difference between technical regulations and technical specifications lies in the fact that the first are binding, while the second are not. Regulations for the recognition of education titles are also included in technical barriers. xi. Registration, certification, licensing and social security procedures Another aspect of legal barriers to entry is the one that relates with registration, certification, licensing and social security procedures faced by new firms. The number, the duration and the cost of these procedures can affect the ease and the cost of new firm entry and also affect market structure (Lipczynski & Wilson, 2001; Bitzenis, 2002; Djankov et al, 2002: Bitzenis, 2009). These procedures are another way of state intervention in the economy through legislation. Research carried out by Djankov et al (2002) pointed out that the costs of these procedures are high in many countries and that their number and duration differ considerably in each case, with the most numerous procedures being met in developing countries. xii. Price Fixing Another source of legal barriers to entry arises in cases where governments intervene by fixing prices. In these cases the state, in order to protect consumers best interest, determines the minimum or maximum prices of products or services (Carlton & Perloff, 2000). xiii. Dumping The policy of dumping that is followed occasionally by some governments can also influence market structure. The term dumping refers to the deliberate export of a product in a foreign market in a price lower than the one that is in effect in the domestic market (Ktenidis, 1996). Governments use dumping in order to support domestic producers and capture market share in foreign markets. Are regulatory barriers socially desirable or not? The evaluation if, and to what extent, the laws and policies that were mentioned in the previous section, constitute barriers to the entry of new competitors and whether these are useful or not from a social point of view, will be carried out in the following part. The evaluation will be made by outlining the arguments that have been put forward for and against legal barriers to entry. Before the analysis of the arguments begins, however, it would be useful to note that the evaluation of the impact of legal barriers to entry could escape the limits of present study and be placed in the more general discussion about the role of 42

52 Market/Sector Analysis government intervention in the economy. The degree of intervention in the economy by the government can characterize a political system as liberal or socialist (at least from an economic point of view). These two political systems emanate from two different opinions for the function of the economy. The one supports that political power must ensure social effectiveness in favor of citizens and hence contains a large degree of intervention in the economy (if not total control), and the other supports that social effectiveness and growth can emanate only via free market operation and competition. In reality it is exceptionally infrequent, almost impossible, to find an economy in the world without absolutely no intervention at all. However, because examining the effects of intervention is not one of the objectives of the present study, the analysis will focus on the specific arguments for and against regulatory barriers to entry. The term arguments for regulatory barriers, in this case, does not mean the apposition of arguments that try to convince that legal barriers do not constitute barriers of entry, but arguments that try to convince that legal barriers are barriers to entry, but exist because they are socially beneficial. Arguments in favor of regulatory barriers to entry One of the main arguments for the existence of regulatory barriers to entry springs from the need for protection of natural monopolies. Legal protection in cases of natural monopolies is necessary because an increase in competition in these industries would lead in a reduction in the monopolistic firm s market share and this in turn would undermine its ability to exploit all available economies of scale (Waterson, 1987; Waldman & Jensen, 2000). This means that the restriction in the number of producers comes from the need to minimize production costs (Church & Ware, 2000). If production is characterized by economies of scale and average cost decreases as production increases, then it is always less costly the production to be carried out by a single firm than by many firms. This is the reason why Domberger & Piggot (1986) claimed that public property is essential in cases of natural monopolies. Through monopoly in these cases, society avoids unnecessary investments in capacity reproduction and the waste of economic resources that these investments involve (OECD, 2004). The protection of natural monopolies from governments can also protect the positive externalities that these create for other related companies and for consumers in general. Another argument in favor of the protection of natural monopolies through regulatory barriers emanate from the view that the government in these cases functions as a guarantor of the quality and quantity of the products and services produced. This argument is based on the principle that the mechanisms of political direction and responsibility are most suitable to control a market than private individuals. If a natural monopoly belongs to the state, the effectiveness of the state monopolistic company is associated with the general effectiveness 43

53 of the government. A failure to meet society s objectives would have an impact on the following elections, rendering the government responsible for the failure. Government intervention can protect consumers interest, even if a natural monopoly is transferred in private ownership though the issuance of monopoly rights. Through the terms of the contract (especially in regard to prices and quality) as well as through the regulation of the terms of supply, governments can again function as effective market regulators. If a government doesn t take any precautionary measures while opening up these industries, the result may be socially harmful. An industry can be monopolized by a private firm who may abuse its market power and raise prices in very high levels. But even if these markets do not lead in private monopolies but in a large number of competitors, then a situation named excessive competition may appear. Excessive competition is a situation characterized by excessive capacity, increased production costs, reduction of total demand, reduction of investments and exit of many firms from the industry (OECD, 2004). The legal protection of natural monopolies can also guarantee the service of markets that would not be efficient for the private sector to serve (e.g. consumers in frontier areas) and also ensures that these monopolistic companies will gather the financial resources they need in order to achieve technological change and innovation through R&D (Waldman & Jensen, 2000). The availability of economic resources earned by monopolies is considered by many authors as a prerequisite for technological change (e.g. Schumpeter, 1943). A large number of small companies would not permit the gathering of the resources required for conducting R&D and creating innovative products and services. Some other arguments in favor of the application of regulatory barriers to entry arise from the need to protect the domestic economy and state revenues. Legal barriers as tariffs and monopoly rights can offer precious income for the state (Krugman & Obstfeld, 1994; Church & Ware, 2000). These can be used for the support of the national economy and for the improvement of the citizens quality of life in general. In many cases these revenues are transferred in other industrial sectors. Moreover, legal barriers as duties, quotas, taxes, subsidies, loans, procurement policies and price fixing can be used for the support of domestic production. The restriction of competition in an industry can help domestic producers to increase their sales and gain the capital they need in order to survive in the long-term. The capital raised can be used for the achievement of economies of scale as well as for investments in R&D. These policies are mainly used for infant industries, meaning those that are still in their initial stage of development and need the support of the state in order to survive (Carlton & Perfloff, 1999). This support is essential especially in cases where the other competitors of the industry are large diversified multinational firms. Apart from the improvement of the competitiveness of domestic firms, important is also the argument that connects legal protection with the increase in domestic employment. More advanced arguments are those that support government intervention for 44

54 Market/Sector Analysis the avoidance of dependence in foreign economies and their economic precessions, as well as those that relate with the national security issues (e.g. defensive industries). Moreover, legal barriers may also arise due to the influence of pressure groups such as trade unions and consumers associations, which some times besiege political power in order to protect their own interests (Thilmany & Barrett, 1997). Another line of arguments in favor of legal barriers emanates from the usefulness of the measures for protection of health, safety and intellectual property. All governments impose regulations for health, safety and protection of the environment though the specifications in domestic and imported goods and services, but also though certification, licensing and inspection procedures. These regulations aim to protect the health and the quality of life of the residents of a country, to protect the natural environment in which they live and to provide safety measures for employees (Jacobson & Andreosso - O' Callaghan, 1996). Regulations for safety can also solve problems of incomplete information in relation to the quality of products. The marking of products along with strict safety regulations can increase total active demand because of the alleviation of consumer s concerns about quality. This is the main difference between technical barriers and other traditional trade restrictions such as tariffs and quotas: technical barriers can strengthen demand. On the other hand legal barriers that concern intellectual property are also considered justified. The protection of intellectual property is required in order to ensure the motives for new creative efforts and innovations. Innovations play a vital role in economic and technological growth. Some claim that these could not be achieved if the law does not guarantee to innovative firms the monopolistic rights and profits they need in order to redeem the investments that they have made in R&D (Lipczynski & Wilson, 2001). This means that patents lead to the availability of products that would be impossible or not practical to be created without legal protection. These new products and services have multiple benefits for the economy. Apart from the improvement of production techniques and the cost efficiency that they can create for producers and consumers, they can also improve the competitiveness of the economy (e.g. via exports). Ginarte & Park (1997) found a strong correlation between the income of country and the strictness of laws that protect intellectual property. Another argument that has been put forward in favor of the protection of intellectual property rights is the one that concerns trademarks. If a firm s trademarks are not protected legally from copying, then this firm would not have a motive to be differentiated in regard to quality and price by other firms in the market. Advertising would be pointless as it would be very difficult for consumers to separate advertised products during their purchases. Arguments against regulatory barriers to entry Although all the arguments mentioned above certainly stress the usefulness and the positive consequences of regulatory barriers to entry, however there are many arguments 45

55 claiming exactly the opposite. Regulatory barriers can have negative effects in economic efficiency as they constitute the most important and difficult to overcome barriers to the entry of new competitors. Neo-Austrian economists Parker & Stead (1991) supported the view that all other barriers should be ignored because they are not important. From an Austrian perspective, the divergences of cost between firms, new or incumbent, are inevitable, as inevitable are also the efforts of new businessmen to overcome these barriers though innovation and advertising. For their new-austrians, the only true barriers are those that result from government activity, as these are the only barriers that cannot be overcome from new firms. The advocates of the so called Chicago school of economic thought agree with this opinion. The reasons for the rising of these barriers have been connected by many authors with the influence of economic circles in politicians (Posner, 1971; Stigler, 1971; Sykes, 1995; Thilmany & Barrett, 1997; Church & Ware, 2000; Lipczynski & Wilson, 2001; OECD, 2005; Bitzenis, 2009). This theory was developed in modern economics by Stigler (1971). Stigler s basic principle is that the government possesses a monopoly in the exercise of legal power and this monopoly firms seek to influence for their own interest. Politicians are willing to provide legal protection in return for help in the achievement and maintenance of political power. In return for the utilization of laws and regulations that limit competition and deter entry, firms provide politicians and political parties what that need in order to win the elections: money and votes. Consequently politicians are controlled by the firms which they are supposed to control. In return to votes, economic resources or the promise of future employment, regulators use their power in order to serve private firms and their own personal interests (Stead et al, 1996). Posner (1971) extended further this opinion by supporting that state intervention in markets is influenced not only by firms, but also by various other pressure groups, such as consumer associations and trade unions. Based on this principle later on Peltzman (1976), claimed that market intervention through legal restrictions in reality creates imperfections instead of solving them. As companies are more organized than consumers that regulators represent, they have the power to influence political circles more effectively. This can lead in the long run to a situation named regulatory capture, meaning the formation of current legislation to the best interest of the private firms and to not of society as a whole. Economists often refer to these firms pressure efforts as rent seeking, which means the expense of resources for the achievement of government created monopolistic profits (Church & Ware, 2000; OECD, 2005). Another relative argument is the one that stresses that the cost of controlling a market is high (because of the committees that have not be organized in order to decide the form of intervention), as high are also the time delays in the entry of new companies that these procedures can create. 46

56 Market/Sector Analysis The restriction of competition in industrial sectors constitutes in substance the most powerful argument against legal restrictions and industrial policy. Either in cases of government-protected monopolies or in cases of exercise of industrial and trade policies that intervene, control and delay entry, the results are similar: exclusion or restriction of entry, reduction in the number of competitors, high concentration, lack of consumer choice and finally transfer of resources from consumers to producers. Taking for example tariffs, quotas and subsidies: these barriers reduce the competitiveness of imported products and limit the social gains they could create. An increase in the number of products and services through imports, can increase consumers available choices and offer a price competition that will decrease final market prices. Many domestic producers could also benefit though the import of more efficient raw materials and production factors. In regard to dumping, its use has obvious negative effects in the operation of competition in industrial sectors, as the import price of new products does not represent their real cost, but is rendered low due to government intervention with a sole aim to take over a sufficient share of the targeted market. This practice can lead other, more efficient, domestic producers on the fringe of a sector. The agreements of the World Trade Organization on the application of compensatory measures for dumping (GATT article 6 Anti-dumping and countervailing duties 1994), and the legislation of the European Union (EE L 56, p.1) on the defense from imports of this kind have been put forward for protection against dumping. On the other hand procurement policies followed by some governments can also negatively influence competition and growth (Kovacic, 1992; EU, 2009). As a country s government usually constitutes the largest domestic consumer, the choice of suppliers that it makes can play a very important role in the development of market structure. Opaque and discriminatory procurement policies sometimes result to the support of specific companies and to the degrading of all the rest in the sector, up to the closure of some them. Companies that gain government contracts are in place to secure the resources they need in order to develop faster than their competitors and capture large market shares. But also taxes imposed by governments have some negative consequences in firm competition. Beyond the obvious consequences of double taxation and the high tax rates in production and income, other negative consequences are those related with increasing concentration in markets where small companies are forced to merge with larger ones in order to pass in more favorable scales of taxation and depreciation (Carlton & Perloff, 2000). Another line of arguments against legal barriers to entry are those that relate with the application of technical barriers to entry. According to the European Commission for Trade (2009) the gradual reduction of tariff barriers to trade has been accompanied by an increase in the number of measures creating technical barriers to entry, such as regulations on packaging, labeling or conformity assessment procedures. These regulations can be 47

57 intended to pursue a legitimate objective, such as the protection of human health or safety. However, they are also sometimes wrongfully used in order to erect protectionist barriers around a domestic market (online). This is why the EC has signed with the WTO the Technical Barriers Treaty (TBT), which tries to ensure that regulations, standards, test and certification procedures do not create unnecessary barriers to the entry of new competitors. As noted by Thilmany & Barrett (1997), trade liberalization agreements as NAFTA that decreased traditional protection methods as tariffs and quotas, can provide a motive for the development of more complex, less transparent means for the protection of domestic industries. The reason is that this trade protection can be less vulnerable in critics from outside parties, especially if the trade restrictions are connected with sensitive political matters, as health and safety (Kramer, 1984; Chambers & Pick, 1994). These barriers, however, in contrast to tariff barriers, are difficult, if not impossible to measure. Often they are hidden in the switching costs for compliance with specific standards or regulations and to time consuming expenses for testing and certification procedures (Thilmany & Barrett, 1997). According to the European Commission technical barriers: not only add extra costs, but also distort production patterns, increase unit costs, increase stockholding costs, discourage business cooperation and fundamentally frustrate the creation of a common market for industrial products. Until all these barriers are removed, community producers are forced to focus in national rather in continental markets and are unable to benefit from the economies of scale that a truly unified market offers" (CEC, 1985, p. 17). The elimination of technical barriers can improve market access, rear the protection of large incumbent firms and lead to a higher degree of competition. Finally, another negative aspect of technical barriers to entry has been highlighted by Scherer & Ross (1990) and concerns the effects in small businesses that cannot correspond with the cost of conformity with technical regulations. The cost of the necessary equipment required for the control of water supplies, air and worker safety in industrial facilities that has been imposed by environmental laws and laws for work safety, has led many small business in closure. The last line of arguments against legal barriers to entry comes from the concerns about the effectiveness of the intellectual property rights system and especially for patents. As patents issue monopoly rights to their holders for a large number of years, they are in turn able to charge high prices and earn monopoly profits. Apart from the well known consequences that every monopoly has in relation to the loss of consumer surplus, further negative effects come from the inability of other firms and organizations to exploit new technology and produce new products and services in a more rapid rate. This is why in some cases the duration of patents is judged as excessively high from a social point of view. This critic is also based on the opinion that knowledge is a public good and no one should be excluded from its use (non-exclusivity). This argument is more clear especially in cases where 48

58 Market/Sector Analysis innovative products and services can have an instant impact in people s lives (e.g. medicines). The issuance of a long term patent can, however, have more extensive consequences for an industrial sector. The monopoly profits and market power that are earned by the firm that holds an important patent may allow it to monopolize the sector and drive all other firms out of competition. This harms social welfare, as the monopoly power of the firm escapes the monopoly of a product and extends in the whole industry. This process is partially owed in a negative parameter of the patent system that relates with who wins the patent first. Many companies are involved in the process that has been named patent races, and means the excessive focus in R&D with an aim to win a patent. As patent offices can grant a patent in only one firm, the first one that presents all the necessary certificates, this means that all other firms that have invested in R&D of the same technology will get nothing. This phenomenon has been named in modern economics as winner takes all (Lipczynksi & Wilson, 2001) and implies the waste of resources in R&D activities of the same kind. Problems with the process of patent issuance can also be created from the different systems adopted by various countries (Church & Ware, 2000). Another issue also relates with the differentiation criteria of innovation. The stricter the differentiation criteria from previous innovations are, the harder it is to win a patent, and this in turn extends the period for which a current patent can win monopoly profits. Other negative parameters of patents relate with the recent burst in patent applications for plants and living organisms. This process has created serious criticisms from the supporters of the view that natural chemical compounds and organisms belong to manhood and they should not be legally secured and commercially exploited. Although the above tell us that in substance governments must balance, through legislation, between providing motives to private companies for investing in R&D and the diffusion of knowledge as a public good, there have been completely different proposals for the promotion of R&D and technology. Alternative plans for the promotion of innovations are those that relate with government awards for those companies or organizations that produce innovative products and services. These opinions are strengthened from research that has proven that R&D does not relate with the issuance of patents, but it is something that would also happen without them (Taylor & Silberston, 1973; Schankerman, 1998; Lipczynksi & Wilson, 2001). Empirical studies on regulatory barriers to entry Due to the large number of regulatory barriers and the different form they take in each case, the empirical studies on the topic are many. In this part of the study there is going to be a short reference to empirical studies for each source of regulatory barriers. The issue of natural monopolies and monopoly rights was examined by Joskow & Rose (1989) and Mosca 49

59 (2008). The OECD has also published many investigations into sectors which are considered natural monopolies (e.g. 2000, 2001). Another study is that of Gelfond & Spiller (1987) in relation to the banking industry. The relationship between government intervention and private sector was examined in the study of Spiller (1990), while Pittman (1988) examined the relation of rent seeking with industrial structure. Jacobsen & Soysa (2006) examined the relationship between rent seeking and FDI. An interesting research related to tariffs is that of Geroski & Murfin (1991) for the UK car market. An overview of the effects of tariffs, quotas and other trade policies was made by Corden (1971) and a study of the effects of tariff barriers to entry is that of Rousslang & Suomela (1985). Tarr (1989) on behalf of the U.S. Federal Trade Commission, has published an assessment of the impact of tariffs on three major sectors: textiles, automobiles and steel. Hoekman et al (2004) examined the relation between tariffs and country size. Regarding subsidies, an important empirical study is that of Carlsson (1983) on the role of industrial subsidies in Sweden, while very interesting is also the one of Dixit & Kyle (1985). Typical is the study by Majumdar (1988) for the aircraft industry. The legal side of subsidies was examined by Stewart & Dwyer (1998) and Hernandez de Madrid (2007). The role of taxation in industrial structure was examined in the studies by Prais (1981), Spiller & Favaro (1984) and Bitzenis (2009), while for loans characteristic is the study by Gonzalez-Maestre & Granero (2003). In relation to procurement policies important are the studies made by Duggan & Morton (2006) on the role of government procurement in drug prices in the U.S. and Burnett & Scherer (1989) for the U.S. defence industry. Taylor & Silberston (1973) and Schankerman (1998) examined the relation of patents with innovation. The relation among IPR protection and economic growth was examined by Horri & Iwaisako (2006). IPR in relation to drug access was examined by Heywood (2002). In relation to sanitary and phytosanitary measures and environmental protection measures, a complete analysis is that of Gruenspecht & Lave (1989), while a specific industry study (food) is that of Thilmany & Barrett (1997). Policy considerations regarding the application of such measures were examined by Miljkovic (2005). Technical barriers were examined by Cecchini (1988) and Hanson & Saykiewicz (2007), but important are also the legal studies by Marceau & Trachtman (2002) and Henson & Wilson (2005). Technical barriers in the EU were examined by Brenton et al (2001). The number, the cost and the duration of registration, certification, licensing and insurance procedures were researched by Djankov et al (2002), while a very good analysis of the operation and impact of price fixing is made by Carlton & Perloff (2000). Legal barriers to the Balkan markets and in particular the case of Bulgaria were examined by Bitzenis (2002), Bitzenis and Marangos (2008) and Bitzenis (2009). Finally in relation to dumping typical are the studies of by Czako, Human & Miranda (2003) and Kong (2003). 50

60 Market/Sector Analysis Policy recommendations By examining the arguments for and against the various sources of regulatory barriers to entry, it is possible to make some policy recommendations about their application and impact. Natural monopolies should be legally protected by the governments, as more competition in these industries is not socially beneficial. More competition in these cases would increase production costs through unnecessary investments in capacity reproduction. Strict state legal and financial control of these industries is a necessary prerequisite for safeguarding their social effectiveness. Where monopoly rights are issued, the terms of the contracts must again ensure the socially desirable level of prices and quality of products and services provided. The use of licences can limit competition, so the opening of these industries can create socially desirable effects. Tariffs and quotas can limit competition so their application is not useful from a social standpoint. Subsidies, taxes and loans should only be used only in order to promote more competition. These regulatory tools should be used only in order to promote new firm start ups in concentrated markets, and not as a strategic tool for restricting current and future domestic or foreign competition. Government procurement on the other hand, should be made with transparent selection procedures so as not to distort industrial competition. The contracts signed should not be very long in duration, so that the fear of replacement will prohibit private firms from degrading the products or services they provide to the state. Industry specific adjustments are needed in each case. In regard to IPRs, there has to be a distinction among them. While copyrights and trademarks are useful from a social point of view, the role and the duration of patents needs to be reconsidered. Trademarks are necessary for the effective operation of competition in the economy, as they provide the basic motive for differentiation regarding the price and quality of the products and services. Copyrights are also useful in order to promote new ideas. The patent system needs to be reconsidered by governments and international organizations. The long duration of patents, the monopoly rights they provide, their exclusivity, the restriction of competition and the different patent systems around the globe are the main reasons for a complete rethinking of the patent system. A free patent system, some claim, would lead in less innovation, as less financial resources will be invested in R&D. Others claim that on the contrary, a system without patents would lead in more innovation, as firms would need to introduce new products and services more often in order to survive. A step towards that direction would be to decrease the patents time duration and discover new means for rewarding innovation. The application of sanitary, phytosanitary and environmental protection measures, as well as technical barriers, should all be used in order to protect social health and welfare and not as anticompetitive tools that restrict competition. In order to achieve that, the use of 51

61 these measures and standards must be based on core scientific data published by international organizations. Registration, certification, licensing and social security procedures should be minimized to a minimum in order to promote and simplify new firm entry. Once new firms are established, then governments can apply the desirable level of firm inspection. This has a double effect: on the one hand new competition is encouraged and on the other hand the government can more easily control established firms. Price fixing is a policy that must be used with caution. A very high price may create a black market for products and services, while a very low price can undermine the ability of the firms to survive. Price fixing can be effective only in monopolistic or highly concentrated oligopolistic industries. However before setting a price, the government must first calculate the profit margins in all stages of production. Finally dumping is a policy that needs to be examined carefully, as price competition is desirable from s social point of view. As with predatory pricing, this strategic tool cannot be applied without the backing of some structural advantages. The effects of dumping on competition however cannot ne longterm. The country applying dumping is in risk of making more losses in the long run than gains. The basic criterion for the application and of each regulatory barrier is the effect it has on social welfare. If social welfare, in cases other than natural monopolies, is connected with more competition, than it is easy to separate those regulatory barriers that restrict domestic or foreign competition from those that are applied in order to increase the number of firms. Specific attention has to be given in providing motives for new firm entry and the intensification of competition though technological progress and innovation. New innovative products and services can lower production costs, make better use of the available economic resources and help new firms to surpass structural and strategic advantages of incumbent firms more effectively. Conclusions Regulatory barriers constitute the most difficult to surpass barriers to entry as they spring from government action and have the power of the law for their application. Through the various sources of regulatory barriers governments can intervene in the process of industrial competition and affect market structure and social efficiency. Regulatory barriers can also completely block, delay or undermine in terms of cost the entry of new competitors in industrial sectors. The presence of regulatory barriers and the restriction of competition that they create is socially effective only if it takes place in order to protect competition and social welfare. In cases where politicians erect these barriers in order to serve private companies or their own personal interests, these barriers have socially undesirable effects. In order to correctly assess the importance and usefulness of each regulatory barrier to entry it is always necessary firstly to assess the motives behind its application and its long term effects in competition. 52

62 Market/Sector Analysis BIBLIOGRAPHY Bain, J. (1956). Barriers to New Competition. Harvard University. Baumol, W. & Willig, R. (1981). Fixed Cost, Sunk Cost, Entry Barriers and Sustainability of Monopoly. Quarterly Journal of Economics, 96(3): Bitzenis, A. (2002). The Determinants of FDI in Transition Countries: Incentives and Barriers Based on a Questionnaire Research: the Case of Bulgaria, In Chionis, D. & Petrakos, G. (Ed.), International and Monetary Aspects of Transition in Southeastern Europe ( pp ). Bitzenis, A. (2009) Globalization, Multinationals, Investments and European Integration in the New Global Economic System. Stamoulis. Bitzenis A. & Marangos J. (2008). The Role of Risk as an FDI Barrier to Entry During Transition: the Case of Bulgaria. Journal of Economic Issues, 42(2): Brenton, P., Sheehy, J. & Vancauteren, M. (2011). Technical Barriers to Trade in the European Union: Importance for Accession Countries. Journal of Common Market Studies, 39(2): Burnett, W. &. Scherer, F. (1990). The Weapons Industry. In: W. Adams (ed) The Structure of American Industry. New York: MacMillan (pp ). Carlsson, B. (1983). Industrial Subsidies in Sweden: Macro-economic effects and an International Comparison. The Journal of Industrial Economics, 32(1): Carlton, D. & Perloff, J. (2000). Modern In dustrial Organization. New York: Harper Col lins College Publishers. Carlton, D. (2004). Why Barriers to Entry are Barriers to Understanding. American Economic Review, 94(2): Caves, R., & Porter, M. (1977). From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition. Quarterly Journal of Economics, 91(2): CEC (1985). Completing the Internal Market. Com (85) 310 Final, CEC, Brussels. Cecchini, P. (1988). 1992: The European Challenge: The Benefits of a Single Market, Gower: Aldershot. Chambers, R.G., & Pick, D.H. (1994). Marketing Orders as Nontariff Trade Barriers. American Journal of Agricultural Economics, 76(1): Church, J. & Ware, R. (2000). Industrial Organization: A Strategic Approach. McGraw Hill. Corden, W. M. (1971). The Theory of Protection. Oxford: Clarendon Press. Czako, J., Human, J. & Miranda, J. (2003). A Handbook on Anti-Dumping Investigations. Cambridge University Press. Demsetz, H. (1982). Barriers to Entry. American Economic Review, 72(1): Dixit A. & Kyle, A. (1985). The Use of Protection and Subsidies for Entry Promotion and Deterrence. American Economic Review, 75(1): Djankov, S., La Porta, R., Lopez-de-Silanes, F. & Shleifer, A. (2002). The Regulation of Entry. Quarterly Journal of Economics, 117(1): Domberger, S. & Piggott, J. (1986). Privatization Policies and Public Enterprise: A Survey. The Economic Record, 62(177): Duggan, M. & Scott-Morton, F. (2006). The Distortionary Effects of Government Procurement: Evidence for Medicaid Prescription Drug Purchasing. Quarterly Journal of Economics, 121(1):

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65 Spiller P. (1990). Politicians, Interest Groups and Regulators: A Multiple-Principals Agency Theory of Regulation, or Let Them Be Bribed. Journal of Law and Economics, 33(1): Spiller, P. & Favaro, E. (1984). The Effects of Entry Regulation on Oligopolistic Interaction: The Uruguayan Banking Sector. Rand Journal of Economics, 15(2): Stead, R., Curwen, P., & Lawler, K. (1996). Industrial Economics: Theory, Applications and Policy. London: McGraw-Hill. Stewart, T. & Dwyer, Α. (1998). WTO Anti-Dumping and Subsidy Agreements: A Practi tioner's Guide, Boston: Kluwer Law International. Stigler, G. (1968). The Organization of Industry. Homewood: Richard D. Irwin. Stigler, G. (1971). The Theory of Economic Regulation. Bell Journal of Economics, 2(1): Sykes, A.(1995). Product Standards for Internationally Integrated Good Markets. Washington, D.C.: Brookings Institution. Tarr, D. (1989). A General Equilibrium Analysis of the Welfare and Employment Effects of US Quotas in Textiles, Autos, and Steel. Federal Trade Commission. Taylor, C. & Silberston, Z. (1973). The Economic Impact of the Patent System. Cambridge: Cambridge University Press. Thilmany, D. & Barrett, C. (1997) Regulatory Barriers in an Integrating Food Market. Review of Agricultural Economics, 19(1): VonWeizsacker, C. (1980). A Welfare Analysis of Barriers to Entry. Bell Journal of Economics, 11(2): Waldman, D.E. & Jensen, E. (2000). Industrial Organization: Theory and Practice, Harlow: Addison-Wesley. Waterson, M. (1987). Recent Developments in the Theory of Natural Monopoly. Journal of Economic Surveys, 1(1): World Trade Organization (1994). General Agreement on Tariffs and Trade (GATT), 8th Round, Uruguay. 56

66 Market/Sector Analysis Analysis of apple production of EU-Balkan states based on PC time series database Nikola Tsaikin, Mariya Zarkova, Diana Stoyanova & Kolyo Onkov 1 Abstract: Data extracted from FAO Statistical Database is used for PC time series database building on crop production of Greece, Romania and Bulgaria. The developed software assembles computing of descriptive statistics and procedures for applying of moving average and other trend modeling methods. The advantage of this solution consists of automated statistical processing of time series data concerning different countries, crops and time periods. The developed PC database and software are used for statistical and economic analysis of apple production, harvested areas and yields. The obtained results show the negative trends during the last 15 years in post socialist Bulgaria. Despite of considerable annual variations, the apple production in Romania weakly rises due to better productivity. Greece has high and sustainable production and yields. Areas with apples are in decline in EU-Balkan states and the negative trends are permanent. The support of agricultural projects is an important measure for EU-Balkan states which is in accordance with the economic crisis and unemployment. Keywords: database processing, time series analysis, apple production, investments, entrepreneurship Introduction International and governmental statistical institutions store large amounts of statistical data from different fields (economy, demography, industry, agriculture etc.) in large scale databases. Data processing of these databases requires high computational costs (HSN Workshop on Large Databases, 2001; Javier 2004). Another problems referring to large scale databases are the lack of synergy among these systems due to poor interoperability, no real integration and weak data mutualisation (EUROSTAT, 2003). These statistical databases, usually presented in Web environment, provide interface for data querying but not on-line data processing. This is significant reason for building PC database containing subset of large scale database for the scientific research purposes. Statistical databases governed by Food and Agriculture Organization (FAO) of the United Nations have the above mentioned weak points. These databases provide time-series and cross sectional data relating to food and agriculture for 210 countries (faostat.fao.org). FAO databases contain detailed datasets on crop production. Profound analysis of data on 1 Department of Computer Science and Statistics, Agricultural University, 4000 Plovdiv, Bulgaria. 57

67 crop production of EU-Balkan states (Greece, Romania and Bulgaria) will support the progress in finding important information and knowledge in order to guide decisions for future activities (UNECE, 2000) in these countries. This work is in the compliance with: Transformational recession, unemployment and other associated concepts of the transitional process of Bulgarian and Romanian economics are not going to fade away without a second stage of transition (Andreff, 2004). It is one of important reasons for estimating quantitative and comparative characteristics of recession in agriculture, especially crop production. Decision theory, start-up factors of production, information processing and network theory, and temporal dynamics are put forward for entrepreneurship scholars to explore important research questions in these intersections (Busenitz, 2007). The creation of informational base for studying crop production in different periods of time will contribute to take adequate decisions in the field. This paper aims to present the building of PC time series database on crop production of EU-Balkan countries (Greece, Romania and Bulgaria) and analysis of apple production using this database. This work argues the necessity of investments and entrepreneurship for the development of new areas with apples in these countries. PC time series database building Primary data on crop production of EU-Balkan states is extracted from FAO database in a set of Excel tables, e.g. semi-structured form. Practically it is data cube in 4 dimensions: country, element, crop and period of time (fig. 1). Country: Bulgaria, Greece, Romania Element: Production, Harvested area Crop: 82 crops Period of time: Figure 1. Data cube The basic problem of PC time series database building is how to store data cube as multidimensional array in a set of relational objects. The idea for creating database model consists of hierarchically related two-dimensional tables. Hierarchical data structures enable the end users to view and access data. Besides, there are powerful software instruments of the Relational Database Management Systems (DBMS) for building of hierarchical data 58

68 Market/Sector Analysis structures. Figure 2 presents the entity-relationships diagram of the database on crop production of EU Balkan countries. Figure 2. Entity relationships diagram The number of levels in the hierarchy is four. Time series data by years is stored in table Time_series_data, indexed by key CEC_ID from the linking tables Country_element and Country_element_crop. Both linking tables combine three ID-keys of the attribute tables Countries, Elements and Crops. Table Crops stores Indicative Crop Classification (ICC) codes of the crops under FAO classification. Each digit of ICC code is stored in a different entity and gives opportunity to classify crops in groups, classes, subclasses and order. DBMS Access is used for the development of database on crop production of EU Balkan countries. Figure 3 presents hierarchically related tables of the database. Cascade arrangement of the windows gives opportunity to view certain time series. Figure 3. Cascade arrangement of windows The developed time series database contains data for the production and harvested area of 82 crops in the three Balkan countries (Bulgaria, Greece and Romania) for the period This database has the following features: 59

69 Its structure makes the system open. The database model can be expanded over time by new countries, elements, crops and corresponding time series data; Time series data is stored vertically (fig. 3). Hence, the annual updating requires to add only one row in each table containing time series; DBMS Access has flexible instruments for data access, view and querying; The FAO ICC classification code enables extended statistical data analysis of crop production by groups, classes, subclasses and order; This database is an information environment which provides: Statistical and economical analysis of extracted data by well-known statistical software (SPSS, Statistica etc). In this case the statistical data processing is only partly automated; Building of non standard mathematical and statistical procedures for automated database processing. This will enable profound studying of the complex processes of crop production in different countries and periods of time. Analysis of apple production of EU-Balkan states Software techniques are developed for processing PC time series database on crop production in EU-Balkan states. They give opportunity for: Estimation of secondary indicator (average yield) by using primary data (production and harvested area) and input of additional data (import and export of crops); Computing descriptive statistics: mean, standard deviation, coefficient of variation and as well as sum and percentage; Application of moving average and other trend modeling methods. The centered moving average trendline is considered to work well for long time series in order to smooth fluctuations and show trends more clearly; Presenting the results of data processing in table and graphical form. The developed software assembles all computations in an entire process. The advantage of this solution consists of automated statistical processing of time series data concerning different countries, crops and time periods. This approach is applied for statistical and economic analysis of apple production in EU-Balkan states: Bulgaria, Greece and Romania. Analysis and discussion of the obtained results are presented in the following sections. The Apple in the national structure of fruits crop in EU Balkan states The data on apple production in EU Balkan countries on average for the period are presented in Table 1. 60

70 Market/Sector Analysis The share of apples in the total fruits produced, is 5.96% in Bulgaria, 7.33% in Greece, and 27.22% in Romania. The biggest part in Pome and stone fruits produced in Bulgaria belongs to apples. It remains relatively stable (22.75%) for the studied time period. The structure of Pome and stone fruits crop in Greece is relatively stable. In this fruits group apple takes the second place with 20.13%, after peaches and nectarines. In Romania apples crop share in Pome and stone fruits declines from 60% in 2004 to 40% in 2008, and concedes the first rank to plums. Table 1 - Production, import and export /tones/. Average for the period Indicator Country Bulgaria Greece Romania Total fruit production incl. Pome and stone fruits Apples Import of apples Export of apples Domestic consumption of apples The discussed three EU Balkan countries meet their domestic apples consumption as follows: Bulgaria 46%; Romania 92.2%; Greece 100%. Romania is the biggest importer with 51% of the total three countries import, while Greece is the biggest exporter with 86.9% of their total export. Regional distribution of the apple production Until 1975 Bulgaria has the largest relative share in the total quantity of apples produced by the three Balkan countries - on average about 44% (fig. 4). Over the past decade its share collapsed to only 3%. After 1975 Bulgaria gave up its leading position to Romania, which now produces around two thirds of the three countries total quantity. Greece's share remained relatively stable over the years from 1961 to After that it began to grow and at the end of the period of study is over 35%. 100% 80% 60% 40% 20% 0% GR BG RO Figure 4. Regional distribution of the apple production 61

71 Analysis of the production tendencies After 1961 in Greece there is a smooth increase in apples production with an approximately straight-line trend to the maximum quantities of tons in the years (fig 5). After this period the tendency becomes negative. The decline continues until 2008 when tons are produced. A certain slowdown in the decrease is observed after the year t BG GR RO 5 per.mov.avg (BG) 5 per.mov.avg (RO) Series6 Figure 5. Dynamics of apples production Bulgaria produces its maximum quantities of apples in the years from 1981 to During the period of transformation from planned to market economy, started in 1990, the local apple production fell into a deep crisis, which continues to this moment. Our trend analysis of apple production in Bulgaria confirms the opinion of other authors [8] that in the short term a change in the existing tendency cannot be expected. The apples crop in Romania increases with an accelerating pace until Through the period it is in constant decline and is characterized by a strong variation in annual volumes. In the last five years Romania s apple production collapsed, and the quantity produced in 2008 is more than two times smaller than that in Harvested areas On average for the period , around 72% of the total three countries area with apples harvested is in Romania and the remaining 28% are almost evenly distributed between Greece and Bulgaria (fig. 6). The trends in the changes in the countries relative parts, however, are very different. While the share of Romania constantly expands reaching 79.5% at the end of the period, that of Bulgaria declines from 20.3 % starting in 1985 to 7.5 % in the last year Over the years Greece s share fluctuates around an average of 14%, but at the end of the period there is a tendency of increase to 16-17%. Areas with apples are in decline in all three Balkan countries and the negative trends are permanent (fig. 6). In Bulgaria this process is carried out especially fast, where only in the last 10 years areas with apples have shrunk 5 times. 62

72 Market/Sector Analysis ha Yields Bulgaria has the highest productivity of apple production at the beginning of the observed period (fig. 7). Greece reaches Bulgaria in the middle of the 70's. Yields of both countries do not differ substantially, both in magnitude and as dynamics over the years from 1975 to During this 15-year period they increase, fluctuating around an approximately equal straight-line trend that for Greece continues until It is in 1996 that its maximum for the whole observed period average yield of kg/ha is registered. The negative tendency in the dynamics of the yield of apples in Bulgaria starts in 1990 and continues to date. Over the last five years Romania and Greece increased their productivity. In the last third of the observed period Greece holds the first position in the magnitude of average yields. The yields in Greece are more than 2 times those of Romania and more than 4 times those of Bulgaria in the last few years. Over the last eight years, Bulgaria has stable, but extremely low average yields of 5000 kg/ha, significantly lower than the average yields worldwide and in the European Union, which in 2004 were kg/ha and kg/ha respectively (Манолова, 2005). kg/ha BG GR 5 per.mov.avg (BG) 5 per.mov.avg (GR) RO 5 per.mov.avg (RO) Figure 6. Dynamics of harvested areas BG GR RO 5 per.mov.avg (GR) 5 per.mov.avg (BG) 5 per.mov.avg (RO) Figure 7. Dynamics of apples yields Table 2 presents descriptive statistical characteristics of the apples yields for the period The productivity in post-socialist Bulgaria and Romania is significantly lower 63

73 than in Greece. This analysis also reveals another problem instability of the yields in Romania and Bulgaria. Table 2 - Descriptive statistical characteristics of apples yield (kg/ha) Country Apples yields (kg/ha) for the period Mean Standard deviation Coefficient of variation* Bulgaria Greece Romania *Coefficient of variation = (Standard deviation/mean) * 100 The results of the accomplished discussion can be summarized as follows: Traditionally for the Balkan geographic region production of apples is developing under different national models. Nevertheless, there is one fact in common the areas with apples are decreasing. Greece has the most favorable characteristics for apple production high and sustainable yields and surplus of production which leads to net export. Romania is successfully pushing its production to meet the demand of apples in its own market. In the last decade the production of apples in this country has been developing intensively. Even though with significant annual variations, the production rises due to better productivity. The Bulgarian production of apples is in deep and constant crises which started with Conclusion the beginning of post-socialist period. As a result, currently Bulgaria imports more than a half of its demand for apples. Bulgaria definitely needs investments in order to develop its potential for apple production. The build database enables statistical processing of time series data concerning different crops and time periods for EU-Balkan states. The developed software is used for statistical and economic analysis of apple production, harvested areas and yields. This analysis proves that the political and financial support of agricultural projects and entrepreneurship are needed for all three EU-Balkan states. This is in accordance with the economic crisis and unemployment in the agricultural sector. The database and software can be used for similar analysis of other crops production and as well as groups, classes and subclasses of crops. This paper shows the coherency between data and information processing, statistical analysis as well as investment policy and entrepreneurship in dynamics of crop production. 64

74 Market/Sector Analysis References [1] Andreff W - Would a Second Transition Stage Prolong the Initial Period of Post-socialist Economic Transformation into Market Capitalism?, The European Journal of Comparative Economics Vol. 1, n. 1, 2004, pp [2] Busenitz Lowell W., G. Page West, Dean Shepherd, Teresa Nelson, Gaylen Gayled N. Chandler and Andrew Zacharakis - Entrepreneurship Research in Emergence: Past Trends and Future Directions, Springer Berlin Heidelberg, [3] EUROSTAT, 2003 (invited paper). Joint ECE/Eurostat/OECD meeting on the management of statistical information systems (Geneva, February, 2003) /12.e.pdf [4] [5] HSN Workshop on Large Databases, 2001: Results and Best Practices. Amsterdam, May [6] Javier C. Fast Nearest Neighbours Search in High-Dimensional Large-Sized Databases, ITI Seminario, SEMINARS/Cano04a.pdf [7] Manolova V., Investments and efficiency in fruit-growing, LAX advertising, 2005, ISBN: [8] UNECE (Economic Commission for Europe of the United Nations), "Terminology on Statistical Metadata", Conference of European Statisticians Statistical Standards and Studies, No. 53, Geneva, 2000, OECD Glossary of statistical terms, detail.asp?id=

75 The market for corporate control in Greece: A critical assessment of the wealth effects to bidding-companies' shareholders Ioannis A. Tampakoudis, Demetres N. Subeniotis & Efpraxia Dalakiouridou 1 Abstract: The paper examines the phenomenon of mergers and acquisitions in Greece, taking into account the wealth effects accruing to bidder-companies shareholders. The empirical results do not appear to robustly support mergers and acquisitions, since the companies being considered gain only marginal positive abnormal returns during the announcement day. Indeed, the returns are not statistically significant, while prior to and after the announcement date the returns show a downturn drift. The level of abnormal returns for the Greek bidder-companies is in line with those in Europe, while the particular diversifying results in the US cannot lead to direct comparisons. In fact, mergers and acquisitions do not constitute a business panacea and probably the extensive interest for business consolidation diachronically is accountable to the managers objectives or the hubris hypothesis. Keywords: mergers, acquisitions, event study, abnormal returns, managerial incentives 1 Department of Business Administration, University of Macedonia; Thessaloniki, Greece. 66

76 Market/Sector Analysis An accounting comparison of the post-merger economic performance of Greek acquiring listed firms in domestic vs. international M&As at south-east Europe Konstantinos Agorastos 1, Michail Pazarskis 2 & Theofanis Karagiorgos 1 Abstract: This study examines the impact of mergers and acquisitions (M&As) on the economic performance of merger-involved firms in Greece at domestic and international M&As transactions using accounting data (financial ratios). The post-merger performance of a sample of Greek firms, listed on the Athens Stock Exchange that executed one domestic merger or acquisition in the period from 1998 to 2002 as acquirers, is compared with an equivalent sample of listed firms with similar characteristics involved in international M&As. In order to measure firms economic performance five profitability ratios are employed and selected accounting data from 1995 to 2005 are compared for the post-merger economic performance of the two groups at three years after the M&As announcements, as well for the cases of two and one year after M&As respectively. The results revealed in general that the international M&As have provided a better post-merger economic performance for the acquiring firms than the domestic M&As, and in contrast to the general economic performance of all listed firms in this period also have had a superior performance. Key Words: mergers, acquisitions, financial ratios, economic performance JEL Classification: G34, F23, M40 1 Department of Business Administration, University of Macedonia; Thessaloniki, Greece. 2 Department of Accounting, Technological Educational Institute of Serres; Serres, Greece. 67

77 The financial crisis and the prospects for investments in the energy sector in Bulgaria Virginia Ivanova Zhelyazkova 1 Summary The financial crisis in combination with high oil prices is hitting all sectors of the global as well as local economies. The interesting question that remains open is whether there is a way to turn the unfavourable situation upside down and to prosper in such climate. The crisis places us ahead of many challenges but opportunities as well. The pressure for climate change and finding alternative solutions to the highly priced conventional resources opens doors for developing profitable solutions to pending energy problems in the field of clean energy. It seems that the crisis stimulates societies to strive for a radical change. As a new member of the EU, Bulgaria is obliged to abide by the common 2020 energy targets. According to them, by 2020 it has to obtain 16% of its total energy consumption from renewable sources. As their share is currently 9.4%, it is obvious that the country has a way to go to reaching the target. This can happen only by intensive government stimuli for the investments in the area. What is the situation on the Bulgarian energy market at the moment and where are the potential areas for development? In this paper we evaluate the energy market in Bulgaria as well as the prospects for energy consumption and exports and outline the key areas for possible further investment. Keywords: financial crisis, energy market, energy consumption, investments 1 Institute of Economics, Bulgaria Academy of Sciences. 68

78 Market/Sector Analysis Crisis management: A contemporary constant need for business continuity in the tourism industry Zissis I. Maditinos & Chris A. Vassiliadis 1 Summary The existing literature concerning tourism industry has noted an increasing number of disasters and crises, which affect the tourism industry, ranging from natural to human influenced incidents. In recent years the global tourism industry has experienced many crises and disasters including terrorist attacks, political instability, biosecurity threats, natural disasters, the global economic crisis that has been emerged recently etc. Many of the scholars that have studied the management of crisis in the tourism industry argue that there is a lack of research on crisis or disaster phenomena in the tourism industry, on the impacts of such events on both the industry and specific organizations, and the responses of the tourism industry to such incidents. This lack of interest and research is somewhat surprising considering that crisis management, disaster recovery and organizational continuity are important competencies for managers in both the public and private sector. Tourism is an important economic sector for many countries and many destinations rely on tourism for their growth and survival. Especially for Greece, tourism constitutes an economic sector with great contribution to GNP, offering thousands of jobs and multiple positive consequences. This important role of tourism puts increasing pressure on managers and planners to consider the impact of crises and disasters on the industry and develop strategies to deal with the impacts to protect tourism business and society in general. Crisis and disaster management should be a core competency for tourism destination managers as well as business managers. This paper aims to support the significance of crisis (and disaster) management as a contemporary constant need for the businesses that are involved in the tourism sector. Crises and disasters are defined in order to better understand these phenomena. The paper focuses further on the nature of crises and disasters for tourism industry. In order to enforce the necessity of organizational preparation in the tourism industry, the paper presents some brief statistical data, which are indicative of the importance of the tourism sector for the Greek economy. Moreover, the paper supports the worldwide interconnection of the tourism industry. This global interconnection has opened businesses up to a wider set of risks making 1 Department of Business Administration, University of Macedonia; Thessaloniki, Greece. 69

79 crises that happen locally to affect the tourism industry globally (i.e. terrorist attacks, political instability, economic recession etc). Indicative paradigms of these situations are presented also. Finally the paper addresses some future research issues which could contribute to better understanding, planning and management of crises and disasters in an increasingly complex and disaster prone world always in relation with tourism industry. 70

80 Market/Sector Analysis Increasing the managerial capabilities in Indonesia Agus Gunawan 1, Mohamed Wahdan 2 & H. Jaap van den Herik 3 Summary Over the last ten years, workers in the garment manufacturing industry have become the essential contributors to Indonesia s Gross Domestic Product. This success inspired other countries, such as China, Vietnam, India, and Bangladesh to increase their activities in this branch. Due to the new competitors there emerged new relations between the five competing countries. Earlier, two decades ago, Indonesia was a leader in the garment manufacturing industry. As an example of the demanding competition in the garment industry, we saw between 1999 and 2004 a growth of 380% of imported China garment to Indonesia. Here we remark that the huge import number is calculated only by the officially garment import; it does not include the illegal import. On 1 January 2010, Indonesia implemented the zero-tariff import duties among the member countries of the AFTA 4, including China. It is an effort to eliminate tariffs on the intra- ASEAN trade. This policy aims at developing a greater trade and more industrial linkages among the ASEAN member countries. However, it also brings more challenging situations for Indonesia s Garment Medium Scale Manufacturing Enterprises (IGMSs). Most of the IGMSs run their businesses based on the owners intuition. So far, the business is good. However, the Indonesian owners usually have a lack of managerial skills on monitoring-and-evaluating the company s financial performance. They focus on how to increase the sales, but rarely focus on how to manage the company efficiently, and how to use historical financial performances in their decisions. Although they might obtain any profit by doing their daily activities, they suffer many times from low profit because of the inefficiency and even of internal frauds. The main question is of course: what countermeasures can we take? Without a clear view on what is happening in their daily business, managers respond too slowly to the changing situations and the remarkable circumstances. When they start to understand the dark clouds above the circumstances mentioned, they will attempt to find a means to increase their managerial capabilities. Because most of IGMS managers do not 1 Department of Business Administration, Parahyangan Catholic University; Indonesia. 2 Faculty of Commerce, El-Menoufia University; Egypt. 3 Tilburg School of Humanities, Tilburg University; the Netherlands. 4 AFTA means ASEAN Free Trade Area. Established on January 1992, the ultimate objective of AFTA is to increase ASEAN s competitive edge as a production base geared for the world market. 71

81 have financial expertise, they need to be supported by the knowledge of experienced financial experts on monitoring-and-evaluating financial activities. Inspired by the success of the Knowledge-based System (KBS) implementation on Financial Statement Analysis (FSA) from previous studies (e.g., Huang, 2009; Khan, 2008; Shiue, Li, & Chen, 2008; Wahdan, 2006), we propose an Automatic Formulation of Financial Report (AFFAR) system. AFFAR is a hybrid KBS that integrate the use of (1) Accounting Information System, (2) KBS, and (3) Analytic Hierarchy Process techniques in FSA methods to produce an experienced financial expert s analysis on monitoring and evaluating financial activities. From studies and interviews performed in Indonesia we may conclude that the automatic interpretation from AFFAR on the historical financial experiences will help IGMS managers to learn from the company experiences in such a way that they can make adequate business decisions. 72

82 Human Resources Issues in International Business The influence of the human resource capacity on the level of foreign investments in countries in transition: The case of Serbia Vladimir Marinkovic 1 & Natasa Stanisavljevic 2 Summary Foreign Direct Investments are a key to development and progress of all contemporary economies in the world. Foreign Direct Investments are particularly important for countries in transition and their level determines both the dynamic of the overall economic development and the process of reforms in all aspects of society. In order to attract foreign investors, it is of crucial importance to formulate a clear economic policy that will be a basis for economic trends in the future and for improving mechanisms for enforcing the existing legal framework, improving administration capacities and the quality of public services. In addition to creating quality environment for business and attracting investments, it is vital to create a reformed workforce market and flexible workforce that adjusts itself to global changes on the market. Besides flexible workforce, it is important to have an efficient educational system adapted to the needs of the economy in the long run, that will provide practically and theoretically highly educated people who should be a comparative advantage over the competition in the region and in the whole world. Well-educated workforce is bound to have a great impact on the decision of foreign investors where to invest their money. World economic crisis has already increased these standards. Regarding Serbia, the market still lacks in adequate expert capacities both regarding functionality and regarding management, relative to the formal education, experience and prior engagements. Workforce demand and the number of qualified personnel are still in disproportion because the supply of workforce is not big enough to cover the rising needs. In addition to this, if we look at the unemployment numbers and notice a high percentage of people with lower education level, it is obvious that the re-training of personnel is also needed. Similarly, it is the highest priority to attract the Serbs that possess adequate expertisethose working abroad and with key qualifications and knowledge of doing business in global companies-to return to Serbia. Instead of hiring foreigners, foreign companies appoint them to the top management positions. 1 Megatrend University, Belgrade; Serbia. 2 Higher Education Institution for Applied Studies for Entrepreneurship, Belgrade; Serbia. 73

83 In Serbia, one can still notice the need to become closer to social partners and have a closer dialogue and consensus between international companies and the government, faculties, universities and trade unions in order to ensure that educational programs are adequately formed according to the new workforce market. Introduction The influence of the global economic crisis has significantly reduced the level of investment at the global level, so that the importance of investments for recovery and progress of individual economies has highly increased. It is not only a great economic crisis that is present, but also the historical geopolitical change, in which the balance of power in the world inevitably moves from the United States, who are losing the dominant role at the global level, due to the nationalization of important parts of the financial system which destroyed their own belief in free markets. U.S. Congress has provided $ 700 billion from the budget for the recovery of Wall Street's and 17 billion extra for the recovery of the automotive industry. China was preparing a strategy of struggle against the economic crisis that transferred to its own ground, despite a rate of economic growth of 9% and its fight in the period of crisis, for the rate to stay above the level of 7%. Crisis management in China has already defined a plan of action-the Central Bank announced the biggest reductions in interest rates over the past 10 years and earlier last month, approved a package of measures stimulating the economy in the amount of 586 billion dollars. From the data shown, there is one common denominator- all the countries understood that a successful fight against the economic crisis and its socio-economic consequences require at least two things. The first is to strengthen the role of government in certain sectors of economic strategy and policy. As the crisis was expanding, the until-then loud neoliberal advocates of unlimited freedom of markets were becoming quieter and many have turned to the state for help. Secondly, the crisis cannot be repaired without additional resources, especially those that imply Foreign Direct Investment. The level of Foreign Direct Investment determines, definitely, the economic development of big, but even more, small and underdeveloped countries. A perfect example of this is Serbia, which in the past three years had an enviable level of FDI, but in this year of crisis, within six months, only 600 million euro investment flew in. Direct foreign investment in the region and in Serbia The level of Foreign Direct Investment in a country depends on many factors and assumes a single systematic approach by the very state, whose task is to create an attractive and high-quality environment for foreign investors. When it comes to countries of the region, 74

84 Human Resources Issues in International Business Croatia is leading, including the participation of FDI in the state GDP. This clearly shows that this state has a better strategy than the others of the area. Data on the level of FDI in the countries in the region are shown in chart No. 1. Chart 1: FDI in central, east and southeast Europe overview FDI influx, EUR milion Per Per capita capita Predictive influx EUR Goods EUR Czech Republic Hungary Poland Slovakia Slovenia New countries members Estonia Latvia Lituania New countries members Bulgaria Romania New countries members Albania Bosnia and Herzegovina Croatia Macedonia Serbia Montenegro Southeast Europe Belarus Moldova Russia Ukraine European CIS Central and Eastern Europe Source: WIIW database on FDI 2007 and WIIW forecast The data in the chart define that Serbia has not yet fulfilled the key requirements that define the level of direct foreign investment and the key reason for which it stays behind, is the labor regulations, training, productivity and efficiency of labor. Chart 2 shows the basics when it comes to implementation of high quality policy of attracting Foreign Direct Investment. Chart 2 clearly shows that the price and quality of human resources highly defines country's attractiveness for foreign investment. In this package, it is also necessary to define the high quality legislation that regulates labor relations in a practical way. 75

85 Similarly, it is necessary to provide a forum for human resources - professionals who seek to improve their professional and personal development. 3 Programs, networks, support services which allow foreign companies to contribute strategically to the complex, dynamic world of human capital. Therefore, one of the most important tasks of management in the private and public institutions is to create the environment for establishing a society of knowledge and flexible models of employment that would lead to profitability and development of investment projects in our country. Chart 2 Foreign Direct Investment and state policies So far, the world practice has shown that apart from well-trained and highly skilled workforce, it is necessary that the state and state institutions influence the attracting the foreign investment through the adoption of high quality legal solutions and a series of measures that would make our country more active in investment. 4 Simply put, nowdays, states are competing in providing better conditions for investments and thus, they develop their economy and employ citizens. Attracting Foreign Direct Investment in one country should be done by all relevant social actors, state, trade unions, employers, NGOs, universities, that would have influence on their level of permanent increase, through recommendations and public hearings. Consensus on ways of attraction of FDI is a very important aspect in successful implementation of proactive policies of economic development. For the realization of this, the state and its institutions have most responsibility, because only the state can change and bring up the legal solutions, as well as create a 3 Bratton, J. and Gold J.: Human resource management, Palgrave Macmillan, New York, Likert,R.: New Patterns of Management, New York, McGraw-Hill, 1961, i The Human Organization Its Management and Value, New York, McGraw-Hill,

86 Human Resources Issues in International Business favorable business environment in which entrepreneurs would be encouraged to invest and employ 5. Chart 1 clearly shows the level of Foreign Direct Investment in Central, Eastern and Southeastern Europe in the period , explaining how much the states in the region were successful in creating such a consensus. It is clear that due to the United Nations embargo and the crisis of the nineties, Serbia lost a whole decade and during that time, there were almost no Foreign Direct Investments, especially Greenfield and Brownfield ones. However, on the displayed charts, you can see a good example of the Republic of Croatia, which has attracted an enviable level of foreign investments. State institutions and relevant ministries should be in constant consultation with business associations, trade unions and especially with associations of foreign investors that are of key importance for attracting new investors, for it is very important which message they send to their colleagues in their home countries. 6 Since 2000 the Foreign Direct Investment in Serbia have amounted 13 billion dollars, of which most to the banking system-five billion, $2.6 billion to manufacturing activities, telecommunications $2.4 billion, trading $1.7 billion and $1.6 billion to the estate. The biggest investors were companies from Austria $2.5 billion, Greece - two billion USD, Norway -$1.5 billion and Germany with $1.6 billion invested. Chart 3: FDI in Serbia, , billions of USD Source: Center for liberalno-demokratic studies, Belgrade, Serbian government has introduced stimulating measures for foreign investments, that started in 2006, even though the economics does not recommended the promotion of investors. Incentives to investors are important for the regress of Serbia, because the neighboring countries do the same. 5 Ulrich, D.: Strategisches Human Resource Management, Carl Hanser Verlag, Munchen, Anthony, W.P., Nicholson, E.A.: Management of human resources, A Systems approach to personnel management, Columbus, OH, Grid, inc

87 Serbia has, so far, had a low level of Greenfield investments that are the core of development and employment. Greenfield investments are investments that start with no infrastructure, space, workers, and when our country is concerned, the biggest obstacle for foreign investors was a political risk, which still lies in complicated administration and licensing. Table 1: Greenfield investments in Serbia: Company Country of origin sector amount Merkur Slovenia Retail 60 Bol Corporation USA Industry 60 GTC international Netherlands Real Estate 58 Helenik petroleum Greece Energy 50 Veropulos Greece Retail 34 Laiki Bank Cyprus Banking 33 Neohimiki-Oil Rafinery Belgrade Greece Energy 31 General Group Italy Insurance 30 Grave Austria Insurance 30 Hotel In Greece Tourism 20 Source: SIEPA, Belgrade, Table 2: Investor countries: County Thousands USD percent Austria 1.685, Norway 1.550, Greece 1.451, Germany 1.361, Netherlands Slovenia France Luxemburg Hungary Great Britain Other Total Source: SIEPA, Belgrade, It can be freely said that Foreign Direct Investments is the only way that can ensure economic growth in Serbia in the long run. 7The alternative to foreign investments is the loans that are expensive and will be even more expensive, but the good thing is that investments in countries in transition are not affected. Conclusion Contemporary business defines innovation and knowledge as the basics of competitiveness of enterprises and economics on the global level. Therefore, the high quality development of human resources is the most important thing in the realization of the competitiveness and efficiency in the market. New technologies and scientific achievements cannot be implemented unless there is highly educated, trained and motivated workforce. 7 Pržulj, Ž: Menadžment ljudskih resursa, Institut za razvoj malih i srednjih preduzeća, Beograd,

88 Human Resources Issues in International Business Countries in transition, such as Serbia, not rich in natural resources, can find its economic growth only in the competitiveness that implies knowledge and motivation. One of the key preconditions for attracting the Foreign Direct Investment is the level of education and qualification of human resources in a country. It is, therefore, of great importance the strategy and the state policy of development of human resources and its potential. Investment in education and the educational system, promotion and providing good conditions for implementation of lifelong learning philosophy is a priority for Serbia in the future. It is certain that the level of Foreign Direct Investment in Serbia depends on development of human resources, because knowledge and skills are the only resource in the world that raises and there is no method to compensate its lost. State policy should be focused on the development of human resources (especially young talent), in order to avoid the situation from the 90's when ten thousands of highly educated people left our country for the developed ones. The brain drain that happened to us should be a constant reminder that human resources should be continuously developed and encouraged and that only human knowledge and skills in the times of crisis can provide us with new ideas and work and that they are the only ones that could attract foreign capital, leading towards improvement of the economy of the entire country. References Pržulj, Ž: Menadžment ljudskih resursa, Institut za razvoj malih i srednjih preduzeća, Beograd, Anthony, W.P., Nicholson, E.A.: Management of human resources, A Systems approach to personnel management, Columbus, OH, Grid, inc Ulrich, D.: Strategisches Human Resource Management, Carl Hanser Verlag, Munchen, Likert,R.: New Patterns of Management, New York, McGraw-Hill, 1961, in The Human Organization Its Management and Value, New York, McGraw-Hill, Bratton, J. and Gold J.: Human resource management, Palgrave Macmillan, New York,

89 Wage system in Albania: An integral part of the human resources management system Frederik Cucllari & Mirela Cini 1 Summary The premise of this paper is that wage system plays a key role in realization of the entrepreneurship objectives, in regard to efficiency, effectiveness, implementation of the law, motivation, maximal engagement of the employees, etc. The links between the remuneration and human resources development have to do with the ways of how the wages are defined. Wage system is the key in providing businesses with sufficient structural flexibility to adjust to sudden changes in the business environment. The paper presents the results of wage survey carried out in the region of Korce, including businesses divided into six groups, according to their economic activities (agriculture, industry, construction, transport, trade and services). The employers take into consideration a number of factors for determination of wages, for different positions or different levels of work skills. The productivity of the individuals is measured by their qualifications, their training, their previous experiences or data of their job quality. Some employers offer base wage based on other personal attributes such as gender, age, etc. The institutional factors such as official minimal wage, the collective agreements may influence upon the level of the wage. Analyzing the fact of how the employers take into consideration these factors, we have observed how much the training and their capacity influence upon the level of the employee s wages. Using survey data, we would like to conclude that the employers need to use a flexible and responsive wage system that can help businesses to complete more effectively, so as, to earn a sustainable competitive return on their capital, while supporting profit growth and rewarding employers. The implementation of flexible wage is only one critical factor in human resources management and the implementation could only be successful and sustainable if businesses adopt a holistic approach in developing other aspects of human resources management practices. 1 Faculty of Economy, Fan S. Noli University; Korce, Albania. 80

90 Human Resources Issues in International Business An exploratory comparison of intended behaviors in ethical business reporting situations between US and Bulgarian university students Greg Broekemier & Sri Seshadri 1 Summary Ethical dilemmas appear frequently in business situations. As international trade by Eastern and Central European countries expands, it has become increasingly important for both these countries and their trading partners to be able to predict behaviors of future business employees when ethical dilemmas arise. The quantity of research regarding business ethics in Eastern and Central Europe is limited. Further, the studies found that did investigate this topic researched ethical perspectives (Rhey, Rustogi, and Brust, 2000) or involved general discussions of ethics (Bitros and Karayiannis, 2010; Bohata, 1997; Bulgarian Business Leaders Forum, 2010; Business Ethics in Bulgaria, 2007; Rangelova, 2002). This study attempts to bridge this gap by comparing the intended behaviors of Bulgarian university students and US University students when confronted with ethical situations. University students from the two countries discussed above, Bulgaria and the US were presented with four ethical dilemmas (vignettes) that required them to make decisions of whether or not to report others involved in the business situations who were engaging in unethical activities. Over 1,000 US university students and nearly 200 Bulgarian students were participants in this study. Respondents were provided with four different situations of the following nature: 1. Padding an expense account - a situation in which a company is being harmed. 2. Supervisor dumping industrial waste - a situation in which society is being harmed. 3. Associate pilferage that reduces employee bonuses - a situation in which fellow employees are being harmed. 4. Boss violating safety codes - a situation in which customers could be harmed. The questionnaire was originally developed in the US where it was administered to students at a US university. The questionnaire was subsequently administered to Englishspeaking students at a university in Bulgaria. Response rates for both sample subsets were high, over 90%. Vignettes have been shown to elicit high quality data (Fraedrich and Ferrell, 1992) and Ferber (1977) argued that a student sample is considered valid for exploratory 1 Marketing and Management Information Systems Department, University of Nebraska at Kearney, USA. 81

91 studies when the subject of the research is perceived to be both relevant and understandable to the respondents, as in this study. Results for the four situations show significant differences between US and Bulgarian respondents in three of the four situations (p<.05). Bulgarian respondents were significantly less likely to report a co-worker who was padding an expense account, significantly more likely to report a supervisor dumping waste, and were significantly less likely to report a coworker whose pilferage was negatively impacting their bonuses. However, in situation four, respondents from both countries were equally likely to report a boss who was endangering customers. These results show that there are significant differences in how people from Bulgaria and the US will behave in ethical situations. This knowledge will aid companies engaged in international trade between these two countries to identify differing ethical training program needs. References: Bitros, G.C. and Karayiannis, A.D. (2010). Morality, Institutions, and the Wealth of Nations: Some Lessons From Ancient Greece. European Journal of Political Economy, 26, 1, pp Bohata, M. (1997). Business Ethics in Central and Eastern Europe With Special Focus on the Czech Republic. Journal of Business Ethics, 16, 14, pp Bulgarian Business Leaders Forum (2010). Business Ethics Standard. Business Ethics in Bulgaria: An Assessment Upon Accession to the European Union, Proceedings of the 11th Annual European Business Ethics Network UK Conference, April 12-13, 2007, pp. 12. Ferber, R. (1977). Research By Convenience. Journal of Consumer Research, 1, pp Fraedrich, J., & Ferrell O.C. (1992). Cognitive Consistency of Marketing Managers in Ethical Situations. Journal of the Academy of Marketing Science, 20, pp Rangelova, R. (2002). Building the Ethical Infrastructure of the Market in Post-Communist Countries: The Case of Bulgaria. Business Ethics: A European Review, 6, 4, pp Rhey, W.L., Rustogi, H., and Brust, J. (2000). Perspectives of Organizational Ethics in a Transitioning Economy: A Comparison of U.S. and Bulgarian Views. Journal of Euromarketing, 9, 1, pp

92 Human Resources Issues in International Business HR related ethics: US vs. Bulgaria Sri Seshadri & Greg Broekemier 1 Summary Ethics are the very foundation for responsible practice of human resources (HR). As commerce becomes more and more global, HR practices also expand their geographic reach. The trade relationship between the US and EU also expands as more countries join the EU. Thus it becomes of significance to understand the differences in the ethics of future managers of both countries when it comes to the practice hiring, an important HR function. We have chosen to Bulgaria and the US as the two countries of interest. Bulgaria has recently joined the EU, hosts an American University, and Amcham The American Chamber of Commerce - is present in Bulgaria. Furthermore, research on business ethics in Bulgaria is quitey limited (Rhey, Rustogi, and Brust, 2000; Bitros and Karayiannis, 2010; Bohata, 1997; Bulgarian Business Leaders Forum, 2010; Business Ethics in Bulgaria, 2007; Rangelova, 2002) and involve very general discussions of ethics. This study attempts to bridge this gap by comparing the intended ethical behaviors of Bulgarian and US citizens when confronted with ethical situations within the practice of human resources. Subjects participating in the study were presented with four ethical dilemmas (vignettes) and asked how they would respond to these situations. Vignettes have been shown to elicit high quality data (Fraedrich and Ferrell, 1992) and Ferber (1977) argued that a student sample is considered valid for exploratory studies when the subject of the research is perceived to be both relevant and understandable to the respondents, as in this study. Dichotomous response options were presented for each of the vignettes. Over 1,000 US and nearly 200 Bulgarian subjects participated in this study. Respondents were provided with four different situations of the following nature, where the company could be hurt financially or legally (results in parenthesis): 1. Hiring decision regarding the best qualified applicant who discriminates against minorities (a greater percentage of Bulgarians than Americans would hire the person). 2. Hiring decision regarding the best qualified applicant who has not revealed getting fired from previous employment (a greater percentage of Bulgarians than Americans would hire the person). 3. Hiring decision regarding a person one feels good about, though may not be qualified (a greater percentage of Bulgarians than Americans would hire the person). 1 Marketing and Management Information Systems Department, University of Nebraska at Kearney, USA. 83

93 4. Hiring a well-qualified fiancé, knowing they may leave (a greater percentage of Bulgarians than Americans would hire the person). The questionnaire, developed in the US, was administered in the US and to Englishspeaking subjects at a university in Bulgaria. Response rates for both sample subsets were high, over 90%. Statistically significant differences (p<.05) were noticed in all four situations between the US sample and the Bulgarian sample. In all four situations it appears that more Bulgarians, compared to the US, put their interests first over what is good for the firm in the long run. This knowledge will aid companies engaged in international trade between these two countries to identify specific ethical training program needs. References: Bitros, G.C. and Karayiannis, A.D. (2010). Morality, Institutions, and the Wealth of Nations: Some Lessons From Ancient Greece. European Journal of Political Economy, 26, 1, pp Bohata, M. (1997). Business Ethics in Central and Eastern Europe With Special Focus on the Czech Republic. Journal of Business Ethics, 16, 14, pp Bulgarian Business Leaders Forum (2010). Business Ethics Standard. Business Ethics in Bulgaria: An Assessment Upon Accession to the European Union, Proceedings of the 11th Annual European Business Ethics Network UK Conference, April 12-13, 2007, pp. 12. Ferber, R. (1977). Research By Convenience. Journal of Consumer Research, 1, pp Fraedrich, J., & Ferrell O.C. (1992). Cognitive Consistency of Marketing Managers in Ethical Situations. Journal of the Academy of Marketing Science, 20, pp Rangelova, R. (2002). Building the Ethical Infrastructure of the Market in Post-Communist Countries: The Case of Bulgaria. Business Ethics: A European Review, 6, 4, pp Rhey, W.L., Rustogi, H., and Brust, J. (2000). Perspectives of Organizational Ethics in a Transitioning Economy: A Comparison of U.S. and Bulgarian Views. Journal of Euromarketing, 9, 1, pp

94 Effects of EU Membership The main determinants of inflation of the EU and the US economy: A panel time-series analysis Dimitris Kalimeris 1 Abstract: This paper uses the panel analysis approach to deal with the impact of oil price shocks, unemployment and interest rates to the most fundamental macroeconomic variable, inflation. A data set ranging from 1997 to 2007 is used, separately for the US and the EU economy. In both sets of data current inflation is heavily affected by unemployment, as expected. The worth noticing difference is, that in the US economy interest rates have a negative relationship with inflation (unlike in the case of the EU), while unemployment plays a more substantial role in the US in affecting inflation level. Oil prices tend to tend play a small and distinctive part. JEL codes: E30, E31, C13, C33 1 School of Economics and Business, Accounting Department, Alexander Technological Educational Institute of Thessaloniki, Greece. 85

95 The macro-economic dimension of the future EU membership for Turkey in comparison with other CEE member countries Panayiotis Kontakos 1 Summary This article reviews the adequacy and suitability of macroeconomic policies of Turkey during the pre-accession period to the European Union (EU). Irrespective of the possibilities of such a perspective to be realized in the future, the current macroeconomic developments and direction of macroeconomic policy in Turkey are reviewed and examined. Regardless of the "distance" of Turkey from satisfying the EU membership, the EMU convergence criteria in the case of Turkey are examined and employed as a benchmark of comparison with other Central and Eastern European countries that have already accomplished or are in the direction to satisfy these criteria. Greece has also been added for the benefit of comparison. An analysis follows of the macroeconomic challenges faced by Turkey, with emphasis on issues related to inflation, fiscal policy, public debt, interest rates, sustainability of the current account, and exchange rates. Turkey realizes that, in the long run, price stability and fiscal discipline create the best conditions for sustained, robust economic growth, but currently the situation although has significantly improved over the last decade, still remains challenging, especially during the current economic crisis climate. The challenge facing Turkey is how to move from the current state of affairs to one in which the Maastricht criteria will be satisfied. The main issues are reducing the inflation rate to about 3 percent over time and maintaining the debt-to-gdp ratio to 60 percent over time, while attaining sustainability of the current account and decreasing the unemployment rate in the economy. Turkey's inflation rate remains much higher than that of most other emerging markets, meaning that will need to move through and entail the costs of a disinflation period. To analyze the issues associated with maintaining the debt-to-gdp ratio below 60 percent over time, crucial parameters determining the time path of the debt-to-gdp ratio are considered, such as the primary-surplus-to-gdp ratio, the domestic and foreign real rates of interest, and the rate of real exchange rate depreciation. 1 Department of International and European Studies, University of Macedonia; Thessaloniki, Greece. 86

96 Effects of EU Membership The sustainability of the current account under the current environment is assessed, shedding also light into the importance of the FDI-to-GDP ratio. Once Turkey is able to attract higher levels of FDI into the country, it does not need to depreciate its real exchange rate by as much as in previous years in order to attain sustainability in its current account. To solve the unemployment problem over time, Turkey has to preserve the flexibility of the labour market and achieve a relatively high but sustainable growth rate of GDP over the next decades. Turkey can no longer sustain the flexibility of the labour market through the lax enforcement of laws on taxation and social security, because such enforcement tends to create different problems for Turkish society. The country has to introduce tax reforms that will aim to lower the personal income and social security taxes, while broadening the tax base through, for example, the introduction of a relatively low flat tax and simultaneously modernizing the tax administration. A comparison of the personal tax, corporate tax, and VAT systems of Turkey and the EU countries is utilized for this purpose as a benchmarking. The paramount importance of Turkey's accession to EU is today deeply in the focus of many discussions in both sides of the Atlantic, and within the context of many diverse backgrounds, bearing, not only economic, but also historical, cultural, social, religion and geo-political features and dimensions. 87

97 Labour relations policies in Greece during the period : The developments in the European Union Eleftheria Masoura 1 Summary The present paper aims at the study of labour relations policies during the period in Greece. Labour relations not only as a constitutional factor of labour regulations but also as the most important factor of labour cost have been the target of reforms during the last 37 years. Methodologically speaking, the legislation referring to the labour relations policies is used as the source of the information needed. At a next step, the statistical methods of Data Analysis (Hierarchical Classification (CAH) and the Factorial Correspondence Analysis (AFC)) are used as the most appropriate methods depicting the development of the issue, the groups of periods, the sub periods and their characteristics as well as they discover the juxtapositions of periods and their characteristics during 37 years examined. Finally, given -on the one hand- the general microeconomic environment based on the labour cost diminution and -on the other hand- the dominant macroeconomic environment based on the fiscal restrictions, the tendencies in the field of the European relations policies are studied. Keywords: Labour Relations policies, Data Analysis Methods, Labour Cost, European Union tendencies Introduction The depiction of the development in the labour relations policies in Greece during the years is the aim of the present study. Theoretically speaking, labour relations refer to the traditional dependent work between the employer and employee, namely the salaried work. It is about the kind of labour that the mixed market system based on. The particular time period has been chosen as it depicts the reestablishment of the Democracy in the modern Greece. All those years, lots of political measures have created what the labour relation is today. 1 Department of Department Of Educational & Social Policy, University of Macedonia; Thessaloniki, Greece. 88

98 Effects of EU Membership More recently thought, a great deal of discussion has been arisen as far as the nature of the labour relations system is concerned. The term reforms has become a burning issue, in a different way analogous to the side of criticism (for instance, government, political parties or syndicates). These reforms refer to significant parts of the labour relations and reflect certain political and economic choices. It is important so, that the depiction of the policies followed in the period examined, should be connected at a second step with the relative developments in the wider European Union, so as to come to some useful conclusions. It is also useful to make a connection with the global perception for the content of labour in the contemporary time as well as the notion of labour cost that all the philosophy of labour relations is focused on. Unlike the most scientific papers that analyse specific parts of the labour relations each time, separately or statically, the present study proposes the diachronic development of the policies followed, analyzing simultaneously a lot of elements of the phenomenon studied and covering at the same time their main features during the period More specifically, with the present study a new statistical approach, the Data Analysis methods, is proposed as a new approach in the study of policies development diachronically. The present study is part of a wider study concerns the policies followed not only for the labour relations but also for the social security is the present (Μασούρα, 2005). In an attempt to study the policies depicting the labour relations, 21 variables have been chosen, as the most representative, the study of which, is considered to give an sufficient description of the issue. These indicative variables with their symbolism are: 1. hre: working time for the general category of workers in the industry, manufacture, services private and public sector 2. hrk: working time for the workers in the commercial shops 3. ype: overtime work 4. mer: part-time employment 5. eoh: fixed-time work -seasonal work 6. aty: atypical forms of employment (teleworking) 7. pro: temporary employment (lending of workers/employees) 8. oap: limits of massive redundancies 9. syl: collective negotiations-collective labour conventions 10. syn: trade-union rights-syndicalism/strike 11. sym: participation of the employed in the enterprise administration / participation of employees and employers in institutions concerning the employment 12. for: institutions practicing employment-policies 13. epa: wage-connection with productivity- (profit-sharing) (benefit of productivity ) 14. eta: annual leave 89

99 15. adm: mothers leave 16. yga: hygiene and safety at the working place 17. ism: equal treatment 18. ekp: vocational education - training of employees 19. dor: general organizational subjects with regard to the employment and the labour relations 20. mis: wage (way of readjustment, minimum/ maximum wage) 21. eid: work of specific categories of working people (juvenile, disabled, having many Methodology children people). The labour legislation became the source of the information needed for each of the variable chosen (Μασούρα, 2005). To make this clear, hypothesis of the study is that the legislation depicts political will, reflecting in this way, specific political decisions which have been put into practice. So, all the national laws involving measures which refer to the 21 variables for the entire period are examined. Statistically speaking, the variables- components of labour relations are qualitative meaning that they not represent a measurable quantity but a situation which can be symbolized arithmetically. For the characterization of each variable diachronically, it is symbolised with the number 1 the first legislative measure that refers to each variable for the first year of the analysis (1974), with the number 2 the second measure that concerns the variable the next year when this measure is met through the respective law, leading thus to the final number that characterizes each variable for each year. Moreover, it should be stressed that the numerical symbolization shows only the change that occurs in each variable through the time examined, it has not a numerical superiority (Παπαδημητρίου, 2005). A brief example of the way of the parameterization for the variable "part time employment" follows: mer1: limited application and permissible after agreement of the employee and on the condition of not more unfavourable labour relation, with authorisation of Committee or Prefect in case of restriction of enterprise s activity ( ). 2 mer2: permissible the constitution of organic places for partial or periodical employment under certain conditions and for certain working categories (1987). 3 mer3: object of negotiation with previous information of Councils of Workers ( ). 4 mer4: general enactment and recognition of part-time employment at the base of daily or weekly work ( ). 5 2 Law 2112/1920, article 8, Law 537/1946, article 11, Law 2961/ 1954, article 13, 532/ Law 1735/1987, article Law 1767/1988, article

100 Effects of EU Membership mer5: intensive enactment of institution with expansion in all forms of part- time work / extension in fortnightly or monthly base ( ). 6 mer6: increase 7,5% of the remuneration in 4 hours part-time work daily provided that these employed people are paid with the minimum wages ( ). 7 mer7: extension of part-time employment in public services, and the sector of wider public sector for services of social character (2003). 8 mer8: redefinition of partial employment (duration, qualifications, services) in public services at the base of enterprising plan ( ). 9 mer9: determination of the meaning of part-time working person in comparison with the full-time working person ability of one-sided imposition of part-time employment on the side of the employer when enterprising is restricted (2010). 10 In the same way, all the rest 20 variables are coded, in other words parameterized, leading to their final characteristic each. The analytical information for the years there is in the analogous doctoral thesis (Μασούρα, 2005) where all the procedure for the presentation of each legal measure is depicted. In this paper, it would be useful to present only the recent developments that are remarked to the most of the variables examined. In the appendix A the way of parameterization after the years 2004 is presented for the variables subjected to reforms so as to include the continuity of the phenomenon After this procedure of the parameterization - codification, the initial table of data 37X21 is created, expressing the 37 years in its lines and the 21 variables in its columns (table 1). It is important to be stressed that there is not any empty cell in the initial table. The initial table shows the arithmetical symbolization of each variable during the period However, the table where the statistical methods are applied is not the initial table of years and variables but the so called table 0-1. In the table 0-1 the lines describe also the years but the variables are transformed into the attributes, according to the parameterization-codification that has been preceded. For instance, the variable mer, on the initial table becomes mer1 mer2, mer3, mer4, mer5, mer6 mer7, mer8, mer9 on the table 0-1. In this way, the table 0-1 is 37X223, where 37 are the years-objects and 223 are the attributes-characteristics of the analysis. On this table, the Data Analysis methods and specifically the Hierarchical Classification and the Factorial Correspondence Analysis are applied (figure 1). They 5 Law 1892/1990, article Law 2639/1998, article 2. 7 Law 2874/2000, article 7. 8 Law 3174/ Law 3250/ Law 3845/2010, article 2. 91

101 concern methods of descriptive statistics revealing through their descriptive results relations of great significance for the interpretation of the phenomenon. These methods are applied on table 0-1, because the multidimensional analysis needs a characteristic of each variable for each year. This is proved by the sum of each line of the table 0-1 which is equal to the number 37, namely the number of the variables used. Table 1: Initial Table of Data Α/Α hre hrk ype mer eoh aty pro oap syl syn sym For epa eta adm yga ism ekp dor mis eid Both methods used play a unique role in the present analysis. The application of Hierarchical Classification (CAH) allows the creation of groups and subgroups that are constituted by the time periods and sub periods with the corresponding attributes that characterize them. The regrouping which is achieved by the CAH is confirmed by the Factorial Correspondence Analysis (AFC) which portrays - gives the photography of the 92

102 Effects of EU Membership phenomenon of labour relations for the examined time period and for the examined variables in the space of two dimensions that is called the first Factorial Plane as a synthesis of the two factorial axes. Figure 1: Methodology- Transformation of Initial Table into 0-1 Table The first factorial axis is the axis which gives the first better information of the phenomenon studied. This information is expressed by the juxtaposition of the extreme situations which are revealed, meaning the opposite situations of the phenomenon described. The second factorial axis gives the second better information of the phenomenon studied. This information is depicted by the juxtaposition of the middle situation from the extreme ones. At this point, it is useful to be marked that with the particular methods of Data Analysis the analytic description of data tables of qualitative variables, is achieved, so that to be rendered easy their interpretation and to come into conclusions without an a priori hypothesis or restriction as far as which variables or results play the most important role in the phenomenon that the table which is analyzed describes (Παπαδημητρίου, 2005). In this way, the multidimensional elaboration of all variables simultaneously and the complete description of the phenomenon through the 37 years examined is ensured. This ability of multivariable Data Analysis methods that permit the simultaneous analysis of columns-points and the lines-points, namely the variables attributes and the years, make the methods the most appropriate in the present study. However, the analytical presentation of the way that these methods function through their algebraic logic as well as their geometric depiction is not the object of the present study. In case thought which someone wants to emphasize the theoretical background of Data Analysis methods, in particular of the CAH and AFC, they could resort to the rich statistical bibliography (Cailliez-Pages, 1976, Benzecri, 1980 Benzecri, 1982, 93

103 Aldenderfer-Blashfield 1984, Benzecri, 1992, Greenacre, 1993, Παπαδημητρίου, 1994, Παπαδημητρίου, 2005). There is also a wide range of the applications of these methods which take place in all the scientific fields (economy, education, psychology, etc). The statistical elaboration of phenomenon that is studied became with the programs M.A.D (Καραπιστόλης, 2002) and C.HI.C. Analysis (Μάρκος, Μενεξές, Παπαδημητρίου,2006) as the development of the computer science has played a decisive role in the development of Data Analysis methods in that it allows the more rapid elaboration of a big dimension table. Finally, through Data Analysis, the statistics without mathematical formulas and numbers, the Statistics for the Society and the Man as Benjecri, the main founder of Data Analysis methods declares, the study of the phenomenon of labour relations in Greece diachronically, is attempted through the depiction of tendencies and directions that are observed. Results of the hierarchical classification (CAH) The pictorial result of the Hierarchical Classification (in English) or the Classification Ascendanτe Hiérarchique (in French) is the dendrogramme with its groups -classes, as they are called. The dendrogramme, leads to the separation of the total time period in two other periods initially, that are separated themselves into two sub-periods each one and these sub-periods are separated also in two new sub-periods. As far as the 223 attributes of the initial variables are concerned, these appear as the characteristics referring to the subperiods which are created with the application of the CAH. Eight final subgroups are created in this way with the simultaneous depiction of the years and their corresponding characteristics (figure 2). It can be observed that the more someone removed from the initial groups downwards, the more specific information receives as far as the content of the groups is concerned. Therefore, the most general information gives its position to the most specific information. With the dendrogramme of CAH a hierarchy of observations is achieved, namely a number of partitions, each derived from the previous one. Also, each class shows the degree of the similarity of observations and the nearer the initial group (top) is the section the less groups of observations occurred which are more similar and each one of them include more observations. Specifically, in the present study the group A1 and the groupa2 are more similar than the group B1 and the group B2 which, despite their different characteristics, resemble more from the groups that proceeded. 94

104 Effects of EU Membership Figure 2. CAH- Dendrogramme The separation into the above eight groups is considered to be sufficient concerning a first satisfactory picture of the policies followed the examined features of the labour relations. The algorithm of the CAH leads to the dipoles, namely the groups are created two by two. The first groups are referred to the general time period on the one hand and time period on the other, with the corresponding attributes that characterizes them and in which the separation is owed to. It is about the group A and the group B which give a first information about the diachronic course of the social security in Greece. Generally speaking, an indicative characterization for the first period ( ) expresses mainly the foundation as well as the extension of labour relations rights. Additionally, the second period ( ), which stands in the antipode of the first period concerns the entry in an era of new economic and social conditions, where important changes takes place in fundamental, steady until then in their most principals. The term flexibility prevails over the traditional values in the labour relations fields. The detailed presentation of all attributes that characterized each group is not in the frame of this paper. The brief depiction of the main features of each group should give the general picture of the phenomenon examined The main characterization of each subgroup from the eight final ones in which the whole time period of study ( ) is divided through the dendrogramme of CAH, 95

105 follows. In order to be easy their equivalence with the Factorial Correspondence Analysis (AFC), they will be also symbolized arithmetically. More specifically: The 1st group, the group A1.1 ( ), is characterized by the foundation of basic principles in policies relative with the labour relations, in a period of search of identity The 2nd group, the group A1.2 ( ) follows the logic of the previous one and extends the protection in labour relations issues. There is also an extension of labour rights. It can be characterized as a stage before the passage into the 1990 period. The 3rd group, the group A2.1 ( ), is the period where new features and new mentality as far as the labour relations policies are introduced. The opening of a new era in the labour relations world where the flexibilities dominate, distinguish this period from the spirit of its previous. The 4th group, the group A2.2 ( ) is differentiated from its previous because of the gravity in institutions of dialogue and consent in the new parameters of labour relations, that are shaped with the entry in the season of flexibilities. The 5th group, the group B1.1 ( ) depicts the period that through the corresponding legislation the flexibilities are intensified. The 6th group, the group B1.2 ( ) is characterized by functional regulations and improvements in details without changing the general tendencies. The 7th group, the group B2.1 ( ), emphasizes on organizational adaptations in the new economic conditions as well as the expansion and regulation of flexibility. Finally, the 8th group, the group B2.2 (2010) continues the path that the after 90 period introduces but in an way without precedent into the working world, especially in the salaried work removing more and more from the traditional and typical forms of work organization. Results of the factorial correspondence analysis (AFC) The grouping and therefore the relation of years and their attributes was realized with the Hierarchical Classification (CAH). The analogous periods coupled with the most significant corresponding characteristics referring to them are created. Afterwards, it would be important to be stressed the descriptive role of Factorial Correspondence Analysis (AFC), which functions additionally to the Hierarchical Classification (CAH), plays however a different interpretative role. Consequently, the first factorial axis depicts the arrangement of years as well as the juxtaposition of the two extreme situations of the phenomenon studied. It is about the group A1.1 ( ) which belongs to the wider group A.1 ( ) and both derives from the group A ( ) in the one side and the group B2.2 (2010) that is part of the group B.2 ( ) and both spring from the group B ( ). In an analogous way, it is about 96

106 Effects of EU Membership the same groups that emerge from the Classification, namely the 1st group ( ) and the 8th period (2010), with the attributes that distinguish them. In this way, the particular juxtaposition shows on the right side mainly the foundation of basic principles in policies relative with the labour relations, in a period of search of identity as well as protection in labour relations issues extension of labour rights ( ). Moreover, on the left side of the axis, organizational adaptations in the new economic conditions coupled with a the expansion and regulation of flexibility in the salaried work removing more and more from the traditional and typical forms of work organization ( ). Figure 3: AFC-1st Factorial axis Additionally, the second factorial axis shows the juxtaposition of the extreme situations with the medium situation. In this way, on it the years are juxtaposed not only to the previous time period ( ) but also the next year 2010 and this is justified interpretatively by the fact that this period becomes the beginning of the change of spirit as well as it is observed a different transitional approach of vital elements in labour relations policies, in comparison with the rest period, for the examined variables (figure 4). It is about a new rationale in the pre-existed conditions but also the herald of the tendencies for the periods followed. It is the juxtaposition of the transitional period ( ) towards flexibilities in working time and the types of employment with the foundation of basic principles ( ) but also with the entrance in a more flexible work world with new data that determines that (2010). Finally, in the first factorial plane (figure5) there is the photograph, the axial tomography of the phenomenon studied, in the space of two dimensions (Παπαδημητρίου, 1994). The depiction in the 1st factorial plane it should be presented as a course into the 97

107 time. Thus, beginning from the 1st time period ( ), the 2nd period ( ) follows which in its turn pass the torch to the 3rd period ( ), that constitutes the top of the parabola (effect of Gutman) (Camiz, 2005). The sub period gives its place to the period so as to end in the last period examined ( ) and the year 2010 that is separated due to the recent reforms that in the name of economic crisis are introduced. Figure 4: AFC-2nd Factorial axis Figure 5: AFC- 1st Factorial plane 98

108 Effects of EU Membership Developments in the European union In this section it should be useful to present the corresponding developments in the European Union in a comparable and critical eye. Given the fact that he European Union as well as the globalization is a reality nowadays, the study of the labour relations policies should show the steps that are followed in the general background that national policies belong. With the adhesion of Greece in the European Community, the European Community Law constitutes internal Law, which prevails over the national legislation. The founding Treaty of European Community, which constitutes her Constitutional Chart, the Regulations, the Decisions, the Recommendations, the Suggestions as well as the Opinions refer to the Community Law. Generally the 70 s, in the European Union, connected with the first waves of economic reformations, is characterized as a period of Community initiatives through the form of Directives, for the protection of workers against the situation given (mass redundancies, employer s arbitrariness etc) (Κουζής, 2001). Thus, despite the fragmentary initial character of European Community as far as the institutional interventions in the labour relations policies are concerned, the protection of workers in more general labour rights is sought for. The European Convention of Human Rights (1950) and the European Social Chart (1961) which was ratified in Greece in 1984, are of great importance in the labour world as they constitute the right of work, fair wages, equal treatment of two sexes the trade-union freedoms in a general declaration without regulating concrete metres for the fulfilment of their objectives (Ντάσιος, 1999, p. 169). After the adaptation of the Single European Act (1986) and the prospect of united market, the Chart of Fundamental Social Rights (1989) is adopted. However, only for the subjects of hygiene and safety at work, it is required special majority, while for the decision-making in other questions the requirement of unanimity prevents their adoption. Consequently, the nature of relevant regulations are more of declarative character concerning the free movement of persons, employment and wage, improvement of conditions of work, freedom of organization into labour unions and collective negotiation, vocational training and education, equal treatment of two sexes, protection of the disabled etc. It can be concluded that at its beginning, the EU was not directed in the creation of a completed frame of policies related to the labour relations, a situation that does not remains the same in 1990 s. In 1990 s, the European Union s policy referring to the labour relations is transformed into directions absolutely connected with the market priorities of that 99

109 period. The terms flexibility, and initiatives for competitiveness and employment make their appearance. In the Treaty of Maastricht (1991), the principle of subsidiarity, meaning the intervention of the European Union when the legislation of states-members is unable to dissolve internal subjects, the social policy is downgraded (Σακελλαρόπουλος, 1995, Κουζής, 2001,p. 69).) In the White Book for the Growth-Competitiveness and Employment, the subject of unemployment is declared as the critical point for the departure of measures that is about to reform the field of labour relations. In particular, the low level of competitiveness of European economy against her main competitors, USA and Japan, as well as the high cost of work (wage and not wage costs) are the main responsible factors for the unemployment in the EU. More specifically, the lack of flexibility in the European job market, is said that deprives of the enterprises the motives for the maintenance and increase of employment. Accordingly, for the reinforcement of employment radical reform in the European job market is required, with intention to stimulate the employment (Ιωακείμογλου, el, 1994). To make that clear, for the reduction of labour cost, the political and social agreements is proposed so as to the profits of economic growth not only be absorbed from the already employed but also be directed in the creation of new places of work with central orientation the restriction of wage increases. It is about the sharing of a place of work and therefore of the relevant wage in more than one workers (Δελιβάνη, 2001). Besides, the increase of flexibility, is sought by White Book with concrete guidelines. The reform of legal frame for the constitution of part time employment in a base of legislating the protection of this kind of work refers to one of these guidelines. The reduction of overtime work by means of the minimization of financing motives, the reduction of work time calculated at annual base with increase however in the hours of work for certain periods depending on the enterprises needs (regulation of work time) in combination with the favourable treatment of leaves for personal, educational and vocational reasons are proved to be some others sides of flexibility. Finally, the development of the social dialogue and the collective negotiations as basic means for the achievement of changes coupled with the reduction of not wage cost via the tax motives to the enterprises for the creation of low specialization work places means the beginning of a different mentality in labour relations. This mentality reflects the intensity of internationalization of economy with terms of markets opening as it is expressed mainly in the low labour cost of underdeveloped countries (Κουζής, 2001, 2004). Despite of the absence of legal engagements, the new directions, reveal the change of spirit, in the European labour relations policies. The suggestions to the national governments, are subjected to the restrict programs of economic convergence. 100

110 Effects of EU Membership Afterwards, in the Treaty of Amsterdam (1997), the protocol of social policy is included in its main body. The reference to the social goals in the European Union such as the employment, the conditions of work and living, the equal treatment, the social dialogue and the development of human resources are focused on the achievement of economic goals through the creation of Economic and Monetary Union (EMU) and on the attachment in the relative criteria of nominal convergence (inflation, state deficit, public debt) The same period, with the Green Book for the Cooperation for a new organisation of Work (1997), the EU intervenes more immediately in the field of labour relations. The new dimension, which is given to the content of flexibility policies, is supported to the essential consent of workers which would ensure the social cohesion. With the establishment of the European Strategic of the Employment in 1997, via the National Plans of Action for the Employment, there is for first time a coordination in the statesmembers policies for the job market. It could be stressed that the previous harmonisation is replaced by the co-ordination of policies for the employment, with the notion of flexibility playing dominant role. After the Session of Luxembourg (1998), the labour flexibility concerns a parameter of enterprises adaptation in the new situation. In all Summits with main theme the problem of employment (as in Essen, Amsterdam, Luxembourg etc), the central choice of reform in job market is the flexibility. The Lisbon s strategy (2000) aims at the fact the European Union become until 2010 initially and until 2020 in a revised version, the most dynamic and competitive economy in the world, capable of creating viable economic growth with more and better jobs, stronger social cohesion and respect to the environment. With the open method of co-ordination is sought the bigger convergence of actions for the Strategy of Lisbon s goals. Moreover, in a Report relating to the Lisbon s Strategy (2004), is demanded the working people s comprehension of the new economic and social environment in which the job market should be adapted on and hence consent on the need of direct changes. In this environment are included the recent reforms for flexibilities in the market policies given the fact of the economic crises and the dominant belief of labour cost reducing. In addition to this, the Pacts of stability and the recent statement on the support to Greece (2004) -in conditions of crisis- by euro area members-states impose a new scenery in the working world. The reduction of state deficit and the creation of stability conditions in Greek market is also aims at safeguarding financial stability in the Euro area as a whole. In 2010, through the Memorandum between the European Commission, the European Central Bank and the International Monetary Fund the financial support /loan to Greece is going to be given on the condition that state expenses will be controlled and the market structure will be corrected. Economic, fiscal and structural measures are taken in the name of facing the 101

111 fiscal and external imbalances and restabilising the confidence (Memorandum, adopted as Law 3845/2010). Among the policies that have been planned are those of adjustment of income policy and social protection as well as the recuperation of competitiveness. As a result, measures of curtailments and flexibilities are in the agenda of discussions. In the appendix A appears that the most variables examined are objects of reforms a they derive from the guidelines of the Memorandum. Conclusions With the present paper two main objectives are realised. On the one hand, the introduction of a new method in the study of diachronic development of policies revealing significant relations that characterizes them, permitting the deduction of useful conclusions. On the other hand, the theoretical deductions concerning a critical part of economic policy, a burning issue nowdays, that of labour relations, parallel to the presentation of the European Unions developments in the field, giving emphasis on the dialectic relations of policies. In brief, a representative picture of the labour relation policies is achieved, through the periods with their corresponding groups of attributes, their classification but also their differentiation, so that the course of selected parameters into the time should be described, emerging juxtapositions that reveal important elements of the theme examined. With the present work, a course from an initial, more constant situation to another transient and afterwards in a final for the present study but continuously evolving for the next years is confirmed. In this course, the spirit of after-1990 period is changed. Before this period a given situation exists, after this period new changes lead to new conditions in Labour Relations. This course should be interpreted by corresponding developments in the European Union and in general, a changing global environment where the change in the world of labour in the form that we traditionally have known it. It appears that the gradual and intense impose of multiple flexibilities in the labour market have been chosen as a dominant political practice mainly for labour cost reducing. In this notion the prevailing perception is summarized. However, the interpretation and the criticism of them are susceptible to different versions depending on the viewpoint of the different social groups with different interests and different ideological optical. It is characteristic the phrase that the road that leads to success is not the low wages, but the specialization of the working class is also the education and technology of high quality (Thurow. 1995). There are also lots of ideological approaches as every theme of socio economic interest, depending on the conflicting schools of economic theories. The intention of the present work is not, however, to analyze the theoretical interpretations of labour relations, something that could be one of the prospects of the present study. 102

112 Effects of EU Membership In addition, the connection with the relative developments in other European countries as well as the enrichment with the study of other policies such as education policy, health policy, economic policy should be the objects of future studies. Apart from this, the study of measures taken and the results in labour market figures and competitiveness coupled with the measurable elements of economic development should be one more field of scientific research. Acknowledgments It would be omission not to express gratitude to the organising and scientific committee of the International Conference on International Business Through this conference an exchange of scientific though and experience has been culminated contributing in this way to the enrichment of the scientific research in the field of business and the general economic environment that influence it. References Aldenderfer M.S, Blashfield R.K (1984), Cluster Analysis, Sage University Paper, 44, Beverly Hills. BenzécriJ.-P.(1980), Analyse des Données,T.1 : La Taxinomie, Dunod, Paris. BenzécriJ.-P.(1982 ), Analyse des Données, T.2: L Analyse des Correspondances, Dunod, Paris. Benjecri J-P. (1992). Correspondence Analysis Handbook. New York : Marcel Dekker, Inc. Γ.Σ.Ε.Ε.(2000), Θέσεις της Γ.Σ.Ε.Ε για την αγορά εργασίας, τις εργασιακές σχέσεις και την καταπολέμηση της ανεργίας, Ενημέρωση. Γεωργακοπούλου Β.- Κουζής Γ.(1996), Ευελιξίες και νέες εργασιακές σχέσεις: απόψεις εργοδοτών και συνδικάτων, η προοπτική του κοινωνικού διαλόγου, ΙΝΕ/ ΓΣΕΕ, Αθήνα. Caillez F., Pagés J.P (1976), Introduction á l Analyse des Données, SMASH, Paris. Επίσημη εφημερίδα ευρωπαϊκών κοινοτήτων C Συνθήκη για την Ε Ε. Επιτροπή Ευρωπαϊκών Κοινοτήτων (1997), Πράσινο Βιβλίο: Σύμπραξη για μια νέα οργάνωση της εργασίας, Βρυξέλλες, COM (97) 128, 16/4/1997. Επιτροπή Ευρωπαϊκών Κοινοτήτων (1994), Λευκή Βίβλος: Ανάπτυξη, Ανταγωνιστικότητα Απασχόληση: οι προκλήσεις και η αντιμετώπισή τους στον 21ο αιώνα, Υπηρ.Εκδ.Ε.Ε., Λουξεμβούργο. Commission Européenne (1994), Politique sociale européenne : une voie á suivre pour l Union, Livre Blanc, Com(94) 333,27/7/94. Επίσημη εφημερίδα, C Συνθήκη περί ιδρύσεως της Ευρωπαϊκής Κοινότητας. High Level Group chaired by Wim Kok (2004), Facing the challenge. The Lisbon strategy for growth and employment. Camiz S. (2005), The Guttman effect : its interpretation and new redressing method, Τετράδια Greenacre M.(1993), Correspondance Analysis in Practice, Academic Press, London. Malinvaud E. (1987), Data Analysis in applied socio-economic statistics with special consideration of Correspondence Analysis, Marketinf Science Conference Proceedindgs, HEC-ISA, Jouyen Josas. 103

113 Καραπιστόλης Δ. (2002), Το λογισμικό MAD, Τετράδια Ανάλυσης Δεδομένων Θεσσαλονίκη, τ.2, σ Κουζής (2001), Εργασιακές Σχέσεις και Ευρωπαϊκή Ενοποίηση, Ευελιξία και απορρύθμιση ή αναβάθμιση της εργασίας;, Μελέτες ΙΝΕ/ΓΣΕΕ, Αθήνα. Μάρκος Α., Μενεξές Γ., Παπαδημητρίου Γ. (2006). H Παραγοντική Ανάλυση των Αντιστοιχιών μέσω του Λογισμικού C.HI.C. Analysis, Πρακτικά, 19ου Πανελληνίου Συνεδρίου Στατιστικής, Ε.Σ.Ι.(υπό δημοσίευση). Μασούρα Ε., Μπαγιάτης Β.(2003), Ανεργία και δημόσιες δαπάνες για την απασχόληση στις 15 χώρες-μέλη της Ευρωπαϊκής Ένωσης, Πρακτικά 16ου Πανελλήνιου Συνεδρίου Στατιστικής, Καβάλα, σ Μασούρα Ε. (2005), Διαχρονική εξέλιξη ( ) πολιτικών των Εργασιακών Σχέσεων και της Κοινωνικής Ασφάλισης στην Ελλάδα με μεθόδους της Ανάλυσης - Δεδομένων, Διδακτορική Διατριβή, Πανεπιστήμιο Μακεδονίας. Νεγρεπόντη-Δελιβάνη Μ. (2005), Συνομωτική Παγκοσμιοποίηση, εκδ Παπαζήση Legislation of Labour Relations ( respective Laws ). Παπαδημητρίου Γ. (1994), Μέθοδοι Ανάλυσης Δεδομένων, έκδοση Πανεπιστημίου Μακεδονίας Παπαδημητρίου Γ. (2005), Πολυμεταβλητή Στατιστική Ανάλυση, Μέθοδοι Ανάλυσης Δεδομένων, έκδοση Πανεπιστημίου Μακεδονίας, Θεσσαλονίκη. Papadimitriou Y. - Hadjikontantinou G. (2000), Evolution diachronique de la position relative des 15 pays members de l' union europeene sous l' effort de la convergence, Vie et Sciences Economiques'', no 156, Paris. Thurow Lester (2006), Ο επερχόμενος οικονομικός πόλεμος μεταξύ Ιαπωνίας, Ευρώπης και Αμερικής, Νέα Σύνορα Web site: 104

114 Effects of EU Membership EU membership and transition: International business in Bulgaria Aristidis Bitzenis and Vasileios A. Vlachos 1 Abstract: This study delegates a survey concerning the motives of, and barriers to international investors in Bulgaria during its transition period ( ), with a special focus on the pre-accession period ( ), for the generation of six variables that characterise international business during the EU accession era: entry mode, target, host country barriers, barriers determined by the MNC, host country motives, and motives determined by the MNC. The research findings indicate that EU accession has a positive contribution to an emerging economy, at the same time as regional characteristics are appended to the FDI inflows of Bulgaria. Keywords: foreign direct investment; FDI; entry mode; Bulgaria; European Union accession. 1 Department of International and European Studies, University of Macedonia; Thessaloniki, Greece. 105

115 The Effects of FDI and Cross Border Acquisition Activities on Developing Markets: Turkey as the Case Study M. Cagri Pehlivanoglu Abstract: In past decades, world inward foreign direct investment (FDI) stock has grown rapidly. Despite the economic downturn in the early 2000s and the most recent one in the last quarter of 2008, FDI still continues to be important in the integration of global production activities. Multinational companies are using cross-border mergers and acquisitions (M&A) to access strategic assets and to strengthen their competitive advantages. This paper investigates the nature of FDI inflows into Turkey by examining the acquisition deals in the Turkish pharmaceutical market during the years and poses the question whether to invest in the industry. Keywords: FDI, Emerging markets, FDI in Turkey, Turkish pharmaceutical industry, Mergers and acquisitions Introduction Global foreign direct investment (FDI) flows have risen steadily over the past 30 years, despite some declines in the early 1980s, 1990s and 2000s. In 2008, global FDI flows were severely affected worldwide by the economic and financial crisis, and fell moderately. The decline of FDI was widespread, affecting all three major groups of economies: developed, developing and transitional. Developed economies were initially the most affected. According to the World Investment Report (UNCTAD, 2009a), the crisis has changed the FDI landscape: investments in developing and transition economies surged, increasing their share in global FDI flows to 43% in The decline has also spread to developing countries, however, and the inward investment in most fell in While FDI is the largest source of external financing for many developing countries, the decline brought many challenges. Over the past two decades, mergers and acquisitions have become more popular as companies look for higher returns and stronger positions in the global market. However, due to the current crisis, cross-border M&A have been on a continuous decline. As a mode of entry, cross-border mergers and acquisitions were the most affected, with a 66% decrease in 2009 as compared to 2008 (UNCTAD, 2009a). In the face of a global economic recession, falling corporate profits and uncertainties for global economic growth, many companies tend to reduce FDI. 106

116 Foreign Direct Investment The acquisition deals that took place in the Turkish pharmaceutical industry during the years are taken as a case study here, in hopes of lighting the way for prospective investors in this uncertain environment. The pharmaceutical industry of Turkey has seen significant mergers and acquisitions during the past 10 years. In 2002, there were 134 entities operating in the pharmaceutical market of Turkey. Of the 134 entities, 35 were foreign capital firms. Today, there are about 300 entities are operating in that market and 52 of them are foreign capital firms. Accordingly, acquisition activities in this very important sector are the focus of investigation. This paper has three goals: To examine the level of FDI in Turkey and the nature of FDI inflows into Turkey by analysing the acquisition deals in a specific industry: The Turkish pharmaceutical market from To investigate the origin of investors, asses the deal value of M&A from in the Turkish pharmaceutical industry and determine whether these investments are permanent. To determine whether the source countries of FDI inflows to Turkey between have been involved in a cross border M&A activity that totals more than 10 million US dollars in the Turkish pharmaceutical market during the same period. The paper is organised as follows: The next section reviews the literature on FDI and M&A, and subsequent sections discuss foreign direct investment, multinational enterprise, FDI in Turkey, and the Turkish pharmaceutical market respectively. Following these, the methodology and sample characteristics used in the study are presented. The paper ends with a discussion of the results and conclusions. Literature Review Although markets are becoming more globalised each day, new entrants to markets are simultaneously increasing competition levels and causing a decrease in profit levels. To gain access to foreign markets is an important part of a firm s strategy to obtain strategic competitiveness and long-term success (Bartlett & Ghoshal, 1998). Mergers and acquisitions help firms to close their resource gaps and improve their product mix (Dierickx & Cool, 1989). As Porter (1990) states, foreign acquisitions can serve two purposes: One is to gain access to a foreign market or to selective skills and the other is to gain access to a highly favourable national resource. Haspeslagh and Jemison (1991) note that the essential task in any acquisition is to create the value that becomes possible when the two organizations are combined, value that would not exist if the firms operated separately. Changes in the international operating environment have forced multinational corporations to optimise global efficiency, national responsiveness and worldwide learning simultaneously (Bartlett& Ghoshal, 1995). 107

117 In his article The Globalization of Markets, Levitt (1983) underlines the importance of two vectors that shape the world - technology and globalisation. The first one helps to determine human preferences and the second one, economic realities. To show the connection between these two vectors, Levitt states: Regardless of how much preferences evolve and diverge, they also gradually converge and form markets where economies of scale lead to reduction of costs and prices (Levitt, 1984). For Friedman (1999) the driving force behind globalisation is free-market capitalism: The more you let market forces rule and the more you open your economy to free trade and competition, the more efficient and flourishing your economy will be. By opening up, deregulating and privatizing its economy a country can attract foreign investment. Following Friedman, we turn to a discussion of the foreign direct investments in the world and the role of multinational enterprises in the next sections. Foreign Direct Investment FDI is a long-term investment by a foreign direct investor based in another country, in other words, FDI is the cross border transfer of capital. A 1996 report of the Organization for Economic Cooperation and Development stated, FDI represents the notion of one enterprise in a particular country having a degree of control over another enterprise in a different country, as opposed to just the provision of financial capital (OECD, 1996). More than just capital, FDI implies that managerial and technical knowledge is moving into a country from outside its borders (McFarlin & Sweeney, 2006). Over the last four decades, the number of Multinational Enterprises (MNE) and the level of FDI in global economy have rose spectacularly: world FDI inflows rise from $13 billion in 1970 to $1,492 billion by FDI flows in 2000 made up nearly $50 for every $1000 of GDP (Jones & Wren, 2006). In 2006, global foreign direct investment (FDI) inflows continued to grow for the third consecutive year and reached $1.306 trillion. The total increase was 34% over the previous year s (2005) figure. The continuing rise of FDI was the result of high economic growth and strong economic performance in many parts of the world (including both developed and developing countries). FDI performance has varied among regions and countries. FDI flows to developed countries in 2006 rose by 48%, and reached $800 billion. For Japan, however, divestment levels increased, and negative inflows appeared for the first time since 1989 (UNCTAD, 2007). Developed countries remained the leading source of FDI, accounting for 84 percent of global outflows (UNCTAD, 2008). Among developing economies, the largest recipients have traditionally been Hong Kong (China) and Singapore. Turkey ranks fourth. The growth of FDI occurred in all regions and was partly driven by increasing corporate profits worldwide that resulted in higher stock prices, which raised the value of cross-border mergers and acquisitions (UNCTAD, 2008). In 2008, developed countries accounted for 81% of the total world FDI flows. Within the developed world, the 108

118 Foreign Direct Investment European Union and North America account for the greater part of the FDI inflows. M&A activity is seen as the chief determinant of FDI inflows in countries such as the United Kingdom, Germany, France and the United States. The upward flow in FDI in recent decades is seen by many to be part of a wider and growing phenomenon known as globalisation (UNCTAD, 2004). The Multinational Enterprise FDI is an activity carried out by firms classified as multinational enterprises. A multinational corporation is a firm that controls and organises production using plants in at least two countries (Caves, 1996). McFarlin and Sweeney (2006) define multinationals as large, well-developed international firms that operate facilities to produce products or deliver services in a variety of overseas locations and have considerable resources invested abroad. Jones and Wren (2006) argue that many authors treat foreign direct investment and multinational enterprises as one and the same thing, and they suggest that for the study of FDI, the multinational enterprise can be seen as a vessel for FDI. Looking at some statistical data helps in understanding the importance of multinationals in the world economy. The number of multinationals around the world has increased over 800 percent in the last three decades. More than 50 of the 100 biggest economies are multinationals. The world s 1000 biggest multinationals are responsible for about 80 percent of industrial production worldwide. Today, there are an estimated 78,000 transnational corporations in the world, with more than 780,000 foreign affiliates (UNCTAD, 2008). The World Investment Report (UNCTAD, 2004) states that the share of total cross border M&A activity in world FDI flows rose from 52 to 82 per cent between 1987 to Further, over the same period, the value of M&A activity increased from 100 billion in 1987 to over 1000 billion dollars in Since 2000, there has been a sharp fall in mergers and acquisitions, (with the 2003 level standing at 300 billion) which in turn impacts on the overall volume of world FDI. The countries with the largest cross border M&A activity in 2004 were those that have the largest FDI flows: the US, UK, Germany and France (UNCTAD, 2004). In 2008, the total value share of M&A in world FDI was 89.3%. The same ratio was 51.8% in Turkey (Republic of Turkey Prime Ministry Undersecretariat of Prime Ministry, 2009). Today, most of the large multinational companies do business around the world. They reduce their risk by increasing their degree of international business. A firm enters an overseas market because it believes that it will be profitable. The motivation is not only the attractiveness of overseas markets but also the idea that the firm can establish a competitive advantage (Porter, 1980) compared to local producers and other multinational corporations. Multinational companies have traditionally been interested in overseas production for two main reasons: to access raw materials and cheap labour, and to provide local production to overseas markets (McFarlin & Sweeney, 2006). A multinational company may initiate foreign 109

119 direct investment by either establishing a new subsidiary or purchasing an existing company in that country. Multinational corporations may increase their degree of international business aiming to do one or more of the following: Attract new sources of demand, enter markets where superior profits are possible, fully benefit from economies of scale, use foreign factors of production, use foreign raw materials, use foreign technology, exploit monopolistic advantages, diversify internationally, react to a foreign currency s changing value, react to trade restrictions, benefit politically (Madura, 1992). Because multinational companies operate in several markets, they have a key strategic advantage over their local competitors. They can cut prices and drive competitors out of the business. Foreign Direct Investment in Turkey Turkey has a population of more than 70 million, and the country has a huge domestic market. It is one of the largest emerging markets worldwide (and the 15th largest economy in the world) and has a large and dynamic market with a relatively high-quality labour force. Turkey has economic advantages and a good location with easy access to regional markets. It is an advantageous and attractive country for global investors but despite these advantages, the country has received less than the expected amount of FDI inflow. Table 1: Global FDI Inflows Source: UNCTAD (2007), UNCTAD (2009), Author s Calculations 110

120 Foreign Direct Investment Foreign capital investments in Turkey began in the 1950s. Between 1950 and 1979, the total amount of foreign investment was $228 million. In 1998, the FDI level was $1.2 billion. It was $1.1 billion in 2002 and $1.7 billion in 2003 (Table 2). FDI inflows over the period indicate that the level of FDI inflow into Turkey is too low relative to FDI flows to developing countries with similar levels of GDP per capita. Until 2001, foreign-owned firms had been subject to special authorisations and industrial limitations, and the government this cited these restrictions as the major cause of the lack of flows. In 2003, new commercial and employment laws for foreigners were adopted by the parliament. With the new laws, a company in almost any sector of the economy can be 100 per cent foreign owned in Turkey. FDI inflows by host region and major host economy between 2004 and 2009 can be found in the table above. Turkey received $2.8 billion of inflow in 2004, and $9.7 billion in Turkey continued to improve its macroeconomic fundamentals in 2006, and FDI grew to $20.1 billion (UNCTAD 2007), achieving uninterrupted growth for a fifth consecutive year. This can be explained by the improving economic conditions in Turkey, which had a more stable economy than had been the case in Particularly after the economic crisis in 2001, the Turkish government applied safer policies for investors and made legal improvements for some specific sectors (such as banking). The upward trend continued in 2007 when FDI reached $22 billion (UNCTAD, 2009b). In 2008, inflows declined by 17% to $18.2 billion (UNCTAD, 2009b; Table 1). In the first six months of 2009, the FDI level in Turkey was $4.2 billion. 57% decrease compared to the same period of Turkish M&A activity also stalled in Privatisations made up 31% of the deal volume ($1.8 billion) an effect of global financial crisis and M&A activity shrank to its lowest level since Table 2 Source: YASED (2009b), UNCTAD (2009b) As noted, FDI inflows to Turkey had reached to a level of $20 billion in 2006 and 2007 (Table 1). In 2008, it dropped in line with global decline to $18 billion in According to the UNCTAD World Investment Report 2009, Turkey had ranked 20th in 2008 among the top countries attracting FDI. In 2008, Turkey s share of the developing countries total (

121 countries) was 2.9%, whereas its share of the world total was 1.1%. In 2009, the decline in FDI continued with the global downward trend (Table 2). The EU accounts for 67% of the foreign capital companies operating in Turkey. The main investing countries are the Netherlands, Germany, the United Kingdom and the United States (TUSIAD, 2006). The EU is the largest investor in Turkey. After the European Union, US investors have the largest interest in Turkey. The stock of U.S. foreign direct investment in Turkey in 2004 was $2.2 billion, up from $2.0 billion in The stock of U.S. foreign direct investment in Turkey in 2005 was $2.4 billion. U.S. investment in Turkey is mainly in the banking, wholesale, and manufacturing sectors (Foreign Trade Barriers, 2006, page: 589). The Turkish Pharmaceutical Market The Turkish pharmaceutical industry is one of the few industrial sectors in which the government exercises strict control over prices, with the prices being determined by the Ministry of Health. During the recent years several regulations have been put into force to harmonise the Turkish pharmaceutical industry with the EU. Some of the foreign companies operating in the market include: Pfizer, AstraZeneca, Novartis, Novo Nordisk, Abbott, Bristol- Myers-Squibb, Roche, Bayer, Sanofi-Aventis, Boehringer Ingelheim, Wyeth, Janssen-Cilag, Schering Plough, and GlaxoSmithKline. The multinational companies with manufacturing facilities in Turkey are Baxter, Bayer, GlaxoSmithKline, Novartis, Pfizer and Sanofi-Aventis. During 1950s fabricated drug production started in Turkey and from 1950 to the 1970s, foreign-based firms began to establish their own facilities. From 1984 on, foreign investments in the industry increased. Between 1970 and 1999, the industry grew at an annual average rate of 10.2% in terms of consumption. In 2002, there were 134 entities operating in the industry, and only two were publicly owned. Out of these 134, 35 were foreign capital firms, and eight had their own production facilities. The domestic firms accounted for 47% of the total sales. In 2005, there were 203 firms operating in the market. The market was valued around $4.5 billion at the point of sale. In 2006 there were 300 entities, and 52 were foreignowned companies (11 with manufacturing facilities). According to the data supplied by the Pharmaceutical Manufacturer s Association of Turkey the market has reached TL 11 billion, and the growth rate of the market is 17 per cent by value and 10 percent by volume in In 2007, pharmaceutical industry imports were $4.1 billion and the exports were $413 million. Pharmaceutical consumption per capita was USD 126 in 2007 (IEIS, 2009). In 2009, the industry generated revenues of US$ 11.5 billion. Turkey ranks as the 16th largest pharmaceutical manufacturer worldwide and the 6th largest pharmaceutical market in Europe after Germany, France, the UK, Italy and Spain (ISPAT, 2010). As a result of concentration in the sector, the top-10 drug producers accounted for about 50% of the market share. The top-20 contributed about 70%. There were only two local companies in the top-10. The Turkish prescribed pharmaceutical market reached 6.54 billion 112

122 Foreign Direct Investment Euros and 1.42 billion units by volume in 2009 (IEIS, 2009). The growth rate of the market is 3.1% and 3.9% by volume. In 2009, there are 7,413 pharmaceutical products available in the market (IEIS, 2009). Despite the uncertain economic conditions, Russia, Turkey, South Korea and Mexico are expected in aggregate to grow by percent over the next five years. IMS (2009) predicts global pharmaceutical market growth of 4-7% through According to the Turkish healthcare industry report of the Republic of Turkey Prime Ministry (ISPAT, 2010), the Turkish healthcare sector (mainly the pharmaceuticals market) may go through a consolidation stage involving multinationals in the next five years with the recovery of the economy. The Government s drug pricing and reimbursement policy could lead to low profit margins for companies and at the same time, this may spark a number of acquisitions. The Turkish market s high growth potential might attract foreign capital inflows, and this might lead to the expansion of healthcare and specifically the pharmaceutical industry. According to the 9th Development Plan of the Turkish Republic (DTP, 2009), autonomous institutionalisation is needed to solve some of the problems of the pharmaceutical industry. Methodology and Sample Characteristics The sample of interest for this study was the Turkish pharmaceutical companies that were involved in acquisitions over the period The pharmaceutical industry was chosen because it is a global industry and one of the largest manufacturing sectors in Europe. The research population of interest was obtained from primary and secondary sources. Qualitative data were collected through interviews between years 2006 and Semi structured interviews with companies formed the data set. There were 25 respondents from fifteen different firms. Secondary sources such as the official web sites of pharmaceutical companies, company reports (for the ones that are listed on stock exchange), industry reports, announced financial statements, and personal contact were also used. The entire sample was compiled by the author and all of the calculations belong to the author. The names of companies that are in the sample will not be announced. As a result of the interview and research findings, data analysis was done according to the categorisation of investors (homeland and foreign companies), merger and acquisition deals in , and deal value and deal year categorization. After conducting a literature review on areas such as FDI, MNE and the Turkish industry, the statistical findings from the Turkish pharmaceutical industry were combined with the interviews and literature research to obtain the results. A deductive approach is used. Because the sample size is small (12 acquisition deals), the number of sampled companies in the study may seem not be enough for a comprehensive conclusion over all sectors of Turkey. Different samples might indeed produce different results. However, looking at the number of foreign capital firms operating in the Turkish pharmaceutical industry might 113

123 give an idea regarding the confidence of the sample for the pharmaceutical industry of Turkey. In 2002, there were 35 foreign capital firms, and in 2006, there were only 52 in the industry. 12 out of 52 means that 20 per cent of the foreign companies operating in the industry were involved in an acquisition deal between 2001 and 2009, taking the number of companies in 2006 as a reference. The research found 12 acquisition deals that took place between 2001 and The investigation was made only through the individual research efforts of the author, and all of the calculations for the sample belong to the author as well. Characteristics of the sample The characteristics of the sample are summarised in Tables I, II and III. Table I shows the various countries involved and the number of samples. The table indicates that about 25 percent of the buyer companies are from the US. This is followed by Italy and the Netherlands having 17 per cent each and the remainder (Switzerland, Czech Republic, Iceland, France and the UK) with 8 per cent each. Table II shows the values for deals in millions of dollars. With regard to size, about 33 per cent has a deal value of $50-$100 million, 25 per cent $10-$50 million, 17 per cent $5-$10 million, 8 per cent $100-$150 million, 8 per cent $150-$500 and 8 per cent million $500-$1000 million. Table III shows the years of acquisitions, and the distribution is as follows: 33 per cent in 2006, 25 per cent in 2007, 17 per cent each in 2001 and 2004 and 8 per cent in Table I Country of origin (Investors) No % US 3 25% Italy 2 17% Netherlands 2 17% Switzerland 1 8% Czech Republic 1 8% Iceland 1 8% France 1 8% UK 1 8% Total % Source: Author s Calculations Table II Year of M&A No % % % % % % Total % Source: Author s Calculations 114

124 Foreign Direct Investment Table III Deal value in $ million No % 5-10$ 2 17% 10-50$ 3 25% $ 4 33% $ 1 8% $ 1 8% $ 1 8% Total % Source: Author s Calculations As noted in the literature review, the EU accounts for 67% of foreign capital companies operating in Turkey. The main countries investing in Turkey are the Netherlands, Germany, the United Kingdom and the United States. Between 2001 and 2009, US investors were clearly are interested in the Turkish pharmaceutical industry; they are the biggest investors. The second biggest investors are the EU countries. Categorising the investor countries might give a more clear understanding of the investment levels of the EU, the US and the rest. See the table included below: Table IV INVESTORS % EU (Italy, Netherlands, Czech Republic, France, UK) 59% US 25% The Rest (Iceland-Switzerland) 16% Source: Author s Calculations Here, one can see that the EU is the largest investor with 59%. In previous paragraphs, it has been discussed that the EU accounts for 67% of foreign capital companies operating in Turkey (overall). The table suggest that the investment situation is also similar in the Turkish pharmaceutical industry (59%). As the biggest investors (the EU and US) in all industries of Turkey, the EU combined with the US accounts for 84% of the total foreign investment in the Turkish pharmaceutical industry. The 84% means that the majority of investors come from the US and the EU countries. In this section (and in the tables below), FDI inflows to Turkey and to the Turkish pharmaceutical industry between 2004 and 2008 are examined. The period is chosen because the FDI flows to Turkey peaked during this period. The aim is to determine whether or not the source countries for FDI Inflows to Turkey ( ) have involved in a cross border M&A activity valued above 10 million US dollars in the Turkish pharmaceutical market during the same period. 115

125 Table V Table VI Source: Author s Calculations Table VII Country of origin (Investors) No % US 2 20% Netherlands 2 20% Italy 1 10% Switzerland 1 10% Czech Republic 1 10% Iceland 1 10% France 1 10% UK 1 10% Total % Source: Author s Calculations 116

126 Foreign Direct Investment Table VIII Deal value in $ million No % 10-50$ 5 50% $ 2 20% $ 1 10% $ 1 10% $ 1 10% Total % Source: Author s Calculations Table IX Year of M&A No % % % % % % Total % Source: Author s Calculations Table X (Comparison of Tables V and VI) INVESTORS All Sectors % Pharmaceutical Industry % EU 62% 60% US 10% 20% Other 28% 20% Source: Author s Calculations Table XI (A summary of Table VII) INVESTORS % EU (Italy, Netherlands, Czech Republic, France, UK) 62% US 10% Others (Iceland-Switzerland) 28% Source: Author s Calculations In table V, source countries for FDI inflows to Turkey between 2004 and 2008 may be found. This period was chosen for investigation because the FDI inflows to Turkey started to show substantial increases after 2004 (Table 2). Looking at Table V, one can see that the US and the EU countries are the source of FDI inflows in to Turkey, which agrees with the assessment of prior sections. In table VI, the source countries for M&A in the Turkish pharmaceutical market above 10 million USD between years 2004 and 2008 may be observed. Here, the aim is to compare the source countries of FDI to all markets of Turkey with the source countries of investors in the Turkish pharmaceutical industry. An investment level of 10 million USD is chosen because the interviews suggested that deals above 10 million 117

127 USD are noticeable and that new successful firms are formed above this amount of investment. Table VI is broken down into sections to create different categorisations, and these appear in the tables VII, VIII and IX. Table VII shows the various countries involved in M&A deals above 10 million USD and the number of samples. The table indicates that about 20 per cent of the buyer companies are from the US and the Netherlands. These are followed by the other European countries with 10 per cent of shares each. Table VII shows the values for deals in million dollars. With regard to size, the majority (which is about 50 per cent) has a deal value of $10-$50 million. Table VIII shows the years of acquisitions, and the distribution is as follows: 2006 has the most with 40 per cent, 30 per cent been in 2007, 20 per cent each in 2004 and 2005; and 10 per cent in A more detailed breakdown of investors can be found in table XI. Here, we see that the EU makes up 62 per cent of the FDI flows to Turkey above 10 million US dollars between 2004 and The US has a 10% share of it, and the others account for 28%. In table X, a comparison of Tables V and VI is made. Between years 2004 and 2008, the European Union had 62% of FDI inflows in the overall Turkish market, whereas it accounted for 60% of FDI inflows to the Turkish pharmaceutical industry over the same period. The US investors composed 10% of total FDI inflows to the Turkish market ( ) where it composed 20% of FDI inflows to the Turkish pharmaceutical industry. The rest of the countries had a share of 28% of the FDI to Turkey ( ), where they composed 20% of the FDI coming to the Turkish pharmaceutical industry. From this table, it can be concluded that the foreign direct investment trend to the Turkish pharmaceutical market follows a similar pattern and distribution to that of the overall Turkish market. Results The number of partnerships, joint ventures and mergers and acquisitions in the industry increases every year. In 2006, 14 out of the top 20 companies were involved in foreign investment. As the result of concentration in the industry, multinational dominance is seen. However, there are also some successful Turkish companies that continue to grow. The interviews indicate that increasing competition within the market has increased various concerns for large local companies in that market and that the changing balances have brought about new strategic alliances and partnerships deals. 1. The research sample shows that the majority of M&A deals ( ) have been successful. Only one of the companies sold to another multinational and changed owner again /12 of the marriages have lasted (deals over 5M USD). The only marriage that failed was because of a global M&A deal that a foreign company made. 118

128 Foreign Direct Investment 3. Some of the source countries for FDI inflows to Turkey ( ) have been involved in M&A activities that are above 10 million USD in the Turkish Pharmaceutical market. These countries are: the USA, the UK, the Netherlands and France. 4. The analyses indicate that foreign companies should not hesitate to invest in the market. Conclusion In this study, the change in the structure of the Turkish pharmaceutical industry through acquisitions is examined. The periods was taken as the sample, and 12 important acquisition deals were found in the sector. The Turkish economy has been receiving notably low levels of foreign investment with respect to its economic potential. Investigating the flows of FDI to the economy suggest that more foreign investment is expected to come to Turkey. The results also forecast that the acquisition deals in the Turkish pharmaceutical industry will continue at an increasing rate while the Turkish market continues its growth. In today s highly competitive environment, enterprises of all sizes in the pharmaceutical industry are changing their strategies towards growth. The companies try to follow and adapt to the rapid changes in the economic and technological environment. The sample companies were trying to grow and expand their assets through acquisitions. They were also increasing their sales and market shares and improving their technological competences and product portfolio by creating new market opportunities. Acquisitions represent a strategic choice that pharmaceuticals follow to grow. In the Turkish pharmaceutical industry, foreign investments were generally realised as the acquisition of local firms rather than investment in new ones. Globalisation has become a key theme in every discussion of international strategy (Douglas & Wind, 1987). Carnoy and Castells (1999) point out that globalisation has precipitated the decline of the nation state if the nation-state fails to redefine itself to meet the new conditions it faces in the global environment. This study recommends that firms react carefully and adapt to the changes in new conditions; so as nation-states. A sign of the globalisation of business is the existence of multinational corporations (MNCs) that operate all over the world. Many of these multinationals are from developed economies. They tend to operate in the emerging markets to take advantage of the market potential of these countries. It is also important to mention that a small number of source economies are responsible for a large share of world FDI outflows, and companies see the need to explore investment opportunities abroad to defend or build a competitive position (UNCTAD, 2006). To benefit more from FDI, the Turkish government has been trying to improve investment conditions (as has been noted). According to the World Investment Report 119

129 (UNCTAD, 2009b), cross-border M&As have been on a continuous decline, but they are likely to lead the future recovery. References Barlett, C.A. and Goshal, S. (1995) Transnational Management: Text, Cases, and Readings in Cross Border Management, Second Edition, R.D. Irwin Inc., New York Bartlett, C., & Ghoshal, S. (1998), Managing across borders (2nd ed.), Boston, MA: Harvard Business School Press. Carnoy, M. and M. Castells (1999), Globalization, the knowledge society, and the network state: Poulantzas at the millennium, International Conference on Nicos Poulantzas, Athens. Caves, R.E. (1996), Multinational Enterprise and Economic Analysis, 2nd Edition, Cambridge, Cambridge University Press. Central Bank of Turkey (2006), Available at: [Accessed 13th February 2007]. Dierickx, I., & Cool, K. (1989). Asset stock accumulation and sustainability of competitive advantage. Management Science, 35(12): De Wit and Meyer (2004), Strategy: Process, Content, Context, Third Edition, London, Thomson Learning Dean McFarlin and Paul Sweeney (2006), International Management (Strategic Opportunities and Cultural Challenges), USA, Houghton Mifflin Company Douglas S.P., and Wind Y. (1987), The Myth of Globalization, Columbia Journal of World Business, 22: DPT (2009), Republic of Turkey 2009 Annual Programme, Turkish Republic Prime Ministry Undersecratariat of State Planning Organization, Ninth Development Plan Friedman T.L. (1999), The Lexus and the Olive Tree: Understanding Globalization, New York, First Anchor Books Addition Foreign Trade Barriers (2006), Turkey Trade Summary, pp: 589, , The Republic of Turkey Prime Ministry, Ankara Grant Robert M. (2005), Contemporary Strategy Analysis, 5th edition, Blackwell Publishing, Oxford, UK Haspeslagh P, Jamison D. (1991) Managing Acquisitions: Creating Value Through Corporate Renewal, Free Press, New York. IEIS (2009), Pharmaceutical Manufacturer s Association of Turkey, 2009, IMS (2009), Press Room, IMS Forecasts Global Pharmaceutical Market Growth of 4-6% in 2010; Predicts 4-7% Expansion Through 2013, imshealth/menuitem.a46c6d4df3db4b3d88f c22a/?vgnextoid=500e8fabedf24210v gnvcm100000ed152ca2rcrd ISPAT (2010), Republic of Turkey Prime Ministry, Investment Support and Promotion agency of Turkey, Turkish healthcare industry report, Jan Related Reports. Jeff Madura (1992), International Financial Management, Third Edition, St. Paul, USA, West Publishing Company Jonathan Jones and Colin Wren (2006), Foreign Direct Investment and the Regional Economy, Burlington, USA, Ashgate Publishing Company, Levitt T. (1983), The Globalization of Markets, Harvard Business Review, 61(3):

130 Foreign Direct Investment OECD (1991), Technology and Productivity: The Challenge for Economic Policy, the Organization for Economic Co-operation and Development, pp , Paris OECD (1996), Globalization of Industry: Overview and Sector Reports, Paris, OECD. Porter, M.E. (1990) The Competitive Advantage of Nations, MacMillan, London Porter M.E. (1980), Competitive Strategy: Techniques for Analyzing Industries and Competitors, New York, Free Press. Republic of Turkey Prime Ministry Undersecretariat of Prime Ministry (2009), Uluslararası Doğrudan Yatırımlar 2008 Yılı Raporu, Yabancı Sermaye Genel Müdürlüğü (General Directorate of Foreign Investment) UNCTAD. (2006). World investment report 2006: FDI from Developing and Transition Economies- Implications for Development. New York and Geneva: UNCTAD. UNCTAD (2007), The World Investment Report 2006, United Nations Conference on Trade and Development, Division on Investment, Technology and Enterprise Development, No: E. 06.II.D.11, Geneva, United Nations Publications UNCTAD (2007), Foreign Direct Investment Surged Again in 2006, Division on Investment, Technology and Enterprise Development, Unctad Investment Brief, Number 1, United Nations Publications UNCTAD (2002), FDI Policies for Development, World Investment Report, Geneva Available at: [Accessed 19th April 2007]. UNCTAD (2004), World Investment Report, Available at: [Accessed 7th March 2007]. UNCTAD (2008), Development and Globalization: Fact and Figures, United Nations publication, Geneva, GE April ,290. UNCTAD (2009a), Global Investment Trends Monitor, Global and Regional Trends in 2009 No:2, Geneva 19 Jan 2010 UNCTAD (2009b), World Investment Report 2009: Transnational Corporations, Agricultural Production and Development Sales No. E.09.II.D.15, New York and Geneva TAIK (2007), Turkey Brief: Turkish-US Relations, Turkish-US Business Council, March 2007, pp Togan S. (2005), Turkey: Trade Policy Review, The World Economy, 28 (9): TUSIAD (2006), Investment Environment and Foreign Direct Investments in Turkey, Working Paper Prepared for Investors Advisory Council Meeting 15 March 2004, Istanbul, pp.1-50 YASED International Investors Association of Turkey (2009), Investment Environment in Turkey, September 2009 pp YASED International Investors Association of Turkey (2009b), UNCTAD World Investment Report 2009 Presentation, 17 September 2009, Istanbul webportal/ Turkish/ haberler/basin_bultenleri/documents/unctad2009-tr pdf 121

131 What kind of theory for FDI in Bulgaria? Christina Sakali 1 Summary The theory of FDI determinants has seen a proliferation since the 1960s, which continues until today. Since then various theoretical approaches emerged, following the changing pattern of investments over time. Indeed the first theories emerged in a very different investment environment and were driven by the predominance of the American multinationals in outward FDI. As a consequence they were preoccupied by the multinational corporation per se and were microeconomic in nature. As the number of countries engaging in FDI (both inward and outward) increased, the theory moved along, to incorporate macroeconomic and dynamic aspects of the investors motivations. Moreover attention has been directed towards countries attracting inward FDI, as locations that possess characteristics favorable to investors. In the 1990s, the fall of the Soviet Union and the opening up of Central and Eastern European countries, as well as their transition to market economies, has created a favorable area for the international expansion of multinational corporations and the rise of FDI in these economies. As a response to these developments, a significant part of empirical research has been directed towards Central and Eastern Europe, in an effort to investigate FDI determinants and motivations in that area. Most of this research studied FDI determinants in groups of countries, with some research focusing on individual countries. This paper s objective is to explore the kind of FDI theory that should apply to the case of Bulgaria, following the empirical research that has been conducted in the country, as well as FDI trends and patterns in Bulgaria from the beginning of the transition until today. The paper will therefore be structured as follows: In part one there will be a brief review of the most important parts of FDI theory since the 1960s. Part two will explore the most important phases of Bulgarian transition as well as FDI patterns in Bulgaria during those phases. In part three a synopsis of the empirical research concerning FDI determinants in Bulgaria will be undertaken, in an attempt to draw out the motivations that have driven FDI in Bulgaria. Part four will present the main conclusions. Some general remarks that can be drawn from the analysis are briefly summarized in the following points: 1 Department of International and European Studies, University of Macedonia; Thessaloniki, Greece. 122

132 Foreign Direct Investment The theory of FDI in Bulgaria should be dynamic because transition countries, and especially Bulgaria, have undergone a process of vast transformation during the last twenty years of transition. Location and transition characteristics seem to be particularly important, as the whole area became attractive to FDI during transition. However varying levels of FDI among countries indicate that each country presents a unique set of advantages, as well as obstacles to investors, which does not remain fixed, but changes over time, along with changes in the levels and types of FDI. Indeed, in the first years of transition FDI was almost non-existent in Bulgaria as the obstacles to investors seemed to outweigh the opportunities. However over time, and as the transition reforms progressed, some of the location challenges were turned into location advantages that contributed to the attraction of significant amounts of FDI, especially in the last few years before the global economic crisis struck. 123

133 A stochastic frontier analysis of foreign direct investment and growth Ilker Arslan & Ayla Ogus Binatli 1 Summary Relationship between foreign direct investment (FDI) and growth is a matter of concern in both theoretical and empirical studies. Although the literature about this subject is vast, there is a controversy among studies about whether a significant relationship exists. Among studies that advocate there is a relationship between them there exist another disagreement about the direction of the relationship, i.e. whether FDI triggers growth or growth triggers FDI. According to the majority of studies, there is a positive relationship between them and FDI triggers growth if the host country has some properties. De Mello (1997) for example concludes that the impact of FDI on growth depends on degree of non-rivalry and nonexcludability of the innovations transferred by FDI, intellectual property legislation, the amount of learning-by-doing, and the value added content of FDI-related production in the host country. Borenzstein et. al. (1998) in their leading and a very influential paper suggest that FDI has a positive impact on growth because by the help of FDI, technology is transferred to developing countries. The study adds also that the effect of FDI depends on human capital of the host country. De Mello (1999) also concludes in the same way. Blonigen (2005) provides a very good review of the literature and concludes that FDI leads to increased economic growth. Wijeweera et. al.(2010) also suggests that FDI effects growth positively if host country has highly skilled labor. On the other hand the study concludes that, in order for FDI to increase economic growth, the prerequisites are a high level of openness in foreign trade and a low level of corruption. Lensink et. al. (2001) highlight the importance of the volatility of FDI and find that although FDI has a positive impact on growth, volatility of FDI negatively effects growth. In this paper, we study the relationship between FDI and growth using the panel data of 140 countries over the period of We use the stochastic frontier production function a la Battese and Coelli (1993, 1995) as in equation (1) below Y it = f(x it, a)e ε it (1) where Yit is the output of country i in year t. Xit is the matrix of explanatory variables, a is the 1 Department of Economics, Izmir University of Economics, Turkey. 124

134 Foreign Direct Investment vector of parameters to be estimated and eit is the error term. This error term is composed of two two independent variables Vit and Uit and eit = Vit - Uit. Vit s are iid random variables that represent random variations in output. We assume that they are normally distributed with mean 0 and variance σν 2. Again, following Battese and Coelli (1993, 1995), we assume that Uit is the random variable representing stochastic shortfall of outputs from the most efficient production. They are assumed to be distributed by the truncation of the normal distribution with mean, and variance σ 2. Here, Zjit is assumed to be the value of the j th explanatory variable related with the technical inefficiency of effect of country i, in year t. δ0 and δj are unknown parameters and will be estimated. After that we have to choose production function. We will use both the most popular production function Cobb-Douglas and the translog function of Christiensen, Jorgensen & Lau (1973). where t and t 2 are linear and quadratic time trends. Finally the dependent variable in the model is the GDP in terms of millions of USD. There are two types of independent variables. Those are factor inputs and inefficiency variables. Factor input variables are labour, capital, human capital and infrastructure. Wijeweera et al. (2010) uses percentage of government spending on education but we will try some other proxies such as number of scientific papers in the country or percentage of graduates from university to the population. Again, Wijeweera et al. (2010) takes telephone main lines per 1000 people as proxy for infrastructure but we will take length of highways also into consideration. For the inefficiency model we take variables as corruption and openness of foreign trade. For corruption we will use Corruption Perception Index (CPI) of Transparency International. While Wijeweera et al. (2010) uses sum of imports and exports as proxy for openness we will normalize it by dividing to total GDP of the economy. References Aigner, D., Lovell, C.A.K. and Schmidt, P. (1977), Formulation and Estimation of Stochastic Frontier Production Function Models, Journal of Econometrics (6), pp Battese, G.E. and Coelli, T.J. (1988), Prediction of Firm-Level Technical Efficiencies with a Generalised Frontier Production Function and Panel Data, Journal ofeconometrics (38), pp Battese, G.E. and Coelli, T.J. (1993), A Stochastic Frontier Production Function Incorporating a Model for Technical Inefficiency Effects', Working Papers in Econometrics and Applied Statistics No. 69, Department of Econometrics, University of New England, Armidale. 125

135 Battese, G.E. and Coelli, T.J. (1995), A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data', EmpiricalEconomics (20), pp Blonigen, B., (2005), A Review of the Empirical Literature on FDI Determinants, Atlantic Economic Journal (33), pp Borensztein, E., De Gregorio, J. and Lee, J.-W. (1998), How does foreign direct investment affect economic growth?. Journal of International Economics (45), pp Christensen, L, Jorgenson, D., and Lau, L. (1973), Transcendental Logarithmic Production Frontiers, The Review of Economics and Statistics (55), February, pp Coelli, T.J. (1996), A Guide to FRONTIER Version 4.1: A Computer Program for Stochastic Frontier Production and Cost Function Estimation, CEPA Working Fapers No. 7/96, Department of Econometrics, University of New England, Armidale. De Mello, L.R. (1997), Foreign direct Investment in Developing Countries and Growth: A Selective Survey, The Journal of Development Studies (34), pp De Mello, L.R. (1999), Foreign direct investment-led growth: evidence from time series and panel data, Oxford Economic Paper, (51), pp Jondrow, J., Lovell, C.A.K., Materov, I.S. and Schmidt, P. (1982), On the Estimation of Technical Inefficiency in the Stochastic Frontier Production Function Model, Journal of Econometrics (19), pp Lensink, R., Morrissey O., (2001), Foreign Direct Investment: Flows, Volatility and Growth, Review of International Economics (14), pp Nourzad, F. (2008) 'Openness and the Efficiency of FDI: A Panel Stochastic Production Frontier Study', International Advances in Economic Research, (14), pp Wijeweera, A., Villano, R., Dolllery, B., (2010), Economic Growth and FDI Inflows: A Stochastic Frontier Analysis, Journal of Developing Areas (43), pp

136 Foreign Direct Investment Foreign direct investments in western Balkans: The case of Albania Lindita Rova, Kristaq Çombi & Daniela Qiqi 1 Summary Albania, Bosnia and Herzegovina, Croatia, Macedonia, Kosovo and Serbia and Montenegro are known as the Western Balkan. This term is often explained as Yugoslavia minus Slovenia plus Albania and has been used for the first time in the beginning of 1990 s. The lack of cooperation with the rest of Europe, the slow reform process toward democratization of their society and the similar problems this post communist countries face give to Western Balkan the name the black hole of Europe (referring to a political and economic context). FDI plays major role in the western Balkan economies. As far as privatization process has almost finished and there are less state owned companies, Western Balkan governments are facing to run budget deficits that are not sustainable on a midterm. Attracting FDI is top priority to all Western Balkan countries not only to finance their budgets, but moreover to improve their economic development and standard of living. Good geographic position, free market access to EU, closeness to Mediterranean countries and relatively good infrastructure makes Western Balkan countries attractive for FDI. High inflow of FDI can increase efficiency of the production and introduce new products on the markets. Experience has shown that foreign direct investment has had a major impact on the economic growth of a country. Some of these benefits are: a) increase in competitive potential between domestic production enterprises. b) the entrance of advanced technology c) progress in knowledge of various fields of production resulting from contacts with foreign customers d) possibilities for the optimal utilization of human resources and help to increase their professional skills etc. The aim of this paper is to study and compare the FDI level during the last years in the Western Balkan countries, studying specifically the case of Albania. Stronger economic cooperation among Western Balkan countries would uphold stability in the region, increase trade volume and promote the region as a good and safe place to invest. 1 Economics Department, University of Gjirokastra, Albania. 127

137 Innovation and competitiveness of Asian companies in facing globalization Theresia Gunawan 1 Abstract: Small and Medium Enterprises (SMEs) manufacturing in Asian countries such as Japan, China, Korea, and Taiwan are stronger than in India, Indonesia, Malaysia, and Thailand. Each of these countries has different stages in facing globalization. Moreover, the contribution of these Asian countries in global trading system have been growing from about 10 percent in the 1970s to more than 25 percent in 2006, this overtaking the North American Free Trade share of about 20 percent (though still lagging from the European Union s share) (Unescap, 2009). In facing globalization, most of these countries use strategies such as acquisitions, mergers, joint ventures, and alliances thus combine them with cheaper human resources and raw materials from their local area. Some Asian countries have been increasing their R&D activities and now they have enjoyed the profit and market share because of being pioneer in the market. At this moment, more than 50 percent of economic growth comes from innovation in technology which results in increased productivity, new products, and processes in the industry (Grossman, 1991). Therefore, it is not surprise that industrialized countries spend an enormous amount of money on research and development (R&D) to promote innovation activities. Japan, US, and Western Europe alone account for about two thirds of worldwide R&D expenditure (Freeman and Hagedoorn, 1994). Therefore, learning from their success experiences, Asian SMEs can also improve their competitiveness through innovation. The Role of SMEs in Asian Countries Small Medium Enterprises (SMEs) have an important role in Asian countries and even in all over the world. The presence of SMEs has significant impact for the economy in a country. SMEs can also eradicate poverty in a country since SMEs employ very poor labors with lower level of education. Asian SMEs provide main income for marginal people and people who live in rural area. Besides that, the number of employment and the number of SMEs unit business are very significant in Asia, as presented in the table below. Nowadays, SMEs have been growing rapidly and it is predicted that the number of SMEs will grow continuously. The growth of SMEs has occurred worldwide. It is indicated that the number of SMEs in Asia, Europe, Africa, and North America engaged in international 1 Maastricht School of Management; the Netherlands. 128

138 Foreign Direct Investment trade have been growing (Luostarinen et al., 1994; Knight, 2001). The business growth and competition in home country have motivated SMEs to look business opportunities abroad. Economic trends make export and others international involvement become strongly viable alternatives for the SMEs to expand their product abroad (Verity, 1994; Luostarinen et al., 1994). TABLE 1 - The Number of Employments and SME unit businesses in Asia Japan China Indonesia Malaysia India Philippines Korea Thailand Unit of SME Employment Source: Mark Goh (2007) Asian Participation and Competitiveness in Globalization SMEs can expand their market and increase their services by offering products through export, internet, and other international involvements. The participation of export oriented SMEs in Asian countries have different paces and competitiveness. The export oriented SMEs in China, Korea, and Taiwan are quite stronger than in India, Indonesia, Malaysia, and Thailand. SMEs in Malaysia have important role in global market by participating in information, communication and technology (ICT), and other electronic sectors. Then, Singaporean SMEs have ability to attract large multinational enterprises. On the other hand, Vietnam is a rising star for Foreign Direct Investment (FDI) because of their cheaper labor forces. Thus, SMEs in Japan, Taiwan, and China contribute as the biggest FDI contributor in Asia (Unescap, 2009). The contribution of Asian countries in global trading system has been growing from about 10 percent in the 1970s to more than 25 percent in 2006, this overtaking the North American Free Trade share of about 20 percent (though still lagging from the European Union s share of around a third of world trade) (Unescap, 2009). The flow of FDI to East Asia has expanded even faster, from 7 percent of total world FDI inflows in 1980 to 13 percent in The flow of FDI mostly is intraregional such as from Japan and newly industrialized economies to the Association of Southeast Asian Nations (ASEAN) and from ASEAN to ASEAN and other Asian countries. This certainly will strengthen the integration process in regional economy. Besides that, China is eminent with import of intermediate products from other Asian countries and then exports final goods to global markets. China has combined that strategy with their competitiveness, particularly in cheaper human labor, because of that, they are able to offer very competitive price of products. This situation has also forced and stimulated the other Asian regions to improve their productivity and performance. Asian SMEs Successful Strategies in Facing Globalization Globalization creates implication for the growth of prospect and competitive performance for Asian SMEs. Along with globalization, the number of export- oriented SMEs is 129

139 increasing in many of newly-industrialized countries such as China, India, and Malaysia. In the globalization era, economic scale and scope become not more important than value creating activities. The SMEs do not need to be big to do internationalization. Most of these companies use acquisitions, mergers, joint ventures, and alliances strategy to get new brand, technological assets, and other resources which are enhancing their competitive advantages (Bologna, Goldstein, Mathews, 2007). These firms use technologies from other countries and combine it with the benefits of their local area, such as cheaper human resources and raw materials. These firms usually start as exporters of cheaper products then gradually try the possibilities for competing in the global market with higher end product. In recent years, some Asian countries which have experienced in R&D activities enjoy the profit and market share because of being pioneer in the market (Hobday, 1995). Nowadays, technology-based sectors generate more than 50 percent of United States Gross National Product (Amin and Hagen, 1998). Similarly, at this moment more than 50 percent of economic growth comes from innovation and result in increased productivity, new products, and processes in the industry (Grossman, 1991). Therefore, it is not surprised that industrialized countries spend an enormous amount of money on research and development (R&D) to promote innovation activities. Japan, US, and Western Europe alone account for about two thirds of worldwide R&D expenditure (Freeman and Hagedoorn 1994). Challenges for Asian SMEs In fact, it is not easy for Asian SMEs to compete in the global market since the characteristics of SMEs in the Asia Pacific region are 1) remain in traditional activities, 2) low level of productivity with simple technology and poor quality of product, and 3) competition in small and local market. Low cost prices are not longer sufficient for sustaining success in global competition. The global competitions are characterized by more products where price is continuously important. The prospect of firms are more increasingly driven by 1) capacity to meet global product and process standards, 2) flexibility and innovation, 3) design and differentiation, 4) reliability of time lines, 5) net working and capacity to collaborate (Unescap, 2009). There are several problems of SMEs in facing globalization: 1) they have limited skill in finance, operation management, accounting, marketing, and finance, 2) they face higher cost in purchasing raw material, transportation, finance, and business service, 3) they have limited access to get information about potential market and buyer because of lack of adequate infrastructures, and scarcity of ICT skills, 4) it is not easy for them to meet strict global standards such as (a) internationally agreed standards, namely ISO 9000 (quality), ISO (environment), SA 8000 (labor); (b) industry specific standards like standards and hazard analysis, and critical point in the food industry expanding (Goh, 2007;Lall, 2000). 130

140 Foreign Direct Investment Globalization also brings more tough competition in home market because SMEs must also compete with import products, foreign investors and expanding of large domestic companies. To be a subcontractor, the SMEs also face investment problem to make both production process and product meet the standard, because frequently it needs new technologies, new raw materials, and additional workforces which means they need more cash flow. However, it could be financially risky for the SMEs when the order or contract is not forthcoming. Indonesian Perspective Indonesia is a country that has abundant natural resources such as agriculture, oil, gas, minerals, and wood, but in other side, technology and human resource capabilities in Indonesian industry are very limited. This is different from Korea and Taiwan, which in 1960s and 1970s had adopted a strategy to increase their exports and now are enjoying the results of the export manufacturing strategy (Jacob, 2005). From 1960s until 1990s Indonesia has sustained economic growth when they changed their economic activity from stagnant, agrarian economy into manufacturing after over 25 years Indonesia priority attention mostly on agriculture, forestry, fishery, oil, gas, mining, and petroleum. The phase of Indonesia industries is divided into three phases the phase of inward orientation ( ), the phase of outward orientation ( ), and the phase of crisis and recovery ( ) are described as follow: In 1970s oil and gas sector accounted for three- quarter of the export. Mid 1980s was decline time for oil and gas sector, contribution of non oil manufacturing and export began to increase. Late 1980s banking reform and manufacturing export boom began then labor intensive in manufacturing is dominated. 1990s textile, paper and printing, iron, and steel had the biggest contribution to Indonesian economy. Three-quarters of the foreign direct investment (FDI) were from South Korea, Taiwan, Hongkong, Singapore, and Japan. Most of investments were in textile and garment industries. Manufacturing import still increase until 1990 but declined significantly during the crisis now Indonesia learn science-based industries and innovation, in this stage Indonesia is very depended on the good capital and intermediate inputs from countries with advanced economies (OECD classification as cite in Jojo Jacob, 2005, p.6). Characteristics of Indonesian manufacturing are labor intensive and low technologies. Limited technology capabilities in manufacturing and unskilled workers make Indonesia less attractive destination for FDI investment than South and East Asian neighbor, especially with China. Until the year 1990, manufacturing activities in Indonesia consisted of 131

141 furniture, textiles, leather products, garment which covered the value more than half of total manufacturing exports (Jacob, 2005). Since the 1990s until now, the manufactured products in Indonesia have broader varieties on electronic goods and office equipments. These manufacturing industries are assisted by investors from Asian countries and Japan (Jacob, 2005). Capital goods from Indonesia are 80% imported and these imports have contributed to the learning of technology. Import has increased the knowledge of SMEs from the technology embodied in the imported products. Import can improve interaction of local firms with supplier from advanced economy countries. From export, companies can increase their export capabilities to meet the international quality standards (Jacob, & Szirmai. 2007). Competitive advantage of Indonesian manufacturing in the past Indonesia has experienced very rapid growth in manufacturing sector in the past of two decades, averaging 12.0 percent annually during the period , and 12.7 percent during (World Bank, 1991). While in 1988, World Bank provided data that Indonesia had been the eighth largest manufacturing sector among all the developing countries after China, Brazil, Korea, Mexico, India, Argentina, and Turkey (Thee, 1994). Hill (1990) stated that Indonesian manufacturing sector relatively low skill, labor intensive in which scale economies are less important. However, they also have a competitive advantage namely flexibility when it is required (in terms of operation and adaptation to customer preferences). In the past, manufacturing companies in Indonesia had only relied on their natural resources and cheaper human labor as their sources of competitiveness. However, in the global competition, those things are not sufficient anymore as their only source of competitiveness. Nowadays, Vietnam is also able to offer cheaper human labor than Indonesia. It is also not enough for Indonesia to only depend on its natural resources without providing value added to their natural resources. In contrast, giving value added to natural resources also needs skill, technology, and innovation. Global Competition and Indonesian Manufacturing SMEs SMEs are very important for Indonesian economy and are considered as the engine of the Indonesia s economic growth. SMEs in Indonesia provide job for 91.8 million labor forces or 97.3 percents of the total of labor forces in Indonesia. The total number of Indonesian SMEs is 49.8 million units or equal to percents of total business units in Indonesia (www.bps.go.id). Central Bureau of Statistics (2003) and the Ministry of Cooperatives and SMEs (2000) characterized the SMEs based on their assets, annual sales, and employees, described on Table 2. Confronted with competition and global business environment, SMEs struggle with their market expansion and value added offering for their customers. Unfortunately, in the recent years, the growth rates of Indonesian export have been declining because 132

142 Foreign Direct Investment Indonesian products could not compete with products from China. It even becomes worse since the global economic slowdown. The following tables 3 and 4 show the decline of export and total GDP from manufacturing in Indonesia. TABLE 2 - Indonesian SME s Classification Source: TABLE 3 - Average Annual GDP and Merchandise Export Growth Rates of Indonesia Year GDP (%) Export Growth Rate (%) Source: Computed from Asian Development Outlook (ADB, 2008) TABLE 4 - Growth of GDP and Employment in Manufacturing Sector (%) PDB/ Employment Growth Rate Gross Domestic Product Employment Source: Adam Latief (LPEM, 2009) Indonesian Chamber of Commerce and Industry (Kadin), Beny Sutrisno, said that the implementation of Free Trade Agreement (FTA) 2004 with China has turned Indonesia s trade surplus into a deficit. The growth of Indonesia s imports from China is not balanced with its exports to that country. The deficit of Indonesian trade with China in the non oil and gas sector is large, and it dropped from a surplus of US$ 79 million in 2004 to a deficit of US$7.16 million in 2008 (www.bilaterals.org). Besides that, Governor Deputy of Indonesian Bank also said that Indonesian international trade in 2009 decreased % because of global of economic slowdown. From January to June 2008, the value of Indonesian exports was Million US$ but in the same period in 2009, it is decreased percent to Million US$. In addition, Central Bureau of Statistics (2009) stated that Indonesian export has been dropped 36 percent from October 2008 and this is the lowest point ever since 1986 (Central Bureau of Statistics, 2009). Thus, serious concern from Government, industrialist, and 133

143 academician are required to cope this issue. This problem needs to be anticipated immediately; otherwise Indonesian export might be more decreased. It is very difficult for Indonesian SMEs manufacturing to compete with manufacturing from other Asian countries. Since 1997, the percentage of bank credit in manufacturing has been shrinking. In the last 13 years, manufacturing industry has not been growing. The credit demand from this sector was decrease. Moreover, giving credit to this sector is considered as a high risk. Indonesian Bank data shows that the share loans to total bank credit on manufacturing industry in early 2002 were 37.6 percent but in November 2009, the credit portion of manufacturing was drop become 17.2 percent (Printed Kompas, 2010). The average growth of manufacturing sector in Indonesia now is averaging 3.01 percent in 2008 and 1.45 percent in 2009, the data showed that there is declining growth in manufacturing sector (www.bps.go.id). As one of manufacturing industries, Indonesia s garment and textile industry now are struggling to compete with China s garment and textile industry that provide very cheap products. China products have been extensively penetrating the Indonesian market over the past few years. The average of growth textile industry in Indonesia has been decreasing, averaging 3.38 percent in 2008 and in The average growth of garment industry was percent in 2008 and in 2009 (www.bps.go.id). That situation is very difficult for Indonesian garment and textile sectors. The competitiveness of Indonesia s garment industry is lower than the upcoming developing countries, particularly in China, Vietnam, India, and Bangladesh (Thee, 2009). Nowadays, China became the largest country origin of import to Indonesia with total import 580 million U.S. dollars in January 2007 and this value increased by percent compared to January The value import of China becomes the largest contributor that reached about percent from the total import to Indonesia. Unfortunately, there is also a difference in data recording import from China to Indonesia for more than 2 billion dollars per year over the period , and this indicates there is an illegal flow export from China to Indonesia (www.inaplas.org). Government support for Indonesian SMEs To boost the development of SMEs in Indonesia, Indonesian government has introduced several promotion programs, notably subsidized credit and technical assistance programs. Indonesian government provide KIK/ KMKP financial program, but it was abolished in January 1990 due to high default rates, serious collection problems, unofficial payment, mismanagement of the fund, inadequate penalties, and incentive for bank to make the collection. Then, financial scheme of Village Cooperative System (KUPEDES) was seemed to be more successful because there are rewards and penalties imposed. However, the knowledge of KUPEDES staffs need to be raised especially in management and accounting 134

144 Foreign Direct Investment so they will be able to make a good appraisal for loan application. Indonesian governments also need to give attention to export-oriented SMEs by providing loan for working capital that suitable for their specific needs in export. (Grizzel, 1988 as cited in Thee, 1994). For technical program, the government helps SMEs to raise their managerial and technical capabilities in order to increase their production process and to improve their product quality by The Small Industries Development Program (BIPIK). This program has not been very successful since there were low occupancy rates, limited use of technical service centers, and low productivity of the SMEs. It was because the officers who gave training had little technical and business experiences. Moreover, the training materials and subsidy were determined by central planners rather than by the real needs of SMEs. Directorate General of Small Industry has also introduced a Foster Father- Partner Linkage scheme, which is now being pushed as a tool to assist SMEs in overcoming production, financing, and marketing problems. However, there is a skepticism about viability of this program because due to the fact that it is pushed by political issue. Moreover, the large firms particularly the stated own firms act as a foster father to unrelated SMEs which is only little or no economic benefit could be gained from the partnership except some political goodwill. Actually, this partnership also can be applied to export oriented SMEs. The large firms with access to export market could give some valuable help to export oriented SMEs in selling their products in overseas market, as the growth of export-oriented SMEs for the past few years generated quite important share (9.7 percent in 1990) of Indonesia s total manufactured export. Besides that, government marketing agencies such as National Agency for Export Development (Badan Pengembangan Ekspor Nasional - BPEN) could also support export oriented SMEs by providing them value information on export market, information about potential demand in export market and promotion in overseas market. This agency needs to be effective in serving the public needs, but they are hampered by low incentives, inconsistent objectives, long accustomed procedures, and regulation than improving facility (Thee, 1994). On the other hand, Indonesia governments try to support innovation for SMEs by providing 122 innovation awards, supporting intellectual property rights promotion, encouraging R&D activities and industry-based science and technology. Innovation as an opportunity for Indonesian SMEs The efforts that have been done by Indonesian government are not enough, Indonesian SMEs still need to build their own competencies so they can compete well in facing globalization. There is a consensus among policy-makers and academics. The consensus suggests that innovation as the crucial factor in generating firms growth, which lead to a country s economic growth. Innovation is believed as the adequate way to help SMEs to compete with the large scale firms on economic scale. Several studies showed that there is a strong and positive relationship between innovation and the firm s growth (Auken 135

145 et al., 2008, Roper 1997, Roper et al., 1996). Relationship between innovation and firm s growth of SMEs are found in several countries such as Australia (Bhaskaran, 2006), Taiwan (Hsueh and Tu, 2004), and England (Hughes, 2001). It is also found that innovating firms had higher productivity and sales growth than those otherwise (Cainelli et al 2004, Regev 1998). Cambridge Small Business Research Centre demonstrated that 80% of British SMEs, which have developed innovation, have increased in profits, market share, and new market penetration (as cited in Auken, 2008, p.39). The explanation above suggests that innovation is a recommended way for the SMEs to improve their competitiveness. Most published research about significant of determining factors for SME innovation come from developed country. Study about innovation including the obstacles to its successful implementation relatively well researched in developed countries, but only limited research has been made in developing countries. However, it is not known to what extend results of study in developed countries can be applied to developing country since they have different characteristics (Hadjimanolis, 1999). Moreover, for particular factors, different studies showed different result. Contradictory results were found regarding the source of knowledge, the role of financial funding, and R&D spending (Oerlemans et al., 1998; Birchall et al., 1996). For example, the variable education levels are not significant in explaining innovative efforts, and this is contrary to prior research (Hoffman et al., 1998; Le Blanc et al., 1997). All of the above findings indicate that the research about stimulus of innovation is still unresolved and especially for Indonesian manufacturing cases. It might be difficult to make generalization from previous research due to the complexity of different geographies and industry sectors. One way to learn more about stimulus factors of innovation is to conduct more research in different economic conditions and in different geographical area. Since there is limited research about innovation for Indonesian SMEs, it is needed to conduct research to find the aspects that could strengthen innovation of Indonesian SMEs. Conclusion The role of government in facilitating export becomes very important factor to support SMEs to compete in the global market place. Government can support the SMEs by providing international market research, market intelligence, and improvement of the national image through brand recognition particularly when consumers have strong negative beliefs about the products of a particular country, and providing assistance with market access issues (Kumar and Chadee, 2002). In some countries such as China, Taiwan, and Singapore, the governments are actively involved in developing foreign markets for their SMEs. As an example, government of China provided funds for the company that can increase technology capabilities. In 1998, the government of China provides funds as much 136

146 Foreign Direct Investment 20 million RMB for each six selected companies that have technological innovation (Duysters, Jacob, Lemmens & Jintian, 2009). For Indonesian cases, the manufacturing companies have increased their knowledge and innovation through export and import. Import can improve their knowledge through the interaction of local firms with the supplier from the advanced economies. From export, companies are forced to increase their export capabilities to meet the international quality standards (Jacob, & Szirmai. 2007). However, Indonesian SMEs still need more support from government to increase their innovation. Acknowledgements This research is funded by Japan Indonesia Presidential Scholarship Program (JIPS) under management of World Bank - Joint Japan/World Bank Graduate Scholarship Program (JJWBGSP). In this paper, the author also would like to appreciate ICIB organizing committee and reviewers for their constructive comments and idea for the paper. References Auken, Howard Van. (2008). Innovation and Performance in Spanish Manufacturing SMEs. International Journal Entrepreneurship and Innovation Management, Vol. 8, No.1, pp Bhaskaran, S. (2006). Incremental Innovation and Business Performance: Small and Mediumsize Food Enterprises in a Concentrated Industry Environment. Journal of Small Business Management, Vol. 44, No. 1, pp Birchall, D.W., Chanaron, J.J., Soderquist, K. (1996). Managing innovation in SMEs: a comparison of companies in the UK, France and Portugal. International Journal of Technology Management 12 (3): Bonaglia, F., Goldstein, A. and Mathews, J. (2007). Accelerated Internationalization by Emerging Multinationals: the Case of White Goods Sector, MPRA Paper No Cainelli, G., Evangelista, R. and Savona, M. (2004). The Impact of Innovation on Economic Performance in Services. The Service Industries Journal, Vol. 24, No. 1, pp Duysters, Jacob, Lemmens & Jintian. (2009). Internationalization and technological catching up of emerging multinationals: a comparative case study of China's Haier group, Industrial and Corporate Change, 18: Freeman, Chris & John Hagedoorn. (1994). Catching up or falling behind: Patterns in international interfirm technology partnering, World Development, vol. 22, nr. 5, pp Gary A. Knight. (2001). Entrepreneurship and strategy in the international SME. Journal of International Management, 7, 3 : Goh, Mark. (2007). High-growth, innovative Asian SMEs for international trade and competitiveness: challenges and solutions for APO member countries (Tokyo, Asian Productivity Organization), available at Hall, Lotti and Mairesse. (2009). Innovation and Productivity in SMEs: Empirical evidence for Italy, Working paper Banca D Italia Eurosistema, Number June 2009 Hidayat, Zulhamdani, Putera (n.d). Evaluation of Incentive Programs that Improving Innovation in Indonesia, Center for Science and Technology Development Studies. Hobday. (1995). East Asian Latecomer Firms: Learning the Technology of Electronics, World Development vol. 23 No

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148 Foreign Direct Investment Internet References Central Bureau of Statistics, 2009 No. 45/08/Th. XII, August 3rd, Retrieved 15 August 2009 from FTA turns Indonesia s trade surplus with China into deficit. Bernama, 30 July Retrieved 20 August from: Ministry of Cooperatives and Small Medium Enterprises. Retrieved 15 August 2009 from: Monexnews. Indonesian export probably decrease 28 % in this year. Retrieved 20 August 2009from:http://monexnews.com/index.php?option=com_content&task=view&id=1668 &Itemid=53 Office of News for Syariah Economy Retrieved 18 August 2009 from: Printed Kompas, 8 February Retrieved 21 March 2010 from: Inaplas, Retrieved 21 April 2010 from: 139

149 The study of possible ways to attract foreign direct investment in order to promote exports in Imam Khomeini trade zone Sayyed Ehsan Zohoori 1 Abstract: Imam Khomeini trade zone with its geographic and economic situation, the neighbourhood of Asian countries and other trade ports, is known as the nearest and the most important trade and portal centre in the southwest of the country. One of the foreign investments, is foreign direct investment which is the main subject to search about the ways of attract it in BIK. In this survey research, the ways of attract FDI is attempted by census data as questionnaires for confined population of zone experts; so other sampling methods is not used. Descriptive and inferential statistics is used for statistical data survey and to represent outputs; Results shows that an improvement in policies and customs law, infrastructures and human resources has a positive effect to attract foreign investment meanwhile in paired variables, infrastructures and human resources have affected co-ordinately and residence years of experts have neutral effect in attitude survey. Along with these results, applied possible ways have been proposed under the trade zone conditions. Keywords: foreign investment, infrastructure, legislation, human resource, trade, incentive, privilege Introduction The establishment of Bandar Imam Khomeini is in 1937.It is located in northeast of Persian Gulf and at the end of Khoormoosa waterway, the distance to Arvand Free Zone is 100km. The citizenship started at The BIK port contains about 32% commercial trade of Iran. The broad hinterland and the neighborhood with Iraq as a transit corridor, Kuwait and etc., are other privileges. Saving and investment rates to charge economic growth have general improvement in welfare and poverty reduction. The access to international markets and the ability to attract capital from abroad, play important roles toward these targets. The main feature of the recent globalization of capital markets in developing countries, consist two major forms: foreign direct investment and foreign portfolio investment. The share of FDI is larger for developing countries than other countries; it has the potential to bring real benefits, enhancing the people welfare and specially has performed short run and long run growth of 1 Islamic Azad University, Khuzestan, Iran. 140

150 Foreign Direct Investment many of the Asian countries in the new millennium. Forcing investment projects depends on many kinds of economic opportunity outcomes for local people. Sun et al (2000) in their paper define that FDI is an effective management control of host country enterprises to develop them in various aspect and is related to international co operations; they summarize 8 factors impact on FDI for a general regression model; high labor quality, infrastructure improvement and political stability, along with openness to the word draw foreign capitals, are important measurable determinants in compare with other variables. Since the trade zone of our research with geographic and economic situation, adjacent to Asian countries and other trade ports is one of the important offshore trade zones in the west of Iran, so FDI is engaged inevitably some more with trade and studies are particularly aimed toward maritime zones. Dowling and Ray(2000) in their research point out that the growth in FDI flow to southeast Asia and China along with supported trade and industrialization, can provide export growth. Ekholm(2003) et al cast about the role of export platform for the production in third countries that occur and discuss mutually about parent countries activities around affiliated products. A considerable point is that there are common variables to affect FDI, for instance Bhattaacharya and Groznik(2008), in addition to the size of a foreign-origin group and government size, they point to the tax burden, infrastructure, capital market development, exchange rate risk and legal environment. In this research 3 introduced variables: infrastructure, manpower effect, changes in policies and customs law are aimed to be tested for significance conclusions. Methods And Materials The limited statistical society of BIK includes main manager, middle manager and the elected personnel who are expert in trade are maximum up to 17 members in BIK, have been under question; so no any other sampling method is used, meanwhile their proposals were noticed in questionnaires. Descriptive statistics is almost used to show frequencies of data and the correlation coefficient which is explained by Levin and Rubin(1991) as an inferential method, is a criteria to describe how a variable is explained by another linearly, moreover it indicates the relationship direction between variables. At first questionnaire of the statistical society, expertise in trade affairs, are collected primarily, then data outputs are represented by graphs and tables. Discussions and Results Statistical society is showed by education level criteria in table 1. Table 1 :Categorized society by education level 141

151 Table 1: Categorized society by education level Frequency Education level 1 Diploma 0 Associate Degree 12 License 3 MSc 1 Phd Graph(a): Infrastructures effect Graph (b): Changes in policies and customs law effect 11.8% 5/9% 23/5% 58.8% 29.4% 70/6% Graph (c): Manpower planning effect HIGH MEDIUM 11.8% LOW 58.8% 29.4% With the observed results in graphs (a),(b),(c), three hypotheses are proved obviously to affect on FDI separately, while data output of (a) and (c) are the same. So the paper explains each variable as follows: 1) For infrastructural improvements include many aspects; wide range of incentives is a framework of road such as Sanandaj-Marivan road to Bashmagh border, air, sea port and terminal, developing coastal equipments, resolving transit problems for freights such as entrances, Shalamcheh boundaries, specially neighbors roads surround it and providing international transport machines and trucks, constructing proper border terminals in export passage toward Iraq. Other transport facilities are constructing suitable bridges, inland 142

152 Foreign Direct Investment container deposit or dry port; while the government should enterprise to operate Parvizkhan and Bashmagh boundries, specially for transit goods to Kordestan of Iraq. Establishing production centers proximity to the BIK according to new installations to diminish transportation costs. Appling new technologies in customs equipments like X-ray, electronic controls, various linked scales, etc. And preparing public welfare services contains deserved hotels, hospital, provide inter-road security along with welfare facilities, recognized as complementary equipments. 2) Providing main incentives to respond effectively to HDR needs, are poverty reduction, employee training promotion and public training through fiscal and financial facilities such as IT & ICT that can direct their viewpoints. Authorities should provide the background of no any duplication and instigate the improvement of training quality by R&D. Creativity and entrepreneurship of manager is a major item to promote human activities in related BIK departments. 3) Since the economic structure of Iran is basically dominated by the decisions of central government, and the private sector roles less than the whole government size, so comprehensive enterprises involves political and social stability. Boles(2000),describes that political stability comprise persons and property security. Public and private sector should be allied to support open economy that motivated by foreign investment. It is subjected to everyone and government authorities particularly, because entrepreneurs come if there is assurance for capital returns. In addition to the above mentioned, the process of a unified decision-making system with an updated perspective based on daily circumstances is perceived to be obligated for BIK managers. More diplomatic co-ordination of foreign ministry is needed for border controls and other preferences. Ayin et al(2005) emphasizes that national strategy to attract FDI, not only should consider the economic opportunities for foreign investors that intend to access the basic materials but also host state opportunities like local productions are recommended. It is distinctive when BIK possesses talent human resources to be employed. In BIK trade zone customs reinforcement and reconsideration for some of legislations that Panary(1999) notes them as FDI incentives are to be aimed that include minimum tax rate or even tax exemption for profits, free repatriation, possibilities to sell in the local market a percentage of total turnover, re-export goods privileges. Another sample for reconsideration in the studied zone, is the Clearance of transit goods that takes twice customs process through Khorramshahr and Shalamcheh. The complementary data analysis is used to test the significance assumption of the linear relationship between variables meanwhile the stay length of residences of the zone is added to test another hypothesis. 143

153 The length of stay, comprises the time factor effect on the viewpoints. Outcomes of correlation matrix in table 2 include nothing for the sake of the length of stay, so deals seem to be arisen obviously and don't belong to the native members. Linear relationships between 3 variables is not concluded to affect on FDI simultaneously except human resources and infrastructural factors, so it can be denoted that public and private sector enterprises through human resources and infrastructural factors should be performed as two wings comprises together various aspects toward FDI. Table 2: Correlation Matrix of variables Variables Changes in policies and customs law Infrastructures manpower planning Length of stay Statistical Definitions Changes in policies and customs law Infrastructures Manpower planning Length of stay Correlation Coefficient Sig. (2-tailed) Sample Size 17 Correlation Coefficient Sig. (2-tailed) Sample Size 17 Correlation Coefficient Sig. (2-tailed) Sample Size 17 Correlation Coefficient Sig. (2-tailed) Sample Size 17 Acknowledgments Thanks to Arash Jamalmanesh and Mohammad Nemat Zadeh at Azad University of Shoushtar Branch along with Mansour Zarra Nezhad at Shahid Chamran University and Heshmatollah Basti with other kind personnel of BIK port who assisted me helpfully in this research. I appreciate from of all members of ICIB conference committee and reviewers; specialy from Vasileios Valchos for the sake of helpful s and favorite accompaniments. References Ayine D. & et al(2005), Lifting the Lid on Foreign Investment Contracts: The Real Deal for Sustainable Development, iied s sustainable markets.p:5. Bhattaacharya U. and Groznik P. (2008). Melting Pot or Salad Bowl: Some Evidence from U.S. Investments Abroad. PP:3-21 Boles W. (2000), Export and Investment Promotion Study Tour to Trinidad and Tobago and Costa Rica, United States Agency for International Development, Georgetown, Guyana. PP:7-8.IED 144

154 Foreign Direct Investment Dowling M. and Ray D. (2000) The structure and composition of international trade in Asia: Historical trends and future prospects.p:306 Ekholm K. & et al.(2003), Export-Platform Foreign Direct Investment, ERWIT conference in Bern.(Abstract). Levin R. l. And Rubin D. S.(1991). Statistics For Management.5th edition. Published by Prentice - Hall. Delhi.PP:417,511. Panray A.B. (1999), Mauritius: A coordinated approach based on institutional specialization, Based on the report :National Trade Development Strategies- Mauritius.P:70. Sun Q. and et al(2000). Determinants of foreign direct investment across China. PP:82,88,

155 FDI determinants and its impact on economic growth: A comparative study between Kenya and Malaysia Bethuel Kinyanjui Kinuthia 1 Abstract: This study seeks to establish the determinants of Foreign Direct Investment (FDI) using a firm level survey conducted in Kenya and Malaysia. These two countries had related development challenges in the 1960s immediately after independence. However 50 years later Malaysia has emerged as a newly industrialised country, while Kenya stagnated in growth over the same period. The successful economic development in Malaysia was partly attributed to its ability to attract successfully FDI which is in favour of the neo classical argument. Kenya although once favoured as an FDI location in the 1970s lost its lustre and has attracted little FDI compared to Malaysia. The main findings of the paper justify the role of the state in attracting FDI and economic development in general. The state can enact policies in favour of FDI, establish institutions with adequate funding, provide a wide range of incentives and the required infrastructure as well as maintaining economic and political stability. These features largely explain the Malaysia s success and Kenya s failure in attracting FDI. Keywords: Foreign Direct Investment, determinants, Kenya, Malaysia Introduction The last two decades have witnessed an increase in FDI activity globally. In 2007, FDI inflows reached an all time peak high of $1,833 billion, well above the previous all high set in Developing countries received an increased share of Global FDI inflows albeit small in comparison to developed countries. FDI in these countries reached the highest level ever of $500 billion, with the least developed countries also reaching their highest peak ever of $13 billion in 2007 (UNCTAD, 2008: xv).increased FDI to developing countries has been attributed to a significant policy shift, from inward looking to outward looking, market determined strategies(sumner, 2005). Although the reasons for this shift have been complex, Lall and Narula (2002) attribute the shift to inefficiencies of import substitution, growth of global production networks and the success of the export oriented Asian newly industrialised economies. The increase in FDI inflows to developing countries has been perceived as good news by many scholars, due to its potential role in accelerating growth and reducing poverty. FDI 1 Africa Studies Centre, Leiden University, the Netherlands. 146

156 Foreign Direct Investment is considered an engine for growth since it provides the much needed capital for investment, increases competition in host country industries and creates employment. In addition, FDI can aid local firms to become more productive by adopting more efficient technology or by investing in human and or physical capital. FDI is also said to contribute to growth in a substantive manner because it s more stable than other forms of capital flows (Sumner 2005). At the same time FDI can be potentially harmful if it leads to the exploitation of these vulnerable countries with a lot of undesired effects (Soysa and Oneal, 1999, Kentor and Boswell 2003). In the recent past numerous studies have been conducted aimed at understanding how developing countries can attract and benefit from FDI to accelerate growth. Although it can be argued that this literature is substantial the findings are sobering. Evidence from a survey of literature suggests that existing theories only accounts partially for the determinants of FDI (Agarwal, 1980). In addition, Blonigen (2005) observes that this literature is arguably at its infancy. In a comprehensive review of literature, Faeth (2009) observes that there is no single theory of FDI, but a variety of theoretical models attempting to explain FDI and the location decision of multinational firms. Therefore, any analysis of determinants of FDI should not be based on a single theoretical model. Similarly empirical evidence on the impact of FDI on economic growth and development is mixed is often dependent some other factor/absorption capacity e.t.c (Reichert and Weinhold, 2001, Lall and Narula, 2005). The mixed findings observed from FDI studies can be traced to several issues. First, models estimated with time-averaged data lose dynamic information and, due to both the lack of dynamics and degrees of freedom; run increased risk of serious omitted variable bias. Second, contemporaneous correlation across the cross-section does not imply causation, and thus these models may suffer from endogeneity biases. In addition, these problems are difficult to address satisfactorily since suitable instruments are often not available (Tsai 1994, de Mello 1997, Reichert and Weinhold, 2001).This approach can also restrict the extent to which comparisons can be made between countries and thus inadequate for policy making. Recently it has been argued that the determinants and motives for FDI have changed in the process of globalization (Kokko 2002, Addison and Heshmati 2003). As a consequence, the traditional determinants of FDI are considered insufficient to induce FDI inflows. Thus, while the importance of FDI has been appreciated over time, several important issues concerning FDI remain unresolved. One important issue of interest in this study is: what are the determinants of foreign direct investment? That is from a developing country perspective, what are the factors that host countries can address or introduce in order to attract foreign direct investment? This paper addresses this question by undertaking a rare comparison of two developing countries (South-South) Kenya and Malaysia. Secondly the paper departs from the usual econometrics approach based on mainly secondary data by 147

157 using a firm survey. This approach is richer as it captures important nuances that are largely ignored by researchers who rely on secondary data and quantitative methods for example the importance of incentives and government support. The results of the study suggest the importance of the role of the state in the development process of a country. In Malaysia, the government has been actively involved in the wooing FDI to Malaysia. This has been accomplished through three main approaches. First the government has created a conducive environment through the removal of FDI restrictions leading to a huge influx of FDI in the 1980s. In addition the government has pursued industrial policies in favour of export oriented industries in the manufacturing sector. Secondly the government has well established institutions which are adequately funded. Among other things, these institutions are also provided a wide range of incentives which they provide to investors depending on their needs. Third the government has invested heavily in infrastructure and has successfully managed the ethnically diverse population leading to political and economic stability in the country. These features are largely absent in Kenya. The Kenyan government apart from a liberalised FDI environment has institutions that are inadequately funded and poorly governed. These institutions also offer very limited incentives selectively. In addition infrastructural development has been neglected for a long time. Political instability due to ethnic tensions in Kenya and its neighbouring countries has enabled crime and insecurity to thrive; this has contributed the most to keeping the investors away. The rest of the paper is as follows. In the next section an overview of the two countries focusing on FDI is presented. In section three, is a review of literature on FDI determinants. Section four contains information on the methodology, data and empirical findings while the conclusion is presented in the last section. Overview of FDI in Kenya and Malaysia Kenya and Malaysia present an interesting match for comparison. Although the two countries are located in different continents, Kenya on the eastern part of Sub Saharan Africa and Malaysia in South East Asia, they exhibit striking similarities useful in understanding the process of development. The two countries were colonised by the British until independence in 1963 and 1957, Kenya and Malaysia respectively. During this period most of the developing countries supplied the western countries with the raw materials to sustain the industrialization process and the two countries were no exceptions. The two countries are also ethnically heterogeneous which has presented a challenge to the ruling governments and to their credit have both enjoyed stability in government until recently in 2007 when Kenya became fairly unstable. Both countries are well endowed with a broad range of natural resources, flora and fauna and arable land. The two countries are located in 148

158 Foreign Direct Investment strategic positions in their respective continents with coastal lines which makes them very important for trade and hence attractive locations for FDI. At present, Kenya has an initiative for structural transformation as documented in Vision 2030 (GOK, 2007). Kenya hopes to increase its competitiveness both regionally and globally following after other second-generation Newly Industrialising countries, such as Malaysia, with whom 35 years ago were at the same stage of development (see table 1). The pattern of FDI inflows in the two countries also captures this divergence (see graph 1). The history of FDI in the two countries dates back to the colonial period where FDI was concentrated in the primary and production sectors. Before Kenya s independence, the few manufacturing industries established up to World War II were mainly for basic processing of agricultural exports and the processing of food for the local market. After the Second World War British manufacturing firms begun to invest directly in the manufacturing, in part, because of the competition from non British trading firms, which threatened Britain's share in the Kenyan market (Rweyemamu, 1987, Gachino 2009). This pattern was also observed in Malaysia where prior to independence, FDI was mainly concentrated in the production of tin and rubber which were the main foreign exchange earners (Rasiah 1995: 50-53). The absence of state subsidies and protection of the manufacturing sector discouraged the growth of large enterprises in these countries. The revenues that the colonial government generated in these countries went toward the development of infrastructure which was considered a subsidy to the manufacturing sector (Rasiah 1995:53, Pearson, 1969). Table 1: Selected Development Indicators for Kenya and Malaysia GDP per capita growth Kenya Malaysia Gross fixed capital formation(% of GDP) Kenya Malaysia Trade (% of GDP) Kenya Malaysia Agriculture value added( % of GDP) Kenya Malaysia Manufacturing Value added (% of GDP) Kenya Malaysia Manufactured exports(as a % of merchandise exports) Kenya Malaysia Source: World development indicators

159 At independence both countries inherited from the British government good infrastructure and a trade and industrial policy that would have been adequate to set a base for industrialization (Pearson, 1969). As a result the import substitution strategy was implemented. This industrial policy advocated for a large role of the public sector participation and protection of the infant manufacturing industries. In Malaysia initially, state intervention was limited to the provision of auxiliary support facilities and tax incentives, but towards mid 1960s tariff protection was common (Alavi, 1996: 34).In Kenya the government used a combination of tariffs and quotas supplemented by foreign allocation measures including overvaluing exchange rates to maintain import costs low, favourable credit and interest rate policies intended to subsidize the manufacturing consumer goods (Rweyemanu, 1987, Gachino 2006). This initiative saw foreign companies relocate to take advantage of the protected environment and produce largely for the domestic market. Kenya enjoyed growth during this early period with the manufacturing sector value added increasing significantly hence the term the golden period. The states also enacted various institutions and investment acts aimed at attracting foreign firms and in general to oversee the development of the manufacturing sector (Rasiah 1995:76, Gachino 2009). During the period to 1970s the FDI levels in Kenya and Malaysia were comparable (graph 1). Although the import substitution strategy was important in establishing a strong industrial base and economic diversification in developing countries it had a lot of problems. It did not encourage the development of domestic firms but rather supported foreign firms to expand their operations to benefit from the protected domestic market. It also had high import content, worsened balance of payments, limited linkages and low labour absorption capacity (Alavi, 1996:34). With these problems the Malaysian government in 1968 was forced to switch its industrial policy towards export oriented industrialization. It also implemented a new economic blueprint the New Economic Policy (NEP) which largely favoured the development of the manufacturing sector as an engine for growth. This led to a new wave of exported oriented FDI in the newly established free trade zones hence the increase from 1972 to early 1980s. Malaysia pursued another round of export oriented industrialization as well as FDI liberalization from mid 1988 leading to huge FDI inflows resulting to Malaysia s industrial success(see graph 1). Kenya on the other hand maintained the old strategy but was forced to abandon it in the early 1980s followed by several failed attempts of liberalization and export orientation until the beginning of the 1990s (Gluhati and Sekhar, 1982, Gachino 2009, Were and Mugerwa, 2009). Graph 1 clearly shows that Malaysia has been successful in attracting FDI compared to Kenya. This performance took Malaysia from being a predominantly resource based exporter to the developing world s sixth largest exporter of manufactures just behind the four dragons of East Asia and China (Lall, 1995) and also see table 1 above. Malaysia had various sources of FDI over the years. In the 1970s, Japan, the UK and the USA were the main sources 150

160 Foreign Direct Investment of FDI. In the 1980s, Japan was the most important source of FDI, while Singapore was second; UK and the USA were third and fourth, respectively. In the early 1990s, Taiwan became the most important source of FDI in Malaysia followed by FDI the USA and Japan. In the middle of the 1990s until 2000, the USA was the most important source of FDI followed by Japan and Singapore (Kinuthia 2010). The main traditional sources of foreign investments in Kenya are Britain, United States of America (USA), Germany, South Africa, Netherlands, Switzerland and recently China and India (UNCTAD, 2005). Graph 1: FDI inflows in Kenya and Malaysia $ M Years Kenya Malaysia Source: UNCTAD database 2008 Literature Review Theoretical Literature review on the determinants of FDI There are many theories which attempt to explain the determinants of foreign direct investment. These theories can be loosely classified as neo classical theories, international organization theories, integrated theories and the new trade theories. A review of these theories is presented in this section. The early neo classical theories of FDI hypothesised that the rate of profit had a tendency to drop in industrialised countries, often due to domestic competition, which created the propensity for firms to engage in FDI in underdeveloped countries. Owing to scarcity of labour as a result of industrialization in the developed countries, there was a reduction in the value that was created by surplus labour available for expropriation. Scholars like Hobson, Lenin among others, argued that the more developed the country, the lower is the rate of profit, the greater the over production of capital and consequently the lower the demand of capital. This forced the owners of capital to exploit the possibilities of operating in other underdeveloped countries where capital was considered scarce but with high returns (Oneal and Oneal, 1988). The thinking was further advanced by the trade theories based on the Heckcher-Ohlin model. They hypothesised that FDI was a function of international differences in the rate of return on capital investment. Thus, FDI flows out from 151

161 countries with low returns to those expected to yield high returns of capital (Faeth, 2009). Tobin(1958) and Markowits(1959) further argued that investors not only consider the rate of return but also the risk of selecting their portfolios, and that investment is a positive function of the former and a negative function of the latter. In addition portfolio diversification reduces the risk involved. Aliber (1970) further expanded this view by suggesting that the differences in the returns observed in underdeveloped countries was due to a difference in capital endowments and currency risks, as interest rates include a premium that is charged according to the expected currency depreciation. As a result, firms from harder currency areas are able to borrow at lower costs and capitalise the earnings on their FDI in softer currency areas at higher rates than the local firms. Along the same line of thought was the Jorgenson s model (1963) which is a generalised form of the flexible accelerator model by Chenery (1952) and Koyck (1954). Within this model is the output/market size hypothesis which assumes a positive relationship between FDI of a firm and its output in the host country. The rationale of this hypothesis is that firms increase their investment in response to their sales and that domestic investment of a country raises with its gross domestic product (GDP) or gross national income (GNI). The main criticism of these models discussed above is that they assume perfect factor mobility among countries and laid emphasis on the monetary form of FDI. The international organization theories begun with the work of Hymer (1976) and Kindelberger(1969). The latter building on the former s unpublished work of 1960, argued that foreign firms survive in other countries due to ownership of intangible assets hence operating as monopolies2. Caves (1971) focusing on product differentiation as a monopolistic advantage argued that imperfect competition encourages foreign firms to differentiate products and as a result engage in horizontal FDI. Knickerbocker(1973) further suggested that multinationals were active in imperfect competitive markets and invested as a result of a follow the leader strategy or in reaction to foreign firms invading their home market. These conditions were deemed necessary but insufficient to explain FDI behaviour (Agarwal, 1980). Aharoni (1966) drawing from the behaviour theory of the firm suggested that three factors were fundamentally important in initial investment decision: uncertainty, information 2 According to Hymer (1) the older theory suggested that flow of capital was one directional, from developed to underdeveloped countries, whereas in reality, in the post-war years, FDI was two-way between developed countries; (2) a country was supposed to either engage in outward FDI or receive inward FDI only. Hymer observed that MNEs, in fact moved in both directions across national boundaries in industrialised countries, meaning countries simultaneously received inward and engaged in outward FDI; (3) the level of outward FDI was found to vary between industries, meaning that if capital availability was the driver of FDI, then there should be no variation, as all industries would be equally able and motivated to invest abroad; (4) as foreign subsidiaries were financed locally, it did not fit that capital moved from one country to another 152

162 Foreign Direct Investment and commitment3. Another useful perspective in understanding the determinants of FDI was given by the product cycle hypothesis presented by Vernon (1966) and related to the international trade theory by Hufbauer (1966). The theory related investment theory with trade theory arguing that the investment decision was a decision between exporting and investing, as products moved a life cycle divided into three stages(new, mature and standardized products). It is the price of competition in the host country that drives the firms to seek cost advantages, especially labour costs hence FDI. It was Buckley and Casson (1976) who first formalised the various streams of thought into a general theory of multinational enterprises (MNCs). Based on the work of Coase (1937) on transaction costs, they developed the internalization concept. They claimed that markets for some goods (intermediate/unfinished) tended to be imperfect and were characterized by risk and uncertainty. This led to high transaction costs such as information, enforcement and bargaining necessitating internalization i.e replacing these external markets by their own internal markets for these products. The internalization of markets across nation boundaries leads to FDI, and this process continues until the benefits and the costs of further internalization are equalised at the margin. The decision to internalise was dependent on industry, region, nation and firm specific factors. What was not clear in this theory is the motive for by passing the market, is it inefficiency in terms of relative transaction costs or longer time lags or anything else(agarwar, 1980). Dunning (1977, 1979) is credited for have made the best attempt to develop a general theory of FDI4. In his eclectic paradigm of FDI, he brought together internalization theory and the traditional trade theory, synthesising the reasons for firms to operate internally and FDI modes of entry. He identified three special advantages possessed by MNCs: ownership, location and internalization5 (OLI). Dunning (1988) further show that these advantages could be related at the country, industry and firm level and varied depending on whether countries were developed or developing, large or small, industrialized or not e.t.c. He further suggested that the FDI type was also determined whether sequential or only initial FDI occurs. He claimed that the resource seeking FDI or the market seeking FDI investment was typical to initial investment, while efficiency seeking and strategic asset seeking investment was typically sequential (Dunning 2000). More recently Dunning and Lundan (2008) explicitly incorporated the content and quality of institutional capital into the eclectic paradigm. 3 A firm must be convinced that the investment is worthwhile and therefore will take into account the risk involved and uncertainties involved. The initial force comes from forces external or internal such as a strong interest of one or several high ranking executives inside the organization for a particular investment obtain the necessary information and have the commitment to implement the project abroad (Agarwal, 1980). 4 See Faeth (2009) and Agarwar (1980). 5 Ownership advantages refer to multinationals production processes ensuring a competitive advantage over domestic firms and include patents, technical knowledge e.t.c Location advantages were motives for producing abroad including access to protected markets, tax incentives e.t.c Internalization advantages as discussed earlier. 153

163 Building on the industrial organization models as well as some aspects of the OLI theory, the new trade theory has offered an alternative framework for analysing FDI and MNC activity. Helpman (1984, 1985) using a general equilibrium model with monopolistic competition in horizontally differentiated goods explains MNCs occurrence through the equilibrium process. According to this theory firms relocated abroad when factor endowment differences were large and factor price differences existed. This became to be known as the factor proportions hypothesis and explained the existence of vertically integrated firms with geographically fragmented production. Markusen (1984) used a similar model to explain horizontally integrated firms with simultaneous activities in multiple similar countries. Here knowledge capital gave rise to firm level scale economies due to its joint input nature, leading to technical efficiency an important advantage over other domestic firms. Horstmann and Markusen(1987) extended this model further by arguing that the MNC activity should be derived endogenously in a general equilibrium model and should not be assumed as given. They modelled horizontal MNCs as organizational mechanisms taking proximity and plant scale economies into account. The proximity concentration hypothesis, based on the trade off between the maximising proximity to customers and concentrating production to archive scale economies was developed in a similar fashion by Krugman (1983). This hypothesis was further elaborated by Horstman and Markusen (1992) for homogenous goods and by Brainard (1997) for differentiated products both arguing that the country size was positively affected MNCs. New trade theories begun to integrate the two streams of literature explaining vertical firms and horizontal firms independently in a knowledge capital model allowing for multiple plans and separate headquarters and production as special cases(markusen, 2002). The main argument was that horizontal MNCs were more common than the vertical MNCs, which only existed for some host economies in some industries. However, Hanson et al (2001) argued vertical FDI were more common than theory suggested based on the observation of the FDI movement in the 1990s due to the use of foreign affiliates as export platforms and outsourcing by multinationals to their affiliates. These had been largely ignored in earlier analysis. This generated new research area on export platforms (Ekholm et al, 2007) and international outsourcing (Grossman and Helpman, 2002). The diversification of multinationals observed led to a further reliance of the earlier neo classical theories that emphasised business risk, which had been extended further by Rugman (1977). Recently, trade models have begun emphasising the importance of firm heterogeneous characteristics and the degree quality of contracting institutions in affecting FDI decisions (Helpman 2006). Building on the work of Melitz (2003) heterogeneity results from productivity differences across firms within industries and because of the organization form. Differences in productivity induce difference choices of the organization of production and distribution. Trade and FDI decisions are then determined jointly within these organization 154

164 Foreign Direct Investment decisions, such as outsourcing and integration strategies. Thus foreign firms with higher productivity will prefer to export and establish plants abroad while those with lower productivity may prefer to serve the domestic markets. Although remarkable progress has been made in attempting to explain why FDI flows to host economies, a general theory is yet to be developed. What Agarwal (1980) observed then is still valid today, that the existing theories account only partially for the determinants of foreign direct investment. More recently, Faeth (2009) observed that there is no one single theory of FDI, but a variety of theoretical models attempting to explain FDI and the location decisions of multinationals. While the neo classical models have been criticized due to their assumption of perfect markets, Dunning, OLI model is the best attempt towards a general FDI theory that has been made so far. An alternative framework has been developed by the new trade theories taking into account the new developments in the world. Apart from the factors suggested by these theories, there are other additional policy variables considered to determine FDI. These include government policies and incentives. Other important non policy factors are political stability, infrastructure among others. Empirical Literature review on determinants of FDI There is a substantial amount of literature on the determinants of foreign direct investments focusing on both developing and developed countries. This study seeks to isolate and compare the locational advantages that a country possesses which would make it attractive location for FDI in the productive sectors. Until recently most of the literature on the determinants of FDI and the consequent choice of location by a MNC has tried to examine the role of certain traditional demand factors such as wages rates, capital costs, market size and proximity to the local market (Biswas, 2002). Of all the traditional determinants of FDI, market size, based on the market size hypothesis seems to be the most undisputed variable (Agarwal, 1980). Ramasamy and Yeung (2010) observe that it is logical to assume that a larger market size, an increased purchasing power and a high growth potential attract greater amounts of FDI. The rationale for the positive relationship is that a reduction in the cost of entry through economies of scale can be exploited in larger markets. At the same time an increase in purchasing power allows greater product differentiation to take place that may result in the localisation of the product/ service. As FDI is a long-term commitment, naturally, a promising future for the host country attracts MNCs to invest. Various market related variables have been considered in literature to include GDP, population, GDP per capita and GDP growth and GNI. Another important set of traditional factors that determine FDI are cost factors. Efficient seeking FDI tends to locate itself in countries that provide cost advantages. Lall et al (2003) finds that having relatively lower costs provide an environment conducive to FDI both in the long and short run. Important cost factors include labour cost, labour skill and 155

165 transportation cost. Low wage rates in host countries should attract labour intensive FDI. This is collaborated with empirical evidence as captured by (Bellack et al, 2008) in a comprehensive literature review on labour costs and foreign firms. Availability of skilled labour strengthens the MNCs ownership advantages they possess and adapt these to the local environment using local talents. This would allow them to expand their market, not only in the host country but the region as well. Feenstra and Hanson (1997) find a positive correlation between growth of FDI and with the relative demand for skilled labour in Mexico. Among developing countries in particular, reliance on low wages and low skills might be detrimental in attracting FDI into higher value-added industries (Ramasamy and Yeung 2010). Infrastructure is an important cost factor that affects FDI. A reliable infrastructural system needs to be in place to allow the movement of input output from source to plant to port. Several studies have found a significant positive relationship between the level of infrastructure and inward FDI (Coughlin et al. 1991, Cheng and Kwan 2000 and Ramasamy and Yeung 2010). Asiedu (2002) find that infrastructure development promotes FDI in non Sub Saharan African countries but has no impact on Sub Saharan African countries. The cost of capital, interest rates is another cost component that influences FDI inflows. Given that a large amount of funds could be raised from the financial system of host countries, a high interest rate could negatively influence the extent of FDI inflow. Moshirian (1997) find a negative relationship between long term interest rates and FDI inflows. Alfaro et al (2009) find that a well developed financial system allows host economies to exploit FDI more efficiently. Thus higher financial development is associated increased FDI. Another important aspect of cost factors is captured by agglomeration economies. Information search costs weigh heavily on first time investors and foreign firms have to rely on other firms in the host country in related industries. FDI also involves a substantial risk and coordination costs. Krugman (1997) points out that as foreign firms face greater uncertainties than domestic firms in the host country; they may have strong incentives to follow previous investors because of the signal they send as to the reliability of the host country location. Guimaraes et al (2000) find evidence of agglomeration as an important determinant of FDI inflows. Barry et al (2001) observes that localization of firms has traditionally been shown to have been an important determinant of FDI inflows due to efficiency and as a signal of reliability in host country. Finally among the traditional factors are the macroeconomic stability factors and trade policy. Macroeconomic policy stability especially price stability is an important determinant of FDI. Without it, the risks to do business rises drastically and both internal and external trade is significantly hampered. One important macroeconomic stabilization factor is the rate of inflation. High and unpredictable inflation cripples businesses and checks on the development of financial intermediation within the private sector (Rogoff and Reinhart, 2003). Investors prefer to invest in more stable economies that reflect lesser degree of 156

166 Foreign Direct Investment uncertainty. Vijayakumar et al (2010) observe that when inflation rate is taken as a measure of the overall level of economic stability the classic symptom of fiscal and monetary control will result in unbridled inflation. Exchange rate volatility is another important component of macroeconomic stability. Currency devaluation means a drop in the relative cost of production and assets from foreign companies and thereby increases the relative attraction of a host country. Empirical studies show that a depreciation of currency in a host country attracts FDI while high volatility of the exchange rate discourages FDI (Froot and Stein, 1991, Kiyota and Utara, 2004). Government spending policies can also affect business location decisions of the investors. Numerous categories of government expenditures such as spending on education, infrastructure could affect FDI. Government promotes FDI mainly through provision of information and investment incentive packages (Coughlin et al.1991). Luger and Shetty (1985) and Coughlin et al (1990, 1991) all find positive evidence between various measures of state expenditures geared towards the promotion of FDI. Trade policy is also an important determinant of FDI. Balasubramanyam et al (1996) find that FDI tends to benefit countries that pursue an outwardly oriented trade policy than it is in those countries adopting an inward oriented policy. In addition, Konishi et al (1999) observe that presence of trade barriers can also create a tariff jump for FDI in the domestic market. Biswas (2002) observe that studies that have concentrated solely on the traditional determinants suffer from low value of the coefficient of determination in their regressions i.e between This has been attributed to the failure to include non traditional factors that have affected the scale and character of FDI to countries. Addison and Heshmati (2003) observe that FDI inflows to host countries have been affected by successive waves in the invention and adoption of new technologies. The latest wave the revolution in information and communication technology (ICT) is facilitating a global shift in the service industries, which are now relocating to select developing countries, following the earlier shift in manufacturing. Global political change also affects FDI flows. Since the early 1980s, a third wave of democratization has pushed aside many authoritarian regimes, and the opening up of political systems is often a catalyst for economic reforms that favour investors. These two waves, one technological, one political, are interacting to reshape trade and capital flows, including FDI. Since the late 1990s literature has increasingly focused on political and institutional determinants of FDI. The quality of institutions may matter for FDI since it can raise productivity prospects; good governance infrastructure may attract foreign investment. In addition poor institutions can bring additional costs to FDI. Due to high sunk costs, FDI is especially vulnerable to any form of uncertainty, including that stemming from poor government efficiency, policy reversals, graft, weak enforcement of property rights and the legal system in general (Quere et al, 2007). Political risk is related to the risk that the host country will 157

167 unexpectedly change the rules of the game under which businesses operate. Changes in government policy/ and or political institutions could affect the behaviour of MNCs, as the risk premium incorporated in any investment project and therefore also the location decision is influenced by political risk (Busse and Hefeker, 2007). Schneider and Frey (1985) find that political instability reduces the inflow of foreign direct investment. Bevan and Estrin (2004) find insignificant results of the host country risk as a determinant of FDI in transition economies. Kolstad and Villanger (2007) find that institutional quality and democracy are more important as determinants than political instability. Methodology and Main Survey Findings Methodology This study was based on a firm survey that was conducted in Kenya and Malaysia. In Kenya two regions were visited, Nairobi and Thika. This was justified by the distribution of FDI in Kenya. These regions account for approximately 60 percent of the foreign firms located in Kenya. In Malaysia the survey was conducted in both Kuala Lumpur and Penang regions. The two regions have traditionally been the main FDI locations in Malaysia6. The data was collected during the period November 2008 to April 2009 in Malaysia and November April 2010 in Kenya. The desired information was obtained through face to face interviews with the use of structured questionnaires. The initial FDI list in Kenya i.e population was compiled from several lists obtained from the Kenya Investment Authority (KenInvest), Kenya Institute for Public Policy Research and Analysis (KIPPRA), Kenya Private Sector Alliance (KEPSA) and Kenya Industrial Research and Development Institute (KIRDI). This was based on the fact that no comprehensive study on FDI has even been undertaken in Kenya. Therefore the number of foreign firms establishment in Kenya is unknown. This list comprised of 2109 firms. In Malaysia the FDI list was obtained from the Malaysia Industrial Development Authority (MIDA) which comprised of 5210 firms. The population was then subdivided into clusters depending on the various sectors, the availability of location address and year the firm begun operations. The firms were then initially contacted through telephone and based on their acceptance to be interviewed an appointment was scheduled. This was then followed by a visit to the premise where the interview was conducted. A total of 56 questionnaires were fully completed in Kenya while in Malaysia a total of 47 questionnaires were fully completed. The respondents were employees in management positions e.g finance, administration, operations, human resources e.t.c. The study targeted firms that were mainly involved in the manufacturing sectors7. In addition some interviews were conducted with policy makers to have a feel of the nature of 6 In the 1980s the government opened up other regions like Johor, Kedar e.t.c 7 The study acknowledges that FDI is also located in other sectors in the two countries. Whereas failing to interview such firms could result in biased results, it is worthwhile to note that since the 1970s much of the FDI has been concentrated in the manufacturing sectors in both countries. 158

168 Foreign Direct Investment institutions and policies that are related to FDI operations in the two countries. Two key institutions that were central in the study are Malaysia Development Authority and the Kenya Investment Promotion Authority. A total of 15 questionnaires were completed by the policy makers: 7 in Kenya and 8 in Malaysia. Main Survey Findings Table 1(a and b) presents information on the distribution of the firms interviewed. Most of the foreign firms are located within the urban centres. 61 percent of the firms interviewed were based in Kuala Lumpur which is the capital city of Malaysia. 39 percent were based in Penang which is the second smallest state in Malaysia. These two states have had a long history of FDI. Most of the early foreign firms settled in these two states. The first free economic zones were established in these regions in the early 1970s. Table 1a: Location of firms and institutions in Malaysia Frequency Percentage Kuala Lumpur Penang Total In Kenya most of the foreign firms are located within Nairobi which is the capital city hence high interviews conducted. Thika town is an industrial town and home to several important industries. Table 1b: Location of firms and institutions in Kenya Frequency Percentage Nairobi Thika Total The firms interviewed portrayed some degree of heterogeneity when considering the country of origin (Table 2 a&b). Most of the firms interviewed in Malaysia were mainly concentrated in three regions, Europe, Asia and the US. Firms in Kenya exhibited more heterogeneity with additional firms originating from Africa, Asia and Australia. However in overall most of the firms in these two countries within the manufacturing sector are from the US and Europe accounting for approximately 60 percent of the foreign firms. Table 2a: Country of origin of investor in Malaysia Frequency Percentage Canada 2 4 USA Europe(Excluding UK) Asia UK

169 Table 2b: Country of origin of investor in Kenya Frequency Percentage Africa Asia Europe(excluding UK) UK 7 13 Canada 3 5 USA 8 14 Australia The sources of information that were instrumental to the foreign firms locating to these countries are contained in Tables 3 a&b below. The most important source of information in Malaysia was from the public agencies accounting for 40 percent of the respondents. Existing investors as well as economic trade missions/or contact through the embassy accounted for 17 and 15 percent of the respondents. In Kenya however, most of the firms obtained investment information from the relation established with an import/ export agent accounting for 30 percent of the respondents. Existing investors as well as clients/customers accounted for 25 and 21 percents of the respondents respectively. What was most notable in Kenya is the low number of respondents who obtained investment information from a public sector agency. Table 3a: Most valuable sources of information to invest in Malaysia Frequency Percentage Public sector agency Import/export agent 5 11 Existing Investor 8 17 Customer/client 5 11 Embassy or economic/trade mission 7 15 Others Table 3b: Most Valuable sources of information to invest in Kenya Frequency Percentage Public sector agency 5 9 Import/export agent Existing Investor Customer/client Embassy or economic/trade mission 2 4 Others Additional information regarding the significance of the support received from the government agencies is reported in table 4(a&b) below. All the firms interviewed indicated that they had some form of contact with a government agency which in this case was MIDA which acts as the first point of contact for the firms interested in investing in Malaysia. Most of the investors considered the information obtained from MIDA at least of some useful. In 160

170 Foreign Direct Investment Kenya however, most of the firms did not contact a government agency. This is because Kenya Investment Authority does not operate as a one stop shop. Besides there are other competing interested parties including private companies and prominent individuals mainly politicians or their protégée who are easily contacted. In addition most of the firms that did contact the government agency found the information useful. Table 4a: Did the Malaysian government/government agency offer you any form of assistance and how important was it? Contact Percent Usefulness of Information Yes No 0 1= too difficult to access; 2= Available but not helpful at all; 3= of some use; 4 =very Helpful but also needed additional information; 5= sufficient on its own Table 4b: Did the Kenyan government/government agency offer you any form of assistance and how important was it? Contact Percent Usefulness of Information Yes No 65 1= too difficult to access; 2= Available but not helpful at all; 3= of some use; 4 =very Helpful but also needed additional information; 5= sufficient on its own A further enquiry into the nature of assistance given revealed that most firms in Malaysia received tax holidays as well as economic processing zone benefits packages. MIDA is the main institution in Malaysia that is charged with the responsibility of providing various incentives with supervision from the ministry of international trade and industry. Incentives in Malaysia are given depending on the nature of the activity the firm is engaged in and its contribution to the present need in the economy. In Kenya on the other hand most of the industries benefited from the economic processing packages that were introduced since the 1990s. In addition tax breaks have been given to investors. Unlike in Malaysia the incentives given are not selectively given and there is no specific well established criteria attached to some purpose. In addition most firms complained of too much bureaucracy and sometimes cases of delayed Value Added Tax (VAT) refunds in cases of exemptions. There were variety of reasons which the respondents gave as having influenced their firms choice to invest in the two countries and are contained in table 6a&b below. In Malaysia the main driving force has been government support, labour cost and infrastructure. These three factors were ranked top by the investors. Interestingly political stability was second, followed by the market size and agglomeration effects. In Kenya on the other hand, the market within the country and its neighbouring countries was the main driving factor for most firms. Political and economic stability were second in rank, while 161

171 human resource availability was ranked third. Reasonable cost of production, EPZ concessions as well as infrastructure were ranked equally. Table 5a: What form of assistance was offered by the Malaysian government and how valuable was it? a) Offered: b) Importance in decision to invest YES (%) a. Tax breaks / holidays 31 4 b. Subsidies / cash payment 3 4 c. Import duty concessions 7 4 d. Reduction of land rent or utility charges 5 4 e. Guarantees on profit and capital 13 4 repatriation f. Export processing zone benefits package 26 5 h. Others = Not important at all ; 2= No effect; 3= Somewhat important ; 4 =very Important ; 5Critical Table 5b: What form of assistance was offered by the Kenyan government and how valuable was it? a) Offered: YES (%) b) Importance in decision to invest a. Tax breaks / holidays 25 3 b. Import duty concessions 17 4 c. Reduction of land rent or utility charges 3 4 d. Guarantees on profit and capital 3 3 repatriation e. Export processing zone benefits package 33 4 f. VAT exempt 12 3 g. Others 7 3 1= Not important at all ; 2= No effect; 3= Somewhat important ; 4 =very Important ; 5Critical Table 6a: Reasons for investing in Malaysia Factors Frequency Percentage Rank Infrastructure Political, Economic and Social stability Labour cost Labour skills Agglomeration effects Supporting vendors(suppliers) Government Support(Incentives or otherwise) Quality of Life Location Intellectual Property Protection Legal and Accounting system Financial system Natural resources Market

172 Foreign Direct Investment Table 6b: Reasons for investing in Kenya Factors Frequency Percentage Rank Market in Kenya and Neighbouring countries Favourable Climate Political Stability/Economic Liberalization of the economy cheap labour and cost of production Bilateral trade agreements Human resource availability Stable and growing economy Existence of similar businesses Easy process of acquiring licenses Resources and Raw material availability EPZ concessions Strategic infrastructure e.g port Financial systems Others The study also sought to understand the impediments investors face while operating in these countries. This information is presented in tables 7 a&b below. The issue of intellectual property rights was highlighted as a major concern to some firms in Malaysia. In additions there were some increasing concerns of the current competition firms owing to a operating in a liberalised environment. Some firms have been experiencing stiff competition especially with the entry of China, India and Vietnam in the global market whose cost of production is considered cheap due to surplus labour. Other reasons cited were availability of inputs locally, some government regulations among others. Interestingly all the respondents did not consider corruption in Malaysia as a problem. In Kenya, several factors were cited as reasons for low FDI. The main reason was the political instability in Kenya and its neighbouring countries. This was followed by crime and insecurity, corruption, unreliable infrastructure, delayed work permits and licenses among others. Table 7a: Potential areas for improvements in attracting FDI in Malaysia? Frequency Percentage Rank Market conditions(demand, competition) Intellectual Property rights Some government regulations Problems to get land Problems with financing Labour availability Availability of some inputs Others: delays by MIDA

173 Table 7b: Main impediments of FDI in Kenya Frequency Percentage Rank Political instability and its neighbours Crime and Insecurity Climate change Competition Unreliable infrastructure Delays in licenses & Work permits Lack of law enforcement/weak legal infrastructure Lack of proper knowledge of regional blocks corruption Lack of clear policies and regulatory impediments Exchange rate volatility/currency risk Economic growth Lack of skilled labour/high cost of production Cost of financing Discussions of findings The survey revealed interesting findings with regard to our study question as follows. The results reveal that the nature of FDI in the two countries is different and motivated by different reasons. Following Dunnings (1988, 2000) classification of FDI according to motives, it can be argued that most of the firms in Malaysia are mainly efficiency seeking. According to Dunning these firms commonly described as offshoring, or, or investing in foreign markets to take advantage of the cost structure. Such firms seek host countries to take advantage of cheap labour, government incentive mainly tax holidays as well as existing infrastructure in order to produce cheaply mainly for export. This finding is consistent with several studies on Malaysia. Drabble (2000), Rasiah (1995) and Kuruvilla (1995) observe that FDI in Malaysia rose due to existence of favourable investment policies, cheap, docile and skilled labour and well developed infrastructure. In addition the study notes that FDI in Malaysia is still dominated by low cost labour intensive industries although this trend begun to change in the 1990s. This is not the case in Kenya. The foreign firms that have located in Kenya are mainly market seeking. According to Dunning these firms are driven by access to local and regional markets. Due to instability and underdevelopment in its neighbouring countries, Kenya until recently has remained a preferred destination for foreign firms (UNCTAD, 2005). Although Kenya s population and GDP provide a good market for consumer goods; it is the regional market that is more important to investors. Kenya is a member of the East Africa Community (EAC) and the Common Market for Eastern and Southern Africa, with nearly 93 million and 385 million people respectively. This makes Kenya a regional business hub for many international companies. In addition Kenya is a preferential trading country under the US legislation, African Growth Opportunity Act (AGOA), among others. 164

174 Foreign Direct Investment The study points to several factors that have resulted to Malaysia s success as an attractive location for foreign direct investment. The first two set of factors that have been highlighted are interrelated namely cheap labour, government support, infrastructure and political and economic stability. They all point to the role of government. To appreciate this point, an understanding of the genesis of FDI in the 1970s necessary. In the 1970s the government of Malaysia addressed prevailing unemployment as well as ethnic tensions by switched its industrial emphasis from import substitution to export orientation. This coincided with the introduction of the New Economic Policy, an economic blue print that was to last for 20 years. Its main aim was to generate and redistribute growth and the manufacturing sector was identified as an engine for growth. During this period the government established free trade zone act to entice export oriented FDI which were mainly labour intensive8. Real wages were also very low in these zones due to existence of surplus labour in the rural economy. The labour market was flexible and laid greater emphasis on job creation, rather than protection of workers' rights. In addition labour unions were not allowed to operate within these areas until in the 1980s nor were there regulations on minimum wage (Athukorala and Menon, 2004). One notable characteristic of the labour force in Malaysia cited during the study was its ability to speak English. Achieving progress in Malaysia has been a struggle to maintain peace and social harmony in a plural society inherited from the colonial past, while pursuing economic development and prosperity. Macroeconomic policy has not only been about economic stabilization, but also addressing income disparities along racial lines in order to preserve racial harmony (Menon 2009). Jomo(1998) observes that prior to the 1997 crisis, Malaysia endeavoured to maintain macro balances except for a large current account deficit which was usually covered short term capital inflows in to the Malaysian stock market as well as private sector short term US dollar borrowings from foreign banks. This was deemed acceptable given the high export oriented growth driven by the manufacturing sector. In addition the government maintained a liberal trade regime which created a receptive environment for FDI while at the same time pursuing selective industrial policies aimed at attracting foreign firms to the manufacturing sector (Lall, 1995). Okamato (1994) attribute the huge influx of FDI in the 1980s to removal of FDI regulations by the government. On infrastructure the government has endeavoured to develop the relevant infrastructure over the years (Drabble 2000, Rasiah 1995). Today Malaysia has one of the most developed infrastructures among the newly industrialised countries in Asia. 8 Initially there was an aggressive campaign mainly in Penang which entailed some of the leaders in government visiting several countries that were already considering relocating their labour intensive units to countries that were considered to possess low production costs. The success of this campaign led to some of the leading giants in manufacturing today establish their base in Malaysia. 165

175 The role of institutions and incentives are two key components when considering government support in Malaysia. MIDA is the government principle agency for the promotion of the manufacturing and more recently services sectors in Malaysia. This institution assists the companies which intend to invest in the said sectors as well as facilitating the implementation of their projects. It also facilitates the exchange of information among institutions engaged or connected with industrial development. In addition it evaluates the firms eligibility to various tax incentives, licenses, and duty exemptions on behalf of the government. This institution is well funded and has offices across the states in Malaysia as well as in strategic countries where it targets potential investors9. The study shows that this agency has been quite effective having acted as a one stop shop to investors in addition to assisting firms cope in a new environment through hand holding program. In addition the government has established other institutions that have been necessary to support the operations of firms, both domestic and foreign. Through MIDA the government offers a wide range of incentives the main ones being Pioneer status and Investment Tax allowance. Most of the incentives are contained in the Promotion Investment Act of 1986, Industrial Incentives Act of 1968 and Free Trade Zone Act of However, these state institutions are not without their share of criticism10. In addition to the role of the state, economic progress in Malaysia has created an internal demand for goods and services hence the market size was identified as an important FDI determinant. The government has also invested and provided resources to develop skilled labour. There is evidence of agglomeration effects resulting from the magnetic pull associated with the early firms moved to Malaysia in the 1970s especially within the electronic industries. Several studies support these findings. Togo and Arikawa (2002) find that agglomeration effects and the use of industrial estates as development policy have positive effects on firms location choice within the electronics industry in Malaysia. Agglomeration effects were found to have had a larger effect than industrial estates. Tseng (2005) using time series analysis identify determinants of FDI to the manufacturing sector in Malaysia as increase in education, infrastructure, market size and a current account balance while increases in inflation and exports have a negative effect. Ang (2008) using time series data for the period 1960 to 2005 identifies the market size as a significant factor in attracting FDI. In addition the study identifies the level of financial development, infrastructure development and trade openness as important for FDI. High corporate tax rate and an appreciation of the real exchange rate appear to affect FDI negatively. Interestingly the study observes that macroeconomic uncertainty induces FDI. In addition skilled labour and the liberalization process have had a positive impact on the inflow of FDI to Malaysia. Chong and Lam (2010) find that market size, trade openness and skilled labour impact FDI positively. 9 More information about MIDA can be obtained from 10 See Henderson, J and R. Phillips ( 1997). 166

176 Foreign Direct Investment Malaysia has been successful in attracting foreign direct investment. However there are several issues that require to be addressed. There was a notable concern on the aspect of intellectual property rights. Although Malaysia is a member of the World Intellectual property Organization (WIPO) and a signatory to the Paris convention and Berne convention which governs intellectual property rights some foreign firms expressed concerns that sometimes there has been lack of enforcement of these rules11. Occasionally the government has supported domestic industries established by employees who previously worked for foreign firms involved in their line of business. Two other important issues identified are the increasing cost of labour and global competition. The liberalised environment in Malaysia although critical in attracting FDI, has exposed foreign firms to stiff competition both domestically and internationally from countries with low costs of production such as China, India and Vietnam. Increased cost of labour and tightening of the labour market over the years has led to Malaysia losing its attractiveness as an attractive locale for efficient seeking FDI12. Chong and Lim(2007) using time series data for the period find that while the market size impacts significantly on the Malaysian economy, the market size of its competitor China impacts negatively. The other issues raised include: availability of raw materials locally leading to high import content in the production process by foreign firms; delayed responses by MIDA officials in addressing problems once reported; the perceived over interference by government authorities through excess supervision creating uncertainty in a free market environment and availability of credit to some foreign firms at affordable rates. The study reveals that Kenya s greatest challenges are political and economic instability, crime and insecurity, infrastructure and institutional factors such as corruption, delays licenses and work permits, lack of law enforcement e.t.c. Interestingly, these factors have also been identified by other studies with different rankings. For example the table below is an extract from a World Bank study conducted in 2007 on major business constraints. Political stability was not a major threat in 2007 survey, but after the post election violence this view seems to have changed. Infrastructure and institutional lists tops the list when considering foreign firms. Kenya until recently has enjoyed relative political stability compared to its neighbouring countries13. This did create certainty in the operations of foreign investors. Existing investors still consider it stable for businesses to thrive in. However with the introduction of multiparty politics towards the end of the 1980s and a demand for constitutional review brought a lot of uncertainties to investors (Mwega and Ngugi, 2007). The government s inability to manage ethnic tensions has led to instability and since 1990s there have been 11 For more information on intellectual property rights in Malaysia visit 12 This has raised concerns of negative de industrialization in Malaysia ( see Huat, 2009 and Malaysia s economic report 2001/2002). 13 For a discussion on political stability see Tamarkin (1978). 167

177 frequent fights among various ethnic groups. This culminated into serious post election violence in 2007 which claimed many lives. In addition the political instability in Somalia, Southern Sudan and the infiltration of refugees from this country has created a lot of uncertainties among investors. As a result, political instability and external shocks largely explain the economic instability in the 1990s and 2000s. Although the exchange rate has been managed, the rate of inflation has been double digits. This uncertainty led to the lending rate being quite high increasing the cost of doing business. Table 8: Business constraints in Kenya All Obstacle firms Size Ownership Location Industry Export Total Small Medium Large Dom Foreign Out. Nairobi Nairobi Manuf Retail Other Non exp Exp Tax rates Access to finance (avail. and cost) Competitors in the inform. sect Corruption Crime, theft and disorder Tax administration Transportation Business licensing and permits Electricity Customs and trade regulations Macroeconomic instability Telecommunications Regulation on pricing and mark-ups Functioning of the courts Political instability Access to land Labor regulations Regulation on hours of operation Zoning restrictions Inadequately educated workforce Source: ICA Survey The liberalization of the economy in the 1990s led to an increase of FDI in Kenya. Prior efforts in the early years by the government to liberalize the economy had not been successful. The key policy components of the liberalization in the 1990s were a shift from import substitution to export promotion and the removal of tariff and non tariff barriers. The goal of trade liberalization was to enhance enterprise efficiency and export growth. In 1990 the government embarked on phased tariff and rationalization of the tariff bands. The highest tariff rate was reduced from 135 percent to 60 percent, while tariff rates from non competing imports were lowered. By 1991, quantitative restrictions affected only 5 percent of imports compared to 12 percent and 5 percent previously. In addition in the 1990s there was removal of trade licenses, foreign exchange controls and all current account and capital account restrictions were removed (Were and Mugerwa, 2009). Several additional measures were also introduced to promote FDI and export oriented industrialization. The measures introduced to promote exports included manufacturing under bond (MUB) in 1986, export processing zones (EPZs) in 1990, and the Export Promotion Centre and Export Programme Office (EPPO) in 1992 (Kimuyu, 1999; Glenday & Ndii, 2000). However these efforts were not very effective due the country s instability. 168

178 Foreign Direct Investment Prior to the establishment of Kenya Investment Authority (KIA) in 2004, was the Investment Promotion Centre whose mandate was to promote Kenya as an investment location. This institution has kept changing names and mandate, and suffers seriously from under funding and lacks a clear mandate a problem shared by most of the institutions in Kenya (Gachino, 2009). KIA whose new mandate is to target and attract investment to achieve economic growth suffers from the same problems. In addition it does not operate as a one stop shop and therefore can not execute its mandate as expected. This explains why most of the firms in the study did not seek assistance from KIA or IPC. In addition the respondents viewed government institutions as corrupt and slow. Similar observations were made by UNCTAD (2005), Mwega and Rose (2007). Rasiah and Gachino(2010) observe that institutional failure in Kenya is so severe that several foreign firms have relocated their operations to neighbouring economies. The World Bank survey in 2007 identified institutional factors among the most severe concerns for foreign firms in Kenya (Table 8). Related to political instability is crime and insecurity. This has been caused by several things. First, the unemployment in Kenya with many young people completing studies without employment. In addition the instability in Kenya has led to an increase in unlicensed fire arms. This has threatened the safety of investors some of whom have been victims and lost their loved ones. In addition foreign firms have had to incur high costs including hiring extra security, acquiring sophisticated security devices to protect their investments. This is made worse by the fact that most investors do not have faith in the judiciary in Kenya as it tends to be very slow to handle cases and is equally corrupt. This was also identified as a major concern in the World Bank survey in table 8 above. Another major setback to foreign investors has been the state of the infrastructure. Cost of telecommunication, electricity and transport are the most problematic. Until recently, most of the roads have been in a deplorable state. This has led to increased cost of doing business. Similar observations are made by Rasiah and Gachino (2010), Phelps et al (2008), and World Bank 2007 survey. In a study by Blattman et al (2004) infrastructure rated highly as a major obstacle. Lastly another important issue raised was cheap imports especially from low cost producing countries, through dumping and counterfeit products have resulted in unfair competition affecting the operating investors. Conclusion The objective of this study was to explain why Malaysia was very successful in attracting FDI compared to Kenya using firm survey. The two countries are strategically advantaged to attract FDI, but Kenya has failed to utilize this chance over the years. The manufacturing sectors in the two countries have a history of foreign investment dominance although Kenya s FDI is very low compared to Malaysia. They both have enjoyed political stability since independence until in the late 1980s when Kenya became quite unstable due 169

179 to an increased demand for a new political dispensation. Although the two countries have been relatively open, they embarked on trade liberalization towards the end of the 1980s with Malaysia registering very impressive growth in FDI while Kenya did not due to existing political instability among other reasons. The study reveals that both countries have managed to attract different kinds of FDI with Malaysia attracting mainly efficiency seeking FDI while in Kenya marketing seeking FDI. The results of the study suggest that the main cause for this observed pattern of divergence largely lies with the role of the state. The government in Malaysia since the 1970s established an economic blue print that shaped the growth of the country for a period of 20 years. During this period the manufacturing sector was identified as the engine for growth and government embarked on export oriented strategy although not entirely abandoning the import substitution policy. Free trade zones were established and the government introduced new incentives to complement what already existed. These incentives have kept changing as the country has progressed. This phenomenon is not observed in Kenya, which held on to the import substitution strategy till the mid 1980s. In addition there was no serious attempt to develop the manufacturing sector in Kenya and few incentives were provided. The few attempts that were made to liberalise the economy did not bear fruit until the 1990s. Although industrial policies and incentives do matter, it is political instability that has cost Kenya big time. Unlike Malaysia, the Kenya government in the recent past has not managed ethnicity tensions well. The government has more often than not supported the interests of specific ethnic groups at the expense of others. This problem usually manifests its self during the election period as people from different ethnic communities fight each other. Although this is still a challenge in Malaysia, the government has embarked on economic prosperity for all, with clear policies aimed at redistribute wealth with great success. Political stability in Malaysia has allowed for economic stability which has been undertaken with special attention given to the interests of marginal groups. This stability has resulted in creating an environment of certainty where FDI can thrive. Instability in Kenya as led to an increase in crime and insecurity which not only increase the cost of production but also has led to sometimes loss of lives forcing the investors relocating their operation to neighbouring countries. An additional role of the state can be analysed based on the existing institutions. The government of Malaysia has numerous institutions established since the 1960s to oversee the industrial investment. One notable institution which has existed over the industrialization period is MIDA. These institutions are well funded and can be said to function properly. They have worked closely with the investors assisting them to deal with various problems. This is not the case in Kenya. Institutions keep changing and are always underfunded and have limited scope to execute their mandate. In addition these institutions are ridden with corruption and 170

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186 Foreign Direct Investment Competitiveness and FDI effects on development and GNP in IRAN Sina Mehrabi Rad & Mohammad Jafar Kabiri 1 Abstract: The aim of this paper is to examine the factors that influence the increase of GNP in Iran. The effect that six basic groups of variables have on the structure of GNP is analyzed. Using factor analysis, the large number of variables decreases significant, at the same time the descriptive ability of the existing models increase considerably. Each industry is examined separately in order to find the specific factors that influence its competitiveness and FDI. Most of the industries of our analysis present different effect on competitiveness and FDI of the development in Iran. Also important role plays the regression of Oil exports on FDI and GNP. Finally, the results of our investigation for the parameters that influence the change of GDP and FDI are presented. Key words: competitiveness, Development, Iran, oil exports, FDI JEL codes: R110, R580 1 University of Tehran, Iran. 177

187 Pattern to capture FDI absorptive capacity Hoang T. Nguyen & Geert Duysters 1 Abstract: The aim of this paper is to suggest a pattern that will help to explain the ability of the host country to effectively utilise foreign direct investment (FDI). Through literature review, the study will assemble a methodological framework to analyse the absorptive capacity in terms of human capital, domestic firm, financial systems, physical infrastructure, technological and institutional development. A set of indicators to capture the absorptive capacity such as the ratio of educated population, share of R&D in GDP, number of telephone per person, stock market capitalization relative to GDP, index of business regulations, among others is indicated. Some policies that improve the internalities in order to absorb the externalities and combine them to synthesis energy to promote national development are recommended. Key words: FDI absorptive capacity, spillovers, conversation analysis, photosynthesis JEL classification: F21, F23, O24, O33 1 Eindhoven University of Technology (TU/e), the Netherlands. 178

188 Economic Development and International Trade Global competition, productivity, and trade: An alternative model of comparative advantage Rafat Fazeli 1 & Reza Fazeli 2 Summary Dani Rodrik, in a recent essay in the Journal of Economic Perspectives, suggests that the principle of comparative advantage is one of the crown jewels of the economics profession. He argues that the idea that all nations gain from trade even when one of them may have an absolute cost advantage in producing everything is subtle in its logic, yet powerful in its implications. In fact, this principle, since its introduction by David Ricardo in 1817, has been the central proposition of international economics and has shaped the way that the mainstream economists view the global economy. It is this principle that, as Dani Rodrik states, serves as the basis for our profession s overwhelming support for free trade. This paper offers a comparative analysis of three alternative theories of trade. The primary concentration of the paper is the Ricardian theory of comparative advantage. However, due to shortcomings, many attempts have been made to modify and/or redefine it. For Ricardo (2006), comparative advantage depended on relative differences in labor productivity resulting from differences in technology among nations. This was a major advancement to Adam Smith s vision that absolute cost differences would govern the movement of goods between nations. Eli Heckscher and Bertil Ohlin developed a neoclassical formulation of the principle of comparative advantage. The Heckscher-Ohlin factor-endowment model points to the central role of resource endowments as the basis of comparative cost differences among nations. The third theoretical perspective discussed in this paper is Anwar Shaikh s reformulation of the Smithian law of absolute advantage. Shaikh argues that absolute advantage not only regulates domestic transactions but also rules international trade. The same forces that guide domestic competition among corporations in a given industry should direct trade across national boundaries. In a more recent paper, William Milberg reviews Keynes contribution to the free trade debate arguing that it leads to the development of a vision that is consistent with the theory of absolute advantage, more or less in line with Shaik s perspective on trade. The paper compares the merits and shortcomings of these theories and their potential to explain patterns of trade and global competition in an increasingly integrated world market. 1 Department of Economics, University of Redlands, USA. 2 Department of Economics, New School for Social Research; New York, USA. 179

189 In a paper published in the RRPE, Reza Fazeli put forward a comparative analysis of these alternative perspectives and developed a theoretical foundation for the analysis of the recent debate on globalization and the competitive position of the United States in the global economy This paper offers a reformulation of the Ricardian model in line with the Shaikh/Classical theory of competition. It modifies and extends the Ricardian model to a general case in which production prices do not need to be proportional to embodied labor coefficients. It develops an alternative model in which both relative productivities and capital labor ratios jointly determine relative prices. It also relies on the proposed model to explain globalization and the changing patterns of international division of labor. We will further argue that the theory of absolute advantage can be valid if certain conditions are met and it is certainly gaining more prominence with the growing level of globalization. The relative relevance of the two theories depends on the reality of global competition and the extent of global integration of national economies. 180

190 Economic Development and International Trade From market economics to institutional embeddedness of economic development: Key ethical issues for transition states Konstantinos Hazakis 1 Abstract: The debate over the role of ethics in transition economies is part of a larger debate concerning the interaction of state and markets in East Europe. The present article demonstrates the suitability of the institutional approach and the methodological disadvantages of the neoclassical theory concerning the key issues of this debate. It is suggested that transition economies need not to provide dichotomy between the end and the means of economic policies but rather need to reflect ethically how market and institutions interact efficiently, targeting in general economic and social welfare. Key words: Institutional theory, ethics, transition economies 1 Department of International Economic Relations and Development, Democritus University of Thrace; Komotini, Greece. 181

191 International trade entrepreneurship in the context of price risk exposure Larisa Nicoleta Pop 1 Abstract: In the fast changing globalized world, the exposure of the entrepreneurs to the international business environment is causing an augment in the concerns regarding the unfeasibility of predicting the market evolutions. The processes of integration and globalization brought undeniable positive effects, but they also emphasized various economic risks, raising the necessity of their identification and estimation. The current expansion of the global markets amplify the requirement of analyzing the risk in general and the price risk in particular, both in the academic and business sector, determined by the continuous process of externalization of the entrepreneurial activities, and the privileged position occupied by the international trade in the contemporary economy. Price stability became obviously unachievable, especially in a current environment characterized by a high exposure of the Global economy to profound turbulences: the severe turmoil experienced by the commodity markets in , the still on-going economic and financial crisis, the worsening manifestations in the changing weather patterns induced by the global warming phenomenon, the financialisation of commodity markets etc. All these increase the vulnerability of the participants to international trade creating a framework of higher price risk and uncertainty. In such a context, it appears as a must for market participants to make additional efforts in order to deal with the volatility implications and price risk intensification. The paper intends to present the specific manners of materialization of the price-changing risk in the present troubled international business environment, the analysis of its emergence and persistence with its consequences for the economic agents, analyzing also some available protection mechanisms. Keywords: price volatility; price risk exposure; currency exposure; price risk management; futures and options exchanges JEL Classifications: F1, F31 Introduction In the fast changing globalized world, the exposure of the entrepreneurs to the currently troubled international business environment is causing an augment in the concerns regarding the impossibility of predicting the market evolutions. The processes of integration 1 Faculty of Economics and Business Administration, Babes-Bolyai University; Cluj-Napoca, Romania. 182

192 Economic Development and International Trade and globalization brought undeniable positive effects, but they also emphasized various economic risks, raising the necessity of their identification and estimation. The trend of market globalization, business externalization and increased competition determined the fading of the traditional separation between risks voluntarily accepted by the firm, as a chance to improve its profitability, and risks which unavoidably lay on the business activity of the firm itself and have to be adequately covered through mechanisms of risk management. As a consequence, a firm s exposures to risks became more complex and more difficultly manageable. In addition, the current Global economic environment is facing a high exposure to profound turbulences: the severe turmoil experienced by the commodity markets in , the still on-going economic and financial crisis, the worsening manifestations in the changing weather patterns induced by the global warming phenomenon, the financialisation of commodity markets doubled by the instability that currently characterizes the financial markets, are just some of them. All these phenomena amplify the vulnerability of the participants to international trade creating a framework of higher price risk and uncertainty. An increased level of exposure is faced primarily by the smaller firms, generally characterized by a low power of negotiation, dependant on rented logistics for carrying out their business processes, and with reduced capacity of passing on into the business chain the increased costs. Nevertheless, for the businesses with an adequate management and operating in fields with significant competitive advantages, this context brings along also profit and development opportunities, especially in the case of exposure to speculative risks. From the entrepreneurial perspective, generally characterized by a propensity for risk-taking, in this category of speculative risks can be situated also the price risk and the foreign exchange risk, due to the fact that while on the one side, the fluctuation of prices and exchange rates can be responsible for profound losses, on the other side, they can bring consistent incomes. Each company needs to analyze its position and to establish its attitude towards risk, and then combining principles of risk management with available protection mechanisms to seek for the appropriate way of facing the current instability in order to guarantee its business continuity. The Price Risk Exposure of Participants to International Trade The price risk arises whenever the firm has exposure to changes in prices as part of its business operations. The price fluctuations have different impacts for a firm, depending on the nature of its business, profile, type of activity or complexity of the process. The degree of risk exposure of a firm involved in international trade activities is a function of a series of variables, among which the most influential ones are: 183

193 the dimension which affects the firm s power of negotiation and its dependency on contracted logistics; the presence of imported inputs in its business process; the availability of hedging mechanisms; the currency denomination of contracts, etc. Changes in prices can have adverse impacts on the profit margins of a firm if the increased costs cannot be passed on, situation that generally characterizes the small businesses with a low power of negotiation. Price fluctuations situate importers and exporters at opposite ends from the standpoint of their expectations regarding the price evolution. As performing in international trade, they both face multiple sources of price risks, among which the correlation between the input prices with the output ones occupies a central role. The key determinants for this correlation are the presence of imported inputs in the business process and the type of activity the firm performs. In the case where the firm performs just a trading function and basically buys and sells the same good, the correlation of input and output prices over short periods of time may be high, diminishing its risk exposure. In contrast, in the case of a more complex process, when an importer purchases a commodity necessary as input to a valueadded processing activity, and perhaps its activity implies operations of further export, the correlations of input and output prices become lower, depending on the importance of a particular input price relative to others, price regulations, competitive pressures and currency denominations. Furthermore, in international transactions, additional risks that can be incorporated into the price risk category include fluctuations in ocean freight rates (or other transportation costs) and foreign currency exchange rates volatilities. The protection strategies and the price risk management plans that a firm formulates and implements in order to hedge itself from these exposures must consider each of these sources of risk. Traditional and Newly Emerged Determinants of Price Volatility Price stability regarded as the abolishment of volatility became obviously unachievable, fact demonstrated once more by the present troubled environment. Price volatility is driven by a wide variety of factors, such as market fundamentals (i.e. supply and demand), stock levels, changing weather patterns and related impacts, cycles in key markets, large purchases by governments, exchange rate movements, oil price fluctuations, trade policies and their transmission, agreements or geo-political tensions, investments in production, changes in purchasing power, etc. In order for market participants to deal with its implications, a general image of the factors inducing price volatility must be presented. These factors require approaching and analyzing first of all from the perspective of the object of transaction. Whether this object is 184

194 Economic Development and International Trade represented by a commodity, a manufactured final good or takes the form of a service, the factors inducing price volatility are either specific for that category or common, with influences manifested for all. Price Volatility of Commodities Price trend and volatility in commodity markets are of major significance for the global economy. Raw materials prices represent an important cost factor for consumer economies; consequently, through their movements they can have a significant influence on the price trends of final goods. In developing and newly industrializing economies which produce and export raw materials, commodity prices are a central determining factor of their export returns, therefore manifesting a high influence on the import capacity of these countries and on their economic development. Hence, the oscillations in the prices of commodities play an important role in price risk emergence through the central position commodities have in international trade, business processes and macroeconomic linkages. Commodities can induce price risk through the following processes: as being the object of transaction; as representing an input for a value-added processing activity; as creating implications and linkages for price movements on other markets (for example, on the energy market). If the commodities represent the object of the firm s activity (the firm exports a commodity or performs just a trading function in importing it, directly reselling it on the local market), their price changes generate direct price risk for both the exporter and importer involved in that transaction. However, commodities often play a central role as inputs (rawmaterials) for business activities, generating price risks through input-output price correlations. Another mean in which the volatility of commodity prices induces price risk is through their linkages and implications in the price movements for the electricity markets, consumers purchasing power, etc. Regarding the factors that determine the movements of commodity prices, when analyzing the present situation, it can be noticed an increased complexity of price dynamics. The identified factors can be placed in three main categories: 1. The category of Market fundamentals Supply-Demand Dynamics includes, among already long-established factors like variations in the stock levels and governmental purchases, also some newly emerged ones currently manifesting a very high impact on price levels, like the weather instability and natural disasters in the recent context of climate changing, the influences in the global supply and demand functions determined by the emerging Asian economies, the ongoing economic and financial 185

195 crisis, the development of new forms of commodity based alternative sources of energy like the biofuels, etc. 2. The category of Macroeconomic factors added to the traditional fluctuations on energy markets and currencies volatility, new factors like the financialisation of commodity markets which affect the prices through the speculative use of commodity based derivatives. 3. The category of Geo-Political Climate includes factors like geo-political tensions, wars, invasions, trade barriers and agreements, changing from an historical period to another. Figure 1: Main Factors Inducing Price Volatility Governmental purchases Emerging Asian Economies Trade policies Agreements Wars, Invasions Geo-political tensions Stock levels Bio-fuels PRICES Fluctuations on Energy Markets Ongoing Global Crisis Changing weather patterns Financialisation Currencies volatility Source: own elaboration inspired by Latentview Hedging and Pricing Tool. Currently, the category of newly emerged factors manifests a very high impact on price levels, overcoming in the attention of the annalists the long-established ones. The commodity markets have been in turmoil in the recent years, with prices reaching historical peaks just to crash dramatically some months later and very soon to restart their rise (Figure 2). Even though there have been common factors impacting on all commodity markets, price dynamics have differed across commodity groups generating different price risk exposures. For example, the impact of changing weather patterns has differed across commodity groups and across regions. These climate changes have the potential to impact production variability, and thus affecting market fundamentals. Until now at the European Union level, no certain links have been established between the climate changes of the last decades and the production level. However, its effect might be already visible in other, more 186

196 Economic Development and International Trade vulnerable countries and is starting to manifest itself more obviously also in the European area. This makes it a factor worth analyzing especially because it seems increasingly likely that global warming will lead to more natural disasters and wider temperature oscillations than currently experienced. Similarly to the global warming, the still on-going global crisis has not affected all categories of commodities in the same way. The primary mechanisms through which the crisis induced price instability were: the shortages in credit availability and trade financing that influenced market fundamentals; the invested capital on exchange markets, which influenced volatility; the stimulus packages introduced in some OECD countries and in some emerging economies, as response to the crisis, that created supplementary pressure on the market fundamentals. The mechanism of stimulus packages, as for example the economic stimulus plan launched by China in November 20082, was pointed out as the central likely reason for the general increase in commodity prices since the first quarter of 2009 (UNCTAD, 2010). However, China s contribution to price increases was occurring gradually for several years already, as its strong and sustained demand for commodities, together with the demand coming from the other emerging economies (primarily India), partially explain also the long price boom started in 2002 and continued until the peaks reached at the middle of There is also a series of systemic macroeconomic factors that affect commodity markets and influence the price volatility, as for example periods of loose regulation of financial transactions, generating fast increase of global financial liquidity or high volatility of the currencies in which the prices are denominated. A newly emerged macroeconomic factor that highly contributed in inducing the price turmoil of the last years is the financialisation of commodity markets, a fairly new feature in price formation on commodity futures markets. This phenomenon expresses the increasing interest in commodity futures not only as hedging mechanism against price risk, but also as an asset which generates returns and can be used to diversify traditional financial portfolios. Speculation on commodity futures markets is a highly blamed factor for price volatility. With active speculators on a market, prices react very fast to new information, and often overreact causing short-term volatility increases, making it more difficult for hedgers to manage their futures positions properly. However, speculation is a common practice in all commodity markets, being an essential ingredient of the commodity trade. And although 2 The Chinese package rose at the value of 4,000 billion Yuan (the equivalent of 586 billion USD) and it was mainly designed to expand infrastructure and to support the manufacturing industry. As a consequence, China has increased its imports of metals, minerals, energy and cereals. 187

197 volatility can attract significant speculative activity and destabilize markets, the presence of speculators on the derivatives markets is a necessary condition for functioning and efficient hedging, because speculators bear the role of taking over themselves the risk formerly kept by hedgers. Figure 2: Commodity Price Indices in current United States dollar terms - Monthly Data from January 2000 May 2010 (2005=100) Food Index Volatility Index Beverages Volatility Agricultural Raw Materials Volatility Metals Prices Volatility Petroleum Spot Prices Volatility Commodity Fuel Prices Volatility Note: Volatility (right scale) is calculated as the standard deviation of the price ratio. Source: own elaboration based on data released by International Monetary Fund. 188

198 Economic Development and International Trade Figure 3: The Characteristics of Hedgers and Speculators That Determine the Risk Transfer Process Hedgers: Risk transfer Have inherent Price Risk Wish to reduce or manage Risk Could deliver against futures contracts Speculators: Risk Takers Wish to make profit from correctly anticipating price changes Source: own elaboration. Several other factors determine price volatility, such as the concentration of supply in specific geographic zones or the relationship between production and other policies (e.g. the energy policies). An increase in this interdependence could cause prices to remain high and amplify their volatility (particularly if, considering the relation between the agricultural market and the energy market, the quantities placed on agricultural markets work as adjustment variables for the energy markets). Furthermore, supply concentrations in specific geographic zones diminish the market s capacity to absorb shocks, thus leading to higher risks. Price Volatility of Manufactured Goods The volatility is a reality also for the prices of manufactured products generating pressure, uncertainty and risk for the traders and processors whose activities imply them. Several factors determine the formation and variation of these prices, but between all, the effect of the costs determined by the utilized inputs, energy and fuel consumption is a decisive one. As inputs for value-added processing activities, the commodities and their price volatility manifest a high influence on the price level of manufactures and its instability. Furthermore, all these movements and turbulences experienced by commodity prices are expected to ultimately convert into higher consumer prices, as the producers and processors will increase their expenses trying to mitigate their risk exposures paying higher risk premiums or higher margins on futures contracts. In such a context, the vulnerability of small firms is augmented through their reduced power of negotiation and their impossibility of passing on the increased cost. The implications of commodity prices for the firms activity is also determined by oil prices, as oil holds the position of primary fuel for most major forms of transportation of goods and persons. While price-shocking events became a common occurrence on global oil markets and the 189

199 alternatives, such as biofuels, imply other sources of risk and price fluctuations3, the volatility on the commodity fuel market has a deep involvement in the business sector. One of the main effects of fuel prices volatility is manifested, within the macroeconomic context, through the role of transportation in determining the price of goods. The transport systems rely on fuel prices and most enterprises depend on rented transport for their business processes. The problem is augmented for the small companies by the fact that although the cost of these services increases as the fuel price increases, these prices proved to be downwardly sticky, meaning that they do not decrease when the petrol price declines (Van Der Heijden and Tsedu, 2008). The consequence is that small businesses dependant on rented transport services may face disproportionate cost increases, compared to larger companies that control their own logistics. Furthermore, this reduces the competitiveness of the smaller businesses, affecting their input-output price correlation. Another impact of commodity price volatility is manifested through the generated inflation and the consequent diminished purchasing power. Furthermore, smaller companies are not in a position either to negotiate price concessions from suppliers or to pass on inflationary costs, aspects that make them relatively more vulnerable than other type of businesses to adverse price changes, amplifying their exposure to risk. An Overview of the Available Key Mechanisms in Dealing with the Price Risk In dealing with all the implications of the price risk in the current context of instability, there is a wide range of market-based price risk management mechanisms available: traded on organized futures and options exchanges or on the over-the-counter market; included into the pricing formulas of physical transactions; or incorporated in financing deals. These mechanisms do not basically modify the risky character of the market, but they allow the participants to plan a way through these risks, improving their certainty regarding the prices they will face at a future date. And even though they do not reduce the volatility of earnings, they allow for an optimization of risk-reward equation at a lower cost, making the revenues more predictable, at least over a certain time horizon. Futures markets offer extremely useful risk management mechanisms. They ensure protection against price volatility, but never an average improvement on prices, as their use for hedging is not a tool to obtain better prices, but a manner to gain more certainty about the prices one can expect to get. The greater predictability they assure provides indirect 3 Lately there has been an increasing awareness around the world regarding the fact that using agricultural commodities like maize and sugar for biofuels is a major contributing factor towards higher food prices and reduced food security. 190

200 Economic Development and International Trade benefits, allowing for better decisions and more convenient credit terms, and consequently allowing for improved revenues. Different combinations and strategies can be applied in order to protect against increases or falls of prices, taking contrary positions on the futures market comparing to the ones held on the physical market. While futures contracts offer the opportunity to lock in prices, the options assure either protection from price risk or the opportunity to benefit from price increases even if the physical transaction already took place. The advantage of the options hedge is that the cost is limited to the upfront premium, perhaps less if positions are closed out prior to expiry (Hull, 2009). And even though the futures contracts are available only for a series of homogenous goods and the options may imply high bid-ask spreads4, they are important mechanisms that can conflate in order to create a risk management product adequate to any user s requirements. Even though the futures and options exchanges have a long period of time since they appeared and proved their efficiency as providers of tools against price risk, there are wide areas worldwide that still lack their presence. The following figure illustrates the geographical location of the main futures and options exchanges in the world. Figure 4: Main Futures and Options Exchanges Worldwide Source: own elaboration using a blank world map layout from As highlighted in Figure 4, futures and options exchanges are present in all developed countries in a fairly large number. Besides, at the European Union level, not only the more developed countries but all twenty-seven members have rather well structured organizations on this matter. As an example, Romania, one of the last joining members, provides a wide range of very sophisticated derivatives instruments through its commodity exchanges reopened at the beginning of 1990s after a period of ban during the communist era. 4 Bid-ask spread is the amounts by which the ask price (the price that a dealer is offering to sell) exceeds the bid price (the price that a dealer is prepared to pay). 191

201 Between the newly industrialized economies an impressing position is occupied by India which since 2002, after more than one century of troubled history with a series of bans for its organized commodity derivatives, has experienced an unprecedented boom in terms of the number of modern exchanges, number of commodities allowed for derivatives trading as well as the value of futures trading in commodities (Ahuja, 2006). Its very specialized exchanges are uniformly distributed across its entire territory. The worst situation from the perspective of commodity exchanges availability is the one of the least developed African countries, highly dependent of commodity trade, with no power in influencing the international price level and too few available mechanisms of price risk covering, aspects that put them in an extremely vulnerable position during this period of turbulences and uncertainties. As emphasized by the above figure 4, the presence of exchanges on the African territory is scarce, mostly localized on the shores of the more developed economies of the continent. Other categories of instruments designed to deal with the price risk, for example the contracts with backward-forward integration, allow for transferring a fraction of the risk upwards and downwards onto the other businesses in the chain. From the processors point of view, they ensure the security of supply, a better quality control of the production process, while from the producer s, they allow for a reduction of price risk, further securing a production outlet and thus reducing transaction costs. However, their main draw-back derives from the fact that the producers bargaining powers are often greatly inferior to the processors, creating a disproportionate effect for the two parties. There is also a wide range of insurance types available in dealing with the price risk. However, the fundamentally systemic character of the price risk, meaning that it affects all actors at the same time, makes the insurance needs significant and the risk hard to cover for a private insurance company. As a consequence, compared to the insurance mechanisms, management tools as derivatives appear to be more appropriate for dealing with the price risk. The price risk has to be approached through mechanisms in concordance with its type (idiosyncratic or systemic) and with its probability of materialization and level of damage implied. If the risk s probability is low and, in case of materialization, the extent of the damage is low, the producer can cover himself through income smoothing (precautionary savings). For medium risk events, the companies can take on the management of the risk using insurance instruments or derivatives. Nevertheless, in case of high, systemic risk, the state intervention might be required to shoulder a share of the consequences, in order to protect traders (Thomas, 2007). However, no single best strategy fits all traders or even one trader from one year to another. The objective is to find the alternative that has the highest net return, reduces income variability and also implies a tolerable level of risk. And even though natural hedges 192

202 Economic Development and International Trade might manifest for a company, especially in times of high instability, the risk needs to be managed proactively by making use of the available mechanisms and, in this way, diminishing the general risk exposure of the company. Hedging Decisions under Foreign Exchange Rate Volatility Another aspect that deepens the company s exposure to risk in times of profound turmoil rises from the fact that the hedging strategies for international transactions are complicated by foreign exchange risk. Given the recent geo-political uncertainties, the foreign currency markets have been in turmoil, with very high variations even on day-to-day basis (Figure 5). The high instability experienced by the currencies not only generated volatility as denominating factor for commodity market, but they also generated price changes and competitiveness disequilibria through the exchange rate pass-through. Figure 5: Representative Exchange Rates for Selected Currencies (in terms of currency units per U.S. dollar, respectively U.S dollars per currency unit for Euro) - Daily Data from 4 January May /04 2/01 3/01 3/29 4/ /04 2/01 3/01 3/29 4/ EURO Volatility UK POUND Volatility /04 2/01 3/01 3/29 4/ /04 2/01 3/01 3/29 4/ YEN Volatility YUAN Volatility Note: Volatility (right scale) is calculated as the standard deviation of the price ratio. Source: own elaboration based on data released by IMF 193

203 The effect of foreign exchange rate volatility for a company involved in international trading is mainly manifested on the level of trade and on prices. The effect on the level of trade Regarding the level of trade, the effect depends on the degree of risk aversion. In the simplest trade models, higher exchange risk is expected to increase the uncertainty of profits from export sales in foreign currency and, hence, lead risk-averse exporters to reduce their supply of exports. The effect of volatility also depends on the degree of risk exposure (which, as mentioned in a previous subsection, is a function of the currency denomination of contracts, hedging possibilities, the presence of imported inputs, etc.). Hedging should be relatively simple and inexpensive for a trading company with short lags between order and delivery, but it may, however, prove to be more difficult and costly for a manufacturing firm with a longer-term planning horizon. Another factor to be considered is the company s ability to reduce its exposure to currency risk, as this risk is highly diversifiable and may be relatively minor compared to the benefits of trade. The effect of the foreign exchange rate volatility on trades depends also on the properties of the utility function. If agents are risk neutral, exchange rate uncertainty does not affect the company s decision. Nevertheless, even in the case of risk aversion, theory does not allow to conclude that an increase in risk necessarily leads to a reduction in the risky activity, as an increase in risk has both a substitution and an income effect, which work in opposite directions: The higher level of risk lowers the attractiveness of the risky activity, leading agents to reduce it (the substitution effect). The higher level of risk also lowers the expected total utility of the activity, and in order to compensate for the decrease, additional resources might be directed to it (the income effect). Furthermore, when the exchange rate becomes more volatile, the probability of making large profits increases together with the volatility. As a consequence, this positive effect on the utility has to be weighed against the negative effects created by greater uncertainty for the risk-averse company. So, it can be considered, on the one side, that even for risk-averse businesses, an increase in risk does not necessarily lead to a reduction in the risky activity, as the availability of hedging techniques makes it possible for traders to avoid at a small cost most of the exchange risk. On the other side, exchange rate volatility may even counterbalance other forms of business risk, and create profitable trading and investment opportunities (Côté, 1994). The effect on prices 194

204 Economic Development and International Trade Regarding the effect of exchange rate volatility on prices, it depends on the degree of competition and the relative degree of risk aversion and risk exposure of importers and exporters. If exporters bear the risk, prices will increase; however, if importers do, prices may fall. When analyzing the effect of exchange rate volatility on prices the invoicing currency plays a key role (Baron, 1976): When the exporter invoices in foreign currency, he faces price risk. The quantity demanded is known, since prices do not change during the contract period, but the revenue flow and profits are uncertain, as the exchange rate between the currency of the contract and exporter s home currency fluctuates. When invoicing in the home currency, the exporter faces quantity risk. Quantity demanded is uncertain because the price the buyer faces is uncertain, due to exchange rate changes. In addition to revenues, costs of production become uncertain, and if the exporter uses imported inputs in production, costs become uncertain in both cases. In any of the situations picked for the invoice currency, the risk-averse company will try to reduce its risk exposure but the price effect will differ: If the company invoices in foreign currency, an increase in risk results in a price increase (as the supply curve shifts up). The higher price reduces expected profits (as demand is elastic at the optimal price) but increases expected utility. If the company invoices in home currency, the response will depend on the properties of the demand function in the destination market. If the function is linear, prices decline. The price decline leads to increased demand, but the price cost margin diminishes, which reduces the expectation and variance of profits. An increase in exchange risk leads to a contraction of the supply curve. Quantities are reduced and prices increase. An increase in exchange risk will lead to a reduction in trade prices if importers bear the risk. The price will fall as import demand falls. However, if exporters bear the risk, the price will rise as exporters will charge an increasingly higher risk premium. The following table summarizes the effects of invoicing in the home currency, for both importers and exporters. So even though invoicing in the home currency may seem appealing, it does not eliminate the exporter s risk, as quantity demanded becomes uncertain. An increase in exchange rate volatility may also have a secondary effect on trade prices, reducing the pass-through of changes in competitiveness (Barelier et al., 1999). 195

205 Table 1: Consequences of invoicing in the home currency Position Consequences Financial risk Loss of opportunity Loss in competitiveness Decline in sales Final Remarks EXPORTER The strengthening of the home currency will determine the other party (the buyer) to try renegotiating the price à la baisse (to diminish it) in order to compensate for the exchange risk; If the home currency depreciates, the seller loses the opportunity of making profit from the difference between the exchange rates; The strengthening of the home currency raises the price level translated in local currency, thus causing consequences in competitiveness. The strengthening of the home currency may determine a drop in the quantity sold. IMPORTER The depreciation of the home currency will determine the other party (the seller) to try renegotiating the price à la hausse (to increase it) in order to compensate for the exchange risk; If the home currency strengthens, the buyer suffers the loss of opportunity; In the last years, the global economic environment faced a high exposure to profound turbulences and shocks that increased the vulnerability of the participants to international trade, creating a framework of higher price risk and uncertainty. As the dynamics of prices remain uncertain, and with the turmoil likely to continue into the future, for companies without the adequate means to manage their risk exposure, the potential for loss is a serious menace to the viability of their business. Furthermore, the management of price risk is going to assume an even more important position in the future with the promotion of free trade and removal of trade barriers in the world. The most exposed ones seem to be the small size firms, due to their low power of negotiation, dependency on rented logistics for carrying out their business processes, and reduced capacity of passing on, along the business chain, the increased costs. However, supporting small enterprises for international trade is a key component for economic growth strategies. The ability of small businesses to deal with external shocks that convert in price risk exposures is a key factor in their survival, and this ability can be improved primarily through a better knowledge of the key determinants of these instabilities and the available mechanisms for price risk mitigation. A series of market-based instruments is available for managing the price risk, and despite the fact that their use is an incomplete solution, have sufficient merits in order to make the overall burden of risk more bearable. Furthermore, the management of price risk through market-based hedging instruments provide more predictable cash flows, fact that 196

206 Economic Development and International Trade generate a number of benefits, including increased investments, improved capacity of adopting new technologies, improved food security, and poverty reduction, effects that can increase economic development and reduce the negative impact of economic fluctuations (Pindyck, 2004). However, some of the most used instruments the futures and options contracts are not yet sufficiently extended especially in parts of the world where commodity trade has a vital role. The government has a fundamental responsibility in facilitating the growth of hedging opportunities, especially in developing countries high dependant of commodity trade, by reducing key barriers related to lack of knowledge, access to credit, and legal and regulatory standards. However, with increased speculation and noise trading in the context of the financialisation phenomenon, commodity markets tend to provide tools that can destabilize even more the prices. Higher price volatility implies higher costs of managing risks (higher margins on futures contracts, higher premiums for insurance, etc.) that are expected to ultimately convert into higher consumer prices. In such a context, the current times of crisis are an opportunity to review the way to manage commodity markets to guarantee they act as engines of sustainable growth, rather than as motors for speculation and higher price instability. Acknowledgements The author wishes to thank for the financial support provided from the program cofinanced by THE SECTORAL OPERATIONAL PROGRAM FOR HUMAN RESOURCES DEVELOPMENT, Contract POSDRU 6/1.5/S/3 "DOCTORAL STUDIES, A MAJOR FACTOR IN THE DEVELOPMENT OF SOCIO-ECONOMIC AND HUMANISTIC STUDIES". Acknowledgements are owed to the PhD coordinator from Babeş-Bolyai University, Romania, and to the internship tutors from University of Florence, Italy (Il Centro Interuniversitario per le Scienze Attuariali e la Gestione dei Rischi) for their guidance and suggestions, as this paper is part of the research for my PhD thesis that studies the price risk in the contemporary international economic relations. Further acknowledgements are owed to the organizing committee and reviewers from the INTERNATIONAL CONFERENCE ON INTERNATIONAL BUSINESS 2010 (held in Thessaloniki, Greece, on May 22-23rd) where this paper was presented. References Ahtiala P. and Orgler Y.E. (1999). The value of invoice currency choice in a volatile exchange rate environment. Multinational Finance Journal, 3(1): Ahuja N.L. (2006). Commodity Derivatives Market in India: Development, Regulation and Future Prospects. International Research Journal of Finance and Economics, Issue 2: Barelier A., Duboin J., Duphil F. et al. (1999). Exporter: Pratique du commerce international, 15ème Edition, Paris: Foucher. 197

207 Baron D.(1976). Fluctuating Exchange Rates and the Pricing of Exports. Economic Inquiry 14: Brown O., Crawford A. & Gibson J. (2008). Boom or Bust: How Commodity Price Volatility Impedes Poverty Reduction, And What to Do About It, Canada: International Institute for Sustainable Development. Cashin P. and McDermott C.J. (2002). The Long-Run Behavior of Commodity prices: Small Trends and Big Variability. IMF Staff Papers, 49(2): Cashin P., McDermott C.J. & Scott A. (1999). Booms and Slumps in World Commodity Prices. IMF Working Paper. WP/99/155, 25 p. Conceição P. and Marone H. (2008). Characterizing the 21st Century First Commodity Boom: Drivers and Impact. A UNDP/ODS Working Paper New York: Office of Development Studies United Nations Development Programme, 57 p. Côté A. (1994). Exchange Rate Volatility and Trade: A Survey, International Department Bank of Canada Working Paper 94-5, 28 p. Hull J.C. (2009). Options, Futures and Other Derivatives. New Jersey: Pearson Prentice Hall. Lu Y. and Neftci S. (2008). Financial Instruments to Hedge Commodity Price Risk for Developing Countries, IMF Working Paper WP/08/6, 20 p. Pindyck R.S. (2004). Volatility and Commodity Price Dynamics, The Journal of Futures Markets, Vol. 24(11): Published online in Wiley InterScience Thomas A.C. (2007). La gestion du risque prix après Papier introductif à la réunion de la task force du 10 septembre 2007, Notre Europe. 33 p. (UNCTAD) United Nations Conference on Trade and Development (2010). Recent developments in key commodity markets: trends and challenges. Note by the UNCTAD secretariat for the Multi-year Expert Meeting on Commodities and Development Second session, March 2010, Geneva, 15 p. Van Der Heijden T. and Tsedu M. (2008). The Impact of Rising Food and Fuel Prices on Small Businesses. Johannesburg: Foundation for African Business and Consumer Services (FABCOS). Wilson W. And Wagner R. (2002). Price Risk Management Strategies for Grain Importers, North Dakota State University AAE Staff Paper No p. 198

208 Economic Development and International Trade The establishment and formulation of the D-8 preferential trade agreement; the strategies by developing eight of economic co-operation organization (D-8) amongst Muslim countries towards successful trade policy formulation and implementation process Madzli bin Harun 1 Summary Generally this paper argues that organisational design such as procedure, incentives and commitment play the important as the resources available for implementation of D-8 trade policy or Preferential Trade Agreement or know as in academic view as acquis communautaire. The countries that have applied for membership of D-8 PTA are currently preoccupied with the huge task of the formulation, application and enforcement of the acquis. Although the implementation of the "acquis" is largely seen as a technical issue and has not so far received much member states attention, one of the objective of this paper is to explain why is likely to become more prominent in the upcoming year as the accessions negotiations between the Developing Eight (D-8) and D-8 PTA membership states and the frontrunner candidate countries near their end. When one look is more carefully there is implementation related problems is most of the bilateral relations between the D-8 or membership of D-8 PTA and the potential D-8 PTA candidates. This paper is developed a long series of questions as well as meetings for exploring the issue of effective policy implementation in general, and that the D-8 rules in particular. The questions and answer gradually lead to a proposal on how candidate countries may establish capacity for effective formulation and implementation of the acquis communautaire. There are several recommendations given by the author to the D-8 Secretariat and D-8 PTA candidates in this connection. It is presumed that D-8 PTA rules will effective applied and enforced by the candidates once sufficient and properly qualified national trade policy in line with D-8 PTA and committed to those purpose and properly qualified administrative are hired and adequate amount of resources as well. By contrast, this paper advocates an institutional and organisational approach to building that kind of capacity. The author not rejecting the view that staff and resources are important, one of the main objectives of this paper is it explains 1 University of Antwerp, Belgium. 199

209 why problem of effective implementation goes beyond count of bodies. At the core of integration, in any form, lies the need to establish credible commitments. Beside that the author will argue that it will be easier for candidates countries to demonstrate to the D-8 Secretariat and member states a credible commitment to apply the acquis communautaire if they assign the task of implementing D-8 PTA rules to sufficiently empowered and accountable institution or organisation, which will have considerable decision making independence and will at the same time be subject to specific performance obligations. Author reasoning is rather simple. The execution of any task requires three necessary conditions such as knowledge, ability and willingness or incentives. The top official of the candidates countries have to learn the acquis: thus screening stage of the accession negotiations to ensure the progress of PTAs must be integrated. Might be D-8 should organise numerous seminars, workshop, training programmes related with trade policy within the framework of the D-8 s technical assistance to the candidates. Means they will be known in deeper and precisely knowledge of the D-8 PTAs policies and regulations; although naturally they still seek advice on the precise implementation method of those laws and policies related to trade. With respect to their ability to apply the acquis, the effort of the candidates countries and of the D-8 are current focused on committing resources, training them and getting them acquainted with national trade policy practices within the existing D-8 PTAs member states. During this PTAs process, the willingness of those will apply and enforce the acquis such as the structure of incentives within the candidate s countries has so far been relatively concern by the D-8 and. However, in some cases the acquis requires national institutional or national Commission to be independent so that they will not be vulnerable to political domestic influence. In other cases, the D-8 need to argue the candidates to introduce quick appeals procedure in order to force D-8 PTA regulators or Commissions from each candidate s member states to resolve problem and difficulties without delays within national actors. There is, however, no systematic attention to the issue of incentive, either positive or negative, that would provide the necessary inducement to National Authorities or National Commission to act effectively and efficiently. Surely this is the theme that underlies many of findings in this paper which discussing the formulation of PTAs process. Perhaps it is natural to give precedence to knowledge formulation and implementation in essential methods and tools. Now, however, issue of institutional design deserve more attention because it is those actors and National Commission that will determine the commitment, success or failure of the effective adoption of the acquis in the longer term. Hence, the author begins, however, by formulating why, paradoxically the progress of the candidates in adopting the formulating likely to be one of the most contentious aspects of the accession negotiation; even though it is do nothing formally a subject under negotiation neither inter Governance neither with Developing Eight (D-8) nor nationally within grass roots. 200

210 Economic Development and International Trade Key-words: Preferential Trade Agreement, Developing Eight (D-8), Institutional Integration, Formulation Process Introduction Generally this chapter will be looking towards Developing Eight for Preferential Trade Agreement Formulation and Implementation Process. Whereby, contents for this chapter mostly about the D-8 PTAs for formulation and implementation process and how it shall be comply among the member states. Hence, there are several issues could be behind these agreement which need to explore by the author such as the need for special arrangement by certain country in Developing Eight (D-8) and the awareness to ratify PTAs by the member states. Hence to discuss further potential for D-8 PTAs, in depth discussion will be referring to another chapter. Although, the Developing Eight (D-8) faces several of problem and obstacles for formulation and implementation of its rules by National Regulatory Authorities (Trade Commission and National Assembly or Parliament). Hereby, Trade Agreement on common trade rules at the Community level does not necessarily translate into commitment to apply those rules coherently and effectively. This study argues that effective trade policy application and enforcement depends on Institutions that are empowered, sufficiently independent and fully accountable. Excessive political control is counterproductive. The reason is that at any implementation by respective authorities need to maintain a degree of autonomy and discretion to be able to respond to changing market environment. Thereby, for this reason that accountability instruments are indispensable. They restrain discretion without sacrificing flexibility. The regulatory trade environment in the D-8 is evolving. Even, the acquis communautaire is continually expanding and becoming more specific and detailed. Generally, the expansion and increase in details of D-8 trade laws in those and related trade policy fields are partly a response to slow implementation by the member states because of lack understanding towards PTAs amongst non- ratify agreement of D-8 member states, and how to formulate and implement it at national level. This implementation deficit will worsen as new members enter the D-8 PTAs group if the certain member states of D-8 Trade Commission is not able to carry maintain the same vigilance as guardian of the PTAs Treaties or Declaration. To remedy the existing implementation deficit and prevent it from getting worse in the future, recent legislation and Commission agreement have aimed, on the one hand, to tighten D-8 trade legislation and define more obligations for national trade authorities, and on the other hand to decentralise enforcement and at the same time confer more monitoring powers to the each National Trade Commission. 201

211 Although these are moves in the right direction, they may actually make heavier the work load of the State Trade Commission. Basically, this study warns that too much control by the State Trade Commission may result in implement regulatory homogeneity. As long as a national condition differs significantly, this kind of homogeneity is not necessarily in the broader interest of the Community. Well, to avoid these particular risks, authors propose an alternative approach based on the fundamentals of effective trade policy implementation that also may highlight the main difficulties in any Principle-Agent relation. Hence, author approach puts accountability instruments in their owned position. Therefore, they force PTAs to use their discretion intelligently and reasonably through member states Commissions. Besides that, to ensure efficiently and effectiveness, PTAs should also be subject to performance agreement and peer review. Peers review can also be clarify through the D-8 levels. But they do not need to be confined to performance policy assessment. They should also be widened in order to identify best practices and national regulatory authority method problems solving. In this way, especially PTAs in the future member states will learn from each other s states Commissions and experiences for example Malaysia and Iran might be could sharing their expert and experience with other states such as Bangladesh etc.. This learning is indispensable to counter balance the decision making independence of national PTAs. Generally, it could create and generate a healthy of competition of environment which it may contribute to regulatory convergence and consistent application of the D-8 trade policy without regulatory justification and inflexibility. Hereby, potential PTAs candidate s countries have been faithfully transposing D-8 trade agreement and policy. In many, perhaps or in most, situation they have gone beyond the requirement of D-8 trade rules and regulations. However, with a new and inexperienced states or institutions (actor and player) as they should be consider the degree of their autonomy, decision making discretion and the complexity of the regulations they need to enforce. The monitoring task of the Commission and indirectly D-8 Secretariat would be lighter if D-8 trade policy required member states to incorporate in their national provisions explicit accountability instruments. Hence, author conclude, that the functioning of the D-8 in the future will become more efficient and its policies will be more consistently and effectively enforced not by depriving national authorities of discretion but by sufficiently empowering them and at the same time making them more accountable. D-8 regulators teams must have great significant role to play in this respect. Whereby they need to provide and formulate the framework in which PTAs take into account the full impact of their decisions into economics integration and facilitate peer reviews and mutual learning in integration setting. 202

212 Economic Development and International Trade Policy implementation Market liberalisation in the D-8 over the past decade or so has been accompanied by the establishment of D-8 Preferential Trade Agreement (D-8 PTAs). New era for D-8 Trade Agreement in important sectors such as food production, fisheries, electronics production, Halal production, agricultural and other related which benefit to the communities and require member states to designate D-8 PTAs as the component body to manage consistently application and rigorous enforcement of trade rules and regulations. This institutionally enhancement approach differs markedly from market opening in the early stages of the D-8 community. Generally, the important for this paper is based on threefold. First, it reviews how the D-8 member states of Commissions monitor the formulation performance of the D-8 PTAs and ensure that how the process has assigned to them. Second, it considers how they should monitor and control the D-8 regulations after all the regulations and legislation process. Finally, it examines the consequences of the ratifications of the D-8 PTAs on these monitoring and controlling functions. Policy and regulations implementation and ratification are not an exact science. Basically, policy implementation, formulation and enforcement are not totally exact science. Trade Policy and Custom Regulations, in general has shift the economy from one imperfect state to another. The challenge facing policy makers is to ensure that this move with systematic manner, which takes place under terms of incomplete information, contributes to an improvement in national welfare. The establishment of D-8 Trade Policy represents such a move from one imperfect state of the economy to another systematic Trade and Custom Rules and Regulatory to measures facilitate market entry, expansion or trade activity beyond national limit, prevent distortions to completion and protect local producers and domestic market as well as SMEs, but regulations itself not costly or difficulties. Moreover, for some member states, the Trade Policy and Regulations required by D-8 regulation is a novel, relatively unknown type of institution and some of the countries it s like normal because their experiences in global economic environment and trades. Traditionally, it is ministries that have exercised regulatory power under the direction of represented country. Hence, this raises the questions how the Secretariat, Council, Commission as well as High Level Trade Officer could have delegated power to newly established agreements and policies such as D-8 PTAs, Rules of Origin, and Visa Fee Mobility for Businesses Agreement and Custom Regulations. How do they ensure that the D-8 PTAs will be meet the target set for them? And, do existing member states such Malaysia and Republic Islam of Iran have enough experience so that potential candidates countries could learn useful lessons? Hence, through these paper author will present, there are both similarities and differences in the 203

213 regulatory and policy structures also monitoring instruments that have been established in the amongst member states after signing the PTAs on 2006 before it will be fully implement and enforcement at least four member states countries during these years. Generally, any delegation of task faces several of risks. The risks are greater, the wider the negotiation, decision making neither in national or Government to Government level and implementing or enforcement discretion of the D-8 PTAs, RoO and Custom Regulations. So again, author need to ask how the member states( Council and Commission) have delegated that particular task and in particular how they determine whether the D-8 PTAs perform their duties as they are meant too. Member states must ask this questions because it they who are liable for the proper and systematic implementation of D-8 trade directives. It is even more important for candidate s countries to ask the same questions because their efforts to build capacity for effective formulation, implementation and enforcement of the D- 8 trade regulations such Rules of Origin and Custom Regulation are precondition for their accession to the D-8 PTAs. Whereby, the candidates member states are under the scrutiny of the Secretariat and Council and would naturally want to know how the Secretariat and Council will assess their (Commission) capacity and whether their efforts will be deemed by the D-8 to be successful or not. So far the Secretariat and Council has focussed most of its attention to the relatively simple, but not easy, issue of whether the candidate countries (National Commission) have created institutions with the pre-requisite legal trade power and sufficient knowledge and resources (e.g. managing D-8 trade resources, with proper trade and custom standards). In some trade policy areas, such as competition policy and trade supervision, the Council through their Commission need also sought to evaluate the enforcement record and trade operating procedures of the responsible authorities in the candidate s countries through peer reviews. The most an important order through this particular paper is that to evaluate the institutional structure of the D-8 PTAs and the monitoring mechanism of their potential performance, which are defined in D-8 PTAs and Rules of Origin (RoO) or which have been added by national member states trade policy. For this purpose author develop his idea and approach, based on the Principal Agent Theory, that allows author to identify the significant features in the institutional structure of the D-8 PTAs and the obligations imposed on them by their Principals (i.e. the member states-commission) and then examine whether such obligations constrain sufficiently the room for manoeuvre of the PTAs so that they would be prevented from exploiting any discretion they may have in carrying out their assigned tasks. However depriving PTAs from any discretion is not necessarily a solution to the problem of delegation. In fact, theory suggests that over restraining PTAs creates problems of its own. The reason is that the D-8 has sought to liberalise and integrate trade by entrusting national authorities (Commission or respective Department) with certain regulatory task is precisely 204

214 Economic Development and International Trade because incumbent operators have to be prevented from abusing their dominance and obstructing the entry of potential candidates. In the face of substation barriers to entry, potential competitor have to be actively aided to enter newly opened up markets. For these reasons, PTAs do need to have space time for manoeuvre to respond to market changes and new strategies. But how much time they need? If they have too little discretion, the markets will remain closed by the anti competitive actions of the incumbent operators. Relying on general trade competition rules in the presence of significant structural impediments is not the answer either. However, in this case, economies of scale and large sunk costs (problems) discourage the establishment of competing networks. Rival small medium enterprises (SMEs), therefore, it needs to be given access to the network of the incumbent operators. Competition trade law cannot normally be used to regulate access condition and fess. By contrast, if Trade Policy of PTAs has too much discretion they may either use it to escape from their obligations or they may abuse it in favour of the incumbent. Again the question will be arise is how the D-8 could to ensure that PTAs will be carry out their task properly and honesty. The definition of that task is in itself very difficult. Hence, in this paper author may argue that national and D-8 wide accountability instrument provide a solution to the problem of regulatory discretion. These questions will become more significant in view of the prospective enlargement of the D-8 PTA membership. Here, author will be addresses the challenges posed by the enlargement of the D-8 PTAs member states in four respects such as: i. Author examines whether and how the countries that have applied for membership of the D-8 PTAs have created viable systems for monitoring the formulation and implementation performance of their PTAs in national level. ii. Author asks whether the new D-8 PTA member states would have the same, stronger or weakest incentives than existing member states to implement and enforce of D-8 trade policy neither in neither D-8 level nor national level. iii. Author considers the consequences of the expansion on the ability of the D-8 Secretariat and Commission to monitor the formulation and implementation process performance of the member states and their D-8 PTAs. iv. Author aim to provide an insight into the evolution of the D-8 PTAs system of ensuring compliance within member states. Although this insight is useful to existing member states, it will be even more relevant to the potential candidates because they are on the outside and have little influence on evaluation of D-8 trade regulations and institutions. By anticipating this institutional evolution they can build administrative structures that will fit better into the future framework of the D-8. For instance, there is a marked but recent trend towards peer reviews in appraising the application of D-8 regulations in diverse fields such as in Priority List of Areas of Cooperation 205

215 that had been agreed upon i.e. Trade, Agriculture and Food Security, Industrial Cooperation and SMEs, Transportation, Energy and Minerals. The potential candidates have much to gain by providing for peer review in their own national trade regulations (national offer list of PTAs after ratification by National Assembly and Parliament). They will be strengthening for monitoring of the PTAs performance of their national level before hand end (finalise proceeding) to D-8 Council and Commission level. Hence, it will give them valuable experience in term of negotiation process and implementation process at national level within actor and player at that level such as SMEs sector, Chamber of Commerce or Business Council, Government Agency or Department and Ministerial which that will be useful when they will be join the D-8 PTAs in part of policy process. On the other hand, most of the existing countries and the candidate s countries have received large of technical assistance to establish and or to improve their knowledge and administrative as well as regulatory capacity from D-8 Secretariat initiative and programme related to PTAs, RoO and Custom Regulations.Hence, to be more realistic and not only talk, D-8 Secretariat through their an initiative the D-8 RoO programme has been organised successfully which it has received great and full assistance from Association of Southeast Asian Nation (ASEAN) representative and World Trade `Organisation (WTO) representative where is embarked for trade and custom technical assistance and regulations in connection to institution building. Generally, the institution and regulatory of respective authorities for the potential candidate s countries have also been subject to unprecedented scrutiny by the Commission. Since 2006, the Commission has been publishing the annually reports on the progress of these countries in adopting the acquis communautaire. All reports contain separate section on administrative capacity such as summit and meeting progress of PTAs and others related regulatory performance achieved by member states. Indeed the D-8 is deeply concerned about the ability and integrity of the public administrative of the candidates towards PTAs formulation and implementation process status. Most trade diplomatic officer, negotiator, researcher, economist and higher level communities in D-8 observes of the expansion process express the same concerns about the trade administration working process of the candidate s countries level. Nonetheless, in the latest summit in Kuala Lumpur on August 2008, where the Secretariat and Commission concluded that sixth candidates (Indonesia, Pakistan, Bangladesh, Turkey, Nigeria And Egypt) will have developed adequate trade administrative capacity at their national level by the expected date of entry in Even this vision was highlighted on the 12th session of D-8 Council of Ministers 2nd November 2009 in Kuala Lumpur. According to Foreign Affairs Minister of Malaysia, Dato Seri Anifah Aman, member states Commissioners must listed trade as the top priority for D-8 cooperation. Whereby it is 206

216 Economic Development and International Trade vital importance that all member countries could complete the signing and ratification of the Preferential Trade Agreement, Agreement on Customs Cooperation and Agreement on Simplification of Visa for D-8 Businessmen. Even Anifah say that I believe that we should exert more effort on improving the pecuniary advantages of countries by introducing and implementing practical economic programmes on an incremental basis to boost trade and economic development 2. Hereby, this particular paper author pursues a different line of analysis. Instead of assuming that they have a capacity problem author ask whether they have a PTAs incentives problem and product or commodity will be offer to the member states in line with demand. This is question not ask before. Most people believe that the candidates are eager to enter the D-8 Trade Group; therefore they infer that they would do their best to comply and apply D-8 PTA but before that they should be convince their national parliament or congress to ratifying PTAs at their own country. Well, capacity is one thing; willingness to enforce D-8 trade policy after accession is another. Author examine whether indeed they will be eager to apply PTAs policy which have been assessing by others. However irrespective of their willingness, without the necessary institutional and administrative reforms and improvements, those particular countries will be unable to apply the acquis properly, let alone effectively. Even worse, incomplete or defective implementation of the acquis in the prospective new member states will impose D-8 PTAs and other member states and may delay the credibility of the whole D-8 system. This system is based on mutual trust, sharing understanding and commitment among the member states. Therefore, they trust that each applies common rules, regulations faithfully and uniformly. Through some observation for these institutions and regulations by author for the D-8 has succinctly put the problem as follows. Generally, there is an institutional vacuum between D-8 legislators; and the formulation and implementation of the D-8 PTAs by national authorities at member states level, the absence of adequate features of conflict resolution and an unequal expertise and independence of the national regulators further undermines the efficiency of the D-8 PTAs system. The lack of D-8 administration institution and networking previously makes cooperation between the national administrations essentially depend on their mutual trust; bilateral activity and loyalty were created the trade agreement cooperation delay for ten years. In the perspective of enlargement of trade integration, this situation becomes clearly insufficiently to assure the credibility and legitimacy of the D-8 rule making process. It s appearing that, in addition to its other deficits, the D-8 may also have a strategic policy implementation deficit. Admission of new members with weak institution will worsen that deficit. Hence, that is why the Jakarta Summit Declaration in 2006 and Kuala Lumpur Summit on August 2008 also Council Meeting in Kuala Lumpur on 2nd November 2009 requested the 2 Report of the 12 th Session of the D-8 Council of Ministers, Kuala Lumpur, Malaysia 2 November

217 candidate s countries need to re-manage or adjusting their administrative structures to be more practical when dealing with negotiation and decision making process. Later D-8 Council has been more explicit about what this kind of adjustment entailed. So, Commissions amongst member states will be together with D-8 Secretariat during Nigeria Summit and Council Meeting at Abuja this year to spelled out that the incorporation of the acquis into legislation is necessary, but is not in itself sufficient; it will also necessary to ensure that it is actually applied at next coming Summit and Council Meeting. Hence, 12th Session of the Developing Eight (D-8) Council of Ministers in Kuala Lumpur on 2 November 2009 went further. It stated that progress in the negotiations must go hand with progress in incorporating the acquis into legislation and actually implementing and enforcing it. Even through that Council of Minister Meeting in Kuala Lumpur on 6th July 2008 and 2nd November 2009 has made the most explicit reference to the indispensability of functioning administrative capacity. As remind that, in addition to finding solutions to the negotiating issues, whereby, progress in the negotiations depends on the incorporation by the potential candidate states and existing member states of the acquis in their national PTAs, Custom Legislation, also amended product offer list on Rules of Origin (RoO) and especially on their capacity to effectively implement and enforce it. Here, how could the D-8 know when the potential candidates have reached and prepare the requisite level of capacity for effective PTAs implementation and enforcement of the acquis? The Commission examines, in this national respect, the relevant policy of the candidates, the preparation they dedicate to implementation and enforcement of that PTAs policy and the record of the relevant and respective authorities. Thereby, it seeks to find out whether they have established a credible enforcement record or report in national level. But this enforcement record or report might necessarily looks to the past. As the small print of trade advertisement warns, past trade negotiation and activities performance is not a guarantee for future performance, especially if the right trade incentives are not in place. Hence, this paper author argue that the only way to be reasonably assured that the candidates, or for that matter existing member states, have the capability and capacity also inclination for effective implementation of the acquis, at present and in the future as well, is to examine whether they have set up institutions with strong trade performance incentives, product and commodity offer on RoO and sufficient customs tariff to maintain and improve their trade policy report. Only the right institutional like Developing Eight (D-8) design will be induce implementing institutions to maintain strict implementation and enforcement of D-8 trade rules and custom regulations in the face of changing international trade climate, market conditions, expansion commodity demand and business strategies amongst private sector. Even though there is hardly for any national institution or ministry that is not affected by D-8 trade policy to be pursue, Author confine D-8 potential sectors to the D-8 Priority list of 208

218 Economic Development and International Trade Area Cooperation in five sector such as Trade, Agriculture and Food Security, Industrial Cooperation and SMEs, Transportation, Energy and Minerals. (Please refer Figure 1). Figure 1: Relations D-8 PTAs and Sectors The Priority List of Areas of Cooperation Transportation Energy and Mineral Industrial and SMEs Trade Agriculture D-8 PTA D-8 Ten Years Road Maps 2008 Sources: Author illustration and observation. An above figure as over view for the relationship between D-8 PTAs and the potential sector. That particular analysis sector, basically as a main stream for D-8 PTAs as well as D-8 Ten Years Road Maps. Moreover than that, the institutions with special task that make then very interesting to study. They are responsible for implementing technical acquis. In the mean time they have to ensure the acquis with their own trade regulations and trade procedures that may be establish in the national trade policy that transform the relevant Community trade policy or may be defined in their own regulations. Generally, they also have strong voice discretion in applying implement trade policy and enforcing their own trade and custom rules in national level before submission it to the D-8 Trade Commission Meeting or D-8 High Level Trade Officer Meeting. In several issues they enjoy a high degree of operational autonomy. However under D-8 trade policy they are required to be independent of the self responsible of trade process in national level, even where such trade process and 209

219 negotiations are owned by the state. The main stream is that they should be able to implement D-8 PTA and national trade policy respective of the full interest of states as a partial shareholder or full D-8 PTAs member states. PTAs, therefore, provide excellent incentives and benefit in aspect of tariff for investigating how autonomy and policy could it in line co-exists with accountability and faithful implementation of D-8 PTAs. Hence, the main research question for author through this research,are how the D-8 and the member states will be monitor the progression of PTAs and how the enlargement of the D-8 PTA amongst the member states will be potential on that monitoring process system. To answer these particular questions, the paper is elaborated as follows. Generally, the main stage by placing author research in the context of literature for implementation of D-8 trade policy. Hereby, to be more firm for this research, author reviewing the main strands of the Principal Agent Theory (P-A Theory). In the meantime, author also refine and adapt it for D-8 research purposes. In line with this, author will be developing a new model that allows author to examine D-8 PTAs in the context of trade integration on organisation approach. Which this is more significant to the D-8 PTAs. To ensure this research in systematic and practical, author might be use theoretical insights author derived earlier to evaluate the performance requirement imposed by both Developing Eight (D-8) and national trade policy. Besides that, author will examine national PTAs provision to ensure it will be in line with D-8 PTAs. Author present data and gathered from a variety of resources on the structure of PTAs; most notably, the D-8 Secretariat, several missions of D-8 member states at Kuala Lumpur, MATRADE and Foreign Affairs Ministry of Malaysia. On the other hand author also present the results of an interview on the issues of PTAs even author will be carried out in both the D-8 and the member states views as well. These results supplement the information author have obtained from several sources, hopefully, allow author to reach a more comprehensive assessment of performance criteria and institutional structures. Finally, author consider how existing institutional structures and procedures as well as legal requirement may be adjusted or revised or amended, respectively, so that they create stronger incentives for D-8 PTAs to carry out their tasks in the best interest of an enlarged D-8 PTAs as a whole, however currently only two countries has ratified either such as Malaysia and Republic Islam of Iran. The significances of delegation method on P-A theory within the formulation and implementation strategy process for D-8 PTA In this section author explained further how this paper in line with the current discussion on delegation, D-8 Secretariat role and the implementation of the D-8 trade policy or know as D-8 PTAs. According to research work about organisation from Dehousse (2001), Lenaerts (1993), Majone (1996, 1999) and Pollack (1997, 2002). From their point of view, most of the literature on the organisation that they has examined the issue of delegation has 210

220 Economic Development and International Trade looked at it from the perspective of the member states which confer power or transfer some of their power to the Principal organisation. The main questions in this voluminous literature are whether and why member states voluntarily give up part of their sovereignty; how they prevent the D-8 from staying beyond powers which are explicitly conferred to it and, lately, whether such delegation of powers is democratically legitimate (Please refer to Figure 2).Currently, have several national Commission and related trade department prepared to ratifying D-8 PTAs at their national level before proceeding at D-8 levels caught the interest of scholar. Basically this article concerned neither about the motives, nor about the methods of endowing the D-8 with reaction to act on its own or together with the member states. In the first stage on 2006 (all member states countries has signed) the D-8 adopts the PTAs policy [mostly in the form of directives] whose application requires formulating or drafted of trade measures by the member states. In general, author also does not question the democratic legitimacy of neither the Community and national institution or ministry that make those decisions or the acts they ratified. Even though these are important issues in the D-8 context, they fall outside the scope of this paper. Figure 2: Understanding Basic principles of Principal-Agent Theory in Developing Eight (D-8) D-8 Secretariat P+ D D-8 Trade Commission s D-8 High Level Trade Officer (HLTO s) D D Government Trade Agent Delegation Outcome from National Chambers of Commerce/Business Council D&Ac D& Ac SMEs/ SEs/Industry Sign: P=Power D=Delegate Ac=Accountability Sources: Author illustration and observation. 211

221 Nevertheless, when author refer to delegation, author mean the preceding of regulatory tasks by the member states to national authorities (grass roots agencies or actors) enforcing within their boundaries. Besides that, according to the term delegation, most of other literatures also refer it to the obligations imposed on the member states as by community acts. Strictly speaking this is not in line with D-8 community. Why? Since the D-8 hardly has any regulatory powers of its own and at any rate has only those powers defined by primary and secondary legalisation, it does not have anything to delegate to the member states before member states to define new trade rules. Besides that, this literature has also examined the purpose and conditions for establishment of organisation such Developing Eight (D-8) for this case study. These are institutions not provided for by the Declarations or Treaties, which are created by regulations of the Council and Summit and which have a narrow technical mandate. The Secretariat aim to regulate certain aspect of the internal market, or to monitor developments of common interest, or to facilitate trade cooperation or to function as executive bodies on behalf of the D-8 member states group. The main objective for this paper is to study the role of Secretariat that is under the responsibility and control of the member states.. Another variation in the theme of delegation is the granting of certain powers by Secretariat institutions to Commissions or bodies to act on their behalf. Hereby, the principle that deals with these instances of delegation stipulates that Community institutions may not transfer to other bodies their responsibilities and may not grant to them powers that they do not hold because it would alter the balance of powers defined by the Trade Treaties of D-8. Based to the literature from legal scholars ( Vervaele, 1999) and political scientist (Talberg, 2002) which both of them highlighted three major questions in European laws, also might be it in line or valuable for D-8 to learn as well, such as ; i. The common of the enforcement standards defined by the respective institution and which have to meet by the member states. Hence, in these case D-8 Secretariat through D-8 Commission should play their role to ensure D-8 PTA will be achieve and ratify by the other D-8 member states as well; ii. Enhancing the liability and obligations of member states and respective national trade and commerce authorities for the provision or policy defined in the D-8 trade policy or D-8 PTAs ant; iii. The obligation of the D-8 Commissions as guardian of the D-8 PTAs and the instruments it s choosing to enforce compliances and enforcement. According to the above statements and explanations, basically the main interest is in the institutional formulating regulatory systems which it managed and monitored by D-8 Secretariat and in which D-8 Secretariat themselves are under certain obligations and certain limitation. Requirements imposed on D-8 PTAs are in national offer list of goods as per agreed in national parliaments or congress. For instance, previously the failure of D-8 PTAs to 212

222 Economic Development and International Trade explain in detail and depth its decisions may be actionable by the respective national Commission while its failure to submit a thorough specific national trade policy report such as National Custom Regulations or Offer of Goods List to the respective Ministry (Ministry), House of Parliament is not normally an infringement for which the D-8 PTA in question may be delayed and lacked by respective National Trade Commission. Meanwhile, previously it does ineffective consensus decisions by D-8 Commission and HLTO towards trade policy integration. On past situation, it does not generates issues which are dealt by the trade policy, unless there is a references for preliminary ruling by the National Parliament or the Commission initiates proceedings against the member states concerned, author will not dwell on the findings of the literature concerning incorrect transposition and non formulation and implementation of D-8 Preferential Trade Agreement (D-8 PTAs) by the member states and the related proceedings failure initiated by the national Commission. Here, author also consider the implications, liabilities and risks of enforcement in relation to policy brought before National Parliaments against member state Government for transposition of D-8 PTAs or doctrine. Generally, for author point of view is that, he assumes that D-8 trade policy is correctly transported by the member states but not only accountable by D-8 Secretariat. Whereby, this particular an assumption that creates Secretariat responsibilities both more difficult. However, from author perspective is more interesting. This does not mean that assessing the legality of measure is an easy task, also, it only not mean that assessing the legality of a measures cannot be faulted on legal grounds, author may need to expand other factors by which to evaluate them. Indeed this is a real risk faced by past leader of D-8 Secretariat, Head of Councils, Commissions and HLTO for each member states. In its various reports on the internal market, the past Secretariat and Commission might be perceives the diversity in national rules as an impediment to cross border trade and economics. But such diversity is recognised by current D-8 policy. However it is need to integrate it under single trade policy so called as D-8 PTAs. The Commission and D-8 Secretariat cannot use legal remedies and appears to be increasingly in favour of softer measures such as peer reviews and benchmark as a means of bringing about convergence of national trade rules and practices. Cause of that, absolutely this raises the question of an important or tolerable degree of diversity between member states. Hence, through this particular paper, author opinion is that, because there is no way defining a priori the optimum level of divergence (diversity) or convergence (integrate), it is important to have procedures that require national authorities for example Department of Trade or Trade Ministry to take into account the reasoned opinions of their counterparts in other member states. Meanwhile, although the issue of delegation, formulation and implementation trade policy process have been aware by D-8, the relevant literature only tangentially relates to the subject matter of this paper. This is because author has an intention to examine the act 213

223 of delegation by the D-8 Secretariat with the Commission of member states and D-8 Commissions of member states with the other national trade bodies or agents (actor and players). At the same time that literature is grounded in law, policy and political science. Besides that, author would like assessing on national authorities and the tools use how their action or achievement could be measure and enforcement. Basically, it is no specific direction on D-8 policy that clarifies how this monitoring and appraisal should be done. Then, author approach also differs by relying on institutional analysis. In line with these, next, author will be review the basic platform of the Principle Agent Theory and explain it is relevant for subject matter. Then, author would like define a new approach that takes into account the process of trade institution integration and the potential might be arises. Meaning that it will be allows author to explore and evaluate the means by which how should member states to delegate executive powers from D-8 Commissions to the national grass roots and even how the Commission or D-8 Secretariat will be monitor the performance of the D-8 Trade Policy (D- 8 PTAs) formulation and implementation as well as enforcement in the right track. Conclusion Through author point of view, where theory and common sense, suggest that Principal should give Agent or Agencies both positive and negative inducements (incentives and sanctions). To ensure it will be perform the tasks assigned to them, means for Agent. Each government of member states through their policies mainly needed an effective and efficient institutional framework faith the rights incentives and controls. Hence, in response for delay or weak formulation of trade policy amongst D-8 member states, the amount of details and controls instruments have been proliferating in D8 trade policy. However, author approach will be mentions that detailed trade provisions and control by Principals may also be counterproductive, policy making will be less flexible and less responsive to changing market conditions. More than that, in author mind is that accountability instruments may be more efficient and effective in the longer term to ensure consistency formulation and implementation of the D-8 trade provisions in a fair policy framework. Later, through author an approach, shows that even countries which benefit from adopting common trade provisions might be have an intention to delay because lack of decision from national level even though the common trade regulations was agreed at stage where they will be formulate or implement these provisions. Herewith the risk occurred or delayed of miss- formulation or implementation may be compounded by the fact that agreement on common trade rules may be possible only by adoption of broad principles rather than detailed rules for extremely support PTAs. Beside that the approach also suggest that the inclusion of more member countries in the system of common trade provisions (i.e. enlargement) may create critical the quality of policy formulation and implementation because the new partners have an even stronger difficulties of trade policy process from the 214

224 Economic Development and International Trade common rules. Hence, if more countries integrate their economics in Developing Eight (D-8), more attention should be concern to instruments for monitoring how the common trade provisions are formulate, applied and enforced. Response to D-8 scenario, it is not surprisingly where very few D-8 trade provisions adopted into the national trade provision amongst candidate countries as well as existing countries, impose performance requirements on national PTAs or define strong accountability instruments. Generally, current directives in D-8 trade relations with D-8 PTAs (e.g. in the field of Halal products) that are not yet fully well known by member states because it still new; created an environment in which PTAs will be more accountable. On the same time, the D-8 Commission assumes a pre-dominant supervising role means from current D8 PTAs membership. Thus may lead to mixed results. On the other hand, D-8 PTAs will be applied more consistently and systematic with trade, customs regulations and tariff. On the other hand, the pre-dominance by the Commission and Secretariat for PTAs and its views with other approaches to trade regulation will be absolutely ensconce it in the right position for implementation and enforcement of PTAs after Abu Ja Summit, Nigeria. In line with that, this emerging hub and spoke model of D-8 trade regulation and the other related rules, with the Secretariat being the hub of the system, is more vulnerable to bottlenecks caused by the Secretariat and Commission s increased workload of monitoring a larger number of more diverse member states. The needs of the potential candidate s countries which will soon become D-8 PTAs will be fully ratify amongst members states may require a different approach to this emerging D-8 model of trade regulation because currently non D-8 PTAs members states still reviewing process and negotiating at their National Parliament to ensure PTAs really prepare to be implement in D-8 level itself. Not only are they learning on delegation of trade regulations from up to down (grass roots), they (actors and players in decision making) may also have to be helped to fend off any political interference (internal and external) especially from their own national political process. The most an important through PTAs is that it would be benefit from closer interaction with their D- 8 counterparts also amongst national actor and players; and from more systematic analyses of the experiences and the lessons of regulations amongst existing member states. In enlarge of D-8 PTAs member states, the introduction of performance and accountability requirement in national regulations will enable the D-8 trade regulatory system to function more effectively and more consistently without relying excessively on Secretariat monitoring. References G. Majone. (1996). Regulating Europe, Rouledge, London. G. Majone. (1999). The Regulating State and its Legitimacy Problems, West European Politics, vol. 22, pp J. Talberg. (2002). Paths to Compliances: Enforcement, Management and the European Union, International Organization, vol. 56, pp

225 J. Vervaele. (1999). Compliance and Enforcement of European Community Law, Kluwer, The Hague. K. Lenaerts. (1993).Regulating the Regulatory Powers: Delegation of Powers in the EC, European Law Review, vol.18, pp M. Pollack. (1997). Delegation, Agency, and Agenda Setting in the EC, International Organisation, Vol. 51, pp M. Pollack. (2002). Learning from American Again: Theory and Method in the Study of Delegation, West European Politics, vol. 25, and pp R. Dehousse. (2001). European Governance in Search of Legitimacy, in O. De Schutter, N. Lebessis & J. Paterson, eds., Governance in the EU, European Commission, Luxembourg. Report of the 12th Session of the D-8 Council of Ministers, Kuala Lumpur, Malaysia 2 November

226 Papers in Greek Η αμοιβή ως μέσο παρακίνησης των εργαζομένων Αργυράκη Αγγελική, Δημοπούλου Ελένη & Καζούκα Ειρήνη 1 Περίληψη Σε αυτό το άρθρο εξετάζεται η παρακίνηση του εργαζομένου μέσω της αμοιβής και των επιπρόσθετων αποδοχών (bonus) καθώς και η ύπαρξη ενός δίκαιου συστήματος αξιολόγησης από τη διοίκηση του οργανισμού. Η απόδοση έργου από τους εργαζομένους στην επιχείρηση, δεδομένων των μέσων και των συστημάτων οργάνωσης της, εξαρτάται από δύο κατηγορίες παραγόντων. Η πρώτη περιλαμβάνει τις γνώσεις και τις ικανότητες που είναι απαραίτητες για την απόδοση έργου. Η δεύτερη κατηγορία, που είναι ίσως και η πιο σημαντική, περιλαμβάνει τους παράγοντες που προσδιορίζουν τη διάθεση του ατόμου να αποδώσει. Τούτη η αναγκαιότητα της παρακίνησης των εργαζομένων για μεγαλύτερη απόδοση πηγάζει από το γεγονός ότι, στο υφιστάμενο μοντέλο πολιτισμού (παραγωγής και κατανάλωσης), η εργασία είναι ετεροπροσδιορισμένη, συχνά χωρίς ενδιαφέρον και η αξία που δημιουργείται από αυτή δεν καρπώνεται στο σύνολο της και άμεσα στον εργαζόμενο. Η παρακίνηση των εργαζομένων αποτελεί ένα από τα πιο σημαντικά ζητήματα της Διοίκησης αφού είναι στενά συνδεδεμένη με την ανθρώπινη συμπεριφορά και την απόδοση στο χώρο της οργάνωσης. Η διαδικασία της παρακίνησης είναι το σύνολο των σχέσεων αλληλεπίδρασης και αλληλεξάρτησης μεταξύ των στοιχείων της, δηλαδή αναγκών, κινήτρων και στόχων. Η αρχή της εν λόγω διαδικασίας είναι η συνειδητή ή υποσυνείδητη ύπαρξη αναγκών. Η ανάγκη παράγει το κίνητρο (ώθηση) και το κίνητρο οδηγεί στον προσδιορισμό στόχων και δράσης πράξεων για την υλοποίηση τους. Η υλοποίηση των στόχων έχει ως συνέπεια την ικανοποίηση των αναγκών και τη μείωση ή εξάλειψη του κινήτρου. Η αμοιβή των εργαζομένων αποτελεί βασική προϋπόθεση παρακίνησης τους και συνδέεται με πολλούς παράγοντες, οι οποίοι θα πρέπει να λαμβάνονται υπόψη από τη διοίκηση της υπηρεσίας. Επίσης, αποτελεί ουσιαστικό και κύριο καθοριστικό παράγοντα αφενός για την προσέλκυση ικανών κατάλληλων υποψηφίων και την παραμονή αυτών στην υπηρεσία και αφετέρου για το επίπεδο απόδοση (ποσοτικό και ποιοτικό) και την εν γένει συμπεριφορά τους. Ως αμοιβή την οποία οι επιχειρήσεις καταβάλουν (αναφέρεται συνήθως και ως «πακέτο» αμοιβών ), θεωρείται κάθε είδους πληρωμή στον εργαζόμενο, εις αντάλλαγμα της απασχόλησης και συμβολής του στην επίτευξη των στόχων τους. Η αμοιβή αυτή αποτελείται από: α) την άμεση οικονομική παροχή, που την αποτελούν ο μισθός και τα κίνητρα βραβεία, δηλαδή η επιπλέον ανταμοιβή που καταβάλλεται για την προσπάθεια και τα 1 Σχολή Επιστημών της Διοίκησης, Πανεπιστήμιο Αιγαίου Χίος, Ελλάδα. 217

227 αποτελέσματα που επιτυγχάνει ο εργαζόμενος β)την έμμεση οικονομική παροχή, που είναι τα οφέλη/πρόσθετες παροχές και δεν σχετίζονται άμεσα με την απόδοση στη θέση εργασίας όπως π.χ. πληρωμές για άδειες, απουσίες, διακοπές, ασφάλεια ζωής κλπ. Οι παραπάνω παράμετροι παρακίνησης των εργαζομένων ( κυρίως μέσω της αμοιβής) από την εργασία τους συσχετίστηκαν με τα έτη εργασίας στην υπηρεσία, τη συνάφεια των σπουδών με την εργασία που εκτελούν μέσα στην υπηρεσία ή οργανισμό και την οικογενειακή τους κατάσταση. Η εργασία στοχεύει στη διερεύνηση της ύπαρξης ή μη, στατιστικά σημαντικών συσχετίσεων που είναι δυνατόν να υφίστανται στα πλαίσια των υπηρεσιών και αφορούν μεταβλητές παρακίνησης των εργαζομένων από την εργασία τους. Τα αποτελέσματα προέκυψαν με την συλλογή ερωτηματολογίων από 290 εργαζόμενους του δημοσίου τομέα. Η στατιστική ανάλυση που χρησιμοποιήθηκε ήταν ο έλεγχος χ 2 και τα αποτελέσματα της έρευνας δείχνουν ότι διαμορφώνεται ένα σύστημα εξαρτήσεων σε κάποιες από τις εξεταζόμενες μεταβλητές. Λέξεις κλειδιά: παρακίνηση, αμοιβή εργαζομένων, τρόπος διοίκησης, έτη εργασίας, συνάφεια εργασίας και πτυχίου, οικογενειακή κατάσταση. 218

228 Papers in Greek Η λήψη αποφάσεων και οι επιχειρησιακές συμπεριφορές στις ελληνικές επιχειρήσεις Αικατερίνη Μπαλάσα, Βασιλική Πανέλου & Εμμανουήλ Ρουσιάδης 1 Περίληψη Στο σύγχρονο ανταγωνιστικό περιβάλλον η προσοχή έχει στραφεί στις επιχειρησιακές στρατηγικές που εφαρμόζουν οι μικρομεσαίες επιχειρήσεις, ώστε να καταφέρουν να αποκτήσουν ανταγωνιστικό πλεονέκτημα στην αγορά. Η καινοτομία, η σύναψη συμμαχιών, ο καταμερισμός του ρίσκου, η εστίαση σε συγκεκριμένη αγορά και ο καλός σχεδιασμός αποτελούν κάποιους από τους παράγοντες που οδηγούν στην επίτευξη του. Παρόλα αυτά, τα θετικά αποτελέσματα εξαρτώνται από σύνθετους παράγοντες, οι οποίοι δεν μπορούν να περιγραφούν εύκολα με ερμηνευτικό μοντέλο. Η συγκεκριμένη μελέτη παρουσιάζει τα αποτελέσματα μίας έρευνας για το κατά πόσο μία ελληνική επιχείρηση, μπορεί να λειτουργήσει σε ένα οξύ ανταγωνιστικό περιβάλλον και να αυξήσει την αποτελεσματικότητα της στη λήψη αποφάσεων, με βάση το μέγεθος της και τη βοήθεια του οργανογράμματος και του καλού σχεδιασμού. Η στατιστική ανάλυση των αποτελεσμάτων της έρευνας, με την κατανομή x2 έδειξε ότι υπάρχει σημαντική συσχέτιση ανάμεσα στο χρόνο λειτουργίας της εταιρείας υπό την ίδια διοίκηση με τη στρατηγική που ακολουθεί και την εφαρμογή πρακτικών υιοθέτησης νέας τεχνολογίας και μηχανημάτων. Επιπλέον, σημαντική συσχέτιση εμφανίστηκε ανάμεσα στο μέγεθος της εταιρείας και τον αριθμό των υπαλλήλων με την πολιτική που ακολουθείται προς το περιβάλλον, τον τρόπο λήψης αποφάσεων, την εξειδίκευση του προσωπικού και την ποιότητα. Λέξεις κλειδιά: Λήψη αποφάσεων, μέγεθος εταιρείας, νέες τεχνολογίες, ISO, επιχειρησιακή συμπεριφορά, ποιότητα, στρατηγική. Εισαγωγή Σε εποχές οικονομικής κρίσης και αμφισβήτησης, οι επιχειρήσεις βρίσκονται αντιμέτωπες με πολλούς κινδύνους, τους οποίους καλούνται να αντισταθμίσουν υιοθετώντας την κατάλληλη στρατηγική. Απώτερος σκοπός είναι η απόκτηση ανταγωνιστικού πλεονεκτήματος και η ικανοποίηση των στόχων που έχουν θέσει. Παρόλα αυτά, η επιλογή στρατηγικής και η επιβίωση της επιχείρησης φαντάζει μία δύσκολη υπόθεση. Παράγοντες όπως η αλλαγή των καταναλωτικών συνηθειών, η δυσκολία εύρεσης οικονομικών πόρων και 1 Τμήμα Διοίκησης Επιχειρήσεων, Πανεπιστήμιο Αιγαίου Χίος, Ελλάδα. 219

229 εξειδικευμένου εργατικού δυναμικού, η διείσδυση σε νέες αγορές, ο ανταγωνισμός που συνεχώς εντείνεται, η ύφεση της αγοράς δυσχεραίνουν το έργο των επιχειρηματιών. Όλα αυτά επηρεάζουν άμεσα και έμμεσα την ποιότητα των προϊόντων που παράγονται, τις σχέσεις εταιρείας και εργαζομένων, τις σχέσεις με τους πελάτες, αλλά και το προφίλ της εταιρείας. Συνεπώς, δημιουργείται ένας φαύλος κύκλος, το αποτέλεσμα του οποίου δημιουργεί αντίξοες συνθήκες σε μία επιχείρηση και φέρει αρνητικές συνέπειες. Μέσα σε αυτό το πλαίσιο, ο καλός σχεδιασμός, η επένδυση σε μηχανήματα τελευταίας τεχνολογίας και στην καινοτομία και η εστίαση σε έννοιες, όπως ποιότητα και κοινωνική ευθύνη μπορούν να επιφέρουν πολλαπλασιαστικά οφέλη, αντισταθμίζοντας του κινδύνους που είναι απόρροια των κοινωνικών και οικονομικών εξελίξεων. Η επιτυχία όμως είναι αποτέλεσμα πολλών παραγόντων, από τους οποίους δεν μπορεί να παραλειφθεί η σημασία της διοίκησης στη λήψη αποφάσεων για την εφαρμογή κατάλληλων μέτρων και στρατηγικών. Η σημασία εφαρμογής σύγχρονων μεθόδων διοίκησης για τις ΜΜΕ Η ιδιωτική πρωτοβουλία και το «επιχειρείν» είναι ο ακρογωνιαίος λίθος της ελεύθερης οικονομίας. Ο αυξανόμενος ρυθμός της επιχειρηματικότητας θα συμβάλει στη μείωση της ανεργίας, την αύξηση του κατά κεφαλήν εισοδήματος και την ανταγωνιστικότητα. Χαρακτηριστικό παράδειγμα είναι ότι σε πολλές ευρωπαϊκές χώρες η ενίσχυση των επιχειρήσεων οδηγεί στη δημιουργία νέων θέσεων εργασίας, αφού οι μικρές και μικρομεσαίες επιχειρήσεις αποτελούν το 99% του συνόλου και είναι οι κυριότεροι συντελεστές σταθεροποίησης και οικονομικής ανάπτυξης (Gulli, Clark, 1999). Στατιστικές έρευνες έδειξαν ότι επτά στους δέκα νέους διαπνέονται από τη φιλοδοξία να ιδρύσουν τη δική τους επιχείρηση, διότι θεωρούν ότι έτσι θα διασφαλίσουν ένα ευοίωνο μέλλον με οικονομική ασφάλεια και σταθερότητα (Αναγνωστάκη, 2000). Ωστόσο, όλες οι προσπάθειες επιχειρηματικότητας δεν έχουν ούτε την ίδια κατάληξη ούτε στέφονται με επιτυχία. Δεν είναι λίγες οι επιχειρήσεις που δεν κατάφεραν να επιβιώσουν σε αυτό το ραγδαία εξελισσόμενο περιβάλλον, επειδή ο κακός σχεδιασμός, η διακινδύνευση και η πλημμελής οργάνωση διακύβευσαν την ομαλή πορεία και προκαθόρισαν την αρνητική ετυμηγορία της αποτυχίας. Οι μικρομεσαίες επιχειρήσεις αποτελούν στην πραγματικότητα μια ευρεία κατηγορία με ετερόκλητα στοιχεία και ετεροβαρείς σχέσεις, με χαρακτηριστικά που διαφοροποιούνται σημαντικά, ως προς το μέγεθος, την κερδοφορία και τον αριθμό των υπαλλήλων που απασχολούν. Οι περισσότερες θεωρίες ομαδοποιούν τις επιχειρήσεις βάσει του αριθμού των υπαλλήλων που απασχολούν, αλλά και του κύκλου εργασιών (Γαγάνης, Γρηγορούδης, Ζοπουνίδης, Ματσατσίνης, 2010). Οι ορισμοί βέβαια λαμβάνουν υπόψη τις οικονομικές και κοινωνικές συνθήκες, που επικρατούν σε κάθε χώρα και τις πολιτικές που υιοθετούν για την ενίσχυση της επιχειρηματικότητας. Εκτός όμως από τις κοινωνικο-οικονομικές συνθήκες, ιδιάζουσα σημασία έχουν και οι διάφοροι γεωγραφικοί παράμετροι και κυρίως οι διαστάσεις των αγορών. Χαρακτηριστικό παράδειγμα είναι ότι στις ΗΠΑ, ως μικρομεσαία επιχείρηση 220

230 Papers in Greek ορίζεται η επιχείρηση που απασχολεί λιγότερους από 500 εργαζόμενους, ενώ στην Ιαπωνία αυτή που απασχολεί λιγότερους από 300. Στην Ελλάδα, ο όρος μικρομεσαία επιχείρηση αποκτά διαφορετικές διαστάσεις. Πιο συγκεκριμένα, η ελληνική οικονομία αποτελείται ως επί το πλείστον (99,8%) από μικρομεσαίες επιχειρήσεις που απασχολούν λιγότερους από 100 υπαλλήλους. Δεδομένου του μεγέθους τους, οι επιχειρήσεις που απασχολούν από 1 έως 9 άτομα χαρακτηρίζονται ως μικρές, από 10 έως 49 μεσαίες και από 50 και άνω μεγάλες (Κανελόπουλος, 2002). Οι μικρομεσαίες επιχειρήσεις μπορεί να ευεργετήσουν ποικιλοτρόπως την ελληνική αγορά. Η ευελιξία που τις χαρακτηρίζει και η εύκολη προσαρμογή στις αλλαγές του περιβάλλοντος, σε συνδυασμό με τον τρόπο δόμησης των σχέσεων με τους πελάτες και τους υπαλλήλους και τη διαδικασία λήψης αποφάσεων παρέχουν ένα ισχυρό προβάδισμα (Γαγάνης, Γρηγορούδης, Ζοπουνίδης, Ματσατσίνης, 2010). Το στοιχείο όμως που φαίνεται να αποτελεί συστατικό στοιχείο της επιτυχίας είναι ο συναισθηματικός δεσμός που έχει ο ιδιοκτήτης με την επιχείρηση, την οποία θεωρεί δημιούργημα του. Ταυτόχρονα, αυτό σημαίνει ότι υπάρχει αυτονομία και ανεξαρτησία στη λήψη αποφάσεων και ισχυρό κίνητρο επιτυχίας. Άλλωστε, κατά τον Vroom (1964), τα κίνητρα είναι οι διαδικασίες που καθορίζουν τις επιλογές του ατόμου μεταξύ διαφορετικών εναλλακτικών επιλογών, στην προκειμένη περίπτωση των αποφάσεων που θα λάβει για την επιχείρηση του. Παρά το γεγονός ότι οι ΜΜΕ έχουν θετική συνεισφορά στην οικονομική ανάπτυξη, οφείλουμε να δούμε και την άλλη όψη του νομίσματος. Εν μέσω οικονομικής κρίσης, έχουν έρθει στην επιφάνεια πολλαπλές αδυναμίες και προβλήματα των ελληνικών επιχειρήσεων, που μέχρι πριν ναι μεν υπήρχαν αλλά δεν φαίνονταν. Τα σημαντικότερα προβλήματα είναι απόρροια της χαμηλής παραγωγικότητας, η οποία μπορεί να αποδοθεί κυρίως στο χαμηλό βαθμό αξιοποίησης της σύγχρονης τεχνολογίας (π.χ. συστήματα ERP) και στην ελλιπή κατάρτιση ή στην απροθυμία εφαρμογής των σύγχρονων μεθόδων διοίκησης, όπως είναι η διοίκηση ολικής ποιότητας, η διοίκηση μέσω αντικειμενικών στόχων (MBO). Ωστόσο, το μεγαλύτερο πρόβλημα που εντοπίζεται στις μικρομεσαίες επιχειρήσεις είναι ότι η λειτουργία τους βασίζεται στις οικογενειακές και κοινωνικές σχέσεις και όχι σε κάποιο οργανόγραμμα, ενώ δεν γίνεται χρήση κάποιου στρατηγικού πλάνου ή στρατηγικού σχεδιασμού και ανταγωνιστικού πλεονεκτήματος. Η στρατηγική συναρμογή των δυο αυτών συστατικών στοιχείων θα ωφελούσε την επιχείρηση. Το ανειδίκευτο προσωπικό, ο κλειστός κύκλος πελατών, η συγκυριακή και όχι μεθοδευμένη ανάπτυξη, η μη επικαιροποίηση της γνώσης, η περιορισμένη αντίληψη των διεθνών οικονομικών εξελίξεων, η ασυνέχεια του σχεδιασμού, η υπερφορολόγηση και ο πληθωρισμός, ο αθέμιτος ανταγωνισμός από τις πολυεθνικές, η απώλεια της γειτονιάς ως κέντρου εμπορικής δραστηριοποίησης καθιστούν ευάλωτες τις μικρομεσαίες επιχειρήσεις και τις αφήνουν βορρά στη χρεοκοπία ή στις εξαγορές και συγχωνεύσεις. Η απουσία κουλτούρας 221

231 καινοτομίας και ανάπτυξης, τους στερεί ένα ισχυρό ανταγωνιστικό πλεονέκτημα (Davenport & Prusak, 1998). Οι Gomes, Yasin & Lisboa (2009), ομαδοποιούν τα προβλήματα που ανακύπτουν ως αποκύημα του μικρού μεγέθους των επιχειρήσεων στα εξής: αδυναμία κάλυψης μεγάλου μεγέθους παραγγελιών, υψηλά κόστη διαχείρισης εγκαταστάσεων και αγοράς πρώτων υλών, ανεπαρκές δίκτυο διάχυσης της πληροφορίας, ανικανότητα δανεισμού λόγω έλλειψης κεφαλαίων και ανειδίκευτο εργατικό δυναμικό. Η ένταση του ανταγωνισμού, η μεγάλη ποικιλία προϊόντων που προσφέρονται ικανοποιούν σε μεγάλο βαθμό τις ανάγκες των πελατών, οι οποίοι πλέον θέτουν περισσότερα ποιοτικά κριτήρια για την επιλογή ενός προϊόντος ή μίας υπηρεσίας. Δεν είναι τυχαίο ότι τα τελευταία χρόνια τα στελέχη των επιχειρήσεων επιζητούν καλύτερες πρακτικές για την βελτιστοποίηση της ανταγωνιστικότητας και της ευημερίας της επιχείρησης τους (Yew Wong & Aspinwall, 2004), αντιλαμβανόμενοι τις προσδοκίες των πελατών για ποιότητα και περιβαλλοντική προστασία. Παρά το γεγονός ότι η εφαρμογή ποιοτικών ελέγχων δημιουργεί αυξημένα κόστη σε μία επιχείρηση, εάν συνδυαστεί με μια περισσότερο προσωποκεντρική προσέγγιση του πελάτη, ενδεχομένως να αποτελέσει μεσομακροπρόθεσμα το αναγκαίο αντιστάθμισμα στη λαίλαπα της έλλειψης ρευστότητας και του άκρατου ανταγωνισμού (Tsiotras, Gotzamani 1996). Οι οργανισμοί δεν επικεντρώνονται μόνο στο να προσαρμόζουν τη διαδικασία παραγωγής ώστε να παράγονται ποιοτικά προϊόντα, αλλά αναζητούν ταυτόχρονα και μεθόδους παραγωγής που θα έχουν αμελητέα επίδραση στο περιβάλλον. Για το λόγο αυτό ο αριθμός των επιχειρήσεων που αναζητά και την πιστοποίηση με το σύστημα Περιβαλλοντικής Διαχείρισης ISO αυξάνεται συνεχώς. (Μανδαράκα & Γεωργακόπουλος, 2006). Η ποιότητα των προϊόντων και η εφαρμογή συστημάτων περιβαλλοντικής διαχείρισης προϋποθέτει την ύπαρξη σύγχρονων τεχνολογικών εξοπλισμών, άρα και μεγάλα κόστη επενδύσεων και συντήρησης (Lema & Dur éndez, 2007). Είναι δεδομένο ότι οι εξελίξεις τόσο στην τεχνολογία όσο και στην οικονομία δημιουργούν καινούργιες επενδυτικές ευκαιρίες και πλεονεκτήματα για τις επιχειρήσεις. Η υιοθέτηση νέων τεχνολογιών στην παραγωγή, στη διακίνηση και το εμπόριο θα δημιουργήσει καινοτόμα προϊόντα και νέες ιδέες, ενώ θα ανοίξει το δρόμο προς νέες αγορές. Οι ΜΜΕ αντιμετωπίζουν στενότητα και περιορισμούς πόρων (οικονομικούς, προσωπικού, παραγωγικής δυναμικότητας, εμπορικών δικτύων) και κατά συνέπεια για να επιβιώσουν χρειάζονται να είναι απόλυτα συντονισμένες με την αγορά και το γενικότερο περιβάλλον, το οποίο μπορεί να επιτευχθεί μόνο μέσω της ισορροπίας ανάμεσα στο στρατηγικό σχεδιασμό και τους αντικειμενικούς στόχους. Οι μικρομεσαίες επιχειρήσεις δεν μπορούν να επιβιώνουν με διοίκηση που βασίζεται στη διαίσθηση, τον κοινό νου και τις παραδοσιακές γνώσεις (Κανελόπουλος, 2002). Η επιβίωση τους και η ευημερία τους εξαρτώνται απόλυτα από την ικανότητα της διοίκησης να δημιουργεί μηχανισμούς που θα 222

232 Papers in Greek τους επιτρέψουν να ασκούν συνειδητή προσπάθεια για συνεχή βελτίωση όλων των πτυχών των δραστηριοτήτων τους (Vouzas & Gotzamani, 2005). Τα συστήματα ολικής ποιότητας, επομένως, οφείλουν να ενσωματώσουν τη γνώση ως ανταγωνιστικό πλεονέκτημα σε κάθε τους επίπεδο και ως κριτήριο επιβίωσης στο σημερινό ανταγωνιστικό και αμείλικτο επιχειρησιακό περιβάλλον, ενώ θα πρέπει να αποστασιοποιηθούν μερικώς από την έντονα οργανωτική κουλτούρα, η οποία δεν συμβάλλει στη διαμόρφωση ενός πιο ευέλικτου συστήματος (Psychogios & Szamosi, 2007). Η προβληματική της έρευνας Στην προσπάθεια ερμηνείας και κατανόησης των στρατηγικών και των επιχειρηματικών συμπεριφορών που ακολουθούν οι επιχειρήσεις, διεξήχθη έρευνα σε ελληνικές εταιρείες, ώστε να διακριβωθεί η ύπαρξη ή μη στατιστικώς σημαντικών συσχετίσεων. Για το σκοπό αυτό χορηγήθηκε ερωτηματολόγιο επιχειρηματικής συμπεριφοράς σε 103 στελέχη ή διευθυντές ή μετόχους. Η ανάλυση των δεδομένων έγινε με τη χρήση του στατιστικού πακέτου SPSS 15. Οι μεταβλητές που συσχετίστηκαν αφορούσαν το μέγεθος των εταιρειών, τον κλάδο στον οποίο δραστηριοποιούνται, τον χρόνο λειτουργίας και τον αριθμό των εργαζομένων σε σχέση με τις στάσεις των υπευθύνων λήψης αποφάσεων, την αγορά δραστηριοποίησης, την πιστοποίηση των εταιριών με ISO 9000 και 14000, τις επενδύσεις της εταιρείας σε τεχνολογικό εξοπλισμό, τα προβλήματα που αντιμετωπίζουν και τη στάση της εταιρείας προς το περιβάλλον. Η ανάλυση των δεδομένων έγινε με το στατιστικό πακέτο SPSS 13. Το μοντέλο που χρησιμοποιήθηκε είναι η ανάλυση συχνοτήτων και η κατανομή x2, με την οποία θα εξετάσουμε το βαθμό στατιστικής σημαντικότητας των συσχετίσεων μεταξύ των πιθανών παραγόντων, που συντελούν στην αποτελεσματικότητα της επιχείρησης. Πιο συγκεκριμένα, οι υποθέσεις της έρευνας ήταν οι εξής: Πειραματική υπόθεση (H1): Υπάρχει στατιστικώς σημαντική συσχέτιση μεταξύ του μεγέθους των επιχειρήσεων και της εφαρμογή συστημάτων διαχείρισης ποιότητας και συστημάτων περιβαλλοντικής διαχείρισης. Μηδενική υπόθεση (Η0): Δεν υπάρχει στατιστικώς σημαντική συσχέτιση μεταξύ του μεγέθους των επιχειρήσεων και της εφαρμογή συστημάτων διαχείρισης ποιότητας και συστημάτων περιβαλλοντικής διαχείρισης Πειραματική υπόθεση (H2): Υπάρχει στατιστικώς σημαντική συσχέτιση μεταξύ του χρόνου λειτουργίας της επιχείρησης υπό συγκεκριμένη διοίκηση με τον επαναπροσδιορισμό στρατηγικής. Μηδενική υπόθεση (Η0): Δεν υπάρχει στατιστικώς σημαντική συσχέτιση μεταξύ του χρόνου λειτουργίας της επιχείρησης υπό συγκεκριμένη διοίκηση με τον επαναπροσδιορισμό στρατηγικής. 223

233 Πειραματική υπόθεση (H3): Υπάρχει στατιστικώς σημαντική συσχέτιση μεταξύ του χρόνου λειτουργίας της επιχείρησης υπό συγκεκριμένη διοίκηση με την πραγματοποίηση μεγάλων επενδύσεων σε τεχνολογικό εξοπλισμό. Μηδενική υπόθεση (Η0): Δεν υπάρχει στατιστικώς σημαντική συσχέτιση μεταξύ του χρόνου λειτουργία της επιχείρησης υπό συγκεκριμένη διοίκηση με την πραγματοποίηση μεγάλων επενδύσεων σε τεχνολογικό εξοπλισμό. Ανάλυση αποτελεσμάτων της έρευνας Περιγραφή δείγματος Το δείγμα της παρούσας έρευνας απαρτίστηκε από 103 μέλη ελληνικών εταιρειών, εκ των οποίων το 26,2% είναι διευθυντικά στελέχη, το 16,5% είναι συνιδιοκτήτες, το 16,5% είναι διευθύνοντες σύμβουλοι, το 12,6% είναι στελέχη και το 11,7% είναι ιδιοκτήτες σε εταιρεία. Από τους παραπάνω, οι περισσότεροι εργάζονται ή διαθέτουν, αν πρόκειται για ιδιοκτήτες, ανώνυμη εταιρεία (78,8%) και ομόρρυθμη εταιρεία (17,2%). Η πλειοψηφία των εταιρειών του δείγματος, λειτουργούν από 16 έτη και πάνω, ενώ ένα ποσοστό της τάξεως 29% λειτουργούν από 7 έως 15 έτη και 26% από 1 έως 6 έτη. Σημαντικό στοιχείο είναι ότι το 46,5% των επιχειρήσεων φαίνεται να αλλάζει συχνά πρόσωπα στη διοίκηση. Οι επιχειρήσεις του δείγματος είναι κυρίως βιομηχανίες τροφίμων ή ποτών (33%) και βιομηχανίες υλικών (27,2%). Οι υπόλοιπες είναι βιομηχανίες κατασκευής και μεταποίησης (11,7%) και Χημικές βιομηχανίες (13,6%). Γράφημα 1: Κλάδος επιχειρήσεων Επιπροσθέτως, όσον αφορά τη μορφή εργασίας που υιοθετούν οι εταιρείες διαφαίνεται ότι το μεγαλύτερο ποσοστό εφαρμόζει την πολιτική ενός πλήρους ωραρίου για το προσωπικό τους (88,3%), ενώ εξίσου σημαντικό ποσοστό δραστηριοποιείται κατά κύριο λόγο στην εγχώρια αγορά (72,7%), ανάλογα με τον τζίρο που πραγματοποιεί σε αυτήν (83,3%). Ως προς την οργάνωση τους, είναι φανερό ότι ακολουθούν κατά γράμμα την παγιωμένη 224

234 Papers in Greek αντίληψη που επικρατεί ότι υπεύθυνοι για τη λήψη αποφάσεων σε μία επιχείρηση είναι μόνο τα διευθυντικά στελέχη της εταιρείας (51,7%), χωρίς να λαμβάνεται υπόψη ότι η λήψη αποφάσεων πρέπει να είναι αποτέλεσμα όλων των τμημάτων της επιχείρησης, από τον απλό υπάλληλο μέχρι και τον διευθυντή των επιμέρους επιχειρηματικών μονάδων. Βέβαια, δεν εξαιρούνται από την όλη διαδικασία λήψης αποφάσεων και οι μέτοχοι (37,9%). Ανάλυση αποτελεσμάτων σε συνάρτηση με το μέγεθος των επιχειρήσεων Όσον αφορά το μέγεθος των επιχειρήσεων, έγινε μία κατηγοριοποίηση βάσει του αριθμού των υπαλλήλων που απασχολεί η κάθε επιχείρηση, και παρατηρήθηκε ότι εμφανίζονται αρκετές στατιστικά σημαντικά συσχετίσεις. Για τις ανάγκες της έρευνας, δεχτήκαμε ως δεδομένο ότι από 0 έως 9 υπάλληλοι είναι μικρές επιχειρήσεις, 10 έως 49 είναι μικρομεσαίες και 50 και άνω είναι μεγάλες επιχειρήσεις. Από τις επιχειρήσεις που έλαβαν μέρος στην έρευνα, οι περισσότερες ήταν μικρομεσαίες επιχειρήσεις (59,2%). Στον πίνακα πολλαπλής εισόδου μπορούμε να κάνουμε τις ακόλουθες παρατηρήσεις. Οι μικρές επιχειρήσεις (1 έως 9 υπάλληλοι) σε ποσοστό 29,4% θεωρούν ότι το μεγαλύτερο πρόβλημα που αντιμετωπίζουν είναι η βελτίωση της ποιότητας των προϊόντων τους. Οι μεσαίες επιχειρήσεις δίνουν έμφαση στο θέμα αυτό σε ποσοστό 24,6%, ενώ οι μεγάλες επιχειρήσεις με περισσότερους από 50 υπαλλήλους εστιάζουν στο θέμα της βελτίωσης της ποιότητας σε ποσοστό 56%. Είναι προφανές ότι το μέγεθος της επιχείρησης συσχετίζεται στατιστικώς σημαντικά (x2=8,031, df=2, sig.0,018<0,05) με την αντίληψη περί ποιότητας. Οι μικρές και οι μεγάλες επιχειρήσεις δεν έχουν εσωτερικεύσει ούτε έχουν θέσει σε εφαρμογή τις επιταγές της διοίκησης ολικής ποιότητας. Δεν έχουν συνειδητοποιήσει ότι η παροχή ποιοτικών υπηρεσιών ή προϊόντων συνδέεται άρρηκτα με την αποτελεσματικότητα, την ικανοποίηση των πελατών και κατά συνέπεια με τη μεγιστοποίηση του κέρδους. Αυτό είναι ιδιαίτερα αληθές στις μεσαίες επιχειρήσεις, αλλά και στις μικρές που σύμφωνα με τα στοιχεία της ΕΣΥΕ (2001) αποτελούν τη συντριπτική πλειοψηφία του επιχειρηματικού ιστού της Ελλάδας. Ενδεχομένως, εκεί να εντοπίζεται η αδυναμία της ελληνικής αγοράς να γίνει ανταγωνιστική και να ενσωματώσει τις αρχές της οικονομικής επιστήμης. Αδιαμφισβήτητα αυτές οι ελληνικές επιχειρήσεις θα πρέπει αν αναθεωρήσουν τα βραχυπρόθεσμα και μη στοχοθετημένα συστήματα λειτουργία τους, να εκπαιδευτούν στην εφαρμογή συστημάτων ποιότητας και να συνειδητοποιήσουν ότι η επιβίωση τους εξαρτάται από αυτά. Η διαπίστωση αυτή συνάδει με το εύρημα ότι ένα πολύ μεγάλο ποσοστό των επιχειρήσεων αυτών κλείνουν στα ρώτα χρόνια λειτουργίας τους, επειδή δεν μπορούν να υπερβούν τα δυσεπίλυτα και παγκοσμιοποιημένη προβλήματα της σύγχρονης επιχείρησης. Σε έρευνα των Παπάνη και Ρόντου (2005), διαπιστώθηκε ότι οι μικρές και μεσαίες ελληνικές επιχειρήσεις διέπονται από ιεραρχική οικογενειοκρατική κουλτούρα. Σε αντίθεση με τις μεγαλύτερες (πολυεθνικές) που χαρακτηρίζονται από κουλτούρα καινοτομίας- στόχο. Συνδυαζόμενο με το δικό μας εύρημα περί ποιότητας γίνεται κατανοητό ότι οι μικρομεσαίες 225

235 ελληνικές επιχειρήσεις διατηρούν πρότυπα λειτουργίας που χαρακτήριζαν προγενέστερες δεκαετίες και δεν έχουν κατανοήσει τις συντριπτικές αλλαγές στο διεθνές επιχειρηματικό στερέωμα. Ζοφερότερη είναι η κατάσταση που επικρατεί σχετικά με την περιβαλλοντική συνείδηση των μικρομεσαίων ελληνικών επιχειρήσεων. Συγκεκριμένα, ανάλυση μας κατέδειξε ότι το 100% των ελληνικών επιχειρήσεων του δείγματος σχεδόν δεν γνωρίζει καν τι είναι η διαπίστευση με σειρά ISO και σίγουρα δεν την εφαρμόζει. Τα ποσοστά κάπως βελτιώνονται στις μεσαίες επιχειρήσεις με το 6,6% αυτών να δηλώνει ότι σκέφτεται ή έχει προχωρήσει στην διαδικασία περιβαλλοντικής πιστοποίησης, ενώ το 28% των μεγαλύτερων επιχειρήσεων δηλώνουν την περιβαλλοντική τους ευαισθησία. Η συνέπεια προς τις περιβαλλοντικές αξιώσεις της σύγχρονης εποχής δηλώνουν την κοινωνική ευαισθησία της επιχείρησης, την οικολογική κουλτούρα και τη διασύνδεση τους με το περιβάλλον το οποίο λειτουργούν. Όλα τα ολιστικά συστήματα ποιότητας θεωρούν ότι αυτό αποτελεί αμετάκλητη προϋπόθεση για τη βιωσιμότητα μίας επιχείρησης. Ξανά η στατιστικώς σημαντική συσχέτιση μεταξύ μεγέθους επιχείρησης και οικολογικής ευαισθησίας είναι καταλυτική: ο δείκτης Pearson x2=10,982, με βαθμούς ελευθερίας= 2 και sig 0,004 <0,5. Πίνακας 1: Συσχετίσεις αναφορικά με το μέγεθος των επιχειρήσεων Μεγαλύτερο πρόβλημα που αντιμετωπίζει η εταιρεία είναι η βελτίωση της ποιότητας Αριθμός υπαλλήλων και άνω Ποσοστά % Ποσοστά % Ποσοστά % ΝΑΙ ΌΧΙ ΝΑΙ ΌΧΙ ΝΑΙ ΌΧΙ 14,7 17,4 44,1 66,7 41,2 15,9 Pearson Chi square Τιμή df sig 1, ,018 Διαπίστευση με σειρά 9000 Διαπίστευση με σειρά ,9 23,5 65,7 55,9 31,4 20,6 7, , ,5% 36, ,6 19,6 10, ,004 Αν η περιβαλλοντική ενημερότητα θεωρείται από μερικούς πολυτέλεια σε περιόδους οικονομικής ύφεσης το ίδιο δε θα έπρεπε να ισχύει όσον αφορά τα συστήματα διαπίστευσης ποιότητας με σειρά ISO Όμως, η πραγματικότητα είναι αποκαρδιωτική: μόνο το 5,9% των μικρών επιχειρήσεων διαθέτουν ανάλογο πιστοποιητικό, διατρανώνοντας την απάθεια τους προς τα άκρως απαραίτητα σύγχρονα συστήματα διασφάλισης ποιότητας. Η κουλτούρα τους χαρακτηρίζεται ως ευκαιριακή, πρόσκαιρη και με πλήρη απουσία ποιοτικών στόχων. Κάπως πιο βελτιωμένη εμφανίζεται η κατάσταση στις μεσαίες και μεγαλύτερες επιχειρήσεις (το 37,7% των μεσαίων και το 44% των μεγαλυτέρων επιχειρήσεων διαθέτουν ή βρίσκονται στη 226

236 Papers in Greek διαδικασία απόκτησης του ISO 9000). Η συσχέτιση είναι στατιστικώς σημαντική (x2=7,479, df=2, sig.0,018<0,024). Αναδεικνύοντας το μέγεθος της επιχείρησης ως τον πιο καθοριστικό παράγοντα των στάσεων και αντιλήψεων για τις σύγχρονες οικονομικές αρχές. Γίνεται καταληπτό ότι η ανάγκη για αλλαγή και μετουσίωση του επιχειρηματικού πνεύματος είναι επιτακτική. Οι παλιότερες πρακτικές που ήταν λειτουργικές σε κλειστά οικονομικά συστήματα και σε αγορές με πενιχρές δυνατότητες έχουν παρέλθει ανεπιστρεπτεί. Η διοίκηση επιχειρήσεων δεν μπορεί να παραμένει για πολύ αναχρονιστική ούτε να διέπεται από κανόνες περίκλειστων κοινωνικών δικτύων. Η διακινδύνευση, ο ανταγωνισμός και η ρευστότητα του επιχειρηματικού γίγνεσθαι επιβάλλουν ανατροπές στο ελληνικό οικονομικό σύστημα, αλλά κυρίως την εκπαίδευση των αρμοδίων στο σύγχρονο μάρκετινγκ και μάνατζμεντ. Ανάλυση αποτελεσμάτων σε συνάρτηση με το χρόνο λειτουργίας της επιχείρησης υπό την ίδια διοίκηση. Στην διεθνή επιχειρηματική κονίστρα συγκριτικό πλεονέκτημα διαθέτουν οι επιχειρήσεις που επενδύουν στη γνώση και στις νέες τεχνολογίες. Πλήθος ερευνών αποδεικνύουν ότι η ορθολογική χρήση τους μειώνει το κόστος και αυξάνει την παραγωγικότητα. Οι νέες τεχνολογίες σε συνδυασμό με την αρτιότερη οργάνωση και την αναδιάρθρωση των τεχνικών παραγωγής βελτιώνει τη θέση της επιχείρησης στην αγορά. Οι ελληνικές επιχειρήσεις φαίνεται να συνειδητοποιούν την αναγκαιότητα αυτή αφού το 100% των επιχειρήσεων που λειτουργεί πάνω από 16 έτη, το 82,8% όσων λειτουργούν 7 έως 15 έτη και το 96,2% εκείνων που λειτουργούν από 1 έως 6 έτη θα αντικαθιστούσαν τα μηχανήματα για τη βελτίωση της θέσης της εταιρείας στην αγορά εργασίας. Αν δούμε συνολικά τα ποσοστά το 94% των επιχειρήσεων του δείγματος κατανοεί ότι αυτό αποτελεί πρωταρχική προτεραιότητα για τη βιωσιμότητα. Η στατιστική συσχέτιση είναι σημαντική (x2=9,584, df=2, sig.0,008<0,05). Ο στρατηγικός επαναπροσδιορισμός της εταιρείας φαίνεται να είναι σημαντική προτεραιότητα για το 30,8% των επιχειρήσεων που λειτουργούν από 16 έτη και πάνω, αλλά και για το 17% όσων λειτουργούν από 1 έως 6 έτη. Αντιθέτως, οι επιχειρήσεις εκείνες με μεσοπρόθεσμο χρόνο λειτουργίας (7 έως 15 έτη) μόνο κατά 3,6% δηλώνουν ότι πρέπει αν αναθεωρήσουν τη στρατηγική τους. H στατιστικώς σημαντική συσχέτιση (x2=7,126, df=2, sig.0,028<0,05). Αθροιστικά βέβαια, το 83,2% των επιχειρήσεων του δείγματος θεωρεί ότι ο επαναπροσδιορισμός αυτός δεν είναι το μεγαλύτερο πρόβλημα της εταιρείας. Προφανώς, αγνοούν ή υποτιμούν τη διαπίστωση ότι η εξειδικευμένη γνώση και ο διαρκής αναστοχασμός για τα ενδογενή χαρακτηριστικά της επιχείρησης καθορίζουν εν πολλοίς την επιτυχία. Συνήθως μένουν προσκολλημένες στην παραδοσιακή αντίληψη ότι το κεφάλαιο και η εργασία είναι οι μόνοι παράγοντες επιχειρηματικής ανάπτυξης. Η τάση αυτή είναι ενδεικτική της νοοτροπίας πολλών Ελλήνων επιχειρηματιών για αντίσταση στην αλλαγή και αναστολή ενώπιων της διακύβευσης. Οι ελληνικές επιχειρήσεις δεν δίνουν έμφαση στον στρατηγικό προγραμματισμό 227

237 με αποτέλεσμα να χαρακτηρίζονται από δυσπροσαρμοστικότητα, βραδύτητα στη λήψη αποφάσεων και κακοδιοίκηση. Πίνακας 2: Συσχετίσεις αναφορικά με το χρόνο λειτουργίας της εταιρείας υπό την ίδια διοίκηση Αντικατάσταση μηχανημάτων για βελτίωση της θέσης της εταιρείας στην αγορά Μεγαλύτερο πρόβλημα που αντιμετωπίζει η εταιρεία είναι ο στρατηγικός επαναπροσδιορισμός Χρόνος λειτουργία υπό την ίδια διοίκηση Λιγότερο από 1 έτος- 6 Ποσοστά % 7 έως 15 έτη Ποσοστά % 16 έτη και άνω ΝΑΙ ΌΧΙ ΝΑΙ ΌΧΙ ΝΑΙ ΌΧΙ 26,6 16,7 25,5 83,3 47,9 0 Pearson Chi square Ποσοστά % Τιμή df sig 9, ,008 47,1 46,4 5,9 32,1 47,1 21,4 7, ,028 Συμπεράσματα Ακόμα και σήμερα πολλές επιχειρήσεις δεν κατανοούν τη σχέση μεταξύ των απαιτήσεων των μοντέλων ολικής ποιότητας, των ISO και της αποτελεσματικότητας στον τομέα της παραγωγής ή των υπηρεσιών. Η στατιστική ανάλυση έδειξε ότι οι περισσότερες ελληνικές επιχειρήσεις αντιλαμβάνονται την σημασία που έχουν οι επενδύσεις σε τεχνολογικό εξοπλισμό, αλλά δεν διαθέτουν τους απαιτούμενους πόρους. Εδώ θα πρέπει να υπογραμμιστεί και η ανύπαρκτη κρατική υποστήριξη για της επιχειρηματικότητα, λόγω του υψηλού επιχειρηματικού ρίσκου. Αυτό συνοδεύεται και από την αδυναμία των ελληνικών ΜΜΕ να ανταποκριθούν στις προδιαγραφές και τα κριτήρια καταλληλότητας για επιχορήγηση. Σύμφωνα με έρευνα του ιδρύματος οικονομικών και βιομηχανικών ερευνών (2003), μόνο το 19% επένδυσε σε προηγμένο τεχνολογικό εξοπλισμό και νέες τεχνολογίες παραγωγής, ενώ μόλις το 10,3% δαπάνησε σε τεχνολογία σχεδιασμού προϊόντων, η οποία προϋποθέτει υψηλή τεχνογνωσία και εκπαίδευση. Εξίσου σημαντικό είναι ότι ελάχιστες είναι οι επιχειρήσεις που έχουν συστήματα ποιότητας και περιβαλλοντικής διαχείρισης. Από την έρευνα μας προέκυψε ότι στην πλειοψηφία των ελληνικών επιχειρήσεων υπεύθυνοι για τη λήψη αποφάσεων σε μία επιχείρηση είναι μόνο τα διευθυντικά στελέχη της εταιρείας. Αυτό έρχεται σε αντίθεση με τις σύγχρονες αντιλήψεις σύμφωνα με τις οποίες η διαδικασία του στρατηγικού προγραμματισμού είναι πιο εκδημοκρατισμένη και περιλαμβάνει όλους τους μάνατζερ μιας επιχείρησης, που συνεργάζονται σε διατμηματικές ομάδες. Πολλές φορές μάλιστα συμπεριλαμβάνουν και ομάδες εκτός επιχείρησης, όπως προμηθευτές και πελάτες. Η διαδικασία αυτή τείνει επίσης να γίνει μέρος των καθημερινών καθηκόντων ενός μάνατζερ παρά κάποια ετήσια ή πενταετής δραστηριότητα. Οι αλλαγές αυτές αντανακλούν τις αλλαγές της παγκοσμιοποίησης της οικονομίας τα τελευταία χρόνια και τη ρευστότητα και 228

238 Papers in Greek αβεβαιότητα των αγορών που επιβάλλουν την αδιάκοπη επαγρύπνηση μιας επιχείρησης. Το παραπάνω γεγονός πιθανότητα εξηγεί την σημαντική υστέρηση της ανταγωνιστικότητας των ελληνικών μικρομεσαίων επιχειρήσεων έναντι των αντίστοιχων ευρωπαϊκών Βιβλιογραφία Αναγνωστάκη, Σ., (2000). Νέοι και επιχείρηση. Ενημέρωση, Δελτίο Επαγγελματικού Επιμελητηρίου Αθηνών, 4/2000, 461. Γαγάνης Χ., Γρηγορούδης Β., Ζοπουνίδης Κ., Ματσατσίνης Ν. (2010). Ανάπτυξη και Λειτουργία Μικρομεσαίων Επιχειρήσεων, Αθήνα: Κλειδάριθμος Γκουτάκου, Α. & Γκοτζαμάνη, Κ. (2006). Η ολοκλήρωση των συστημάτων ISO 9000 και ISO 14000: Οι προϋποθέσεις, η διαδικασία, τα οφέλη, και οι περιορισμοί της ενοποίησης, Clark, P. et al. (1999). Microenterprise and the Poor: Findings from the Self-Employment Learning Project Five-Year Survey of Microenterpreneurs. Washington, DC, United States: Aspen Institute. Davenport, T.H., and Prusak, L. (1998), Working Knowledge. Harvard Business School Press, Boston, MA Gomes, C., Yasin, M.& Lisboa, J. (2009). Benchmarking competitive Methods and strategic choices of Portuguese SMEs. Benchmarking: An International Journal, Gulli, H. (1998). Microfinance and Poverty: Questioning the Conventional Wisdom. Washington, DC, United States: Inter-American Development Bank. Κανελλόπουλος, Χ. (2002). Διοίκηση Μικρομεσαίων Επιχειρήσεων. Αθήνα: Κέντρο Ευρωπαϊκών Σπουδών ΕΠΕ(GEMS) Lema D, & Duréndez, A. (2007). Managerial behavior of small and Medium- sized family businesses: an empirical study. International Journal of Entrepreneurial Behavior & Research, Μανδαράκα, Μ. & Γεωργακόπουλος, Κ. (2006). Συστήματα Περιβαλλοντικής Διαχείρισης σε Ελληνικές Επιχειρήσεις: Ωθούσες Δυνάμεις και Σημαντικότερα Οφέλη, Ελληνική Βιομηχανία: προς την οικονομία της γνώσης Psychogios, A. & Szamosi, L. (2007). Exploring the Greek national Business system. Euro Med Journal of Business, 7-22 Salavou, H., Baltas, G.& Lioukas, S. (2004), Organizational innovation in SMEs. European Journal of Marketing, Tsiotras, G.& Gotzamani, K. (1996). ISO 9000 as an entry key to TQM: the case of Greek industry, International Journal of Quality & Reliability Management, Vouzas, F. & Gotzamani, K. (2005). Best practices of selected Greek Organizations on their road to business excellence. The TQM Magazine, Vroom, H.V. (1964). Work αnd Motivαtion, Willey: N.York Yew Wong, K. & Aspinwall, E (2004). Characterizing knowledge Management in the small business environment. Journal of Knowledge Management,

239 Η αντίληψη της νέας τεχνολογίας των ERP συστημάτων από τις επιχειρήσεις: Το κλειδί για την επιτυχία Γραμμένος Γρηγόρης, Ευθυμίου Αθανάσιος & Στρατήγη Αρχοντία 1 Περίληψη Τα τελευταία χρόνια, δεδομένου του δυναμικού και απρόβλεπτου επιχειρησιακού περιβάλλοντος, οι επιχειρήσεις αντιμετωπίζουν σημαντικές προκλήσεις σε θέματα που αφορούν την επέκτασή τους σε νέες αγορές αλλά και τη μεγιστοποίηση της ικανοποίησης των πελατών τους. Αυτό έχει σαν αποτέλεσμα οι συνθήκες αυτές να τους επιβάλλουν μείωση των συνολικών δαπανών σε ολόκληρη την εφοδιαστική αλυσίδα, μείωση των χρόνων διεκπεραίωσης των συναλλαγών, μεγαλύτερη γκάμα προϊόντων, αύξηση της αξιοπιστίας των χρόνων παράδοσης και καλύτερη εξυπηρέτηση πελατών. Επίσης, βελτιωμένη ποιότητα προϊόντων και αποτελεσματική αλληλεπίδραση ζήτησης, προσφοράς και παραγωγής. Προκειμένου να επιτευχθούν οι παραπάνω στόχοι ολοένα και περισσότερες επιχειρήσεις στρέφονται στα συστήματα ERP. Ένα σύστημα ERP είναι ένα ευρύ επιχειρησιακό σύστημα πληροφοριών το οποίο ενσωματώνει όλες τις απαραίτητες επιχειρησιακές λειτουργίες όπως :ο προγραμματισμός των προϊόντων, η αγορά, ο έλεγχος, οι πωλήσεις, τα χρηματοοικονομικά και οι ανθρώπινοι πόροι σε ένα ενιαίο σύστημα με κοινή βάση δεδομένων. Πρόκειται για μία από τις πιο καινοτόμες εξελίξεις της τεχνολογίας των πληροφοριών, που αναπτύχθηκε στις αρχές της δεκαετίας του 1990, σηματοδοτώντας μια νέα εποχή για τις επιχειρήσεις. Σκοπός του συγκεκριμένου άρθρου είναι να διερευνηθεί ο βαθμός σημαντικότητας του τεχνολογικού επιπέδου ενός ERP συστήματος, προκειμένου να εξασφαλιστεί η αποτελεσματικότητα όλων των διεργασιών που καλείται να διεκπεραιώσει ένα λογιστικό τμήμα μιας επιχείρησης. Λέξεις κλειδιά: λογιστικά πληροφοριακά συστήματα, τεχνολογία, αποτελεσματικότητα. Εισαγωγή Στον 21ο αιώνα, οι επιχειρήσεις βρίσκονται αντιμέτωπες με ποικίλες και σημαντικές προκλήσεις. Οι προκλήσεις αυτές εκτείνονται από την παγκοσμιοποίηση της αγοράς έως την έντονη ανταγωνιστικότητα των επιχειρήσεων που έχει προκληθεί εξαιτίας της συνεχούς εξέλιξης της τεχνολογίας. Η πολυπλοκότητα της σύγχρονης αλυσίδας παραγωγής και διακίνησης προϊόντων, σε συνδυασμό με την ανάγκη για τεκμηριωμένη λήψη επιχειρηματικών αποφάσεων δημιουργούν την ανάγκη για ολοκληρωμένη διαχείριση των πόρων μιας επιχείρησης και της ροής πληροφοριών. 1 Σχολή Επιστημών της Διοίκησης, Πανεπιστήμιο Αιγαίου Χίος, Ελλάδα. 230

240 Papers in Greek Τα ολοκληρωμένα επιχειρησιακά συστήματα αποτελούν ένα από τα σημαντικότερα επιτεύγματα της πληροφορικής στη μάχη της αγοράς που χαρακτηρίζεται από έντονη ανταγωνιστικότητα. Τα πληροφοριακά αυτά συστήματα είναι ολοκληρωμένες επιχειρηματικές λύσεις, οι οποίες καλύπτουν πλήρως όλα το φάσμα των επιχειρηματικών δραστηριοτήτων μιας εταιρίας (παραγωγική, εμπορική, υπηρεσίες, κ.λπ.) σε ένα ενιαίο σύστημα. Τα Συστήματα Διαχείρισης Πόρων (Enterprise Resource Planning ERP) αποτελούν μια από τις πιο καινοτόμες εξελίξεις της τεχνολογίας των πληροφοριών, που αναπτύχθηκε στις αρχές τις δεκαετίας του Οι σημαντικότεροι λόγοι που ωθούν τις επιχειρήσεις στην υιοθέτηση των ERP συστημάτων είναι οι δυνατότητες ολοκλήρωσης και τυποποίησης που προσφέρουν, η ευέλικτη δομή πελάτη/διαχειριστή και οι ικανότητες τους να καθοδηγούν αποτελεσματικά τον επιχειρηματικό επανασχεδιασμό και την διοίκηση των κύριων και υποστηρικτικών διαδικασιών(computer World,1998). Το θέμα γύρω από το οποίο επικεντρώνεται το παρόν άρθρο είναι το κομμάτι των ERP συστημάτων το οποίο καλύπτει τις λογιστικές διεργασίες και πρακτικές μιας επιχείρησης. Συγκεκριμένα ερευνάται ο τρόπος με τον οποίο αντιλαμβάνεται το λογιστικό τμήμα μιας επιχείρησης τη διάσταση της νέας τεχνολογίας. Επιδιώκεται μια προσέγγιση γύρω από τις δυνατότητες των συστημάτων αυτών και πως αυτές συσχετίζονται με το τεχνολογικό επίπεδο του συστήματος. Η δομή του άρθρου είναι η ακόλουθη : Αρχικά πραγματοποιείται μία σύντομη ανασκόπηση σχετικά το τι είναι ένα ERP σύστημα, καθώς και η εξέλιξή του μέσω μιας σύντομης αναδρομής μέσα στο χρόνο. Στη συνέχεια, παρουσιάζονται ορισμένα χαρακτηριστικά τους, κάποια προβλήματα που δημιουργούνται κατά τη φάση της εγκατάσταση τους καθώς και τα σημαντικότερα μειονεκτήματα που απορρέουν από την υιοθέτησή τους. Στο δεύτερο μέρος, ακολουθεί η μεθοδολογία και οι στατιστικές τεχνικές που χρησιμοποιήθηκαν στην παρούσα έρευνα. Έπειτα παρουσιάζεται η στατιστική ανάλυση της έρευνας και τα αποτελέσματά της. Τέλος παρατίθενται τα συμπεράσματα που εξάγονται από την πραγματοποιηθείσα έρευνα. Τι είναι τα συστήματα ERP; Τα συστήματα E.R.P., αποτελούν μια σημαντική εξέλιξη μίας τεχνολογίας που ξεκίνησε σαράντα πέντε χρόνια πριν και συνεχίζει να λαμβάνει χώρα μέχρι και σήμερα. Πριν από τη δεκαετία του 1960, η βιομηχανία στηριζόταν σε παραδοσιακές μεθόδους διαχείρισης αποθεμάτων με δημοφιλέστερη ίσως τη μέθοδο της Οικονομικής Ποσότητα Παραγγελίας (Economic Order Quantity). Κατά τη διάρκεια της δεκαετίας του 1960, τόσο οι ελληνικές όσο και οι διεθνής επιχειρήσεις, προκειμένου να υποστηρίξουν τις πολύπλοκες λειτουργιές τους, στράφηκαν σε πληροφοριακά πακέτα τα οποία βοηθούσαν βασικές διεργασίες οικονομικού περιεχομένου όπως λογιστική και μισθοδοσία. Στις αρχές της επόμενης δεκαετίας (1970) κάνουν την εμφάνισή τους τα συστήματα MRP τα οποία χαρακτηρίζονται από κάποιο βαθμό ολοκλήρωσης, ενώ στα τέλη της ίδιας δεκαετίας, το MRP II έρχεται να υποβοηθήσει τις 231

241 λειτουργίες του ελέγχου, της παραγωγής, της κοστολόγησης κτλ. Κατά τη δεκαετία του 1980, η ανάγκη για ολοκλήρωση και ενοποίηση των βασικών επιχειρηματικών διαδικασιών, συγκεκριμένα δίνοντας έμφαση στις λειτουργίες που περιλαμβάνει η οικονομική διαχείριση και παραγωγή, είχε σαν αποτέλεσμα την εμφάνιση των συστημάτων Enterprise Resources Planning (Προγραμματισμός Επιχειρηματικών Πόρων). Η παρουσία των συστημάτων αυτών αύξησε σημαντικά το βαθμό ενοποίησης των επιχειρηματικών διαδικασιών αφού επεκτείνεται και στη διαχείριση ανθρωπίνων πόρων κτλ.(jacobs and Weston 2006) Συνεπώς, ένα σύστημα ΕRP (Enterprise Resource Planning): αποτελεί μία ακολουθία από άμεσα υλοποιήσιμα πακέτα εφαρμογών, που καλύπτουν όλες τις λειτουργίες μίας επιχείρησης και διαθέτουν την απαραίτητη ευλυγισία, για τη δυναμική προσαρμογή τους στις απαιτήσεις και τις μεταβολές που συμβαίνουν σε αυτή. Αποτελεί ουσιαστικά τη θεμελίωση και ολοκλήρωση των επιχειρησιακών διαδικασιών (BPR Business Process Reengineering) των επιχειρησιακών πληροφοριακών συστημάτων. Παρέχει ολοκληρωμένες πληροφοριακές λύσεις για την καλύτερη και αποδοτικότερη διαχείριση και προγραμματισμό των πόρων και δίνει τη δυνατότητα στην επιχείρηση να λειτουργήσει συντονισμένα σαν ενιαίο σύνολο, καθοδηγούμενη από τις πληροφορίες που δέχεται από το περιβάλλον (Escalle et al., 1999). Η χρήση των συστημάτων ERP στη δράση των ελληνικών επιχειρήσεων Το σύστημα ERP είναι μια από τις βασικότερες επενδύσεις των περισσότερων ελληνικών εταιριών. Με την υιοθέτηση των ERP συστημάτων εξασφαλίζεται η αποτελεσματικότερη διαχείριση των πόρων της επιχείρησης στοχεύοντας τόσο στη μείωση του κόστους, με παράλληλη αύξηση των πωλήσεων της επιχείρησης, όσο και στη βελτιστοποίηση της διαδικασίας παραγωγής. Μειώνεται ο χρόνος απόκρισης (ο χρόνος από τη στιγμή που θα ληφθεί μια παραγγελία μέχρι το προϊόν να φτάσει στον πελάτη) συντελώντας στη μείωση του όγκου εργασίας, σε καλύτερους χρόνους αντίδρασης και σε βελτιωμένες ταχύτητες παράδοσης (Cotteleer and Bendoly, 2006 and McAfee, 2002). Επιπλέον, η χρήση ενός ERP συστήματος παρέχει τη δυνατότητα διατήρησης μικρότερης ποσότητας αποθεμάτων πρώτων υλών αλλά και τελικών προϊόντων μειώνοντας ταυτόχρονα το κόστος αποθεματοποίησης και το κόστος ελέγχου τους. Επίσης, οι αυτοματοποιημένες χρηματοοικονομικές συναλλαγές μειώνουν τους χρόνους από τη στιγμή που θα γίνει η παραγγελία στους προμηθευτές έως ότου οι επιχειρήσεις εισπράξουν το αντίτιμο από την πώληση αυτή (cash to cash cycle times) και το χρόνο που απαιτεί για τη διευθέτηση και την κατάρτιση των χρηματοοικονομικών καταστάσεων στο τέλους του τετραμήνου ή του έτους (Mabert et al., 2000, Mabert et al., 2003, McAfee, 1999 and Stratman, 2001). Με την εγκατάσταση του ERP, η πληροφορία είναι διαθέσιμη προς όλους και μάλιστα άμεσα. Συνεπώς, ένας αριθμός εργασιών ρουτίνας θα πάψει να υφίσταται. Όμως, η ευκολία με την οποία είναι πλέον διαθέσιμη η πληροφορία επιτρέπει στα στελέχη να κάνουν πιο ουσιώδεις αναλύσεις, με βάση τα στοιχεία που παρέχονται από το ERP, με αποτέλεσμα τα στελέχη που πριν δούλευαν για να δημιουργήσουν 232

242 Papers in Greek την πληροφορία, τώρα να μπορούν να δουλεύουν με την πληροφορία (Bancroft et. al., 1998). Τέλος, τα προβλήματα και οι απαιτήσεις που σχετίζονται με το ανθρώπινο δυναμικό είναι σε θέση να διαχειρίζονται αποτελεσματικά μέσω του προγραμματισμού που προσφέρεται το σύστημα όσο αφορά τα ωράρια, τις άδειες κτλ. Στόχος ενός συστήματος ERP είναι η ολοκλήρωση των επιμέρους διαδικασιών μέσα στην επιχείρηση στις οποίες εμπλέκονται τα διάφορα τμήματα (λογιστήριο, παραγωγή, πωλήσεις, κλπ.), έτσι ώστε να μπορεί αυτή να διεκπεραιώνει τις κύριες επιχειρηματικές δραστηριότητές της(mcafee, 1999). Η "ολοκλήρωση" αποτελεί και τη λέξη-κλειδί, αφού η εγκατάσταση ενός συστήματος ERP δημιουργεί καλύτερες δομές στην επιχείρηση, οι οποίες επιτρέπουν στους εργαζόμενους να εργαστούν αποτελεσματικότερα και πιο παραγωγικά. Παρόλα αυτά, από την υιοθέτηση των συστημάτων αυτών ενδέχεται να παρουσιαστούν ορισμένα προβλήματα. Χαρακτηριστικά, αξίζει να αναφερθεί ότι δεδομένης της μοναδικότητας του κάθε προγράμματος, η επιχείρηση που το διαθέτει ενδέχεται να μην είναι σε θέση να αντιμετωπίσει ορισμένα προβλήματα που δημιουργούνται κατά τη φάση της εγκατάστασης του. Το σημαντικότερο μειονέκτημα που προκύπτει όμως είναι το υψηλό κόστος που επιβαρύνει την επιχείρηση. Το κόστος αυτό δεν προέρχεται αποκλειστικά από την κτήση του αλλά και από την εκπαίδευση του προσωπικού καθώς και από την παραμετροποίηση και συντήρησή του(sidney, 1999; Tim, 1999). Επιπλέον η εγκατάσταση ενός ERP συστήματος απαιτεί αναδιοργάνωση των επιχειρησιακών δραστηριοτήτων και εναρμόνιση τους με το νέο σύστημα, ενώ υπάρχει σχέση εξάρτησης μεταξύ του οργανισμού και του κατασκευαστή του εκάστοτε ERP συστήματος. Μεθοδολογία και στατιστικές τεχνικές Για τη διεξαγωγή της έρευνας χρησιμοποιήθηκε η μέθοδος των ερωτηματολογίων, τα οποία περιείχαν 39 ερωτήσεις κλειστού τύπου(ναι/οχι) και ερωτήσεις με κλίμακα αξιολόγησης από 1 έως 5 (κλίμακα Likert). Σύμφωνα με την κλίμακα αυτή, το 1 δηλώνει το χαμηλότερο επίπεδο ικανοποίησης ενώ το 5 το υψηλότερο. Αξίζει να σημειώσουμε ότι η μέθοδος αυτή μας οδηγεί στη διατύπωση ασφαλών συμπερασμάτων σχετικά με το βαθμό ικανοποίησης. Τα ερωτηματολόγια αυτά διανεμήθηκαν σε 132 επιχειρήσεις σε όλη την Ελλάδα η νομική μορφή των περισσοτέρων ήταν ΑΕ. Αναφορικά με τη δομή του ερωτηματολογίου οι ερωτήσεις κατηγοριοποιούνται με βάση την πληρότητα της εφαρμογής των συστημάτων ERP και τις δυνατότητες επέκτασης-επικοινωνίας τους. Για την ανάλυση της έρευνας χρησιμοποιήθηκε περιγραφική στατιστική (π.χ. πίνακες κατανομής συχνοτήτων), πίνακες διπλής εισόδου και στατιστικές τεχνικές που έχουν αναπτυχθεί βασισμένες στον έλεγχο χ-τετράγωνο. Για να εφαρμόσουμε τον έλεγχο σε στοιχεία πίνακα διπλής εισόδου με r γραμμές και c στήλες και συμβολίζοντας με Οi τις πραγματικές τιμές και Εi τις εκτιμώμενες, χρησιμοποιούμε την εξίσωση: 233

243 Αποτελέσματα Έρευνας Τα αποτελέσματα της έρευνας παρουσιάζονται με τη βοήθεια διαγραμμάτων και πινάκων παρακάτω: Σχήμα 1 :Σύνοψη απαντήσεων στις ερωτήσεις του ερωτηματολογίου Από το παραπάνω διάγραμμα μπορούμε να διακρίνουμε το βαθμό ικανοποίησης των επιχειρήσεων από τη χρήση του συστήματος ERP όσον αφορά την κάλυψη των λογιστικών τους υποχρεώσεων, τις δυνατότητες επέκτασης του συστήματος και τη δυνατότητα συνεχούς ενημέρωσής του. Είναι εμφανής η πλήρης ικανοποίηση των επιχειρήσεων αναφορικά με την πρώτη μεταβλητή(4,82/5), ενώ οι επιχειρήσεις δεν φαίνονται δυσαρεστημένες και από την κάλυψη των υπολοίπων δυνατοτήτων που προσφέρει το σύστημα. Επιπλέον αξιολογείται το τεχνολογικό επίπεδο του συστήματος που χρησιμοποιεί κάθε μία από τις επιχειρήσεις, το οποίο θα μπορούσε να χαρακτηριστεί υψηλό αφού τα αποτελέσματα της έρευνας είναι ικανοποιητικά με βαθμό αξιολόγησης περίπου 4/5. Στην παρούσα έρευνα κρίθηκε αναγκαίο να αξιολογηθεί η αποτελεσματικότητα του συστήματος ERP με βάση το αν χαρακτηρίζεται το σύστημα ως προηγμένης τεχνολογίας ή όχι. Για το λόγο αυτό πραγματοποιήθηκαν συσχετίσεις μεταξύ του βαθμού του τεχνολογικού επιπέδου του συστήματος και των υπολοίπων μεταβλητών (κάλυψη λογιστικών υποχρεώσεων, δυνατότητες επέκτασης, δυνατότητα συνεχούς ενημέρωσής) ώστε να γίνει αντιληπτό αν και κατά πόσο η διάσταση του επιπέδου της τεχνολογίας επηρεάζει την αποτελεσματικότητα του συστήματος. Η παραπάνω πίτα εμφανίζει άλλο ένα χαρακτηριστικό του συστήματος ERP που αφορά στην τήρηση ενιαίου αρχείου συναλλασσομένων. Παρατηρούμε ότι η δυνατότητα αυτή παρέχεται στην πλειοψηφία των επιχειρήσεων που χρησιμοποιούν το συγκεκριμένο σύστημα ενώ παρακάτω θα δούμε πώς το τεχνολογικό επίπεδο του συστήματος επηρεάζει την 234

244 Papers in Greek δυνατότητα αυτή και κατά συνέπεια την αποτελεσματικότητα διαχείρισης των λογιστικών διεργασιών. Πίνακας 1 : Σχέση τεχνολογικού επιπέδου συστήματος και κάλυψης λογιστικών απαιτήσεων ΚΑΛΥΨΗ ΛΟΓΙΣΤΙΚΩΝ ΥΠΟΧΡΕΩΣΕΩΝ ΤΕΧΝΟΛΟΓΙΚΟ ΕΠΙΠΕΔΟ ΣΥΣΤΗΜΑΤΟΣ ΣΥΝΟΛΟ (0.0%) 2 0 (0,00%) 0 (0,00%) 0 (0,00%) 2 (1,51%) (0.00%) (4,54%) (10,60%) (1,51%) (1,51%) (0,00%) (0,00%) (6,06%) (9,09%) (21,21%) Ο παραπάνω πίνακας παρουσιάζει τη σχέση ανάμεσα στο τεχνολογικό επίπεδο του συστήματος και το βαθμό κάλυψης των λογιστικών υποχρεώσεων. Διενεργώντας έλεγχο χ- τετράγωνο, οι προϋποθέσεις εφαρμογής του δεν πληρούνταν, συνεπώς τα αποτελέσματα που έδωσε ο μη παραμετρικός έλεγχος Monte-Carlo δηλώνουν ύπαρξη συσχέτισης των δύο μεταβλητών (Lower Bound= 0,014<0,05 & Upper Bound =0,019<0,05). Επομένως είναι εμφανές ότι υπάρχει συσχέτιση ανάμεσα στο βαθμό της τεχνολογικής εξέλιξης του συστήματος και της ικανότητας του για κάλυψη των λογιστικών απαιτήσεων που δημιουργούνται. Πίνακας 2 : Σχέση τεχνολογικού επιπέδου συστήματος και δυνατότητας επέκτασης ΔΥΝΑΤΟΤΗΤΑ ΕΠΕΚΤΑΣΗΣ ΤΕΧΝΟΛΟΓΙΚΟ ΕΠΙΠΕΔΟ ΣΥΣΤΗΜΑΤΟΣ ΣΥΝΟΛΟ (0.0%) (1,51%) (0,00%) (0,00%) (0,00%) (1,51%) (0,00%) (4,54%) (4,54%) (1,51%) (0,00%) (0.00%) (4,54%) (12,12%) (1,51%) (0,00%) (0,00%) (18,18%) (19,69%) (7,57%) (12,12%) 30 (0,00%) (0,00%) (0,00%) (10,60%) ΣΥΝΟΛΟ Ο παραπάνω πίνακας παρουσιάζει τη σχέση ανάμεσα στο τεχνολογικό επίπεδο του συστήματος και τη δυνατότητά του για περαιτέρω επέκταση ώστε να περιλαμβάνει και άλλες εφαρμογές. Διενεργώντας έλεγχο χ-τετράγωνο, οι προϋποθέσεις εφαρμογής του δεν πληρούνταν, συνεπώς τα αποτελέσματα που μας έδωσε ο μη παραμετρικός έλεγχος Monte- Carlo δηλώνουν ύπαρξη συσχέτισης των δύο μεταβλητών (Lower Bound= 0,010<0,05 & Upper Bound=0,020<0,05). Επομένως προκύπτει ότι υπάρχει συσχέτιση ανάμεσα στο βαθμό του τεχνολογικού επιπέδου του συστήματος και της ικανότητας του να μπορεί να επεκταθεί και να συμπεριλάβει και άλλες εφαρμογές. 235

245 Πίνακας 3: Σχέση τεχνολογικού επιπέδου συστήματος και δυνατότητας συνεχούς ενημέρωσης ΔΥΝΑΤΟΤΗΤΑ ΤΕΧΝΟΛΟΓΙΚΟ ΕΠΙΠΕΔΟ ΣΥΣΤΗΜΑΤΟΣ ΣΥΝΟΛΟ ΣΥΝΕΧΟΥΣ ΕΝΗΜΕΡΩΣΗΣ (0,00%) 0 2 (1,51%) 4 (1,51%) (0,00%) (0,00%) (0,00%) (1,51%) (3,03%) (9,09%) (0,00%) (0,00%) (0.00%) (3,03%) (7,57%) (3,03%) (0,00%) (0,00%) (16,66%) (7,57%) (6,06%) (0,00%) (0,00%) (4,54%) (22,72%) (12,12%) ΣΥΝΟΛΟ Ο παραπάνω πίνακας παρουσιάζει τη σχέση ανάμεσα στο τεχνολογικό επίπεδο του συστήματος και τη δυνατότητά του για συνεχή ενημέρωση έτσι ώστε να είναι σε θέση να προσαρμόζεται έγκαιρα σε πιθανές μεταβολές στο εξωτερικό περιβάλλον (π.χ. νομικό περιβάλλον). Διενεργώντας έλεγχο χ-τετράγωνο, οι προϋποθέσεις εφαρμογής του δεν πληρούνταν, συνεπώς τα αποτελέσματα που μας έδωσε ο μη παραμετρικός έλεγχος Monte- Carlo δηλώνουν ύπαρξη συσχέτισης των δύο μεταβλητών (Lower Bound= 0,020<0,05 & Upper Bound =0,040<0,05). Επομένως προκύπτει ότι υπάρχει συσχέτιση ανάμεσα στο βαθμό του τεχνολογικού επιπέδου του συστήματος και της ικανότητας του για συνεχή ενημέρωση. Πίνακας 4: Σχέση τεχνολογικού επιπέδου συστήματος και ενιαίου αρχείου συναλλασσομένων ΥΠΑΡΞΗ ΤΕΧΝΟΛΟΓΙΚΟ ΕΠΙΠΕΔΟ ΣΥΣΤΗΜΑΤΟΣ ΣΥΝΟΛΟ ΕΝΙΑΙΟΥ ΑΡΧΕΙΟΥ ΣΥΝ (1,51%) (0,00%) (7,57%) (33,33%) (16,66%) (0,00%) (1,51%) (19,69%) (13,63%) (6,06%) ΣΥΝΟΛΟ Ο παραπάνω πίνακας παρουσιάζει τη σχέση ανάμεσα στο τεχνολογικό επίπεδο του συστήματος και τη δυνατότητά του για τήρηση ενός ενιαίου αρχείου συναλλασσομένων, προκειμένου να είναι άμεσα διαθέσιμη η κατάσταση ρευστότητας της επιχείρησης.. Διενεργώντας έλεγχο χ-τετράγωνο, οι προϋποθέσεις εφαρμογής του δεν πληρούνταν, συνεπώς τα αποτελέσματα που μας έδωσε ο μη παραμετρικός έλεγχος Monte-Carlo δηλώνουν ύπαρξη συσχέτισης των δύο μεταβλητών (Lower Bound= 0,040<0,05 & Upper Bound =0,070<0,05). Επομένως προκύπτει ότι υπάρχει συσχέτιση ανάμεσα στο βαθμό του τεχνολογικού επιπέδου του συστήματος και της ικανότητας του για την τήρηση ενός κοινού αρχείου συναλλαζομένων. Συμπεράσματα 236

246 Papers in Greek Από τα παραπάνω είναι προφανής η ανάγκη εγκατάστασης του συστήματος ERP στις επιχειρήσεις καθώς μέσω αυτού είναι δυνατή η ενοποίηση και τυποποίηση των βασικών επιχειρηματικών διεργασιών και η δημιουργία ενός ενιαίου πλαισίου λειτουργίας και επικοινωνίας. Αναμφισβήτητα τα συστήματα ERP αποτελούν μια σημαντική καινοτομία η οποία είναι ικανή να εξασφαλίσει στην επιχείρηση ένα διατηρήσιμο ανταγωνιστικό πλεονέκτημα. Μέσω της έρευνας η οποία διεξήχθη με τη μέθοδο των ερωτηματολογίων σε 132 ελληνικές επιχειρήσεις που χρησιμοποιούν το σύστημα ERP διατυπώθηκαν σημαντικά συμπεράσματα για τον ρόλο του τεχνολογικού επιπέδου του συστήματος που χρησιμοποιείται. Οι μεταβλητές που εξετάστηκαν ήταν: η δυνατότητα κάλυψης των αναγκών του λογιστικού γραφείου από το σύστημα ERP, η δυνατότητα επέκτασης των λειτουργιών του, η δυνατότητα συνεχούς ενημέρωσής του και η τήρηση ενιαίου αρχείου συναλλασσομένων από το πρόγραμμα. Έπειτα από συσχετίσεις που πραγματοποιήθηκαν μεταξύ των παραπάνω μεταβλητών και της μεταβλητής που χαρακτηρίζει το σύστημα από καθόλου σύγχρονο έως πολύ, προέκυψε ότι η υιοθέτηση ενός κατά μέσο όρο σύγχρονου συστήματος ERP προάγει και βοηθά τις λογιστικές διεργασίες του λογιστή. Συγκεκριμένα, προκειμένου για μια εταιρεία το πρόγραμμα που χρησιμοποιεί να είναι ικανό να καλύπτει οποιαδήποτε ανάγκη στον τομέα των λογιστικών υποχρεώσεων, απαραίτητη είναι η ύπαρξη ενός προγράμματος σύγχρονης τεχνολογίας. Ένα σύγχρονο σύστημα ERP είναι ικανό να εξασφαλίσει μια ενιαία βάση χρηματοοικονομικών δεδομένων καλύπτοντας τις ανάγκες του χρήστη λογιστή παρέχοντας του το πλεονέκτημα της ευελιξίας. Επιπλέον, ένα εξελιγμένο τεχνολογικό σύστημα είναι συμβατό με διάφορα εξωτερικά προγράμματα (MS Office) πράγμα το οποίο σημαίνει πλήρης αξιοποίηση των τεχνολογικών πόρων. Ακόμη, εξοικονόμηση χρόνου λόγω της πλήρους συμβατότητας των προγραμμάτων και συνεπώς των δεδομένων. Ένα σύστημα ERP προηγμένης τεχνολογίας παρέχει σο χρήστη δυνατότητες συνεχούς ενημέρωσής του. Συνεπώς ο χρήστης λογιστής είναι πλήρως καλυμμένος για όποια μεταβολή και αν συμβεί στο νομοθετικό περιβάλλον που διέπει την τήρηση των λογιστικών βιβλίων και την έκδοση των δηλώσεων της εφορίας. Αξίζει να σημειωθεί πως τα στοιχεία της έρευνάς μας κινούνται προς την ίδια κατεύθυνση με μια έρευνα που πραγματοποιήθηκε στο παρελθόν (Σπαθής, 2006) και σύμφωνα με την οποία τα εξελιγμένα συστήματα παρέχουν μεγαλύτερη ευελιξία της πληροφορίας καθώς μέσω της αποθήκευσής της σε ένα εύκολα προσπελάσιμο σημείο είναι δυνατή και η συνεχής ανανέωσή της. Τέλος, προκειμένου να τηρείται ένα ενιαίο αρχείο συναλλασσομένων το σύστημα πρέπει να είναι υψηλών τεχνολογικών προδιαγραφών. Γιατί μονάχα ένα τέτοιου είδους σύστημα μπορεί να δώσει την πραγματική εικόνα τόσο της ρευστότητας των τμημάτων όσο και ολόκληρης της επιχείρησης, βοηθώντας την να αναγνωρίσει αναγκαίες βελτιώσεις στη λειτουργία των τμημάτων της. 237

247 Αρθρογραφία F.Robert Jacobs, F.C. Ted Weston Jr. Enterprise Resource Planning (ERP)- A brief history, Journal of Operations Management, 25 (2007), p.p Cotteleer and Bendoly, 2006 Cotteleer, M., Bendoly, E., Order lead-time improvement following enterprise-it implementation: an empirical study. MIS Quarterly 30 (3). Escalle, C.X., Cotteleer, M.J., Austin, R.D. (1999), Enterprise Resource Planning (ERP): Technology Note, Harvard Business School Publishing, Boston, MA. McAfee, 2002 A. McAfee, The impact of enterprise information technology adoption on operational performance: an empirical investigation, Production and Operations Management 11 (2002) (1), pp Spathis, C. 2006, Enterprise systems implementation and accounting benefits, Journal of Enterprise Information Management, Vol.19 No. 1, p.p "Big retail SAP project put on ice", ComputerWorld Mabert et al., 2003 V.A. Mabert, A.K. Soni and M.A. Venkataramanan, The impact of organization size on enterprise resource planning (ERP) implementations in the US manufacturing sector, OMEGA 31 (2003), pp Mabert et al., 2000 V.A. Mabert, A.K. Soni and M.A. Venkataramanan, Enterprise resource planning survey of US manufacturing firms, Production & Inventory Management Journal 41 (2000) (20), pp Sidney Jr, H. (1999). Fast is your business? Manufacturing Systems, 17 (8), 1-9 Tim, S. (1999). Consulting s new era. Industry Week, 248 (15), Bancroft, N.H., Seip, H., Sprengel, A., Implementing SAP R/3 second ed. Manning Publications Co., Greenwich. MA. 238

248 Papers in Greek Αντιλήψεις σχετικά με την εφαρμογή συστημάτων περιβαλλοντικής διαχείρισης στις σύγχρονες ελληνικές επιχειρήσεις Θεοχαροπούλου Κωνσταντίνα & Λεώβαρη Γεωργία 1 Περίληψη Ο πρωταρχικός και βασικότερος προμηθευτής όλων των επιχειρήσεων, ανεξάρτητα από τον κλάδο στον οποίο δραστηριοποιούνται, είναι το περιβάλλον. Όπως η κάθε επιχείρηση φροντίζει, ώστε να διατηρεί ισορροπημένες σχέσεις με τους εξωτερικούς συνεργάτες της, οφείλει να μεριμνά για τους δεσμούς και την αλληλεπίδρασή της με το περιβάλλον. Το πρώτο βήμα προς αυτή την κατεύθυνση είναι η ευαισθητοποίηση κάθε επιχείρησης για θέματα που αφορούν το περιβάλλον και την προστασία του. Στη συνέχεια ακολουθεί η ανάπτυξη περιβαλλοντικής συνείδησης και τέλος, σειρά έχει η ανάπτυξη και η εφαρμογή συγκεκριμένων και ολοκληρωμένων περιβαλλοντικών προγραμμάτων. Η ορθή διαχείριση των περιβαλλοντικών αυτών προγραμμάτων, κατά ουσιαστικό, συστηματικό, καλά σχεδιασμένο και τεκμηριωμένο τρόπο, επιτυγχάνεται μέσω της ανάπτυξης ενός Συστήματος Διαχείρισης Περιβάλλοντος. Ένα τέτοιο Σύστημα περιλαμβάνει την άντληση των πόρων, την οργάνωση, καθώς και το σχεδιασμό που είναι απαιτούνται για την ανάπτυξη, την εφαρμογή και τη διατήρηση μίας αποτελεσματικής πολιτικής, εκ μέρους του οργανισμού, για την προστασία του περιβάλλοντος. Για να λειτουργήσει περισσότερο αποδοτικά ένα Σύστημα Διαχείρισης Περιβάλλοντος απαιτείται η εναρμόνισή του με τις προδιαγραφές που ορίζονται από τους διεθνώς αναγνωρισμένους φορείς πιστοποίησης και τα αντίστοιχα πρότυπα που αυτοί εκδίδουν, όπως για παράδειγμα το ΙSO Καθώς η ανάπτυξη τέτοιου είδους Συστημάτων δεν είναι διαδεδομένη στην Ελλάδα, η παρούσα μελέτη τείνει να ανιχνεύσει τις πεποιθήσεις των διευθυντικών στελεχών των επιχειρήσεων που δραστηριοποιούνται στον βιομηχανικό κλάδο. Στόχος της μελέτης είναι να ερευνήσει τις στρατηγικές προδιαγραφές που οφείλει να ικανοποιεί ένα Σύστημα Περιβαλλοντικής Διαχείρισης, ώστε να υποστηρίζει την περιβαλλοντική δράση της επιχείρησης και να δίνει παράλληλα τη δυνατότητα ανταπόδοσης ανάλογου οφέλους στις επιχειρήσεις που το εφαρμόζουν. Η έρευνα έχει πραγματοποιηθεί σε δείγμα 107 βιομηχανικών επιχειρήσεων της βορείου Ελλάδος. Τα πρώτα αποτελέσματα δείχνουν ότι η 1 Σχολή Επιστημών της Διοίκησης, Πανεπιστήμιο Αιγαίου Χίος, Ελλάδα. 239

249 διάσταση της διαμόρφωσης στρατηγικών περιβαλλοντικής δυναμικής για τις βιομηχανίες μεταποίησης της βορείου Ελλάδας είναι μια πολυσύνθετη διαδικασία στην οποία παρεμβαίνουν ενδοεπιχειρησιακές και εξωεπιχειρησιακές μεταβλητές οι οποίες όμως δεν είναι ακόμα ρητά διαμορφωμένες. Λέξεις κλειδιά: Σύστημα Διαχείρισης Περιβάλλοντος, Διεθνείς Οργανισμοί Πιστοποίησης, Περιβαλλοντική Πολιτική. 240

250 Papers in Greek Ποιότητα υπηρεσιών και ικανοποίηση τραπεζικού πελάτη Βερβερίδου Φανή, Βλασοπούλου Ασπασία & Ζιάκα Σταματία 1 Περίληψη Η έννοια της ποιότητας των υπηρεσιών έχει συγκεντρώσει το ενδιαφέρον των ακαδημαϊκών και επαγγελματιών τις τελευταίες δεκαετίες. Αυτό είναι αναμενόμενο καθώς, από τη μια πλευρά, η παράδοση υπηρεσιών υψηλής ποιότητας στους πελάτες προσφέρει στις επιχειρήσεις τη δυνατότητα να διαφοροποιηθούν και να ισχυροποιήσουν τη θέση τους σε μια αγορά υψηλού ανταγωνισμού. Από την άλλη, η παροχή υπηρεσιών υψηλής ποιότητας επιδρά θετικά στην ικανοποίηση και αφοσίωση του πελάτη, στη διαφήμιση από «στόμα σε στόμα», στην μείωση των παραπόνων των πελατών και στη διατήρηση και περαιτέρω αύξηση της πελατειακής βάσης. Γι αυτό και η ποιότητα υπηρεσιών θεωρείται πρωταρχικό στοιχείο μέτρησης της απόδοσης των επιχειρήσεων και πολλές έρευνες προσανατολίζονται προς την κατεύθυνση προσδιορισμού και αξιολόγησής τους. Σε αντίθεση με την ποιότητα των προϊόντων, η ποιότητα των υπηρεσιών είναι μια έννοια αφηρημένη και αόριστη. Συγκεκριμένα χαρακτηριστικά των υπηρεσιών, όπως είναι η αδιαιρετότητα μεταξύ παραγωγής και κατανάλωσης, η αϋλότητα και η ανομοιογένεια, αφού κάθε φορά οι συνθήκες πραγματοποίησης της συναλλαγής είναι μοναδικές, καθιστούν την μέτρηση της ποιότητας ένα θέμα ιδιαίτερα πολύπλοκο. Εξαιτίας της απουσίας αντικειμενικών μέτρων, οι επιχειρήσεις πρέπει να βασίζονται στις αντιλήψεις των πελατών σχετικά με την ποιότητα ώστε να αναγνωρίζουν τα δυνατά και αδύνατα σημεία και να διαμορφώσουν κατάλληλη στρατηγική μέσω ανατροφοδότησης. Ειδικά, η ποιότητα των τραπεζικών υπηρεσιών είναι μείζονος σημασίας, διότι ο τραπεζικός τομέας έχει αναπτυχθεί ραγδαία. Η απελευθέρωση του πιστωτικού συστήματος, η χρήση σύγχρονων μέσων συναλλαγών και τεχνολογίας και η ανάπτυξη καινοτόμων προϊόντων και υπηρεσιών όξυναν τον ανταγωνισμό με αποτέλεσμα την εστίαση στις ανάγκες του πελάτη και στην ποιότητα των προσφερόμενων υπηρεσιών. Πολλές τράπεζες χρησιμοποιούν ένα σύγχρονο «εργαλείο» του management, η Διασφάλιση Ποιότητας. Το πρότυπο διασφάλισης ποιότητας είναι το σύνολο των οργανωτικών δομών, αρμοδιοτήτων, διαδικασιών και μέσων που χρησιμοποιεί μια επιχείρηση για να διασφαλίσει σταθερό επίπεδο ποιότητας των παρεχόμενων υπηρεσιών της. 1 Σχολή Επιστημών της Διοίκησης, Πανεπιστήμιο Αιγαίου Χίος, Ελλάδα. 241

251 Τα αποτελέσματα, παρά το περιορισμένο μέγεθος του δείγματός μας, έρχονται να επιβεβαιώσουν την αναμενόμενη αναλογική σχέση μεταξύ ποιότητας και ικανοποίησης όχι όμως σε γενικό πλαίσιο, όπως υποστηρίζεται από τον Kano, αλλά εστιάζοντας πιο συγκεκριμένα και μεθοδευμένα στην υπευθυνότητα, ως βασικό συστατικό της ποιότητας. Τα ευρήματα αποτελούν εφαλτήριο για περαιτέρω ανάλυση και αποτελούν βασικό οδηγό για τις τράπεζες που επενδύουν στην ποιότητα των υπηρεσιών τους για την απόκτηση ανταγωνιστικού πλεονεκτήματος. Εισαγωγή Ο Τραπεζικός τομέας στην Ευρώπη κατά τη διάρκεια της προηγούμενης δεκαετίας είχε αναπτυχθεί ραγδαία. Η περίοδος αυτή χαρακτηρίζεται από τη διαδικασία απελευθέρωσης του πιστωτικού συστήματος, από τη χρήση σύγχρονων μέσων συναλλαγών, από την προσφορά νέων προϊόντων και υπηρεσιών και από την ανάπτυξη της μηχανοργάνωσης. Για την αντιμετώπιση του ανταγωνισμού χρησιμοποιείται ένα σύγχρονο «εργαλείο» του management, η Διασφάλιση Ποιότητας. Στόχος των περισσότερων τραπεζών είναι η ισχυροποίηση της ανταγωνιστικής τους θέσης. Για να το επιτύχουν, η σημαντικότερη τάση είναι η επικέντρωση στον πελάτη και στην ποιότητα των προσφερόμενων υπηρεσιών. Το πρότυπο διασφάλισης ποιότητας είναι το σύνολο των οργανωτικών δομών, αρμοδιοτήτων, διαδικασιών και μέσων που χρησιμοποιεί μια επιχείρηση για να διασφαλίσει σταθερό επίπεδο ποιότητας των παρεχόμενων προϊόντων ή υπηρεσιών της. Είναι λοιπόν προφανές, ότι είναι αναγκαία η μελέτη και παρατήρηση της σχέσης του επιπέδου ποιότητας των παρεχόμενων τραπεζικών υπηρεσιών, τόσο με την ικανοποίηση που παρέχουν στον πελάτη όσο και με την όσο συνολική ικανοποίησή του (Ruyter K. et al, 1997). Οριοθέτηση εννοιών Υπηρεσίες Σε αυτό το σημείο θεωρείται αναγκαία η οριοθέτηση της έννοιας της υπηρεσίας για την οποία έχουν διατυπωθεί κατά καιρούς διάφορες απόψεις. Σύμφωνα με τον Berry (1984) «μία υπηρεσία είναι μια πράξη, μια απόδοση, μια προσπάθεια». Επίσης, «υπηρεσίες είναι οι δραστηριότητες παροχής χρησιμότητας μέσω της ικανοποίησης των αναγκών, που συνδέονται με τη χρήση άυλων αγαθών ή που προσφέρονται σε συνδυασμό με την πώληση υλικών αγαθών», (Λυμπερόπουλος, 2004). Ειδικότερα, οι χρηματοπιστωτικές υπηρεσίες διακρίνονται από τα εξής χαρακτηριστικά: Αϋλότητα, καθώς δεν είναι απτές και αντιληπτές από τις αισθήσεις, γεγονός το οποίο καθιστά δυσκολότερη την απόφαση για αγορά τους. Αδιαιρετότητα, δηλαδή η παραγωγή, η διανομή και η κατανάλωση τους συμπίπτουν τοπικά και χρονικά, με συνέπεια η υπηρεσία να έχει διαφορετική εκλαμβανόμενη αξία για κάθε πελάτη. 242

252 Papers in Greek Ανομοιογένεια, καθώς διαφέρουν σε κάθε περίπτωση οι συνθήκες, οι πάροχοι και οι λήπτες τους, γεγονός που καθιστά ανέφικτη την τυποποίησή τους. Αναλωσιμότητα, δηλαδή αδυναμία αποθήκευσής τους, με αποτέλεσμα η λανθασμένη πρόβλεψη της ζήτησης να δημιουργήσει είτε πλεονάζουσα, είτε ελλιπή παραγωγική δυναμικότητα και αίσθημα δυσαρέσκειας στον καταναλωτή στην τελευταία περίπτωση. Εμπιστοσύνη, καθώς δεν πρόκειται απλά για υπηρεσία, αλλά για διαχείριση των περιουσιακών στοιχείων. Δεν προϋπάρχει, αλλά δημιουργείται και ενισχύεται μετά από απόκτηση θετικών εμπειριών. Αμφίδρομη πληροφόρηση, καθώς οι πληροφορίες ανταλλάσσονται κατά τη διάρκεια των συναλλαγών. Σύμφωνα με τον Parasuraman Α. (1998, σελ.19-21) για τις υπηρεσίες ισχύουν τα εξής: 1. Είναι δυσκολότερο για τον πελάτη να διακρίνει την ποιότητα μιας υπηρεσίας από αυτή του προϊόντος. 2. Η αντίληψη που δημιουργείται στον πελάτη σχετικά με την ποιότητα των παρεχομένων υπηρεσιών πηγάζει από τη σύγκριση των προσδοκιών του με το επίπεδο υπηρεσιών που λαμβάνει. 3. Ο τρόπος με τον οποίο ο πελάτης αξιολογεί την ποιότητα της ληφθείσας υπηρεσίας προκύπτει τόσο από την υπηρεσία κάθε αυτή, όσο και από την διαδικασία παραγωγής της και μεταφοράς της προς αυτόν. Ποιότητα Όσον αφορά την ποιότητα των παρεχομένων υπηρεσιών, σύμφωνα με τους Lehtinen U. και Lehtinen J.R. (1991), παρατηρείται διάκριση της ποιότητας σε : Ποιότητα διαδικασιών, λόγω της ιδιότητας της αδιαιρετότητας των υπηρεσιών δεν υπάρχει διαχωρισμός παραγωγής διανομής και κατανάλωσης. Η ποιότητα κρίνεται από τον πελάτη κατά την διάρκεια της παραγωγικής διαδικασίας. Ποιότητα προϊόντος, η οποία αξιολογείται από τον πελάτη μόνο μετά την παροχή της υπηρεσίας. Το εύρος ανοχής για τον πελάτη είναι στη συγκεκριμένη περίπτωση μικρότερο από αυτό της λειτουργικής ποιότητας. Προχωρώντας, η Harrison (2000: ) προσθέτει τις εξής διαστάσεις: Φυσική ποιότητα, η οποία αφορά τον περιβάλλοντα χώρο και τα υλικά στοιχεία της προσφοράς. Ποιότητα αλληλεπίδρασης, που είναι η ποιότητα της αμφίδρομης επικοινωνίας. Σε αυτή την περίπτωση πρέπει να εξασφαλιστεί η αποτελεσματικότητα της επικοινωνίας. Ποιότητα του οργανισμού και της εταιρείας, που σχετίζεται με τη γενική εικόνα της ποιότητας των παρεχόμενων υπηρεσιών. Οι προσδιοριστικοί παράγοντες ποιότητας στις υπηρεσίες σύμφωνα με τους Parasuraman et al. (1988) είναι οι ακόλουθοι: 243

253 Υλικά χαρακτηριστικά (εγκαταστάσεις, εξοπλισμός, εμφάνιση προσωπικού, προϊόντα που συνοδεύουν την υπηρεσία). Αξιοπιστία (δυνατότητα έγκαιρης και σύμφωνης με τις προδιαγραφές παράδοση της υπηρεσίας). Ανταπόκριση (κατάλληλη εξυπηρέτηση) Εμπιστοσύνη (ευγένεια και λοιπές ικανότητες του απασχολούμενου προσωπικού, που εμπνέουν σιγουριά στον πελάτη). Ενσυναίσθηση (συμπάθια-συμμετοχή στο πρόβλημα του πελάτη, κατανόηση και φροντίδα αυτού). Διάγραμμα 1 Πηγή: Η ποιότητα έχει τρία επίπεδα (Kano, 1996): Την αναμενόμενη ποιότητα, που σχετίζεται με χαρακτηριστικά τα οποία θεωρείται αυτονόητο ότι θα πρέπει να υπάρχουν στις υπηρεσίες. Η ύπαρξή τους δεν αυξάνει την ικανοποίηση του πελάτη, ενώ η απουσία τους προκαλεί δυσαρέσκεια. Στις χρηματοπιστωτικές υπηρεσίες, ειδικά, αυτά τα χαρακτηριστικά συνδέονται με τον πυρήνα του προϊόντος, όπως οι καταθέσεις, οι χορηγήσεις, τα επιτόκια και όροι συνεργασίας. Την επιθυμητή ποιότητα, που αφορά τις κύριες ανάγκες και απαιτήσεις των πελατών. Η σχέση μεταξύ ικανοποίησης ή μη του πελάτη και ύπαρξης αυτών των χαρακτηριστικών είναι αναλογική. Τέτοια χαρακτηριστικά, αναφορικά με τις τράπεζες, θα μπορούσαν να είναι η ταχύτητα και ποιότητα εξυπηρέτησης, φιλική διάθεση και αντιμετώπιση από το προσωπικό και προσεγμένη εμφάνιση αυτού, ευχάριστο και μοντέρνο περιβάλλον, τήρηση υποσχέσεων και συνέπεια στις συναλλαγές. 244

254 Papers in Greek Την ελκυστική ποιότητα, που συγκεντρώνει εκείνα τα στοιχεία που καθιστούν το προϊόν δελεαστικό, καθώς ο πελάτης δεν αναμένει την ύπαρξή τους. Όταν αυτά συναντώνται στην προσφερόμενη υπηρεσία δημιουργούν μεγάλη ικανοποίηση, ενώ η έλλειψή τους δεν δημιουργεί δυσαρέσκεια. Στον τραπεζικό τομέα τέτοιου είδους στοιχεία αποτελούν η παροχή χρήσιμων επενδυτικών συμβουλών και η δυνατότητα ενημέρωσης στο χώρο του πελάτη, όπως το Internet, το Phone Banking και το e-banking. Ικανοποίηση Όσον αφορά τον όρο ικανοποίηση σύμφωνα με τους Westbrook & Reilly (1983), «η ικανοποίηση είναι μια συναισθηματική αντίδραση στις εμπειρίες του πελάτη, οι οποίες σχετίζονται είτε με συγκεκριμένα προϊόντα και υπηρεσίες, είτε με τις διαδικασίες αγοράς, είτε ακόμα με συγκεκριμένα χαρακτηριστικά του πελάτη αυτού». Βέβαια, ενώ εκ πρώτης όψεως η ικανοποίηση φαίνεται να επηρεάζεται μονοδιάστατα από την ποιότητα εξυπηρέτησης και τεχνικών χαρακτηριστικών προϊόντος, μια εκτενέστερη ανάλυση καταδεικνύει ότι πρόκειται για μια πιο σύνθετη έννοια, όπου η τιμή, οι υποκειμενικοί και περιστασιακοί παράγοντες παίζουν εξίσου σημαντικό ρόλο. Στην προκειμένη περίπτωση των τραπεζικών συναλλαγών θα μπορούσε να προστεθεί και ο βαθμός ευκολίας πρόσβασης στις παρεχόμενες υπηρεσίες. Η ικανοποίηση του πελάτη είναι πρωταρχικής σημασίας και για την ίδια την επιχείρηση γιατί: Σταθεροποιεί και αυξάνει την πελατειακή βάση, δημιουργώντας αυξανόμενες πωλήσεις κι επομένως άνοδο της αξίας της επιχείρησης. Αυξάνει την αξιοπιστία και την προσήλωση στα προϊόντα της επιχείρησης, προσδίδοντας ανταγωνιστικό πλεονέκτημα. Αυξάνει τον όγκο πωλήσεων, καθώς η ικανοποίηση που δημιουργείται από ένα προϊόν δημιουργεί θετικές προϋποθέσεις και για την αύξηση της ζήτησης άλλων προϊόντων της επιχείρησης. Δημιουργεί θετικές εντυπώσεις και βελτιώνει την εικόνα της επιχείρησης στην αγορά μέσω της διαφήμισης από άτομο σε άτομο. Προβληματική-υποθέσεις εργασίας Ο βασικός άξονας προβληματικής της έρευνας είναι κατά πόσο η ποιότητα και συγκεκριμένα ο παράγοντας της υπευθυνότητας των υπαλλήλων συσχετίζεται με τη συνολική ικανοποίηση και την ικανοποίηση από τις υπηρεσίες που προσφέρουν οι υπάλληλοι και σε τι βαθμό έντασης. Οι υποθέσεις που έγιναν είναι οι εξής: Ηo: Η ικανοποίηση από τις υπηρεσίες που προσφέρουν οι υπάλληλοι είναι ανεξάρτητη από την ακριβή ενημέρωση που παρέχουν. 245

255 Η1: Η ικανοποίηση από τις υπηρεσίες που προσφέρουν οι υπάλληλοι δεν είναι ανεξάρτητη από την ακριβή ενημέρωση που παρέχουν. Ηo: Η συνολική ικανοποίηση είναι ανεξάρτητη από την ακριβή ενημέρωση που παρέχουν οι υπάλληλοι. Η2: Η συνολική ικανοποίηση δεν είναι ανεξάρτητη από την ακριβή ενημέρωση που παρέχουν οι υπάλληλοι. Ηo: Η ικανοποίηση από τις υπηρεσίες που προσφέρουν οι υπάλληλοι είναι ανεξάρτητη από το γρήγορο χρόνο εξυπηρέτησης. Η3: Η ικανοποίηση από τις υπηρεσίες που προσφέρουν οι υπάλληλοι δεν είναι ανεξάρτητη από το γρήγορο χρόνο εξυπηρέτησης. Ηo: Η συνολική ικανοποίηση από τις υπηρεσίες που προσφέρουν οι υπάλληλοι είναι ανεξάρτητη από το γρήγορο χρόνο εξυπηρέτησης. Η4: Η συνολική ικανοποίηση από τις υπηρεσίες που προσφέρουν οι υπάλληλοι δεν είναι ανεξάρτητη από το γρήγορο χρόνο εξυπηρέτησης. Ηo: Η ικανοποίηση από τις υπηρεσίες που προσφέρουν οι υπάλληλοι είναι ανεξάρτητη από την προθυμία των υπαλλήλων. Η5: Η ικανοποίηση από τις υπηρεσίες που προσφέρουν οι υπάλληλοι δεν είναι ανεξάρτητη από την προθυμία των υπαλλήλων. Ηo: Η συνολική ικανοποίηση είναι ανεξάρτητη από την προθυμία των υπαλλήλων. Η6: Η συνολική ικανοποίηση δεν είναι ανεξάρτητη από την προθυμία των υπαλλήλων. Ηo: Η ικανοποίηση από τις υπηρεσίες που προσφέρουν οι τράπεζες είναι ανεξάρτητη από τη διάθεση χρόνου για κάλυψη αναγκών. Η7: Η ικανοποίηση από τις υπηρεσίες που προσφέρουν οι τράπεζες δεν είναι ανεξάρτητη από τη διάθεση χρόνου για κάλυψη αναγκών. Ηo: Η συνολική ικανοποίηση είναι ανεξάρτητη από τη διάθεση χρόνου για κάλυψη αναγκών. Η8: Η συνολική ικανοποίηση δεν είναι ανεξάρτητη από τη διάθεση χρόνου για κάλυψη αναγκών. Μεθοδολογία έρευνας Για τον σκοπό αυτής της έρευνας χρησιμοποιήθηκαν πρωτογενή στοιχεία. Συγκεντρώθηκαν ερωτηματολόγια που συμπληρώθηκαν σε τραπεζικά υποκαταστήματα στον Ελλαδικό χώρο από δείγμα 461 πελατών. Η αναλογία ανδρών-γυναικών είναι 50,8% και 49,2% αντίστοιχα. Η συλλογή πραγματοποιήθηκε με προσωπική συνέντευξη. Χρησιμοποιήθηκαν ερωτήσεις κλίμακας Likert ποσοτικοποίησης διαθέσεων από 1(διαφωνώ απόλυτα) έως 7(συμφωνώ απόλυτα). Υπήρχε και η δυνατότητα απάντησης δεν γνωρίζω/δεν απαντώ. 246

256 Papers in Greek Οι ανεξάρτητες μεταβλητές του ερωτηματολογίου, που θεωρούνται διαστάσεις ποιότητας, και των οποίων ερευνάται η επίδραση τόσο στην ικανοποίηση από τις προσφερόμενες υπηρεσίες όσο και στη συνολική ικανοποίηση (εξαρτημένες), είναι οι εξής: Ακριβής ενημέρωση στους πελάτες για τις ημερομηνίες που τους ενδιαφέρουν (π.χ πότε θα είναι διαθέσιμα τα χρήματά τους) Γρήγορη εξυπηρέτηση(χωρίς καθυστέρηση) Προθυμία εξυπηρέτησης Διάθεση χρόνου για κάλυψη αναγκών των πελατών Για την διερεύνηση της ύπαρξης ή μη της σχέσης των εξαρτημένων και των ανεξάρτητων μεταβλητών χρησιμοποιήθηκε τεστ Pearson Chi-Square Χ². Το τεστ αυτό εξετάζει αν υπάρχει επίδραση της ανεξάρτητης μεταβλητής στην εξαρτημένη. Προκειμένου να διαπιστωθεί η ένταση συσχέτισης, όπου αυτή υπάρχει, εφαρμόστηκε ο συντελεστής συσχέτισης kendall s Tau b. Ο συντελεστής αυτός στηρίζεται στην απόσταση μεταξύ των ζευγών των παρατηρήσεων που έχουν την ίδια κατεύθυνση και αυτών που έχουν αντίθετη κατεύθυνση. Λαμβάνει τιμές από -1 έως +1(Σιώμκος, Βασιλικοπούλου,2005). Αποτελέσματα Κατά τους ελέγχους Χ² που πραγματοποιήθηκαν για τις κατηγορικές μεταβλητές οι αναμενόμενες συχνότητες (expected counts) δεν είναι όλες πάνω από το απαραίτητο επίπεδο(>5), οπότε η ανάλυση διεξήχθη με μη παραμετρικό έλεγχο Monte-Carlo σε επίπεδο σημαντικότητας 5%. Το κριτήριο απόρριψης είναι Sig<0.05. Πίνακας 1 - Αποτελέσματα Fisher s Exact με μη-παραμετρικό έλεγχο Monte Carlo Monte Carlo Sig. (2-sided) 95% Confidence Interval Value Sig. Lower Bound Upper Bound Fisher's Exact 152, Fisher's Exact 147, Fisher's Exact 217, Fisher's Exact 190, Fisher's Exact Fisher's Exact Fisher's Exact Fisher's Exact Με βάση τα αποτελέσματα που προέκυψαν από την στατιστική ανάλυση των δεδομένων του δείγματος, παρατηρείται ότι τα sig του δείκτη Fisher s Exact είναι σε όλες τις περιπτώσεις 0.000<0.05.Συνεπώς απορρίπτονται όλες οι μηδενικές υποθέσεις γεγονός που σημαίνει ότι υπάρχει συσχέτιση μεταξύ των μεταβλητών που εξετάστηκαν. Πιο αναλυτικά η ακριβής ενημέρωση, ο γρήγορος χρόνος εξυπηρέτησης, η προθυμία των υπαλλήλων και η διάθεση χρόνου για την κάλυψη των αναγκών των πελατών συμβάλλουν τόσο στην 247

257 ικανοποίηση του πελάτη από τις τραπεζικές υπηρεσίες που προσφέρουν οι υπάλληλοι όσο και στη συνολική ικανοποίησή του. Εφόσον υπάρχει συσχέτιση μεταξύ των μεταβλητών, θεωρήθηκε σκόπιμο να εξεταστεί το είδος της συσχέτισης(θετική ή αρνητική) και ο βαθμός έντασής της. Ακολουθεί η σειρά κατάταξής τους με βάση το δείκτη Kendall s από τη σημαντικότερη(μεγαλύτερη τιμή) προς τη λιγότερο σημαντική(μικρότερη τιμή). Πίνακας 2 - Ένταση βαθμού συσχέτισης ποιότητας με ικανοποίηση από υπηρεσίες με βάση το δείκτη Kendall s Ικανοποίηση από υπηρεσίες Kendall's Tau B. Προθυμία εξυπηρέτησης Xρόνος κάλυψης αναγκών Γρήγορη Εξυπηρέτηση Ακριβής ενημέρωση Όπως φαίνεται από τους πίνακες 2 και 3 ο παράγοντας προθυμία εξυπηρέτησης έρχεται πρώτος όσον αφορά και τις δύο μεταβλητές «ικανοποίηση από υπηρεσίες» «συνολική ικανοποίηση» ενώ η ακριβής ενημέρωση έρχεται τελευταία χωρίς αυτό βέβαια να σημαίνει ότι δεν είναι ιδιαίτερης σημασίας, αφού ο δείκτης εμφανίζεται υψηλός. Πίνακας 3 - Ένταση βαθμού συσχέτισης ποιότητας με συνολική ικανοποίηση με βάση το δείκτη Kendall s Συνολική Ικανοποίηση Kendall's Tau B. Προθυμία εξυπηρέτησης Γρήγορη Εξυπηρέτηση Xρόνος κάλυψης αναγκών Ακριβής ενημέρωση και Συμπεράσματα Τα τελευταία χρόνια ο τραπεζικός τομέας βρίσκεται σε ένα κρίσιμο σημείο. Οι ανάγκες και προσδοκίες των πελατών αλλάζουν τόσο γρήγορα όσο και το ανταγωνιστικό τοπίο. Οι πελάτες απαιτούν διαφανείς διαδικασίες, καινοτόμα προϊόντα και έμπειρο προσωπικό όσον αφορά τον τρόπο εξυπηρέτησής τους. Οπότε και οι τράπεζες πρέπει να προχωρήσουν ένα βήμα πιο κάτω από την απλή επίτευξη στόχων κέρδους και ανάπτυξης επικεντρώνοντας την προσοχή τους στις ανάγκες των πελατών. Η κατανόηση της σχέσης μεταξύ ποιότητας υπηρεσιών και ικανοποίησης του πελάτη είναι πρωταρχικής σημασίας για τα χρηματοπιστωτικά ιδρύματα, καθώς και οι δύο αυτοί παράγοντες διαμορφώνουν τη συμπεριφορά των καταναλωτών, όπως η πρόθεση για μελλοντικές αγορές και η διαφήμιση μέσω μεταφοράς θετικών εμπειριών από άτομο σε άτομο. Τα ευρήματα της παρούσας έρευνας καταδεικνύουν ότι η υπευθυνότητα ως ποιοτικός παράγοντας οδηγεί στην ικανοποίηση. Αυτό έρχεται σε απόλυτη συμφωνία με παρόμοιες έρευνες (Jamal & Naser, 2002; Karatepe et al, 2005). 248

258 Papers in Greek Η σημαντικότητα της διάστασης της ποιότητας σημαίνει ότι οι τράπεζες πρέπει να διασφαλίσουν ότι τηρούνται οι υποσχέσεις τους σχετικά με το επίπεδο παρεχόμενων υπηρεσιών. Ειδικότερα, οι υπάλληλοι πρέπει να είναι κατάλληλα εκπαιδευμένοι έτσι ώστε να είναι όχι μόνο ευγενικοί αλλά, κυρίως, να δείχνουν προσοχή και προθυμία κατά την εξυπηρέτηση των πελατών και να κατανοούν τις ιδιαίτερες ανάγκες τους. Ο μακροπρόθεσμος στόχος είναι να βελτιωθεί η ικανοποίηση του τραπεζικού πελάτη σχετικά με τα σημαντικά χαρακτηριστικά γνωρίσματα των υπηρεσιών, προκειμένου να καθιερωθούν ανταγωνιστικά πλεονεκτήματα. Προτάσεις για περαιτέρω έρευνα Στην παρούσα έρευνα μελετήθηκε η σχέση ικανοποίησης με έναν παράγοντα ποιότητας, την υπευθυνότητα. Το δείγμα μας αν και ήταν μικρό, τα ευρήματα του αποτελούν κινητήριο δύναμη για μελλοντική διερεύνηση της σχέσης της συνολικής ικανοποίησης με περισσότερους ποιοτικούς παράγοντες όπως για παράδειγμα η αξιοπιστία, η υποδομή και ο πυρήνας του προϊόντος. Μια άλλη ενδιαφέρουσα πτυχή είναι η εξέταση του κατά πόσο η ικανοποίηση οδηγεί τελικά στην αφοσίωση και την προσήλωση του τραπεζικού πελάτη. Ευχαριστίες Θα θέλαμε να ευχαριστήσουμε θερμά την οργανωτική επιτροπή του συνεδρίου, τα μέλη της κριτικής επιτροπής και όσους εργάστηκαν για την διεξαγωγή αυτού του συνεδρίου. Επίσης, το Πανεπιστήμιο Μακεδονίας που φιλοξένησε το συνέδριο αυτό, καθώς και το Πανεπιστήμιο Αιγαίου και προσωπικά τον κ. Κωνσταντόπουλο Νικόλαο (επίκουρο καθηγητή) που μας έδωσε αυτή την δυνατότητα να αποκτήσουμε μια τέτοια εμπειρία. Αναφορές Berry L. (1980). Service Marketing is Different. Business, 30 (3) : Harrison T. (2000). Financial Services Marketing. Financial Times, Prentice Hall, Pearson Education, Harlow: Jamal A., Naser K. (2002).Customer Satisfaction and retail banking: An assessment of some of the key antecedents of customer satisfaction in retail banking. International Journal of Bank Marketing, 20(4) : Kano N., Seraku N., Tsuji S (1996). Attractive quality and must-be quality in: Takahashi F, Hromi J.D (Ed.) The Best on Quality, International Academy for Quality, The Quality Press, Milwaukee, WI, 7. Karatepe O., Yavas U., Babakus E.(2005). Measuring service quality of banks: Scale development and validation. Journal of Retailing and Consumer Services, 12: Lehtinen U., Lehtinen J.R (1991). Two approaches to Service Quality Dimensions. The Service Industries Journal, 13 (1) : Parasuraman A., Zeithaml V.A., Berry L.L. (1988). SERVQUAL:A Multy-item Scale for Measuring and Consumer Perceptions of Service Quality. Journal of Retailing, 64 (1): Ruyter K., Bloemer G., Peeters P. (1997). Merging Service Quality and Service Satisfaction. An empirical Test of an integrative model. Journal of Economic Psychology, 18:

259 Westbrook & Reilly (1983), R.A. Westbrook, M.D.Reilly, Value-Percept Disparity: An Alternative To The Disconfirmation Of Expectations Theory Of Consumer Satisfaction,in Advances In Consumer Research. Λυμπερόπουλος Κ.(2004).Αγοραστική Προσήλωση Του Τραπεζικού Πελάτη. Αθήνα: Ιnterbooks. 250

260 Papers in Greek Η συναισθηματική νοημοσύνη στην πανεπιστημιακή διοίκηση Σπυριδούλα Ματσικοπούλου & Δέσποινα Ψυχή 1 Περίληψη Σκοπός του παρόντος άρθρου είναι να παρουσιάσει μια πρόσφατη έρευνα που διεξήχθη στην Ελλάδα προκειμένου να διερευνήσει τη σχέση των ικανοτήτων της συναισθηματικής νοημοσύνης και συγκεκριμένων δημογραφικών χαρακτηριστικών στο χώρο εργασίας. Ειδικότερα, η έρευνα εστιάζει στο αν ανεξάρτητες μεταβλητές όπως η ηλικία, η οικογενειακή κατάσταση, το μορφωτικό επίπεδο και τα έτη παραμονής σε μια θέση εργασίας επηρεάζουν μία από τις διαστάσεις της συναισθηματικής νοημοσύνης, συγκεκριμένα τη διάσταση του αυτοελέγχου, των εργαζομένων σε Ελληνικά Πανεπιστήμια. Τα ευρήματα της έρευνας φανερώνουν πώς οι ανωτέρω προαναφερθείσες ανεξάρτητες μεταβλητές επιδρούν στην εκδήλωση των συναισθημάτων των εργαζομένων μέσα στο χώρο των πανεπιστημίων, υπογραμμίζοντας την σημαντική πτυχή του αυτοελέγχου ειδικά και της συναισθηματικής νοημοσύνης ευρύτερα. Λέξεις κλειδιά: Συναισθηματική Νοημοσύνη, Αυτοέλεγχος. Εισαγωγή Η συναισθηματική νοημοσύνη είναι ένας όρος που τουλάχιστον τα τελευταία είκοσι χρόνια, από τις αρχές δηλαδή της δεκαετίας του 90, έχει προσελκύσει το ενδιαφέρον πληθώρας επιστημόνων διαφόρων ειδικοτήτων (ψυχολόγους, ψυχιάτρους, βιολόγους κ.ο.κ.) αλλά και μελετητών της διοικητικής επιστήμης και της οργανωτικής θεωρίας. Ο λόγος που έχει προσελκύσει το ενδιαφέρον αυτό είναι διότι της αποδίδεται η ιδιότητα του να οδηγεί στην επιτυχία (Goleman, 2000). Βέβαια, η συναισθηματική νοημοσύνη από μόνη της δεν αρκεί για να οδηγήσει στην επιτυχία καθώς απαιτείται να συντρέχουν και άλλοι παράγοντες όπως χαρακτηριστικά της προσωπικότητας (Sternberg, 1997) αλλά και βιολογικοί, περιβαλλοντικοί και ευρύτερα κοινωνικοί παράγοντες (Mayer, 1995). Η συναισθηματική νοημοσύνη χαρακτηρίζεται λοιπόν, ως ένα από τα συγκριτικά πλεονεκτήματα, όχι το μοναδικό, που μπορεί κάποιος (άτομο, οργανισμός, επιχείρηση) να διαθέσει ώστε να διακριθεί ενώ στη συμβολή της αποδίδεται η ανάπτυξη των θετικών 1 Σχολή Επιστημών της Διοίκησης, Πανεπιστήμιο Αιγαίου Χίος, Ελλάδα. 251

261 συναισθημάτων, η ικανοποίηση και η αποδοτικότητα (Kirk Bev. et al, 2009), η αποτελεσματική οργάνωση και η ομαδική αποτελεσματικότητα (Druskat and Wolff, 2001). Θεωρητικό Υπόβαθρο Αν και ο όρος συναισθηματική νοημοσύνη έχει αναφερθεί και αναλυθεί διεξοδικά στη βιβλιογραφία, στη παρούσα μελέτη θα προσεγγίσουμε την έννοια της συναισθηματικής νοημοσύνης μέσω δυο ευρέως γνωστών θεωριών οι οποίες γέννησαν τόσο υποστηρικτές όσο και πολέμιους, αποτελούν ωστόσο το θεωρητικό περιβάλλον μέσα στο οποίο ανατράφηκε η συναισθηματική νοημοσύνη. Συγκεκριμένα θα προσεγγίσο