Chapter 14 - Doing business in advanced economies. The main goals of this chapter are to: Outline the main characteristics of advanced economies, establish the relationship between the private sector and government sector in advanced economies, outline the size and structure of the import market in advanced economies,...
Chapter 14 Doing business in advanced economies Copyright 2006 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea Slides prepared by John Gionea 14–1 Lecture plan • Definition of advanced economies (AEs) • Import markets in ICs – Western Europe; North America; Japan; Australia and New Zealand; newly industrialised economies (NIEA-4) • Trade issues in AEs • Export marketing aspects • Investing in AEs Copyright 2006 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea Slides prepared by John Gionea 14–2 Features of advanced economies • High per capita income and standard of living • Market based economic systems; limited government intervention • Mature secondary sector; dynamic tertiary sector • Rational macroeconomic policies • Sophisticated financial systems • Well-developed infrastructures • Advanced communication networks • High-level education and training Copyright 2006 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea Slides prepared by John Gionea 14–3 Advanced economies as mixed economies • Predominance of private sector – domestic firms (small, medium, large) – MNEs • Various degrees of government intervention • Substantial freedom for markets and MNEs Copyright 2006 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea Slides prepared by John Gionea 14–4 Government involvement in production of goods and services • Government sector: about 1/3 of GDP of ICs + 10% of GDP for government companies • Government ownership: electric and telephone utilities; banking, petroleum • Australia – about 1/4 of GDP ( >US and UK; inward FDI than Japan – foreign affiliates: 1.5% of total sales in Japan • Sectoral shifts since mid 1970s – services up; primary/secondary sectors down – banking: the leading service sector Copyright 2006 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea Slides prepared by John Gionea 14–15 16 14 12 10 5.0 4.0 3.0 2.0 % of world US$ Billion FDI inflows into Oceania, 1993–2003, $US billion Australia New Zealand CER share 1.0 0.0 Source: adapted from UNCTAD, World Investment Report, 2004 Copyright 2006 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea Slides prepared by John Gionea 14–16 Investment considerations • Political stability • Nationalisation; government controls – prices, pollution • Economic outlook (e.g synchronised cycles) • Attitude to foreign investment Copyright 2006 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea Slides prepared by John Gionea 14–17 Investment considerations cont • Taxes • Incentives • Personnel, labour and social considerations • Exchange rates • Ease of doing business Copyright 2006 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea Slides prepared by John Gionea 14–18 ... McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea Slides prepared by John Gionea 14 8 Australia and New Zealand’s merchandise... McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea Slides prepared by John Gionea 14 10 Trade policy issues • • • • Free trade. .. Copyright 2006 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea Slides prepared by John Gionea 14 14 Foreign direct investment in