The Macro Economic Policies Of Australia

The Macro Economic Policies Of Australia Australian governments over precedent decades have conventionally aimed towards including triangular objectives of financial growth, domestic poise, and external poise within framework of single economy. (DORNBUSCH, Rudiger, 2006) Collectively, these trio set of objectives aim towards sustaining nationalized financial growth while retaining inferior inflation as well as limiting the mass of overseas debts and liabilities. Several researches conducted in concerned field have revealed that there is no consistency in level of economic growth though; it is influenced greatly by fluctuations of international business cycle. (DORNBUSCH, Rudiger, 2006) A governmental macroeconomic management is referred as an attempt to minimize the impact of international business fluctuations by controlling demand to facilitate sustained growth together with inferior inflation and unemployment. In the last decade macroeconomics policy in Australia has been directed at controlling inflation as it would be associated with macroeconomic stability and growth. Following on from the GFCs the governments main emphasis of macroeconomic policy has been trying to avoid a recession. Contrast these two phases of policy. Explain how macroeconomic policy objectives, targets and instruments have differed. Explain how macroeconomic policy objectives, targets and instruments have differed. Outline the experiences of the Australian Economy over the last 10-15 years making use of macroeconomic aggregates these may be presented in summaries of tables and/or graphs. Stress should be placed on the challenges facing policy makers at present and likely challenges. Before the global economic crisis (GFC), the Australian economy has seen significant growth in terms of GDP ignoring various crises that have affected the global economy such as the Asian financial crises (1997-1998) and the United States (US) dot com bust (2000) (reference). Throughout this time, Australian macroeconomic policy (MP) has primarily been directed at controlling inflation to maintain stability and growth. MP refers to the structure, performance, behaviour and decision making of a whole economy. (Reference) states that MP is associated with the study of aggregates such as gross domestic product (GDP), price indices and unemployment rates to examine how the economy functions. Macroeconomic Policy The continuance of a steady economic environment in Australia post GFC has proven to be a difficult task, with the surfacing of undesired inflation and external account pressures (Treasury, 2008). According to Treasury (2008) acts of policy to tackle such pressures has consistently contributed to short-term downturns and, unavoidably, constrained the prolonging of economic growth. The basis of the issue, however, is the policy failure which permitted the pressures to appear. Nevertheless, the resulting changes in the economic outlook would affect the self-assurance of businesses and consumers and their readiness to engage in the process of structural change. Moreover, disparity in fiscal policy and hesitation about inflation predictions has lead to higher real interest rates, discouraging investment and distorting investment patterns. In the last few years substantial progress has been made in addressing inflation and to a lesser extent current account deficit constraints (RBA, 2009). The current cycle has been characterised by low inflation, with monetary policy being carried out on a more strategic basis with the desire to keep principal inflation consistent with the Reserve Bank of Australias (RBA) average target range of 2 to 3 per cent over a yearly cycle. Last year the Government introduced a new framework for the conduct of policy, clearly recognising the Reserve Banks role and endorsing its inflation objective. The clarification of policy responsibilities, and recognition of their observance in practice over time, together with an accumulating record of low inflation, is likely to have a continuing positive impact on lowering inflation expectations and creating confidence in a sound investment environment. Australias large structural current account deficit reflects both inadequate national saving and inadequate investment returns overall (ABA, 2009). On the saving side, the principal cause is a deficiency in public saving especially at the Commonwealth level. The Government through its fiscal consolidation program is addressing this problem and has put in place a policy framework that will maintain the adequacy of the Commonwealth contribution to public saving. Statements 1 and 2 spell out in detail the fiscal strategy, including improved transparency and accountability practices, and implementation of the strategy in the years ahead. The benefit of a more soundly based fiscal policy is likely to be seen over time in the capacity of the economy to sustain faster rates of growth than would otherwise be the case. While it is too early to be able to point to any concrete results with confidence, the 1997-98 economic outlook presented in Statement 2 suggests that higher saving in prospect next financial year will help to constrain the current account deficit. Before the global economic crisis of 2007 the Australian economy sustained increased economic growth of approximately 8% per annum except for the year 1997-1998 (Asian financial crisis) (The Australian Year Book 2008). This resilience reflects on well-timed monetary and fiscal policy responses; strong demand from various major trading partners, such as China; increased population growth that aided demand in the domestic economy; and the robustness of the financial sector (The Australian Year Book 2008). More generally, Australias strong economic performance can be commended by decades of economic reform in economic policy, regulatory frameworks and governance. These have increased the flexibility of the economy, and strengthened its ability to withstand unforeseen circumstances. Dungy and Pagan (2007) suggest that aggregate behaviour exists between fiscal policies and is connected Since 1997/98 the federal budget has been in surplus continually, apart from a very small deficit in one year. The governments net debt has been retired. Gross debt on issue is maintained at a small size in order to facilitate a functioning bond market so as to allow efficient risk pricing more generally. As with monetary policy, there is a medium-term framework for fiscal policy emphasising balance over the business cycle. There is much less inclination today than there once was to use fiscal policy as a counter-cyclical stabilisation tool. Significant fiscal challenges in the long-term include health spending and responding to population ageing, as the very important work by officers of the Australian Treasury has made clear. Macroeconomic policy has a supportive and complementary role in providing a stable economic environment conducive to sound investment decisions by business and to encouraging workers to invest in upgrading their skills to take advantage of new employment opportunities. Macroeconomic aggregates are: Aggregate behaviour: relationships between economic aggregates such as national income, government expenditure and aggregate demand. For example, the consumption function is a relationship between aggregate demand for consumption and aggregate disposable income. Models of aggregate behaviour may be derived from direct observation of the economy, or from models of individual behaviour. Theories of aggregate behaviour are central to macroeconomics. Aggregate demand: aggregate demand (AD) is the total price for demand for final goods and services in the economy (Y) at a given time and price level [1]. It is the amount of goods and services in the economy that will be purchased at all possible price levels.[2] This is the demand for the gross domestic product of a country when inventory levels are static. It is often called effective demand, though at other times this term is distinguished. It is often cited that the aggregate demand curve is downward sloping because at lower price levels a greater quantity is demanded. While this is correct at the microeconomic, single good level, at the aggregate level this is incorrect. The aggregate demand curve is in fact downward sloping as a result of three distinct effects; Pigous wealth effect, the Keynes interest rate effect and the Mundell-Fleming exchange-rate effect. Aggregate expenditure: is a measure of national income. It is a way to measure the GDP or Gross Domestic Product (A measure of the level of economic activity). It is defined as the value of planned goods and services produced in an economy. GDP is calculated by the formula C + I + G + NX and I = Ip + Iu (planned + unplanned investment), Aggregate Expenditures is defined as C + Ip + G + NX, where: C = Consumption Expenditure (Also can be written as CE) I = Investment G = Government spending NX = Net exports (Exports-Imports) Aggregate supply Aggregation problem Effective demand: Saving Government Macroeconomic goals: High and stable economic growth rates Low unemployment Low inflation Stable and manageable Balance of Payments RBA article: RBA uses short term interest rate as its operating instrument for implementing monetary policy. RBA sets target level for its cash rate. RBA has two options It can target particular level of bank reserves and accept the resulting outcome for short term interest rates It can seek to achieve a particular target level for short-term and supply whatever quantity of services is demanded at the target rate. For a given demand curve for reserves the RBA will need to alter the supply of bank reserves to implement a change in the stance of monetary policy. While banks continue to hold reserves with the RBA these reserves are associated with settlement in the payments system. In addition the RBA pays interest on reserves which is linked to the cash rate. An important effect on the current operating procedure is the relationship between the quantity of reserves and the level of the policy rate. Monetary policy operating procedures is based on the supply of and demand for some measure of the money supply. Systematic changes to the stance of monetary policy need to be implemented by changing the supply of bank reserves. Central banks can influence the stock of bank reserves by undertaking open market operations either directly with the banking system or with the non-bank public. A central bank is unable to independently determine both the quantity of bank reserves and their price. To understand how the RBA achieves its target for the cash rate it is necessary to consider the operation of the payments system in Australia and the overnight cash market. In Australia the major players in the payments system are the nonbank public (households and firms), the private banks, the RBA and the federal government. The trend in unemployment in the most recent decade has generally been downward. Following a rise of a percentage point in the economic slowdown in 2001, it has fallen to the lowest levels since the mid 1970s. The long expansion, with occasional temporary pauses, has done a lot to foster lower unemployment. But the changes in labour market arrangements over the past 20 years or so have also been very important. Indeed, I would argue that they are a key contributor, not least because they have facilitated the longer length of economic expansions. http://www.bis.org/review/r080516b.pdf?noframes=1 Firstly, as is widely accepted, tax systems must be fiscally sustainable across the economic cycle. Secondly, while monetary policy is the principal instrument of macroeconomic management, it is still necessary to remain mindful of the short-run liquidity effects of fiscal policy The challenges associated with an aging population identified in the Intergenerational Report have prompted the Howard Government to establish a long-term strategy to put fiscal policy on a more sustainable footing. Central here was the creation of an independently managed Future Fund in 2006 to help meet the costs associated with Australias aging population. The primary goal of the Future Fund is to accumulate adequate capital to meet the Commonwealths unfunded $91 billion superannuation liability so that it does not burden future generations. The Future Fund has been capitalised from a number of sources including asset sales, special seed funding (designed in part to preserve sovereign debt markets) and budget surpluses from the governments cash account. While the Future Fund is primarily about fiscal sustainability rather than stabilisation per se, it is important to note that the structure of the Future Fund and the allocation of surpluses to it do have some important implication s for the stabilisation debate. The significant point here is that the Future Fund represents an innovative vehicle in which cash surpluses can be invested without stimulating short-run consumption. Overall recent Australian fiscal policy has been consistent with the objectives set out in the Charter, in that fiscal policy is clearly being conducted on a sustainable basis with significant financial resources now being invested in the Future Fund. What is less clear, however, is the impact of this policy on the goal of macroeconomic stabilisation and whether the challenges currently confronting the Australian economy may require more careful consideration of the impact of fiscal policy on short-run economic activity. Given the political sensitivity of the issue and the RBAs understandable reluctance to speak outside its official mandate, the central bank has not been willing to provide the government with explicit advice on fiscal policy. Indeed the new RBA Governor, Glenn Stevens, attempted to down-play the issue at a February 2007 Parliamentary Committee hearing when he stated that it was unlikely any election spending spree would have enough short-term impact to enter into the RBAs interest rate calculations (Wood 2007). Activist fiscal policy of the Keynesian golden age may well have passed, with monetary policy now established as the primary instrument of macroeconomic management. Yet this does not mean that we can completely ignore the stabilisation function of fiscal policy which Musgrave described almost half a century ago. This is especially so when, as in the case in Australia at present, key sectors of an economy are running at close to full capacity and inflationary risks are building. Under these circumstances fiscal policy must not only be sustainable, it must also be sensitive to its potential to stimulate demand in the short-run. Fortunately, for the Australian economy it seems that there is an awareness of the need to exercise a degree of fiscal restraint in the prevailing conditions with both major parties. http://eprints.utas.edu.au/3970/1/3970.pdf Challenges: Australias population is projected to reach nearly 36 million by 2050 an increase of around 14 million The first challenge is that an ageing population implies slower economic growth. As the proportion of the population that is of traditional working age falls, the labour force participation rate is projected to fall (from above 65 per cent today, to below 61 per cent over the next 40 years), dampening workforce growth. Population dynamics explain one-half of the 0.4 percentage point gap between annual growth in GDP per capita over the next 40 years relative to the past 40 years the other half being due to a technical assumption relating to productivity growth. The second challenge is that working Australians will need to support an ageing population that, in part due to continuing technological advancements, is likely to be living longer. Men aged 60 in 2050 are projected to live an average of 5.8 years longer than someone aged 60 today, while women aged 60 in 2050 are projected to live an average of 4.8 years longer. This is great news for Generation Y, but a sobering statistic for future budgets. The greater publicly funded health, aged care and related expenditures to support Generations X and Y in their retirement years will need to come from a relatively smaller number of workers than we have today. On a no policy change basis, a significant fiscal gap is projected. The intergenerational report shows how the Governments fiscal strategy to constrain real expenditure growth contributes to reducing, without wholly eliminating, the projected fiscal gap. The third challenge identified in the intergenerational report concerns the impact of climate change on ecosystems, water resources, agricultural production and weather patterns. Against these challenges, there are three topics I want to say something about today: Promoting economic growth by improving productivity and workforce participation; The implications of a growing population, particularly for infrastructure investment; and Medium-term prospects for capital flows required to finance national investment. For obvious reasons, I wont be saying anything about climate change on this occasion. Discuss the concept of instruments and targets in macroeconomic policy and assess how this concept of instruments and targets in macroeconomic policy and assess how this concept might be applied to the current policy framework in Australia. A number of people have asked me for clarification on instruments and targets as referred to in assignment 2. Here is what I mean: These refer to macroeconomic policy. INSTITUTIONS make policy. Examples would be the Reserve Bank of Australia and the Treasury. These institutions set policy TARGETS. An example of such a target would be an annual inflation rate of no more than 3%. Policymakers then use policy INSTRUMENTS to meet the targets. Typical instruments include the RBA cash rate or government spending. Show how the economic theory you have learnt can be used to explain current macroeconomic policy. How is inflation measured? GDP Deflator Consumer Price Index: an average of the prices of the goods and services purchased by the typical urban family of four. Producer Price Index: An average of the prices received by producers of goods and services at all stages of the production process fiscal and monetary policy The tools the Australian government controls to smooth short-run fluctuations in the economy inflation, unemployment and external trade The causes and effects of inflation, the link between inflation and unemployment, Australian trade with the rest of the world Fiscal policy: Fiscal policy is the government operation of government spending (G) and taxes (T). Typically we consider the problem of how the government can manipulate G and T so as to control economic variables such as output, inflation, interest rates, etc. Issues: how fiscal policy can stabilize the economy? what about government borrowing and public debt? Budget deficit: the budget deficit is the extent of overspending by the government Budget deficit = G T Expansionary fiscal policy: increasing the budget deficit (Gà ¢Ã¢â‚¬  Ã¢â‚¬Ëœ or Tà ¢Ã¢â‚¬  Ã¢â‚¬Å") usually in a recession. Contractionary fiscal policy: decreasing the budget deficit (Gà ¢Ã¢â‚¬  Ã¢â‚¬Å" or T à ¢Ã¢â‚¬  Ã¢â‚¬Ëœ) usually in an economic boom. Budget deficits and surpluses If the government spends more than it brings in in taxes, what happens? (G > T) The money has to come from somewhere. For developed countries, this means borrowing (issuing government debt or public debt) from domestic residents or foreigners. If the government is spending less than it brings in in taxes, the government can reduce public debt. The Australian government has followed this policy in the last 10 years. Types of fiscal policy We differentiate two types of fiscal policy: Discretionary fiscal policy: This is fiscal policy that comes about from planned changes in G and T that the government brings in response to the economic situation. Non-discretionary fiscal policy: This is fiscal policy that comes about from the design of spending and taxes. There is no government official actively determining these changes. Non-discretionary fiscal policy Certain parts of our spending and taxes automatically increase demand in a recession (when AD < potential GDP) and decrease demand in a boom (when AD > potential GDP). Welfare spending and unemployment benefits are part of G and increase in a recession and decrease in a boom. Income and company taxes are part of T and depend on GDP, they increase during a boom and decrease during a recession. These act as automatic stabilizers on the economy, reducing the variability of the economy. Cyclically-adjusted budget deficits The automatic stabilizers raise the budget deficit in a recession and lower the budget deficit in a boom. This fact means that we can not just look at the budget deficit to determine whether the government is overspending, we also have to take into account where we are in the business cycle. Adjusting the budget deficit for the point we are in the business cycle is called cyclically adjusting. We would expect even a sensible government to be in a deficit in a recession. Discretionary fiscal policy Discretionary fiscal policy is the manipulation of G and T by government officials typically to reduce the severity of shocks to the economy. It sounds like a good idea, but how does it work in reality? There are many problems and limitations to the use of fiscal policy to reduce recessions and booms. Problems with discretion Scenario: Imagine a train driver that has only one control- an accelerator/brake that he or she can push or pull on to control the train. This is exactly the same situation as the government faces with fiscal policy. Now what limitations can the train driver face? Problems with discretion Limitations: Correctness of data: Is the train driver seeing the tracks correctly? Or Does the government get the right data about where the economy is? Timing of data: Is the train driver seeing the tracks with enough time to react? Or Does the government get the statistics quickly enough to do anything? Decision lags: Can the train driver make a decision about the correct action before the train reaches the problem spot? Or does the government have time to design the correct fiscal policy? Problems with discretion Administration lags: If the driver pulls on the control, how long will it take for the brakes to start to work? Or New spending and taxes have to be passed through parliament, which takes time, even after a decision is made. Operational lags: If the brakes start to work, how long before the train slows down? Or New government spending and taxes take time to affect the economy. So even the best-designed fiscal policies can go wrong if they are in response to the wrong data or if they take too long to affect the economy. Political considerations There are further concerns we might have about the operation of fiscal policy. Politicians have to remain popular. No one likes taxes, and everyone likes new spending on themselves. Will a politician make an unpopular decision that may result in them losing the election if it is the best decision for the economy. Electoral cycles: Governments have to be re-elected every 3-4 years. So a politician would love to engineer a boom right before his or her election. Crowding out Another problem with fiscal policy is that an increase in G may increase output but at the expense of other components of aggregate expenditure. Y = C + I + G + NX Since the economy returns to potential GDP over the long-run, an increase in G must come at the expense of either C, I or NX or all 3. If an increase in G reduces investment spending over the long-run, this could lead to lower future growth in the economy. Crowding out How can this happen? An increase in G shifts the AD curve to the right. This results in higher Y and higher P. The increased government borrowing in the market for savings raises the interest rate. Higher interest rates lead to lower investment spending so I drops, shifting AD left. Higher interest rates leads to an appreciation of the A$ (as foreign investors put their money in Australia), so NX drops, shifting AD left. Crowding out- I and NX Government debt One problem that economic commentators always point to is the level of government debt- Our debt is too high. How do we evaluate the level of government debt? How do we know is it is too high. Government debt is like any other form of debt. You evaluate the debt relative to the income/wealth of the person incurring the debt. A $500,000 debt might be high to you and me, but it might mean nothing to Kerry Packer. Government debt So we need to evaluate government debt relative to government income. But what is the appropriate form of government income, as the government doesnt earn or produce anything. Generally we use the income of the country as the comparison, since the government is free to tax or claim any part of GDP. Government debt So our criterion for too much is debt (B, since typically government debt is issued in government bonds) over GDP (Y): B / Y Banks would make much the same calculation when considering whether to issue someone a home loan. In general debt is growing at the rate of interest each year, r, while GDP is growing at the growth rate of the economy, g. Monetary policy Firstly, monetary policy uses the level of interest rates to influence the economy in the short to medium term. Its major goals are to stabilise demand and inflation in the medium term and inflationary expectations and to achieve the governments objectives of sustainable growth with underlying inflation of about 2-3%. Source: Chapter 12 of the book plus second part of Module 3. Monetary policy is the government operation of the money supply and interest rates. Typically we consider the problem of how the government can manipulate monetary policy so as to control economic variables such as output, inflation, interest rates, etc. Issues: how monetary policy can stabilize the economy? how will monetary policy affect interest rates or exchange rates? Who operates monetary policy? The Reserve Bank of Australia (RBA) is responsible for monetary policy. The RBA was given 3 goals when it was created: Maintain low inflation Maintain low unemployment Maintain value of the A$ The RBA was only given one policy tool- the money supply to achieve 3 goals. In the mid 1990s, the RBA was simply told to have one aim: Maintain low inflation. Definitions The RBA implements monetary policy through its control of the cash rate. Cash rate: The cash rate is the rate the RBA charges bank for loans within the RBA reserves system. The cash rate is the base interest rate for the economy, and all other interest rates are derived from it. Easy monetary policy: When the RBA lowers the cash rate to stimulate AD. Tight monetary policy: When the RBA raises the cash rate to cut off AD. Interest rates As we saw in the Investment section, the profitability of investment projects depends on the nominal interest rate. The lower are interest rates, the more projects will be profitable, so the higher will be investment spending. Since the RBA controls the cash rate, and since all interest rates depend on the cash rate, the RBA controls I, and so can shift the AD curve. How monetary policy works Cause-Effect Chain of Monetary Policy: Money supply impacts interest rates Interest rates affect investment Investment is a component of AD Equilibrium GDP is changed Monetary policy and the open economy Net Export Effect Changes in interest rate affect the value of the exchange rate under floating exchange rate. An increase in interest rate appreciates the currency, resulting in lower net exports A decrease in interest rate leads to currency depreciation and a rise in net exports So an easy monetary policy is enhanced by the net export effect. Quantity theory of money There is a nice, simple model of money which explains many features of money supply and demand. This model is called the quantity theory of money. If we imagine that money is needed for all of the purchases made each year, then demand for money is the vale of purchases: PY. The supply of money for purchases is the amount of cash in the economy. But each piece of money in the economy can be used multiple times during a year in transactions. We call the number of transactions the velocity of money v. Quantity theory of money So the total supply of money for transactions in a year is v times M: vM. So demand equals supply requires that: PY = vM So if Y goes up, but nothing else does, then average level of prices must fall. The QTM is good to use for thinking about money and inflation. Unemployment A person becomes unemployed: Job loser Job leaver New entrant or re-entrant into the labour force He or she is no longer unemployed: Hired or recalled Withdraws from the labour force Labour force participation rate Unemployment rate Types of unemployment Three main types of unemployment: Cyclical unemployment Frictional unemployment Structural unemployment Cyclical unemployment Associated with the ups and downs of the business cycle Takes place due to insufficient aggregate demand or total spending- reflects shifts in AD curve. High during recessions and low during booms. Fiscal and monetary policies can reduce cyclical unemployment policies are relevant. Frictional unemployment Associated with the period of time in which people are searching for jobs, being interviewed and waiting to commence duties. It is inevitable and always exist Fiscal and monetary policies can not reduce frictional unemployment macroeconomic policies are irrelevant. Policies that make it easier to find new jobs will affect

Intuitive Decision Making Theory Essay

The intuitive decision making theory can be described as the process of receiving input and ideas without knowing exactly how and where they came from.Intuitive decision making is far more than using common sense because it involves additional sensors to perceive and get aware of the information from outside. Sometimes it is referred to as gut feeling, sixth sense, inner sense, instinct, or inner voice. Information acquired through associated learning and stored in long-term memory is accessed subconsciously to form the basis of a judgment or decision. Our ability to make hunch decisions varies considerably; therefore, intuition can either be a useful ally or it can lead to costly and dangerous mistakes. Intuition may be just as effective in decision-making as an analytical approach, and sometimes more efficient and effective, depending on the decision-maker’s level of expertise on the subject at hand. Analytic decisions are great for breaking things down into smaller parts, which is necessary for a math problem. But intuition is about looking at patterns and wholes, which is needed when making quick decisions about whether something is right or wrong. For example, if one works in an industry where rising up the ranks occurred, his expertise will likely serve an intuitive approach. On the other hand, if one gains expertise in another field, he may not have the background to rely as strongly on intuition. Analytical thinking has always been viewed as a more effective means to critical reasoning compared to the intuitive approach. Yet as businesses place a greater emphasis on the speed and effectiveness of decision making, the intuitive approach has been identified as an increasingly important tool.

Foreign Direct Investment in Egypt Essay

Foreign direct investment (FDI) is investment directly into production in a country by a company located in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is done for many reasons including to take advantage of cheaper wages in the country, special investment privileges such as tax exemptions offered by the country as an incentive to gain tariff-free access to the markets of the country or the region. In the global economy today, we see many developing countries competing for foreign direct investment. FDI is said to be an important factor for spurring the development of a nation. Foreign direct investment (FDI) an important vehicle for economic growth in emerging markets countries. Since 2006/2007, Egypt has become the leading attractor of overall foreign direct investment (FDI) on the African continent. Up till 2008, Egypt has attracted 56 foreign investment companies in the textile sector, employing 14,169 workers with total investment value of $ 172. million, and total production value of $ 370. 6 million. Furthermore, Egyptian-Foreign joint venture companies totaled 150; employing 30,635 workers; with an investment of $ 515 million, and a total production value of 509. 4 million in 2008. Egypt has experienced profound political changes over the past two years. On February 11, 2011, President Hosni Mubarak’s 30-year rule came to an end under intense popular pressure as hundreds of thousands of Egyptians converged on Tahrir Square. Transition to democratic rule has been marked by advances and challenges. Egypt has seen several prime ministers and multiple cabinet changes since the revolution, and many investors have reported that the constant shuffle and interim tenure of government officials have contributed to a difficult business environment. Nonetheless, in January 2012 Egypt seated its first parliament elected in free and fair elections, and many of the members have identified increasing foreign investment as a top priority for the government. Even though political uncertainty and economic downturn in Egypt , this African country still present a lot of opportunity to make profit for foreign direct investor especially in textile and apparel industry . Foreign Direct Investment In Egypt Investing in Egyptian Apparel and Textiles Industry 2-Apparel and Textile Industry Egypt is home to the only fully vertically integrated textiles industry in the Middle East, with the entire production process —from the cultivation of cotton to the production of yarns, fabrics and ready-made garments —carried out domestically. Egypt is the largest producer in Africa and worldwide of long (LS) and extra-long staple (ELS) cotton, accounting for 50 percent of world production in 2008, it has built a brand reputation for its quality of cotton. The sector plays an extremely central role in the Egyptian economy. It is the second largest producing sector after agro-industry and the first in terms of jobs accounting form30% of local employment in 2008. It accounts for 3% of the GDP, 30% of industrial output and around 13% of Non-Petroleum exports in 2010 / 2011, according to the Central Bank of Egypt. There are more than 6,700 textile-related companies registered with the Industrial Development Authority. The power player within the sector is readymade garments (RMG), worth 75% of the textile and garment industry. The RMG subsector produced more than 313million pieces in 2009, with global brands such as Marks & Spencer, GAP, Wal-Mart, Levi Strauss, Target and Calvin Klein sourcing from and investing in Egypt. Of the 25% of the industry focused on textile production, home textiles constitute 12% of the industry, and cotton yarn 8%, while the remaining 5% is attributed to other cotton fabrics and textiles. The majority of spinning (50%), weaving (60%) and hemming (60%) capacity is owned by the public sector while 90% of garmenting capacity is private. For the spinning and weaving industry, medium-to large-scale companies dominate the industry with a strong public sector presence in spinning and weaving. The government’s strategy is to boost exports to the European garment market by moving up the quality ladder in garments, vertically integrating the garment production value chain (e. g. use local extra-long staple (ELS) cotton, improve design and patternmaking offering) and defending leadership in low-end garmenting by establishing strong brands at both country and supplier levels. Also on the agenda is restructuring the domestic textile industry by privatizing mills and leveraging on low cost and provided labor in addition to large domestic supply of high-quality cotton. Currently, the main markets for the sector were EU countries with about 34% of total exports in 2010, Arab c ountries and USA with 16% and15% respectively, according to General Organization of Export and Import Council (GOEIC) 3- Country Summary As one of the most influential nations in the Middle East, Egypt has encountered mixed success in transitioning from an economy driven by natural resources to one with a healthy amalgam of industry and services over the past 50 years. Although it has successfully diversified its economy, Egypt remains one of the poorest of its regional neighbors on the basis of per-capita income, and a succession of unstable governments have left the nation with inconsistent political institutions, weakening social infrastructure, and a legacy of corruption. Long-term national competitiveness will require a clear economic strategy and continuity of effort. Egyptian cotton is recognized globally for its unmatched quality, fueling a textile cluster that has historically been an important component of the national economy. Bolstered by superb endowments and several advantageous related industries, the textile cluster faces new challenges as falling structural barriers to trade boost the intensity of global competition Egypt is located strategically between the Mediterranean Sea and Red Sea, at the crossroads of Africa and southwest Asia. Bordering Sudan, Libya, and Israel, Egypt is home to the Nile, the longest river in the world. The nation’s rapid population growth from 23M citizens in 1960 to 83M today —has increased Egypt’s regional importance but also deeply changed Egypt’s character. Egyptian urban areas have become some of the most crowded in the world, with Cairo itself recently laying claim to the title of world’s most densely-populated city. Agriculture is similarly constrained; only 3% of the country’s total land mass was under cultivation in 2008 (AFDB, 2009). By 2010, Egypt was the fourth-largest economy in the Middle East. Recent economic performance has been positive, with 4. 75% annual GDP growth from 2001 to 2010. Per capita GDP remains relatively low compared to regional peers. Egypt’s economy is diversified as compared to its largest regional neighbors, many of which depend heavily on commodity petroleum exports (Saudi Arabia, Iran, and the UAE). As of 2010, the largest sector in the economy was the manufacturing sector (16. 9%), followed by mining (14. 4%), and agriculture (14%). Exports are concentrated in the hospitality and tourism, transport and logistics, and petroleum products clusters. Egypt’s shifting export product mix over the past 20 years is symptomatic of a broader economic change —from a singularly natural resource-focused economy to one that is less factor driven. Egypt’s national competitiveness is aided by favorable endowments and some positive microeconomic elements, ranking 63rd out of 138 countries in business sophistication and 26th in market size. But Egypt has been hamstrung by adverse macroeconomic conditions, ranking only 129th in macroeconomic environment, 133rd in labor-market efficiency. Egypt’s strongest competitive advantages lie in its natural endowments. The country’s position at the crossroads of three continents has made it a historic trading hub, amplified by the construction of the Suez Canal in 1869. Roughly 10% of the world’s maritime volume has passed through Egyptian waterways, and the canal spawned a robust shipping and logistics cluster that facilitates export of goods like textiles. The Nile Delta, an area of northern Egypt where the Nile River spreads into distributaries and drains into the Mediterranean Sea, has served as Egypt’s breadbox for over five millennia (Baines, 2011). Twenty years of redistributive economic policies have left Egypt with inefficient, low-quality social institutions —the nation boasted a 29% illiteracy rate despite 96% enrollment in primary education. In an economy characterized by a high degree of centralized planning, Egypt spent only3. 7% of its government budget on education and 6% on healthcare. Corruption and unreactive centralized economic planning constitute major challenge to Egyptian macroeconomic competitiveness. a- Background To Business in Egypt Egypt has recently been through the most profound of changes with a popular revolution, widely referred to as ‘ the Arab Spring’, sweeping away the decades long, semi-totalitarian rule of Hosny Mubarek and replacing it with†¦? Time will tell how successful the putative new, democratic institutions will be but despite all of this Egypt remains one of the fastest growing economies in the world and a country which many economists predict will become increasingly successful and influential in the region. Egypt is, in a strange way, both a secular and a religious state and it is worth bearing these two important strands in mind on any business trip to the country. It could be said that the Egyptian economy is ‘mixed’ in two vital, but differing ways. Firstly, many businesses were nationalized after independence, during the prolonged period of ‘Arab socialism’ which typified the Egyptian approach in the 1960’s and 1970’s. The government still plays a vital role in setting both business and macro-economic agendas but the past couple of decades have seen the proliferation of larger-scale private companies which may be locally (usually family) owned or joint-venture operations with overseas conglomerates. Secondly, companies fall into the category of either Islamic or non-Islamic in orientation. Those companies which are Islamic in orientation will govern their approach to business through the strict interpretation of classical Shari’a law which impacts on such varied issues as attitudes to borrowings, shareholder profile and HR policies. Before entering into business negotiations in Egypt it is important to do some homework on any potential contacts. Is the company state-owned or private; is it Islamic or secular in approach? b- Egyptian Business Structures Many companies in Egypt operate according to Islamic, rather than secular law and this impacts on a number of key areas of business structure and performance. One key issue is that, due to Islamic strictures on avoiding usury, the difference between companies and banks are less defined than in western economies. Companies tend to be financed through a combination of equity capital and short-term loans where the lenders do not charge interest but take a share of profits or losses (PLS loans. ) Thus all risks are shared equally amongst the shareholders and lenders. In addition, many companies have a religious Supervisory Board comprised of Islamic jurists whose role is to ensure that the company’s operations comply with the strictures of Shari’a law. Thus employees must be Muslims and work stops for the regulatory prayer sessions every day. Firms are expected to make reasonable, but not excessive, profit and managers have a social as well as corporate responsibility – they are expected to balance the interests of the company with the interests of society at large. None of the above applies to the workings of those firms that are non-Islamic in orientation (remember that 10% of the Egyptian population are Coptic Christians) or joint-ventures with overseas organizations. c- Egyptian Management Style Most Egyptian companies tend towards extremely hierarchical structures and this is reflected in the management style most frequently manifested within these companies. The approach is often described as ‘managing authority consultatively’ which implies the need for discussion without any loss of perceived status or power. Thus Egyptian managers (who are on the whole men) will consult widely with colleagues but be expected to make the final, firm authoritative decision. This decision will rarely, if ever, be delegated to a subordinate – even if the subordinate is a member of the family. After a decision has been reached, subordinates are expected to follow it to the letter and dispute or criticism are not expected or appreciated. Thus consultation has a ‘socializing’ aspect within an organization, but questions have to be asked as to the true extent of its impact on any final decisions. Management is expected to be cautious and not take too many risks – thus decision-making can seem extremely slow and cumbersome by US standards. It is also important to remember that religious considerations could form an important element in the final decision – something Western businessmen often forget within the negotiating process. It is important to factor this into any negotiating stance. d- Egyptian Business Meetings As in most of the Arab world, personal relationships are key to a successful meeting and good quality relationships can help to cut through the tendency towards an overly bureaucratic approach. Who you are and who you know really matter and for that reason it is often important to appoint a local go-between who has ready-made contacts who can operate on your behalf ‘ (and local often means local to the city or town. ) Initial meetings can often seem very formal to western businessmen and involve coffee, cake and lots of small talk – even when time is very short. Do not make the mistake of seeing these formalities as a waste of valuable time, as they form an integral part of the early relationship-building process. If time is not restricted, these formalities can start to eat away at the day and it is sometimes difficult to schedule more than one meeting per day. If concrete issues are discussed, it is advisable to ensure that specific actions are agreed upon and that individuals are tasked to perform them. If this is not done, things can very often drift and several months can elapse without any discernible progress being made. Time is very elastic and agreed start and finish times should not be relied upon. Patience is very necessary. It is not a good idea to arrange meetings on a Friday (or even Thursday) as these are the days of rest. It is advisable to travel to Egypt on business with a good supply of gifts, which can be given to key contacts. Gifts should be small and it is quite a good idea if they convey something of where you come from. However, when giving gifts be conscious of Muslim sensitivities and avoid the following: alcohol, pork, pigskin, perfumes with alcohol e- Egyptian Teams Working Teams revolve around a strong leader who usually allocates tasks rather than specific roles or functions. Individuals within the team expect direct access to and feedback from the leader. Thus teams tend to be more a grouping of individuals working independently towards a common objective. Many private companies are family-run and owned and family members would fill most management positions. Thus, the most obvious team grouping in a typical private company would be family-oriented but even this would be fairly hierarchical in nature. f- Egyptian Communication Styles  As in most of the Arabic world, people stand quite close to one another when communicating and many other cultures may feel that their personal space has been invaded. When this close proximity is coupled with strong same-sex eye contact and large amounts of tactility, many overseas business people can feel extremely uncomfortable. When attempting to build good relationships it is important that these differences in approach to body language do not become a barrier. Arabic conversation can be very hyperbolic with much use of flowery language and flattery. This is a protocol of the language and is expected. Do not misinterpret this approach as insincerity or a tactic. Try to express yourself in a similar fashion – especially when establishing relationships. It may sometimes appear that Egyptians are shouting at each other and in the throes of a very heated, acrimonious argument. Remember that emotion is used to convey conviction and that an overly reserved approach could be misconstrued as detachment or even lack of interest. Egyptians are proud of their country and Egyptian achievements (both ancient and modern. ) Egypt’s standing in the world, its history and local sport are all positive topics of conversation. However it is best to avoid discussing political issues or enquiring about female relatives of business acquaintances. When dealing with government officials, it is important to learn the titles of any contacts as titles are of considerable importance, denoting hierarchy and status. Do not address government officials in a familiar way unless specifically requested to do so. g- Women in Business in Egypt Women play a much less significant role in business life than in the West but are more active than in the Gulf States such as Saudi Arabia. Most senior business people are men, but it may be possible to meet a senior female employee. There would tend to be more women in prominent positions in joint-ventures, family businesses and companies owned by Coptic Christians. When dealing with women in business in Egypt keep a respectful, professional distance and do not try to ask personal questions. h- Egyptian Dress Code Appropriate dress in Egypt is both conservative and modest. Standard dress for men would be trousers, jacket, and shirt and tie in formal business meetings. Women should dress modestly, wearing long sleeves. Skirts hould be of a reasonable length (not too short). Do not wear native attire, as this might be considered offensive. Top 20 Tips For Doing Business In Egypt Tip 1. It is important to research any company before approaching it in order to determine whether it is state-owned or private and secular or Islamic in orientation. Tip 2. When doing business with an Islamic oriented organization, do not overlook the potential impact of religious issues on any decision- making process. Tip 3. Business is driven by relationships and therefore a great deal of resource and time should be allocated to the development of key contacts. Tip 4.  Who you are and who you know are important issues in Egypt; therefore it can be difficult to break into business without access to the right initial contacts. Tip 5. In order to help develop the all-important initial contacts it is often necessary to appoint a go-between who can arrange meetings and act as a bridge into the culture. Tip 6. It may be necessary to appoint a number of different go-betweens who know the locality (i. e. one for Cairo and one for Alexandria). Tip 7. Egyptian companies tend to be hierarchical and power usually rests in the hands of a small number of key senior managers who make all the major decisions. Tip 8. Managers tend to give direct instructions and subordinates are not expected to show initiative. If something is not specifically requested, it may not get done. Tip 9. Meetings can involve sitting in rooms with unknown people who are simultaneously meeting your contact. In effect, several meetings may take place at the same time. Tip 10. Initial meetings can be very time-consuming and appear to deliver very little in terms of tangible returns. Tip 11. Time is very flexible and meetings may start very late (if at all) and last for many hours. It is difficult to schedule a series of meetings on the same day. Tip 12. Meetings may start with coffee and a great deal of non-business related small talk. Do not try to rush this process Tip 13. It is important to offer lavish compliments to your host – and be prepared to receive them in return. Tip 14. Do not try to do anything on Thursday or Friday and avoid key issues during the month of Ramadan. Tip 15. People may stand much closer to you than you are comfortable with. Try not to back away as this can seem stand-offish. Tip 16. Levels of eye contact are very strong and strong eye ontact denotes sincerity and trustworthiness. Tip 17. Avoid touching anybody with your left hand or pointing feet at people as both of these are seen as extremely rude behaviour. Tip 18. Do not comment on the political situation in the Middle East or make any adverse comments about the influence of Islam. Tip 19. Women are less prominent in business than in the West but play a more prominent role than in some other Middle Eastern countries (i. e. Saudi). Tip 20. Dress conservatively, but very smartly. You will be judged partly on your appearance.

Essay on Against Love - 864 Words

Kayla Gainey Professor Joey Poole English 101 14 February 2012 Laura Kipnis’ â€Å"Against Love† In her essay â€Å"Against Love†, Laura Kipnis touches on many different aspects of love. I think this is a touchy subject simply because love brings out many different opinions and beliefs. Kipnis basically argues over the fact that in order to have a good relationship and love someone you have to be able to meet certain requirements which are mutuality, communication, and advanced intimacy. This essay was a big eye opener for me. My interpretation of what I read this essay is about loves meaning and the different aspects of love. At the beginning of this essay Kipnis says something stands out to me. â€Å"Love is, as we know, a mysterious and†¦show more content†¦I personally believe that love is not something that can be rushed. Do not get me wrong people can be young and fall in love and get married but you have to do it for the right reasons. I myself would love to find someone to have a deep love for. Love is so h ard to explain but there is a passion that you find with someone else and it is not something you can just pretend to feel. I think that if it is meant to be then everything falls into place on its own. Something that I believe personally people are doing now days is getting married and if things do not seem to work out the answer simply is divorce. The divorce rate now days is growing higher and higher. Divorce is not something that is uncommon, I hate to say it but it is something that happens every day. After a while for one reason or the other people simply want out of the marriage and want to go their separate ways. Some people go into a marriage and come out very quickly; they decide it is simply not for them. On the other hand others stay together for 10 years and more before they decided they want out of the marriage. I personally believe that it is not the world’s job to keep marriages loyal. I do not feel that today marriage is taken seriously anymore because people think that if it does not work out why try and make things better if we can simply just get a divorce. Honestly what would people do if divorce was not anShow MoreRelated`` Against Love `` By Kipnis1169 Words   |  5 Pagesside effects of love. Divorce, torn families, and years of resentment towards divided partners, to name a few. Despite how love can and often does burn up in flames, people still fight for love and being in love like it’s the only hope they’ve got left. Everyone wants to love and be loved. It has this magic and mysterious aura surrounding it, something that is is utterly inexplicable until one has felt its effects themselves. In Kipnis’ novel, Against Love, she argues that the love most everyone seeksRead MoreAgainst Love By Kathrine Philips829 Words   |  4 Pages â€Å"Against Love†, by Kathrine Philips, is a poem that was written in sixteen forty eight. â€Å"Against love† is based on rejection of love. There is a high price when it comes to love and there is no need for it, if it ends up being destructive. The speaker makes it indistinct that there is no need to get caught up in love and person can live their life content without being in love. There are countless thoughts that come to mind about the poem â€Å"Against Love†. The development, the history, and the personRead MoreThe Myth Of Love : Laura Kipnis s Against Love1283 Words   |  6 PagesThe Myth of Love Laura Kipnis’s â€Å"Against Love†, and Raymond Carver’s â€Å"What We Talk about When We Talk about Love† ,brings up the issue of what is the definition of love and is love what we think it is. Love has changed in comparison to what it once was, and we now loosely use the term, but what does it truly mean, and why do we buy in to it. Kipnis’s essay develops the idea that this â€Å"mature love† is when someone can love and be loved, and she takes the position that this does not happen. AlthoughRead MoreReview Of Against Love By Laura Kipnis1290 Words   |  6 PagesLove is a difficult word to explain, and everyone has their own opinions on what they think it truly means. Romance is a major topic in literature, movies, music, etc.†¦ The world is continuously surrounded by the notion of finding companionship in a single person and staying with them â€Å"until death do us part.† In â€Å"Against Love† by Laura Kipnis, Kip nis states, â€Å"If you love me, you’ll do what I want or need, or demand--- and I’ll love you in return† (Kipnis 805). â€Å"Carnal Knowledge† is a prime exampleRead MoreAnalysis Of The Poem Against Love By Laura Kipnis Essay1987 Words   |  8 Pagesthe emotion love, love itself seems to defy definition.   In her polemic â€Å"Against Love†, Laura Kipnis argues that love cannot exist as traditional expressions of love such as marriage, monogamy, and mutuality.   However, in her argument, she defines love incorrectly by equating love to expressions of love. This definition lacks a component essential to understanding the abstract concept of love: emotion. 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The author, Stephenie Meyer, bases her story on the life of Bella and how she met and fell in love with Edward in the city of Forks, Washington. Stephenie Meyer’s inspiration for Twilight came to her after a dream on June 2, 2003, that involved a human girl and a sparkling vampire sitting in a meadow. Twilight was published in 2005 to great successRead MoreWilliam Shakespeare s Romeo And Juliet1595 Words   |  7 Pagesfamilial love as harmful and, as a result, 1950’s parenting guides, mother’s associations and medical experts rang with warnings against showing affection toward children, they stated that doing so spread disease and caused mental health issues. Government-issued brochures advised mothers and fathers to â€Å"never kiss a baby† and to not â€Å"rock or play with children†. The director of the American Psychological Association warned â€Å"when you are tempted to pet your child, remember that mother love is a dangerousRead MoreTheme Of The Rain Came And The Chiefs Daughter1679 Words   |  7 Pageslives. This is an idea that both, Oganda from â€Å"The Rain Came† and Adaeze from â€Å"The Chief’s Daughter† know all too well. Both women are being forced to struggle against their own t raditions when they are threatened by cruel fates. Although both short stories have many differences throughout, the major themes of strong traditions, love, and a father’s role in their daughter’s fate make them similar to one another. In addition, both stories have similar themes; however, the characters individuallyRead MoreRe Essay: ‘There Has Always Been Wars and There Will Always Be Wars; It’s Humans Nature to Fight’1594 Words   |  7 Pagesvirtue, man is able to have patience, understanding, tolerance, love, forgiveness, gentleness, and goodness, even in the face of fear, intolerance, hate, and anger. Self-defence is necessary, but more times than not, war are waged by men who fight against the free agency of others, and men who will the dominance and manipulation of others. This stems greatly from pride and selfishness, but it can come from any attitude that is against the spirit of true virtues, those virtues which are of God. Most