UNIT – 8
Factor Mobility and Foreign Trade Policy
MEANING AND NEED OF FOREIGN CAPITAL:
The term ‘foreign capital’ may be a comprehensive term and includes any inflow of capital in home country from abroad. it may be within the form of aid or loans and grants from the host country or an institution at the govt. level also as foreign investment and commercial borrowings at the enterprise level or both. Foreign capital may flow in ally country with technological collaboration as well. it's interesting to notice that even in Russia and East European countries foreign capital has been allowed to flow in.
In countries like China, Thailand, Malaysia and Singapore contribution of foreign capital has been extremely encouraging. But in Latin America and African Countries foreign capital flow has not been satisfactory. Foreign capital is helpful for both developed and developing countries. Advanced countries try actively to invest capital in developing countries. In India, foreign capital has been given a major role, although it's been changing overtime.
In the early phases of planning, foreign capital has been used as a way to supplement domestic investment. Later on there have been technological collaborations between foreign and Indian entrepreneurs. But since July 1991, there has been an amazing change in government’s policy (commonly called liberalization policy) about foreign investments.
NEED FOR FOREIGN CAPITAL:
Following arguments are advanced in favour of foreign capital:
1. To Sustain a High Level of Investment:
For the industrialisation of underdeveloped countries, it's necessary to raise the level of their investments substantially. this requires in turn a high level of savings. because of general poverty, the savings are often very low. Hence there's a gap between investments and savings. This gap is often filled up through foreign capital.
2. To Fill the Technological Gap:
The underdeveloped countries have very low level of technology as compared to the advanced countries. This raises the necessity for importing technology from the developed countries.
In the case of India, technical assistance received from abroad has helped in filling up the technological gap within the following three ways:
(i) Provision of expert services
(ii) Training of Indian personnel abroad
(iii) Provision of educational, research and training institutions within the country.
3. To Undertake the Initial Risk:
Many underdeveloped countries suffer from acute scarcity of private entrepreneurs. This creates obstacles within the programmes of industrialisation. But once the programme of industrialisation gets started with the initiative of foreign capital, domestic industrial activity starts picking up, as more and more people of the host country enter the industrial field.
4. To take advantage of the Natural Resources:
A number of underdeveloped countries possess huge natural resources which await exploitation. These countries themselves don't possess the required technical skill and expertise to accomplish this task. As a result, they need to rely upon foreign capital to undertake the exploitation of the resources.
5. To Develop Basic Economic Infrastructure:
The economic infrastructure includes the system of transport and communications generation and distribution of electricity, development of irrigation facilities etc. ‘The domestic capital of the underdeveloped countries is often too inadequate to make up the economic infrastructure of country on its own. Thus they require the assistance of foreign capital to undertake this task.
6. To improve the Balance of Payments Position:
In the initial phase of the economic development, the underdeveloped countries need much larger imports within the kind of machinery, capital goods, raw materials, spares and components etc., as compared to their exports. As a result, the balance of payments generally turns adverse. This creates a gap between the earnings and expenditure of foreign exchange. Foreign capital presents a short term solution to the matter.
This shows that the economic development of an under-developed country should obviously receive a lift as results of foreign capital.
TYPES OF FOREIGN CAPITAL:
Foreign capital can be divided into two types:
1. Foreign aid.
2. Private Foreign Investment.
Foreign aid may contain loans and grants.
Private foreign investment takes two forms:
(a) Foreign Direct Investment (FDI)
(b) Foreign Portfolio Investments (FPI).
In India foreign direct investment may further take the form of (i) wholly owned subsidiary (ii) joint venture and (iii) acquisitions, Foreign portfolio investment may be (i) Investment by Foreign, Institutional Investors (FIIs) including Non-Resident Indian (MRIs) (ii) Investment in (a) Global Depository Receipts (GDRs) and (b) Foreign Currency Convertible Bonds (FCCBs).
Private foreign investment in India is often further classified as follows:
1. Foreign Aid:
It consists of loans and grants. Loans could also be taken from individual countries or from institutional agencies like International Bank for Reconstruction and development , IMF and International Financial Corporation. Usually loans are taken for medium and future capital needs of a country. Loans impose a heavy burden on the borrower country because they're to be repaid, alongside interest, called surviving of loans. Loans could also be tied because of restrictions. Such restrictions could also be within the form of end use or within the kind of source. Grants are given by public or private charitable organisations.
They are given for relief purposes and immediate use grants could also be time bound and may be used just for specific purpose. Loans involve repayment obligations, whereas grants are non-refunded. it's important to see that grants are properly utilized for the specified purpose. Any foreign capital within the sort of aid should be pledged on the basis of its purpose, mode of repayment, cost to the borrower and political considerations. For it's not only uncertain, usually not extended for public sector except for consumer goods industries and don't create means for its repayment. It's therefore better to make ‘trade’ instead of ‘aid’ from a far off country.
2. Private Foreign Investment:
It is of two types – (i) Foreign Direct Investment (ii) Foreign Portfolio Investment.
Foreign investment and collaboration with a forcing nation are closely interrelated, but they're different from each other. Capital investment is participation of a far off country in capital of recipient country’s enterprises. Collaboration, on the other hand means providing technical and managerial knowhow, licensing franchise, trade-marks and patents by a host country to home country.
IMPORTANCE OF FOREIGN CAPITAL:
In the early stages of industrialization in any country foreign capital plays a very important role.
Their importance can be better understood under the subsequent heads:
(1) Increase in Resources:
Foreign capital not only provides an addition to the domestic savings the resources, but also an addition to the productive assets of the country. The country gets foreign exchange through FDI. It helps to increase the investment level and thereby income and employment within the recipient country.
(2) Risk Taking:
Foreign capital undertakes the initial risk of developing new lines of production. it's with it experience, initiative, resources to explore new lines. If a concern fails, losses are borne by the foreign investor.
(3) Technical Know-How:
Foreign investor brings with him the technical and managerial know how. This helps the recipient country to organise its resources in most efficient ways i.e. the least costs of production methods are adopted. they supply training facilities to the local personnel they employ.
(4) High Standards:
Foreign capital brings with it the tradition of keeping high standards in respect of quality of goods, higher real wages to labour and business practices. Such things not only serve the interest of investors, but they act as a very important factor in raising the quality of product of other native concerns.
(5) Marketing Facilities:
Foreign capital provides marketing outlets. It helps exports and imports among the units located in several countries financed by same firm.
(6) Reduces Trade Deficit:
Foreign capital by helping the host country to increase exports reduces trade deficit. The exports are increased by raising the quality and quantity of products and by lower prices.
(7) Increases Competition:
Foreign capital may help to increase competition and break domestic monopoly. Foreign capital may be a good barometer of world’s perception of a country’s potential. it's rightly said that a satisfied foreign investor is that the best commercial ambassador a country can have. To sum up, foreign capital helps three important areas that are necessary for the economic development of a country.
These three areas are savings, trade and exchange and technology. Foreign capital performs three gaps filling function i.e., (i) savings gap (ii) trade gap (iii) and technological gap within the recipient country’s economy. It encourages development of technology, managerial expertise, and integration with other economies of the world, export of goods and services and higher growth of country’s economy.
INTRODUCTION TO FOREIGN DIRECT INVESTMENT
International trade and foreign direct investment (FDI) are the two most important international economic activities integrating the world economy. With the rise within the mobility of factors of production across countries, FDI has become an integral a part of a firm’s strategy to expand international business.
FDI is that the largest source of external finance for developing countries. At the present, inward stock of FDI amounts to about one-third of the developing countries’ gross domestic product (GDP), compared to merely 10 per cent in 1980.
FDI plays an important role within the development process of host economies. It also includes a significant role in enhancing exports of the host country. It's estimated that the sales from foreign-owned facilities are about double the worth of world trade.
FDI not only is a source of capital inflow into host economies, but also helps to reinforce the competitiveness of the domestic economy through transferring technology, strengthening infrastructure, raising productivity, and generating new employment opportunities.
FDI has often been viewed as a threat by host countries because of the capacity of transnational investing firms to influence economic and political affairs. Many developing countries often fear FDI as a modern form of economic colonialism and exploitation, similar to their previous unpleasant experiences with colonial powers.
Yet, FDI flows are generally preferred to other sorts of external finance because these are non-debt creating, non-volatile, and the returns depend upon the performance of the project financed by the investors.
FDI IS CONSIDERED SUPERIOR TO OTHER KIND OF CAPITAL FLOWS BECAUSE OF VARIOUS REASONS:
i. Firms entering a number country through FDI have a long-term perspective in contrast to foreign lenders and portfolio investors. Therefore, FDI flows are less volatile and easier to sustain at the time of economic crisis.
ii. Debt inflows may finance consumption whereas FDI is more likely to be wont to improve productivity.
iii. Since FDI provides more than just capital by offering access to internationally available technologies, management know-how, and marketing skills, it's likely to have a strong impact on economic growth.
A firm must evaluate various options to cater to foreign markets and select the most appropriate mode of international business expansion.
Geographical distances of markets or resources, especially for low-value products, make it more attractive to get into manufacturing operations overseas. in addition, the firm must perform a risk benefit analysis of licensing vis-a-vis ownership for its international operations.
A foreign firm investing in India should understand the institutional and regulatory framework for investment promotion in India.
CONCEPT OF FDI:
In simple terms, FDI means acquiring ownership in an overseas business entity. It's the movement of capital across national frontiers, which gives the investor control over the assets acquired. FDI occurs when an investor based in one country (the home country) acquires an asset in another country (the host country) with the intent to manage it.
It is the management dimension that distinguishes FDI from portfolio investment in foreign stocks and other financial instruments. Conceptually, a firm becomes a multinational corporation (MNC) by way of FDI as its operations extend to multiple countries.
FDI is defined as an investment involving a long-term relationship and reflecting a lasting interest and control by a resident enterprise (foreign direct investor or parent enterprise) in one economy in an enterprise (FDI enterprise or affiliate enterprise or foreign affiliate) resident in an economy aside from that of the foreign direct investor.’
For acquiring substantial controlling interest, generally 10 per cent or more equity is to be acquired within the foreign firm. The ‘lasting interest’ implies the existence of a long- term relationship between the direct investor and therefore the enterprise wherein a significant degree of influence is exerted by the investor within the management of the direct investment enterprise.
Direct investment enterprise refers to an incorporated enterprise in which a foreign investor owns 10 per cent or more of the ordinary shares of voting power or an unincorporated enterprise during which a foreign investor has equivalent ownership.
Ownership of 10 per cent of the ordinary shares or voting stock is that the criterion for determining the existence of a direct investment relationship. These are either directly or indirectly owned by the direct investor. The definition of direct investment enterprise extends to the branches and subsidiaries of the direct investor.
FDI is characterized by decreased sensitivity to fluctuations in foreign exchange rates. Since FDI is that the results of a long-term perspective by the investor, it's much less volatile than foreign portfolio investment. it's been reported that most FDI (i.e., more than 90%) leads to intra-corporate trade at international level.
The returns of FDI are generally in sort of profit, i.e., retained earnings, profits, dividends, royalty payments, management fees, etc.
FOREIGN PORTFOLIO INVESTMENT IN COMPARISON TO FDI:
Foreign portfolio investment (FPI) is defined as an investment by individuals, firms, or a public body in foreign financial instruments, like foreign stocks, government bonds, etc. In FPl, the equity stake within the foreign business entity isn't significant enough to exert any management control.
Thus, FPI is that the passive holding of securities and other financial assets by a foreign firm, which doesn't entail internal control of the issuing firm. High rate of returns and mitigation of risks because of geographical diversification positively influence FPL Thus, FPI is passive whereas FDI is active.
The returns within the case of FPI are generally within the form of non-voting dividends or interest payments. Portfolio investment, like FDI, is part of the capital account of balance of payment (BOP) statistics.
REASONS FOR FDI:
It is important to understand why a firm takes a decision to invest in foreign countries when low-risk alternatives to cater to foreign markets, like exporting and licensing, are already available. Because the firm invests its own resources during a foreign country, the firm is exposed to greater risks. Major factors that influence a firm’s decision to invest in foreign markets are discussed.
Cost of transportation:
Higher costs of transportation between the production facilities and geographically distant markets make it economically unviable for firms to compete or enter such markets. Substantial costs of transportation need to be incurred for marketing products in countries located at larger geographical distances.
For a product with low unit value, i.e., value to weight ratio, like steel, fast food, cement, etc., the cost of transportation has much larger impact on its competitiveness in foreign markets compared to a high-unit value product, like watches, jewellery, computer processors, hard-disks, etc.
Therefore, for low-unit value products, it becomes more attractive to manufacture the products within the foreign country itself either by way of licensing or FDI.
Liability of foreignness:
A firm’s unfamiliarity with the host country and lack of adaptation of business practices during a foreign country often result in a competitive disadvantage vis-a-vis indigenous firms. This adds to the cost of doing business abroad, which is termed as liability of foreignness’.
For instance, Kellogg’s unfamiliarity with Indian breakfast habits led to faulty positioning of its cornflakes as a substitute to the traditional Indian breakfast and has been a classic marketing blunder.
It took several years for Kellogg’s to know the centrality of its traditional food in India’s lifestyle before repositioning its cornflakes as a complementary instead of a substitute to the Indian breakfast. In another instance, Disneyland failed miserably in its French venture primarily thanks to lack of product adaptation in view of significant differences in customers’ preferences in Europe vis-a-vis the US market.
It has to reach a trade-off between scale benefits from concentrating production at a single location and exporting or benefits of FDI, such as proximity of production locations, higher level of control, and gaining better access to the market.
BENEFITS OF FDI:
Potential benefits of FDI to host countries include the following:
Access to superior technology:
Foreign firms bring superior technology to the host countries while investing. The extent of benefits depends upon the technology spill-over to other firms based within the host country.
Increased competition:
The investing foreign firm increases industry output, resulting in overall reduction in domestic prices, improved product or services quality, and greater availability. This intensifies competition in host economies, leading to net improvement in consumer welfare.
Increase in domestic investment:
It is found that capital inflows within the form of FDI increase domestic investment so on survive and effectively answer the increased competition.
Bridging host countries foreign exchange gaps:
In most developing countries, the levels of domestic savings are often insufficient to support capital accumulation to realize growth targets. Besides, the level of foreign exchange could also be insufficient to purchase imported inputs. Under such situations, the FDI helps in making available foreign exchange for imports.
WHAT IS A FOREIGN INSTITUTIONAL INVESTOR (FII)?
A foreign institutional investor (FII) is an investor or investment fund investing during a country outside of the one during which it's registered or headquartered. The term foreign institutional investor is probably most commonly used in India, where it refers to outside entities investing within the nation's financial markets. The term is also used officially in China.
FOREIGN INSTITUTIONAL INVESTOR (FII)
FIIs can include hedge funds, insurance companies, pension funds, investment banks, and mutual funds. FIIs are often important sources of capital in developing economies, yet many developing nations, like India, have placed limits on the total value of assets an FII can purchase and therefore the number of equity shares it can buy, particularly during a single company. This helps limit the influence of FIIs on individual companies and therefore the nation's financial markets, and therefore the potential damage which may occur if FIIs fled en masse during a crisis.
FOREIGN INSTITUTIONAL INVESTORS (FIIS) IN INDIA
Some of the countries with the highest volume of foreign institutional investments are those with developing economies, which generally provide investors with higher growth potential than mature economies. This is one reason FIIs are commonly found in India, which includes a high-growth economy and attractive individual corporations to invest in. All FIIs in India must register with the Securities and Exchange Board of India (SEBI) to participate within the market.
KEY TAKEAWAYS-
Example of a foreign Institutional Investor (FII)
If a mutual fund within the United States sees a high-growth investment opportunity in an India-listed company, it can take an extended position by purchasing shares in an Indian stock market. This type of arrangement also benefits private U.S. investors who might not be able to buy Indian stocks directly. Instead, they will invest within the mutual fund and take part within the high-growth potential.
REGULATIONS ON INVESTING IN INDIAN COMPANIES
FIIs are allowed to invest in India's primary and secondary capital markets only through the country's portfolio investment scheme. This scheme allows FIIs to get shares and debentures of Indian companies on the nation's public exchanges.
However, there are many regulations. For instance, FIIs are generally limited to a maximum investment of 24% of the paid-up capital of the Indian company receiving the investment. However, FIIs can invest more than 24% if the investment is approved by the company's board and a special resolution is passed. The ceiling on FIIs' investments in Indian public-sector banks is just 20% of the banks' paid-up capital.
The reserve bank of India monitors compliance with these limits daily by implementing cut off points 2% below the utmost investment. This provides it an opportunity to caution the Indian company receiving the investment before allowing the final 2% to be purchased.
FOREIGN INSTITUTIONAL INVESTORS (FII)
Foreign Institutional Investors (FII) is an investment fund or a gathering of investors. Such a fund is registered in a foreign country, i.e. not in the country it's investing in. Such institutional investors mostly involve hedge funds, mutual funds, pension funds, insurance bonds, high-value debentures, investment banks etc.
We use this term FII for foreign players investing funds within the financial market of India. They play a big role within the development of our economy. the quantity of funds they invest is very considerable.
So when such FII’s buy shares and securities the market is bullish and trends upwards. The other can also happen when they withdraw their funds from the markets. So they have considerable sway over the market.
ADVANTAGES OF FII’S-
DISADVANTAGES OF FII’S
DIFFERENCE BETWEEN FDI VERSES FII
Let us clarify; both FDI and FII are forms of foreign investment during a country. However, they're starkly different in nature, target, and consequences. allow us to study the differences between the 2 to understand them better.
Firstly FDI may be a direct investment made in one particular business or company. The aim is to urge a interest within the business. FII, on the other hand, are funds which are invested within the foreign financial market.
There are many regulations and rules with regard to FDI. In fact, there are some industries like atomic energy , agriculture etc. where there are often no foreign direct investment. But FII has fewer barriers for entry or exit from the market.
FDI isn't only transfer of funds or capital. there's a transfer of technology, R&D, know-how, strategies, technical knowledge, and many other such aspects. Within the case of FII, only the transfer of funds is there.
MEANING OF MULTINATIONAL COMPANIES (MNCS):
A multinational company is one which is incorporated in one country (called the home country); but whose operations extend beyond the home country and which carries on business in other countries (called the host countries) in addition to the home country.
It must be emphasized that the headquarters of a multinational company are located within the home country.
Neil H. Jacoby defines a multinational company as follows:
“A multinational corporation owns and manages business in two or more countries.”
Point of comment:
A multinational corporation is known by various names such as: global enterprise, international enterprise, world enterprise, transnational corporation etc.
FEATURES OF MULTINATIONAL CORPORATIONS (MNCS):
Following are the salient features of MNCs:
(i) Huge Assets and Turnover:
Because of operations on a global basis, MNCs have huge physical and financial assets. This also results in huge turnover (sales) of MNCs. In fact, in terms of assets and turnover, many MNCs are bigger than national economies of several countries.
(ii) International Operations Through a Network of Branches:
MNCs have production and marketing operations in several countries; operating through a network of branches, subsidiaries and affiliates in host countries.
(iii) Unity of Control:
MNCs are characterized by unity of control. MNCs control business activities of their branches in foreign countries through head office located within the home country. Managements of branches operate within the policy framework of the parent corporation.
(iv) Mighty Economic Power:
MNCs are powerful economic entities. They keep on adding to their economic power through constant mergers and acquisitions of companies, in host countries.
(v) Advanced and sophisticated Technology:
Generally, a MNC has at its command advanced and sophisticated technology. It employs capital intensive technology in manufacturing and marketing.
(vi) Professional Management:
A MNC employs professionally trained managers to handle huge funds, advanced technology and international business operations.
(vii)Aggressive Advertising and Marketing:
MNCs spend huge sums of money on advertising and marketing to secure international business. This is, perhaps, the biggest strategy of success of MNCs. due to this strategy, they're able to sell whatever products/services, and they produce/generate.
(viii) Better Quality of Products:
A MNC has got to compete on the world level. It, therefore, has got to pay special attention to the quality of its products.
ADVANTAGES AND LIMITATIONS OF MNCS:
Advantages of MNCs from the viewpoint of Host Country:
We propose to examine the advantages and limitations of MNCs from the viewpoint of the host country. In fact, advantages of MNCs make for the case in favour of MNCs; while limitations of MNCs become the case against MNCs.
(i) Employment Generation:
MNCs create large scale employment opportunities in host countries. this is often a big advantage of MNCs for countries; where there's a lot of unemployment.
(ii) Automatic Inflow of Foreign Capital:
MNCs bring in much needed capital for the rapid development of developing countries. In fact, with the entry of MNCs, inflow of foreign capital is automatic. As a results of the entry of MNCs, India e.g. has attracted foreign investment with several million dollars.
(iii) Proper Use of Idle Resources:
Because of their advanced technical knowledge, MNCs are during a position to properly utilise idle physical and human resources of the host country. This results in an increase within the national income of the host country.
(iv) Improvement in Balance of Payment Position:
MNCs help the host countries to increase their exports. As such, they help the host country to improve upon its Balance of Payment position.
(vi) Technical Development:
MNCs carry the advantages of technical development 10 host countries. In fact, MNCs are a vehicle for transference of technical development from one country to another. Due to MNCs poor host countries also begin to develop technically.
(vii) Managerial Development:
MNCs employ latest management techniques. People employed by MNCs do a lot of research in management. In a way, they assist to professionalize management along latest lines of management theory and practice. This leads to managerial development in host countries.
(viii) End of Local Monopolies:
The entry of MNCs leads to competition within the host countries. Local monopolies of host countries either start improving their products or reduce their prices. Thus MNCs put an end to exploitative practices of local monopolists. As a matter of fact, MNCs compel domestic companies to enhance their efficiency and quality.
In India, many Indian companies acquired ISO-9000 quality certificates, due to fear of competition posed by MNCs.
(ix) Improvement in Standard of Living:
By providing super quality products and services, MNCs help to improve the standard of living of people of host countries.
(x) Promotion of international brotherhood and culture:
MNCs integrate economies of various nations with the world economy. Through their international dealings, MNCs promote international brotherhood and culture; and pave way for world peace and prosperity.
LIMITATIONS OF MNCS FROM THE VIEWPOINT OF HOST COUNTRY:
(i) Danger for Domestic Industries:
MNCs, due to their vast economic power, pose a danger to domestic industries; which are still within the process of development. Domestic industries cannot face challenges posed by MNCs. Many domestic industries need to wind up, as a result of threat from MNCs. Thus MNCs give a setback to the economic growth of host countries.
(ii) Repatriation of Profits:
(Repatriation of profits means sending profits to their country).
MNCs earn huge profits. Repatriation of profits by MNCs adversely affects the foreign exchange reserves of the host country; which means that a large amount of foreign exchange goes out of the host country.
(iii) No Benefit to Poor People:
MNCs produce only those things, which are used by the rich. Therefore, poor people of host countries don't get, generally, any benefit, out of MNCs.
(iv) Danger to Independence:
Initially MNCs help the government of the host country, in a number of ways; then gradually start interfering within the political affairs of the host country. There is, then, an implicit danger to the independence of the host country, within the long-run.
(v) Disregard of the National Interests of the Host Country:
MNCs invest in most profitable sectors; and disregard the national goals and priorities of the host country. they do not look after the development of backward regions; and never care to solve chronic problems of the host country like unemployment and poverty.
(vi) Misuse of Mighty Status:
MNCs are powerful economic entities. They can afford to bear losses for a long while, within the hope of earning huge profits-once they need ended local competition and achieved monopoly. This might be the dirties strategy of MNCs to wipe off local competitors from the host country.
(vii) Careless Exploitation of Natural Resources:
MNCs tend to use the natural resources of the host country carelessly. They cause rapid depletion of some of the non-renewable natural resources of the host country. in this way, MNCs cause a permanent damage to the economic development of the host country.
(viii) Selfish Promotion of Alien Culture:
MNCs tend to promote alien culture in host country to sell their products. they make people forget about their own cultural heritage. In India, e.g. MNCs have created a taste for synthetic food, soft drinks etc. This promotion of foreign culture by MNCs is injurious to the health of people also.
(ix) Exploitation of people, during a Systematic Manner:
MNCs join hands with business houses of host country and emerge as powerful monopolies. This results in concentration of economic power only during a few hands. Gradually these monopolies make it their birth right to exploit poor people and enrich themselves at the cost of the poor working class.
ADVANTAGES FROM THE POINT OF VIEW OF THE HOME COUNTRY:
Some of the advantages of the MNCs from the point of view of the home country are:
(i) MNCs usually get raw-materials and labour supplies from host countries at lower prices; especially when host countries are backward or developing economies.
(ii) MNCs can widen their market for goods by selling in host countries; and increase their profits. They usually have good earnings by way of dividends earned from operations in host countries.
(iii) Through operating in many countries and providing quality services, MNCs increase their international goodwill on which they will capitalize, within the long-run.
LIMITATIONS FROM THE POINT OF VIEW OF THE HOME COUNTRY:
Some of the limitations of MNCs from the point of view of home country may be:
(i) There could also be loss of employment within the home country, because of spreading manufacturing and marketing operations in other countries.
(ii) MNCs face severe problems of managing cultural diversity. This might distract managements’ attention from main business issues, causing loss to the home country.
(iii) MNCs may face severe competition from bigger MNCs in international markets. Their attention and finances could be more devoted to wasteful counter and competitive advertising; resulting in higher marketing costs and lesser profits for the house country.
MEANING
International labour migration is that the mobility of labour from one country to another for a period quite one year.
International labour migration covers the whole world: both the event part and therefore the underdeveloped periphery. Currently there are quite 214 million of international migrants. International migration of the population has played an increasingly significant role within the development of societies and has become a worldwide process that covered the majority the continents and countries, as well as various social strata. The entire number of international migrants increases continuously.
More than half of migrants come from developing countries and countries with economies in transition. From these countries over the past 5 years, industrialized nations have taken 12 million migrants, in other words, the annual inflow of migrants is a mean of two .3 million people, of whom 1.4 million went into the North America and 800 thousand - into the Europe.
International labour migration is one of the objective bases of becoming an integrated international system. At the same time, the matter of free migration is that the most dangerous for governments, both politically and within the social aspect. Ethnic and religious superstition and direct economic threat to the interests of particular groups who are scared of competition from immigrants make this problem too spicy. For politicians, the problem of migration may be a "hot potato that it's better to not remove of the fire. Therefore, during the migration policy implementation is very important to understand the nature and general economic and social implications.
THE INTERNATIONAL MIGRATION CONSISTS OF THE TWO BASIC INTERDEPENDENT PROCESSES:
Emigration and immigration. Emigration may be a departure of labour from one country to another, immigration is that the entrance of labour to the receiving country. Also as a part of international flows of individuals distinguish remigration, which is that the return of the labour to the country of emigration.
THE MAIN FORMS OF MIGRATION:
Permanent migration: This form of migration prevailed over others before world war I and is characterized by the fact that lots of people were left their countries for the permanent residence within the USA, Canada, Australia for ever;
Time migration providing the migrant's homecoming on the expiration of certain term.During this connection it's necessary to note that modern labour migration has got rotational character;
The illegal migration, which rather favourable to businessmen of the country of immigration and makes an original reserve of cheap labour necessary for them.
Differently directed flows of labour, which cross national borders, form the international labour market functioning in interrelation with the markets of the capital, the goods and services. In other words, the international market exists within the kind of labour migration.
The international labour migration is caused by both factors of internal economic development of every separate country and external factors: a condition of the international economy as whole and economic relations between the countries. During the certain periods as motive forces of the international labour mobility might be the political, military, religious, national, cultural, family and other social factors. the reasons of the international labour migration are often understood also only as concrete set of the named factors.
Traditionally (in the neoclassical theory) because the basic allocate the economic reason of the international labour migration connected with scales, rates and structure of accumulation of the capital.
1. Differences in rates of accumulation of the capital cause the differences between a beautiful and therefore the repulsive forces of labour in various regions of the world economy that finally defines directions of moving of this factor of production between the countries.
2. Level and scales of accumulation of the capital have direct influence on an occupation level of able-bodied population and, thus, on the sizes of a relative overpopulation (unemployment), which is that the basic source of labour migration.
3. Rates and therefore the sizes of accumulation of the capital, in turn, in certain degree depend upon migration level. This dependence means rather low salary of immigrants and possibility to reduce payment to domestic workers allows reducing the production costs and thereby increasing the accumulation of capital. The same purpose is reached by the organization of production within the countries with low-paid labour. Transnational corporations for the purpose of acceleration of accumulation of the capital use either the labour movement to the capital, or move the capital to the regions with excessive amount of labour.
4. The reason of the labour movement is changes within the pattern of requirements and therefore the production caused by scientific and technical progress. The production cutback or liquidation of some out-of-date branches release labour which searches for its applications in other countries.
So, the international labour migration, first of all, is that the kind of movement concerning surplus population from one centre of accumulation of the capital to another. It’s the economic nature of labour migration.
However within the international labour migration not only the unemployed, but also a part of the working population is involved. in this case, the driving motive of migration is that the search of more favourable working conditions. The labour moves from the countries with a low standard of living and salaries to the countries with higher ones. So, an objective basis of labour migration is national distinctions within the level of wages.
MAIN FEATURES OF TRADE POLICIES (TRADE REFORMS) SINCE 1991 ARE AS FOLLOWS
The massive trade liberalisation measures adopted after 1991 mark a major departure from the relatively protectionist trade policies pursued in earlier years.
The current trade policy reforms seem to have been guided mainly by the concerns over globalisation of the Indian economy, improving competitiveness of its industry, and adverse balance of payments situation. Main features of trade policies (trade reforms) since 1991 are as follows:
1. Freer Imports and Exports:
Substantial simplification and liberalisation has been carried out within the reform period. The tariff line wise import policy was first announced on March 31, 1996 and at that time itself 6,161 tariff lines were made free.
Till March 2000, this total had gone up to 8,066. The Exim Policy 2000-01 removed quantitative restrictions on 714 items and therefore the Exim Policy 2001- 02 removed quantitative restrictions on the balance 715 items. Thus, in line with India’s commitment to the WTO, quantitative restrictions on all import items are withdrawn.
2. Rationalisation of Tariff Structure:
Acting on the recommendations of the Chelliah Committee, the govt. has, over the years, reduced the maximum rate of duty. The 1993-94, Budget had reduced it from 110 per cent to 85 per cent. The successive Budgets have reduced it further in stages. the peak import duty on non-agricultural goods is now only 12.5 per cent.
3. DE canalisation:
A large number of exports and imports won’t to be canalised through the public sector agencies in India. The supplementary trade policy announced on August 13, 1991 reviewed these canalised items and DE canalised 16 export items and 20 import items. The 1992-97 policy decanalised imports of a number of items including newsprint, non-ferrous metals, natural rubber, intermediates and raw materials for fertilisers.
However, 8 items (petroleum products, fertilisers, edible oils, cereals, etc.) were to remain canalised. The Exim Policy, 2001-02 put 6 items under special list — rice, wheat, maize, petrol, diesel and urea. Imports of those items were to be allowed only through State trading agencies.
4. Devaluation and Convertibility of Rupee on Current Account:
The government made a two- step downward adjustment of 18-19 per cent within the rate of exchange of the rupee on July 1 and July 3, 1991. This was followed by the introduction of LERMS i.e., partial convertibility of rupee in 1992-93, full convertibility on the trade account in 1993-94 and full convertibility on the present account in August 1994.
Substantial capital account liberalisation measures have also been announced. The rate of exchange of the rupee is now market-determined. Thus, exchange rate policy in India has evolved from the rupee being pegged to a market related system (since March 1993).
5. Trading Houses:
The 1991 policy allowed export houses and trading houses to import a good range of items. The govt. also permitted the setting up of trading houses with 51 per cent foreign equity for the purpose of promoting exports.
The 1994-95 policy introduced a new category of trading houses called Super Star Trading Houses. These houses are entitled to membership of apex consultative bodies concerned with trade policy and promotion, representation in important business delegations, special permission for overseas trading and special import licences at enhanced rate.
6. Special Economic Zones:
A scheme for fixing Special Economic Zones (SEZs) within the country to market exports was announced by the govt. within the Export and Import Policy of March 31, 2000. The SEZs are to provide an internationally competitive and hassle-free environment for exports and are expected to offer a lift to the country’s exports.
The Policy has provided provisions for setting up SEZs within the public sector, joint sector or by State governments. it had been also announced that some of the existing Export Processing Zones (EPZs) would be converted into Special Economic Zones.
Some of the distinctive features of SEZ scheme are:
(i) A designated duty-free enclave to be treated as foreign territory for trade operations and duties and tariffs;
(ii) SEZ units might be for manufacturing services;
(iii) No routine examination of export and import cargo by customs;
(iv) Sale in domestic market on full duty and import policy in force;
(v) SEZ units to be positive net foreign exchange earners in three years; (vi) no fixed wastage norms;
(vii) Duty-free goods to be utilised within the approval period of 5 years;
(viii) Subcontracting of a part of production and production process allowed for all sectors, including jewellery units;
(ix) 100 per cent foreign direct investment through automatic route within the manufacturing sector;
(x) 100 per cent income tax exemption for five years and 50 per cent for two years thereafter and 50 per cent of the ploughed back profit for the next 3 years;
(xi) External commercial borrowing through automatic route, etc.
7. EOU Scheme:
The Export Oriented Units (EOUs) scheme introduced in early 1981 is complementary to the SEZ scheme. It offers a wide option in locations with regard to factors like source of raw materials, ports of export, hinterland facilities, and availability of technological skills, existence of an industrial base and therefore the need for a larger area of land for the project. The EOUs have put up their own infrastructure.
8. Agriculture Export Zones:
The Exim Policy 2001 introduced the concept of Agra- Export Zones (AEZs) to give primacy to promotion of agricultural exports and effect a reorganisation of our export efforts on the basis of specific products and specific geographical areas.
The scheme is cantered on the cluster approach of identifying the potential products, the geographical region during which these products are grown and adopting an end-to-end approach of integrating the entire process right from the stage of production till it reaches the market.
The AEZs would have the state-of-the-art services like pre-post harvest treatment and operations, plant protection, processing, packaging, storage and related research and development. The exporters in these zones can avail of the various export promotion schemes under the Exim Policy including recognition as a status holder.
9. Market Access Initiative Scheme:
Market Access Initiative Scheme was launched in 2001- 02 for undertaking marketing promotion efforts abroad. The key features of the scheme are in- depth market studies for select products in chosen countries to get data for promotion of exports from India, assist in promotion of India, Indian products and Indian brands within the international market by display through showrooms and warehouses set up in rental premises by identified exporters, display in identified leading departmental stores total exhibitions trade fairs, etc. The scheme shall also assist quality upgradation of products as per requirements of overseas markets, intensive publicity campaigns, etc.
10. Focus on Service Exports:
The amended Export-Import Policy, 2002-07, announced on March 31, 2003, specifically emphasized service exports as an engine of growth. It, accordingly, announced a number of measures for the promotion of exports of services. as an example , import of consumables, office and professional equipment, spares and furniture upto 10 per cent of the average foreign exchange export earning has been allowed.
The advance licence system has been extended to the tourism sector. Under this, firms will be allowed duty-free import of consumables and spares upto 5 per cent of their average foreign exchange earnings of the previous three years, subject to actual user condition.
11. Concessions and Exemptions:
A large number of tax benefits and exemptions are granted during the 1990s to liberalise imports and promote exports with the five year Exim Policy 1992-97 and Exim Policy 1997-2002 serving because the basis for such concessions.
These policies, in turn, are reviewed and modified on an annual basis within the Exim policies announced per annum. Successive annual Union Budgets have also extended variety of tax benefits and exemptions to the exporters.
These include reduction within the peak rate of customs duty to 15 per cent; significant reduction in duty rates for critical inputs for the information Technology sector, which is a crucial export sector; grant of concessions for building infrastructure by way of 10-years tax holiday to the developers of SEZs;
Facilities and tax benefits to exporters of goods and merchandise; reduction within the customs on specified equipment for ports and airports to 10 per cent to encourage the development of world class infrastructure facilities, etc.
A number of tax benefits have also been announced for the three integral parts of the ‘convergence revolution’ the information Technology sector, the Telecommunication sector, and therefore the entertainment industry.
12. Reducing transactional costs and simplifying procedures: The foreign trade policy (2004-09) announced an outsized number of rationalization measure to reduce transactional costs and simplify procedures. All EDI equipped ports mill be treated as one port form January 2009 to reduce procedural delays for exported and importers. the commerce ministry would also make the advance authorization scheme and therefore the EPCG scheme EDI enabled form July this year to try and do away with the hassles of physical verification and registration at the customs end commerce minister kamalnath said while announcing the annual supplement to the foreign trade policy 2004-09. the govt. has also allowed the export oriented units (EOU) to play the duty on monthly basis instead of paying it on consignment basis. Also under EPCG scheme payment has been allowed trough debit of duty credit scripts under the promotional schemes of the government the government has also given facility that the central excise to endorse supply invoice within 21 days of supply to facilitate faster clearance of deemed export benefits the govt. reduced the application fee for duty credit scraps and for EPCG authorization to rs 2 per thousand for getting the exports imports code number the trader mill need to pay only 250 now rather than earlier prescribed 100.For getting the free import of R & D equipment units not registered with the excise department can now provides installation certificate from an independent chartered engineer. Earlier the certificate of excise authorities was essential. For supplementary claims, the fee has been reduced to twenty from prevailing 10% .The limit of duty free import of samples has been increased to 1,00,000 from 75,000.
13. Free trade & Warehousing Zones:
According to Ministry of Commerce & Industry, Directorate general of foreign trade, chapter-A.1 FTP(2015-20). –“The objective is to make trade related infrastructure to facilitate the import and export of good and services with freedom to hold out trade and transaction in free currency. The scheme envisages creation of world class infrastructure for warehousing of various products, state-of-the-art equipment, transportation and handling facilities, commercial office space, water, power, communications and connectivity with one-step clearance of import and export formality to support the integrated zones as 'international trading hubs,’ these zones would be established in areas proximate to seaports ,airports or dry. So on offer easy access by rail and road.” Again according to chapter 7A.2 “The free trade & Warehousing Zones(FTWZ) shall be a special category of special economic zones with a focus on trading & warehousing:
14. Service Scheme From India Scheme (SEIS):
As per highlights of foreign trade policy (2015-20), Ministry of Commerce and Industry – (a)Served From India Scheme(SFIS) has been replaced with Service Exports From India Scheme (SEIS).SEIS shall apply to ‘ Service providers located in India’ instead of 'Indian Service providers' of notified services who are providing services from India, regardless of the contribution or profile of the service provider. The list of services and rate of rewards under SEIS are at Annexure-2.
(b)The rate of reward under SEIS would be based on net foreign exchange earned. The rewards issued as duty credit scrip would not be with actual user condition and would not be restricted to usage for specified kinds of goods but be freely transferable and usable for all types of goods and services tax. A Critical Overview of Foreign trade policy The foreign trade policy reforms started in 1991 have changed the foreign trade scenario and now the foreign trade policy in India have shifted from inward-oriented to and outward-oriented policy.
During the period of trade liberalisation shares of foreign trade in India’s GDP has increased significantly. One to extensive programme of liberalisation, globalisation of Indian economy, the extent of protection of Indian economy has declined significantly because the govt has restored to a massive lowering of tariffs, removal of quantitative restrictions etc. Now it had been recognised that foreign trade policy will play leading role in development of Indian economy. Every governmental and non-governmental agencies were estimating that the growth of Indian economy will increase significantly. However during this euphoria, one shouldn't ignore the following three issues which according to Deepak Nayyar are of fundamental of strategic importance of planning for industrialization –the relative importance of home market, the nature of degree of state invention and therefore the acquisition or development of technology. because the discussion above shows, the foreign trade policy introduced a number of schemes promoting exports and opening up trade.
TRENDS OF INDIA’S FOREIGN TRADE POLICY SINCE 1991
1. Huge Growth in the Value of Trade:
Table 7.1 reveals that the total value of foreign trade which was Rs. 1,972 crore in 1950-51, gradually increased to Rs. 2,835 crore in 1960-61 then to Rs. 3,487 crore in 1965-66. then the value of trade increased at a quicker pace from Rs. 3,169 crore in 1970-71 to Rs. 9,301 crore in 1975.-76 then rose significantly to Rs. 19,260 crore in 1980- 81.
Thereafter, the total value of trade rose significantly to Rs. 30,553 crore in 1985-86 to Rs. 63,097 crore in 1989-90 and to Rs. 91,893 crore in 1991-92 then to Rs. 1,17,063 crore in 1992-93 and finally to Rs. 22.15,191 crore in 2008-09.
Value of India's Foreign Trade
Thus during the period from 1950-51 to 1970-71 total value of trade rose by only 60.9 per cent. Again during the period 1970-71 to 1980-81, total value of foreign trade rose significantly by 597 per cent, i.e., by nearly 6 times. But during the period 1980-81 to 1990-91, total value of trade rose by 293.3 per cent, i.e., by nearly 4 times. In 2008-09 the worth of trade recorded a rise of 32.79 per cent over the previous year.
2. Higher Growth of Imports:
Another peculiarity that can be seen from this trend is that there has been consequential higher growth in respect of imports of the country since 1951. Thus the total value of imports which was Rs. 1,025 crore in 1950-51 gradually rose to Rs. 1,634 crore in 1970- 71, i.e., by only 59 per cent. Since then the value of imports started to rise at a very faster pace and thus reached the level of Rs. 12,549 crore in 1980-81 then to Rs. 43,193 crore in 1990-91 showing a rise of 667 per cent and 244 per cent during the last two decades respectively.
The factors which were largely responsible for this phenomenal increase in imports include: huge import of industrial inputs, regular import of food grains under P.L. 480 rising anti-inflationary imports, liberal imports of non-essential items, periodic hike on oil prices and therefore the initiation of liberal import policy by the govt. during 1985-86 to 1991-92. In 2008-09, the value of imports rose significantly to Rs. 13, 74,436crore, showing a rate of growth of 33.77 per cent over the previous year.
3. Inadequate Growth of Exports:
Another very peculiar situation that the country has been facing may be a very slow growth in respect of its exports. within the initial period, total value of exports in India rose marginally from Rs. 947 crore in 1950-51 to Rs. 1,535 crore in 1970-71, showing a rise of only 62 per cent. But since then the growth of exports within the country couldn't keep step with the growth in imports.
Total value of exports rose gradually to Rs. 6,711 crore in 1980-81 showing an increase of 337 per cent over 1970-71 then to Rs. 32,553 crore in 1990-91, showing a rise of 385 per cent over the value of 1980-81. In 1993-94, the value of exports rose considerably to Rs. 69,751 crore showing a growth of 29.9 per cent over the previous year.
In 2008-2009, the value of exports rose to Rs. 8, 40,755crore showing a rate of growth of 28.2 per cent over the previous year. Again in 2009-2010 (Apr.-Jan.) the value of exports stood at Rs. 3, 72,096crore showing a negative growth of 19.9 per cent over the previous year. Because of the introduction of various export promotion measures since the devaluation of rupee in 1966, the worth of Indian exports recorded some increase but this increase in exports was totally inadequate considering the sizeable growth within the value of imports.
This has resulted during a persistent and widening trade deficit in the country. The factors which were mostly responsible for this low growth of exports include un-favourable terms of trade for Indian primary (agro-based) goods, inadequate export surplus, and adoption of the policy of protectionism by developed countries and long period of business recession in developed country in recent years.
Reasons of Slow Export growth:
Survey Findings. Recently a survey conducted by the Delhi School of Business on 150 export organizations revealed that the main reasons for the slow growth of exports in India were that 65 per cent of the export establishments weren't using ITPO, MMTC and other such institutions.
Moreover, a majority of the establishments weren't inclined to make use of training and education in international marketing. Clearly, lack of adequate professionally trained manpower in export organizations is one among the important reasons for slow growth of exports within the country and failure to compete effectively in global markets.
Some of the important factors which were found responsible for reduction in growth of exports from 20 per cent to a mere four per cent during the last two years (1996-98) were Government policies, quality of production, tariffs, quality control and management, institutional finance, banks, export procedures and participation in trade fairs.
It was also observed that as many as 47 per cent of the exporters wouldn't like to avail of the services of personnel trained in export and would manage their operations through family members or others not professionally trained. The study also highlighted an attitudinal disinclination towards professionalism. Thereby, as many as 56 per cent of the respondents weren't inclined to sponsor a candidate for training international marketing.
As per this survey, the most dominant constraints and problems faced by the exporters were lack of export marketing information, inadequate infrastructural facilities, procedural complications, monetary loss because of low export prices and delay in clearance in ports. Therefore, immediate improvement or upgrading was required in port handling facilities, road transportation, and rail transport and power sectors.
Regarding shipments, the biggest constraints were high incidence of warehousing cost, delay in customs clearance, inadequate warehousing facilities, low frequency of sailing, high incidence of port expenses and inadequate shipping space.
It is quite disturbing to note that India’s share in world trade was 1.78 per cent in 1950 and in-spite of all the efforts made it's come down to 0.61 per cent in 1994. Immediately after liberalization, there have been positive signs up to 1995 but in 1996 and 1997 there had been a reversal of the trend. But during the current period, i.e., in 2001-02 and 2002-03, the export has recorded a rate of growth of 19.7 per cent respectively. In-spite of the constraints and inadequacies faced by the exporters it had been heartening to note that the exporting community, as observed by the survey, was optimistic about the future scenario.
4. Mounting Trade Deficit: Deficit within the Balance of Trade:
As results of higher growth of imports and slow growth of exports the country has been experiencing a mounting trade deficit since 1980-81. During the last 45 years period, the country has recorded a small surplus in its trade only in two years (viz., in 1972-73 and in 1976-77).
Due to adverse balance of trade situation, the extent of trade deficit in India gradually rose from Rs. 78 crore in 1950-51 to Rs. 949 crores in 1965-66. Recording a decline to Rs. 99 crore in 1970-71, the extent of trade deficit rose from Rs. 1,229 crore in 1975-76 to Rs. 5,838 crore in 1980-81 then considerably to Rs. 10,640 crores in 1990-91. But after the introduction of some changes within the trade policy and due to considerable import compression the extent of trade deficit declined remarkably to Rs. 3,809 crore in 1991-92.
Accordingly, the annual average deficit in balance of trade which was Rs. 108 cu.re during the first Plan gradually rose to Rs 747 crore during the Third Plan. But due to import compression and boosting exports, the annual average trade deficit declined to Rs. 167 crore during the Fourth Plan. But since then the annual average deficit in balance of trade rose significantly from Rs. 810 crore during the Fifth plan to Rs. 5,716 crore during the Sixth Plan then to Rs. 7,720 crore during the Seventh Plan.
In 1992- 93 the extent of trade deficit again rose to Rs. 9,687 crore because of huge increase in import. But during 1993-94, the extent of deficit declined to Rs. 3,350 crore due to considerable increase in exports. But during 2008-2009, the extent of trade deficit again rose to Rs. 5, 33,681crore. Again during 2009- 2010, the extent of trade deficit further rose to Rs. 2, 31,110crore (April-Sept.).
EVATUATION OF INDIA’S FOREIGN TRADE POLICY
(1)Relative importance of home market:
Under the FTP major importance has been given to foreign investment and foreign trade, however ignored the importance of home market. But it's true that sustainable development of any economy expansion of domestic trade and market is equally important to foreign trade. As far because the issue of the relative importance of home market is concerned, Deepak Nayyar has said that in large country like India where the domestic market is overwhelming important sustained industrialization can only be based on the growth of the internal market.(Deepak Nayyar,”the foreign trade sector, planning and industrialization in India .”in Terrance J. Byres (Ed.)
The state development planning and liberalisation in India (Delhi 1997)(page. 360.)
(2)The nature or the degree of state intervention:
Within the new trade policy neither it's been explained anywhere about the nature nor the degree of state intervention. If foreign trade has removed all the rules and regulations of government, there are often possible of heavy damages to the domestic traders and also domestic Indian market, due to this the speed of economic growth is often slowed down. Thus the nature or the degree of state intervention is extremely big issue against the liberalised economic national trading policy.
(3) Acquisition or development of Technology:
Again this is often very big matter of Criticism of new trade policy since 1991.This policy very much advocates about the foreign technology for the fast growth of Indian economy. It shows to much dependency upon foreign technology instead of development of domestic technology. As far as sustainable and continuous growth is concerned development of own domestic technology is compulsory, from this Indian economy can become self-reliable?
(4) Dependence on other economy:
Excessive dependence on import may destroy the economy of the country. Again open economy may destroy the underdeveloped economy. There's possibility of consolidation of underdeveloped economy.
(5) Slow growth of domestic economy:
New foreign trade policy open door of domestic economy for foreign trade. Foreign trade may trade policy of India Since 1991-A Critical Evaluation and Comparative Study between Pre & Post Reform Periods discourage the growth of domestic industries. Unrestricted imports and foreign competition might pose a threat to the survival of infant and upcoming industries within the economy.
(6) Possibilities of misuse of natural resources:
From the free trade the frequency important also as export is increased in large amount. Excessive export is one of the main causes of quick depletion of natural resources. Foreign trade may Promote lopsided development, only those goods are produced under the economy which has comparative cost advantage for big profitable for the trader.
(7) Possibility of Political exploitation:
Through foreign trade an economy (underdeveloped) became dependence of other economy (developed)which may threaten political independence. For instance British’s came to India as traders and ultimately ruled the country for centuries.
(8) Possibility Of Harmful goods:
Foreign trade policy facilitates free flow imports and exports among the nations with very less amount of intervention, it may cause of import of harmful goods into countries.
9) Some other evaluation of foreign trade policy, 1991.
(1) Possibility of Rivalry among nations.
(2) Possibility of invasion of culture
