Business Operations In Emerging Economies Of Asean Economics Essay
As portion of the concern operations in emerging economic systems sub-module assignment, I am supposed to carry on an audit of concern chances in ASEAN in an industry of my pick. In this respect, I have selected the emerging economic systems of Cambodia, Laos, Myanmar and Vietnam, the CLMV states, to look into. Where the likes of Singapore, Malaysia and Thailand have been touted as the emerging economic systems of the part in the last several decennaries, the CLMV states are seeing increased degrees of economic activities in recent times. In 2004, these states came together to explicate the acceptance of the Vientiane Declaration, aimed at furthering better economic cooperation and integrating among themselves. The declaration acknowledges the increased degrees of economic activity and the committedness the several authoritiess have towards the Indochina part. .
With increased economic activity comes an addition in demand for energy to back up the turning industries. Unlike developed economic systems who have established energy industries carry throughing the energy demands of their local economic systems, the CLMV states had largely merely emerged from war in the 2nd half of the twentieth century and most of their energy industries are still in the babyhood phase. This coupled with the known fact that there exist much undiscovered and untapped resources in the CLMV states, represents an country of chance for the established companies in the developed states to take advantage of.
Aim
The aim of this assignment is to carry on a survey of concern operations in the emerging economic systems of ASEAN. As discussed in the Introduction, I have selected the ASEAN states of Cambodia, Laos, Myanmar and Vietnam for this intent. More specifically, I will be looking into the potency of the energy industry and the concern chances available in these states.
Key deliverables in this assignment are:
Present an overview of the political and economic constructions of CLMV
Perform an analysis on the nature of international trade in ASEAN, comparing the sum of foreign investing now and 10 old ages ago
Look into the function and attitude of authorities towards international trade and investings
Overview of the energy industry in CLMV
Specify possible countries of intra-regional struggles / synergisms
Apply suited direction theoretical accounts to analyse energy concern operations in CLMV
Stipulate the restrictions / information spreads that may impact the above analysis
Recommend possible concern schemes to be implemented so as to work the benefits in the part
Show a sum-up of findings
Overview of political and economic constructions of CLMV
Cambodia
Cambodia ‘s Political Structure
Cambodia ‘s political system is a multiparty broad democracy under a constitutional monarchy. The king serves as the caput of province of Cambodia but in world, do non keep any regulating power. Alternatively, the King Acts of the Apostless as a symbol of integrity and continuity for the state. The caput of authorities is Prime Minister Hun Sen, who was officially appointed in 1998 by the sovereign after a ballot of assurance by the National Assembly.
hypertext transfer protocol: //www.bookrags.com/research/cambodiapolitical-system-ema-01/
Cambodia ‘s Economic Structure
The cardinal economic sector for Cambodia remains that of agribusiness and its associated sub-sectors. These sub sectors include lumber and gum elastic plantations, piscaries etc. Among them, rice is the major harvest of the state and is one of the major exports of Cambodia. Cambodia ‘s secondary sector includes little and average endeavors involved in little graduated table, diverse fabrication activities. These activities include that of garment processing and building. Cambodia holds a wealth of natural resources such as oil and gas, Fe, bauxite etc. However, these resources have remained mostly undiscovered and undeveloped.
hypertext transfer protocol: //www.economywatch.com/world_economy/cambodia/structure-of-economy.html
Lao people’s democratic republic
Laos Political Structure
Laos is one of the last communist states left in the universe and is led by an autocratic, centralised government identifiable by beds of bureaucratic behaviour in its authorities. The authorities of Laos is in situated in its capital Vientiane and is headed by President Choummaly Sayasone.
hypertext transfer protocol: //laos.suite101.com/article.cfm/the_government_of_laos
Laos Economical Structure
The economic construction of Laos consists of many sectors under assorted economic organisational systems and all these sectors operate under the direction of the province. Up to 80 % of the state ‘s working population is involved in its agricultural sector, which makes up about half of the GDP. Laos besides engages in exporting activities to states such as France, Thailand, Germany and Vietnam. Main merchandises include java, Sn, garments and wood merchandises. Laos besides holds a important sum of untapped natural resources such as Sn, Fe ore, lead, Zn, coal and lumber.
hypertext transfer protocol: //www.vietnambudgettour.com/webplus/viewer.asp? pgid=46 & A ; aid=1176
Union of burma
Political Structure of Myanmar
The authorities of Myanmar is led by the armed forces in the signifier of the State Peace and Development Council ( SPDC ) General Thein Sein heads the current government as the Prime Minister. This military junta has been responsible for the supplanting of several hundred 1000 citizens, both inside and outside of Myanmar and wields absolute power to regulate in Myanmar.
hypertext transfer protocol: //en.wikipedia.org/wiki/Politics_of_Burma
Economic Structure of Myanmar
Myanmar is a hapless state economically with 32.7 % of its population life below the poorness line.
Poor authorities planning, inefficient economic policies, minimum foreign investing, a trade shortage and internal unrest contribute to Myanmar ‘s sulky growing rate. Although rich in natural resources, Myanmar ‘s wealths does non dribble down to the economic system but is normally filtered away by the corrupted authorities, which is led by the military leaders and their associates.
hypertext transfer protocol: //www.economywatch.com/world_economy/myanmar/structure-of-economy.html
Vietnam
Political Structure of Vietnam
The political construction of Vietnam consists of a single-party socialist democracy who has established economic development as a national precedence. All Vietnamese political organisations are under Vietnamese Communist Party control and there exists no separation of powers between executive, legislative and judicial subdivisions
hypertext transfer protocol: //en.wikipedia.org/wiki/Politics_of_Vietnam
Economic Structure of Vietnam
Vietnam is preponderantly an agricultural state with much dependance on wet rice cultivation. After the Vietnam war, the Government had embarked on a mission to reorganise the farms and mills, and has in the procedure, employed 1000000s of locals to run the governmental services.
However, Vietnam continued to fight with legion limitations placed on its economic system by the West, most perceptibly the trade trade stoppage by the US and Europe as a consequence of the Vietnam War.
A hypertext transfer protocol: //www.economywatch.com/world_economy/vietnam/structure-of-economy.html
Analysis on the nature of international trade in ASEAN
Figure 1 below shows the sum of intra-ASEAN trade as compared to other regional axis. From the figure, we are able to see that even though the intraregional trade among ASEAN is smaller in value as compared to those of the more good established regional axis, we are able to place slow and consistent growing over the old ages.
Figure 2 compares intra-ASEAN and extra-ASEAN trade ( Internet Explorer: trade with developed and developing markets ) Statistics indicate that approximately 70 % of ASEAN ‘s chief trade spouses in its imports and exports are with developing states.
ASEAN in universe trade
The tabular array below nowadayss a comparing between ASEAN and the other regional integrating organic structures in the universe
ASEAN can be seen to be much more dependent on trade than other regional integratings. For illustration, in 2006 its trade to GDP ratio is up to 168 % , about four times the ratio for South Asia Free Trade Agreement ( SAFTA ) and more than twice for the Asia-Pacific Trade Agreement ( APTA ) .
Tendency of Foreign direct investing
A good index of authorities ‘s attitude towards international trade and investings would be in the signifier of FDI, both inwards and outwards.
Analysis of FDI informations
From the informations above, it can be seen that ASEAN has been sing a steadily turning influx of foreign direct investings over the old ages with the lone exclusions being the periods of clip where the universe experienced unexpected events such as the September 11 terrorists onslaughts in the US and the eruption of SARS in Asia. These events discouraged FDI in the part and is reflected clearly in the figure above. Looking into figures, the value of FDI into ASEAN totals up to be USD 22,310 million in 1998. This figure has since ballooned up to USD 59,923 million in 2008, an addition of more than two times the value O FDI in 1998. This can merely bespeak the turning openness of the ASEAN states to merchandise and the willingness of foreign investors in prosecuting the ASEAN states in trade.
hypertext transfer protocol: //www.unctad.org/Templates/Page.asp? intItemID=1923 & A ; lang=1
More specifically, the FDI charts of the CLMV states are shown below
FDI chart of Cambodia
FDI chart of Laos
FDI chart of Myanmar
FDI of Vietnam
Overview of the energy industry in CLMV
Cambodia
The Government of Cambodia has been actively advancing the development of the state ‘s oil and gas assets with the purpose of heightening economic growing and providing chances for employment in the industry for Kampuchean subjects and companies. MNCs such as ChevronTexaco has began important geographic expedition activities in Kampuchean Waterss and it seems to be a affair of clip before development and production will take topographic point in Cambodia.
Harmonizing to studies by the World Bank and the United Nations Development Programme, Cambodia might be sitting on oil assets of every bit much as two billion barrels deserving and gas assets of up to 11 trillion three-dimensional pess. These assets are estimated to be lending one-year grosss of $ 2biullion to the Kampuchean authorities within 5 to 10 old ages, and this sum is important in the sense that the figure is several times the current degree of domestic gross and overseas development assistance combined.
Kampuchean National Petroleum Authority
As portion of governmental attempts to supervise upstream and downstream crude oil activities in Cambodia, the Kampuchean National Petroleum Authority ( CNPA ) was formed in 1998 against the background of Cambodia ‘s Petroleum Regulations 1991. ***Quote The Petroleum Regulations prescribes a procedure for which crude oil understandings can be drawn up between CNPA and the relevant crude oil companies for the grants of Cambodian crude oil assets.
Lao people’s democratic republic
Laos has considerable gas and coal assets but they remains mostly untapped. As a consequence of the Mekong river and its feeders which runs through the state, Laos is extremely dependent on hydropower for their ain energy ingestion. Several hydropower Stationss are already operational in Laos and the stretch of the Mekong that flows through the state offers Laos the possible to bring forth up to 20,000 MW. Currently, merely approximately 2 % of that possible energy has been tapped. The bulk of the power generated from hydropower is sold to its neighbour hooding states such as Thailand. Gross saless from hydropower generate a steady flow of gross for Laos but at the same clip, exposed Laos dependence on the regional markets for the demand and the pricing of its hydropower.
Union of burma
Increasingly, foreign companies are run alonging up to spouse with Myanmar ‘s Government to foster explore and develop the state ‘s oil and gas assets and Myanmar ‘s military authorities is welcoming such foreign investings because of the pecuniary benefits it will convey to them. Grosss collected from the geographic expedition and development of Myanmar ‘s oil and gas assets by and large go into the military Junta pockets and into funding the military, with really small or about none being re-invested into Myanmar ‘s economic system.
In 2006, Myanmar reportedly earned $ 2.16 billion from the sale of natural gas, and this entirely accounted for about half of Myanmar ‘s exports and represents its individual largest beginning of offshore foreign exchange. As geographic expedition activities increases, returns from oil and gas activities is set to increase, conveying yet more money for the military junta.
Vietnam
Vietnam has emerged as an of import regional manufacturer of oil and gas in ASEAN over the past two decennaries. Through Petro Vietnam, a province owned national oil company ; Vietnam boosted its geographic expedition activities and allowed for greater engagement from foreign companies, particularly through investing vehicles such as Joint Ventures and/or Production Sharing Agreements.
Harmonizing to Oil & A ; Gas Journal ( OGJ ) , Vietnam held 600 million barrels of proved oil militias as of January 2007, all of which are located offshore. This figure is set to increase in the hereafter, as more and more geographic expedition activities get underway off the seashore of Vietnam
While these attempts have helped Vietnam spread out production of oil and natural gas, domestic ingestion has been besides increasing at the same time as a consequence of rapid economic growing. Half of Vietnam ‘s domestic energy ingestion comes from oil, with hydropower ( 20 per centum ) , coal ( 18 per centum ) , and natural gas ( 12 per centum ) providing the balance. Although Vietnam is a important net exporter of oil and gas, it remains extremely reliant on imports of crude oil merchandises due to a deficiency of refinement capacity.
Potential countries of intra-regional struggles / synergisms
traveller2000.com
Potential struggles
Territorial Disputes
spratlys.org
Spratly Islands, which is located in the South China Sea, has been a major country of contention between the states environing it. States such as Vietnam, Malaysia, China, Taiwan and the Philippines have been claiming ownership over the Islands, which are deemed to be rich in hydrocarbon assets. Territorial dissensions between the states would merely discourage companies from coming in to beginning for chances to further research the country for oil and gas militias and hence bound production activity. More late, there have been attempts by the states involved to carry on joint geographic expedition for oil and gas in the country, but these attempts have since discontinued because of the continued territorial dissensions.
Potential Synergies
volconvo.com
Cambodia + Laos + Vietnam in Hydropower coevals
Cambodia, Laos and Vietnam all sits of parts of the Mekong River and its feeders, which is famed for its hydropower coevals capablenesss. There is a possible for these states to work together to jointly develop and tackle the power of the river, transforming it into hydropower that can be used domestically and sold off externally. Such a development non merely helps in bring forthing a long term energy program for its domestic population, but will besides develop an industry of which these states may go leaders in the field.
Analysis of energy concern operations in CLMV
Michael Porter introduced a theoretical account to analyze the strengths and failing that can give a state, or industry within a state, a competitory advantage or disadvantage. The theoretical account of finding factors of national advantage has become widely known as “ Porter ‘s Diamond ” and includes four key elements.
Factor Conditionss
Demand Conditionss
Related and Supporting Industries
Firm Strategy, Structure and Rivalry
Cambodia
Factor conditions
Cambodia have easy been placing oil and gas militias in their Waterss and they seem to hold a important sum of such resources
Home Demand Conditions
Home demand for energy has been turning steadily as Camboida moves out of their war history towards a underdeveloped stage.
Related and Supporting Industries
There seem to be a deficiency of related and back uping industries in the energy sector in Myanmar.
Firm Strategy, Structure and Rivalry
Energy houses runing in Cambodia will come under the indirect control of the authorities through the Cambodia National Petroleum Authority. The construction is good defined and companies would by and large profit from the handiness of a well supported authorization
Lao people’s democratic republic
Factor Conditionss
Laos do non look to hold an copiousness of oil and gas assets. However, much accent has been placed on their trust on the Mekong River for hydropower coevals of which satisfy their domestic ingestion, go forthing the surplus to be sold to neighbor hooding states such as Thailand
Home Demand Conditions:
At place, demand is known to be weak as the assorted industries in Laos are still at a babyhood phase and does non necessitate immense sum of energy.
Related and Supporting Industries:
There seem to be a deficiency of related and back uping industries in the energy sector in Myanmar.
Firm Strategy, Structure and Rivalry:
Laos is led by an autocratic, centralized government which can be advantageous for companies in the energy sector in deriving blessing and entree to their energy assets
Union of burma
Factor Conditionss
There seems to be ample of seaward resources offshore Myanmar
Home Demand Conditions:
Although Myanmar is considered a underdeveloped state, its development is limited by and to the sum of resources committed to the state by the opinion military junta. As a consequence, Myanmar by itself merely has a weak domestic demand for energy
Related and Supporting Industries:
There seem to be a deficiency of related and back uping industries in the energy sector in Myanmar.
Firm Strategy, Structure and Rivalry:
Energy houses can merely derive grants to research Myanmar ‘s oil and gas assets if they work with the authorities. Having the authorities on the side would surely ease the bureaucratisms and ruddy tape involved, particularly so when the authorities is reliant on the grosss from the sale of their oil and gas to finance the state ‘s disbursement and their ain personal additions.
Vietnam
Factor Conditionss:
The pre-requisite of the energy industry is natural resources. In Vietnam, there seem to be ample of such resources, with known oil and gas Fieldss located merely off the seashore of Vietnam and Vietnam ‘s contention of the oil rich Spartly Islands. In add-on, the Mekong river sits right across Vietnam, leting Vietnam to tackle the river for hydropower.
Home Demand Conditions:
Vietnam, as a developing economic system, has seen its energy ingestion rate lifting on a changeless footing. While it is researching, bring forthing and exporting oil and gas, Vietnam is still purchasing oil from other states because it lacks the capableness to polish oil. As in the instance of all developing states, the demand for oil expressions set to lift with industrialization of the state.
Related and Supporting Industries:
There seem to be a deficiency of related and back uping industries in the energy sector. However, a fast rise sector is the ship building industry which complements the seaward geographic expedition of oil and gas. There have been developments in the ship building industry because of the comparatively low cost of labor.
Firm Strategy, Structure and Rivalry:
Energy houses runing in Vietnam are by and large linked to the Vietnamese authorities ( Internet Explorer: the authorities have some signifier of control ) . As such, it can be seen that these companies will jump to hold advantages in the sense that certain bureaucratisms could be avoided merely because the authorities is merely every bit dying to acquire production running. However, in the exact same manner, the advantages could go disadvantages as the authorities holds the reins and could cut down the bargaining power of the house.
Restrictions of Analysis / Information Gaps
Restrictions of Porters diamond theoretical account
One peculiar restriction of the Porter ‘s diamond theoretical account is the influence of the Government on each of the factors. In the energy industry, about all its determiners are extremely dependent on the actions of the authorities, for it is the authorities who own the resources of the state. For case, the Government is able to implement policies to increase the barriers of entry to the states resources, ensuing into a bead in the development of back uping industries. On the other manus, the authorities may give subsidies to the local participants in the energy industry, therefore altering the system of competition, scheme and construction of local houses towards the energy market.
Another restriction would be that Porter had developed the diamond theoretical account based on instance surveies from developed states. Hence, while the model may still be able supply a good indicant of national comparative advantage in emerging economic systems ; it may non be every bit good a tantrum as if it is used on developed states.
Information spreads
In the analysis of the energy industries of the CLMV states, there exists much information spreads. This is in peculiar respect to Myanmar, where the presence of oil and gas geographic expedition activities are known to be but are non easy available because of the extremely close military government. In add-on, the beginning of the informations that were available assumably comes from the governmental bureaus of the states, and there might be differences in the calculation methodological analysiss and reading methods of the statistics
The CLMV states with the exclusion of Myanmar have experienced war late and are now still retrieving from the wake of war. As such substructure webs in these states are non good developed and this presents a job for the turning industries. Besides, the degree of educated population is considered low, and skilled local labourers specific to the energy industry are difficult to come by, therefore cut downing the supply of skilled workers to the industry and its supporting industries.
The energy industry is one which utilizes province of the art engineering to develop and keep. And geographic expedition and production activities require the input of experient and skilled forces. These are presently missing in the states of CLMV, where the energy industry is considered to be at an babyhood phase. In add-on, the substructure required to back up the energy industry are frequently capital intensive and requires much clip, money and attempt from the authoritiess to develop. These are all presently non present locally in the CLMV states and it seems to connote that the CLMV states might non be ready to prosecute the energy industry at the current point of clip.
Drumhead
The energy industry in the CLMV states is demoing a batch of possible. Myanmar is already known to hold been join forcesing with good established foreign oil companies to research and work the resources in their country, Cambodia is in the babyhood phase of crude oil development with the formation of the Kampuchean National Petroleum Authority in 1998 in an effort to supply ordinance to the industry. Vietnam, through its national oil company, Petro Vietnam, has already been researching the offshore oil and gas assets located within its district and counts in its ranks more than 50 subordinates and joint ventures. Laos, while non in ownership of a coastline, happened to hold the Mekong River running through its land, and have turned to it for hydropower. These are all marks of the potency of the energy industry of the part.
However, the political construction of the part is turn outing to be an obstruction for concerns desiring to come in the energy industry. Till today, both Laos and Vietnam are run by communist authoritiess who pride themselves on a centralised system of administration. While politically stable, the deficiency of a free market system deters foreign companies from come ining the market. Myanmar is run by a close military government that is good known to be corrupted. There is fundamentally small or no opportunity of entry to the market unless a company is willing to supply ‘grease money ‘ to the military authorities.
From the above treatment, I would urge Vietnam as the most promising state to come in and take advantage of the energy industry. This is because Vietnam has a good established national oil company, Petro Vietnam, modulating contacts with foreign oil companies and join forcesing with them to tackle its ain resources. The sheer figure of joint ventures and subordinates bears testimony to the openness of the authorities to foreign investing. Furthermore, Vietnam ‘s free trade understanding with the US in 2000 and its accession to the World Trade Organization in 2007 demonstrated its Government ‘s continued committedness to economic transmutation even though it remains a communist province. In add-on, factors of production like an progressively educated and skilled population, bettering substructure have all complemented the energy industry. These, plus the fact that Vietnam ‘s rate of energy ingestion is rapidly lifting to degrees above that of even developed states, sends a signal to the universe that Vietnam is ready for the universe and welcomes foreign investings.
