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Doing Business in the Developing Countries - Coggle Diagram
Doing Business in the Developing Countries
Classification Of Developing Countries
World Bank Classification:
1) Low Income
2) Middle Income
3) Upper-Middle Income
4)High Income
UN Classification:
1) Least developed (44 countries)
2) Nonoil exporting developing nations (88)
3) Developing countries from OPEC; 13 member states
UN Criteria:
-Using two interdependent criteria: GDP per capita and the source of income (oil vs nonoil).
Determining Factors
Production of low value-added commodities: natural resources, minerals, primary agro products, labor intensive, and low-priced industrial products.
Outdated technological base, little or even absence of investments in research and development, lack of government support for fundamental and applied sciences. Also, absence or insufficient protection of the intellectual property rights.
Low qualified labor, high illiteracy, and difficult access to educational services
Outsource of the most talented and young specialists toward the more developed countries
Too much protectionism, a lot of bureaucracy, corruption, and deliberate complication of the import customs procedures
Low or even absence of stimulus for foreign capital inflow
Hard currency control and restrictions on the profit repatriation
Lack of appropriate business infrastructure and logistical services
Difficult entry and exit for the foreign investors, because of too extended license and concession requirements, leading to monopoly or limited competition
Entry Strategies in the LDCs
Direct exporting/importing
Indirect exporting/importing
Licensing
Off-shore production (direct investments)
Subcontracting
Portfolio (indirect) investments.
The Host Country Characteristics
Export/Import trade regime
• Type of government
• Government’s trade and economic policy
• Government’s foreign policy
• Favorability or restrictions toward the foreign business activities
• Availability and reliability of the existing distributive system
• Membership of regional custom and/or economic agreements
• Level of corruption.
Company’s Characteristics
The type of its products and services
• The qualification and motivation of its management
• Export experiences and possible contacts with business counter
partners in the host country
• The availability of financial reserves for backing the higher risk of
direct exporting.
Economic outcomes from the regional economic cooperation
Economies of scale resulting from the interrelated domestic markets
Lower costs on export/import because of the lower or eliminated tariffs and nontariff barriers (improved terms of trade)
Better allocation of production, based on division of labor (specialization and cooperation)
Better allocation of capital, building capacity to finance or co-finance larger investment projects at national or regional level
Coordinated economic policy
Stronger competition and stimulus for technological and product innovations
Higher economic growth, higher employment and better standard of living
Easier and more efficient interaction with the international organizations and institutions.