FDI in Nepal: An Overview

Amish Dhungel

Dwaipayan Regmi

Foreign Direct Investment (FDI) is a remarkable indicator of a country moving into free market and accepting globalization. One of the potential markets for FDI is developing countries, as such countries have abundance of valuable resources that are untapped. Besides, FDI helps these developing countries to balance the gap between desired investment and domestically mobilized savings. Widely believed notion is that FDI role is tremendous in terms of bringing wave of economic changes that would benefit a country, and that is even more in case of developing country like Nepal.

Often referred to as a major tool of globalization post early 1990s, FDI increases ownership of assets across the national frontiers. FDI provides a country with access to global talent, global managerial skills and knowledge, optimum utilization of human capital and natural resources, enhances exports, makes industry competitive, provides forward and backward linkages and access to international quality product offerings, and facilitates more employment opportunities.

In the context of developing countries like Nepal, FDI can be regarded as lifeblood for rapid economic development.  FDI contribution to all round development of economy is crucial. Indian Management guru, Ram Charan reflects the importance as: “No country ever has grown without FDI, including America. FDI is not only money it’s what comes with it: technology, managerial knowhow, risk-taking.” Though Liberalization of national economy in 1990s opened door for FDI in Nepal, the country hasn’t been successful to attract significant amount of FDI.

The Foreign Investment and Technology Transfer Act 2049(1992) shapes the basic foundation for Investment in Nepal. The policy seems liberal. There is easy entry, as one can get ‘non tourist visa’ for six months if they tend to invest in Nepal. They can take every penny that they earn out of profit, share, dividend, equity and interest back to their country. There is no any Government interference in case of any dispute with the local stakeholders. The case will rather be solved following United Nations Commission on International Trade Law. Again, foreign investors are allowed to hold 100% ownership in any business apart from cottage industry and other few sensitive places.

The policy is beautifully designed, but the practical side is loaded with lots of side effects. Any foreigner cannot own land in Nepal. FDI is restricted for the ownership of commercial banks up to 66% only. There are various places where Government is enjoying monopoly; as such it is difficult for foreign investor to enter into these sectors. Nepal Electricity Authority, Nepal Drinking Water Corporation comes into these sectors. Foreign investors are not granted equal right as that of domestic investor. For instance, a foreign investor pays double rate to register a trademark. Above all, one can note that there is a political disturbance that creates fear within the mind of foreign investors. Government has not yet been able to take risk for their loss because of political disturbances. Failure of BIPPA has also showed negative impact to foreigners regarding investment in Nepal.

Despite the dark sides and limitations of the policy, there are rays of hope as well. World Bank’s Ease of Doing Business Indicator 2015 ranks Nepal as second best destination among the SAARC countries for investment. There are educated mass, who are always turning pages for looking job opportunities. This indicates, large number of educated mass is looking for job, so any investor would get educated manpower at comparatively low price. Nepal has recently come up from the ten years of civil war. History indicates that industries built after war times have been long lasting, so this hypothesis shows that this is appropriate time to invest in Nepal too. There are problems in sector of communication, electricity, water, fuels. But, these problems are actually opportunities for the investors.

After the end of ten years of Maoist insurgency, Foreign Investment in Nepal has showed a positive symptom. Although, the Investment Year 2012/13 effectiveness can be kept as a separate question to be answered, we can see that Nepal has received Rs 19.93 billion of FDI in the year 2012/13 and that of Rs 20.18 billion in the year 2013/14. There was 0.9% increment in FDI, however, 3.8% decline in foreign investment projects.

China has been the largest investor in Nepal investing Rs 2.71 billion and Rs 7.32 billion in the year 2012/13 and 2013/14 respectively.  It is then followed by India who invested Rs 2.8 billion and Rs 6.5 billion in 2012/13 and 2013/14 respectively. After Indian PM Modi’s visit this investment from India is likely to be increased in next year. Investment in the sectors like tourism, service, mineral, manufacturing, energy, construction, agro and forestry has been getting prime concern in Nepal.

In order to attract the new investors in Nepal, first thing that Nepal can do is create favorable environment. Government need to provide security to the investors, ensure good environment for business and its operation. There is again a necessity to shape a proper monetary and fiscal policy that would attract the investors. BIPPA and other bilateral and multilateral trade agreements should be formulated and implemented properly. There is still the fear of political disturbance in Nepal, this issue has to be properly addressed, and the one planning to invest should be welcomed.

The recent development in FDI sector has been praiseworthy with the arrival of largest ever FDI project in Nepal in Hydropower sector by Indian company GMR.

For a rapid growth of economy, Nepal has no option but to attract FDI. Being sandwiched between two giant economies of the world, Nepal holds the vast potentiality of benefitting from these humongous economies via FDI.

(This article was published on The Himalayan Times, dated March 9, 2015)

Incredible MYSORE

I wanted to visit Mysore as soon as I came to India on July, 2014. There were two reason behind this.
One: I wanted to meet my dear friend Sujan.
Two: I wanted to see Mysore palace.
However this had become only a wish until and unless I decided to go all of sudden during my semester break. We had just cancelled out North India visit because of fear about Swine flu being viral as it had already taken dangerous presence all over India. The first day of vacation was passed boringly in Hostel. However, I couldn't prepare myself for three such more days. So I convinced Gaurav and finally boarded train to Mysore, the second day. That was a challenge to swine flu ;)


Mysore:

Mysore is one of the beautiful cities of whole of India. Located in Karnataka state of India, Mysore is an ancient city with rich cultural heritages and historical importance.

I happened to visit this place recently. During my three day stay in Mysore, I visited some of the prominent tourist destinations that were really amazing. One of the oldest planned cities of Asia, life in Mysore resembles to that of some European countries. Things that keep Mysore a class apart from amongst other cities of India are: clean roads and public spaces, mildly populated, no heavy traffic, many cultural and architecturally exceptional buildings, etc.

Based on my own experience, I recommend you to visit following places if you happen to visit Mysore anytime in future.

1)      Mysore Palace

It’s marvelous, really captivating, and the lights makes it really a heaven on earth !

Mysore palace during evening time, every Sunday, 7:00 pm to 8:00 pm.

Mysore palace is the official residence of the Maharajas of Mysore-The Wodeyars. The palace houses gigantic courtyards, gardens and buildings. The palace is built via use of Hindu, Muslim, Rajput and Gothic styles.

Mysore palace during morning time

Every year during Dussera festival in Autumn, the palace hosts famous Mysore Dussera which is the major festival in Mysore and a major tourist season.  The palace is a must see especially during evening time on every Sunday and some other special occasions like Dussera.

2)      Chamundi Hills

Chamundi hills houses the famous 11^th century Chamundeshwari temple on top of the hill. Situated at about 13 kms from the city and at height of 1000 meters, the view from top is mesmerizing panoramic, from where we can see beautiful Mysore.  On the midway to the hill is a statue of bull Nandi, the carrier of Lord Shiva, which is carved out of single piece of black granite ( 1.9 m tall and 7.6 m long). Hindu Mythology has it that the then king of Mysore Mahisasura was killed by goddess Chamundeswari after a fierce battle. To mark this victory Hindu followers celebrate Dussera/Dashain festival, which is the major festival in Mysore.

An evening bike ride to Chamundi hill can be really a worthwhile experience. Try it !

3)      Brindaban Garden

Adjoining to a dam called Krishnarajasagara which crosses Kaveri river is a beautiful garden called Brindavan garden. This garden is one of the most visited tourist destination in Mysore. Famous for variety of flowers and fruits, the garden is really amazing during evening time when the ambience is beautified via lights and water fountains. The construction of garden dates back to 1927 and is still one of the most favored tourist attractions in Mysore.

A major attraction here is the musical fountain where bursts of waters are synchronized to music of song.  Go there with your loved ones and enjoy the gift of nature. :)

Beautiful Sunset on way to Brindavan Garden !!

It was not only place but my greatest buddies who made travelling fun. On the first day Suwas decided to join from Bangalore. More fun to my stay was by momo party hosted by Nepalese girls, evening  bike ride, sleep upto late morning, alcohol, movie and movie and so on....such a FUN !!! I am thankful to my friends for being such a great host. Special mention to Sujan, Suwas, Sainju, Raju !! See you soon again Mysore ! Now back to default >>Chittoor!!

Business as a solution to Social Problems

Contemporary world has been confronting with many social problems that people, government and business societies are concerned about. Many serious problems are arising that have come down heavily on the people. Problems like: climate change, deforestation, poor nutrition, access to water, pollution etc. have created major threat to livelihood of people. The problems are supposed to increase even more when endeavor of governments to address these problems have been making only an incremental improvement and primarily the reason for this being scarcity of resources.  In this connection when government (which has been referred to as the solver of societal problems) has been facing with resource crunch, the onus lies on the business which is the real creator of resources in the form of profit. 

Business can create resources when they meet the need, at a profit.  Business at the present time possess humongous power availed to them via resources possession. The accumulation of vast resources generated from profit enables them to mobilize energy and resources to solve the societal problems.

Societal problems and Business:

When we generally talk about business in relation to the societal problems, two differing views appear. The traditional thought identifies business as a creator of societal problems. Meaning that business creates profit at the expense of the society. Profit is excessive when: pollution is massive, labor exploitation is prevailing etc. This is the view that is commonly prevalent which partly is also because of the fact that companies have been neglecting the society in which they operate.

However the modern thought opines exactly the opposite and finds a cordial linkage between business and societal problems. For example a business causing less pollution means that the system is efficient, resources wastages is minimum etc. which automatically leads to more profit and vice-versa. As companies focus on long run of business, the notion of business as solver of societal problems is getting more practiced. This philosophy has been more popularized by socially responsible investors.

Role of CSR in addressing Social problems:

CSR in not a new buzz world in business world. The term originated in a club Rome in 1970s among a group of scholars, thinkers, executives that took talk of laying the future of sustainable development.  Though there isn’t any widely accepted definition of CSR, it can be defined as a self-regulatory mechanism, voluntary rather than mandatory, whereby business ensures compliance with the law of land, ethical standards, and international values. As such, besides embracing the responsibilities for the business actions, CSR attempt to address social issues by going beyond the interest of the firm and the law of the land. Though CSR has often been referred to as a voluntary initiative, recent change has been in the direction to make it mandatory also. For e.g.: Company Act  2013 of India makes CSR a mandatory obligation on the part of the company with  at least INC 5 crore net profit or INC 1,000 crore turnover or INC 500 crore net worth, to pay 2 % of their average net profit of three year on CSR activities on each financial year. The importance of CSR reporting is increasing which are driven by regulatory bodies and stock exchanges around the world.

In case of Nepal, there is absence of dedicated policy that guides CSR activities. Proper enforcement of existing laws will promotes basis for voluntary CSR activities. For instance Environment Protection Act 1997 forbids individuals and enterprises from polluting the environment that might have an adverse effect on the environment or public life. Similarly other acts like, Consumer Protection Act 1998, Black Marketing and Punishment Act, Drugs Act, Corruption Prevention Act, etc. promotes fair practices in business and society.

For companies wanting to be socially responsible, CSR standardization measure like ISO 26000 can give a good reference. ISO 26000 though is a voluntary measure, specifies key principles as roots of socially responsible behavior which are: accountability, transparency, ethical behavior, respect for rule of law etc. Similarly another accepted framework is Triple bottom line which identifies three Ps: people, planet and profit as three pillars of sustainability. As such concern of society, economy and environment must be addressed. Also OECD guideline to multinational companies, UN Global compact etc. are also very popular.

Futuristic Approach to CSR

Though CSR initiatives have been effective in addressing social problems (at least in incremental way) the more sustainable approach to CSR approach would be “Creation of Shared Value” which means addressing of a social issue with a business model. The notion of creating social value is to create product offerings that meet social needs. Harvard Professor and strategist Michael Porter in one of the Ted talks, identifies this model as “high form of capitalism that aims on addressing social problems in effective way”. For e.g.: Invention of drip irrigation technology saves water and fertilizer by allowing water to go drip slowly to the roots of plants, Nestle initiative to become a nutrient company rather than being a food company (that may make people victim of obesity), etc. marks the movement of a company towards this approach of creation of share value.

In another way, this approach enables companies to change the conventional approach of the society of business as creator of social problems. The advantages of this would flow in manifold volume which might be, reduces business risk, greater acceptability of brand, garner customer appreciation, brand enforcement, reduce conflicts etc. which in totality helps it to be a leader in the industry.

As such business resources when deployed effectively can play an instrumental role in solving social problems that are too large for government and I/NGOs. 

ICCR Winter Camp- 2014-15, Madhya Pradesh

I am quite a lazy guy to update my blog regularly and mostly internet of my hostel favors my laziness by not working properly. I wanted to write a blog about this camp that I recently participated. But thought that if I write down immediately I might write it in details and make it a boring read. So I made up my mind that I would write it later  and only about those things that I found important and I missed the most. 

I was selected for a camp which would turn out to be incredible experience in terms of fun, adventure, friendship and exposure. It was Government of India affiliated Indian Center for Culture and Relation(ICCR) organised Winter camp for scholars from different countries across the world currently studying in India under Government of India scholarship.

I along with my classmate Dwaipayan were selected for this week long event. We boarded our train from Vellore station to Bhopal. The next seven days would unravel a fun fulled and thrilling experience to be cherished for a lifetime. 

Moments that I would like to remember:

1) Almost missed the Train to Bhopal

  It was really a long journey and we were almost late for train when we attended the first half of our MBA classes. Another unfortunate event was that we almost missed our train because of lack of any indication in the platform. Thanks to our habit that we keep poking people for information.

 2) Train journey and almost lost phone

It was awesome and tiresome. We had carried enough food to survive with, some books to keep our brain busy and our casual talks ranging from MBA classes to politics in Nepal. Most of all it was fun. Almost same happened when we were about to board train back to Chittoor. The train was late by some four hours  and it made a great test of our patience. A small tamil kid made our journey fun-filled who was teasing my friend by calling him villian in his regional language. 

Another stressful and memorable incident was me losing phone. I had kept it in my pocked while sleeping. I happened to wake up at 4:00 am in the morning and found that my phone was lost. I searched for a while and later woke up Dwaipayan to search it. Unfortunately couldn't find it. I began to think about new phone to buy, but was sad that I would lots of memory and data of  lost phone. But Dwaipayan was not to lose hope. He asked to intensify search and thanks to him that finally after some 15 minutes I found my phone below a rucksack.

3) Searching for Good food in Itarshi ! 

Banks of Narmada river, Hosangabad.

 I don't know how long but we really walked for longer time to get a good food. Because I was with a great gourmet, we always needed good food. :D  Happy part was that in the end we were successful. I do also remember that spicy Panipuri and Cutting chai of Hosangabad, near Narmada river bank. Such a blissful it was. 

4) Bhopal

We finally reached to Bhopal. What awaited in Bhopal was good friends, good foods  and a perfect travel plan. Next seven days would unravel unprecedented fun-filled moments with to-be-friends from different countries. 

5) Travel-Travel and Travel

While a lot happened in between, we were busy travelling most of the time in the camp.  

My favorite of all places during the camp: Bhedagaht. Boating among the rocks was  an amazing experience.

 Bhopal, BhimBetika, Sanchi, Jabalpur, Panna Tiger Reserve, Bhedaghat, Shivpuri, Gwalior etc were the places that we had to visit in the camp. Things like Music, pranks with friend, dance and all added spice to our fun.

6) Anna, Kaif and Adam

I and D waipayan were placed in a room. We were accompanied by a friend, from SriLanka, Mr. Anna(Joy). On first day we also got to meet another fun-loving guy from Afghanistan-Kaif. And rest of seven days would be filled with Anna's jokes, being satirical and lots of mischief. Not to miss to mention was Adam from Nigerrrrrr (as he would pronounce). Inspite of being single from his country, this boy was a serious fun lover and humble human being. What we liked more of this guy was him singing a Hindi song " Kal ho na ho" ! 

7) Chumki, my beloved, everyone's beloved! 

Camp had participants in majority from Afgansthan, Srilanka, and Nepal. Because of fear of unknown all of us were not interacting with each other and staying in almost fixed position in our bus. Me and Dwaipayan planned something that would make camp really great. We started teasing Chumki( friend from Bangladesh) and almost everyone joined us. This started interaction in between/among all of us. In few hours Chumki became celebrity of the camp. Thanks to her fun loving nature. Guess what then? Everyone started expressing their love for Chumki.

8) Birthday of Kesayat ??

We wanted to add more fun to the camp. So  asked if anyone had birthday during camp duration. But none had. So we came up with fake birthday. Of course our dear friend Kaif was ready for the prank. We worked really hard to get a good cake late-night in Khajuraho. Finally our effort paid well. Specially for Kefayat who got a lovely birthday surprise gift !! ;) May be that Cake shop knew that it was a fake birthday, the spelling of his name was wrong. So it was a birthday of Mr. Kesayat, who none of us knew. :D

 

9) Our Nepali dudes !

I feel very comfort to start conversation with foreign nationals in contrast to Nepalese. The same happened in the camp. However after few days we started to talk to everyone and fostered a cordial relationship.  Our Nepali juniors from Delhi univeristy( Alisa, Palpasa and Raj), Pratima and Nesa from Chennai ! 

10)Emotional goodbye

The camp ended in Gwalior after travelling various historical and prominent places of Madhya Pradesh. It was our last day in Gwalior.We had train back to chittoor late night of the last day of camp. So me and Dwaipayan, along with camp officials were only left to bid farewell to everyone. Everyone was sad to bid goodbye to each other. What made difficult was tears of Chumki and Antara. Further more to bid goodbye to everyone was a emotional work. At the end of the day, the hotel premises was silent and I began to feel like I woke up from a long beautiful dream. 

I personally enjoyed Afgani music and dance, Tamil dance, Adams hindi song, Mr. Junge songs, ICCR officer being strict , cracking jokes with  my nepali sisters, doing pranks with Kefayat and Joy, and many more. That was awesome week we spend together. And now I really feel that all those memories are from a long beautiful dreams. 

ICCR Winter camp was a great platform to explore India and to explore- self amongst friends from various part of the world. This indeed was really incredible experience in the heart of Incredible India. 

Half Girlfriend : A book review

I generally read Chetan Bhagat(C.B) when I have nothing to do and just to keep pace with what most of the youths love doing: reading romance filled yet dramatic story.

Released late this year, Half Girlfriend is a love story about couples who come from different part of the India, and more specifically a tribute to a guy from rural India who is haunted by his inability to speak english fluently.

Plot of the Story:
Madhav Jha comes in contact with Chetan Bhagat in Patna and leaves his some notes of his girlfriend, who, he assumes to have passed away. Inspite of Chetan unwillingness to read the notes of a poor bihari guy's deceased girlfriend, he can't get past the feeling and finally reads the whole diary overnight. The real story line in the novel starts when the author calls the boy in the early morning to talk about the details of the love relationship of the boy.

Madhav Jha, a boy from rural part of Bihar in India, comes from a former Royal family which garners him the respect from his villagers as  a Prince (though he never enjoys being called  so). Having played basketball as a state-level player, he applies to one of the premier educational institution of the country- St. Stephan College, via the sports quota. During the trail match for examination, Madhav comes across Riya Somani, a beautiful girl with pretty good english and  from an elite delhi family. Just like how most of the love story starts, here Madhav easily falls in love with Riya. He befriends Riya by giving some tips on how to score. Later on both of them get selected in St. Stephen and their friendship blossoms based on common interest of basketball.

Time and often Madhav expresses his desire to make Riya his girlfriend which, most of the time is rejected. Finally they strike upon a deal when Riya proposes Madhav to become his Half Girlfriend (friends with benefits?? ;). In between the plot, the story also portrays the lifestyle that elites share: lavish parties, show-off's, stressed relationship, obsession to wealth, etc. Being obsessed to make Riya his own, Madhav demands that Riya have sex with him, which puts the relationship in stake and they finally part away.

The story gets a twist when after a year Riya marries her childhood friend Rohan who has a good business in London. Riya settles in London with her husband. Here Madhav Jha, not being able to overcome the guilt of inferior behavior with Riya leaves Delhi and relocates himself in the service of his village in Bihar, with his mother. He comes in contact with local MLA and requests him to help the school, but in vain. Later he confronts with an opportunity to approach to The Bill & Melinda Gates foundation for donation to his school via local MLA. As things roll on, Madhav becomes successful for being selected for Bill Gates visit to his school. Madhav now is supposed to make a impressive speech in a good english, so as to impress on Mr. Gates.

The story presents another twist when Madhav comes across Riya Somani (a divorcee now) while taking english classes in Patna. Riya who has moved to Patna as part of her job, helps Madhav to make an appealing speech. The couple become successful in getting a humongous grant from the foundation. Though the couple become close to each-other in this period, Riya leaves Madhav surprisingly after the function of Gates foundation. Madhav gets a letter of Riya that she had lung cancer and is left with three months to live. Madhav tries to find the whereabouts of Riya but fails. It is only after 3 complete years that Riya journal reveal of her being alive.

Just remembering the eternal wish of Riya to sing in bar of New York and live a peaceful life, Madhav speculates that she might be in New York and thus prepares to travel to New York. He manages to visit New York in an internship arrangement with the Gates Foundation and stays there with his college friend of Stephen. Finally, desperately searching for Riya for about 3 months, he finds her in a bar, just two days prior of him returning to India. They get married and justify their relationship and love. The story ends when the author visits Madhav and his family(with a son), 3 and half years later in their successfully running school of Bihar.

Review:
It took me 3 complete hours to read the book in which I felt like a movie play running in a single plot.  More than a literature type, the book resembles to a script of a bollywood movies. You can see parts of life of Bihar, Delhi and New York. Special appearance of Bill Gates, and dramatic plots of union and separation of the couple, etc.

Similarly,the story moves along the line of negative stereotyping of Bihar as a backward and most reviled state in India and of Biharis as bumpkin, not so good with English, obsessed with sex,etc., while of Delhiites girls as fair,  beautiful, and intelligent.

Earlier book of Bhagat sounded more realistic and read-worthy basically because that he had personal experience with the storyline of previous novel and he could relate himself with them. This recent one is more dramatic. He also fails to explain why a girl from Delhi elite falls for a pathetically portrayed rural guy from Bihar who had no talents beside basketball.

However just like Bhagat's previous novel, Half Girlfriend is less boring to read. Though the novel is devoid of any moral lessons, it goes in line to the objective of Chetan Bhagat "to make India read like never before". This novel is going to be another success as it contains dramatic love-life of stereotyped Delhi girl and Bihari boy and on top of that it contains all species that  Bollywood movie has: dramatic, romance and sex. Thus the book is suggested only for hard-core fan of Chetan Bhagat and the people who are new to english novel reading.

Globalization and Transnational Organised Crime

With the pace of globalization increasing tremendously, just like its benefits, its side-effects are also increasing at a tremendous manner. People can advocate the advantages of globalization for a long period of time but what we are failing to address is the disadvantages that are produced by globalization.  Based on the platform on which globalization is claiming such a large success, the perpetrator are using the same platform to develop an illicit system and thus putting a threat to the advantages of globalization. Many factors that have helped prosper globalization have been used to organize cross-border crime which has been creating a trouble for the preachers of globalized world.

The two major aspects of Globalization process that promotes transnational organized crime are :

1)      Electronic and physical connectivity:

Internet at the present time has been bloodline for the globalization to speed up. Internet has facilitated the globalization process via enabling easy and rapid connectivity. It has completely changed the whole communication industry and has a wide influence in the lifestyle of the people. Besides, it has also been developed as a platform to facilitate business and also perform business online. Because of the vital role that internet has played at the current time, it has often been recognized as nervous system of globalization. Though internet has facilitated the globalization process, people are also misusing it to commit various types of crimes. For example: Cybercrimes, child pornography, etc. has been increasing via use of electronic media and internet. Other crime like hacking of bank accounts, credit cards details, identity theft etc. has been more enabled because of the use of modern tool that has facilitated the globalization process.

Also rapid progress in the physical connectivity has also facilitated the cross national organized crime. Though the rapid means of transportation like bullet trains, airplane, ships etc have increased the transportation and trading of goods across borders, it has also at the same time, facilitated cross-national crimes. Because of modern means of transportation that has improved connectivity, people with criminal mindset can move from one place to another very easily, within fractions of hours. Free flow mechanism facilitation across borders has facilitated illegal activities like: transportation of drugs, human trafficking, prostitution, etc. Similarly crimes like trafficking of women for marriage purpose, modern day slavery in sweatshops, etc has also increased at an alarming rate. Beside these, unregulated maritime network has helped many criminals and terrorist groups to carry out illegal activities in an easy way.

2)      Increased inequalities and disparities:

Globalization has not only brought prosperity to some part of the world, but it has also increased disparity among the people of the globalized world. Differences between haves and have-not have increased like never before. For example, the difference between haves and have-not has been said to be highest in the last 100 years. Also because of increasing inequalities poor segments of the society have become vulnerable to the more globalized world. The condition of women and children has become more vulnerable. Similarly poor status of women, low-level skills of the employees, unsafe working condition, etc. have made the situation worse for the people of such segment.

Conclusion:

The basic problem with the economic system created/promoted by Globalization is that it has facilitated for the rich to become more rich and poor to become poorer. Rich people are thus prompted to do anything that they find is worth doing for their personal benefit, or for the accumulation of wealth. Besides, poor section of population doesn’t have any option but to become desperate and search for brighter opportunities. But these vulnerable sections of the society are always out into demerit and thus suffer.



This write-up is based on my learning via MOOC course: Age of Globalization. 

Analysing Humongous Bonus Distribution by Surat Diamond

Publishes in New Business Age Magazine, November Issue 2014,  http://www.newbusinessage.com/issuedetail/991)

Last week came incredible business news that amazed many people in India and abroad. This news was about an Indian diamond based business company, named Hari Krishna Exports, giving generous bonuses to its employees. The company gifted nearly 500 Fiat Punto cars, 200 two-bedroom houses and jewels to 1200 staffs, all told, a worth of 50 crores.  The company gave these “as part of reward for loyalty program for employees who performed best for last five years”, according to the company chairman and MD Savji Dholakia.

Picture of the reward distribution program: taken from ibtimes.co

In the contemporary business world where organizations are driven by profit via cut-throat competition, this model of giving enormous amount of profit to employees is taken by surprise by many people.  Let look at different aspect of the news and its impact.

• By giving enormous bonus to its employees, this company has earned humongous popularity that wouldn't have been possible even if it had allocated the monetary worth of bonus to advertising.   
• As I googled to learn more about Surat Diamond business l, I got many Google pages that would be with heading such as: “Diwali Bonus-500 CARS, 200 Flats and Jewels”. This is a unique social business model that the business world has seen of now and can be a benchmark model for others wanting to adapt this model.
• This can also be related to as an exemplary form of Corporate Social Responsibility (CSR). As Richard Branson has defined business as” trying to make a real difference to other people’s life”. In this connection, the real “business” of a business should be caring of its employees, and in fact, this is the starting point of a sound CSR.
• As I read this news, I thought about how amazing it would be to work in company like this. And this might be what most of the employees who read the news be thinking as of now. What I am sure is that, this particular company has been Dream Company for many employees of the industry and prospect employees. The direct impact is, the retention will be high and the company at the same time can attract the talented personnel of the industry also.
• Another important thing here is that the bonus was given to 1200 employees based on their preference. Those who didn't have home were gifted with flats, those who had home were rewarded with cars, and those having both cars and home were gifted with jewels.  As such, it encourages the existing companies to have reward preferences options when they design any reward program from their employees.

Looking at the big picture, HariKrishna Exports can realize in next few years are: increased sales, increased client base, high employees retention and performance, increased brand awareness of the company, and increased job applicants. Well, the advantages that it is going to reap are in manifold times greater than the cost incurred for achieving it.

Porter's Five Force analysis of Boeing Co.

Introduction to Porter’s Five Forces:

In 1979 came an article which was published in Harvard Business Review, titled “How Competitive Forces Shape Strategy” by Michael Porter, which ignited a revolutionary era in the field of strategy. Today’s Porters five force model has been the de facto framework for the industry analysis. Analysis of the five forces can help a company understand the structure of its industry and stake out a position that is more profitable and less vulnerable to attack. A proper analysis helps one to gain a big picture of what is influencing profitability in the industry. You identify game-changing trends in advance, so you can exploit them swiftly.

The five forces are:

1) Threat of New Entrants

2) Threat of Substitutes

3) Bargaining Power of Buyers

4) Bargaining Power of Suppliers

5) Competitive Rivalry.

Industry information:

Global aircraft manufacture is dominated by strongest duopolies: Boeing and Airbus.  Also known as “Big boys club”, these two gigantic companies have dominated the market tremendously and thus have created significant barrier to entry.  The industry also has cases of new entrants coming into operation but eventually failed. Some of them were: Mitsubishi, Indonesia IPTN, etc. Beside these two dominating companies, there are small players who have been operating in niche market like: Bombardier (Canada), Embraer (Brazil) etc. and recently Chinese manufacturer COMAC which generally caters to the local market.

Company Profile:

 Founded in 1916, Boeing is the largest global aircraft manufacturer by revenue, orders and deliveries. It has a strong customer base and support in 150 countries across the globe. With more than 12000 commercial jetliner engaged in aviation service, Boeing boasts itself as the largest aircraft manufacturer. Boeing is also a market leader in the industry of military aircraft manufacturing. Boeing features in Fortune 500 list of companies and is ranked 26^th on the “World’s Most Admired Companies” list, 2013.

Porter’s Five Forces analysis of Boeing Company:

1.       Threat of New Entrants: Low

Threat of new entrants is relatively low because of humongous amount of fixed cost of competing. Factors like: huge capital investment required, extensive level of R&D budget and activities, massive level of technological expertise needed, etc. creates a high entry barriers and thus low threat of new entrants.  Some companies that have operated in regional level and aircraft manufacturer of china are enjoying niche market are because of the preferential benefit arranged by the particular Nation state.

2.       Threat of Substitute: Mild

Threat of substitute for aircraft manufacture is minor as people prefer aircrafts largely because of time factor. Rapid advancement in bullet trains, car etc. might affect the aircraft manufacturing business in the future.

Fig: Five forces that shape Industry’s competition

3.       Bargaining power of Buyers: Mild

In totality bargaining power of buyers is mild.

·         Buyers purchasing in bulk: High bargaining power of buyer

·         High capital investment by buyer in purchasing of aircraft: Buyer involves long-term contract with seller and thus low bargaining power.

·         High switching cost: Switching cost is high because of technological factors and long-term contracts involved and this low bargaining power.

4.       Bargaining power of Suppliers: Low

In case of aircraft manufacturers it has been found that both of that Boeings makes outsourcing to large number of suppliers throughout the globe. For e.g.: Boeing itself has more than 100 firms supplying it with the parts of the aircrafts. As there are large numbers of suppliers and the firms that purchase are concentrated, the bargaining power of supplier is low. The company has the power to negotiate with the price of supplies due to economies of scale.

1.       Competitive Rivalry: High

Sluggish industry growth, no clear market leader and undifferentiated strategies, high barrier to exit, etc. drives for the competitive rivalry among the existing players of the industry. The market is largely a duopoly market, resulting in low profit margin in the airline industry and thus Boeing fighting furiously with Airbus for more share of the industry.

Online Business Surge in India and it's Future Prospect

If you study the recent trend in the online business in India, you can easily find out three major market players. Namely: Flipkart, Snapdeal and Amazon. For traditional India where online purchasing was a taboo and thus was limited to few online ticket booking, these companies together have introduced a new culture of online business culture in India. A business that is forecasted to grow from sales of $ 2.3 billion (As of 2014) to $32 billion ( as of 2020).

source: Technopak

For Flipkart which is largest internet company by its market value of $7 billion, it went through rough ways to arrive at this position to bust the myth that consumers like to see and feel the product before buying. Reluctance of customers to give details of their credit cards, fear about the delivery of the product, suspicion to get exact product etc were of paramount amount which pioneers like flipkart had to go through. 

These companies are at the verge of cut-throat competition as they have been going with massive marketing strategy to boost the sales. Recent humongous sales made by e-tailers like Flipkart of $100 million in 10 hours as "Big Big Billion Sales day" and Snapdeal retaliating the same with sales of a crore per minutes proves this. As such there is a humongous sales that these companies have been able to make. And thus large amount of profit. While the competition is tough over a small profit margin, these companies are also facing challenges.The recent challenge is not because of the competitors in online commerce , but because of the competition/conflict between these e-tailers and brick and mortar models. It should be understood that it is until recently that brick and mortar business have been dominant in doing business in country like India. But this culture is changing rapidly. 

Challenges to Indian e-tailers:

1) Tough competition from competitors who are coming up with innovative strategy to increase sales.

2) Problems from top brands having brick and mortar outlets like: LG, Sony, Samsung etc who are accusing the e-tailers of making predatory sales (selling below cost), thus damaging their sales and brand names.

3) The customers in Tier-I cities like Mumbai, Delhi, Bangalore etc who prefer see-feel-buy approach in contrast to online modes. Luring them for online business might be relatively difficult.

4) New entrants in the industry which might reduce the price of product offerings sharply in contrast to the old market leaders. Similarly, it is also more likely that manufacturers and brands might offer product offerings via their own online sites. 

5) Another possible challenge would be large brick and mortar group like: Reliance Industries, Future Group, TATA group planning to go online to expand. etc

Brighter side:

It can been seen evidently that indian e-tailers have been inspired from chinese mega online internet retailer: Alibaba's success, which raised record high of $21.8 billion IPO. The statement of Flipkart CEO and Founder Sachin Bansal to make Flipkart a $100 billion club member in upcoming 5,10 or 15 years provides a hint that they are planning for a rapid growth of company business in near future. 

Now lets us put light on the basic facts that hints us about the brighter aspects of growth of online business in India.

1)The online market has moved towards growth phase of business cycle in which the startup has dried up in recent years as investors are focussing more in larger companies. Thus the prospects of larger companies to grow is even more.
2)  Indian is a country with population of 1.2 billion out of which the population of age group of 18-40 is 40% (as of census 2011). And this is the chunk of population on which online retailer have been finding a dip in sales. This trend is supposed to increase even more.

3) Online retailers selling product-offerings in a cheaper price as they save on rent and other infrastructures is sure to attract large untapped customer segment in future.

4) Online markets are growing rapidly in Tier 2 and Tier 3 cities where physical outlet are absent or  are few. They will penetrate the market deep enough before physical outlet set-up there and start to attract the customers.

5) The service that these companies offer is almost flawless. Delivery before the delivery date, free delivery, 30 days replacement period, etc will lure more customers to try these sites.

6) Proliferation in the use of smartphones in Indian market which have enabled large base of customers to go online regularly and thus have access to these sites will increase the sales even more in near future. 

Why Small Countries are Economically Viable in Globalized world ?

From amongst the large number of small countries, some are developed while many others are still struggling to prosper. The small countries that have developed have followed a specific path that has allowed them to attain a competitive advantage with respect to the other countries. We maynot exactly attribute a particular reason for the underdevelopment of a particular country but we can clearly pinpoint why a particular country has developed over a particular period of time.

For small countries, the case may be different than that of the bigger countries. The concept of “small of beautiful” applies when we take reference of small countries that have prospered a lot in short period of time. 

Let us study the reason that pushed small countries hard enough to prosper in a short span of time.

1.             Openness to trade:

Small countries are generally found to be open to the trade. They are less hesitant to enter to the international business. The reason behind this is that, small countries develop themselves competitively in some niche products or services that have been ignored by the larger nations. Eg: Singapore, Hong Kong, Switzerland etc.

2.             Social Cohesion:

A good example of social cohesion is demonstrated by small countries. Small countries are characterized by less/no problems amongst the ethnic communities, more social harmony, equal and easier to run the country. Hence a better government because of the political stability resulting from the social cohesion.

3.             More adaptive and responsive to changes:

Smaller countries are generally found to be more adaptive than the larger countries. Because of the vulnerability factor, they keep themselves updated of the major changes that are going to take place in the global business or politics. They tend to have better developed sensing mechanism in terms of what is happening in the rest of the world. As such they develop a proactive mechanism to adjust to the changes of the volatile business and political world.

4.             Stable political system and clear economic goals:

If we study the characteristics of the small countries we find that they possess well developed political system that promotes stability and favors economic growth. For a country like Singapore, it has a political system that favors political stability and has clearly identified economic policies that favors rapid development. E.g.: Singapore political system that favors single party rule.

5.             Export oriented:

Because of the relative smaller size of the national consumption (relative to total income), small economies tend naturally to be more export oriented that the larger economies.

6.             Prioritized focus:

The focus of small countries is limited to certain priorities like: education (thus more skilled labor force), innovation(thus more investment and employment), export promotion, competitiveness etc. Most of the time they are not engaged in the issues of international politics, politics over oil, support for democracy etc., that bigger nation find themselves.

7.             Preferential economic advantage:

Many international policies and regulations related to international trade favor small nations. The arrangements are such that small countries are less exposed to trade quotas and other restrictions as they don’t produce in large quantities.

8.             Optimum utilization of resources:

Similarly economic efficacies are found more in small countries. Because of the scare resources, small countries specialize in the maximum utilization of the resources. For example we can see how Japan is proactive to the natural calamities and disasters in spite of having scarce resources.

One important discussion that must be introduced while describing about the development phenomena of some countries is: On what cost factor those countries are developing ? For example for those countries which haven't prospered , we must recognize that their concerns of political freedom ahead of economic liberalization has put a cap on the pace of development.We can relate this to bigger countries like India also. Democracy, poverty, humanitarian values, etc have caused those nation states to focus their resources and energy in diverse sectors , which is, at the expense of the industrialization. Countries based on democracy have to balance their activities between long-term growth needs and short-term social benefits. For example Qatar escapes itself from this phenomena and thus its emphasis on economic freedom before political freedom has served well in the areas of attaining systematic growth. Hence small countries have been prospering mostly because of the value they put on economic development in contrast to political freedom.

But again the question is, Is it really justifiable to attain development at the cost of the social justice and freedom of its people ?


(P.S: This write-up is based on my learnings from MOOC courses and personal research)