1. CONCEPTS:
Terrorism: "Terrorism is a criminal act that influences an audience beyond the immediate victim". (International Terrorism and Security Research, 2010).Property seizure: "Seizure is the act of law enforcement officials taking property, including cash, real estate, vehicles, etc." (US legal, 2010)
Confiscation: "Forced transfer of assets from a company to the government without compensation." (Daniels, 2004)
Expropiation: "forced transfer of assets from a company to the government with compensation." (Daniels, 2004)
Policy Changes: "A major change in attitude or principle or point of view; "an about-face on foreign policy". (free dictionary, 2010).
Local Content Requirements: " Laws stipulating that a specified amount of a good or servce be supplied by producers in the domestic market." (Daniels, 2004).
2. HOW POLITICAL RISK COULD AFFECT INTERNATIONAL BUSINESS IN ROMANIA?
Concepts like terrorism, kidnapping and expropiation are very common in many countries, but unfortunately they are not the unique. in countries located in middle east for example is more common wars, terrorism and conflicts with other countries and , but in other countries the most common concepts are not the same. "Political risk levels vary from nation to nation". (daniels, 2004, p. 86).
In countries like Romania, Ukraine or Hungary the political risk is not characterized by terrorism, but yes for corruption, political instability, lack of political transparency and therefore risk of insolvency.
Romania has several problems due to the corruption, "Malfunctioning political institutions and weak political standards can undermine the legitimacy of democratic institutions and erode the whole system. In Romania, studies have found that the frequent failure to uphold social and political norms feeds a strong cynicism among both voters and politicians. It creates a socio-economic context where breaking the rules is “normal” and individuals’ trust in institutions, politicians and their fellow citizens is extremely low." ( Kreko y Szabados, 2009)
Kreko, P. y Szabados, K. (2009). Most Significant Risk Factors that Could Hinder Economic Recovery in Romania. [online]: http://www.riskandforecast.com/post/nakheel/most-significant-risk-factors-that-could-hinder-economic-recovery-in-romania_333.html In countries like Romania, Ukraine or Hungary the political risk is not characterized by terrorism, but yes for corruption, political instability, lack of political transparency and therefore risk of insolvency.
Romania has several problems due to the corruption, "Malfunctioning political institutions and weak political standards can undermine the legitimacy of democratic institutions and erode the whole system. In Romania, studies have found that the frequent failure to uphold social and political norms feeds a strong cynicism among both voters and politicians. It creates a socio-economic context where breaking the rules is “normal” and individuals’ trust in institutions, politicians and their fellow citizens is extremely low." ( Kreko y Szabados, 2009)
When a company analyse countries to invest there, political risk is very important, just because anybody would invest in a place where terrorism, corruption and expropiation could affect directly or indirectly their own business. International business can be affected at this context also because this kind of problems affect the economy of the country and therefore the economic variables affecting affects the sale of products and services. For example in Romania, "Emerging political risks have made it even more difficult to get a bank loan and can raise interest rates to extreme heights." ( Kreko y Szabados, 2009). This situation affects companies in two ways, firstly when interest rates are high, consumers can´t get money that they could use for the concumption of products, so there is a discourage of consumption and secondly, if a company decide to get a bank loan, is more expensive because of the interest rates.
3. POINT OF VIEW
I think problems should be solved root. when exists this kind of political risks, people think that these problems are not serious enough yet to be solved immediately. There is not a magic formula to solve corruption and it is difficult situation precisely because people in the power are less transparent in their responsabilities , but I think problem should be solved firstly inside the country. "Political risk insurance is available against a broad spectrum of risks, including non-payment products for financial institutions, expropriation, war and political violence, cancellation of operating licences, exchange transfer problems, import and export embargoes and non-repossession for global corporations". (AON, 2010).
A company could have tools like Daniels propose: "adaptation, information gathering and political influence" (daniels, 2004, p. 91), but to the extent that companies make this type of study, are realizing that there are countries that are managing this situation and that this is more efficient to invest in them, which makes direct foreign investment is shrinking in the country.
BIBLIOGRAPHY
Daniel, J. (2004). International Business: Environments and operations. Pearson.
CYBERGRAPHY
AON. (2010). Political Risk Management. [online]:
http://www.aon.com/risk-services/political-risk.jsp
Female executive standing in front of seated male executive, gun behind her back. getty image. (online). Available at : http://www.gettyimages.com/detail/72803733/Asia-Images
http://www.aon.com/risk-services/political-risk.jsp
Female executive standing in front of seated male executive, gun behind her back. getty image. (online). Available at : http://www.gettyimages.com/detail/72803733/Asia-Images
Special Operation Forces soldier in combat. getty image. (online). Available at: http://www.gettyimages.com/detail/103299634/The-Image-Bank
The free dictionary. 2010. (online). Available at: http://www.thefreedictionary.com/policy+change
Us legal. (2010). Seizure Law & Legal Definition. [online]: http://definitions.uslegal.com/s/seizure/
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