Ethical and Socially Responsive Business Essay

Describe key areas of the selected company’s code of conduct that are of significant importance to the business, and explain why. The first question we should ask ourselves â€Å"what is ethics?† I think ethics are a collection of principles and practices that a business believes in, statements and more specific policies about conduct to give employees, partners, vendors, and outsiders an idea of what the corporation stands for and how it’s staff should conduct themselves . The Cheesecake Factory was established in the 1940s by Oscar and Evelyn Overton. In 1972 they open their first business store to Los Angeles, CA known as the Cheesecake Factory. Now The Cheesecake Factory has over 170 locations around the world. Having such a large corporation like Cheesecake Factory brings a lot of ethical and business problems when it comes to having such a large stores and staff. We should always remember that everyone has their own set of moral ethics that they live by at tend to take those same ethics to the work place. When writing a code of ethics it is important that these will cover every staff member from the top of the corporation to the lowest lever employee. Key areas that are of significant importance to The Cheesecake Factory start with the general standards of conduct in how all its employees will be treated by fellow employees and by management. The standards deals the basic values that we all have, with the expectation of building trust, loyalty, honesty, respect, and a high level of professionalism within the company. The cheesecake Factory has an established code of ethical conduct that is an essential factor in maintaining a proper balance in the human aspect of ethics and the link to the business success. Corporate leaders and managements need to be careful about their behaviors and how they make important decisions. Although all areas of the Cheesecake Factory’s code of ethical conduct is important for the success of the company, there are a few key areas of the company’s code of ethical conduct that are of significant importance for The Cheesecake Factory. 1-The first occurs in Article IV, in the â€Å"Conflicts of Interest,† section that pertains to transactions and investments. This specifically states that an officer or a director† should avoid participating in any transaction or investment that conflicts with, or gives the appearance of a conflict with, the interest of the company.†(Reference 1) This is key in maintaining ethics because a person who is in a leadership / management positions must be loyal to only their organization; otherwise, all decisions that are made and act are suspect as to the integrity of the choice, especially concerning money matters. 2- A second key area of The Cheesecake Factory’s code of ethical conduct that is of significant importance is in Article V, in the â€Å"Compliance with Company Policies and Procedures,† section that pertains to confidential information. It is very important and essential for the success of any company and business especially, the confidentiality of information, especially for third parties, be maintained. This leads to another key area that is also in Article V of the company’s code of ethical conduct. In the section that pertains to insider trading. In the section that deals with prohibiting insider trading it states that, â€Å"An officer or director shall observe the Company’s policy prohibiting trading on the basis of material, non-public information.†(Reference 1) 2.Explain the key steps that the company should take to ensure that employees follow the code of conduct. There are some key steps that a company can take in order to ensure the employees follow the code of conduct. 1-The Cheesecake Factory should have a â€Å"compliance department† that handles all disputes and investigations regarding violations of the code of conduct. This specific department at Cheesecake Factory should have designated employees that govern the entire company’s employees and handle any issues that arise. 2-The Cheesecake Factory can  take to ensure the employees follow the code of conduct is to have each employee sign and date, the code of conduct when they hired and give it to the employee a copy and keep another copy in the employee files. This makes it possible for the employee and the company to be on the same page from the beginning of the working relationship. This process can repeat every year for the existing employees to follow the code of conduct. 3-The Cheesecake Factory can take to ensure the employees follow the code of conduct is complete mandatory â€Å" Business ethics† training videos for new and existing employees every year. These videos make sure reminder of all employees’ business ethics and code of conduct. 3. Suggest three (3) ways in which the restaurant can engage in socially responsive activities in the community within which it operates The Cheesecake Factory can engage many socially responsive activities in the local community. 1-The Cheesecake Factory can donate foods to local food banks, soup kitchens and homeless shelters. Restaurants always have extra food that does not used for any reasons or left over foods. As a respectful company being able to donate fresh food to shelters and feeding someone who is unable to have a meal, would be wonderful social responsive project and activity. 2-The Cheesecake Factory could engage in socially responsive activities in the community would be to help raise money for a local non-profit organizations, charities, children hospitals or cancer associates. This could be done by donating money, ask costumers to participate or fund rising which will show that the company is giving back to the local community in which it is a part. 3- The Cheesecake Factory could engage in socially responsive activities in the community would be to offer free meals to shelters for specified holidays, such as Thanksgiving and Christmas. 4- Also Cheesecake Factory could run campaign for â€Å"Local Food Drive† to contribute as a company and ask their costumers donate dry and canned foods to reach local families who needs help .This is one of excellent way of giving back to the local community. References: 1. (March 16, 2004) The Cheesecake Factory Incorporated. Amended and Restated Code of Ethics for Executive Officers, Senior Financial Officers, and Directors. Retrieved from: http://investors.thecheesecakefactory.com/phoenix.zhtml?c=109258&p=irol-govconduct. 2. (January 2001) C.B. And R.L. â€Å"The Legal Environment of Business: Text and Cases: Ethical Regulatory, Global, and Corporate Issues.† Cengage Learning, 8th edition. 3. (January 2012) Ferrell, O.C. And John Fraedrich. â€Å"Business Ethics: Ethical Decision Making & Cases.† Cengage Learning, 9th edition.

Cold War

The cold war was a tense relationship between the Soviet Union and the Americans. The reason why they were fighting was because of the way their countries ran. The Soviet Union communism is a political way of thinking and an idea of how society should work and be organized. Communism is a kind of extreme socialism that says that there should not be social classes or states. Communism says that the people of any and every place in the world should all own the tools, factories, and farms that are used to produce goods and food.This social process is known as common ownership. In a communist society, there is no private property. The main differences between Socialism and Communism are that, in a Communist society, the state ceases to exist along with money, so that the people work in exchange for the things they need to live.. In America they have something called capitalism. Capitalism is an economic system in which capital and assets in the economy are controlled by the private secto r(private enterprise or ownership) and in which the eans of production are on the bases of making profit.In capitalism you make your own economic decisions with risks and you can either fail or succeed, but in socialism you stay at only one economic status, in which their is always a social safety net but at the same time you cant strive to achieve more. Both America and the Soviet Union said they were both Democratic, but they didn't believe each other so they started to argue and threats were thrown around about nuclear ware fare. NORAD is the North American Aerospace Defence Command.It's a Joint USA – Canada organization that was set up in 1958 as the North American Air Defence Command as a response to the Cold War threat from the Soviet Union. It provides for aerospace warning (for example, if enemy missiles or aircraft are headed towards North America) , protection of North American airspace Cold war Americans became increasingly suspicious of anyone with communist ties or interests, past or present, and the government Egan to take further involvement in the affairs in other nations that seemed at risk to leftist revolts. This compromised the rights and privacy of many innocent Americans, and crossed into the sovereignty of other nations. During the Cold War, America compromised it's fundamental values and at the expense of it's own citizens and in the affairs of other nations to increase tension In this era.Domestically, the United States abandoned Its value of privacy and freedom to political beliefs due to growing concern of communism at home, and Seen. Joseph McCarthy speeches as well the Interrogations through HUGH contributed to this fear. McCarthy, a Republican from Wisconsin, denounced communism and publicly accused members of the State Department and other government positions of being communists. He is quoted in his book, McCarthy: The Fight For America (1952), â€Å"A government Job is a privilege, not a right.There is no reason why men who chum with communists†¦ Who are consistently found at the time and place where disaster strikes America and success comes to international Communism, should be given positions of power.. † (Doc 5). However, McCarthy claims were false, and they were part of a publicity stunt for him to gain attention. As a Republican, he faced no communist skepticism, whereas the Democrats did, and he used this tactic to further gain support from the working class republicans.He was Impressionable upon many blue collar workers who associated liberals and communists together, and made democrats a bigger target, Although the superficial Intentions of McCarthy beliefs of keeping communists out of the government were good, they were form of hiding his true goal of ruining the reputations of other politicians. McCarthy later admitted the truth about the fraudulent claims, but damage had been done in rousing unrest and put ting other innocent politicians in negative spotlights, against integrity McCarthy was supposed to stand for as a senator.Additionally, the House Committee on Un- American Activities (HIJACK) held hearings for numerous Americans who were suspected of communist interests. Average middle class Americans to Hollywood writers in the entertainment business were interrogated about their own political beliefs and past experiences as well as those of others. Lillian Hellman, who was ailed for falling to comply with Yucca's requests, wrote this to the committee, â€Å"If I answer the committee's questions about myself†¦ L will [also] have waived my rights under the fifth amendment and could be forced legally to answer questions about others†¦ Answering about others] to save myself is, to me, inhuman and indecent to refrain from asking me to name other people† (Doc Three). Hijack's hearing policy made it difficult for Americans to withhold information, and even more, they wer e put in a situation that made them expose private information of others. Helmsman's espouse to HUGH also included a portion on how she believed that speaking about other people's involvement would be against Christian ideals as well as American tradition. Many people interrogated by HUGH felt pressured to â€Å"bear false witness† and Juxtaposing other Americans as leftist supporters to avoid contempt.HUGH led to many Americans being blacklisted, out of Jobs, or losing support as being falsely marked a communist. The basis on which HUGH was founded on, to expose communists for the protection of the American government and people and prevent uprising, resulted in something similar to a modern day witch hunt. HUGH was a mistake, as it led to unrest over a non-existent threat to the nation, at the expense of the livelihood and Jobs, privacy and sense of security, because of how it, much like McCarthy betrayed American fundamental values in this time period.Outside of the States , the United States stepped into the political affairs of foreign nations, such as Greece and Guatemala, and betrayed it's previous values of not interfering into issues abroad. The Greek Civil War was being fought between democratic and communist party supporters, and America agreed to give aid to to get against the communists. In the interest of containment, preventing the spread of communism, America believed that this was a necessary step to protect its interests to keep the Soviet Union from gaining further power.However, the Soviet Union believed that this conflict was not appropriate for the States to put their efforts towards, and that it wrongly crossed a boundary into another nation's sovereignty. The Soviet News once wrote, â€Å"Truman, indeed, failed to reckon either with the international organization or with the sovereignty of Greece†¦ We are now witnessing fresh intrusion of the U. S. A. Into the affairs of other states. American claims to leadership in interna tional affairs grow parallel with the growing appetite of the American quarters concerned† (Doc Two).From the Soviet point of view, the United States' actions were unwarranted, and are a direct result of their need for security in areas where they have no right to govern. The Soviets did not take involvement, and their point of view is a criticism of United States that can even be drawn to it's previous ideals. Washington preaching to avoid entanglement in foreign affairs, the Monroe Doctrine, and the Roosevelt corollary, all were statements that made it clear that foreign conflicts were not of their concern. But in the Cold War, this ideal changed into the containment policy and the Truman doctrine.An even more severe breach of American values during the Cold War occurred in Guatemala, where a new issue had begun. Jacob Urbane Gunman had been elected by the Guatemalan people by a large majority. Urbane was associated with Marxism, and one of the major platforms he campaigned and was elected on was land redistribution in effort to aid the poor and hungry. The land largely to be redistributed would come from the United Fruit Company (AFC), a wealthy corporation that was based in the states. There was a great amount of uncultivated land that Urbane thought could be put to better use by being given to those in dire need of it.The New York Times discussed Arbiter's power in Guatemala and plans for the redistribution, â€Å"Urbane noted that the assemble and belong in terms of ideas with which they sympathize†¦ Urbane said no one could doubt that [redistribution] of about 400,000 acres of uncultivated JIFF land meant better prospects for thousands of Guatemalan† (Doc Seven). The United States began to worry about the political and economic implications of this decision in Guatemala, and what it could mean for the economy at home and the future of communism in the Western Hemisphere.The company was worth over half a billion dollars, and many worrie d that if Guatemala fell, other Central American nations could fall to communism in a domino effect. Senator William Longer of North Dakota commented on American involvement in the situation in Guatemala describing it the situation as, â€Å"a sensitive and very grave threat to world peace, [the U. S. Acting]with such elephantine delicacy. I do not believe that the†¦ Senate [has] been adequately informed†¦ The malevolent influence of the $548 million U. F. C. N Guatemala, which some have charged is bigger than the government itself†¦ We ought to be, committed to the principle that every sovereign nation has a right to determine for itself its own form of government† (Doc Six). Lancer's belief was ignored in this situation, as America organized a intrusive coup d' ©tat that took Urbane out of power, hoping to prevent the spread of communism and keeping peace within the West. Lancer's statement held another likely reason to the American involvement, to protect the economic interest.He would have pointed a finger of blame at America for interfering with Guatemala, who defended the rights of any political practice, what the United States claimed to protect prior to the Cold War, and to alter the course of their political rule and decisions, disrespecting their sovereignty and right to self- determination. It was apparent that the United States knowingly crossed boundaries of other nations' freedoms to protect it's own self interests, and sent aid where it was inappropriate, and in both situations abroad, was contrary to the values the nation as once built on.Overall, the United States overstepped the boundaries of private domestic lives and in the political issues of other nations, and abused it's power to act in interests of the Truman Doctrine and anti-communism, at the expense of straying from its fundamental values. Although the reasoning behind the government's actions was to prevent the spread of another government, that threat was no t imminent, and their attempts to eradicate potential Marxist uprisings resulted in more damaging effects to the nation's innocent people. Our values were even more abandoned inGuatemala, where we did acted against a government, albeit influenced by Marxism, was much like our own in the way it gave political freedom and expression to it's people. The United States sacrificed it's own traditional ideals of protecting these rights and not interfering in the issues of other nations, for our own benefit, which was not as successful as the government hope. Even today, the question on what motivates the government to act abroad, and whether economic self-interest or desire to change the politics of other nations for our own benefit, play a part and remains a relevant question. Cold War The cold war was a tense relationship between the Soviet Union and the Americans. The reason why they were fighting was because of the way their countries ran. The Soviet Union communism is a political way of thinking and an idea of how society should work and be organized. Communism is a kind of extreme socialism that says that there should not be social classes or states. Communism says that the people of any and every place in the world should all own the tools, factories, and farms that are used to produce goods and food.This social process is known as common ownership. In a communist society, there is no private property. The main differences between Socialism and Communism are that, in a Communist society, the state ceases to exist along with money, so that the people work in exchange for the things they need to live.. In America they have something called capitalism. Capitalism is an economic system in which capital and assets in the economy are controlled by the private secto r(private enterprise or ownership) and in which the eans of production are on the bases of making profit.In capitalism you make your own economic decisions with risks and you can either fail or succeed, but in socialism you stay at only one economic status, in which their is always a social safety net but at the same time you cant strive to achieve more. Both America and the Soviet Union said they were both Democratic, but they didn't believe each other so they started to argue and threats were thrown around about nuclear ware fare. NORAD is the North American Aerospace Defence Command.It's a Joint USA – Canada organization that was set up in 1958 as the North American Air Defence Command as a response to the Cold War threat from the Soviet Union. It provides for aerospace warning (for example, if enemy missiles or aircraft are headed towards North America) , protection of North American airspace

A Safe Place

The day she found the baby she was carrying was a woman, her fears came back. She remembered that she returned home after making a promise, her stomach was tied, and her hands were strained. He almost killed her when he came home from work that night. He was waiting for a boy. Carol cried because he was thrown away by the coffee table. It is a miracle that Sofia survived. It is a miracle that she survived. When she stared at Ed by her she remembered that warm blood cried in her eyes. She has at least eight books in hand, then she goes to the blind man. This is her safe place. The staff is safe and secure for other curious people. She does not want to speak far away. Just being reading and relaxing, in the same building. Usually there is no one. Even if the armchair or table looks old, there are scratches and holes. Beneath the window in the attic, there are beautiful rolling wooden chairs on the corner. The second day after writing the assignment - Sucking the dice in the library, sh e can read the text inside There are few safe places in our culture. Avoid continuous noise such as news, colleagues, opinions, advertisements. Our smartphone has already decided this. (Previously the shower was a safe place for me, but I have not even worried about the flooding of the new iPhone so I even even started holding my news articles with the Kindle app!) Culture, I Does not talk about deeply embedded religious buildings and references that are penetrating many places of Western civilization. These cultures are not actually personalized as we imagined, but they are conveyed through a larger and broader comprehensive culture that no one can see. of Francis Collins is passionate about finding a safe place for confused Christians to find answers to their questions about Bible truth and science. I am anxious for a safe place for people to express their doubts and get answers. However, there is no safe place if human beings are responsible for determining which parts of the Bib le are true and which parts are not genuine. Be thankful to God, he far beyond what our little heart understands, reliable, definitely gave us his word. Without understanding the power of God, we all need humble mind. My idea is neither your thought nor your way. Because the sky is higher than the earth, my path is higher than your way, and my idea is more than yours High book 5: 8-9, NKJV)

The Abortion Controversy in the USA Essay Example | Topics and Well Written Essays - 500 words

The Abortion Controversy in the USA - Essay Example Simply speaking, it would be practical to say that all women do need to have the right to avail an abortion because eventually it is the woman who should have a decisive role when it comes to deciding as to whether she intends to give birth to a child or not. The one big reason why abortion should be legal is the fact that any woman should have a complete right over her own body and what she intends to do to her body (Harrison 106). In that context it would be totally wrong on the part of the government and the religious bodies to exercise control over a woman’s body by making abortion illegal or unethical (Harrison 106). Denying an abortion to a woman on legal and ethical grounds is like taking away the individual freedom of a woman. Once the government or the religion is allowed to have a say into the right to have an abortion, it is quite possible that they may exceed their limits by imposing varied other unreasonable limitations on the women like making motherhood mandator y or taking away the right to use birth control methods like pills. There are sections of the society who say that abortion is like a murder and it insults the human dignity (Rubin 240). Abortion allows a woman to put an end to a human life. However, realistically speaking these concerns happen to more of ideological in their scope than being practical.

Oil and us foreign policy in middle East Essay Example | Topics and Well Written Essays - 2500 words

Oil and us foreign policy in middle East - Essay Example Significance of Study The Middle East is one of the most strategic places that have attracted many nations from most parts of the world with regard to both commercial and political interest. Middle east is actually at the centre of world attention and always captured on the global news bulletin all around the world for both political social and economic reasons. This shows that Middle East is a key partner in the global economy. Its role in the global commercial and political ties cannot be undermined. Oil and petroleum are key element in the economies of all the nations of the world and changes in economic trends for various nations are often linked with changes in the oil prices in the world market. The major reason is that petroleum products are a major source of energy for both household and firms in all parts of the world. Cars, motor vehicles, airplanes and many machines rely heavily on fossil fuel as a source of their power. Thus, the demand for petroleum products is almost co nstant and increases steadily as global demand rises. The United States is then submerged in crude oil. Up from 2008 to 2013, domestic oil production in United States went up by 2.4 million barrels in a day this was the biggest in the country’s history. ... q or Saudi Arabia still have a big impact.  That is one conclusion of a major new report by a commission of  former generals and senior officials, backed by Securing America's Energy Future (SAFE). Wallander Celeste in his article explains that many experts who have worked for the U.S. government believe that there has been careless talk in the recent days that America can now ignore Middle East1. These middle east nations have come together to consolidate their power by forming the Organization of petroleum Exporting Countries (OPEC) which provides the oil producing nations a strong bargaining power to negotiate for the best deal in their commercialization and sale of crude oil. OPEC sets the production quotas and support in the provision of earning levels and standards for producing nations. This goes a long way to determine the prices of petroleum products. It is worthy to note that after the collapse of the Soviet Union in 1991, the bipolar global ideological war ended and th e United States and the Capitalist West emerged as the global leaders1. Currently, the United States leads the global economic order. Due to this, the United States plays a vital role in putting in place measures to ensure that OPEC and other nations are meeting all necessary requirements to ensure a reasonable and stable price for crude oil. Since the United States plays a fundamental leadership role in dealing with OPEC countries the volatility of Middle Eastern nations causes major fluctuations in oil prices, there is the need to understand the foreign policy of the US in the Middle East. The essence of this study is to identify the main ways the United States keeps oil prices stable to maintain stable oil prices. This will provide significant information and guidance on the core indicators

Explaining the reasons for income inequality in the US Research Paper

Explaining the reasons for income inequality in the US - Research Paper Example The causes of the increasing levels of income gaps and inequalities in the United States of America, which is one of the largest and most developed nations in the world has been a topic which is subject to a number of extensive researches, political interests and media attentions because this aspect involves how the income of the nation is divided among the people of the country and thus, is a primary factor involved in the development of economic consistency and stability of a country. Therefore, the topic of identifying and analyzing the main reasons which are driving the exponential growth of the inequalities in the financial and economic positions of the rich and the poor classes of the society has become an interesting area of study and research. This research is aimed at identifying and analyzing the primary and secondary reasons that have caused the high level of income inequalities in the United States of America. For this purpose, the macro economic backgrounds of the company as well as the different sources of income among the rich and the poor classes of the American society are studied in depth. Additionally, the main drivers of the income inequalities in the society and economy of the United States are identified so as to understand how these income gaps can be reduced in the future by the government of the United States of America and the various other governing authorities and institutions functioning in the country. Thus, the main research question formulated for the study is given as follows As per the work of Galbraith and Hale (2008), income inequality refers to the degree to which income within a population is distributed in a disproportionate and uneven manner. Income inequality can also be described as the gap between the income of the rich and the poor classes of people within a society or a nation (Galbraith and Hale, 2008, p.344). Duncan and Murnane

Movie of choice - Joyeux Noel (Merry Christmas) 2005 Essay

Movie of choice - Joyeux Noel (Merry Christmas) 2005 - Essay Example But here there is one opposite situation and that is the fraternity and brotherhood which was established before the war for some time. The series is totally vise versa i.e. from war to fraternity and again from fraternity to war. The soldiers from two opposite troops have already prepared for the war, yet celebrating the Christmas with the genuine feelings of fraternity. It seems to be weird and unbelievable yet it had happened during the First World War. This amazing true story was pictured by Christian Carion in his film â€Å"Joyeux Noel (Merry Christmas)† One very beautiful line quoted by Henry Wadsworth Longfellow, â€Å"If we could read the secret history of our enemies, we should find in each mans life sorrow and suffering enough to disarm all hostility.† Hostility is there among the countries, among the leaders but what about the common soldiers? As a part of the duties they might be fighting with each other but their fight is not at all due to their personal abhorrence. These soldiers are also the human beings and they have their family, friends. War is for the politics and not for human beings. Apart from being and enemy of each other the soldiers have created some emotional tie ups with the soldiers from their enemy country. In war stories we can see many incredible things. Here also we can see the love and hatred dwell under one single roof. This movie explains about the ceasefire took place in the regiments of three major countries on the Christmas Eve of 1914 during the First World War near Prussian occupied France. At that time the soldiers urging for peaceful family life put down their ammunitions and began to establish fraternity among each other. Though this film is a war film, the approach is individual and sentimental. It gives prominence to the emotions of the individual rather than the war and the political scenario. Joyeux Noel (Merry Christmas) is an amazing and a very touching

The Linguistic Acquisition Device Essay Example | Topics and Well Written Essays - 1000 words

The Linguistic Acquisition Device - Essay Example He was able to give an evident account of the case of Victor of Aveyron who showed severe difficulty in developing language skills after years of isolation in the woods where he only interacted with animals. Subsequent observed improvement in language acquisition by Victor of Aveyron and a similar case of Genie in the United States seemed to provide reliable backup towards the theories of Chomsky. In the two cases of feral children, isolation from human interaction at childhood was attributed to the slow rate of language acquisition. The film Secret of the wild child is a reflection of how one United States girl commonly known as Genie was discovered in 1970 after suffering from physical abuse over a decade of isolation. The ensuing efforts to make her learn language proved difficult to achieve and this led to the advance element of Critical Period Hypothesis. In this theory, it is emphasized that there is a period mostly from infancy to adolescence when a human being has the highest potential of gaining native language competency. Outside this time limit, a child will experience severe difficulty in learning a language. The case of Genie who was discovered having been isolated for more than the critical age was an evidence of this research finding. This theory further asserts why adults find it difficult to learn the language than children as they have exceeded the critical period. After 13 years of isolation and deprivation, the mother of Genie left her abusive husband.Her mother, grandmother and herself had gone into the Social Welfare office in Temple City, California, to learn about resources for the blind in November 1970. It is at this point that a social worker grew curious over the possibly abnormal posture of the young girl who also looked younger than her actual age. The social worker’s initial thought of autism of the girl compelled her to enquire and subsequently.

Criminal Justice in the Movie Gridiron Gang Review

Criminal Justice in the Gridiron Gang - Movie Review Example The Camp Kilpatrick serves as the "last stop" for juvenile offenders before they are finally transferred to jail with the adults. The essence of retribution is encapsulated in the statement: "Let the punishment fit the crime" which is actually reflected in Gridiron Gang. Under this context, the degree of the harshness of the crime committed should be proportionate to the seriousness of the crime that was committed. Simply put, retribution is somewhat a backward-looking type of theory which looks to the past in order to know what to do in the present. In the context of the film, this is manifested through the number of years that a convicted person should spend inside the jail. Meanwhile, deterrence is usually classified into two categories: general deterrence and specific deterrence. General deterrence basically uses the individual who is sentenced for a crime as means of inducing the public not to commit any forms of crime. On the other hand, specific deterrence means punishing the offender to prevent the offender himself from committing other crimes in the future. Their detention itself is actually a means to convey to the other people that these offenders must not be emulated; meanwhile, the offenders themselves would be discouraged to commit another crime given the stigma that they could get from the society. Meanwhile, rehabilitation asserts for changing the offender through correctional means like the football team that is initiated by Sean. It is a good way of motivating the teenagers to turn a new leaf and also serves as a good way of diverting their attention into worthwhile activities. Instead of thinking about the punishment that they are given, they would be more focused on forging camaraderie and sportsmanship among their teammates, as well as opponents in the game. Rehabilitation is considered more effective among first time and non-violent offenders. Â  

In what ways does a consideration of interdependence challenge the Essay

In what ways does a consideration of interdependence challenge the realist analysis of the prospects for international co-operation in pursuit of absolute gains - Essay Example The very fact that a new world order has emerged following the collapse of Soviet Union in particular and the Communist Bloc in general demands a shift in our focus of attention while analysing the interactions of the states. The very nature of nation-states itself has profoundly changed. The mutations on sovereignty of nation-states, which are caused by neoliberal globalisation, are unprecedented and apparently irreversible. New institutions have emerged at the international level and they exert greater influence over the policy formulations even by the nation-states that are marginally integrated to the world market. Tradionally, the international system has been indeed seen as a world of sovereign states. States have the monopoly of power within a given territory and claim to represent the interests of the subjects of its rule. A state is primary unit at the international level. Constitutional independence is a defining character of a legitimate state. All states are considered equal in front of the international law. As opposed to the theoretical situation, we can see that the interactions between and among the states at the international level do involves relations of power. Many theorists of international politics have observed that powerful states are able to incorporate their desired ends to the international laws and mobilise what they want from the other states that have lesser resources. The very conception of political is different for realism and liberalism. The political is conceived as the means to certain ideals in liberal theory such as democracy and liberty. Antagonistically, realism sees politics as characterised by conflict. Realism is also known as political realism. Classical realism, neorealism and neoclassical realism are the major varieties of realist thinking. On the other hand, liberal

Cultural Experience Essay Example for Free

Cultural Experience Essay 1. The museum I visited was the Smithsonian mem  orial holocaust museum in DC. http://www.ushmm.org/ 2. The museum had very informational facts of the challenges faced for victims of the holocaust. There are many educational pieces all throughout the museum. 3. Upon entering the holocaust museum, you will notice the dim lights and eerie sounds coming from the speaker. Also, the walkway is actually a timeline beginning with WWI. There are many artifacts of victims on display. 4. Walking through the museum, I felt a lot of remorse and emotions for the victims of the Holocaust. The most influential moment of the tour is a pile of shoes worn by the victims. The shoe pile is stacked very high and ranges in many sizes. I was emotional of the encounter because it showed me a real example of men, women, and children innocently killed for a radical idea. 5. During week two of our class, we had read about the differences of religion and the culture it brings. We also discussed about the challenges people would face based on their religion. I think this tie in with my topic for this report. The challenge Jews had faced during the holocaust had left an imprint in history. They were out casted in most of central Europe during the Nazi rule. I also believe that the Holocaust ties in with the discussion of humanities because it is a life lesson that had a major impact in history. It has taught us the significance of what a radical idea can do and how it affects people. 6. Here is a link to the â€Å"ID cards† used in the museum but can also be found online. http://www.ushmm.org/remember/id-cards Collection of shoes found in the Smithsonian Holocaust Museum. 7. This experience had really affected my feelings toward genocide victims. I felt lots of remorse and sadness for the people who had to endure the pains of the holocaust. With this experience, I view the human culture of the past to be different of todays. I believe as time progresses, and the learning of past mistakes, we try to and become more positive of ethics. 8. Although this experience does not directly affect me, I understand more of what is going on around the world. My experience here as opened my eyes to genocide and the horrid effects of what it can do to a population. During WWI and WWII, there were many deaths because of a radical ideological man, Adolf Hitler. He was the supreme leader of the Nazi forces and had envisioned to rule the world. Aside from the deaths of combat, there was a mass genocide of innocent Jews which accounted for more than five million deaths. Many of the victims ranged from the youngest to the eldest with executions of the most horrid way imaginable. Many Holocaust memorials were built around the world to remind people of the cruel event to which the Jews had to endure. My experience in the Smithsonian Holocaust Museum was very interesting. I have only heard of the Holocaust in grade school and textbooks. However coming here, I was hit with a big impact of emotions from the display of antiques from the victim. In the museum there are authentic photograph and artifacts used and worn by Jews during the genocide. With tons of information and videos, I felt like I understood more and more the anguish the victims had to endure. I also learned of the torture devices used by soldiers to kill the victims. Cold blooded methods such as gas chambers, fire pits, and death squads are only a few of the many tactics used during the mass genocide. Walking through the museum, I found the most influential section to be a room filled with old shoes piled high. I was particularly focused on it because the shoes were worn and used by actual victims in concentration camps. The shoes were collected after the executions and were reissued to other prisoners who would cycle through. It was a hard sight to see because some of the shoes had dried blood which signified the torture they had gone through. I was literally speechless with  the sight. Genocides are still happening today all over the world. Although the ban of genocide is an international law created by the Geneva Convention, mass killings have since continued after the holocaust. The most notable places are in rural Africa. Many victims are living in constant fear because of their belief in their religion.

Management Information System Essay Example for Free

Management Information System Essay Question 1 : In the 21st century, information technology has emerged as the fundamental technology of business. Explain how it has helped business and state examples of real time situation which you have read about of experienced. Decision Support, Problem Analysis and Overall Control Business managers often need to make decisions that can affect the business fortunes one way or other. For example, a company with sales outlets or distributors spread over a wide geographic area might want to optimize the logistical operations of delivering merchandise to the outlets. The best solution might be affected by numerous factors such as demand patterns, availability of merchandise, distances involved and the option of using external carriers (who can find two way loads and might prove a lesser cost option over long distances) instead of own vehicles. While it might be possible to use complex mathematical formulas by hand to compute the best solution, computers transform the whole process into a routine task of feeding certain information as input and obtaining suggestions for best solutions as output. The task can typically be done in a few minutes (instead of hours or even days) and it becomes possible to examine several alternatives before deciding upon one that seems most realistic. Identifying problems and analysing the factors that cause them also has been transformed by modern computer information systems. In a typical MIS environment, standard reports are generated in a routine manner comparing actual performance against original estimates. The software that generates the report can be instructed to highlight exceptions, i.e. significant variations between original estimates and actual performance. Managers will thus become aware of problem areas in the daily course of their work simply by looking at the reports they receive, without having to do detailed data collection and computations themselves. Identifying the factors responsible for the problem can also be routinized to some extent by using such tools as variance analysis. Variance analysis is an element of standard costing system that splits deviations from estimates (or standards) into causative factors such as increase in price of materials used, excessive usage of materials, unexpected machine downtimes, etc. With such a detailed report, managers can delve deeper into the problem factor, such as why there was excessive usage of materials. Control is also exercised through variance analysis. Budgets are prepared for all business operations by concerned managers working in a coordinated fashion. For example, estimated sales volumes will determine the levels of production; production levels will determine raw material purchases; and so on. With good information system management, it then becomes possible to generate timely reports comparing actual sales, production, raw material deliveries, etc against estimated levels. The reports will help managers to keep a watch on things and take corrective action quickly. For example, the production manager will become aware of falling sales (or rising sales) of particular products and can prepare to make adjustments in production schedules, and purchasing and inventory managers will become quickly aware of any mounting inventories of unused materials. MIS thus enhances the quality of communication all around and can significantly improve the effectiveness of operations control. Effective MIS Involves Humans and Computers Working together The major aspect to note is that MIS provides only the information; it is the responsibility of concerned managers to act on the information. It is the synergy between efficient, accurate and speedy equipment and humans with common sense, intelligence and judgment that really gives power to MIS. As a chartered accountant with business management qualifications and decades of exposure to business in senior to top level positions, Gopinathan helps small to medium businesses with new business start-up, business performance improvement and marketing. He uses structured business modelling techniques to help with all these, and has launched a business support website to provide the help in a convenient manner irrespective of geographical distances and boundaries. Significance Information technology has grown to permeate the business world, affecting how companies make and market their products, as well as how people communicate and accomplish their jobs in modern organizations. Specialized software shapes best-practices and industry standards, continually changing the face of business in almost every way. Information technology management includes many of the basic functions of management, such as staffing, organizing, budgeting and control, but it also has functions that are unique to IT, such as software development, change management, network planning and tech support. Generally, IT is used by organizations to support and compliment their business operations. The advantages brought about by having a dedicated IT department are too great for most organizations to pass up. Some organizations actually use IT as the centre of their business. Positive Impact on Business: First off, I.T. affects how businesses go about with their usual routine. For instance: the technology allows companies to go paperless, depending only on digital databases to store important data. Many pundits see this as a risk; isn’t digital data flimsy and unreliable, they ask. But the shift offers several benefits as well—including reduction in operational cost, since the business no longer has to buy or rent space or equipment just to store data. Information Technology also affects the accuracy of business operations. When a company uses a computerized accounting system instead of relying on a real live accountant, they eliminate (or, at the very least, significantly reduce) human error. And because such systems allow for faster operations, the company’s workers can concentrate on more pressing tasks. The impact of the Management Information System The impact of MIS on the functions is in its management. With a good MIS support, the management of marketing, finance, production and personnel becomes more efficient, the tracking and monitoring the functional targets becomes easy. The functional managers are informed about the progress, achievements and shortfalls in the activity and the targets. The manager is kept alert by providing certain information indicating the probable trends in the various aspects of business. This helps in forecasting and long-term perspective planning. The manager attention is brought to a situation which is exceptional in nature, inducing him to take an action or a decision in the matter. A disciplined information reporting system creates a structured database and a knowledge base for all the people in the organization. The information is available in such a form that it can be used straight away or by blending and analysis, saving the managers valuable time. The MIS creates another impact in the organization which relates to the understanding of the business itself. The MIS begins with the definition of a data entity and its attributes. It uses a dictionary of data, entity and attributes, respectively, designed for information generation in the organization. Since all the information systems use the dictionary, there is common understanding of terms and terminology in the organization bringing clarity in the communication and a similar understanding of an event in the organization. The MIS calls for a systemization of the business operations for an effective system design. This leads to streamlining of the operations which complicate the system design. It improves the administration of the business by bringing a discipline in its operations everybody is required to follow and use systems and procedures. This process brings a high degree of professionalism in the business operations. Since the goals and objective of the MIS are the products of business goals and objectives, it helps indirectly to pull the entire organization in one direction towards the corporate goals and objectives by providing the relevant information to the people in the organization. A well designed system with a focus on the manager makes an impact on the managerial efficiency. The fund of information motivates an enlightened manager to use a variety of tools of the management. It helps him to resort to such exercises as experimentation and modelling. The use of computers enables him to use the tools and techniques which are impossible to use manually. The ready-made packages make this task simpler. The impact is on the managerial ability to perform. It improv es the decision making ability considerably. Communications Technology Leveraging advances in communications technology is imperative to surviving in the modern business world. Advances in cellular phone technology have revolutionized the way businesspeople communicate with clients, employees, suppliers and strategic partners. The Internet has revolutionized the marketing function in addition to opening up a wide range of communication options. Modern smartphones are changing the game yet again with the introduction of new and innovative applications. A small business owner can now access a web-based customer relationship management service on a smartphone from anywhere in the world, for example, allowing him to obtain vital data about contacts before making calls. Accessibility By making communication more convenient, communication technology has helped to make communication more accessible, especially long-distance communication. Through various computer-mediated communication methodscommunication done through the use of a computer, such as email, instant messages, and social networking websitesyou can easily and instantly communicate with people in other cities, states and countries. This is vastly different from early forms of long-distance communication. Early forms of long-distance communication included the use of homing pigeons and/or runners to carry a message to its destination. How long a message would take before reaching its destination depended on the distance between the person sending the message and the person receiving the message. Mass Communication Organizations, like schools and businesses, use electronic communication to share information with a large number of people. Businesses can send mass emails to employees in order to inform workers about things like rule changes and important meetings. Many academic institutions use mass communication in order to maintain a well-informed campus. In case of an emergency, such as a spreading fire or presence of an armed assailant, mass communication can quickly inform people of the situation, giving enough notice to allow people to take the necessary actions to stay safe. Computer-mediated communication can be socially beneficial. For people who are socially awkward, computer-mediated communication such as online forums and chat rooms can help create a more fulfilling social life. For example, someone who fails at personal relationships because he speaks before thinking about the consequences has more control with Internet communication. He can read back his statements before posting, which will likely reduce the number of awkward moments the person creates. Communication technology offers other benefits, as well. Dating websites, for instance, can relieve some of the frustration involved with dating by allowing you to view the profiles of potential dates so you can determine who is the best match for you. This can save you both time and heartbreak. Considerations While information technology solutions can contribute to the success of your organization, there are a number of unique costs to consider. In addition to the cost of implementing an IT solution, you must employ highly educated and specialized workers to maintain, monitor, expand and repair your IT infrastructure. Question 4 : The role of hospital has changed from medical assistance to health care. What are the important information systems required to be considered while implementing front-end application development for hospital management? HOSPITAL INFORMATION SYSTEM (HIS) A hospital information system (HIS) is essentially a computer system that can manage all the information to allow health care providers to do their jobs effectively. These systems have been around since they were first introduced in the 1960s and have evolved with time and the modernization of healthcare facilities. The computers were not as fast in those days and they were not able to provide information in real time as they do today. The staff used them primarily for managing billing and hospital inventory. All this has changed now, and today hospital information systems include the integration of all clinical, financial and administrative applications. Modern HIS includes many applications addressing the needs of various departments in a hospital. They manage the data related to the clinic, finance department, laboratory, nursing, pharmacy and also the radiology and pathology departments. The hospitals that have switched to HIS have access to quick and reliable information including patients’ records illustrating details about their demographics, gender, age etc. By a simple click of the mouse they receive important data pertaining to hospital finance systems, diet of patients, and even the distribution of medications. With this information they can monitor drug usage in the facility and improve its effectiveness. Many hospitals have as many as 200 disparate systems combined into their HIS. Hospital information systems have become very advanced and new innovations are continuously being introduced. But a HIS is useless if it confuses the hospital employees. The system must be user friendly and should include training by the vendors. A good HIS offers numerous benefits to a hospital including but not limited to the delivery of quality patient care and better financial management. The HIS should also be patient centric, medical staff centric, affordable and scalable. The technology changes quickly and if the system is not flexible it will not be able to accommodate hospital growth. COMPONENTS It can be composed of one or a few software components with specialty-specific extensions as well as of a large variety of sub-systems in medical specialties * Laboratory Information System (LIS) * Radiology Information System (RIS) * Clinical Information System (CIS) * Nursing Information Systems (NIS) * Pharmacy Information System (PIS) SOFTWARE COMPONENT Software Component is a system element offering a predefined service or event, and able to communicate with other components. It should be : * Multiple-use * Non-context-specific * Compostable with other components (inter relationship with other components) * Encapsulated i.e., non-investigable through its interfaces * A unit of independent deployment and versioning Laboratory Information System (LIS) Laboratory Information System (LIS) is a software based laboratory and information management system that offers a set of key features that support a modern laboratorys operations. Those key features include but are not limited to workflow and data tracking support, flexible architecture, and smart data exchange interfaces, which fully support its use in regulated environments. The features and uses of a LIMS have evolved over the years from simple sample tracking to an enterprise resource planning tool that manages multiple aspects of laboratory informatics. Due to the rapid pace at which laboratories and their data management needs shift, the definition of LIMS has become somewhat controversial. As the needs of the modern laboratory vary widely from lab to lab, what is needed from a laboratory information management system also shifts. The end result: the definition of a LIMS will shift based on who you ask and what their vision of the modern lab. Radiology Information System (RIS) A radiology information system (RIS) is a networked software suite for managing medical imagery and associated data. An RIS is especially useful for managing radiological records and associated data in a multiple locations and is often used in conjunction with a picture archiving and communication system (PACS) to manage work flow and billing. An RIS has several basic functions: Patient management * An RIS can track a patient’s entire workflow within the radiology department; images and reports can be added to and retrieved from electronic medical records (EMRs) and viewed by authorized radiology staff. Scheduling * Appointments can be made for both in- and out-patients with specific radiology staff. Patient tracking * A patient’s entire radiology history can be tracked from admission to discharge. The history can be coordinated with past, present and future appointments. Results reporting * An RIS can generate statistical reports for a single patient, group of patients or particular procedure. Film tracking * An RIS can track individual films and their associate data. Billing * An RIS facilitates detailed financial record-keeping, electronic payments and automated claims submission. Clinical Information System (CIS) Clinical Information System is a collection of various information technology applications that provides a centralized repository of information related to patient care across distributed locations. This repository represents the patients history of illnesses and interactions with providers by encoding knowledge capable of helping clinicians decide about the patients condition, treatment options, and wellness activities. The repository also encodes the status of decisions, actions underway for those decisions, and relevant information that can help in performing those actions. The database could also hold other information about the patient, including genetic, environmental, and social contexts. Features : * access the medical literature * ask clinical or administrative questions of aggregates of patient data, * receive automatic warnings or suggestions when the patients data satisfy certain logical rules * receive critiques when proposing therapies or ordering diagnostic tests, * access guidelines for standards of care * analyse trade-offs and the likelihood of alternative outcomes (decision analysis) * receive lists of differential diagnoses Nursing Information System (NIS) Nursing information systems is a type of health care management system. It helps nurses use their nursing skills and computer knowledge within a health care environment. A nursing information system has different features and benefits. Features Nurses can self-schedule work hours based on their work shift and departmental needs. Staff nurse managers or nursing administrators can review each nurses schedule and make approvals. Another nursing information system feature includes documenting patient care plans. Benefits One nursing information system benefit includes saving time. For instance, nursing managers can confirm a nurses work availability without contacting each nurse. Nurses can review a patients treatment plan when working outside the office, such as a home care nurse. Pharmacy Information System (PIS) Pharmacy information systems (PIS) are complex computer systems that have been designed to meet the needs of a pharmacy department. Through the use of such systems, pharmacists can supervise and have inputs on how medication is used in a hospital. Some of the activities which Pharmacy Information Systems have been employed in pharmacy departments include: Clinical Screening The Pharmacy Information System can assist in patient care by the monitoring of drug interactions, drug allergies and other possible medication-related complications. When a prescription order is entered, the system can check to see if there are any interactions between two or more drugs taken by the patient simultaneously or with any typical food, any known allergies to the drug, and if the appropriate dosage has been given based on the patient’s age, weight and other physiologic factors. Alerts and flags come up when the system picks up any of these. Prescription Management The Pharmacy Information System can also be used to manage prescription for inpatients and/or outpatients. When prescription orders are received, the orders are matched to available pharmaceutical products and then dispensed accordingly depending on whether the patient is an inpatient or outpatient. It is possible to track all prescriptions passed through the system from who prescribed the drug, when it was prescribed to when it was dispensed. It is also possible to print out prescription labels and instructions on how medication should be taken based on the prescription. Inventory Management Pharmacies require a continuous inventory culture in order to ensure that drugs do not go out of stock. This is made even more difficult when there are multiple dispensing points. When don manually it is very difficult to maintain an accurate inventory. Pharmacy Information Systems aid inventory management by maintaining an internal inventory of all pharmaceutical products, providing alerts when the quantity of an item is below a set quantity and providing an electronic ordering system that recommends the ordering of the affected item and with the appropriate quantity from approved suppliers. Patient Drug Profiles These are patient profiles managed by the Pharmacy Information System and contain details of their current and past medications, known allergies and physiological parameters. These profiles are used for used for clinical screening anytime a prescription is ordered for the patient. Report Generation Most Pharmacy Information Systems can generate reports which range from determining medication usage patterns in the hospital to the cost of drugs purchased and /or dispensed. Interactivity with other systems It is important that Pharmacy Information Systems should be able to interact with other available systems such as the clinical information systems to receive prescription orders and financial information system for billing and charging.

Development of the Caspian Oil and Gas Sector

Development of the Caspian Oil and Gas Sector Caspian Oil Gas Role of FDI in Economic Development of Azerbaijan, Kazakhstan and Turkmenistan Abstract This paper underlines the foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and its role in economic development of each country. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. The first part of this paper overviews the Caspian region and its oil and gas reserves. More specifically this part summarises the role of foreign direct investment in oil and gas industry and how it promotes economic development of Caspian basin countries, namely Azerbaijan, Kazakhstan and Turkmenistan. The second part presents the theoretical framework of foreign direct investment. This part also reviews the previous empirical findings on types, determinants and motives of foreign direct investment. The part 3 comparatively analysis foreign direct investment performance in selected countries and factors which may influence the ability of a country to attract foreign investment. This part also overviews the investment climates in Azerbaijan, Kazakhstan and Turkmenistan. Part 4 concludes. Key Words: FDI, Caspian Sea region, Oil and Gas, Azerbaijan, Kazakhstan, Turkmenistan. 1 Introduction The Overview of the Caspian Sea Region It is wide recognized that foreign direct investment (FDI) can play an important role in the development process of many countries and it is much required. Economies in transition, such as those in Central Asia and the Caucasus, are no exception as they realize the important role of FDI in strengthening their transition process. While some of them have sizable deposits of oil, gas and minerals which are major attractions to foreign investors, others, being less endowed, have more difficulty to attract FDI to their fledgling industrial and service sectors. But in even those countries which are well endowed with natural resources, there is a thrust to diversify their economies away from over-dependence on those resources and to develop viable value-added manufacturing industries and services. FDI can play a major catalytic role in this process. Just a decade years ago the areas on each side of the Caspian Sea – Central Asia to its east side and the Transcaucasia to its west were largely unknown. These regions were provinces of the Soviet Empire important to the outside world neither politically nor economically. Now its is well known that the Caspian Sea is largest land-locked body of water on Earth, bordered by Azerbaijan, Russia, Kazakhstan, Turkmenistan and Iran – the Caspian basin countries (see Map 1). Amongst the five countries only Iran is a member of the Organization of Petroleum Exporting Countries. Kazakhstan, Azerbaijan and Turkmenistan became independent after collapse of Soviet Union in 1991. Once a centre of global commerce, the Caspian Sea region has languished in obscurity ever since the rise of the sailing ship rendered the Silk Road obsolete a half millennium ago (Olcott, 1998). After discovery of oil and gas resources in the Caspian offshore and shore areas, this region became very important oil and gas sector in global context. Moreover, owing to energy security and geopolitical reasons, the Caspian region became very attractive for the West. Azerbaijan became one of the world’s first oil sectors after crude oil production started in Baku in the middle of 19th century. The oil production in Central Asia started in the beginning of the 20th century. Azerbaijan recorded about 70% of Soviet oil production by end of 1940. The former Soviet Union controlled almost all natural resources in Soviet Republics. At the time of their independence, Soviet republics were quasi-states (Olcott, 1998). Each republic has its own president and prime minister, local and national legislatures. The political and economic liberalisation of the Soviet Union in the mid-1980s attracted foreign investors and oil and gas companies interested in exploration and production prospects. The collapse of the Soviet Union gave further opportunities for the liberalisation of investment regulations. By the late 1990s the Caspian region was comparatively politically stable region, and a number of countries significantly improved investment regimes to their oil and gas sectors. Historically, energy industry in Azerbaijan, Russia, Kazakhstan, Turkmenistan and Uzbekistan is very important sector for the economy growth of these countries. However, poor management of natural resources and poor investment climate in these countries lead to disparities emergent between the countries in socio-economic terms. Nowadays, it is well recognized that foreign investment plays a vital role in the development of the oil and gas sector for such countries as Azerbaijan, Kazakhstan and Turkmenistan and significantly stimulates social and economic development of each of these countries. 1.2 Research Questions The presence of potentially vast oil and gas reserves is a part of the foreign investment attraction into the Caspian Sea region. On the other hand, it is important to note that while the quantity of proven reserves undoubtedly plays a significant role in estimating a region’s production and export potential, the other decisive factors for attraction foreign direct investment into this region are undeveloped market, cheap labour and cheap inputs and weak competition. This paper focuses on foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan; and on what foreign direct investment strategy in each country are based. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and performance by each country. The significant number of researches in regard to foreign direct investment mostly explains the investment strategy in the developed countries, when limited study has done on investment in less-developed countries or emerging countries. The selected countries Azerbaijan, Kazakhstan and Turkmenistan are transition countries and to a certain extent new participants in the competition to attract foreign investment. These countries can offer many potential advantages to foreign investor, especially in oil and gas sector of business. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. There is no much research which explores the determinants of investment in Azerbaijan, Kazakhstan and Turkmenistan, the stereotypes and perceptions that foreign investors have about these countries and what could be done to increase the foreign direct investment flow into these countries. This paper surveys these parts by investigating the multinational oil companies operating in Azerbaijan, Kazakhstan and Turkmenistan. The data from different energy agencies were gathered for comparative analysis of oil and gas data as well as foreign direct investment in different countries. This would not only let one to have a picture of various state strategies related to foreign investment, but could also provide the valuable outlook of the most advantageous approach for transition countries in doing business with foreign investors. 1.3 The Legal Status of Caspian Sea A large share of oil and gas reserves in Central Asia and Caucasus are thought to lie under he Caspian Sea. The question of the ownership of those resources, including the right to license and tax their development, is being argued by the Caspian littoral countries. The legal debate over the Caspian Sea can be tracked back to the 1921 Treaty to Moscow, reaffirmed in 1935, which declared that the inland Caspian Sea belonged to Russia (Kemp, 2000). Later Russia sent a note to the United Nations dated from 5th October 1994, where Russian Ministry of Foreign Affairs stated that the Caspian Sea should not be subject to the provisions of international maritime law (International Energy Agency, 1998). The importance of the application of international law is that a â€Å"sea† under the 1982 Law of the Sea Convention would be subject to separation into national zones for the development of its mineral resources. Russia stated that until all five of the Caspian littoral states (Azerbaijan, Russia, Kazakhstan, Turkmenistan, and Iran) came to a common decision on some other arrangement, the legal status of the Caspian Sea was subject only to the provisions of the more general (Treaty of Friendship between Iran and the USSR of 26 February 1921 and Treaty between Iran and the USSR on Trade and Maritime Navigation of 26 March 1940). Nevertheless, the ongoing legal uncertainty does not seem considerably decreased foreign investment in the Caspian Sea region. Advantageous geological prospects, with potential of a major oil and gas resource base, show significant motivations for companies to invest in this important producing region, preferably from the beginning of its development. 1.4 Current Production and Proven Reserves in Caspian Region Caspian oil presents a lot of opportunities for world oil markets and for the region itself (Energy Charter Secretariat, 2008): The appearance of new production sources would expand world oil supplies. Major quantities of Caspian oil would ease the pressure on the Persian Gulf production capacity and provide an additional hedge against oil supply disruptions Profits from oil exports could stimulate economic growth and improve the standard of living in the Caspian energy-rich counties. The availability of Caspian energy supplies in world markets will likewise improve the prospects for economic growth and political stability in the Caspian basin countries. Nowadays the Caspian Sea region is important, but not major supplier of crude oil to world markets, based upon estimates by British Petroleum (BP) and the Energy Information Administration (EIA). In 2005 the Caspian region produced 2.1 million barrels per day, or 2 per cent of total world production (see Table 1). Kazakhstan’s production rapidly increased since the late 1990s, accounted for 67 per cent and Azerbaijan for 22 per cent of regional crude oil production in 2005. The Caspian Sea region’s comparative contribution to world natural gas supplies is larger than that for oil. Gas production of 3.0 trillion cubic feet per year in 2005 was 3 percent of world production (Energy Information Administration, 2006). Turkmenistan is the largest producer; with production of 2.0 trillion cubic feet per year, it accounts for almost two-thirds of the region’s gas production. (see Figure 1). Unlike oil, the region’s proven reserves of natural gas are a higher proportion of the world total than is its natural gas production. The estimate of proven reserves of natural gas in the Caspian Sea region for the end of 2006 published by Energy Information Administration is 232 trillion cubic feet per year, which represents 4 per cent of the world total (see Table 2). Table 1Oil Production in the Caspian Sea Region 1. Proven reserves are defined by the EIA 2. Possible reserves 3. Other estimates (EIA/IEO 2006) 3.45 million barrels per day, (World Oil, 10 March 2004) 3 million ^Only Caspian area oil and gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Table 2Gas Production in the Caspian Sea Region ^Only Caspian area gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Figure 1 Gas Production in Caspian Sea region (1992-2004) Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. 1.5 Role of Oil and Gas in the Economic Development of Caspian Region The development of oil and gas resources in the Caspian region is mostly important for the development of economies in the Central Asian and Transcaucasia. In 1995 the energy sector’s share of gross domestic product (GDP) was an estimated 14.6 percent in Azerbaijan, 10.1 percent in Kazakhstan, 10.2 percent in Turkmenistan (International Energy Agency, 1998). Foreign investment attracted to the oil and gas sector in Caspian region could offer significant profits for the region’s governments and stimulate investment in other economic sectors. The attract foreign investment the host Governments should take discreet measures to ensure the development of an sufficient legal and administrative infrastructure, including institution building and personnel training, to handle the inflow of oil related revenues and to help ensure the countries’ efficient and equitable development. International Monetary Fund (2003) expressed concerns that unless regional governments introduce further administrative reforms, they risk being overwhelmed by new oil wealth. Particularly, corruption is a peril. Economic development motivated by foreign investment in the oil and gas industry helps to guarantee the financial independence of the Central Asian and Transcaucasian states. The transition to the market economy and the economic dislocations originated by collapse of Soviet Union left Azerbaijan, Kazakhstan and Turkmenistan without adequate funds to develop oil and gas resources. Governments of these countries are looking for private investment (mainly from foreign companies) that would play significant role in the development of oil and gas industry. Besides financial capital, a foreign investor brings a modern technology to local industry, including environmentally sound production techniques and modern management approaches. The Caspian Sea region countries are competing with each other for foreign investment. Oil and gas companies have a wide choice of where to make investment. The foreign investor considers the opportunities that offer the best financial returns. However, the investment climate is vital for company’s decision on where to invest. As a result, Kazakhstan and Azerbaijan took considerable steps in creating attractive investment climates. Kazakhstan concentrated on building a body of law applicable to all projects, while Azerbaijan focused primarily on modified production sharing agreements (International Monetary Fund, 2003). By the beginning of 1998, cumulative foreign direct investment in the oil and gas sectors of Central Asia and Transcaucasia had reached an estimated 3 billion of American dollars, nearly one third of which was placed in 1997. Future investment commitments in the region from contracts already signed total over 40 billion of America dollars (International Energy Agency, 1998). So far most foreign investment has been in Kazakhstan and Azerbaijan. Gas-endowed Turkmenistan started to attract foreign investment later than the others due to Government dictatorship and poor investment climate. Caspian oil development has gained a great deal of political and commercial momentum since the first foreign companies came there at the end of 1980s (Ruseckas, 2000). Since then the most important external factor influencing Caspian oil development is the price of oil. Principally if oil prices remain at present high level it is possible the more optimistic projects will be started. The Caspian Sea region could possibly produce approximately 4 million barrels per day by 2010. In any case, the Caspian Sea states require a stable legal regime to develop, produce, transport and market its natural resources. 1.5.1 Summary data on Azerbaijan Owing to extensive oil reserves, Azerbaijan is a major oil producer since the middle of the last century. Between 1990 and 1995 Azerbaijan’s gross domestic product dropped 58 percent (International Energy Agency, 1998). Oil production fell by only 25 percent mainly because of continuing oil product exports to neighbouring countries and an increasing use of heavy fuel oil in domestic power stations to alternative for imported gas. Due to the tightening of monetary and budgetary policies, the fiscal deficit dropped from 11.4 percent of gross domestic product in 1995 to less than 2 percent in 1996. In 2006 Azerbaijans real gross domestic product grew by 31 percent when the oil production in this region significantly increased. Azerbaijans anticipate for sustained economic growth is in its managing of large oil and natural gas resources in the Caspian Sea region, through effective management of the resulting revenue stream, and non-oil sector diversification (Energy Information Administration, 2006). During the beginning of transition most Azerbaijan onshore oil fields were in decline and required momentous new investment to develop large-scale offshore projects and to reconstruct existing fields. Since independence Azerbaijan signed several agreements with foreign oil companies. While maintaining full state ownership over energy companies, Azerbaijan was quick to invite foreign investors to assume a direct role in the development of its hydrocarbon reserves (Thompson, 2004). In 1992 most of the Azerbaijan oil sector assets were merged in two state oil companies – Azerineft and Azneftkimiya. The new merger was called the State Oil Company of the Azerbaijan Republic or SOCAR. While Government organizations handle production and exploration agreements with foreign companies, SOCAR is body to all international companies developing new oil and gas projects in Azerbaijan. After the first commercial oil flows through the Baku-Tbilisi-Ceyhan pipeline during summer 2006 and the increasing oil production from the Azeri-Chirag-Guneshli project, oil revenues are expected to contribute to a doubling of Azerbaijan’s gross domestic product by 2008 (Thompson, 2004). Energy Information Administration (2007) reports that though the oil sector represented around 10 percent of Azerbaijan’s gross domestic product in 2005, it is already projected to double to almost 20 percent of gross domestic product in 2007 (see Table 3). To manage the revenues, former President of Azerbaijan Heydar Aliyev formed a State Oil Fund in 1999, which is designed to use money obtained from oil-related foreign investment for poverty reduction, education and raising rural living standards. As of the end of 2006, the State Oil Fund reported assets of almost 2 billion US dollars, but the fund’s assets are expected to increase to 36 billion US dollars by 2010 (Energy Information Administration, 2006). Table 3Azerbaijan: Economy and Energy (in millions US dollars) 2003 2004 2005 2006 2007 2010 Oil Production (thousand barrels per day) 320 319 441 648 860 1,300 Oil Exports (thousand barrels per day) 215 204 314 521 721 N/A Foreign Direct Investment 3,285 3,556 1,680 -219 -4,750 476 FDI in Oil Sector 3,246 3,461 1,459 -573 -5,198 366 Oil Sector Revenue 886 946 1,337 2,921 5,272 19,417 As share of total rev (%) 42% 38% 39% 51% 59% N/A As share of total GDP (%) N/A N/A 9.8% 15% 19.7% 43.3% Oil Fund Assets 816 972 1,394 1,936 3,093 36,387 Source: Energy Information Administration: Short Term Energy Outlook, 2007; International Monetary Fund (IMF), Article IV Consultation, Staff Report, No 07/191, June 2007 1.5.2 Summary Data on Kazakhstan As it was the case in most other former Soviet Union countries, Kazakhstan’s first attempts at economic reform were effectively taken in response to Russias one-sided price reforms in 1992. After Kazak oil production had suddenly declined for two years in the end of 1993, inflation had out of control. The efforts to create an economic union with Russia and other former Soviet Union countries didn’t meet expectations of the Kazakh Government. Looking at the dynamic Asian economies as a model, the Kazakh Government turned to market style policies. However, the government increased hard budget constraints and restrictive monetary policies due to attempts to solve non-payment problem through state financing. The remained net debts after netting out inter-industry arrears were financed from Government budget and the central bank. In 1993 International Monetary Fund (IMF) granted Kazakhstan a one-year standby package. To maintain IMF collaboration and to stop the decline in gross domestic product, the Kazakh government implemented a second stabilisation program in 1995. But this time hard budget constraints and monetary policy were strengthened by excluding of government financing of net positions in inter-enterprise debts and retreating government guarantees for loans granted by foreign and domestic banks. In the middle of 1996, the International Monetary Fund approved an Extended Fund Facility (EFF) of 446 million US dollars for three years (IMF, 2003). According to International Monetary Fund (2003) the decision was made in light of a wide-ranging three-year reform programme submitted by the government, as well as the positive longer term prospects for production and exports of energy and non-ferrous metals. In 1996, Kazakhstan experienced its first positive economic growth since 1989. 1.5.3 Summary Data on Turkmenistan Preceding the collapse of the Soviet Union approximately 8 percent Turkmenistan’s gross domestic product was generated by gas exports to the rest of the USSR mostly to Belarus, Ukraine and the Caucasus. Another 5 percent of gross domestic product was earned from cotton exports. Gas and cotton exports continue to be used to cover the import of considerable amounts of grain and capital equipment from other former Soviet Republics. While estimates for the fall of gross domestic product between 1990 and 1995 vary depending on how adjustments to official gross domestic product are made, International Monetary Fund and European Bank of Reconstruction and Development agree on about -35 percent (IMF, 2003). This is much less than the 58 percent drop in Turkmen gas production. The rest of the economy is basically agricultural. The cotton industry has been less affected by the downfall of the Soviet Union. The government gradually liberalised some prices beginning in 1992. A presidential decree of 1995 removed price controls on all products except for about 50 items, including energy. The government introduced the manat as the national currency in 1993. In 1995 it unified the previously separate official and commercial exchange rates, which subsequently became determined by inter-bank auctions for foreign exchange. Between 1992 and 1995 the government compensated for the shortfall in revenue from taxes on gas production and exports by cutting expenditures and replacing subsidies to the economy with additional allocations of credit at largely negative interest rates. Controlled prices were adjusted repeatedly but declined in real terms for natural gas and for oil products through 1994. The share of gas related revenues in the central budget declined from 60 percent in 1992 to under 20 percent in 1995, which lowered the share of total budgetary revenue in GDP from 40 percent to 10 percent during this period. Due to drastic expenditure cuts in government wages and investment, including maintenance, the central budget deficit remained fairly stable over this period. It also helped that new excise taxes were introduced in 1995 on petrol (55 percent) and diesel (60 percent). This resulted in some recovery of government capital spending. The easy money policy was changed slowly in 1995 and 1996. During this time foreign exchange surrender requirements of state-owned enterprises to the Foreign Exchange Reserve Fund (FERF) were increased to 50 percent for gas and oil exports, and the money allocated directly to the central budget. Prior to that, this fund had been used to award credits to the economy, contributing to monetary expansion. In 1995 and 1996, bank credit allocation was reduced, real interest rates rose (due to credit auctions with deregulated interest rates), and reserve requirements for banks were increased. However, the pursuit of these policies was not smooth, in part due to the limited political autonomy of the Central Bank. Nevertheless, inflation decelerated by 50 percent towards the end of 1995 and is estimated to have been 445 percent in 1996, and 21 percent in 1997. Despite plummeting gas exports in recent years, Turkmenistan’s current account was slightly positive in 1994 and 1995, as long as arrears owed to the country are not taken into account. If such arrears are counted the 1995 balance swings from an estimated surplus of 54 million US Dollars to a deficit of 289 million US Dollars. The situation has probably continued to deteriorate due to weak gas exports. 2 Theoretical Frameworks 2.1 Overview of Foreign Direct Investment Theories There is variety of empirical studies on theoretical models explaining foreign direct investment (FDI) and its determinants. The various approaches from different disciplines such as economics, international business, organisation and management explain numerous characteristics of this phenomenon. The following dissimilar methods, explaining foreign direct investment as the location decision of multinational enterprises are mostly acknowledged in empirical literature on FDI: Ownership advantages as determinants of foreign direct investment (including monopolistic advantage and internalisation theory) based on imperfect competition models and the view that multinational enterprises (MNEs) are firms with market power (Hymer, 1960; Buckley and Casson, 1979; Kindleberger, 1969; Caves, 1971 for ownership advantages) Determinants according to the Neoclassical Trade Theory and the Heckscher-Ohlin model, where capital moves across countries due to differences in capital returns (for example Markusen et al, 1995,pp. 98-128; Aliber, 1970); Determinants of foreign direct investment in Dunning’s ownership-location-internalization (OLI) framework, which brought together traditional trade economics, ownership advantages and internalisation theory (Dunning, 1977; 1979); Determinants of foreign direct investment according to the horizontal FDI model or Proximity- Concentration Hypothesis (Krugman, 1983; Markusen, 1984; Ethier, 1986; Horstmann and Markusen, 1992; Brainard, 1993); Determinants of foreign direct investment according to the vertical FDI model, Factor-Proportions Hypothesis or the theory Development of the Caspian Oil and Gas Sector Development of the Caspian Oil and Gas Sector Caspian Oil Gas Role of FDI in Economic Development of Azerbaijan, Kazakhstan and Turkmenistan Abstract This paper underlines the foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and its role in economic development of each country. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. The first part of this paper overviews the Caspian region and its oil and gas reserves. More specifically this part summarises the role of foreign direct investment in oil and gas industry and how it promotes economic development of Caspian basin countries, namely Azerbaijan, Kazakhstan and Turkmenistan. The second part presents the theoretical framework of foreign direct investment. This part also reviews the previous empirical findings on types, determinants and motives of foreign direct investment. The part 3 comparatively analysis foreign direct investment performance in selected countries and factors which may influence the ability of a country to attract foreign investment. This part also overviews the investment climates in Azerbaijan, Kazakhstan and Turkmenistan. Part 4 concludes. Key Words: FDI, Caspian Sea region, Oil and Gas, Azerbaijan, Kazakhstan, Turkmenistan. 1 Introduction The Overview of the Caspian Sea Region It is wide recognized that foreign direct investment (FDI) can play an important role in the development process of many countries and it is much required. Economies in transition, such as those in Central Asia and the Caucasus, are no exception as they realize the important role of FDI in strengthening their transition process. While some of them have sizable deposits of oil, gas and minerals which are major attractions to foreign investors, others, being less endowed, have more difficulty to attract FDI to their fledgling industrial and service sectors. But in even those countries which are well endowed with natural resources, there is a thrust to diversify their economies away from over-dependence on those resources and to develop viable value-added manufacturing industries and services. FDI can play a major catalytic role in this process. Just a decade years ago the areas on each side of the Caspian Sea – Central Asia to its east side and the Transcaucasia to its west were largely unknown. These regions were provinces of the Soviet Empire important to the outside world neither politically nor economically. Now its is well known that the Caspian Sea is largest land-locked body of water on Earth, bordered by Azerbaijan, Russia, Kazakhstan, Turkmenistan and Iran – the Caspian basin countries (see Map 1). Amongst the five countries only Iran is a member of the Organization of Petroleum Exporting Countries. Kazakhstan, Azerbaijan and Turkmenistan became independent after collapse of Soviet Union in 1991. Once a centre of global commerce, the Caspian Sea region has languished in obscurity ever since the rise of the sailing ship rendered the Silk Road obsolete a half millennium ago (Olcott, 1998). After discovery of oil and gas resources in the Caspian offshore and shore areas, this region became very important oil and gas sector in global context. Moreover, owing to energy security and geopolitical reasons, the Caspian region became very attractive for the West. Azerbaijan became one of the world’s first oil sectors after crude oil production started in Baku in the middle of 19th century. The oil production in Central Asia started in the beginning of the 20th century. Azerbaijan recorded about 70% of Soviet oil production by end of 1940. The former Soviet Union controlled almost all natural resources in Soviet Republics. At the time of their independence, Soviet republics were quasi-states (Olcott, 1998). Each republic has its own president and prime minister, local and national legislatures. The political and economic liberalisation of the Soviet Union in the mid-1980s attracted foreign investors and oil and gas companies interested in exploration and production prospects. The collapse of the Soviet Union gave further opportunities for the liberalisation of investment regulations. By the late 1990s the Caspian region was comparatively politically stable region, and a number of countries significantly improved investment regimes to their oil and gas sectors. Historically, energy industry in Azerbaijan, Russia, Kazakhstan, Turkmenistan and Uzbekistan is very important sector for the economy growth of these countries. However, poor management of natural resources and poor investment climate in these countries lead to disparities emergent between the countries in socio-economic terms. Nowadays, it is well recognized that foreign investment plays a vital role in the development of the oil and gas sector for such countries as Azerbaijan, Kazakhstan and Turkmenistan and significantly stimulates social and economic development of each of these countries. 1.2 Research Questions The presence of potentially vast oil and gas reserves is a part of the foreign investment attraction into the Caspian Sea region. On the other hand, it is important to note that while the quantity of proven reserves undoubtedly plays a significant role in estimating a region’s production and export potential, the other decisive factors for attraction foreign direct investment into this region are undeveloped market, cheap labour and cheap inputs and weak competition. This paper focuses on foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan; and on what foreign direct investment strategy in each country are based. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and performance by each country. The significant number of researches in regard to foreign direct investment mostly explains the investment strategy in the developed countries, when limited study has done on investment in less-developed countries or emerging countries. The selected countries Azerbaijan, Kazakhstan and Turkmenistan are transition countries and to a certain extent new participants in the competition to attract foreign investment. These countries can offer many potential advantages to foreign investor, especially in oil and gas sector of business. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. There is no much research which explores the determinants of investment in Azerbaijan, Kazakhstan and Turkmenistan, the stereotypes and perceptions that foreign investors have about these countries and what could be done to increase the foreign direct investment flow into these countries. This paper surveys these parts by investigating the multinational oil companies operating in Azerbaijan, Kazakhstan and Turkmenistan. The data from different energy agencies were gathered for comparative analysis of oil and gas data as well as foreign direct investment in different countries. This would not only let one to have a picture of various state strategies related to foreign investment, but could also provide the valuable outlook of the most advantageous approach for transition countries in doing business with foreign investors. 1.3 The Legal Status of Caspian Sea A large share of oil and gas reserves in Central Asia and Caucasus are thought to lie under he Caspian Sea. The question of the ownership of those resources, including the right to license and tax their development, is being argued by the Caspian littoral countries. The legal debate over the Caspian Sea can be tracked back to the 1921 Treaty to Moscow, reaffirmed in 1935, which declared that the inland Caspian Sea belonged to Russia (Kemp, 2000). Later Russia sent a note to the United Nations dated from 5th October 1994, where Russian Ministry of Foreign Affairs stated that the Caspian Sea should not be subject to the provisions of international maritime law (International Energy Agency, 1998). The importance of the application of international law is that a â€Å"sea† under the 1982 Law of the Sea Convention would be subject to separation into national zones for the development of its mineral resources. Russia stated that until all five of the Caspian littoral states (Azerbaijan, Russia, Kazakhstan, Turkmenistan, and Iran) came to a common decision on some other arrangement, the legal status of the Caspian Sea was subject only to the provisions of the more general (Treaty of Friendship between Iran and the USSR of 26 February 1921 and Treaty between Iran and the USSR on Trade and Maritime Navigation of 26 March 1940). Nevertheless, the ongoing legal uncertainty does not seem considerably decreased foreign investment in the Caspian Sea region. Advantageous geological prospects, with potential of a major oil and gas resource base, show significant motivations for companies to invest in this important producing region, preferably from the beginning of its development. 1.4 Current Production and Proven Reserves in Caspian Region Caspian oil presents a lot of opportunities for world oil markets and for the region itself (Energy Charter Secretariat, 2008): The appearance of new production sources would expand world oil supplies. Major quantities of Caspian oil would ease the pressure on the Persian Gulf production capacity and provide an additional hedge against oil supply disruptions Profits from oil exports could stimulate economic growth and improve the standard of living in the Caspian energy-rich counties. The availability of Caspian energy supplies in world markets will likewise improve the prospects for economic growth and political stability in the Caspian basin countries. Nowadays the Caspian Sea region is important, but not major supplier of crude oil to world markets, based upon estimates by British Petroleum (BP) and the Energy Information Administration (EIA). In 2005 the Caspian region produced 2.1 million barrels per day, or 2 per cent of total world production (see Table 1). Kazakhstan’s production rapidly increased since the late 1990s, accounted for 67 per cent and Azerbaijan for 22 per cent of regional crude oil production in 2005. The Caspian Sea region’s comparative contribution to world natural gas supplies is larger than that for oil. Gas production of 3.0 trillion cubic feet per year in 2005 was 3 percent of world production (Energy Information Administration, 2006). Turkmenistan is the largest producer; with production of 2.0 trillion cubic feet per year, it accounts for almost two-thirds of the region’s gas production. (see Figure 1). Unlike oil, the region’s proven reserves of natural gas are a higher proportion of the world total than is its natural gas production. The estimate of proven reserves of natural gas in the Caspian Sea region for the end of 2006 published by Energy Information Administration is 232 trillion cubic feet per year, which represents 4 per cent of the world total (see Table 2). Table 1Oil Production in the Caspian Sea Region 1. Proven reserves are defined by the EIA 2. Possible reserves 3. Other estimates (EIA/IEO 2006) 3.45 million barrels per day, (World Oil, 10 March 2004) 3 million ^Only Caspian area oil and gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Table 2Gas Production in the Caspian Sea Region ^Only Caspian area gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Figure 1 Gas Production in Caspian Sea region (1992-2004) Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. 1.5 Role of Oil and Gas in the Economic Development of Caspian Region The development of oil and gas resources in the Caspian region is mostly important for the development of economies in the Central Asian and Transcaucasia. In 1995 the energy sector’s share of gross domestic product (GDP) was an estimated 14.6 percent in Azerbaijan, 10.1 percent in Kazakhstan, 10.2 percent in Turkmenistan (International Energy Agency, 1998). Foreign investment attracted to the oil and gas sector in Caspian region could offer significant profits for the region’s governments and stimulate investment in other economic sectors. The attract foreign investment the host Governments should take discreet measures to ensure the development of an sufficient legal and administrative infrastructure, including institution building and personnel training, to handle the inflow of oil related revenues and to help ensure the countries’ efficient and equitable development. International Monetary Fund (2003) expressed concerns that unless regional governments introduce further administrative reforms, they risk being overwhelmed by new oil wealth. Particularly, corruption is a peril. Economic development motivated by foreign investment in the oil and gas industry helps to guarantee the financial independence of the Central Asian and Transcaucasian states. The transition to the market economy and the economic dislocations originated by collapse of Soviet Union left Azerbaijan, Kazakhstan and Turkmenistan without adequate funds to develop oil and gas resources. Governments of these countries are looking for private investment (mainly from foreign companies) that would play significant role in the development of oil and gas industry. Besides financial capital, a foreign investor brings a modern technology to local industry, including environmentally sound production techniques and modern management approaches. The Caspian Sea region countries are competing with each other for foreign investment. Oil and gas companies have a wide choice of where to make investment. The foreign investor considers the opportunities that offer the best financial returns. However, the investment climate is vital for company’s decision on where to invest. As a result, Kazakhstan and Azerbaijan took considerable steps in creating attractive investment climates. Kazakhstan concentrated on building a body of law applicable to all projects, while Azerbaijan focused primarily on modified production sharing agreements (International Monetary Fund, 2003). By the beginning of 1998, cumulative foreign direct investment in the oil and gas sectors of Central Asia and Transcaucasia had reached an estimated 3 billion of American dollars, nearly one third of which was placed in 1997. Future investment commitments in the region from contracts already signed total over 40 billion of America dollars (International Energy Agency, 1998). So far most foreign investment has been in Kazakhstan and Azerbaijan. Gas-endowed Turkmenistan started to attract foreign investment later than the others due to Government dictatorship and poor investment climate. Caspian oil development has gained a great deal of political and commercial momentum since the first foreign companies came there at the end of 1980s (Ruseckas, 2000). Since then the most important external factor influencing Caspian oil development is the price of oil. Principally if oil prices remain at present high level it is possible the more optimistic projects will be started. The Caspian Sea region could possibly produce approximately 4 million barrels per day by 2010. In any case, the Caspian Sea states require a stable legal regime to develop, produce, transport and market its natural resources. 1.5.1 Summary data on Azerbaijan Owing to extensive oil reserves, Azerbaijan is a major oil producer since the middle of the last century. Between 1990 and 1995 Azerbaijan’s gross domestic product dropped 58 percent (International Energy Agency, 1998). Oil production fell by only 25 percent mainly because of continuing oil product exports to neighbouring countries and an increasing use of heavy fuel oil in domestic power stations to alternative for imported gas. Due to the tightening of monetary and budgetary policies, the fiscal deficit dropped from 11.4 percent of gross domestic product in 1995 to less than 2 percent in 1996. In 2006 Azerbaijans real gross domestic product grew by 31 percent when the oil production in this region significantly increased. Azerbaijans anticipate for sustained economic growth is in its managing of large oil and natural gas resources in the Caspian Sea region, through effective management of the resulting revenue stream, and non-oil sector diversification (Energy Information Administration, 2006). During the beginning of transition most Azerbaijan onshore oil fields were in decline and required momentous new investment to develop large-scale offshore projects and to reconstruct existing fields. Since independence Azerbaijan signed several agreements with foreign oil companies. While maintaining full state ownership over energy companies, Azerbaijan was quick to invite foreign investors to assume a direct role in the development of its hydrocarbon reserves (Thompson, 2004). In 1992 most of the Azerbaijan oil sector assets were merged in two state oil companies – Azerineft and Azneftkimiya. The new merger was called the State Oil Company of the Azerbaijan Republic or SOCAR. While Government organizations handle production and exploration agreements with foreign companies, SOCAR is body to all international companies developing new oil and gas projects in Azerbaijan. After the first commercial oil flows through the Baku-Tbilisi-Ceyhan pipeline during summer 2006 and the increasing oil production from the Azeri-Chirag-Guneshli project, oil revenues are expected to contribute to a doubling of Azerbaijan’s gross domestic product by 2008 (Thompson, 2004). Energy Information Administration (2007) reports that though the oil sector represented around 10 percent of Azerbaijan’s gross domestic product in 2005, it is already projected to double to almost 20 percent of gross domestic product in 2007 (see Table 3). To manage the revenues, former President of Azerbaijan Heydar Aliyev formed a State Oil Fund in 1999, which is designed to use money obtained from oil-related foreign investment for poverty reduction, education and raising rural living standards. As of the end of 2006, the State Oil Fund reported assets of almost 2 billion US dollars, but the fund’s assets are expected to increase to 36 billion US dollars by 2010 (Energy Information Administration, 2006). Table 3Azerbaijan: Economy and Energy (in millions US dollars) 2003 2004 2005 2006 2007 2010 Oil Production (thousand barrels per day) 320 319 441 648 860 1,300 Oil Exports (thousand barrels per day) 215 204 314 521 721 N/A Foreign Direct Investment 3,285 3,556 1,680 -219 -4,750 476 FDI in Oil Sector 3,246 3,461 1,459 -573 -5,198 366 Oil Sector Revenue 886 946 1,337 2,921 5,272 19,417 As share of total rev (%) 42% 38% 39% 51% 59% N/A As share of total GDP (%) N/A N/A 9.8% 15% 19.7% 43.3% Oil Fund Assets 816 972 1,394 1,936 3,093 36,387 Source: Energy Information Administration: Short Term Energy Outlook, 2007; International Monetary Fund (IMF), Article IV Consultation, Staff Report, No 07/191, June 2007 1.5.2 Summary Data on Kazakhstan As it was the case in most other former Soviet Union countries, Kazakhstan’s first attempts at economic reform were effectively taken in response to Russias one-sided price reforms in 1992. After Kazak oil production had suddenly declined for two years in the end of 1993, inflation had out of control. The efforts to create an economic union with Russia and other former Soviet Union countries didn’t meet expectations of the Kazakh Government. Looking at the dynamic Asian economies as a model, the Kazakh Government turned to market style policies. However, the government increased hard budget constraints and restrictive monetary policies due to attempts to solve non-payment problem through state financing. The remained net debts after netting out inter-industry arrears were financed from Government budget and the central bank. In 1993 International Monetary Fund (IMF) granted Kazakhstan a one-year standby package. To maintain IMF collaboration and to stop the decline in gross domestic product, the Kazakh government implemented a second stabilisation program in 1995. But this time hard budget constraints and monetary policy were strengthened by excluding of government financing of net positions in inter-enterprise debts and retreating government guarantees for loans granted by foreign and domestic banks. In the middle of 1996, the International Monetary Fund approved an Extended Fund Facility (EFF) of 446 million US dollars for three years (IMF, 2003). According to International Monetary Fund (2003) the decision was made in light of a wide-ranging three-year reform programme submitted by the government, as well as the positive longer term prospects for production and exports of energy and non-ferrous metals. In 1996, Kazakhstan experienced its first positive economic growth since 1989. 1.5.3 Summary Data on Turkmenistan Preceding the collapse of the Soviet Union approximately 8 percent Turkmenistan’s gross domestic product was generated by gas exports to the rest of the USSR mostly to Belarus, Ukraine and the Caucasus. Another 5 percent of gross domestic product was earned from cotton exports. Gas and cotton exports continue to be used to cover the import of considerable amounts of grain and capital equipment from other former Soviet Republics. While estimates for the fall of gross domestic product between 1990 and 1995 vary depending on how adjustments to official gross domestic product are made, International Monetary Fund and European Bank of Reconstruction and Development agree on about -35 percent (IMF, 2003). This is much less than the 58 percent drop in Turkmen gas production. The rest of the economy is basically agricultural. The cotton industry has been less affected by the downfall of the Soviet Union. The government gradually liberalised some prices beginning in 1992. A presidential decree of 1995 removed price controls on all products except for about 50 items, including energy. The government introduced the manat as the national currency in 1993. In 1995 it unified the previously separate official and commercial exchange rates, which subsequently became determined by inter-bank auctions for foreign exchange. Between 1992 and 1995 the government compensated for the shortfall in revenue from taxes on gas production and exports by cutting expenditures and replacing subsidies to the economy with additional allocations of credit at largely negative interest rates. Controlled prices were adjusted repeatedly but declined in real terms for natural gas and for oil products through 1994. The share of gas related revenues in the central budget declined from 60 percent in 1992 to under 20 percent in 1995, which lowered the share of total budgetary revenue in GDP from 40 percent to 10 percent during this period. Due to drastic expenditure cuts in government wages and investment, including maintenance, the central budget deficit remained fairly stable over this period. It also helped that new excise taxes were introduced in 1995 on petrol (55 percent) and diesel (60 percent). This resulted in some recovery of government capital spending. The easy money policy was changed slowly in 1995 and 1996. During this time foreign exchange surrender requirements of state-owned enterprises to the Foreign Exchange Reserve Fund (FERF) were increased to 50 percent for gas and oil exports, and the money allocated directly to the central budget. Prior to that, this fund had been used to award credits to the economy, contributing to monetary expansion. In 1995 and 1996, bank credit allocation was reduced, real interest rates rose (due to credit auctions with deregulated interest rates), and reserve requirements for banks were increased. However, the pursuit of these policies was not smooth, in part due to the limited political autonomy of the Central Bank. Nevertheless, inflation decelerated by 50 percent towards the end of 1995 and is estimated to have been 445 percent in 1996, and 21 percent in 1997. Despite plummeting gas exports in recent years, Turkmenistan’s current account was slightly positive in 1994 and 1995, as long as arrears owed to the country are not taken into account. If such arrears are counted the 1995 balance swings from an estimated surplus of 54 million US Dollars to a deficit of 289 million US Dollars. The situation has probably continued to deteriorate due to weak gas exports. 2 Theoretical Frameworks 2.1 Overview of Foreign Direct Investment Theories There is variety of empirical studies on theoretical models explaining foreign direct investment (FDI) and its determinants. The various approaches from different disciplines such as economics, international business, organisation and management explain numerous characteristics of this phenomenon. The following dissimilar methods, explaining foreign direct investment as the location decision of multinational enterprises are mostly acknowledged in empirical literature on FDI: Ownership advantages as determinants of foreign direct investment (including monopolistic advantage and internalisation theory) based on imperfect competition models and the view that multinational enterprises (MNEs) are firms with market power (Hymer, 1960; Buckley and Casson, 1979; Kindleberger, 1969; Caves, 1971 for ownership advantages) Determinants according to the Neoclassical Trade Theory and the Heckscher-Ohlin model, where capital moves across countries due to differences in capital returns (for example Markusen et al, 1995,pp. 98-128; Aliber, 1970); Determinants of foreign direct investment in Dunning’s ownership-location-internalization (OLI) framework, which brought together traditional trade economics, ownership advantages and internalisation theory (Dunning, 1977; 1979); Determinants of foreign direct investment according to the horizontal FDI model or Proximity- Concentration Hypothesis (Krugman, 1983; Markusen, 1984; Ethier, 1986; Horstmann and Markusen, 1992; Brainard, 1993); Determinants of foreign direct investment according to the vertical FDI model, Factor-Proportions Hypothesis or the theory