The International Business Environment The Changing Political Environment: National, Regional and International Forces Dr(Prof) M Ambashankar

How political factors affect business Monetary and fiscal policies, e.g. taxation Environmental policies Regional development schemes Welfare state measures, including health, social security, pensions, education Agricultural support Immigration policies Employment protection and regulation of working conditions Dr(Prof) M Ambashankar

The nation state Defining characteristics: geographical territory, sovereignty, monopoly of coercive power; continuity despite changes of government Government – the institutions through which the state is run. These may change over time. What do we expect of the state? - national security, system of laws, protection from invasion, effective policing to maintain order Dr(Prof) M Ambashankar

Political risks for international business Unstable country environment, where government forces struggle to maintain law and order Disaffected groups in society External threats, such as from terrorists Armed groups in society, who have a political or regional base Countries run by military governments Dr(Prof) M Ambashankar

Sources of authority in states Traditional sources such as monarchy or theocracy (religious rule) Constitution – set of basic rules which underpin institutions of government (may be written or unwritten) Democracy – legitimacy rests on accountability to the people through elections, contrasted with - Authoritarian rule – rule by a single leader or small group Dr(Prof) M Ambashankar

Functional framework of government: Checks and balances between executive, legislative and judiciary Dr(Prof) M Ambashankar

Democracy: basic principles Rule of law Free and fair elections – includes choice of candidates and right to stand for office Universal right to vote for all adults Freedoms of expression, speech and association Dr(Prof) M Ambashankar

Elections and political parties Proportional representation systems (PR) vs first-past-the-post systems – PR systems are more advantageous for small parties Political parties – may be leftist (closer to socialist principles); rightist (closer to conservative principles); or centrist (hoping to appeal to the widest possible range of voters) Political parties may also be based on religion, economic interests (such as agriculture) or environmental concerns (‘green’ parties) Dr(Prof) M Ambashankar

Women in national legislatures in selected EU countries (lower or single house) Dr(Prof) M Ambashankar

Transitional democracies The consolidated democracy has settled institutions and values, contributing to political stability Democratization - introducing democratic reforms - introduction of elections, but often with limited political rights (limited right to form political parties and restrictions on free speech) - legislative assembly in place, but weak in relation to strong executive Democratization often goes hand in hand with economic liberalization, offering opportunities to international business, but with risks stemming from weak institutions Dr(Prof) M Ambashankar

Global politics Interdependence of nation states Most independent states are members of the United Nations (UN) Through the UN, numerous treaties and other conventions promote inter-governmental co-operation Role of non-governmental organizations (NGOs) – work with both UN agencies and businesses, e.g. in environmental and human rights areas Dr(Prof) M Ambashankar

The European Union Major institutions – Council, Commission, European Parliament, European Court of Justice A new Constitution for Europe? Are existing institutions in need of reform following enlargement in 2004, with further enlargement to come? Euro-sceptic parties and weak voter turnout in EU parliamentary elections suggest doubt over future political reforms Dr(Prof) M Ambashankar

Concluding summary and questions Nation states have become more interdependent: to what extent has sovereignty been eroded through globalization? A stable political environment is conducive to international business, but many industries are concentrated in unstable areas, posing risks for businesses. The EU seems to be at a turning point in terms of institutional structure, but what sort of structural reforms are likely to occur? Dr(Prof) M Ambashankar