Effect of Foreign Direct Investment on Nigerias Development

Effect of Foreign Direct Investment on Nigerias Development Chapter One 1.1 Introduction The drying up in the early 1980’s of commercial bank lending to developing economies made most countries eased restriction on foreign direct investment (FDI) and many aggressively offered tax incentives and subsidies to attract foreign capital (Aitken  and Harrison, 1999). Private capital flow to emerging market economies reached almost $200 billion in 2000. This is almost four times larger than the peak commercial bank lending years of the 1970’s and early 80’s. FDI now accounts for over sixty percent of private capital flow (Levine and  Carkovic, 2002). However, while the explosion of FDI flow remains unmistakable, the growth effect remains unclear. Foreign direct investment (FDI) has been a topic high on the policy agenda in emerging markets. This is due to the contributions FDI make to a country’s external financing and economic growth. The extent of regulation of FDI and other form of capital flow are also issues policymakers take a stand on and economic research has devoted a large effort to these issues. The experience of small number of fast-growing East Asian newly industrialized economies (NIEs), and recently china, has strengthened the belief that attracting FDI is needed to bridging the resource gap of low-income countries and avoiding further build-up of debt while directly tackling the cause of poverty (UNCTAD, 2005). Even though the Asian crisis sounded a cautionary note to premature financial liberalization the call for more accelerated pace of opening up FDI have intensified on the assumption that this will bring not only more stable capital inflow but also greater technological know-how, higher paying jobs, entrepreneurial and workplace skills and new export opportunities (Prasad  et  al., 2003). The increased importance of FDI has brought about international relationships, trade and policies materializing into export and imports between nations. This in turn results financial rewards to host countries. Policy makers across the region of Africa have hoped that attracting FDI with the bait of high tariff protection and generous incentives packages would provide the catalyst for a â€Å"late industrialization† drive (Thandika, 2001). The debt crises in the early 80’s and policies introduced by several countries in Africa also witnessed increased FDI as necessary for economic development. The pursuit of responsible macroeconomic policies combined with an accelerating pace of liberalization, deregulation and above all privatization were expected to attract FDI to Africa (WorldBank, 1997).  However, the record of the past two decades with respect to reducing poverty and attracting FDI as a result of policy changes has been disappointing at best (Ayanwale, 2007). The importance of FDI varies across different sector in the recipient countries. However, in all major country groups, the extractive sector accounts for a significant share of inflow of FDI: for example, Australia, Canada and Norway among developed countries; Botswana, Nigeria and South Africa in Africa; Bolivia, Chile, Ecuador and Venezuela in Latin America and the Caribbean; and Kazakhstan in South-East Europe and the  CIS  (UNCTAD, 2006a). The important of this sector is due to the fact that oil and gas are crucial to the contemporary global economy and their prices are key components of economic forecasts and performance. Crude oil and refined petroleum products constitute the largest single item in international trade, whether measured by volume or value (Steven, 2005). Thus, oil and gas are strategic resources in national, regional and global economies. Despite this significant and strategic influence, empirical evidence suggests that oil and gas abundant economies are among the least growing economies (Sachs and Warner, 1997,  Gelb, 1988, Stevens, 1991, Steven, 2005). This phenomenon is often conceived within the prisms of the â€Å"resource curse† and â€Å"Dutch disease†. Both of which are manifestations of inefficient utilization of resources rather than the inevitable outcome of the availability of oil and gas resources.  The impact of FDI on economic growth of recipient country has been one of varying opinions among authors. A huge literature exists concerning different effects of foreign investment on economic development in a recipient economy. Currently FDI sustains the most dynamic development in the world economy in comparison with other forms of foreign financing (De Gregorio, 1992). Most theoretical and empirical findings (see chapter 3) imply that FDI has a strong positive growth impact on the recipient economy. Within the African context, the Nigerian economy is a unique case, not because it is a developing economy and is quite large, but because during last 15 years the country has not managed to attract significant amounts of FDI (Asiedu, 2002). Typically investment risks are so high in Nigeria that only high profits in export oriented extractive industries (e.g. fuel industry) have attracted much foreign direct investment. This sector exerts a prominent influence on the economy as a key revenue earner. While oil and gas resources have very high revenue yields due to increasing international demand the question of aggregate FDI impact on economic growth remains an open question. This paper attempts to find some answers.   Over the last decade, the Atlantic Ocean off the coast of Western and Southern Africa has become one of the most promising oil exploration areas in the world with a convergence of interest between African governments, multinational oil companies, international Financial Institutions  (Jerome  et  al., 2007). Nigeria falls among the six countries which have become key players in the world of energy stake. However, the economic record and lived experience of mineral-exporting countries has generally been disappointing. The World Bank classification of Highly Indebted Poor Countries include: twelve of the world 25 most mineral dependent states and six most oil dependent. When taken as a group, all â€Å"petroleum rich† less developed countries has witnessed erosion in their living standards and many rank bottom one-third of United Nations Human Development Index. In addition to poor growth records and entrenched poverty, they are also characterized by high level of corruption and a low prevalence of democratization  (Jerome  et  al., 2007).† 1.2 FDI Defined Various classifications have been made of foreign direct investment. For instance, FDI has been described by the Balance of Payment Manual 5th  edition (BPM5) as a category of international investment that reflects the objective of a resident in one economy (the direct Investor) obtaining a lasting interest of a resident in another economy (the direct investment enterprise). The lasting interest implies the existence of a long-term relationship between the direct investor and the direct investment enterprise and a significant degree of influence by the investor on the management of the enterprise. A direct investment relationship is established when the direct investor has acquired 10 percent or more of the ordinary shares or voting power of an enterprise abroad (IMF, 1993). This comprises not only the initial transaction establishing the FDI relationship between the direct investor and the direct investment enterprise but all subsequent capital transactions between them and among affiliated enterprises resident in different economies (Patterson  et  al., 2004). Once a firm undertakes FDI, it becomes a  multinational enterprise  (MNEs). Policymakers believe that foreign direct investment produces positive effects on host economies. Some of these benefits are in the form of  externalities  and the adoption of foreign technology which could be in the form of licensing, agreements, imitation, employee training and the introduction of new processes by the foreign firms (Alfaro  et  al., 2004). Multinational enterprises are said to diffuse technology and management know-how to domestic firms (Tang  et  al., 2008). FDI is conventionally used as a proxy to measure the extent and direction of  MNE  activities (Jones, 1996). Like any other business,  MNEs  have a major objective of maximizing profit and reducing costs. Hence,  MNEs  consider regions with higher returns on investment and enabling environment for business success. This is one of the reasons for more FDI in some places than others. Accordingly  MNE  will invest higher in regions that provide the best mix of the traditional FDI determinants (Berg, 2003). The motivation for investment by multinationals in certain countries much more than others  is discussed elaborately in chapter three 1.3. Background The involvement of  MNEs  (through FDI) in extractive industries has had a chequered history. In the early twentieth century, these industries accounted for the largest share of FDI, reflecting the international expansion of firms from the colonial powers. With a growing number of former colonies gaining independence after the Second World War, and the creation of the Organization of the Petroleum Exporting Countries (OPEC) in 1960, the dominance of these  MNEs  s declined, as did the share of extractive industries in global FDI. From the mid-1970s, in particular, the share of oil, gas and metal mining in world FDI fell steadily as other sectors grew much faster. However, as a result of rising mineral prices, the share of extractive industries in global FDI has recently increased, although it is still much lower than those of services and manufacturing. It is therefore an opportune timeto revisit the impact of FDI into theextractive industries has on economic development. Measuring the effect of FDI on economic growth occupies a substantial body of economic literature. Many theoretical and empirical studies have identified several channels through which FDI may positively or negatively affect economic growth (Akinlo, 2003,  Mello, 1997). Not many studies have reported on the effects of FDI in Africa and most existing studies have concentrated on economies with high FDI in the manufacturing industries unlike economies with high FDI inflow in the extractive sector (as the case of Nigeria). Several factors suggest that the indirect benefits of FDI maybe less in extractive sector especially oil industries. Reasons given for this are that: firstly, the extractive sector (such as oil  sub-sector) is often an enclave sector with little linkages with the other sectors. Secondly, the knowledge and technology embedded in the sector is extremely capital intensive and so transfer of knowledge and technology maybe less. Also, the capital requirement and large economies of scale may not attract new entrants into the sector as in the manufacturing sector.  Furthermore, not all sector of the economy have the same potential to absorb foreign technology or create linkages with the rest of the economy (Hirschman, 1958).  Finally, sales in this sector are foreign market oriented and require fewer input of materials and intermediate goods from local suppliers. Hence will have less forward and backward linkages  (Akinlo, 2004). The  sensitivity of project to world commodity pric e also make it been view as a volatie sector (WorldBank, 2005) Given the pattern of foreign direct investment flow to Nigeria (mostly in oil and gas sector) and the angst-ridden as regards the benefits from the extractive FDI, it is apposite to examine empirically the situation in Nigeria. This constitutes the objective of this research. An analysis of this will be done for the period between 1980 and 2006 1.4  Overview of Foreign Direct Investment 1.5  Natural Resources and Economic Development Since the 1950’s, economists have been concerned that economies dominated by natural resources would somehow be disadvantaged in the drive for economic progress. In the 1950’s and 1960’s, this concern was based upon deteriorating terms of trade between the â€Å"centre† and â€Å"periphery† (Prebisch, 1964) coupled with concern over the limited economic linkages from primary product exports to the rest of the economy (Hirschman, 1958). In the 1970’s, it was driven by the impact of the oil shocks on the oil exporting countries (Wijnbergen  and Van, 1986,  Mabro  and Monroe, 1974). In the 1980’s, the phenomenon of â€Å"Dutch Disease† (the impact of an overvalued exchange rate on the non-resource traded sector) attracted attention (Corden, 1984). Finally in the 1990’s, it was the impact of revenues from oil, gas and mineral projects on government behaviour that dominated the discussion (Stevens, 1991,  Gelb, 1988). The common thread running through these concerns is that the development of natural resources should generate revenues to translate into economic growth and development. Thus the revenues accruing to the economies should provide capital in the form of foreign exchange overcoming what was seen as a key barrier to economic progress. This could be explained both in terms of common sense (more money means a better standard of life) and development theories the requirement for a â€Å"big-push† (Murphy  et  al., 1989), capital constraints (Lewis, 1955,  Rostow, 1960) and dual-gap analysis (Shibley  and  thirlwall, 1981). However, the reality appeared to be the reverse. Countries with abundant natural resources appeared to perform less well than their more poorly endowed neighbors. Thus the term â€Å"resource curse† began to enter the literature (Vanderlinde, 1994). More recently there has been a revival of interest in the phenomenon of â€Å"resource curse†. Furthermore, this has drawn the attention of a much wider audience than previously. Growing concern among a number of non-governmental organizations (NGO’s) regarding the negative effects of oil, gas and mineral projects on developing countries has had several effects. It has forced the World Bank group to consider their role in such projects. This has culminated in the creation of â€Å"the Extractive Industry Review† based in Jakarta to consider whether the World Bank Group should, as a matter of principle, have any involvement with such projects. Disagreement within and between the World Bank and the IMF have further fuelled the debate over how such revenues should be managed.   NGO  concern has also encouraged the more responsible petroleum and mineral corporations to consider the impact of their investment in such projects on the countries concerned. However, in the literature that has focused on â€Å"resource curse†, there are references to countries that allegedly managed to avoid a â€Å"curse† and instead received a â€Å"blessing†. For example, even the report produced by  Oxfam  America (Ross, 2001) which is strongly negative towards such projects, states †¦ â€Å"There are exceptions: some states with large extractive industries – like Botswana, Chile and Malaysia – have overcome many of the obstacles †¦ and implemented sound pro-poor strategies†. There are similar references elsewhere to â€Å"success† stories – Botswana (Hope, 1998, Love, 1994), Chile (Schurman, 1996), Indonesia (Usui, 1996), Malaysia (Rasiah  and Shari, 2001), and Norway (Wright and  Czelutsa, 2002). Nigeria is Africa’s most populous country with close to 132 million inhabitants. However, approximately 55% of the population lives on less than the value of one US dollar per day. The Nigerian economy depends heavily on the oil sector, which contributes 95% of export revenues, 76% of government revenues and about a third of gross domestic product. Before the establishment of democracy in 1999, the country was governed by military generals, under whose rule Nigeria’s economic performance had taken a beating for 15 consecutive years (Datamonitor, 2007). Nigeria has a dual economy with a modern segment dependent on oil earnings, overlaid by a traditional agricultural and trading economy. At independence in 1960 agriculture accounted for well over half of GDP, and was the main source of export earnings and public revenue. The oil sector, which emerged in the 1960s and was firmly established during the 1970s, is now of overwhelming importance to the point of over-dependence. Undoubtedly, Africa and indeed Nigeria is facing an economic crises situation featured by inadequate resources for long-term development, high poverty level, low capacity utilization, high level of unemployment and other Millennium Development Goals (MDGs) increasingly becoming difficult to achieve by 2020. Foreign direct investment has assumed prominent place in her strategy as a way of boosting economic rival and growth. It is also seen by policy makers at all levels as a way of bridging the resource gap of the country and avoiding further debt build-up (UNCTAD, 2005). This has brought about several changes in policy and regulations in order to encourage foreign investor to invest in the country. Other measures include – the liberalization of the foreign investment regime to allow major foreign ownership, lifting foreign exchange controls and the privatization of Nigeria’s public enterprises. This research is aimed to take an in-depth analysis of the major private capital flow foreign direct investment to a growing economy; Nigeria. This investment trend will be narrowed down to the extractive sector and in particular the oil and gas sector with the aim of investigating how investment in this sector translate to economic growth. 1.6 Research Gap During the last decade, a number of interesting studies in the role of foreign direct investment in stimulating economic growth has appeared. Several authors have observed that the major reason for increased effort in attracting more FDI has been stemmed from the belief that FDI has several positive effects (Levine and  Carkovic, 2002, Caves, 1996). In contributing to the importance of FDI, it has also been shown that FDI is three times more efficient than domestic investment (De-Gregorio, 2003). Available evidence for developed countries seems to support the idea that productivity of domestic firms is positively related to the presence of foreign firms (Globerman, 1979). The result for developing countries are not clear, with some finding positive spillover (Blomstrom, 1986,  Kokko, 1994), and others reporting limited evidence (Aitken  et  al., 1997). Earlier studies on FDI showed that target countries receive very few benefits and in most cases negative effect on economic growth (Singer, 1950;  Prebisch, 1968;  Saltz, 1992;  Bos  et  al., 1974 cited in (Katerina  et  al., 2004). A positive  effect is only contingent on the ‘absorptive capacity’ of the host country  (Durham, 2004).  Many research have shown that FDI stimulates economic growth (Borensztein  et  al., 1998, Amy Jocelyn and  Kamal, 1999) as seen in china’s economic growth (Dees, 1998 cited in (Ayanwale, 2007) and Latin American countries (Mello, 1997) showing that inflow of capital brings about increase in investment level. FDI has also been shown to have both a positive and negative effect on economic development depending on the variables[1]  that are used along side the test equation  (UNCTAD, 1998; 1999). Its effect has also been more positively acclaimed in countries with higher institutional capabilities (Olofsdotter, 1998) and economically less advanced countries (like Philippines and Thailand) but negatively on more economically advanced countries like Japan and Taiwan (Bende-Nabende  and Ford, 1998). In essence, the impact FDI has on growth of any economy may be country an period specific and as such there is a need for country specific studies. Several studies have shown varying relationship between FDI and economic growth in Nigeria. For example,  Odozi  (1995)  study showed that Structural Adjustment Policies (SAP hereafter) of Nigeria contributed to the FDI-growth relationship. He revealed that macro-policies before SAP discouraged foreign investors.  Ogiogo  (1995) reported a negative contribution of public investment to GDP growth for the reason of distortion. However, positive linkage effect of FDI-growth relationship was shown by  Aluko  (1961). Private domestic investment was also shown by  Ariyo  (1998)  to contribute positively to raising GDP-growth rate for the period 1970-1995. Oyinlola  (1995) using  Chenery  and Stout’s two-gap model found a positive relationship between FDI and economic growth.  Ekpo  (1995) using time series data revealed that political regime, real income per  capita, inflation rate, credit rating and debt service were key factors explaining variability  in FDI into Nigeria. Using unrelated regression model, FDI was shown to be pro-consumption and pro-import hence showing a negative relationship to domestic investment (Adelegan, 2000 cited in  Ayanwale, 2007) and statistically insignificant effect was shown for FDI-growth (Akinlo, 2004). More recent findings by  Ayanwale  (2007) revealed that FDI contributes positively to Nigeria’s economic growth with the communication sector accounting for the highest potential to grow that economy. He also opined that FDI in the manufacturing sector has a negative relationship with economic growth suggesting that the business climate is not healthy enough for the manufacturing sector to thrive and contribute to positive growth. Crude oil discovery and exploration has been said to have both positive and negative effect on Nigeria. The negative side is seen in term of the environmental degradation, deprived means of livelihood and other economic and social factors experienced by surrounding communities where the oil wells are exploited while the positive side is viewed from the large proceeds from domestic sale and export of petroleum products. However, its effect on the growth of the Nigerian economy as regards returns and productivity is still questionable (Odularu, 2007). This review shows that the debate on the impact of FDI on economic growth is far from being conclusive. The role of FDI can be country specific and its relationship with growth can either be positive, negative or insignificant depending on the macroeconomic dispensation (economic,  institutional  and  technological  conditions) in the recipient country (Zhang, 2001). Even though none of these studies controlled for the fact that must of the FDI was concentrated in the extractive industry, they did not specifically investigate the relationship between oil-FDI and economic growth. This is the focus of this study. 1.7 Research Objectives and Questions Few research on FDI into Sub-Saharan Africa have shown empirical evidence of FDI and economic growth as ambiguous (Ayanwale, 2007). In theory FDI is believed to have several positive effects on the economy of host country (such as productivity gains, technology transfers, the introduction of new processes, managerial know-how and skills, employee training etc), promoting its growth and in general, a significant factor in modernizing the host country’s economy (Katerina  et  al., 2004). However, there is no clear understanding of its contribution to growth (Bora, 2002). This research was driven by the following questions: Has foreign direct investment into Nigerian oil and gas sector brought about economic development? What is the transmission mechanism through which FDI brings about growth 1.8 Methodology 1.9 Dissertation Outline The rest of the paper is organized as follows: Chapter Two: This chapter is the literature review and shall be discussed in three subsection. The first two sections shall seek to review the theories and motivation for Foreign direct investment and the third section deals with the theoretical and analytic review of literature on FDI Growth linkages. This shall seek to answer the question on the mechanism through which FDI result in economic growth. Chapter Three: This chapter discusses the case study Nigeria and reviews the contribution performance and challenges of the oil and gas sector in Nigeria. Also, the impact of this sector on economic growth is discussed. Chapter Four: The methodology and theoretical framework for the analysis is the objective of this chapter. This section discusses the research approach and data collection mode. The variables for analysis and the model for shall be derived. Chapter Five: Data Analysis of the result and findings shall be the aim of this chapter. Chapter Six: This chapter shall form the conclusion of the research and give a summary of the findings, suggestion for improving economic growth in Nigeria and recommendation for further study. Chapter Three Literature Review 3.0 Introduction Foreign direct investment is in general motivated by both â€Å"pull† and â€Å"push† factors. The push factors are external to developing countries and focuses majorly on growth and financial market conditions in industrial countries. On the other hand, the pull factors are dependent (on a lot of factors) domestic policies and characteristics of host countries. While the push factors determine the totality of available resources, the push factors determine its allocation between countries (Ajayi, 2004). The diversity of theoretical and empirical explanations for the impact and influence of FDI (and growth) is without doubt very rich. Many studies among others have emphasized conducive macroeconomic policy, increased liberalization of markets, large domestic markets, liberal trade regime, low labour cost, availability of natural resources, good infrastructure and investment in human capital (bring about an educative workforce) (Ajayi, 2003). This review therefore draws from many of these works with the particular aim of providing an understanding of the theoretical and empirical background, views and present thought on the relationship between FDI and economic growth. The discussion shall be presented in three sections. The first two sections shall discuss the theories and motivation for FDI and the third section involves theoretical and empirical review of the literature of FDI and economic growth from four perspectives: trade or export (openness), linkages and spillover effect, knowledge and technology transfer and human capital. 3.1 Theories of FDI FDI can take the form of a Greenfield investment in a new facility or an acquisition of or merger with an existing local firm. Majority of cross-border investment is in the form of merger and acquisition rather than Greenfield investments. According to estimates by United Nations, 40 to 80 percent of all FDI inflows between 1998 and 2005 were in the form of mergers and acquisition (Hill, 2009). However, FDI flows into developed nations are different from those of developing nations. For developing nations only about one- third of FDI is in the form of cross-border merger and acquisition. This may simply reflect the fact that there are fewer firms to acquire in developing nations (Hill, 2009). For the purpose of this research, I have concentrated on two theories of FDI which are relevant to the study. The first perspective explains why firms in the same industry often undertake FDI at the same time and why certain locations are favoured over others (i.e. the observed pattern of FDI). The second is known as the eclectic paradigm. This perspective is eclectic because it combines the best aspects of other theories into a single explanation. In proceeding with the discussion, we define some terms. When goods are produced at home and then shipped to the receiving country for sale, it is known as exporting. The process of granting a foreign entity (the licensee) rights to produce and sell the firm’s product in return for a royalty fee on every unit sold is known as Licensing. Foreign direct investment has been view as an expensive and risky venture compared to exporting and licensing. This is because firms bear the cost of establishing production facilities in a foreign country or acquiring a foreign enterprise and the risk of doing business in countries with different culture. In exporting, firms need not bear cost associated with FDI and risk can be reduced by the use of local sales agents. Similarly, under licensing, the licensee bears the cost and risks. However, it is worth noting in summary that firms will choose FDI over exporting as an entry strategy when transportation costs or trade barriers make exporting unattractive. Furthermore, firms will favor FDI over licensing (or franchising) when it wishes to maintain control of technological know-how or over its operations and business strategy or when firm’s capabilities are simply not amenable to licensing (Hill, 2009). 3.1.1 The Pattern of FDI 3.1.1.1 Strategic Behaviour The idea that FDI flow reflects strategic rivalry between firms in the global marketplace is the basis for one of the theories of FDI. In studying the relationship between FDI and rivalry in oligopolistic industries F. T. Knickerbocker proposed a variation to this argument. An oligopoly is an industry made up of a small number of large players (for example, an industry in which four firms control 80 percent of a domestic market). One key features of such market is the interdependence of major players: the action of one firm have immediate impact on the major competitors, forcing a response in kind. This interdependence leads to imitative behaviour; rivals are usually quick to imitate opponents in and oligopoly – â€Å"the bandwagon effect†. Imitative behaviour can take many forms in an oligopoly. Some good examples are price war and capacity increase. Rivals imitate lest they be left at a disadvantage in the future. F. T. Knickerbocker argued that the same kind of imitative behaviour characterizes FDI. Although Knickerbockers’ theory and its extensions can help to explain imitative FDI behaviour by firms in oligopolistic industry, it does not explain the choice and efficiency of FDI over exporting or licensing. This is explained by the internalization theory. 3.1.1.2 The Product Life Cycle Theory The product life cycle theory was proposed by Raymond Vernon in the mid-1960s and was based on the observation that for most of the 20th century, a very large proportion of the world’s new products had been developed by U.S. firms and sold first in the U.S. market (e.g. automobiles, photocopiers, televisions and semiconductor chips). Vernon opined that the wealth and size of the U.S. market gave U.S. firms a strong incentive to develop new consumer products and the high labour cost also gave firms in the U.S. an incentive to develop cost-saving process innovations. The theory went further to argue that early in the life cycle of a typical new product, while demand is starting to grow rapidly in the United States, demand in other advanced countries does not make it worth while for firms in those countries to start producing the new product, but it does necessitate some export from the United State to those countries. However, over time the demand for new product starts to grow in other advanced countries. As this happens, foreign producer begin to produce at home for their own market and growing demand causes U.S. firms to setup production facilities in those advanced countries. This limits the potential for export for the United States. Finally, at maturity product becomes standardized, cost consideration start to play a greater role in the competitive process and producer in advanced countries with lower labour cost than the U.S. might now begin to export to the United States. Under intense cost pressure, the cycle by which the United State lo st its advantage to other advanced countries might be repeated once more as developing countries begin to acquire a production advantage over advanced countries (Hill, 2009). The effect of these trends is that over time the United States switches form being an exporter of the product to an importer of the product as production becomes concentrated in lower-cost foreign locations. The product life cycle seems to be an accurate explanation of international trade patterns. However, the product l Effect of Foreign Direct Investment on Nigerias Development Effect of Foreign Direct Investment on Nigerias Development Chapter One 1.1 Introduction The drying up in the early 1980’s of commercial bank lending to developing economies made most countries eased restriction on foreign direct investment (FDI) and many aggressively offered tax incentives and subsidies to attract foreign capital (Aitken  and Harrison, 1999). Private capital flow to emerging market economies reached almost $200 billion in 2000. This is almost four times larger than the peak commercial bank lending years of the 1970’s and early 80’s. FDI now accounts for over sixty percent of private capital flow (Levine and  Carkovic, 2002). However, while the explosion of FDI flow remains unmistakable, the growth effect remains unclear. Foreign direct investment (FDI) has been a topic high on the policy agenda in emerging markets. This is due to the contributions FDI make to a country’s external financing and economic growth. The extent of regulation of FDI and other form of capital flow are also issues policymakers take a stand on and economic research has devoted a large effort to these issues. The experience of small number of fast-growing East Asian newly industrialized economies (NIEs), and recently china, has strengthened the belief that attracting FDI is needed to bridging the resource gap of low-income countries and avoiding further build-up of debt while directly tackling the cause of poverty (UNCTAD, 2005). Even though the Asian crisis sounded a cautionary note to premature financial liberalization the call for more accelerated pace of opening up FDI have intensified on the assumption that this will bring not only more stable capital inflow but also greater technological know-how, higher paying jobs, entrepreneurial and workplace skills and new export opportunities (Prasad  et  al., 2003). The increased importance of FDI has brought about international relationships, trade and policies materializing into export and imports between nations. This in turn results financial rewards to host countries. Policy makers across the region of Africa have hoped that attracting FDI with the bait of high tariff protection and generous incentives packages would provide the catalyst for a â€Å"late industrialization† drive (Thandika, 2001). The debt crises in the early 80’s and policies introduced by several countries in Africa also witnessed increased FDI as necessary for economic development. The pursuit of responsible macroeconomic policies combined with an accelerating pace of liberalization, deregulation and above all privatization were expected to attract FDI to Africa (WorldBank, 1997).  However, the record of the past two decades with respect to reducing poverty and attracting FDI as a result of policy changes has been disappointing at best (Ayanwale, 2007). The importance of FDI varies across different sector in the recipient countries. However, in all major country groups, the extractive sector accounts for a significant share of inflow of FDI: for example, Australia, Canada and Norway among developed countries; Botswana, Nigeria and South Africa in Africa; Bolivia, Chile, Ecuador and Venezuela in Latin America and the Caribbean; and Kazakhstan in South-East Europe and the  CIS  (UNCTAD, 2006a). The important of this sector is due to the fact that oil and gas are crucial to the contemporary global economy and their prices are key components of economic forecasts and performance. Crude oil and refined petroleum products constitute the largest single item in international trade, whether measured by volume or value (Steven, 2005). Thus, oil and gas are strategic resources in national, regional and global economies. Despite this significant and strategic influence, empirical evidence suggests that oil and gas abundant economies are among the least growing economies (Sachs and Warner, 1997,  Gelb, 1988, Stevens, 1991, Steven, 2005). This phenomenon is often conceived within the prisms of the â€Å"resource curse† and â€Å"Dutch disease†. Both of which are manifestations of inefficient utilization of resources rather than the inevitable outcome of the availability of oil and gas resources.  The impact of FDI on economic growth of recipient country has been one of varying opinions among authors. A huge literature exists concerning different effects of foreign investment on economic development in a recipient economy. Currently FDI sustains the most dynamic development in the world economy in comparison with other forms of foreign financing (De Gregorio, 1992). Most theoretical and empirical findings (see chapter 3) imply that FDI has a strong positive growth impact on the recipient economy. Within the African context, the Nigerian economy is a unique case, not because it is a developing economy and is quite large, but because during last 15 years the country has not managed to attract significant amounts of FDI (Asiedu, 2002). Typically investment risks are so high in Nigeria that only high profits in export oriented extractive industries (e.g. fuel industry) have attracted much foreign direct investment. This sector exerts a prominent influence on the economy as a key revenue earner. While oil and gas resources have very high revenue yields due to increasing international demand the question of aggregate FDI impact on economic growth remains an open question. This paper attempts to find some answers.   Over the last decade, the Atlantic Ocean off the coast of Western and Southern Africa has become one of the most promising oil exploration areas in the world with a convergence of interest between African governments, multinational oil companies, international Financial Institutions  (Jerome  et  al., 2007). Nigeria falls among the six countries which have become key players in the world of energy stake. However, the economic record and lived experience of mineral-exporting countries has generally been disappointing. The World Bank classification of Highly Indebted Poor Countries include: twelve of the world 25 most mineral dependent states and six most oil dependent. When taken as a group, all â€Å"petroleum rich† less developed countries has witnessed erosion in their living standards and many rank bottom one-third of United Nations Human Development Index. In addition to poor growth records and entrenched poverty, they are also characterized by high level of corruption and a low prevalence of democratization  (Jerome  et  al., 2007).† 1.2 FDI Defined Various classifications have been made of foreign direct investment. For instance, FDI has been described by the Balance of Payment Manual 5th  edition (BPM5) as a category of international investment that reflects the objective of a resident in one economy (the direct Investor) obtaining a lasting interest of a resident in another economy (the direct investment enterprise). The lasting interest implies the existence of a long-term relationship between the direct investor and the direct investment enterprise and a significant degree of influence by the investor on the management of the enterprise. A direct investment relationship is established when the direct investor has acquired 10 percent or more of the ordinary shares or voting power of an enterprise abroad (IMF, 1993). This comprises not only the initial transaction establishing the FDI relationship between the direct investor and the direct investment enterprise but all subsequent capital transactions between them and among affiliated enterprises resident in different economies (Patterson  et  al., 2004). Once a firm undertakes FDI, it becomes a  multinational enterprise  (MNEs). Policymakers believe that foreign direct investment produces positive effects on host economies. Some of these benefits are in the form of  externalities  and the adoption of foreign technology which could be in the form of licensing, agreements, imitation, employee training and the introduction of new processes by the foreign firms (Alfaro  et  al., 2004). Multinational enterprises are said to diffuse technology and management know-how to domestic firms (Tang  et  al., 2008). FDI is conventionally used as a proxy to measure the extent and direction of  MNE  activities (Jones, 1996). Like any other business,  MNEs  have a major objective of maximizing profit and reducing costs. Hence,  MNEs  consider regions with higher returns on investment and enabling environment for business success. This is one of the reasons for more FDI in some places than others. Accordingly  MNE  will invest higher in regions that provide the best mix of the traditional FDI determinants (Berg, 2003). The motivation for investment by multinationals in certain countries much more than others  is discussed elaborately in chapter three 1.3. Background The involvement of  MNEs  (through FDI) in extractive industries has had a chequered history. In the early twentieth century, these industries accounted for the largest share of FDI, reflecting the international expansion of firms from the colonial powers. With a growing number of former colonies gaining independence after the Second World War, and the creation of the Organization of the Petroleum Exporting Countries (OPEC) in 1960, the dominance of these  MNEs  s declined, as did the share of extractive industries in global FDI. From the mid-1970s, in particular, the share of oil, gas and metal mining in world FDI fell steadily as other sectors grew much faster. However, as a result of rising mineral prices, the share of extractive industries in global FDI has recently increased, although it is still much lower than those of services and manufacturing. It is therefore an opportune timeto revisit the impact of FDI into theextractive industries has on economic development. Measuring the effect of FDI on economic growth occupies a substantial body of economic literature. Many theoretical and empirical studies have identified several channels through which FDI may positively or negatively affect economic growth (Akinlo, 2003,  Mello, 1997). Not many studies have reported on the effects of FDI in Africa and most existing studies have concentrated on economies with high FDI in the manufacturing industries unlike economies with high FDI inflow in the extractive sector (as the case of Nigeria). Several factors suggest that the indirect benefits of FDI maybe less in extractive sector especially oil industries. Reasons given for this are that: firstly, the extractive sector (such as oil  sub-sector) is often an enclave sector with little linkages with the other sectors. Secondly, the knowledge and technology embedded in the sector is extremely capital intensive and so transfer of knowledge and technology maybe less. Also, the capital requirement and large economies of scale may not attract new entrants into the sector as in the manufacturing sector.  Furthermore, not all sector of the economy have the same potential to absorb foreign technology or create linkages with the rest of the economy (Hirschman, 1958).  Finally, sales in this sector are foreign market oriented and require fewer input of materials and intermediate goods from local suppliers. Hence will have less forward and backward linkages  (Akinlo, 2004). The  sensitivity of project to world commodity pric e also make it been view as a volatie sector (WorldBank, 2005) Given the pattern of foreign direct investment flow to Nigeria (mostly in oil and gas sector) and the angst-ridden as regards the benefits from the extractive FDI, it is apposite to examine empirically the situation in Nigeria. This constitutes the objective of this research. An analysis of this will be done for the period between 1980 and 2006 1.4  Overview of Foreign Direct Investment 1.5  Natural Resources and Economic Development Since the 1950’s, economists have been concerned that economies dominated by natural resources would somehow be disadvantaged in the drive for economic progress. In the 1950’s and 1960’s, this concern was based upon deteriorating terms of trade between the â€Å"centre† and â€Å"periphery† (Prebisch, 1964) coupled with concern over the limited economic linkages from primary product exports to the rest of the economy (Hirschman, 1958). In the 1970’s, it was driven by the impact of the oil shocks on the oil exporting countries (Wijnbergen  and Van, 1986,  Mabro  and Monroe, 1974). In the 1980’s, the phenomenon of â€Å"Dutch Disease† (the impact of an overvalued exchange rate on the non-resource traded sector) attracted attention (Corden, 1984). Finally in the 1990’s, it was the impact of revenues from oil, gas and mineral projects on government behaviour that dominated the discussion (Stevens, 1991,  Gelb, 1988). The common thread running through these concerns is that the development of natural resources should generate revenues to translate into economic growth and development. Thus the revenues accruing to the economies should provide capital in the form of foreign exchange overcoming what was seen as a key barrier to economic progress. This could be explained both in terms of common sense (more money means a better standard of life) and development theories the requirement for a â€Å"big-push† (Murphy  et  al., 1989), capital constraints (Lewis, 1955,  Rostow, 1960) and dual-gap analysis (Shibley  and  thirlwall, 1981). However, the reality appeared to be the reverse. Countries with abundant natural resources appeared to perform less well than their more poorly endowed neighbors. Thus the term â€Å"resource curse† began to enter the literature (Vanderlinde, 1994). More recently there has been a revival of interest in the phenomenon of â€Å"resource curse†. Furthermore, this has drawn the attention of a much wider audience than previously. Growing concern among a number of non-governmental organizations (NGO’s) regarding the negative effects of oil, gas and mineral projects on developing countries has had several effects. It has forced the World Bank group to consider their role in such projects. This has culminated in the creation of â€Å"the Extractive Industry Review† based in Jakarta to consider whether the World Bank Group should, as a matter of principle, have any involvement with such projects. Disagreement within and between the World Bank and the IMF have further fuelled the debate over how such revenues should be managed.   NGO  concern has also encouraged the more responsible petroleum and mineral corporations to consider the impact of their investment in such projects on the countries concerned. However, in the literature that has focused on â€Å"resource curse†, there are references to countries that allegedly managed to avoid a â€Å"curse† and instead received a â€Å"blessing†. For example, even the report produced by  Oxfam  America (Ross, 2001) which is strongly negative towards such projects, states †¦ â€Å"There are exceptions: some states with large extractive industries – like Botswana, Chile and Malaysia – have overcome many of the obstacles †¦ and implemented sound pro-poor strategies†. There are similar references elsewhere to â€Å"success† stories – Botswana (Hope, 1998, Love, 1994), Chile (Schurman, 1996), Indonesia (Usui, 1996), Malaysia (Rasiah  and Shari, 2001), and Norway (Wright and  Czelutsa, 2002). Nigeria is Africa’s most populous country with close to 132 million inhabitants. However, approximately 55% of the population lives on less than the value of one US dollar per day. The Nigerian economy depends heavily on the oil sector, which contributes 95% of export revenues, 76% of government revenues and about a third of gross domestic product. Before the establishment of democracy in 1999, the country was governed by military generals, under whose rule Nigeria’s economic performance had taken a beating for 15 consecutive years (Datamonitor, 2007). Nigeria has a dual economy with a modern segment dependent on oil earnings, overlaid by a traditional agricultural and trading economy. At independence in 1960 agriculture accounted for well over half of GDP, and was the main source of export earnings and public revenue. The oil sector, which emerged in the 1960s and was firmly established during the 1970s, is now of overwhelming importance to the point of over-dependence. Undoubtedly, Africa and indeed Nigeria is facing an economic crises situation featured by inadequate resources for long-term development, high poverty level, low capacity utilization, high level of unemployment and other Millennium Development Goals (MDGs) increasingly becoming difficult to achieve by 2020. Foreign direct investment has assumed prominent place in her strategy as a way of boosting economic rival and growth. It is also seen by policy makers at all levels as a way of bridging the resource gap of the country and avoiding further debt build-up (UNCTAD, 2005). This has brought about several changes in policy and regulations in order to encourage foreign investor to invest in the country. Other measures include – the liberalization of the foreign investment regime to allow major foreign ownership, lifting foreign exchange controls and the privatization of Nigeria’s public enterprises. This research is aimed to take an in-depth analysis of the major private capital flow foreign direct investment to a growing economy; Nigeria. This investment trend will be narrowed down to the extractive sector and in particular the oil and gas sector with the aim of investigating how investment in this sector translate to economic growth. 1.6 Research Gap During the last decade, a number of interesting studies in the role of foreign direct investment in stimulating economic growth has appeared. Several authors have observed that the major reason for increased effort in attracting more FDI has been stemmed from the belief that FDI has several positive effects (Levine and  Carkovic, 2002, Caves, 1996). In contributing to the importance of FDI, it has also been shown that FDI is three times more efficient than domestic investment (De-Gregorio, 2003). Available evidence for developed countries seems to support the idea that productivity of domestic firms is positively related to the presence of foreign firms (Globerman, 1979). The result for developing countries are not clear, with some finding positive spillover (Blomstrom, 1986,  Kokko, 1994), and others reporting limited evidence (Aitken  et  al., 1997). Earlier studies on FDI showed that target countries receive very few benefits and in most cases negative effect on economic growth (Singer, 1950;  Prebisch, 1968;  Saltz, 1992;  Bos  et  al., 1974 cited in (Katerina  et  al., 2004). A positive  effect is only contingent on the ‘absorptive capacity’ of the host country  (Durham, 2004).  Many research have shown that FDI stimulates economic growth (Borensztein  et  al., 1998, Amy Jocelyn and  Kamal, 1999) as seen in china’s economic growth (Dees, 1998 cited in (Ayanwale, 2007) and Latin American countries (Mello, 1997) showing that inflow of capital brings about increase in investment level. FDI has also been shown to have both a positive and negative effect on economic development depending on the variables[1]  that are used along side the test equation  (UNCTAD, 1998; 1999). Its effect has also been more positively acclaimed in countries with higher institutional capabilities (Olofsdotter, 1998) and economically less advanced countries (like Philippines and Thailand) but negatively on more economically advanced countries like Japan and Taiwan (Bende-Nabende  and Ford, 1998). In essence, the impact FDI has on growth of any economy may be country an period specific and as such there is a need for country specific studies. Several studies have shown varying relationship between FDI and economic growth in Nigeria. For example,  Odozi  (1995)  study showed that Structural Adjustment Policies (SAP hereafter) of Nigeria contributed to the FDI-growth relationship. He revealed that macro-policies before SAP discouraged foreign investors.  Ogiogo  (1995) reported a negative contribution of public investment to GDP growth for the reason of distortion. However, positive linkage effect of FDI-growth relationship was shown by  Aluko  (1961). Private domestic investment was also shown by  Ariyo  (1998)  to contribute positively to raising GDP-growth rate for the period 1970-1995. Oyinlola  (1995) using  Chenery  and Stout’s two-gap model found a positive relationship between FDI and economic growth.  Ekpo  (1995) using time series data revealed that political regime, real income per  capita, inflation rate, credit rating and debt service were key factors explaining variability  in FDI into Nigeria. Using unrelated regression model, FDI was shown to be pro-consumption and pro-import hence showing a negative relationship to domestic investment (Adelegan, 2000 cited in  Ayanwale, 2007) and statistically insignificant effect was shown for FDI-growth (Akinlo, 2004). More recent findings by  Ayanwale  (2007) revealed that FDI contributes positively to Nigeria’s economic growth with the communication sector accounting for the highest potential to grow that economy. He also opined that FDI in the manufacturing sector has a negative relationship with economic growth suggesting that the business climate is not healthy enough for the manufacturing sector to thrive and contribute to positive growth. Crude oil discovery and exploration has been said to have both positive and negative effect on Nigeria. The negative side is seen in term of the environmental degradation, deprived means of livelihood and other economic and social factors experienced by surrounding communities where the oil wells are exploited while the positive side is viewed from the large proceeds from domestic sale and export of petroleum products. However, its effect on the growth of the Nigerian economy as regards returns and productivity is still questionable (Odularu, 2007). This review shows that the debate on the impact of FDI on economic growth is far from being conclusive. The role of FDI can be country specific and its relationship with growth can either be positive, negative or insignificant depending on the macroeconomic dispensation (economic,  institutional  and  technological  conditions) in the recipient country (Zhang, 2001). Even though none of these studies controlled for the fact that must of the FDI was concentrated in the extractive industry, they did not specifically investigate the relationship between oil-FDI and economic growth. This is the focus of this study. 1.7 Research Objectives and Questions Few research on FDI into Sub-Saharan Africa have shown empirical evidence of FDI and economic growth as ambiguous (Ayanwale, 2007). In theory FDI is believed to have several positive effects on the economy of host country (such as productivity gains, technology transfers, the introduction of new processes, managerial know-how and skills, employee training etc), promoting its growth and in general, a significant factor in modernizing the host country’s economy (Katerina  et  al., 2004). However, there is no clear understanding of its contribution to growth (Bora, 2002). This research was driven by the following questions: Has foreign direct investment into Nigerian oil and gas sector brought about economic development? What is the transmission mechanism through which FDI brings about growth 1.8 Methodology 1.9 Dissertation Outline The rest of the paper is organized as follows: Chapter Two: This chapter is the literature review and shall be discussed in three subsection. The first two sections shall seek to review the theories and motivation for Foreign direct investment and the third section deals with the theoretical and analytic review of literature on FDI Growth linkages. This shall seek to answer the question on the mechanism through which FDI result in economic growth. Chapter Three: This chapter discusses the case study Nigeria and reviews the contribution performance and challenges of the oil and gas sector in Nigeria. Also, the impact of this sector on economic growth is discussed. Chapter Four: The methodology and theoretical framework for the analysis is the objective of this chapter. This section discusses the research approach and data collection mode. The variables for analysis and the model for shall be derived. Chapter Five: Data Analysis of the result and findings shall be the aim of this chapter. Chapter Six: This chapter shall form the conclusion of the research and give a summary of the findings, suggestion for improving economic growth in Nigeria and recommendation for further study. Chapter Three Literature Review 3.0 Introduction Foreign direct investment is in general motivated by both â€Å"pull† and â€Å"push† factors. The push factors are external to developing countries and focuses majorly on growth and financial market conditions in industrial countries. On the other hand, the pull factors are dependent (on a lot of factors) domestic policies and characteristics of host countries. While the push factors determine the totality of available resources, the push factors determine its allocation between countries (Ajayi, 2004). The diversity of theoretical and empirical explanations for the impact and influence of FDI (and growth) is without doubt very rich. Many studies among others have emphasized conducive macroeconomic policy, increased liberalization of markets, large domestic markets, liberal trade regime, low labour cost, availability of natural resources, good infrastructure and investment in human capital (bring about an educative workforce) (Ajayi, 2003). This review therefore draws from many of these works with the particular aim of providing an understanding of the theoretical and empirical background, views and present thought on the relationship between FDI and economic growth. The discussion shall be presented in three sections. The first two sections shall discuss the theories and motivation for FDI and the third section involves theoretical and empirical review of the literature of FDI and economic growth from four perspectives: trade or export (openness), linkages and spillover effect, knowledge and technology transfer and human capital. 3.1 Theories of FDI FDI can take the form of a Greenfield investment in a new facility or an acquisition of or merger with an existing local firm. Majority of cross-border investment is in the form of merger and acquisition rather than Greenfield investments. According to estimates by United Nations, 40 to 80 percent of all FDI inflows between 1998 and 2005 were in the form of mergers and acquisition (Hill, 2009). However, FDI flows into developed nations are different from those of developing nations. For developing nations only about one- third of FDI is in the form of cross-border merger and acquisition. This may simply reflect the fact that there are fewer firms to acquire in developing nations (Hill, 2009). For the purpose of this research, I have concentrated on two theories of FDI which are relevant to the study. The first perspective explains why firms in the same industry often undertake FDI at the same time and why certain locations are favoured over others (i.e. the observed pattern of FDI). The second is known as the eclectic paradigm. This perspective is eclectic because it combines the best aspects of other theories into a single explanation. In proceeding with the discussion, we define some terms. When goods are produced at home and then shipped to the receiving country for sale, it is known as exporting. The process of granting a foreign entity (the licensee) rights to produce and sell the firm’s product in return for a royalty fee on every unit sold is known as Licensing. Foreign direct investment has been view as an expensive and risky venture compared to exporting and licensing. This is because firms bear the cost of establishing production facilities in a foreign country or acquiring a foreign enterprise and the risk of doing business in countries with different culture. In exporting, firms need not bear cost associated with FDI and risk can be reduced by the use of local sales agents. Similarly, under licensing, the licensee bears the cost and risks. However, it is worth noting in summary that firms will choose FDI over exporting as an entry strategy when transportation costs or trade barriers make exporting unattractive. Furthermore, firms will favor FDI over licensing (or franchising) when it wishes to maintain control of technological know-how or over its operations and business strategy or when firm’s capabilities are simply not amenable to licensing (Hill, 2009). 3.1.1 The Pattern of FDI 3.1.1.1 Strategic Behaviour The idea that FDI flow reflects strategic rivalry between firms in the global marketplace is the basis for one of the theories of FDI. In studying the relationship between FDI and rivalry in oligopolistic industries F. T. Knickerbocker proposed a variation to this argument. An oligopoly is an industry made up of a small number of large players (for example, an industry in which four firms control 80 percent of a domestic market). One key features of such market is the interdependence of major players: the action of one firm have immediate impact on the major competitors, forcing a response in kind. This interdependence leads to imitative behaviour; rivals are usually quick to imitate opponents in and oligopoly – â€Å"the bandwagon effect†. Imitative behaviour can take many forms in an oligopoly. Some good examples are price war and capacity increase. Rivals imitate lest they be left at a disadvantage in the future. F. T. Knickerbocker argued that the same kind of imitative behaviour characterizes FDI. Although Knickerbockers’ theory and its extensions can help to explain imitative FDI behaviour by firms in oligopolistic industry, it does not explain the choice and efficiency of FDI over exporting or licensing. This is explained by the internalization theory. 3.1.1.2 The Product Life Cycle Theory The product life cycle theory was proposed by Raymond Vernon in the mid-1960s and was based on the observation that for most of the 20th century, a very large proportion of the world’s new products had been developed by U.S. firms and sold first in the U.S. market (e.g. automobiles, photocopiers, televisions and semiconductor chips). Vernon opined that the wealth and size of the U.S. market gave U.S. firms a strong incentive to develop new consumer products and the high labour cost also gave firms in the U.S. an incentive to develop cost-saving process innovations. The theory went further to argue that early in the life cycle of a typical new product, while demand is starting to grow rapidly in the United States, demand in other advanced countries does not make it worth while for firms in those countries to start producing the new product, but it does necessitate some export from the United State to those countries. However, over time the demand for new product starts to grow in other advanced countries. As this happens, foreign producer begin to produce at home for their own market and growing demand causes U.S. firms to setup production facilities in those advanced countries. This limits the potential for export for the United States. Finally, at maturity product becomes standardized, cost consideration start to play a greater role in the competitive process and producer in advanced countries with lower labour cost than the U.S. might now begin to export to the United States. Under intense cost pressure, the cycle by which the United State lo st its advantage to other advanced countries might be repeated once more as developing countries begin to acquire a production advantage over advanced countries (Hill, 2009). The effect of these trends is that over time the United States switches form being an exporter of the product to an importer of the product as production becomes concentrated in lower-cost foreign locations. The product life cycle seems to be an accurate explanation of international trade patterns. However, the product l

The Effects Of Globalisation On McDonalds

The Effects Of Globalisation On McDonalds Globalization has led to movement towards the integration of several different markets. Over the past years we can observe how markets from all over the world have transitioned to function together, being more interrelated and interdependent to each other. The shift towards one world economy was made possible because globalization has brought forward several benefits which enabled the ease of movement of business operations from one country to another. Technology has rapidly advanced over the years which made it much simpler to operate internationally and the increase in the power and importance of global organizations (like World Trade Organization) to discourage trade barriers among countries and promote international business and trade. Globalization has encouraged firms to go global and operate outside their local market. International expansion are done through various ways, firms can export their products and sell in international markets, franchising and licensing involve perm itting a business operation in other markets or allowing production of goods and services in other markets, e-business also helps reach out to customers all around the world. Businesses find it healthy and beneficial to operate in international markets because it can be seen as a method of spreading risk, challenging their way across new competitors and attracting new customers towards the companys goods and services. McDonalds, a well known and valued fast food company would be used as a case of how international business has helped the company achieve their goals and succeed overall. McDonalds was first established in 1940, two brothers Richard McDonald and Maurice McDonald partnered up and opened up a restaurant in California, moved towards self-service drive-in restaurant with a limited menu which consisted of cheeseburgers, milkshakes, pie and the world famous French fries of McDonalds. They differentiated their service by focusing on saving time [their Speedee Service System] to satisfy customers. Later, McDonalds had successfully created a unique brand image which was trademarked. The success of McDonalds outlets in the US has encouraged them to go global. They were able to open restaurants in Canada, Japan, Germany, Australia and France. McDonalds main form of expansion was through franchising themselves to different markets. The company was able to successfully open over 30000 outlets aro und the world in more than 120 countries. McDonalds international success has earned them to be ranked 8th in the Top 100 of the Worlds most valuable brands in 2008. Every international business success depends on its approach towards a new market. When it comes to entering new different markets it is very important for any company to analyze the market it wishes to operate in. Here, they will need to study all the aspects that makes the market different from its local market, the competition that exists in that market, as well as the markets macroeconomic environment. A countrys macroeconomic environment can have a great impact on a companys performance. The macroeconomic environment basically consists of four major factors which influences the market function. The first factor is the economic factor of the market. This focuses on the economys well-being, i.e. income level, employment, inflation and how these can influence decision making of international businesses. The second factor focuses on the countrys legislation overview, the rules and regulations that companies may follow if they wish to operate in that market. The third, political fact or mainly sums up to the exercising power of the countrys government. Political status and stability of a country can greatly influence the attractiveness of foreign direct investment into the country. The last factor which has an impact on international business operations is the culture of the market. Culture refers to a system of values and norms that are shared among a group of people, -Hofstede. Culture differs from country to country. It is usually determined by the countrys ethnicity, religious views, education, language spoken etc. This factor of macroeconomic environment makes it difficult for international businesses to determine their success in operating in new markets. In the case of McDonalds, the four factors of macroeconomic environment did have an affect McDonalds products and their standard method of operating their fast food restaurants. From the economic factor, McDonalds have positioned their brand as one of the best fast food outlets with the greatest value meals offered. Differences in income levels did not influence McDonalds because they offer their meals at low reasonable prices. For example in Dubai, McDonalds offers the lowest economic prices for their value meals when compared to the other fast food outlets such as Hardees or Burger King. McDonalds is now known to rank the 6th most valuable global brands in 2010. The legal factor of macroeconomic environment did affect the products of McDonalds. Rules and regulations that were followed by every company in a particular market had to be followed by McDonalds too. For example, McDonalds toys which were given in Kids Happy Meals should be approved by safety measures. The labeling of their products such as the green dot which symbolizes suitable for vegetarians is also another example which McDonalds adapts with relation to labeling laws to inform consumers. In Muslim countries, any meat products had to be Halal, McDonalds sandwiches had to adjust to meet religious standards. When it came to promotion, McDonalds advertising also had to be controlled and approved by certain markets like Saudi Arabia. Certain TV Commercials that use attractive female models may be seen as an inappropriate way for McDonalds to advertise in Saudi Arabia. The political factor of macroeconomic environment does not directly affect McDonalds operations but governments in different countries do have control on what products a business is allowed to sell in their markets. Political reasons can affect McDonalds performance internally through taxation etc affecting their pr ofitability. The cultural factor of every market can be used as an advantage for every international business to differentiate their products and adapt to these cultural differences thus valuing their brand image among local consumers. McDonalds operates in over a hundred countries and they have deeply focused on using cultural views to differentiate their products in different markets. McDonalds products respond to local taste and preferences. There are many examples which show us how McDonalds have adjusted to offer differentiated products, having special offers on special occasions and events that are held in different countries. McDonalds had recently introduced a dessert offer during Ramadan in Dubai. This was the McBrownie Sundae which was advertised around bringing in the Ramadan atmosphere into the picture using the moon, emphasis of historical background, colors etc. McDonalds respond to catering to local customers tastes too. In India, McDonalds offers a sandwich exclusively to that country, the McAloo Tikki Burger. McDonalds also has their famous McArabia value meals in the Middle East. In terms of language dimensions McDonalds are referred to differently in different markets around the world. Most of the West refers to McDonalds as Mickey Ds, in Australia their slang for McDonalds is Maccas. When it comes to religion McDonalds does take religious standards into consideration, this way it shows how they value their customers. McDonalds advertisements, way of packaging all come under appropriateness towards the market they are serving. All of McDonalds meals in Muslim countries are Halal. McDonalds outlets in different markets restrict them to sell certain type of products in those markets. The McPork burger was inappropriate to sell in Middle East or Muslim countries, even all their beef products were not offered in outlets located in India because it was seen prohibited and against Hindu religion. Businesses that tend to go global always plan out and adapt a global strategy which will help assist them towards achieving their objectives and long term goals. When a company decides for global expansion there are usually four common strategies that they can choose from in relation to their approach towards the market, either follow an international strategy, localization strategy, global standardization strategy or transnational strategy. These four strategies are influenced by the pressure of two dimensions. The first is the pressure faced from cost reduction measures, where this depends usually on the competition of the market. Profitability and survival mainly depends on this measure, so if a company wishes to operate in a different market they should make sure that they are in line with other competitors when it comes to cost related or price related products. The other dimension is the pressure of local responsiveness, depending on a companys flexibility towards adjusting to local consumers taste and preferences. The nature of the product would influence this pressure, food products tend to be more local responsive because it is directly related to satisfying consumers taste and preferences. McDonalds is often cited as a clear example of standardization, the president of McDonalds International has insisted that the company is as much a part of local culture as possible (Ritzer, 2004, p. 179) and its standard menu has been glocalised to accommodate local foods. McDonalds focus on following a more hybrid type of global strategy when entering international markets. They associate with transnational strategy measures. The company has over 3000 fast food outlets around the world and so McDonalds found that it was more beneficial for their outlets to gain competitive advantage in these different markets by differentiating their menu and meal offers that would cater to and satisfy consumers taste and preferences in various different markets. Based on ethnicity, culture, religion, trend people taste and preferences differed from country to country. For example, India is famous for their savory spiced food. Most of Indian Cuisine tends to be hotter in flavor than compared to tastes of people in the West. Therefore the McAloo Tikki, a spicy traditional flavored burger, is a specially differentiated product of McDonalds which suits the taste of consumers in India. By differentiating their sandwiches and meals to market requirements McDonalds finds it easier to operate in these markets because this reduces the risk of uncertainty of their success or failure in operating in these new markets. Differentiated products also add value to brand name because customers find themselves attracted to their differentiated products. McDonalds always focused on cost pressures to avoid threats from competitive fast food outlets. Costs are always kept at its lowers so that McDonalds selling prices wouldnt be high enough for customers to doubt their purchase and change their mind over McDonalds. Catering to consumer responsiveness towards taste and flavor, and focusing on low costing/pricing enhances the brand reputation and value, thus positively affecting their sales figures. Although, food related businesses follow localization or transnational strategy, McDonalds also tries to adapt a global standardization strategy for some of its meal products. McDonalds menu is mostly standardized because the company wishes to protect some of its original ideas which were innovated from home. Some examples of McDonalds products which they wish to keep standard in all markets are the McFries, McNuggets and Big Mac Sandwich. These products remained unchanged or adjusted towards local responsiveness and so were offered to markets as a representation of McDonalds culture. These products had the McDonaldization approach where these products mainly standardized and focused on efficiency and predictability. McDonalds hybrid approach towards global expansion does have its limitations. Apart from having more pressure on focusing on following two different directions of strategy they would not be able to make sure how successful their standard menu would profit them. As seen earlier people have different tastes and preferences, especially when it comes to food products. So McDonalds offering their home-based standard menu would be seen as a risk to enter new different markets. They would have to spend a lot on research and innovation to adjusting to consumer responsiveness. Not only does McDonalds make sandwiches which would satisfy local consumer. They would also need to spend a great deal on differentiated advertising, coming up with innovative offers on special occasions like Eid, Diwali, Christmas etc. McDonalds current position in the global economy is very strong so its limitations wouldnt affect them as much. They possess great strengths compared to any other international business. McDonalds opportunities are wide to them, further expansion and differentiation of their standard meal menu in different markets would reap in even greater sales and profit to the company. Their hybrid strategy not only gives them the competitive advantage to compete with rivals, it also protects the corporate culture and historical values by keeping some aspects of McDonalds standardized. McDonalds makes sure it doesnt let any factor affect them provided they behave flexible to changes and adapt to what consumers want, valuing their opinions, tastes and preferences. With the help of macroeconomic environment analysis, international businesses like McDonalds find it simple to plot down their steps towards achieving their objectives and long term goals. Economic, legal, political and cultural reasons do have an impact on every business that operates internationally which is why it is crucial for these international businesses to follow an appropriate approach and adapt an effective global strategy. Any external factors can influence business operations and so by being as flexible as possible to the changing environmental factors, international businesses like McDonalds can prosper into becoming a major successful well recognized valued corporation.

Essay --

Drew Rivera English 4 Ms. R. Crow December 11th, 2013 NSA spying, what is it and how can we stop it? The National Security Agency was created in 1952 through a top secret memorandum signed by President Truman. At the time of its creation, the NSA was secretive, with only a few members of Congress knowing about it. Existence of the agency had been a deep secret until it was unveiled in a Senate investigation called the â€Å"Church Committee† in 1975 (2nd Source Title: Timeline of NSA Domestic Spying). The Committee uncovered illegal domestic spying by the NSA, and recommended it make reforms, this was one of the earliest incidents / scandals for the NSA. Prior to that, in 1973 the Supreme Court ruled that warrants are required and that the NSA are to provide the names of all US citizens and residents it wished to monitor. After 9/11, President Bush ordered the NSA to eavesdrop without court approved warrants technically breaking breaking previously set â€Å"rules† on domestic spying. Leaked reports from whistleblower and former NSA contractor Edward Snowden, claims the NSA reviews millions of phone records collected by Verizon (source title: NSA said to be spying on millions of Verizon users.), does this sound legal to you? The NSA collects and keeps record of calls made in the U.S., this includes the phone number of the telephone that is receiving and making the call, and the duration of the call. This is known as â€Å"metadata† it doesn’t include a recording of the call. This information was discovered through a leaked secret court order, that states Verizon is to turn over all information meeting this criteria every day. Phone Companies including AT&T and Sprint, are also said to be giving up records to the NSA on a daily basis. All of... ...vering information about the programs. In that sense, the supposed â€Å"Congressional oversight† seems more like an illusion of accountability. The NSA claims its mission for domestic spying is â€Å"simple† that they are here to : collect, process, and store U.S. citizen data for the good of our nation. They NSA further elaborates that they cope with the overload of information we have in our country and use it to their strategic advantage. This in turn, helps them find new ways to detect, report, and respond to all domestic threats. â€Å"We work through you. For you. For our Nation.†(Source:http://nsa.gov1.info), this means they are trying to justify that spying on civilians is being done for the good of our nation. Though they claim this is for the sake of our nation, does this violate any previously set laws that are in the constitution or amendments in the Bill Of Rights?

The Importance of History :: World History

The Importance of History Can anything worthwhile be gained from continued research into historical events? History seen as study of the past is an integral part of many education systems across the world. Many countries spend huge amounts of money and resources to uncover their past. Every year new and new historical sites are uncovered, excavations on those sites are conducted and the result are studied by archeologists throughout the world. But have we gained anything worthwhile from research into the past? The answer seems clear: Yes, we have. The Study of history especially into historical battles and wars is beneficial when not vital for the evolution of warfare in the modern world. Military strategists continually study wars such as the World Wars, the Napoleonic Conflicts and many modern wars. Tactics and strategies are analyzed and continuously refined, so as to improve their effectiveness and efficacy in future conflicts, without historical study into conflicts, advanced warfare tactics prevalent today would never have evolved from those primitive tactics man used to use in wars. Many countries nowadays are trying to acquire Weapons of Mass Destruction (WMD), as history has convincingly displayed their awesome destructive power, and their potential to deter aggressions and conflicts thrust upon on a country, like the Cold war remained 'cold' because both countries had WMD and were aware of the consequences if they were used. Another example were historical research is vital is the judicial system. History sets precedents of judicial cases, which are studied by judges to before they make decision in similar cases themselves. The effectiveness of certain punishments for offences is also evaluated through history. Thus we study history in order to learn from it, improve our past experiences and avoid repeating past mistakes. However this is not always the case. When World war one broke out in Europe, The Empires of Germany, Austro-Hungarian and the Ottoman, were fighting against the axis France, Britain, and Italy. The result of this conflict was total destruction for all of Europe. However just after 20 years, the same nations were getting closer to another military confrontation. Yet again the same nations were allowing Germany to rise militarily, yet again they failed to act soon enough, and yet again they found themselves in another conflict. Yet again the conflict brought total destruction for Europe. What went wrong here, why didn't the study of history prevent a cataclysm in Europe when just one had happened 2 or 3 decades ago?

Instructions Essay -- essays research papers

How to Change the Oil in Your Vehicle Why should you change your oil? Everybody should change their oil in their vehicles whether or not they do it themselves. Changing your oil yourself is not very hard and saves you money. Changing your oil is very critical. In fact, manufacturers recommended that you change your oil at least every 3,000 miles. You will increase the engine life of your car. The oil is what keeps the engine lubricated. When oil gets old it becomes dirty which causes friction. Draining the old oil and adding new oil will prevent this friction, thus increasing the reliability and life of your engine. It is also necessary to change your oil filter every time you change your oil. The oil filter is what filters out the particles before they reach your engine. A new filter will filter out particles a lot better than an old and dirty one. These instructions will take you through the steps so that you will be able to change your oil in your own driveway. Caution: Changing your oil can be very dangerous. Never lay under a vehicle only supported by a jack. You must use jack stands or you will be putting your self at risk. Oil can also be very hot, so take extra precaution when removing the drain plug.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Things that are needed to change you oil ?  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  clothes you don?ft care about getting dirty  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   ?  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  a jack  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   ?  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  some old rags ?  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  a funnel ?  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  oil pan or a container that holds at least 6 quarts ?  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  latex gloves (optional: Helps keep your hands clean) ?  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  wheel blocks ?  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  oil filter wrench ?  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  2 jack stands or ram... ...the oil in, replace the oil fill cap and wipe up some of the oil you might have spilled.   Ã‚  Ã‚  Ã‚  Ã‚  Start the engine and with the engine running, carefully check around the filter for any leaks. If there is a leak, tighten up the oil filter a little more. If no leaks are found, shut off the engine and jack the car down. Once the car is on level ground again, recheck the oil and make sure it is at the full mark. Do not over fill the oil, that will cause engine damage. Changing your oil can be a simple process. Always be cautious when you are laying underneath a vehicle. Having the oil changed every 3,000 miles is strongly recommended and will increase the life of your engine. It is required by law that you put the oil in a container and dispose it at a nearest garage If you have any doubts or do not feel like you are that mechanically inclined you should go the safe route and bring it to a professional place.  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  

Terminal Data Capability

Terminal Data Capability [What is it? ] – Generally, It is a data element that stores information particularly on terminal that can be individually addressed by tag ID. Data element resident in the terminal shall be under control of one of the following parties:†¢ Terminal manufacturer: For example, IFD Serial Number†¢ Acquirer/Agent: For example, Merchant Category Code†¢ Merchant: For example, Local Date and Local Time (these may be controlled by either merchant or acquirer)Terminal should be constructed in such a way that data which is under control of acquirer is only initialised and updated by the acquirer (or its agent).[Types] 1. Application Independent[1] Data:†¢ Terminal related data†¢ Transaction related data -Unique to terminal. -Shall have parameters initialised so that it can identify what language(s) supported to process the card’s language preference.2. Application Dependent[2] Data: [Characteristic] – A terminal data shall be initialized in the terminal or obtainable at the time of a transaction. A terminal data can be of any format: alphabetic, numeric to binary. – Some terminal data serves as a constant whereas the rest is updatable. – Each terminal data has its own functionality and usage which facilitates an EMV transaction. – The dependency of the terminal data in application indicates how data management is done in terminal. – During the transaction, the terminal shall ignore any data object coming from the ICC which is terminal-sourced or issuer-sourced. [How it involved in EMV] Transaction (Exchange/Supply Data to ICC) Counter Record (updatable) ComparableReference Notes: Terminal data element, ICC data element, Issuer data element, EMV function. [Counter] [Record] Cardholder Verification Method (CVM) Results: – Being set/updated upon Cardholder Verification completion. [P102B3] – Consists of 3 bytes: CVM Performed, CVM Condition, and CVM Result. †“ There are 5 applicable CVMs in Cardholder Verification: Online PIN, Offline PIN, Signature, No CMV Required, and Combo CVM (2 CVM combination). – After a successful CVM, CVM Results reflect the successful CVM; an unsuccessful CVM, CVM Results reflect the unsuccessful CVM. Byte 3 of CVM Results is set to ‘successful’, IFF: i. Applicable CVM is ‘No CVM required’, and terminal supports it. ii. Offline PIN verification by the ICC is successful. – Byte 3 of CVM Results is set to ‘unknown’, IFF: i. Applicable CVM is ‘Signature’, and terminal supports it. ii. Online PIN verification is successful. – Byte 3 of CVM Results is set to ‘failed’, IFF: i. Previous applicable CVM is failed, and succeeding (last) application CVM failed as well. – Byte 1 and byte 2 of CVM Results indicate method and condition of the last performed CVM throughout CMV List.In addition, byte 2 is set to ‘00’ (N o meaning) IFF byte 1 is ‘3F’ (No CVM performed). – Table 2: shows all the possible failed/unknown CVM Results. [P49P121B4] Terminal Verification Result (TVR) Initialized to 0: Initiate Application Processing Function: Offline Data Authentication, Processing Restrictions, Cardholder Verification, Terminal Risk Management, Online Processing, Issuer-to-Card Script Processing. Use in analysis: Terminal Action Analysis. Description: Status of different function as seen from terminal. Diagram: [P165B4], TVR bytes breakdown: TVR byte |EMV Function |Status jotted on bits |When will it be set | | | |RFU |Reserved for future use | | | | | | | | | | | |1 |Offline Data | | | | |Authentication | | | | | |RFU | | | | |CDA failed |If CDA is performed but unsuccessful. [P44B4] | | | |DDA failed |If DDA is performed but unsuccessful. | | | |Card appears on terminal exception (set at Terminal Risk |If a match on presence card (Application PAN and Application PAN | | | |Management ) |Sequence Number) is found in the exception file. | | |ICC data missing (Can be set at any function) |When an optional data object that is required because of the | | | | |existence of other data objects or that is required to support | | | | |functions that must be performed (AIP) is missing. | | | |SDA failed |If SDA is performed but unsuccessful. | | | |Offline Data Authentication was not performed |If neither SDA nor DDA nor CDA is performed. | | |RFU | | | | | |Reserved for future use | |2 | | | | | |Processing Restriction | | | | | |RFU | | | | |RFU | | | | |New Card (set at Terminal Risk Management) |If Last Online ATC Register == 0. [P113B3] | | | Requested service not allowed for card product |If all test against Issuer Country Code and Terminal Country Code | | | | |fail. [T32B4] | | | |Application not yet effective |If Transaction Date > Application Effective Date | | | |Expired application |If Transaction Date > Application Expiration Date | | | |ICC and terminal have different application versions |If AVN in ICC ? AVN in Terminal. | | |RFU |Reserved for future use | | | | | | |3 | | | | | |Cardholder Verification| | | | | |RFU | | | | |Online PIN entered |If online PIN is successfully entered. | | | |PIN entry required, PIN pad present, but PIN was not entered |If CVM is online/offline PIN, but bypassed by terminal in the | | | | |direction of merchant or cardholder. | | |PIN entry required and PIN pad not present or not working |If CVM is online/offline PIN, but neither of them were supported | | | | |by terminal or malfunctioned PIN pad. | | | |PIN Try Limit exceeded |If PIN Try Counter < 1. | | | |Unrecognised CVM |If CVM is not recognized by terminal. | | | |Cardholder Verification was not successful |If CVM List is exhausted without any successful case or applicable| | | | |CVM indicates ‘Fail CVM Processing’. | | |RFU | | | | | |Reserved for future use | |4 | | | | | |Terminal Risk | | | | |Management | | | | | |RFU | | | | |R FU | | | | |Merchant forced transaction online |An attended terminal may allow an attendant to force a transaction| | | | |online, such as in a situation where the attendant is suspicious | | | | |of the cardholder. If this function is performed, it should occur | | | | |at the beginning of the transaction. | | |Transaction selected randomly for Online Processing | | | | |Upper Consecutive Offline Limit exceeded |If ATC ? Last Online ATC Register (Precautious) or | | | | |If (ATC – Last Online ATC Register) > Upper Consecutive Offline | | | | |Limit. [P113B3] | | | |Lower Consecutive Offline Limit exceeded |If ATC ?Last Online ATC Register (Precautious) or | | | | |If (ATC – Last Online ATC Register) > Lower Consecutive Offline | | | | |Limit. [P113B3] | | | |Transaction exceeds floor limit |If (Amount, Authorize + Amount stored in log) > Terminal Floor | | | | |Limit. Or if (Amount, Authorize) > appropriate Terminal Floor | | | | |Limit. P111B3] | | | |RFU | | | | | | Reserved for future use | |5 | | | | | | |RFU | | | | |RFU | | | | |RFU | | | |Script Processing |Script Processing failed after final GENERATE AC |If an error occurred while ICC processing Issuer Script Template | | | | |1. | | | |Script Processing failed before final GENERATE AC |If an error occurred while ICC processing Issuer Script Template | | | | |2. | |Online Processing |Issuer authentication failed |When Issuer Authentication Data (part of authorisation response | | | | |message) from Issuer sent to ICC via EXTERNAL AUTHENTICATE/ second| | | | |GENERATE AC command failed, i. e. (SW1 SW2)! = 9090. [P120B3] | | | |Default TDOL used |If TDOL in ICC not presented and Default TDOL in terminal is used | | | | |to generate TC Hash Value. | Transaction Status Information (TSI) Initialized to 0: Initiate Application Processing Function: Offline Data Authentication, Cardholder Verification, Terminal Risk Management, Card Action Analysis, Online Processing, Issuer-to-Card Script Proce ssing. TSI byte |EMV Function |Status jotted on bits |When will it be set | | | |RFU |Reserved for future use | | | | | | | | | | | |1 | | | | | | |RFU | | | | |Script Processing was performed |If CDA is performed but unsuccessful. P44B4] | | | |Terminal Risk Management was performed |If DDA is performed but unsuccessful. | | | |Issuer Authentication was performed |If | | | |Card Risk Management was performed |When an | | | |Cardholder Verification was performed |If SDA is performed but unsuccessful. | | | |Offline Data Authentication was performed |If neither SDA nor DDA nor CDA is performed. | | |RFU | | | | | |Reserved for future use | |2 | | | | | | |RFU | | | | |RFU | | | | |New Card (set at Terminal Risk Management) |If Last Online ATC Register == 0. [P113B3] | | | |Requested service not allowed for card product |If all test against Issuer Country Code and Terminal Country Code | | | | |fail. T32B4] | | | |Application not yet effective |If Transaction Date > Application Effect ive Date | | | |Expired application |If Transaction Date > Application Expiration Date | | | |ICC and terminal have different application versions |If AVN in ICC ? AVN in Terminal. | [Comparable] [Reference] Array {What is it? } In data storage, an array is a method for storing information on multiple devices. In general, an array is a number of items arranged in some specified way – for example, in a list of in a three-dimensional table.In computer programming languages, an array is a group of objects with the same attributes that can be addressed individually, using such techniques as subscripting. An array is a collection of similar elements, must have the same data type. In random access memory (RAM), an array is the arrangement of memory cells. {Characteristic} You need an index to locate their value. The index starts from 0 and end with the length – 1. Data in array must be in same data type. {What is its implementation? } List, queue, stack, link list. —à ¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€Ã¢â‚¬â€œ [1] No matter what application is selected, its data will not be affected. [2] If an application changed, its value changed as well. ———————–Data Authentication Terminal Action Analysis Terminal Risk Management Read Application Data Online/ Offline Decision Processing Restriction ‘()34*[pic]hK? hAKyjhK? 0J;*[pic]U[pic]hY}_hY}_;*[pic]h;q;*[pic] h;qh;qh:[5? CJaJhm†¡Initiate Application Completion Script Processing Online processing & Authorization message request Card Action Analysis Cardholder Verification Data Authentication Terminal Action Analysis Terminal Risk Management Read Application Data Online/ Offline Decision Processing Restriction Initiate Application Completion Script Processing Online processing & Authorization message request Card Action Analysis Cardholder Verification

Mystery and Fear in The Withered Arm

How does the social/ historical context ad to the fear and mystery created? In the Withered Arm, Hardy uses various literary techniques to create mystery and fear. Through crafting his characters' personalities, forming events and setting a tone for his story, Hardy treats the reader as If they were one of the characters. Through the story, Information Is drip fed to us as well as the characters which creates mystery, because we experience the consequences of the characters actions along with them.With the additional background knowledge of historical and social context, the reader is already in the loop, so they can gain a deeper understanding of the story. The modern reader knows that this information could often cause much more fear and mystery back then, due to the superstitious persona's of people living in the Victorian sass's. They would have been more easily influenced therefore, in a way, a better audience, as they would have interpreted Hardy's writing exactly the way he wa nted them to- with a feeling of fear and in an atmosphere of mystery. In the first pages of The Withered Arm Hardy sets the tone for his story.Hardy creates a dark tone In chapter one. The title ‘A Loran Milkmaid' means that the story will be sad about someone who lives an Isolated life and seems to blend Into the background. This Is because In the sass It would be very common for women of a somewhat lower class to be milkmaids. The first sentence also creates mystery ‘It was an 80 cow dairy†¦ Troop of the millers, regular†¦ Were all at work', this seems like a very casual setting, very normal and plain. This is the factor, which creates mystery, as the reader thinks that it is almost too normal.The word ‘regular' signifies no break from routine, s if these people have been working this way all their lives. Another quote is the title ‘The Withered Arm' that coincides with pain, or a wound of some kind. This creates fear, as the person affected could be either dead or alive and it could be any of the characters. Hardy thus Invites the reader to engage in his story. Although setting doesn't play a strong part In the story, It Is still Important. Take the description of Road's house for example; ‘a rafter showed Like a bone protruding through the skin'.The reference to the bone creates an ghostly feeling for the reader, as It Is described n quite a graphic manner. It will also cause fear, as the connotations of ‘bone' include other gory images, like blood. This description allows the reader to empathic with Road's situation. The description of her house then goes on to say the walls were made of mud, this shows the reader Just how working class Rhoda is and how life must be a struggle for her. We now know that Farmer Lodge, whom she fell pregnant with, was of a higher class, and when he abandoned Rhoda, he clearly left her with very little possessions.In the 19th Century, no husband or an illegitimate hill would immed iately lower a woman's social status, as would lack of expensive material objects. Hardy also uses various personalities In the Withered Arm, to add detail to the story. As each character arrives In the plot, some Information Is slowly revealed. He has designed them for the sole purpose of creating mystery and fear for the reader. Gertrude, as a female character would have been objectified in the Victorian times. Characters I. E. Farmer Lodge, causes us to consider what Gertrude purpose in Holystone is.What with the age difference between her and Lodge, they would have title to discuss and this leads us to think that Lodge only wants her for her looks. For example, ‘†¦ Married experience sank into proneness and worse', shows how through the decay of Gertrude limb along with her looks, Mr. and Mrs. Lodges' connections had slowly started to deteriorate. Mentions of Gertrude wishes to ‘regain some at least of her personal beauty give us an idea of the immense stress pu t on women in Victorian times to look good for their men. This again creates mystery as we wonder what Lodge's intentions with Gertrude are.The events, which follow the arrival of Gertrude Lodge in Holystone, create a sinister atmosphere. Although Rhoda had never met the new bride, she carried a strong grudge against her, apparently caused by her ever-growing Jealousy. One night Rhoda had a supernatural vision of the young Mrs. Lodge with ‘†¦ Features shockingly distorted†¦ ‘ and ‘†¦ Wrinkled as by age†¦ ‘ In addition, Gertrude flashes her new ring at Rhoda taunting her, the figure thrust forward its left hand mockingly. This shows the reader that Rhoda has not only taken an immediate dislike to Gertrude but also creates mystery because the reader yearns to find out why.In the vision, Rhoda grabs Ghost Gertrude by the arm, which connects with a deeper emotion of envy. Road's seeming obsession with Gertrude, and finding out everything about her has led to this. Subconsciously, Rhoda may be so Jealous of Gertrude hands, which are so opposite to her own, that she may want to ruin them in some way, to prevent Lodge from being attracted to her. This is why she grabbed Gertrude in her ‘dream'. To cause her hands to Wither' and at the same time lose their youthfulness. By introducing Rhoda Brooks ‘horrid fascination' with Gertrude limbs Hardy creates fear.At first, the reader may think that her interest has something to do with Road's insecurities, which could be triggered by the fact, that she has over-worked her own hands, as she is a milkmaid. However, when Rhoda begins to inquire deeper, through the quote: move never told me what sort of hands she has†, it suggests that she wants even more knowledge. By calling Gertrude ‘she', it's similar to fear or discomfort of using her name, as if it is taboo. As the quote is an implied question, we immediately want the answer.The word ‘sort' entails t hat there are many types of hands, which seems strange to the reader. Maybe Rhoda thinks that the ‘quality of hands signifies Gertrude class. There is also already reference to the title Withered Arm'. There is almost a sickening feeling of some kind of affection towards Gertrude, but Hardy also creates fear, by never fully explaining the two women's relationship. Thomas Hardy manages to create both mystery and fear, through the question asked in the aftermath of Road's late night encounter. â€Å"What was the noise in your chimer last night†¦ You fell off the bed surely? Hardy gives the question to Road's son, who is already an inquisitive character; this gives IM an innocent incentive, to enquire without suspicion. The mystery is created for the reader because supposedly, Road's encounter was a dream, however if Road's son heard it too, we begin to question the likeliness of what we've been told. Hardy has created doubt for the reader, and we are now suspicious of both Rhoda and Gertrude. Fear is created for Rhoda as she has already assumed that â€Å"it was not a dream†, but now her uncertainties have been confirmed. The question comes directly and used it effectively.As the reader, we are both surprised and fearful of this ‘incubus' which is apparently haunting Rhoda. As the truth hits both reader and character at the same time, Hardy makes it easier for us to empathic with her. When Farmer Lodge, lies to Gertrude about Rhoda and her son, secrecy is introduced into the Withered Arm. The quote â€Å"l think he lives with his mother, a mile of two off' creates mystery, in the sense that, a son would not really be something to keep secret from one's new wife. As the reader, we know that the boy is in fact Farmer Lodge's son, so when we catch him in the lie, we wonder how trustworthy he may be.In Victorian times, ‘a mile or two off would be a very long distance, and would usually mean, outside the village. Why would such a wealt hy man, worry about a 3rd class worker from his farm, who probably lives quite a Journey away. Is Lodge ashamed of his ex-family, or is he simply trying to hide their ongoing contact from Gertrude? The reader once again asks questions, as does Gertrude, but Farmer Lodge seems to keep his answers vague in order to avoid confrontation. It is as if he is trying to conceal his old life from his new life, so we get the idea that he is living in constant fear of his two worlds colliding.This mysterious factor not only make us question whether he loud be willing to sever his ties with his other family to prevent sabotaging his new ‘sugar-daddy profile but also whether he may be hiding other, more private secrets†¦ During the women's Journey to visit Trundle, Hardy uses pathetic fallacy to create fear. The quote thick clouds made the atmosphere dark, though it was yet only early afternoon' shows how the weather sets a dampener on the mood, consequently creating tension between Ge rtrude and Rhoda.It is common knowledge, that rain and dark clouds indicate bad weather, which can generate fear not only through setting the mood. To show that something strange is about to happen a connection between gloominess and the supernatural is established, as the quote goes on to say: ‘The wind howled'. This not only personifies the wind, by giving it a voice of its own but also, howling can be linked to werewolves which are supernatural animals often used in stories to portray the supernatural, therefore creating a mysterious and unnerving feeling for the reader.By slowly, introducing negative vocabulary in this section such as ‘dismally Hardy has captivated our attention, as he prepares us for the event, which will quickly change the course of the story. This yet again shows his consideration of structure and language to create mystery and fear. The curse in this tale is the reason why Gertrude develops a Withered Arm'; however, it is not confirmed who cursed Gertrude until she visits Conjurer Trundle. In the sass's medical science was not half as advanced as it is today therefore people would turn to look for answers in the thing they knew best; superstition.This is why Gertrude unfortunate incident is explained purely through magic; Conjurer Trundle would not have enough information in order to diagnose her with medical facts to back up his sections. Hardy's purpose for Trundle, as a character, is to incorporate fear in the story. From the very beginning, the reader has reason to be suspicious of the Conjurer. The quote â€Å"they say†¦ He had powers other folks had not† spoken by Gertrude, means that he would have a unique ability to perform rituals and spells of the mystical sort in order to aid the village people in their issues.The fact that Rhoda says they also adds mystery, as often the insecurity of the Victorian townspeople, would leave people with unanswered questions. It is indefinite where this information is co ming from. The hesitation in Road's voice would show that people would have a wary attitude toward Conjurer Trundle. His name in itself has a mysterious sound as to conjure' could mean to summon'. Would this mysterious figure ‘summon' some spirits to reveal Rhoda as Gertrude enemy?Hardy has written in such detail to ensure that both reader and character are wary of his personality. Another quote, its the work of an enemy causes distrust towards Trundle from the readers and the characters view, as they wonder how Trundle could have possibly made such a quick diagnosis and thus makes the reader evaluate how reliable Trundle is. In addition, how the verdict is delivered in such a short and spunky sentence shows the reader what a solemn character he is, almost replying nationalistically as if he was preoccupied elsewhere.The suddenness of it creates fear and the reader is almost frightened of reading on. When afterwards Gertrude attitude has changed so eerily in such a short amoun t of time the reader can be confident that the ‘enemy described is Rhoda herself. On of the scariest events is the death of Road's son, not a main character in the story but an event, which abruptly ends the story; thus making it more mysterious. When Gertrude visits the jail to fulfill her last spell in order to cure her arm, there is a shocking twist of fate.The quote ‘a second shriek rent the air of the enclosure' warns the reader that there have been consequences of the actions of a character. The word ‘shriek signifies pain, and as the same word is used to describe the feeling of relief coming from Gertrude to the horror-stricken Rhoda, more fear is created. How can these two women have anything more in common? The reader is afraid of what Rhoda will do next, as Hardy has already shown us her true colors so we know exactly what she is capable of. By changing the plot, Hardy creates even more mystery.As the reader, we were sure that a happy ending would ensue, we now once again fear for Gertrude, as her ‘enemy has returned. This broadens the possibilities of what could happen next and creates both mystery and fear. Hardy has yet again induced a feeling of uncertainty for the reader, by leaving the story at such an ambiguous point. Throughout ‘The Withered Arm' we have had to use our own Judgment and instincts to try to predict the story, which is what has created a fair part of the mystery for the reader. We also fear our own opinion, of making a false accusation and surprising ourselves.Hardy has pressured us into doing this and therefore induced fear from the very beginning, while withholding information, without us even reading too deep into the story. Through leaving certain questions unanswered, I empathetic with people from the Victorian era, who would also have been kept in the dark. I appreciate the way that Hardy has molded his story to create mystery and fear, through his individual writing style. He has kept the rea der attentive, thinking through every detail carefully while making his story engaging and entertaining. Yet another successfully created literary piece by Thomas Hardy.