Gross Domestic Product

Turkey is a country poised between Asia and Europe. This country of 71 million people is crucial to economic developments as it lies between producers and consumers, supply and demand. While seen as a bridge between the East and West, this majority Muslim country is also torn between both worlds. Its secular government has a long history of struggles between those who feel their country’s identity lies in the Middle East, those who desire full accession to the European Union (EU), and all those in between. The Turkish government’s main foreign policy goals are to make Turkey an integral part of the European Union

The Turkish government has, in recent years, worked on reforms to liberalize Turkey’s trade relationships and open its markets. Turkey’s main export commodities are apparel, foodstuffs, textiles, metal manufactures, and transport equipment. Its main export partner is Germany, who receives 11. 3% of Turkey’s exports, followed by the United Kingdom, Italy, the United States, France, and Spain. On the import side, it receives the most products from Russia, at 12. 8% of total imports, followed by Germany, China, Italy, France, the United States, and Iran.

Turkey’s trade with Iran, the other great economic power in the region, is of special interest to those in the United States and elsewhere who are concerned about Iran’s intentions and Turkey’s ability to hedge against Iran in the region. Turkey has a dynamic and complex economy that has seen strong growth since a devastating economic crisis in 2001 but still faces several major vulnerabilities. The country has used its mindset of modernization to develop competitive commerce and industries in the country, yet struggles to maintain equity between the urban and rural areas.

An exceptionally high 35% of its population is still employed in the agricultural sector (compare to 2. 8% in Germany, 8. 5% in Russia, 0. 6% in the United States, etc). The country has seen decreased inflation and strong economic growth in the last five to seven years, largely due to renewed investor interest in emerging markets, tightened fiscal policies, and International Monetary Fund backing. Its economy, however, is still vulnerable because of high external debt and a high current account deficit. Despite strong growth, Turkey’s economy is still relatively small in comparison to its main trading partners.

Comparisons can be made by examining countries’ gross domestic product, which is the value of all final goods and services produced within a nation in a given year. In 2007 Turkey had an estimated GDP of $667. 7 billion, with a GDP per capita (purchasing power per individual) of approximately $9,400. The United States, the largest economy in the world and one of Turkey’s major trading partners, had an estimated GDP in 2007 of $13. 86 trillion, with a GDP per capita of $46,000. Three of Turkey’s other main trading partners are Germany, Italy, and France. Germany had an estimated 2007 GDP of $2. 33 trillion, with GDP per capita at $34,400; Italy had a GDP of $1. 8 trillion, with GDP per capita of $31,000; and France had a GDP of $2. 067 trillion, with a GDP per capita of $33,800. Thus, while large in comparison to its neighbors (Armenia, GDP $16. 83 billion; Greece, GDP $326. 4 billion; etc. ), Turkey still has much room for growth and competitive development in comparison to its major trading partners. When compared to Turkey, The people of France are among the healthiest, wealthiest, and best-educated people in the world. The country is highly urbanized with more than 75 per cent of the people living in cities.

The French are known for their sophistication, their culture, the beauty of their spoken language, and their diverse accomplishments in literature, arts, and sciences. Even French cuisine and apparels have long been a source of national pride. The economy of France is one of the highly developed economies in the European Union (EU). The country is the leading manufacturer of goods such as automobiles, electrical equipments, machine tools, and chemicals. Apart from this, France is also the European Union’s most important agricultural nation and ships cereals, wine, cheese, and other agricultural products to the rest of Europe and the world.

However, today, the economy in France is determined by services industry, which includes banking, retail and wholesale trade, communications, health care, and tourism. With its culture, France has been able to influence the entire Western world, particularly in the areas of art and literature. French literary and artistic contributions during the Renaissance and the Age of Enlightenment deeply influenced the path of Western cultural development. It was during the Middle Ages that France attained cultural prominence in Europe. The 16th, 17th, and 18th centuries saw many of Europe’s most talented artists and artisans being attracted to Paris.

The 20th century was considered to be the ‘cinema era,’ with French cinema assuming a leading world position, particularly in the 1960s. World-renowned French cultural figures include philosophers, writers, painters, sculptors, architects, composers, playwrights, and film directors. Based on the country analysis, it is clear that Turkey is a market whose economy is rapidly growing, and the government of Turkey’s new foreign trade policies are open market business friendly. Kraft has been aggressively pursuing to enter the French market by acquiring Cadbury by preparing to bid as much as 18. billion. Given this high competition in the French market and the possible over load of the market with Kraft’s products, it would not be of Hershey’s best business interest to compete and enter into the French Market at this time. Therefore, I recommend that Hershey should enter the markets of Turkey first before it ventures into opportunities in France. This means, popular companies such as Hershey can take advantage of the new open market policies of the Turkish government to explore entrepreneurial opportunities to deploy its popular products.

One of the Entrepreneurial opportunities to explore is to expand product platforms that suite the local market and strengthen the route to market through local partnerships and acquisition. I would recommend exporting as an initial market entry approach followed by joint ventures and contract manufacturing. Reference: 1. Country Analysis Report – Turkey. August 2009. Market Research. com 2. www. economist. com Country briefings – France 3. France24. com. Jan, 2010. Hershey eyes $ 17. 0 billion bid for Cadbury.

In extension of the production function, foreign financed capital (l), export (EX) and import (IM) are added into the model to determine their impact on the economic growth. Pawl’s (2002) mentioned that the import is considered will affect the economic growth which are divided into intermediate and capital good imports. Flamboyancy’s (as cited in Bait, 2013) include FED as the addition input to labor and domestic capital in production function since it’s the main source of human capital and new technology for new developing country.

As mentioned by Namely (as cited in Bait, 2013), exports are included in the production function as more input of macro are needed. The FED stock was excluded from the Gross Capital Formation as it included both domestic and foreign investment and to avoid double measurement (Bait, 201 3) The production function extended, assuming multiple-linear equation, an Ordinary Least Squared estimate which specified below: Where – The estimated Gross Domestic Product per capita growth (annual = The Investment in terms of Gross Fixed Capital formation (% of GAP). The Labor force in terms of total (person). The Export of goods and services (% of GAP). The Import of goods and services (% of GAP). The Gross Capital Formation (% of GAP).  The error term of the regression. In the research done by Bass, Corroboratory and Regale (as cited in Turned, 201 2) studied the long-run and the short-run relationship between the investments with the gross domestic product (GAP). The result of their finding that there are positive long-run relationship between GAP and investment where their finding are consistent with findings obtained from Khan and Khan ND Mathematician (as cited in Turned, 2012).

Allah, Zamia, Faro and Jived (as cited in Hussein, 2014) have conducted a research to check whether there is nun-directional or bidirectional causality between the export and economy growth and the result suggested that there is nun-directional causality between the economic growth and export. In addition, findings by Mishear (201 1) there exist a positive impact on the increasing of real GAP with export in the case study of India which supported by Pharaoh also found that export have positive and significant impact on economic growth.

The increasing number of global labor workforce represent the opportunity to drive the economic growth and the increase in the gross domestic product (GAP) but it also represent many challenges (Wristwatch Institute, 2014). With the increase of number of labor in the labor workforce, the productivity level will reach optimum level at a certain point but after that point, the productivity level will decrease as the number keep increasing.

As or the case of Sir Lankan, now with the government effort to achieve upper middle income country, the increasing of the labor workforce will bring positive impact to the economic growth of Sir Lankan. According to Pawl’s (2002), imported intermediate goods have a positively and significantly influence the GAP growth in the long run. The main export of Sir Lankan is mainly architecture goods which are mainly depends on the import of fertilizers and agriculture machines. Thus it is acceptable to said that import of intermediate goods will brings positive and significant effect on the economic growth of Sir Lankan.

Based on the study by Imprimatur (2013) on effects of the gross capital formation on the GAP growth in India on agriculture sector found that higher level of gross capital formation in the agriculture sector as agriculture is the main backbone of the India economy was able to improve the overall GAP growth rate. This study can be apply to Sir Lankan as Sir Land’s main economy are agriculture based economy. Thus, this shows positive relationship between the Gross Capital Formation (GIF) with the Gross Domestic Product (GAP).

Financial services in today’s society has become more than what a high street bank can offer you from behind a counter. It has become a diverse functional area within any economically adequate society. Throughout this essay I have tried to grasp the main concepts concerning Financial Services and condense them into an essay of relatively minor proportions in comparison to the subject matter. I hope I can give you, the reader an insight into the world of financial services in all its diversity.

So what is meant by “financial services”. To be honest there is no straightforward definition such is the spread of financial services across the business spectrum. We can however dam different organisation under the heading of financial services to give you an idea of what financial service intails. Financial service is understood to include “banking, insurance, building societies, stock brooking and investment services”. These are the 5 main areas described by Brian Anderton in his 1995 book “current issues in financial services”. Brian also found it difficult to pinpoint a definitive meaning and found it easier to list organisation associated.

Going in to detail when concerning the institution aids in creating a further understanding of financial services yourself. Of the main financial institutions banks are the most common. Banks can be either “commercial” or “merchant”. Dealing with retail and investment respectively. Commercial banks are easily found on the high street and rely on deposits from ordinary people. There is very little interest paid to their savings accounts however savers can borrow sums of money from the banks from which the banks make profit from interest on the loan. Merchant banking is slightly more complicated when dealing with finances and in my opinion is more exciting. Merchant banks arrange finance deals and charge for this service. This investing is slightly risky and less straightforward. However the profit rewards outweigh the timescale and effort needed to invest.

Investment institutions such as pensions and insurance companies again take the liquid earnings of their clients and invest them in a wide range of profit making investments. Payment to these companies often takes the form of monthly payments taken by debit from wages. These companies give clients a sense of security, and in the claim free years to come, the chance of a large windfall payment.

Large investment institution deals with modern day trading, the trading of assets and debt. It is not fast companies that trade but individual people. In this hectic rat race people and institutions stand to loose and gain huge amounts of money. Due to the uncertain nature of this trade, people and institutions are extremely keen to lend as this is seen as a stable funds reclaim if it becomes necessary to do so.

The textbook definition for GDP- across domestic product is the total value of all the goods and services produced by the residents in this country. The fact that the financial sector and service sectors are growing is in no doubt, neither is the quite mind blowing increase in gross domestic product from years 1952 – 1992. An overall increase of 21% of EDP from 381m in 1952 to ?121704m in 1992 this growth is nothing less than remarkable.

This forty-year spell has seen such a huge financial success in terms of the sheer man of profit gain that the reasons for FS contributing so greatly to the GDP must be assessed. In the past Britain could be seen as a true industrialist profits made and traded through visible earnings such as machinery and farm produce. However the rise in strength of nation such as the US and major Asian powers, with their seemingly endless resources has seen the death of Britain the industrial workhorse.

On this level Britain could have remained at a financial and trading standstill. Not so however Britain has found its new market – the financial market. And with an educational population Britain set about resurrecting the countries profit making ability through invisible earning of finance matters. The idea of visible and invisible earnings is extremely important to Britains economy. So let me explain that apart from obvious differences between visible and invisible.

The desire to disseminate one’s knowledge, gained through experience in the field, often prompts one to say what one has to say in spite of the pitying and patronizing attitude of the amused but silent out lookers. The Macro Economics final report on the GDP and GNP trends of Pakistan since 1990 has got everything about the crusts and troughs of the Pakistan economy. In writing the report we have been guided mainly by our teacher. The reason for writing this report is to have a look at the trends in Pakistan economy and comparison of it with the world’s economy for a look at the changing world scenarios.

The difficulty we faced while writing this report was definitely the collection of data as these type of data are not very rarely found on websites as well as economic journals are very hard to be understood. We hope that the readers will appreciate our work and give suggestions for the betterment as nothing is perfect in this world and there is always a chance of enhancement and betterment in every field of life. Your good suggestions and ideas will be eagerly accepted. Islamic Republic of Pakistan is a country in South Asia.

It is bounded to the west by Iran, to the north by Afghanistan, to the northeast by China, to the east and southeast by India, and to the south by the Arabian Sea. The territory has an area of 796,095 square kilometers. The capital of Pakistan is Islamabad. Pakistan was brought into being at the time of the partition of British India in1947 in order to create a separate homeland for India’s Muslims in response to the demands of Islamic nationalists, demands that were articulated by the All India Muslim League under the leadership of Mohammad Ali Jinnah.

From independence in 1947 until 1971, Pakistan (both de facto and in law) consisted of two regions: West Pakistan, in the Indus River basin; and East Pakistan, located more than 1,600 kilometers away in the Ganges River delta. In response to grave internal political problems, however, an independent state of Bangladesh was proclaimed in East Pakistan in 1971. Since 1947, the territory of Jammu and Kashmir, along the western Himalayas, has been disputed between Pakistan and India.

With each holding sectors of Jammu and Kashmir, the two countries have gone to war three times in 1948, 1965, and 1971. Since its independence the country has established an industrial base and a sound technological infrastructure. In addition to setting up a network of hydro and thermal power generating stations, Pakistan is also the first Muslim state to have a nuclear power plant in operation catering for 20 percent of energy needs of Karachi, the industrial center and city port of over 10 million people.

Its arable lands, criss-crossed with largest irrigation system in the world, produce not only enough cotton, food-grains, fruits and vegetables to sustain but plenty more to spare for exports as well. In 1947, only 36. 3 million acres, or 18. 45 percent of the total land area, was under cultivation. Agriculture, apart from sustaining the economy, also provides basic raw materials to a large number of such industries as textiles, edible oils, sugar mills etc.

At the time when Pakistan came into being, it was predominantly an agricultural country, over 80 percent of its population living in rural areas engaged in primitive sub-sustaining farming, but over the years its economy has profoundly changed to a mix of agriculture and manufacturing, both contributing about 25 and 18 percent to GDP, and employing 48 and 13 percent respectively of the workforce. Both these sectors have come a long way by way of expansion and modernization in achieving a measure of self-sufficiency at least in the basic consumer needs.

Week 5 Quizzes ECO/GM 561

Your Results for: “Readiness Assessment Quiz”Print this page Site

Title:Economics UOP custom CW Book Title:UOP-custom course for Economics Book

Author:Case Summary of Results 100% Correct of 7

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1. GDP includes all transactions in which money or goods change hands. Your Answer:False
2. GDP is equal to the value of total sales in an economy. Your Answer:False
3. I bought a record last year. I don’t like it any more and am going to sell it to my cousin for $2. This sale should be included in GDP. Your Answer:False
4. Consumption, investment, government purchases, and net exports are the four components of total expenditures. Your Answer:True
5. Households have all of their personal income to spend or save. Your Answer:False
6. When economists calculate nominal GDP it means they are calculating GDP only approximately. Your Answer:False
7. Per capital GDP is a country’s GDP divided by its population. Your Answer:True

Your Results for: “Readiness Assessment Quiz”

Title:Economics UOP custom

CW Book Title:UOP-custom course for Economics Summary of Results 100%

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1. The twin evils of macroeconomics are unemployment and inflation. Your Answer:True
2. Recessions last six months. Anything longer is called a depression. Your Answer:False
3. To be considered employed a person must be working for pay for at least 20 hours per week. Your Answer:False
4. You need to be 14 years old to be considered part of the labor force. Your Answer:False
5. A discouraged worker is not actually working. Your Answer:True
6. People typically are unemployed for at least six months. Your Answer:False
7. Recessions have a good side to them because they help reduce inflation. Your Answer:True
8. The consumer price index is based on a bundle of goods and services purchased yearly by the typical urban consumer. Your Answer:False

India Economy GDP

India’s economy is the twelfth largest in the world in terms of market exchange rates. Since the liberalization of the economy in 1991, the economy has progressed towards a market-based system from a regulated and protected one. The country became the second-fastest growing economy in the world in 2008. India’s Economy GDP growth rate was 6. 1% in 2009. Gross Domestic Product (GDP) is the measure of a country’s economic performance. It is the market value of all the goods and services produced in a year. GDP can be calculated in three ways namely through the product (or output) approach, expenditure approach, and the income approach. The product approach is the most direct one which calculates the total product output of each class. The expenditure approach calculates the total value of the products bought by an individual which should be equal to the expenditure of the things bought. The expenditure approach calculates the sum of all the producers’ incomes where the incomes of the productive factors are equal to the value of their product. In 2007, the Indian economy GDP crossed over a trillion-dollar which made it one of the twelve trillion-dollar economy countries in the world. There has been excellent progress in knowledge process services, information technology, and high-end services. But the economic growth has been sector and location-specific.

The trend for India’s GDP growth rate is given below:

Contribution of different sectors in GDP.

Below are the contributions of different sectors in India’s GDP for:

Earlier agriculture was the main contributor to the GDP. To improve the GDP and boost the economy, the government has taken various steps like the implementation of FDI policies, SEZ’s, and NRI investments. The GDP growth rate slowed down to 6. 1% in 2009. In 2006, the country’s trade contributed to around 24% of the GDP from 6% in 1985. According to Goldman Sachs, India’s GDP in current prices may overtake France and Italy by 2020, Russia, Germany, and the UK by 2025 and Japan by 2035. It is also predicted that the Indian economy will be the third-largest after the US and China by 2035. In 2007, agriculture contributed around 16. 6% of the GDP. Even though its share has been declining, agriculture plays a major role in India’s socio-economic development. The industry contributes around 27. 6% of the GDP (2007 est). The services sector contributed to 55% of the GDP in 2007. The IT industry contributed around 7% of the GDP in 2008 which was 4. 8% in 2005-06. Remittances from overseas Indian migrants were around $27 billion or around 3% of the GDP of India’s economy in 2006.

Indian Economy-Facts on India GDP

• The Indian economy is the 12th largest in the world.
• It ranks 5th pertaining to purchasing power parity (PPP) according to the latest calculation of the World Bank.
• The GDP of India in the year 2007 was the US $1. 09 trillion.
• India is one of the most rapidly growing economies in the world.
• The growth rate of the India GDP was 9. 4% per year Due to the huge population the per capita income in India is $964 at nominal and $4,182 at PPP Points to remember while calculating India GDP.
• Calculating India GDP has to be done cautiously pertaining to the diversity of the Indian Economy.
• There are different sectors contributing to the GDP in India such as agriculture, textile, manufacturing, information technology, telecommunication, petroleum, etc.
• The different sectors contributing to the India GDP are classified into three segments, such as the primary or agriculture sector, secondary sector or manufacturing sector, and tertiary or service sector. With the introduction of the digital era, the Indian economy has huge scopes in the future to become one of the leading economies in the world.
• India has become one of the most favored destinations for outsourcing activities.
• India at present is one of the biggest exporters of highly skilled labor in different countries.
• The new sectors such as pharmaceuticals, nanotechnology, biotechnology, telecommunication, aviation, manufacturing, shipbuilding, and tourism would experience a very high rate of growth How to calculate India GDP.

The method of Calculating India GDP is the expenditure method, which is:

GDP = consumption + investment + (government spending) + (exports-imports) and the formula is GDP = C + I + G + (X-M)

Where,  C stands for consumption which includes personal expenditures pertaining to food, households, medical expenses, rent, etc. I stand for business investment as capital which includes the construction of a new mine, purchase of machinery and equipment for a factory, purchase of software, expenditure on new houses, buying goods and services but investments on financial products s not included as it falls under savings. G stands for the total government expenditures on final goods and services which includes investment expenditure by the government, purchase of weapons for the military, and salaries of public servants. X stands for gross exports which include all goods and services produced for overseas consumption. M stands for gross imports which includes any goods or services imported for consumption and it should be deducted to prevent from calculating foreign supply as domestic supply Recent developments in Indian GDP

Over the past 4 quarters, India Gross Domestic Product (GDP) has extended 6. 10%. According to the World Bank report, India Gross Domestic Product accounts for 1217 billion dollars or 1. 96% of the world economy. India being a diverse economy incorporates customary village farming, handicrafts, and a wide range of contemporary industry and services. Services are considered as a chief factor behind the economic elevation accounting for more than half of India’s productivity. Since 1997, the Indian economy has registered an average growth rate of more than 7%, minimizing the poverty rate by around 10%. India’s GDP grew at a notable 9. 2 percent in the year 2006-2007. Now that the service sector accounts for more than half of the GDP is a landmark in the economic history of India and helps the nation to come closer to the basics of an industrial economy. Where does India stand? India is positioned as one of the major economies worldwide in terms of the purchasing power parity (PPP) of the gross domestic product (GDP) by chief financial units of the world such as the International Monetary Fund, the CIA, and the World Bank. In terms of agricultural output, India is the second largest.

Industries related to agriculture have also played an important role in the up-gradation of the nation’s economy by opening up employment avenues in the forestry, fishing, and logging sectors. For the elevation in the production volume in Indian agriculture, various five-year plans should also be given due credit. Improvements in irrigation methods as well as usage of modern technologies have also added value to the agriculture processes. In terms of factory output, India ranks 14th in quantity produced by the industrial sector. Gas, mining, electricity, and quarrying industries also play major developmental roles and contribute in a major way to the GDP.

Latest snapshots of India Per Capita GDP

• India’s Per Capita Income stood at Rs 19040 in the year 2002-03.
• In 2003-04 India Per Capita Income was Rs 20989.
• Per Capita Income in India was Rs 23241 in 2004-05.
• In the fiscal year 2008-2009, the Per Capita GDP in India was Rs 37490.
• Per Capita GDP at factor rate at regular (1999-2000) prices in the FY 2008-2009 is estimated to reach a level of Rs 3351653.
• In 2008-2009 India attained a growth rate of 7. percent.
• A collective growth rate of 2. 6 percent in the field of agriculture, forestry, and fishing was witnessed in the FY 2008-2009.
• The service industry had a growth rate of 10. 3 percent in 2008-2009.
• During the 2008-2009 industry saw a growth rate of 3. 4 percent.
• The Indian States in terms of Per Capita Income.
• Jharkhand and Orissa which are considered as two backward states are increasingly developing in terms of per capita income. This expansion is facilitated by the growth of business activities taking place in these two mineral-rich states. Jharkhand with per capita income of Rs 14,990 has posted 16. 6 percent rise.
• Orissa is a spectator of the steady growth of 11. 5 percent in per capita income (Rs 14. 795).
• The industrialized Gujarat and Karnataka and Tamil Nadu are rated among the top states with a per capita income of more than Rs 20,734.
• Karnataka has per capita income nearly 9. 28% followed by Gujarat and Tamil Nadu at 8. 92% and 8. 46% respectively.
• Delhi and Goa however have a slower growth rate at 6. 9 percent and 6 percent respectively but ranks the highest in per capita income at Rs 49172 and Rs. 7507 respectively.
• Chhattisgarh with turbulence in social, political, and economic front registered a growth of 8. 8 percent. However, the average income base is very minimal at Rs. 16,365.
• Madhya Pradesh, Uttar Pradesh, and Bihar are yet to make a mark in the category of highest per capita income as the growth measures in these states are yet to be implemented.
• At per capita income of Rs. 12566, Rs. 10637 and Rs. 6610 of Madhya Pradesh, Uttar Pradesh, and Bihar respectively, these states have the sluggish rates of 2. percent, 3. 1 percent, and 3. 7 percent respectively.

17 states have per capita income less than the national average of 8. 4%. India’s Per Capita Income in the coming years India’s per capita income is predicted to rise in the coming years. FY 2008-09 was expected to witness more than double of per capita income over the last seven years to Rs 38,084, indicating an enhancement in the living standards of an average Indian citizen. The highest increase in per capita income was seen during 2006-07 in terms of percentage which stood at 13. %. However, after reducing for inflation (at 1999-2000 rates), the per capita income is predicted to grow to Rs25,661, indicating an upsurge of 5. 6%. In conclusion, as compared to other nations, India has performed well in spite of the global financial meltdown. GDP India Growth Rate India is considered as one of the best players in the world economy in the past few decades, but rapidly increasing inflation and the intricacies in administering the world’s biggest democracy are acting as the major hurdle in the field of development.

The Indian economy in recent years has been consistently performing with flying colors, escalating 9. 2% in 2007 and 9. 6% in 2006. This uninterrupted expansion is assisted by market restructuring, huge infusions of FDI, increasing foreign exchange reserves, the boom in both IT and real estate sectors, and a thriving capital market. The latest reviews of the India GDP growth rate areas under. For the first quarter of 2007-08 GDP posted a growth of 9. 3% and stood at Rs 7,23,132 crore, as compared to the consequent quarter of the previous fiscal year. In the quarter of April-June economy of India grew at 9. %. The progress was triggered by the construction, manufacturing, services, and agriculture industries. For the week concluded July 28, 2007, the yearly inflation rate was 4. 45%. The balance of payments in India is predicted to remain contended. Merchandise Exports registered steady growth. Manufacturing posted 11. 95 expansion Difference between GDP and GDP Growth Rate Retail spending, government expenses exports and inventory levels determine GDP growth rate. Elevation in imports will affect GDP growth in a negative way. The economic strength of a nation is indicated by the GDP growth rate.

Development in GDP will eventually boom business, employment opportunities, and personal income. On the flip side, if GDP slows down, then business ventures and already established enterprises will come to a halt. This will call off monetary infusion in new purchases, tie-ups, and recruiting new employees until the economy gain pace. As a result the GDP further deteriorates because the consumers do not have sufficient money to spend on buying a product or service. India GDP growth rate in 2009 According to the International Monetary Fund (IMF) economic growth rate of India is predicted to dip by 6. percent in the fiscal year 2009. IMF has further stated that this relegation is unavoidable because the Asian nations are not fully impervious to the global financial crisis and its consequent negative effects. IMF’s World Economic Outlook (WEO), released in Washington on October 8, 2008, explains the slopping of GDP growth rate in the last three years. In 2007 the GDP growth rate was 9. 3 percent while in 2008 it dipped to 7. 8 percent and would end up at 6. 9 percent in 2009. The analysis also asserted that Asia’s economic growth rate is expected to undergo a negative transition in the coming fiscal year.

Political Risk Analysis KENYA Table of contents Kenya covers an area of 582,646 square kilometers. The land stretches from the sea level (Indian Ocean) in the east, to 5,199 meters at the peak of the snow-capped Mount Kenya. From the coast, the altitude changes gradually through the coastal belt and plains (below 152 meters above sea level), the dry intermediate low belt to what is known as the Kenya Highlands (over 900 meters above sea level).

The monotony of terrain in the low belt is broken by residual hills, masses of broken boulders and inselbergs. Settlement is confined to places where water can be found. Wildlife are masters of the greater part of the low belt. The famous Amboseli Game Reserve and Tsavo National Parks are situated here. The Great Rift Valley bisects the Kenya Highlands into east and west. Mount Kenya is on the eastern side. The Highlands are cool and agriculturally rich. Both large and small holder farming is carried out in the highlands.

The Lake Victoria Basin is dominated by Kano plains which are suited for farming through irrigation. The northern part of Kenya is plain and arid. However, a variety of food crops do well through irrigation. Kenya is located approximately 8-10 hours flying time from major European cities, and about 16-20 hours flying time from North American cities. 1. 2. CLIMATIC CONDITIONS Kenya enjoys a tropical climate. It is hot and humid at the coast, temperate inland and very dry in the north and northeast parts of the country. The average annual temperature for the coastal town of Mombasa (altitude 17 meters) is 30. 0 Celsius maximum and 22. 40 Celsius minimum, the capital city, Nairobi (altitude 1,661 meters) 25. 20 Celsius maximum and 13. 60 Celsius minimum, Eldoret (altitude 3,085) 23. 60 Celsius maximum and 9. 50 Celsius minimum, Lodwar (altitude) 506 meters) and the drier north plain lands 34. 80 Celsius maximum and 23. 70 Celsius minimum. There is plenty of sunshine all the year round and summer clothes are worn throughout the year. However, it is usually cool at night and early in the morning. The long rains occur from April to June and short rains from October to December.

The rain-fall is sometimes heavy and when it does come it often falls in the afternoons and evenings. The hottest period is from February to March and coldest in July to August. The annual migration of wildlife between Serengeti National Park in Tanzania and Maasai Mara National Park in Kenya takes place between June and September. The migration of almost two million wildebeest, zebras and other species is nature’s greatest spectacle on earth. 1. 3. POPULATION Kenya’s population has rapidly increased over the past several decades, and consequently it is relatively young. Some 73% of Kenyans are under 30.

In 50 years, Kenya’s population has grown from 7 million to 43 million. Kenya is a country of great ethnic diversity. Most Kenyans are bilingual in English and Swahili. Kenya has a very diverse population that includes three of Africa’s major sociolinguistic groups: Bantu (67%), Nilotic (30%), and Cushitic (3%). Kenyans are deeply religious. About 80% of Kenyans are Christian, 11% Muslim, and the remainders follow traditional African religions or other faiths. Most city residents retain links with their rural, extended families and leave the city periodi-cally to help work on the family farm.

About 75% of Kenya’s population lives in rural areas and relies on agriculture for most of its income. Nearly half the country’s 42 million people are poor, or unable to meet their daily nutritional requirements. The national motto of Kenya is Harambee, meaning “pull together. ” In that spirit, volunteers in hundreds of communities build schools, clinics, and other facilities each year and collect funds to send students abroad. 1. 4. BACKGROUND OF KENYA’S ECONOMY (1960-2010) Kenya is the largest economy in east Africa and is a regional financial and transportation hub.

After independence, Kenya promoted rapid economic growth through public invest-ment, encouragement of smallholder agricultural production, and incentives for private (of-ten foreign) industrial investment. Gross domestic product (GDP) grew at an annual average of 6. 6% from 1963 to 1973. Agri-cultural production grew by 4. 7% annually during the same period, stimulated by redistrib-uting estates, diffusing new crop strains, and opening new areas to cultivation. After experiencing moderately high growth rates during the 1960s and 1970s, Kenya’s eco-nomic performance during the 1980s and 1990s was far below its potential.

From 1991 to 1993, Kenya had its worst economic performance since independence. Growth in GDP stagnated, and agricultural production shrank at an annual rate of 3. 9%. In-flation reached a record 100% in August 1993. In the mid-1990s, the government imple-mented economic reform measures to stabilize the economy and restore sustainable growth, including lifting nearly all administrative controls on producer and retail prices, im-ports, foreign exchange, and grain marketing. Nevertheless, the economy grew by an annual average of only 1. 5% between 1997 and 2002, which was below the population growth estimated at 2. % per annum, leading to a decline in per capita incomes. The poor economic performance was largely due to inappropriate agricultural, land, and industrial policies compounded by poor international terms of trade and governance weaknesses. Increased government intrusion into the private sector and import substitution policies made the manufacturing sector uncompetitive. The policy environment, along with tight import controls and foreign exchange controls, made the do-mestic environment for investment unattractive for both foreign and domestic investors.

The Kenyan Government’s failure to meet commitments related to governance led to a stop-start relationship with the International Monetary Fund (IMF) and World Bank, both of which suspended support in 1997 and again in 2001. During President Kibaki’s first term in office (2003-2007), the Government of Kenya began an ambitious economic reform program and resumed its cooperation with the World Bank and the IMF. There was some movement to reduce corruption in 2003, but the government did not sustain that momentum. Economic growth began to recover in this period, with real GDP growth registering 2. % in 2003, 4. 3% in 2004, 5. 8% in 2005, 6. 1% in 2006, and 7. 0% in 2007. However, the economic effects of the violence that broke out after the December 27, 2007 general election, compounded by drought and the global financial crisis, brought growth down to less than 2% in 2008. In 2009, there was modest improvement with 2. 6% growth. In May 2009, the IMF Board approved a disbursement of approximately $200 million under its Exogenous Shock Facility (ESF), which is designed to provide policy support and financial assistance to low-income countries facing exogenous but temporary shocks.

The ESF re-sources were meant to help Kenya recover from the negative impact of higher food and in-ternational fuel and fertilizer costs, and the slowdown in external demand associated with the global financial crisis. In January 2011, the IMF approved a 3-year, $508. 7-million ar-rangement for Kenya under the Fund’s Extended Credit Facility. To a considerable extent, the government’s ability to stimulate economic demand through fiscal and monetary policy is linked to the pace at which the government is pursuing reforms in other key areas. The Privatization Law was enacted in 2005, but only became operational as of January 1, 2008.

Parastatals Kenya Electricity Generating Company (KenGen), Telkom Kenya, and Kenya Re-Insurance have been privatized. The government sold 25% of Safaricom (10 billion shares) in 2008, reducing its share to 35%. Accelerating growth to achieve Kenya’s potential and reduce the poverty that afflicts about 46% of its population will require con-tinued deregulation of business, improved delivery of government services, addressing structural reforms, massive investment in new infrastructure (especially roads), reduction of chronic insecurity caused by crime, and improved economic governance generally.

The gov-ernment’s Vision 2030 plan calls for these reforms, but realization of the goals could be de-layed by coalition politics and line ministries’ limited capacity. Economic expansion is fairly broad-based and is built on a stable macro-environment fos-tered by government, and the resilience, resourcefulness, and improved confidence of the private sector. Despite the post-election crisis, Nairobi continues to be the primary commu-nication and financial hub of East Africa.

It enjoys the region’s best transportation linkages, communications infrastructure, and trained personnel, although these advantages are less prominent than in past years. Kenya faces profound environmental challenges brought on by high population growth, de-forestation, shifting climate patterns, and the overgrazing of cattle in marginal areas in the north and west of the country. Significant portions of the population will continue to require emergency food assistance in the coming years. Kenya is pursuing regional economic integration, which could enhance long-term growth prospects.

The government is pursuing a strategy to reduce unemployment by expanding its manufacturing base to export more value-added goods to the region while enabling Kenya to develop its services hub. In March 1996, the Presidents of Kenya, Tanzania, and Uganda re-established the East Afri-can Community (EAC). The EAC’s objectives include harmonizing tariffs and customs regimes, free movement of people, and improving regional infrastructures. In March 2004, the three East African countries signed a Customs Union Agreement paving the way for a common market.

The Customs Union and a Common External Tariff were es-tablished on January 1, 2005, but the EAC countries are still working out exceptions to the tariff. Rwanda and Burundi joined the community in July 2007. In May 2007, during a Com-mon Market for Eastern and Southern Africa (COMESA) summit, 13 heads of state endorsed a move to adopt a COMESA customs union and set December 8, 2008 as the target date for its adoption. On July 1, 2010, the EAC Common Market Protocol, which allows for the free movement of goods and services across the five member states, took effect.

In October 2008, the heads of state of EAC, COMESA, and the Southern African Development Communi-ty (SADC) agreed to work toward a free trade area among all three economic groups with the eventual goal of establishing a customs union. If realized, the Tripartite Free Trade area would cover 26 countries. 2. POLITICAL CRITERIA 2. 1. GENERAL From the moment Kenya became independent, they went through lots of big changes. In 1962 the KANU-KADU coalition government was formed. The coalition government included both Kenyatta and Ngala.

The country was divided in 7 regions and each one of the regions had its own regional assembly. After forming the coalition, the principle of reserving seats in the parliament for non-Africans was abandoned and the first open elections were held in May 1963. In 1964 Kenya became a republic, and constitutional changes further centralized the government (Wikipedia – September 2012). When in 1978 Daniel Arap Moi became president in an authoritarian and corrupt manner, there were several changes in the politic of Kenya.

Moi reduced the power of the Kenyatta’s men in the cabinet by identifying them to be traitors. Also although the parliament started off as coalition during the whole presidency of Moi there was only one party who had all the power. Even after being requested by United States to have multi-party system Moi declined. In the end because of the local and foreign pressure Moi was forced to accept a new party so that the multy-party could be restored. Moi won the elections in 1992 and 1997 where he used fear and electoral fraud to win (Wik-ipedia – July 2008).

In 2002 Moi was not able to present himself in the presidential elections because it is stated in the Kenya’s constitution that a present cannot be in the presidential elections more than three times. Moi unsuccessfully tried to promote Uhuru Kenyatta, as his successor. Moi’s former vice-president Mwai Kibaki was elected president by a large majority. International and local observers reported that the 2002 elections to be generally more fair than those of both 1992 and 1997 when Moi was elected as president. Kibaki lost quickly much of its power because his regime was too close linked with the Moi forces.

The continuity between Kibaki and Moi became one of the reasons for the self-destruction of Kibaki’s regime. In 2007 Odinga attacked the failures of the Kibaki regime. In December Odinga won majority of the seats in the Parliament, but the presidential elections votes were divided. In the end it became never clear who won the elections, still the election committee stated that Kibaki was the winner. Odinga accused Kibaki of corruption which resulted in several big confrontations between followers of Odinga and Kibaki. The European Union did not agree with the outcome either because of the detected fraud in the presidential elections.

As relation mass protest were triggered, bring-ing simmering ethnic tensions. The protest and the ongoing violence between several groups continued and became worse over the months. Between December and February 1. 500 people died and 600. 000 people became homeless. The United Nations tried to settle and offered a compromise whereby Kibaki stayed president and Odinga became Prime Minister (Chartis – February 2008). In August 2010, a reference date taken on a new Kenyan constitution. The new Kenyan con-stitution restricted the power of president which would benefit to the parliament and re-gions.

The reference date was accepted by the majority of parliament and passed peacefully. 2. 2. THE POLITICAL BALANCE OF POWER Various people speak of the heritance of Moi when looked at Kibaki and the amount of pow-er he has. Moi reduced the power of the cabinet – this resulted in more power for him, the president. When Kibaki became the president he had his first years as much power as Moi had in his years. But the second time Kibaki became president there were many protests against him becoming the president. Many people and also Odinga accused him winning unfairly.

United Nations stepped in and made Odinga prime minister and shortly after that the Kenyan constitution changed. With the new Kenyan constitution rules Kibaki, or the pre-sent president, is not allowed to appoint more than 50% of the ministers. The rest of the ministers can be chosen by the prime minister. In this way the president is never able to al-ways have full support by his ministers. Nowadays you can speak of a power-sharing cabinet in Kenya. The cabinet is fifty percent Kibaki appointed ministers and fifty percent Odinga appointed ministers.

At the moment we can speak of balanced coalition when we look at Kenya. 2. 3. PRESENT GOVERNMENT AND HIS ATTITUDES AND PROGRAMS Although many opposed of Kibaki to become the president Kenya again in 2007 he did by some say an outstanding job. The country is compared to the Moi years much better man-aged and has by far more competent personnel (Wikipedia – October 2012). Many sectors of the economy have recovered from collapsing in 2003. So did many state corporations who had collapsed during the Moi years have been revived and are performing profitably. Also the infrastructure has been going through changes.

Several ambitious infra-structural and other projects are planned or ongoing. Kibaki also introduced the Constituency Development Fund, this was introduced in 2003. The fund was designed to develop resources across regions and to control imbalances in regional development. The CDF program has invested in putting up new water, health and education facilities. There was also special attention for the remote areas of Kenya; these areas were usually overlooked during projects (CDF – official website). Another fact is since the presidency of Kibaki the dependence of Kenya on aid by western donors has been decreased.

The country is still getting funded significant but is now finding more fund by internally generated resources, such as tax. During Kibaki presidency, Kenya was more democratic and freer than before. When Kibaki came to power in 2003, he gave away free learning in primary school as well as in secondary school. This resulted in increase of number of children in primary- as in secondary school. 2. 4. POLITICAL STABILITY IN KENYA Before August 2010 all the power laid in the hands of the president. Ex-president Moi for example used his position for his own benefits.

After the new Kenyan constitution the power changed of only one person, the president, too have it shared with the cabinet. With the new Kenyan constitution it results in a more stable government. When we look at the further the cabinet of Kenya will go through huge changes starting from 4 March 2013, because the general election will then be held. So far Kibaki did not state that he will run in the president elections next year. Odinga will be participating as well as several other ministers, for example: the Deputy prime minister and the Cooperative minister (Wikipedia – October 2012). . CRITERIA RELATED TO DOMESTIC ECONOMY 3. 1. GENERAL INFORMATION Most of Eastern Africa’s economy is centralized in Kenya, although this gives them a power-ful position they still suffer from corruption and the low prices of their most important ex-port products. Lately the government has lacked investing in infrastructure which leaves them in danger of losing the position of the largest economy in Eastern Africa. The government is accused of the lack of attempting to stop the corruption which opened the doors to a lot of scandals within Kenya’s economy.

This has led to a deduction of financial support options. Recently Kenya have had a lot of setbacks like: high food and fuel import prices, a severe drought and reduced tourism resulted in rise in the interest rated and an increased cash re-serve. 3. 2. GDP The GDP in 2011 was $ 72, 34 billion, in 2010 this was $ 68,9 billion and in 2009 $ 2,6 billion. GDP growth in % Because of violence used during the elections plus the global financial crisis have led to a deduction in the GDP, in 2008 the growth was only 1,7% but luckily the economy rebounded since the year 2009.

Now in 2011 the growth was only 4,3% due to the inflation and currency depreciation. The GDP per capita was $1,700 in 2009 and in 2010 and increased to $1,800 in 2011. If you would compare this with the rest of the world this leaves Kenya on the 195th place in the, which is dangerously low when we look at the risk of doing business with Kenya. Year PPP growth 20051398. 7034. 74 % 20061490. 4066. 56 % 20071592. 9866. 88 % 20081604. 9250. 75 % 20091616. 1430. 70 % 20101675. 9183. 70 % Even though historical facts do not look good, the forecast concerning the GDP are looking better.

The GDP is likely to increase due to expansions in tourism, telecommunications, transport and construction and recovery in the agriculture, one of the most important sec-tors for Kenya’s GDP. 3. 3. MOST IMPORTANT SECTORS AND PRODUCTS As mentioned before, one of the most important sectors in Kenya’s economy is the agricul-tural sector, forestry and fishing accounted for 24% of the total GDP, 18% of the wage em-ployment and 50% revenue from exports. Especially the tea production and export are likely to increase because of prosperous weath-er forecasts; the coffee industry has stagnated and is not likely to increase in the near future.

The most profitable sector in Kenya is the service sector with tourism dominating that sec-tor. About 63% of all GDP is generated by tourism. Most tourists come from Germany and the Uniting Kingdom; they are attracted to the coastal beaches and the big game reserves. The tourism sector had a downfall because of negative attention in the media and the unsafe environment. The government is currently addressing the security problems within Kenya by introducing a tourism police and by launching marketing campaigns in key tourist origin markets.

The most important sectors are: consumer goods (mobile, batteries and textile), agriculture, oil, aluminum, steel, cement and tourism. 3. 4. INFLATION RATE Inflation in consumer prices in % The inflation rate in 2011 was 14%. As we can see on the chart the inflation rate fluctuates a lot which means it will have a negative effect on the analysis on the risk. The Kenyan inflation rate has been on an average of 12,6%, from 2006 until 2012. The ultimate high was 31,5% in May 2012 and 3,2% in October 2011. On the following chart we can see the inflation rate more specified in recent times.

Even in the last months there has been a lot of fluctuation in the inflation rate. The main reasons for the fluctuations are droughts and uncertainty in the import and export prices. 3. 5. THE GROWTH OF THE POPULATION The current total population is 43,013,341 (July 2012). In this chart we can see that the population always has had a steady growth. 3. 6. DOMESTIC INFRASTRUCTURE Kenya has an extensive road network of 152887 kilometers but most of the roads are in bad state unfortunately. For example of the total of 63. 800 ilometers of high way only 8,868 are paved. There is currently a project designed for creating links between all major and minor roads and to rehabilitate 20. 000 kilometer of roads in the urban centers. Kenya has a state owned railway corporation which is managing the single track railway station. It runs from Mombasa through Nairobi to the Ugandan border. Certain institutes are investing in the railway corporation to make it viable. The government is working on making the railway a private owned company. Either way, the Kenyan railway station is in a bad state.

Kenya has a port located in Mombasa; it has a freight throughput of about 8. 1 million tons. Kenya has an airport that recently has changed from a state owned company to a public/private company. This has been successful since Kenya now is the key gateway to Africa Communications Overall Kenya has a well-established communication system More than 90% of the population has access to GSM signals. Kenya Posts and Telecommunications Corporation provides international direct dialing and subscriber trunk dialing, mobile telephones, telex, facsimile, data communication and related services.

Substantial investment for the expansion of these facilities is under way and various internet providers have made their entry into Kenya. 4. CRITERIA RELATED TO FOREIGN ECONOMY Economic Cooperation, Regional Integration & Trade The East African Community (EAC) countries – Kenya, Tanzania, Uganda, Rwanda and Burun-di – transformed into a fully ? edged and enforceable customs union on 1 January 2010. They adopted a common external tari? (CET) with three bands: 0% (raw materials and capital goods), 10% (intermediate goods) and 25% (? nished goods). Tari? of up to 100% are appli-cable to products that are deemed to be sensitive to member states. These include maize, rice, cement, sugar and dairy products. Members will continue to collect customs receipts separately until a revenue sharing mechanism can be agreed. Furthermore, the EAC Common Market Protocol came into force on 1 July 2010, potentially allowing for the free movement of goods, services, people and capital in a zone with a com-bined population of some 135 million people. Given the large amount of legislation that needs to be amended in all countries to comply with the protocol, the transition is expected to proceed slowly.

Kenya has already taken signi? cant steps to domesticate and embrace the provisions of the protocol. A task force charged with reviewing national laws and aligning them with the Common Market Protocol has completed its report. Areas that need harmonization include investment, tax, labor, education, standards, competition, transport, communications and ? nancial services. The report was forwarded to the attorney general who was expected to prepare a miscellaneous amendment bill to be tabled in parliament. Non-tari? barriers (e. g. road blocks, varying quality standards, the ine? ient functioning of the port of Mombasa and other red tape) continue to impede the free trade in goods and add to the costs of doing business. The replacement of paper-based customs administration practices with an electronic inter-face system, Simba, is a strong step towards enhancing competitiveness and trade facilita-tion. With the bringing into operation of Simba customs checks are subjected to computer-ized scanning and fewer physical checks are undertaken. The programme has enabled im-porters and exporters to lodge their documentation on line.

In 2012, the Simba upgrade is expected to increase automation of goods clearance across all Kenyan border crossings. 4. 1. IMPORT 2011 While Kenya had just spent 3. 3 billion US Dollars on merchandise imports in 99’, they imported goods worth to 13. 49 billion US Dollar in 2011 which is an increase of over 400%. The depressed performance during the 2008-09 was due to a number of adverse shocks including the post-election violence in early 2008, a severe drought that affected most parts of the country, high international commodity prices and spillover effects of the global financial crisis, but the econ-omy rebounded in 2010.

Import Products The major import products for the year to June 2011 were oil, manufactured goods, chemi-cals, machinery and transport equipment. The increase in the value of imports was mainly due to imports of oil, machinery and transport equipment, and manufactured goods. Oil imports accounted for 24. 2% of the total import. International oil prices increased from USD 74. 8 per barrel in June 2010 to USD 112. 15 per barrel in June 2011. Imports of machinery and transport equipment accounted for 28. 9% of total imports, and increased from USD 3 212 million to USD 3 942 million.

This was due to the ongoing infra-structure development. Imports of manufactured items, mainly intermediate goods, accounted for 14. 8% of the im-port bill and increased from USD 1. 625 million to USD 2. 021 million while chemicals ac-counted for 13. 5%. Major Import Partners Kenya’s major import partners for merchandise are (2011): 1United Arab Emirates13. 0% 2China12. 1% 3India11. 6% 4South Africa5. 8% 5United Kingdom4. 6% 4. 2. EXPORT 2011 Kenya had received 2. 2 Billion US Dollar in 99’, while they could increase their receiving for ex-ports in 2011 to 5. 77 Billion US Dollar.

This is an increase of about 260%. The depressed performance during the 2008-09 was due to a number of adverse shocks including the post election violence in early 2008, a severe drought that affected most parts of the country, high international commodity prices and spillover effects of the global financial crisis, but the economy rebounded in 2010. Export Products The agricultural sector continues to dominate Kenya’s economy, although only 15 percent of Kenya’s total land area has sufficient fertility and rainfall to be farmed, and only 7 or 8 per-cent can be classified as first-class land.

It is the mainstay of Kenya’s economy, contributing over one third of the Gross Domestic Product (GDP). AGRICULTURAL PRODUCTS:Tea, coffee, horticultural products, pyrethrum, pineapples, sisal, tobacco and cotton. TOP 1 – TEA Kenya is one of world`s top producers and exporters of high quality tea and coffee. Value of the produce was boosted by the average auction price TOP 2 – HORTICULTURE The robust flower industry in Kenya sees flower exports ac-counting up to 35% of all Europe’s flower imports. The good performance recorded in the horticultural sub-sector was due to improved external demand.

OTHER EXPORTS:Beside this also iron, steel, petroleum products, cement, arti-cles of plastics, medicinal and pharmaceutical products, and leather are exported Textile is Kenya’s leading manufactured export. Soda ash (used in glassmaking) is Kenya’s most valuable min-eral export and is quarried at Lake Magadi in the Rift Valley. SERVICES: Transport, tourism and telecommunications services are the top three service exports in the country. Kenya’s services sector, which contributes about 63 percent of GDP, is dominated by tourism. TOURISM: In 2011 tourism experienced signi? cant gains with earnings rising by 32. %. The United King-dom continued to be the country’s main departure point for tourists with 203. 290 arrivals. Tourism is the second most important source of foreign exchange. To maximize on this growth trend, the Government is working together with the private sector in carrying out marketing as well as in strengthening linkages between tourism and the rest of the economy. Major Export Partners The market for Kenyan exports has been transformed over the years due to changing policy environment, regional integration and other initiatives providing market access to 12 key trading blocks.

The initiatives include the East African Community, the Common Market for Eastern and Southern Africa (COMESA), Cotonou ACP/EU Partnership Agreement, and the AGOA initiative, among others. COMESA is Kenya’s key export market, absorbing about 35% of total exports. The European Union market is the second most important, absorbing about 30% of total exports. Kenya’s major export partners for merchandise are (2011): 1COMESA (e. g. Uganda, Tanzania etc. )35. 0% 2European Union30. 0% 3United States5. 6% 4Pakistan4,2% 5United Arab Emirates4,1%

Kenya’s relations with Western countries are generally friendly, although current political and economic instabilities are sometimes blamed on Western pressures. ? 4. 3. THE IMBALANCE IN TRADING Kenya is largely a trade deficit country. The negative balance of trade occurs because the country’s exports are vulnerable to both international prices and the weather conditions. Since independence, Kenya has enjoyed close international relations, particularly with the western countries. It is also a member of several regional trade blocs, such as the COMESA (Common Market for Eastern and Southern Africa) and the EAC (East African Community).

These blocs are key components of Kenya’s trade volumes. The 2011 Kenya’s trade performance was mainly affected by rise of oil prices globally which led to increase in the import bill and the depreciation of the Kenya shilling, while exports remained stagnant. The gap between imports and exports, also called current account deficit, now stands at above 10% of GDP – one of the highest in the world! Today, Kenya’s main exports don’t even earn enough to pay for its oil imports, 4. 4. KENYAN CURRENCY The recent history of Kenyan currency

On 14 September 1966, the Kenyan shilling (KES) replaced the East African shilling at par, although it was not demonetized until 1969. The Central Bank of Kenya issued notes in de-nominations of 5, 10, 20, 50 and 100 shillings. Locals in Kenya call the Kenyan shilling also “Bob”. The Kenyan Shilling: Development of the Kenyan shilling Overview of the development of the Kenyan shilling (blue) compared to the US Dollar (red) between 2002 and 2012. Exchange rate in October 2012: EUR / KES 1 Euro = ca. 110,38 Kenya shilling 100 Kenya shilling = ca. 0,91 Euro EUR / USD 1 Euro = ca. 1,29 US Dollar 100 Kenya shilling = ca. ,18 US Dollar 4. 5. KENYAN MONETARY POLICY The year 2011 was tumultuous for the monetary authorities in Kenya with high inflation rates and a heavily depreciated currency. The month–on-month inflation rate averaged 12. 9% from January to October and peaked at 19. 7% in November 2011 against a target of 5%. The high rate of inflation was mainly driven by a rise in food and non-alcoholic beverage prices and transport charges. The food and non-alcoholic beverages index rose by 26. 2% compared with October 2010 while the transport index rose by 26. 22%. The rise in transport index reflected the sharp rise in fuel prices.

According to the Central Bank of Kenya (CBK), the euro-area currency crisis also had a desta-bilizing effect on the price level. Inflation is expected to drop to single digits in the next two years thanks to improved production of food and stability of fuel prices. In 2011 the Kenyan shilling depreciated (=im Wert gefallen) by a margin of 25. 2% against the US dollar (USD), dropping from an average of KES 81. 11 per USD 1 in January 2011 to KES 101. 51 in October 2011. It depreciated against the euro (EUR) from an average of KES 108. 29 per EUR 1 in January to KES 139. 07 in October 2011.

To arrest the fall of the Kenyan shilling, the monetary policy committee (MPC) progressively increased the central bank rate (CBR) from a low of 6% in January 2011 to a high of 18% by December 2011. The inflationary pressure experienced in 2011 and the depreciation of the Kenyan shilling can directly be traced back to the Central Bank of Kenya policy adopted in 2010, when it cut the central bank rate from 7% in January to 6% in December. This was meant to revive lend-ing and stimulate the economy through increased consumption. The policy was highly suc-cessful as evidenced by the 5. 6% growth attained in 2010.

However increased consumption pushed up consumer prices and put pressure on the Kenyan shilling as it heightened demand for imports, which rose from USD 11,283 million in year 2009/10 to USD 13,659 million in year 2010/11. Furthermore, in year 2010/11, domestic credit increased by KES 254. 4 billion (23. 4%) against a target of KES 205. 9 billion (18. 9%). The excess credit growth reflected a stronger domestic demand than previously estimated. 4. 6. KENYAN’S DEBT SITUATION Kenya’s external debt (or foreign debt) External debt is that part of the total debt in a country that is owed to creditors outside the country.

This is not to be confused with actual government debts. The debtors can be the government, corporations or private households. The debt includes money owed to private commercial banks, other governments, or international financial institutions such as the International Monetary Fund (IMF) and World Bank. List of countries by external debt (End of 2011): External debt. (in USD)per capita% of GDP 1 United States14,710,000,000,00050,266103 2 United Kingdom9,836,000,000,000156,126390 3 France5,633,000,000,00074,619182 4 Germany5,624,000,000,00057,755142 5 Japan2,719,000,000,00019,14845 Italy2,684,000,000,00036,841108 7 Netherlands2,655,489,600,000226,503344 8 Spain2,570,000,000,00018,26084 16 Austria 883,500,000,00090,128200 92 Kenya 7,935,000,00020025 The debt service ratio The debt service ratio is the ratio of debt service payments (principal + interest) of a country to that country’s export earnings. A country’s international finances are healthier when this ratio is low. The ratio is between 0 and 20% for most countries. For example, if a country has export revenue of ? 100bn and pays ? 15bn interest payments on its external debt, then its debt service ratio is 15%.

A rising debt service ratio is often the sign of an imminent economic crisis. Debt service ra-tios may rise because of: •A fall in exports •Lower price of commodities which are main exports of a country. •Higher Borrowing •Higher interest rates increasing cost of debt repayments •Devaluation increasing cost of external repayments. 5. CONCLUSION All in all Africa has a big potential for exports and investments as there are still big growth opportunities. Kenya has the greatest growth potential in the Sub-Saharan area followed by South Africa. However there are some recommendations to bear in mind (e. . Letter of credit, creditworthiness check,… see list at end of paper) Following there is an overview of the key advantages and disadvantages for exporting to or investing in Kenya: +- Stable economy and good eco-nomic prospectspolitical instability ? political riskBUT: increasing political stability since peaceful referendum in 2010 ? adoption of a new con-stitution Favourable strategic geographical position and access to export mar-kets (? Eastern Africa) corruption and impunity (=Straflosigkeit) BUT: High efforts to bring the problem under control: since 2010 ?

Kenyan Anti-Corruption Commission forced high-profile cabinet ministers to step aside and the International Criminal Court publicly named perpetra-tors of violence (=Gewalttater) Membership of the largest African common market, the EAC (Eastern African Community), COMESA and the Southern African Development Community (SADC) ? enables the free movement of goods and ser-vices across the member statesInadequate infrastructure for absorption of economic devel-opmentBUT: High efforts to catch up on infrastructure English languagewidespread poverty ? crime Mombasa seaport ? most impor-tant seaport + Nairobi ? olitical and economic stronghold in the Eastern African Areacompanies are often undercap-italized ? risk of late or non-payment Small time difference Small taxes and levies (=Abgaben) Low wages compared to European countries and well trained em-ployees Emerge of a middle class with increasing purchasing power Kenya plays a major role in the Eastern African economy. Mombasa is the most important seaport in Eastern Africa and Nairobi is the economic and political stronghold in this area. One big plus for exports to or investments in Kenya is that the country has a quite stable economy. Even there were some setbacks in the past (e. . violence during the last elections in 2008, global financial crisis) the outlook for Kenya’s economy and GDP is quite favourable for the future. Due to the expansionary of fiscal measures and by structural business reforms driven by the IMF the economy of Kenya will further improve in the past few years. Addi-tionally the recovery of agricultural production and investment in infrastructures will also contribute to the dynamism of the economy. These are quite good prerequisites for potential exporters and investors. Even if Kenya’s investment prospects are quite attractive they had been marred by political risk for a long time.

Violence during the election in 2008 frightened away many potential investors. The turning point for Kenya was the peaceful referendum in 2010 where a new country’s constitution was decided (? separation of powers). The peacefulness around the referendum had a huge positive impact on the country. Following this event Standard and Poors increased the credit rating to level B+ which brings Kenya closer to a score that foreign investors regard as an all-clear signal. Nevertheless exporters and investors need to be careful about the political situation in Kenya as new elections will take place in March 2013.

The electoral campaign carries significant risks of a resurgence of the violent confrontations within the ethnic groups in Kenya. Our opinion is that Kenya has a huge potential for exporters and investors. It has a solid eco-nomic basis and political stability is already improving, so we would export to or invest in Kenya. Our recommendation prior to do export or investment is the following Exporters/Investors… •… need to check the local partner/customer in Kenya carefully It is very important to have a reliable, reputable partner in Kenya.

Creditworthiness should be checked prior to doing business with them. •…insist on payment by letter of credit Especially when doing business with a customer/partner the first time it is advisable not to sell under open payment terms. It could than occur that the exporter would never receive his money. A letter of credit is used to eliminate the risk such as unfa-miliarity with the foreign country, customs or political instability. •… should not admit corruption Corruption in a foreign country is also indictable in Austria. Austrian exporters may also be reliable for their Kenyan partners.

Therefore it is advisable to agree on anti-corruption clauses in the contract. In case an Austrian exporter would admit corruption the export insurance will not be valid anymore. •… need to consider and watch the political situation When political unrests occur it may be advisable to stop exports until the unrests have calmed down. 6. SUMMARY MILESTONE HISTORYThe independent Republic of Kenya was founded in December 1963. JOMO KENYATTA was the first president (until 1978). Kenyatta’s long presidency provided the country with stability. GEOGRAPHIC FEATURES •580. 000 km2 •42 million inhabitants •Capital City: Nairobi Language: English, SwahiliThe Republic of Kenya is a country in East Africa that lies on the equator with the Indian Ocean to its south-east. It is bordered by Tanzania to the south, Uganda to the west, South Sudan to the north-west, Ethiopia to the north and Somalia to the north-east. Kenya has a land area of 580. 000 km2 (7 times bigger than Austria) and a population of about 43 million residents. It is to stress out that 75% of the population is younger than 30 years. Its capital and largest city is Nairobi. English is the language of choice when doing business in Kenya and is also used in Kenyan schools.

Swahili (also called Kiswahili) is the national language of Kenya. It is a unifying African language spoken by nearly 100 percent of the Kenyan population. CLIMATIC CONDITIONSKenya has a warm and humid climate along its coastline on the Indian Ocean, which changes to wildlife-rich savannah grasslands moving in-land towards the capital. Nairobi has a cool climate that gets colder ap-proaching Mount Kenya (5. 166m), which has three permanently snow-capped peaks. 1. OVERVIEW OF THE COUNTRY 2. POLITICAL CRITERIA 2002 transitional election 2007 accusation of electoral ma-nipulation resulted in violent riots in Kenya

August 2010: peaceful referen-dum in passing a new constitution Kenya has seen significant political changes in the last decade. The his-toric 2002 transitional election, in which the National Rainbow Coalition (NARC) defeated the long-ruling Kenya African National Union, created a major political shift and inspired optimism among citizens about the future of their country as a multiparty democracy. Kenyans went to polls in large numbers for the December 2007 general elections, but the elections turned violent after accusations of electoral manipulation. More than 1. 00 Kenyans died and more than 600. 000 were displaced. Peace was restored following the signing and enactment of the National Accord and the creation of the Grand Coalition Government (GCG), a power-sharing deal ending a political stalemate between President Mwai Kibaki of the Party of National Unity and Raila Odinga of the Orange Democratic Movement. The National Accord also set out an ambitious reform agenda including a review of the country’s constitution. In August 2010, a largely fair and peaceful referendum resulted in pass-ing a new constitution.

The new constitution was a landmark NEW ELECTIONS IN 2013 risk of new post-electoral vio-lence and rumorsachievement for the GCG as it enforces broad changes to the govern-ance framework, including: a new devolved system of government; reduced presidential powers, a reformed electoral process, more defined separation of powers between the three branches of government; land reform; and an expanded bill of rights. Government institutions, civil society, political parties and citizens face an ambitious and challenging period as they enact the reforms dictated by the new constitution.

Kenya’s political dynamics also are likely to be influenced by the outcome of the International Criminal Court (ICC) proceedings in which six prominent Kenyans are accused of involvement in the 2008 post-election violence. It is not yet clear whether the charges will be upheld by the ICC. Kenyan leaders are under increasing pressure to continue rebuilding their country and to avoid a repeat of the 2008 post-election crisis as the country heads into general elections in 2013. 3. KENYA’S DOMESTIC ECONOMY DOMESTIC ECONOMY The economy experienced moderate growth in 2011 but is expected to rise modestly in 2012 and 2013 respectively.

The year 2011 witnessed drastic currency depreciation and rapid inflation, both of which are ex-pected to stabilize in 2012 and 2013. Youth unemployment constitutes 70% of total unemployment. In 2011 Kenya’s economy recorded “checked” growth, primarily driven by financial intermediation, tourism, construction and agricultural sectors. Gross domestic product (GDP) growth rate for the first nine months was estimated at 4. 2%, down from 4. 9% in the same period in 2010. Overall, growth in 2011 was curtailed by an unstable macroeconomic environment characterized by rising inflation, exchange rate depreciation and high energy costs.

The country also experienced limited rainfall in the first half of 2011, which affected aggregate food production. In January 2011, the Kenyan government was forced to ask the IMF for support to counter the mounting financing pressures caused by a widening current account deficit. Certain other structural constraints, such as widespread corruption and poor infrastructure, also continued to undermine Kenya’s growth potential. 4. KENYA & FOREIGN ECONOMY IMPORT While Kenya had just spent 3. 3 billion US Dollars on merchandise im-ports in 99’, they imported goods worth to 13. 49 billion US Dollar in 2011 which is an increase of over 400%.

The depressed performance during the 2008-09 was due to a number of adverse shocks including the post election violence in early 2008, a severe drought that affect-ed most parts of the country, high international commodity prices and spillover effects of the global financial crisis, but the economy rebounded in 2010. IMPORT PRODUCTS The major import products for the year to June 2011 were oil, manu-factured goods, chemicals, machinery and transport equipment. The increase in the value of imports was mainly due to imports of oil (International oil prices increased) IMPORT PARTNERS1. United Arab Emirates -> 13. % 2. China -> 12,1% 3. India -> 11. 6% 4. South Africa -> 5,8% 5. United Kingdom 4,6% EXPORT Kenya had received 2. 2 Billion US Dollar in 99’, while they could in-crease their receivement for exports in 2011 to 5. 77 Billion US Dollar. This is an increase of about 260%. The depressed performance during the 2008-09 was due to a number of adverse shocks including the post-election violence in early 2008, a severe drought that affect-ed most parts of the country, high international commodity prices and spillover effects of the global financial crisis, but the economy rebounded in 2010.

EXPORT PRODUCTSThe agricultural sector continues to dominate Kenya’s economy, alt-hough only 15 percent of Kenya’s total land area has sufficient fertility and rainfall to be farmed. Tourism currently is Kenya’s third largest foreign-exchange earner after tea and horticulture (flowers) EXPORT PARTNERSCOMESA (East-South Africa) -> 35. % European Union ->30% United States -> 5,6% Pakistan -> 4,2% United Arab Emirates -> 4,1% IMBALANCE IN TRADING Kenya is largely a trade deficit country.

The negative balance of trade occurs because the country’s exports are vulnerable to both interna-tional prices and the weather conditions. The gap between imports and exports, also called current account deficit, now stands at above 10% of GDP – one of the highest in the world! Today, Kenya’s main exports do not even earn enough to pay for its oil imports. ECONOMIC COOPERATION, REGIONAL INTEGRATION & TRADE COMMON EXTERNAL TAFFIFF VISION STRATEGIC OPPORTUNITY

The East African Community (EAC) countries – Kenya, Tanzania, Uganda, Rwanda and Burundi – transformed into a fully-fledged and enforceable customs union on 1 January 2010 allowing for the free movement of goods, services, people and capital in a zone with a combined population of some 135 million people. The next phase of the integration will see the bloc enter into a Monetary Union and ultimately become a Political Federation of the East African States. They adopted a common external tariff (CET) with three bands: 0% (raw materials and capital goods), 10% (intermediate goods) and 25% (finished goods).

Tariffs of up to 100% are applicable to products that are deemed to be sensitive to member states. These include maize, rice, cement, sugar and dairy products. The Vision of EAC is a prosperous, competitive, secure, stable and politically united East Africa; and the Mission is to widen and deepen Economic, Political, Social and Culture integration in order to improve the quality of life of the people of East Africa through increased competitiveness, value added production, trade and investments. EAC has a combined population of more than 135 million people, land area of 1. 2 million square kilometres and a combined Gross Domestic Product of $74. 5 billion. This bears great strategic and geopolitical sig-nificance and prospects of a renewed and reinvigorated East African Community 5. CONCLUSION POTENTIAL OF KENYAAll in all Africa has a big potential for exports and investments as there are still big growth opportunities. Kenya has the greatest growth potential in the Sub-Saharan area after South Africa. However there are some recommendations to bear in mind (e. g. Letter of credit, creditworthiness check,…) ADVANTAGESRISKS

Stable economy and good eco-nomic prospectspolitical instability ? political riskBUT: increasing political instability since peaceful referendum in 2010 ? adoption of a new constitution Favourable strategic geographical position and access to export mar-kets (? Eastern Africa) corruption and impunity (=Straflosigkeit) BUT: High efforts to bring the problem un-der control: since 2010 ? Kenyan Anti-Corruption Commission forced high-profile cabinet ministers to step aside and the International Criminal Court publicly named perpetrators of violence (=Gewalttater) ADVANTAGESRISKS

Membership of the largest African common market, the EAC (Eastern African Community), COMESA and the Southern African Development Community (SADC) ? enables the free movement of goods and ser-vices across the member statesInadequate infrastructure for absorption of economic devel-opmentBUT: High efforts to catch up on infrastruc-ture English languagewidespread poverty ? crime Mombasa seaport ? most impor-tant seaport + Nairobi ? political and economic stronghold in the Eastern African Areacompanies are often undercap-italized ? risk of late or non-payment Small time difference Small taxes and levies (=Abgaben)

Low wages compared to European countries and well trained em-ployees Emerge of a middle class with increasing purchasing power OUR RECCOMENDATIONS Exporters/Investors… … need to check the local partner/customer in Kenya carefully It is very important to have a reliable, reputable partner in Kenya. Cre-ditworthiness should be checked prior to doing business with them. …insist on payment by letter of credit Especially when doing business with a customer/partner the first time it is advisable not to sell under open payment terms. It could than occur that the exporter would never receive his money.

A letter of credit is used to eliminate the risk such as unfamiliarity with the foreign country, customs or political instability. … should not admit corruption Corruption in a foreign country is also indictable in Austria. Austrian exporters may also be reliable for their Kenyan partners. Therefore it is advisable to agree on anti-corruption clauses in the contract. In case an Austrian exporter would admit corruption the export insur-ance will not be valid anymore. … need to consider and watch the political situation When political unrests occur it may be advisable to stop exports until the unrests have calmed down.