Onkvisit S., Shaw J. International Marketing: Analysis and Strategy

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MULTIPLICITY OF POLITICAL

ENVIRONMENTS

The political environment that MNCs face is a

complex one because they must cope with the pol-

itics of more than one nation. That complexity

forces MNCs to consider the three different types

of political environment: foreign, domestic, and

international (see Cultural Dimension 4.1). As in

the case of the US steel industry, it has received a

variety of subsidy and government protection for

more than thirty years. George W. Bush continued

the assistance by imposing quotas for three years,

and politics may have played a role. The action

should help Republican candidates in the steel-

producing states. Bush was criticized for shunning

free trade for the “pleasure of political oppor-

tunism.”

The measures were like new taxes that

would cost consumers of steel products $8 billion.

Although political and economic motives are two

distinct components, they are often closely inter-

twined. A country may use economic sanctions to

make a political statement. Likewise, a political

action may be taken so as to enhance the country’s

economic prospects. It is also hardly uncommon for

governments as well as companies to ignore politics

for the purpose of economic interests. Even while

the economic sanctions were in place, the USA was

actually importing a large amount of oil from Iraq.

While Taiwan and China are supposedly enemies

POLITICAL ENVIRONMENT

from having to ﬁght two world wars on their

soil.

Americans’ anger resulted in boycotts of French

wine and vacations in France. Even french fries and

french toast were not immune; several American

restaurants switched from french fries to freedom

fries. The shares of Sodexho, a French catering

company, forfeited 14 percent in one day because of

a radio report mentioning that it had lost a $1 billion

contract with the US Marines. To combat the back-

lash, French companies took action to downplay their

identity.The Accor Group allowed its ten Soﬁtel hotels

in the USA to put away French ﬂags. The chairman

of Danone proclaimed: “Don’t forget Danone in the

US is an American company. It is even written in

American style D-A-N-N-O-N.”

American businesses faced the same problems

abroad.To protest the war in Iraq, a number of restau-

rants in Germany took American items off their

menus. Consumers in several Middle Eastern coun-

tries boycotted American products. Iran has banned

media advertising of American goods. While risks are

relatively high for US ﬁrms doing business in the

Middle East, the risks are heightened when a US

brand is a cultural icon. McDonald’s and its Golden

Arches at 30,000 outlets worldwide is certainly one

of the most recognized American symbols. The

company and its American competitors have made it

clear that most overseas outlets are owned and oper-

ated by local franchisees who buy most products

locally. Unfortunately, local consumers often fail to

make this distinction.

Even after the war, while softening their tones, the

leaders did not change their positions. In his speech to

the United Nations General Assembly in September

2003, President George W. Bush wanted to “move for-

ward” but was unapologetic for going to war without

a UN endorsement. His speech was preceded by that of

UN Secretary Koﬁ Annan who criticized “the lawless

use of force.” French President Jacques Chirac fol-

lowed both and stated that, without Security Council

approval, the war has undermined the multilateral sys-

tem.“In an open world, no one can live in isolation, no

one can act alone in the name of all, and no one can

accept the anarchy of a society without rules.”

Sources:

“Hotel Soﬁtel Puts Its French Flag Away,”

San

José Mercury News

, March 4, 2003; “French Companies Try

to Appear Less French,”

San José Mercury News

, March

18, 2003; “US Backlash Against France Targets Wine,

Renames Fries,”

San José Mercury News

, February 23,

2003; “US Companies Bracing for Hostility Overseas,”

San

José Mercury News

, March 5, 2003; “US Products

Boycotted,”

San José Mercury News

, March 26, 2003;

“Bush Gets Chilly UN Reception,”

San José Mercury News

September 24, 2003.

that do not want to do business with one another,

the truth of the matter is that there are some 50,000

Taiwanese-owned factories in China.

Developing countries often view foreign ﬁrms

and foreign capital investment with distrust and

even resentment, owing primarily to a concern over

potential foreign exploitation of local natural

resources. Dependency theory may partially

explain why Latin American countries are reluctant

to welcome foreign-based multinational ﬁrms.

According to this theory, the ongoing economic,

political, and social transformations have made it

necessary for Latin America to rely on the capital-

istic system. Consequently, advanced countries are

able to extract surplus value from their less devel-

oped counterparts, thus leaving them under-

developed while perpetuating the existence of class

conﬂicts and oppressive governments.

Developed countries themselves are also con-

cerned about foreign investment. Many Americans

have expressed their concern that the increasing

foreign ownership of American assets poses a threat

to their country’s national security, both politically

and economically. It should be pointed out that

inﬂows of foreign capital add to the domestic capital

stock. This activity contributes to the American

standard of living and enhances the country’s ability

to service its international indebtedness.As a result,

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Genes are the materials that contain the blueprint for

living beings’ make-up. Genetic engineering or bio-

engineering is a process that deliberately but not nat-

urally transfers genes from one species to another.

Seeds may thus have new traits obtained from gene-

splicing. More than 25 percent of corn and roughly

70 percent of soy and cotton grown in the USA are

genetically engineered. In general, some 25 to 45

percent of the major crops of the USA use the process.

As a major user and exporter of genetically mod-

iﬁed products, the USA feels that the process is safe.

However, genetic engineering is highly controversial in

Europe and Asia. As an example, a consumer poll con-

ducted by Greenpeace Southeast Asia shows that 95

percent of respondents in Thailand prefer manufac-

turers to have labels that identify products with genet-

ically modiﬁed ingredients. Such concerns have led to

an effort to create the world’s ﬁrst global treaty to

regulate trade in such modiﬁed products. This inter-

national cooperation has proposed the Biosafety

Protocol that requires exporters of genetically modi-

ﬁed organisms to obtain an importing country’s prior

approval. The idea is to allow countries to minimize

ecological risks that may stem from an introduction

of genetically altered plants, animals, and micro-

organisms into the environment.

Even though the Protocol has the support of about

120 countries, six major agricultural exporters

(the USA, Canada, Australia, Chile, Argentina, and

Uruguay) have rejected it. Monsanto’s business activ-

ities have complicated the matter further. The com-

pany has used genetic engineering to combat farm

diseases and improve crop yields.However, its business

model emphasizes exclusive uses and patent rights that

appear to beneﬁt Monsanto more than farmers.

Nestlé has likewise become a lightning rod.

Greenpeace alleges that Nestlé uses genetically mod-

iﬁed ingredients only in its products that are sold in

developing countries. Nestlé has insisted that it has

implemented the same safety and quality standards

worldwide. On the other hand, national regulations,

availability of raw materials, and consumer attitudes

dictate whether the company uses genetically modi-

ﬁed ingredients. Nestlé has criticized Greenpeace for

rejecting the opinion of international scientiﬁc bodies

that genetically modiﬁed crops are as safe as their

conventional counterparts.

Sources:

“FDA Looks at Altered Crops,”

San José Mercury

News

, May 4, 2000; “US Helps Foil Treaty on Genetically

Modiﬁed Crops,”

San José Mercury News

, February 25,

1999; “Some Food for Thought on Bioengineering,”

San

José Mercury News

, January 13, 2002; and “Nestlé Hits

Back at Greenpeace,”

Bangkok Post

, May 17, 2002.

CULTURAL DIMENSION 4.1 GENETICALLY MODIFIED ORGANISMS

the beneﬁts of foreign investment far outweigh the

costs.

In some cases, opposition to imported goods and

foreign investment is based on moral principle. For

example, the citizens of many nations pressured

companies in their countries not to invest in South

Africa because of that country’s policy of apartheid.

In the mid-1980s the pressure became so great that

the South African government ran advertisements in

the USA in an attempt to minimize damage, as

shown in Figure 4.1. Ironically,American ﬁrms that

heeded the anti-apartheid movement’s call to divest

have found it difﬁcult to re-enter the market and

capture back market share.

Regardless of whether the politics are foreign,

domestic, or international, the company should

POLITICAL ENVIRONMENT

Figure 4.1 Dealing with political pressure

Source:

Reprinted with permission of the South African Consulate General.

keep in mind that political climate does not remain

stationary. The political relationship between the

USA and a long-time adversary, China, is a prime

example. After decades as bitter enemies, both

countries became very interested in improving their

political and economic ties so as to dilute the power

of the Soviet Union.

Although most companies have little control

over affecting changes in international politics, they

must be prepared to respond to new developments.

Companies can derive positive economic beneﬁts

when the relationship between two countries

improves or when the host government adopts a

new investment policy. As in the case of India, the

country was a highly regulated, closed economy

which discouraged foreign investment. It was not

until 1991 that a new government began a reform

program which could transform India into one of

the world’s most dynamic economies.

On the other hand, serious problems can develop

when political conditions deteriorate. A favorable

investment climate can disappear almost overnight.

In one case, the USA withdrew Chile’s duty-free

trade status because of Chile’s failure to take “steps

to afford internationally recognized worker rights.”

Chile thus joined Romania, Nicaragua, and Paraguay

in being suspended from the GSP (generalized

system of preferences).

TYPES OF GOVERNMENT: POLITICAL

SYSTEMS

A system of the form governments can take can be

useful in appraising the political climate. One way

to classify governments is to consider them as either

parliamentary (open) or absolutist (closed). Table

4.1 shows the political features of oil-exporting

nations.

Parliamentary governments consult with citi-

zens from time to time for the purpose of learning

about opinions and preferences. Government poli-

cies are thus intended to reﬂect the desire of the

majority segment of a society. Most industrialized

nations and all democratic nations may be classiﬁed

as parliamentary.

At the other end of the spectrum are absolutist

governments, which include monarchies and dicta-

torships. In an absolutist system, the ruling

regime dictates government policy without consid-

ering citizens’ needs or opinions. Frequently,

absolutist countries are newly formed nations or

those undergoing some kind of political transition.

Absolute monarchies are now relatively rare. The

United Kingdom is a good example of a constitu-

tional hereditary monarchy; despite the monarch,

the government is classiﬁed as parliamentary.

Many countries’ political systems do not fall

neatly into one of these two categories. Some

monarchies and dictatorships (e.g., Saudi Arabia and

North Korea) have parliamentary elections. The

former Soviet Union had elections and mandatory

voting but was not classiﬁed as parliamentary

because the ruling party never allowed an alterna-

tive on the ballot. Countries such as the Philippines

under Marcos and Nicaragua under Somoza held

elections, but the results were suspect due to

government involvement in voting fraud.

Another way to classify governments is by the

number of political parties.This classiﬁcation results

in four types of governments: two-party, multi-

party, single-party, and dominated one-party. In a

two-party system, there are typically two strong

parties that take turns controlling the government,

although other parties are allowed. The USA and

the United Kingdom are prime examples. The

two parties generally have different philosophies,

resulting in a change in government policy when

one party succeeds the other. In the USA, the

Republican Party is often viewed as representing

business interests, whereas the Democratic Party is

often viewed as representing labor interests, as well

as the poor and disaffected.

In a multi-party system, there are several polit-

ical parties, none of which is strong enough to gain

control of the government. Even though some

parties may be large, their elected representatives

fall short of a majority. A government must then be

formed through coalitions between the various

parties, each of which wants to protect its own

interests. The longevity of the coalition depends

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Table 4.1 Oil exporter’s political systems. Classifying oil exporters.

The type of political system affects how oil revenue is spent.

Political features Institutional implications Economic implications

Mature democracy

Stable party system Long policy horizon Saving likely

Range of social consensus Policy stability, transparency Expenditure smoothing, stabilization

Strong, competent, insulated bureaucracy High competitiveness, low transaction costs Rents transferred to public through government-

Competent, professional judicial system Strong private/traded sector, prostabilization provided social services and insurance or direct

Highly educated electorate interests vis-à-vis prospending interests transfers

Factional democracy

Government and parties often unstable relative Short policy horizon Saving very difﬁcult

to interest groups Policy instability, nontransparency, high Procyclical expenditure; instability

Political support gained through clientelistic transaction costs Rents transferred to different interests and to

ties and provision of patronage Strong state role in production public through subsidies, policy distortions,

Wide social disparities, lack of consensus Strong interests attached directly to state public employment

Politicized bureaucracy and judicial system expenditures; politically weak private non-oil

sector and prostabilization interests

Paternalistic autocracy

Stable government; legitimacy originally from Long horizon Procyclical expenditure, mixed success with

traditional role, maintained through rent Policy stability, nontransparency stabilization

distribution Low competitiveness, high transaction costs Risk of unsustainable long-term spending

Strong cultural elements of consensus, clientelistic, Strong state role in production trajectory leading to political crisis

and nationalistic patterns Strong interests attached directly to state Little economic diversiﬁcation

Bureaucracy provides both services and public expenditures

employment Weak private sector

Reformist autocracy

Stable government, legitimized by development Long horizon

Expenditure smoothing, stabilization

Social range of consensus toward development Policy stability, nontransparency State investment complementary to competitive

Constituency in non-oil traded sectors Drive for competitiveness, low transaction costs private sector

Insulated technocracy Strong constituency for stabilization and ﬁscal Active exchange rate management to l

imit

restraint Dutch disease

Predatory autocracy

Unstable government, legitimized by military force Short horizon No saving

Lack of consensus-building mechanisms Policy instability, nontransparency Highly procyclical expenditure

Bureaucracy exists as mechanism of rent capture Low competitiveness, high transaction costs Very high government consumption, rent

and distribution; corrupt judicial system Spending interests strong vis-à-vis private sector absorption by elites through petty corruption

Little or no civic counterweight or prostabilization interests and patronage, capital ﬂight

Note

1 These classiﬁcations are not exhaustive, and some countries have a blend of features from different categories. For example, ﬁscal federalism is one factor cutting across the

categories.The aim is not to create a rigid classiﬁcation of oil countries but to help provide insights into the policy options available to governments. For use of a similar

classiﬁcation, see, for example, D. Lal, 1995, “Why Growth Rates Diffe

r.The Political Economy of Social Capability in 21 Developing Countries,” in

Social Capability and

Long-Term Economic Growth

, edited by Bon Ho Koo and Dwight H. Perkins (New York, NY: St. Martin’s Press).

Source:

Benn Eifert, Alan Gelb, and Nils Borje Tallroth, “Managing Oil Wealth,”

Finance & Development

(March 2003): 42.

largely on the cooperation of party partners.

Usually, the coalition is challenged continuously by

various opposing parties. A change in a few votes

may be sufﬁcient to bring the coalition government

down. If the government does not survive a vote of

no conﬁdence (i.e., it does not have the support of

the majority of the representatives), the govern-

ment is disbanded and a new election is called.

Countries operating under this system include

Germany, France, and Israel. In the 1991 elections

in Poland, twenty-nine parties (including the Polish

Beer Lovers’ Party) won seats, and no party got

more than 13 percent of the vote.

In a single-party system, there may be several

parties, but one party is so dominant that there is

little opportunity for others to elect representatives

to govern the country. Egypt has operated under

single-party rule for several decades. This form of

government is often used by countries in the early

stages of the development of a true parliamentary

system. Because the ruling party holds support from

the vast majority, the system is not necessarily a

poor one, especially when it can provide the stabil-

ity and continuity necessary for rapid growth. But

when serious economic problems persist, citizens’

dissatisfaction and frustration may create an explo-

sive situation. For example, Mexico has been ruled

since its revolution by the Institutional Revolution-

ary Party (PRI), but economic problems caused dis-

satisfaction with the PRI in the 1980s.The National

Action Party (PAN), Mexico’s main opposition

party, began gaining strength, possibly foreshadow-

ing a transition away from a single-party system. As

a matter of fact,Vicente Fox indeed took Mexico’s

presidency away from the PRI.

In a dominated one-party system, the dom-

inant party does not allow any opposition, resulting

in no alternative for the people.In contrast, a single-

party system does allow some opposition party.The

former Soviet Union, Cuba, Libya, and China are

good examples of dominated one-party systems.

Such a system may easily transform itself into a

dictatorship. The party, to maintain its power, is

prepared to use force or any necessary means

to eliminate the introduction and growth of other

parties. Such countries as Burma, Cambodia, and

Afghanistan have tried to reject outside inﬂuences,

and it is no accident that they were or are among

the most repressive regimes. Understandably,

repression or suppression may be their only way of

maintaining their ideology.

In addition, countries’ electoral systems may be

either majoritarianism or proportionality. In the

case of majoritarianism, a country is ruled by a

simple numerical majority in an organized group.

Proportionality occurs when the number of par-

liamentary seats is based on vote share. Research

shows that spending on social security and welfare

is lower under majoritarian systems. In contrast,

“certain political factors, such as an electoral system

that emphasizes proportionality or a fragmented

parliament or government, lead simultaneously to

higher transfers, bigger government, and a revenue

system that emphasizes labor taxes over consump-

tion taxes.”

Freedom House publishes Freedom in the World,a

survey which reports on freedom around the globe.

The publication is an annual comparative assessment

of the state of political rights and civil liberties in

192 countries and seventeen related and disputed

territories. In 2002, eighty-nine countries were

“free” and ﬁfty-six are “partly free.” The “not free”

category claimed forty-seven countries.

Freedom

House’s Freedom of the Press 2003: A Global Survey of

Media Independence reveals that press freedom dete-

riorated in 2002.

One should not be hasty in making generaliza-

tions about the ideal form of government in terms

of political stability. It may be tempting to believe

that stability is a function of economic develop-

ment. South Africa and Italy, two developed coun-

tries, have been beset with internal and external

problems. The political atmosphere from time to

time is marred by a weak economy, recurring labor

unrest, and internal dissension. In contrast, it may

be argued that Vietnam, despite being a developing

economy, is politically more stable. This stability is

due in part to Vietnam’s relatively closed economy.

It may be just as tempting to conclude that a

democratic political system is a prerequisite for

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POLITICAL ENVIRONMENT

political stability. India, the world’s largest democ-

racy, possesses a solid political infrastructure and

political institutions that have withstood many crises

over time.The democratic system is strongly estab-

lished in India, and it is almost inconceivable that

the Indians would choose any other.Yet India’s polit-

ical stability is hampered by regional, ethnic, lan-

guage, religious, and economic problems. Unlike

such other democratic nations as Australia, where

such problems have largely been resolved, India’s

difﬁculties remain. These geographic, ideological,

and ethnic problems inhibit the government’s

ability to respond to one sector’s demands without

alienating others.

Democracy does not guarantee peace. When

hateful religious fundamentalists won elections in

Algeria, Indonesia, Nigeria, and Pakistan, violence

followed.Yugoslavia’s citizens appeared to endorse

Slobodan Milosevic’s policy of ethnic cleansing.

Adolf Hitler’s rise to power was a result of a free

vote. On the other hand, some authoritarian rulers

may be more progressive than their followers.While

Suharto was in power, his authoritarian style, rightly

or wrongly, brought ethnic peace and strong eco-

nomic growth. Free elections have given power to

anti-American Muslim extremists, Christians are

being killed, and growth has declined. It is debat-

able whether elections in Egypt, Jordan, Pakistan,

and Saudi Arabia will make the countries better off

if fundamentalists come to power.

Dictatorial systems, monarchies, and oligarchies

may be able to provide great stability for a country,

especially one with a relatively closed society, which

exists in many communist countries and Arab

nations. If a country’s ruler and military are strong,

any instability that may occur can be kept under

control.The problem, however, is that such systems

frequently exist in a divided society where dissident

groups are waiting for an opportunity to challenge

the regime. When a ruler dies suddenly, the risk

of widespread disruption and revolution can be

quite high.

Democracy itself is not a perfect system. Japan’s

recession has been caused in part by its divided,

ineffective government. India continues to cope

with the chaos due to a coalition of a dozen frac-

tured parties that runs the government.While rep-

resentative democracy is generally a good thing, it

can create an explosive situation when democracy

is combined with capitalism to create “market-dom-

inant minorities.”The ethnic Chinese, for example,

constitute 1 percent of the Philippines population

but control 60 percent of the country’s wealth,

while two-thirds of the ethnic Filipinos struggle on

less than $2 a day.The oppressed majority may vio-

lently strike back at the easily identiﬁed ethnic

minority group (e.g., the ethnic Chinese in the

Philippines and Indonesia, the Lebanese in West

Africa, the Asian Indians in East Africa, the Jews

in Russia, and the whites in Zimbabwe, the indige-

nous Ibo tribe in Nigeria, and the Tutsi tribe in

Rwanda).

Policy makers naturally want to know whether

there is a direct relationship between democracy

and economic progress. Latin America and Eastern

Europe have moved in the democratic direction, and

democracies have done relatively well in economic

reform. Econometric results also point in the same

direction.

TYPES OF GOVERNMENT: ECONOMIC

SYSTEMS

Economic systems provide another basis for classi-

ﬁcation of governments. These systems serve to

explain whether businesses are privately owned or

government owned, or whether there is a combi-

nation of private and government ownership.

Basically, three systems may be identiﬁed: commu-

nism, socialism, and capitalism. Based on the degree

of government control of business activity, the

various economic systems can be placed along a

continuum, with communism at one end and capi-

talism at another. A movement toward communism

is accompanied by an increase in government inter-

ference and more control of factors of production.

A movement toward capitalism is accompanied by

an increase in private ownership.

Communist theory holds that all resources

should be owned and shared by all the people (i.e.,

POLITICAL ENVIRONMENT

not by proﬁt-seeking enterprises) for the beneﬁt of

the society. In practice, it is the government that

controls all productive assets and industries and, as

a result, the government determines jobs, produc-

tion, price, education, and just about anything else.

The emphasis is on human welfare. Because proﬁt

making is not the government’s main motive, there

is a lack of incentive for workers and managers to

improve productivity.

The term centrally planned economies is

often used to refer to the former Soviet Union,

Eastern European countries, China, Vietnam, and

North Korea. These economies tend to have the

following characteristics: a communist philosophy,

an active government role in economic planning, a

nonmarket economy, a weak economy, high foreign

debt, and rigid and bureaucratic political/economic

systems. A contrast between North Korea and

South Korea is quite striking. While North Korea’s

economy has contracted, South Korea’s economy

has been booming. South Korea’s GDP of $931

billion dwarfs North Korea’s GDP of $22 billion.

North Korea’s exports of $842 million are no match

for South Korea’s exports of $162.6 billion. It

should be noted that North Korea is much better

endowed than its southern counterpart in terms

of natural resources.

Despite communist countries’ preoccupation

with control of industries, it would be erroneous to

conclude that all communist governments are

exactly alike.Although the former Soviet Union and

China adhered to the same basic ideology, there was

a marked difference between the two largest com-

munist nations. China has been experimenting with

a new type of communism by allowing its citizens

to work for themselves and to keep any proﬁt in the

process.Yet one must remember that “free markets”

can exist in China only with the state’s permission,

and the operations of such markets are still overseen

by government ofﬁcials.

The degree of government control that occurs

under socialism is somewhat less than under com-

munism.A socialist government owns and operates

the basic, major industries but leaves small busi-

nesses to private ownership. Socialism is a matter of

degree, and not all socialist countries are the same.

A socialist country such as Poland leans toward

communism, as evidenced by its rigid control over

prices, and distribution. France’s socialist system, in

comparison, is much closer to capitalism than it is

to communism.

At one time, Sweden was a role model of what

socialism could be, but a middle road between com-

munism and capitalism may now produce stalled

economic growth.

Sweden’s economic decline is

due in part to a rapid expansion in regulations and to

the rising share of national income spent by central

and local governments. During the 1970s and

1980s, Sweden introduced very generous retire-

ment and health beneﬁts, lengthy paid leave for par-

ents, liberal rules for sick workers on taking days

off, and many other types of transfer payments. Not

surprisingly, on an average day, almost one in four

employees is absent from work because of reported

illness, parental responsibilities, study leave, and

other reasons that allow a worker to stay at home.

On a yearly basis, the average Swedish worker is off

sick for almost a month of the year while receiving

full salary. Moreover, differences in pay by education

level, job experience, and other measures of worker

productivity have largely disappeared. In the long

run, there is no incentive to work hard when one

can get paid for staying at home, when education

and better jobs do not offer much higher wages, and

when taxes offset any increase in pay.

At the opposite end of the continuum from com-

munism is capitalism. The philosophy of capital-

ism provides for a free-market system that allows

business competition and freedom of choice for

both consumers and companies. It is a market-ori-

ented system in which individuals, motivated by

private gain, are allowed to produce goods or ser-

vices for public consumption under competitive

conditions. Product price is determined by demand

and supply.This system serves the needs of society

by encouraging decentralized decision making, risk

taking, and innovation.The results include product

variety, product quality, efﬁciency, and relatively

lower prices.Table 4.2 and Fig. 4.2 ranks the world’s

free economies.

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Table 4.2 Index of economic freedom rankings

Rank 2003 Trade Fiscal Govern- Mone- Foreign Banking Wage/ Property Regula- Black

Scores burden of ment tary invest- and prices rights tion market

govern- inter- policy ment ﬁnance

ment vention

1 Hong Kong 1.45 1 2 3 1 1 1 2 1 1 1.5

2 Singapore 1.50 1 2 3 1 1 2 2 1 1 1

3 Luxembourg 1.70 2 4 2 1 1 1 2 1 2 1

3 New Zealand 1.70 2 4 2 1 1 1 2 1 2 1

5 Ireland 1.75 2 3 2 2 1 1 2 1 2 1.5

6 Denmark 1.80 2 4.5 3.5 1 2 1 1 1 1 1

6 Estonia 1.80 1 3.5 2 2 1 1 1 2 2 2.5

6 USA 1.80 2 3.5 2 1 2 1 2 1 2 1.5

9 Australia 1.85 2 3.5 2 2 2 1 2 1 2 1

9 United Kingdom 1.85 2 4 2 1 2 1 2 1 2 1.5

11 Finland 1.90 2 4 2 1 2 2 2 1 2 1

11 Iceland 1.90 2 3 2 2 2 3 1 1 2 1

11 Netherlands 1.90 2 4 2 2 1 1 2 1 3 1

11 Sweden 1.90 2 4.5 2.5 1 1 1 2 1 3 1

15 Switzerland 1.95 2 3.5 3 1 2 1 2 1 3 1

16 Bahrain 2.00 3 2 3 1 2 1 3 1 2 2

16 Chile 2.00 2 2.5 2 2 2 2 2 1 3 1.5

18 Canada 2.05 2 4 2.5 1 3 2 2 1 2 1

19 Austria 2.10 2 4.5 2 1 2 2 2 1 3 1.5

19 Belguim 2.10 2 5 2 1 1 2 2 1 3 2

19 Germany 2.10 2 4.5 2 1 1 3 2 1 3 1.5

22 Bahamas 2.15 5 1.5 2 1 3 2 3 1 1 2

22 Cyprus 2.15 2 3.5 3 1 3 2 2 1 2 2

24 Barbados 2.20 3 4 2 1 3 2 2 1 2 2

24 United Arab Emirates 2.20 2 2 3 1 3 3 2 2 3 1

26 El Salvador 2.25 2 2 2 2 2 2 2 3 2 3.5

27 Norway 2.30 2 4 3 1 3 3 2 1 3 1

27 Taiwan 2.30 2 3 2.5 1 3 2 2 2 3 2.5

29 Italy 2.35 2 5 2 1 2 2 2 2 3 2.5

29 Lithuania 2.35 2 3.5 2 1 2 2 2 3 3 3

29 Spain 2.35 2 4 2.5 2 2 2 2 2 3 2

32 Portugal 2.40 2 4 2 2 2 3 2 2 3 2

33 Israel 2.45 2 5 3 1 2 3 2 2 3 1.5

33 Latvia 2.45 2 4 2 1 2 2 2 3 3 3.5

35 Botswana 2.50 2 3.5 4 3 2 2 2 2 2 2.5

35 Cambodia 2.50 2 2 1 1 3 2 3 4 4 3

35 Czech Rep.,The 2.50 3 4.5 2 2 2 1 2 2 3 3.5

35 Japan 2.50 2 4 3 1 3 3 2 2 3 2

35 Uruguay 2.50 3 3.5 2.5 2 2 2 2 2 3 3

40 France 2.55 2 4.5 3 1 3 3 2 2 3 2

1111

10111

20111

45111

POLITICAL ENVIRONMENT

Table 4.2 continued

Rank 2003 Trade Fiscal Govern- Mone- Foreign Banking Wage/ Property Regula- Black

Scores burden of ment tary invest- and prices rights tion market

govern- inter- policy ment ﬁnance

ment vention

40 Kuwait 2.55 2 2.5 3 1 4 3 3 2 3 2

40 Thailand 2.55 4 2.5 1.5 1 3 3 2 2 3 3.5

43 Trinidad and Tobago 2.60 4 3.5 3 2 2 2 2 2 3 2.5

44 Armenia 2.65 1 2.5 3 2 2 2 3 3 4 4

44 Bolivia 2.65 3 3 2 1 1 2 2 4 4 4.5

44 Costa Rica 2.65 2 3 2.5 3 2 3 2 3 3 3

44 Hungary 2.65 3 4 2 3 2 2 3 2 3 2.5

44 Madagascar 2.65 2 2.5 1 3 3 3 2 3 3 4

44 Panama 2.65 3 4 3 1 2 1 2 4 3 3.5

44 Qatar 2.65 3 2.5 3 1 3 3 2 3 4 2

44 South Africa 2.65 3 4.5 2 2 2 2 2 3 3 3

52 Korea, South 2.70 3 3 4 2 2 3 2 2 3 3

52 Malta 2.70 3 4 3 1 3 3 3 1 2 4

52 Namibia 2.70 3 4 3.5 3 2 2 2 2 3 2.5

55 Belize 2.75 4 3.5 2 1 3 3 2 3 3 3

56 Greece 2.80 2 4 2 2 3 3 3 3 3 3

56 Guatemala 2.80 3 2 1 3 3 2 2 4 4 4

56 Jamaica 2.80 4 4 3 3 1 2 2 3 3 3

56 Mexico 2.80 2 3.5 3 3 3 2 2 3 3 3.5

56 Oman 2.80 3 3 4 1 3 3 3 3 3 2

56 Peru 2.80 4 25 3 1 2 2 2 4 4 3.5

62 Jordan 2.85 5 3.5 4 1 2 2 2 3 3 3

62 Philippines,The 2.85 2 2.5 2 2 3 3 3 3 4 4

62 Slovenia 2.85 4 4 2 3 3 3 2 3 2 2.5

62 Uganda 2.85 3 3 2 1 3 3 2 3 4 4.5

66 Poland 2.90 3 4.5 2 3 3 2 3 2 3 3.5

66 Slovak Rep.,The 2.90 3 4.5 2 3 2 2 3 3 3 3.5

68 Argentina 2.95 4 3 2 1 3 4 2 4 3 3.5

68 Morocco 2.95 5 4 2.5 1 2 3 2 4 3 3

68 Saudi Arabia 2.95 4 2.5 4 1 3 4 2 3 3 3

68 Tunisia 2.95 5 4 3 1 3 3 2 3 3 2.5

72 Brazil 3.00 4 2.5 3 3 3 3 2 3 3 3.5

72 Colombia 3.00 4 3.5 3 3 2 2 2 4 3 3.5

72 Malaysia 3.00 3 3 3 1 4 4 3 3 3 3

72 Mali 3.00 3 3 3 2 3 3 2 3 3 5

72 Mauritius 3.00 5 3 3 2 3 2 4 2 3 3

72 Mongolia 3.00 2 4.5 2.5 3 3 3 2 3 4 3

72 Nicaragua 3.00 2 3 3 3 2 2 3 4 4 4

72 Swaziland 3.00 2 4 2 3 3 3 3 3 3 4

80 Central African Rep. 3.05 5 2.5 3 1 2 3 3 3 4 4