IBI101 - CHAPTER 2

Critical Thinking and Discussion Questions

GROUP 1
1. Phạm Nguyễn Minh Anh
2. Phan Phương Thảo
3. Nguyễn Trần Khánh Ly
4. Nguyễn Quang Huy
5. Huỳnh Lưu Phúc Quỳnh

Question 3, 4, 5
3. What is the relationship between corruption in a country (i.e.,
government officials taking bribes) and economic growth? Is corruption
always bad?
- There is growing concern about the negative economic and social impacts of
corruption. For the most part, it is believed that corruption is bad for economic
growth. However, some economic theories disagree. These theories suggest
that corruption, in the short term, can counteract government failure and lead to
economic growth. This is more likely to happen when bureaucratic rules and
regulations stagnate the economy and constrain short-term growth. However, it
is important to note that government failure is often caused by corrupt activity,
which means that corruption leads to reduced economic growth in the long run.
- For economists, the focus should be on the long-term effects of corruption on
economic growth, not the short-term effects.
- Corruption impedes economic growth in a number of ways. Money earned
from corruption disrupts markets and leads to fluctuating demand for goods
and services. Corruption must find ways to launder their illicit profits. In
addition, government agencies make corrupt decisions and allocate funds to
projects with low priority or low economic viability. This also means capital
loss and stunted economic growth.

- According to my view on corruption, corruption is always bad and must be

condemned.Money earned from corruption disrupts markets and leads to
fluctuating demand for goods and services. Corruption must find ways to
launder their illicit profits. And these will lead to economic shortage of capital
and economic stagnation, not only that, it costs human resources, time and
money to overcome. Because of the effects of corruption, it takes a long time
for the country to develop again if that money is not corrupt. Corruption will
have positive consequences, for example: "considering that corrupt activities
can indirectly 'contribute' somewhat to the process of market liberalization (by
reducing the effectiveness of state intervention) then it is only encouraging if
state intervention is to be avoided altogether. In other words, the argument
loses meaning if state regulation is necessary for economic development or
other benefits. other public interest". so the conclusion that our group comes to
is that corruptiont is always bad and will never be accepted.
4. You are the CEO of a company that has to choose between making a
$100 million investment in Russia or Poland. Both investments promise the
same long-run return, so your choice is driven by risk considerations.
Assess the various risks of doing business in each of these nations. Which
investment would you favor and why?

a. Assess the various risks of doing business in each of these nations.

RUSSIA: RISK ASSESSMENT 1 BUDGET & CURRENT BALANCES
DEPENDENT ON OIL PRICES:
– The 2012 budget was amended in June to take accountof an expected rise in
oil prices (from $100 to $115 a barrel),which increases fiscal revenue and
allows expenditureto be maintained. Oil revenue accounts for half of
Staterevenue and the price of oil ensuring equilibrium in publicfinances has
doubled since 2008. Taking into account therecent change in the price of a
barrel, revenue should bebelow that expected while expenditure will not be
reviseddownwards. Consequently, the balance should be slightlyin deficit at the
end of the year. However, Russian publicfinances remain solid with public debt
below 10% of GDP,leaving the government some room for manoeuvre, at
leastin the short term.
- COMPLEX JUDICIAL SYSTEM:
– Property rights are widely perceived to be contingent on political
connections, and intimidation of businesses by the FSB and police for political
and financial ends is frequent. Red tape stifles innovation, and lack of
transparency makes adequate partner due diligence elusive. The judicial system
is also problematic: legislation implementation is broadly unpredictable and the
independence and integrity of Russian courts is deeply flawed.
Poland: Risk Assessment RELATIONSHIPS:
- Doing business in Poland requires an understanding of the importance of
relationships in polish businessculture. Building individual relationships is
essential to the success of business objectives, especially in the long term.
Polish people take time to establish relationships with business partners and to
build trust. Poland has a family-focused society, and poles value building and
maintaining close personal relationships. This may be considered as a
challenge for many foreigners doing business in poland who are not used to
sharing personal information with their business partners. For poles this is one
of the stages of the trust-building process.
- COMPLEX BUREAUCRACY:
– Although Poland’s per capita GDP is increasing relative to the rest of the EU,
it amounts to less than 70% of the EU average. Nonetheless, strong domestic
consumption is one of the engines of growth in Poland. Poland has made great
strides toward improving the commercial climate, but investors point to an
inefficient commercial court system, a rigid labour code, bureaucratic red tape,
and a burdensome tax system as challenges for foreign companies.

b. Which investment would you favor and why?

Russia:
 -According to the World Bank's leading economist in Russia, the economy
will face 4 risks: pandemic, inflation, energy transition and follow-up.
According to the World Bank's Chief Economist for Russia, the Covid-19
pandemic puts more pressure on the Russian economy than in some other
countries, mainly due to the relatively low vaccination rates.
Poland:
-Poland's economy can improve in the long run if the country solves these
problems.
Inadequacies still exist in the business environment and railway and road
infrastructure.
set. An inconsistent commercial court system, an opaque labor code,
bureaucracy, and persistently low levels of corruption have plagued the private
sector. unable to reach their full potential.
*I will support Poland according to the most realistic and objective situation
because the Russian economy is currently facing difficulties
Long term cannot be guaranteed.
Due to wars and conflicts: Russia has put too many resources into war,
resulting in financial losses and economic risks are too great.

5. Read the Management Focus “Did Walmart Violate the Foreign

Corrupt Practices Act?” What is your opinion? If you think it did, what do
you think the consequences will be for Walmart?
- After reading the Management Focus “Did Walmart Violate the Foreign
Corrupt Practices Act? I believe that Walmart actually violated the overseas
anti-corruption law because bribery is something that shouldn't happen in
business. The head of all these bribery cases is Walmex general manager
Eduardo Castro- Wright, but to keep the brand's reputation, Walmart has kept
this secret even though it has been repeatedly forced to clarify.
- In my opinion, if Walmart does not comply with FCPA, it will not be
forgiven and individuals who participate in corruption will be forced to go to
jail for their actions. I do not support corruption at all, so I hope this incident is
repeated by the New York Times and the authorities request an investigation
again to clarify this very bad issue of Walmart. If possible, I hope many people
across the country know and do not support Walmart products.