Unit 4- Reference Handouts- MBM 208

I. Foreign Technology Agreements in India permits transfer of technology by the

means of Government approval or through the automatic route delegated by RBI.

Automatic Approval-Foreign Technology Agreements in India

 The RBI grants automatic approval by the means of the regional offices to
Indian industries for foreign technology collaboration
 The payments pertaining to the technology transfer should not exceed
US$ 2 million
 The royalty to be paid is restricted to 5 % in case of domestic sales, 8 % in
case of exports and total payment should be 8 % on sales for a period of
10 years
 The royalty period should not exceed 7 years from the date of starting of
the business or 10 years from the date mentioned in the agreement
 The royalty paid is 5 % in case of domestic sales and 8 % in case of
exports as granted under automatic route for wholly owned subsidiaries

Government Approval-Foreign Technology Agreements in India

Government approval is required in the following cases -
 Proposals which requires licensing
 The manufacturing and products should be compliant with the small scale
industries
 Proposals which involves previous trademark agreement, joint ventures,
technology transfer, etc
 In case of an extension of the foreign technology collaboration
agreements which had been automatically approved earlier
 Proposals with no parity with the norms of the automatic approval

Institute-Industry Collaboration Example:

L&T and IIT Bombay sign MoU for technical collaboration

L&T and the Indian Institute of Technology (IITB) Bombay have signed a three-year
Memorandum of Understanding (MoU) for technical collaboration in the areas of
information technology, technology management, chemical engineering, CAD-CAM,
high-end engineering services, industrial design, communications and embedded
systems, mobile communications and IP network. The signing of this MoU is aimed
at strengthening the existing interaction between L&T and IITB in mutually beneficial
areas. The collaboration would be through one or more of the following modes :
 Sponsoring L&T's Build India M.Tech scholarship programme at IIT Bombay.
 Sponsoring student projects/fellowships in the two year M.Tech and five year
dual degree programmes at IIT Bombay.
 Sponsoring eligible employees of L&T for M.Tech/Ph.D. degrees at IIT
Bombay.
 Sponsoring R&D projects either at IITB or L&T.
  Training of L&T personnel through Continuing Education Programmes
conducted by IIT Bombay in areas of interest to L&T.

L&T will also be using IIT Bombay's assistance in the preparation of testing materials
and assessment center tools for L&T's technological leadership programme
initiative.

II. SAMPLE FORM OF TECHNICAL COLLABORATION AGREEMENT:

THIS AGREEMENT made on this…………..day of……………BETWEEN

………………an Indian company having its registered office at……………….
(hereinafter referred to as “A”) of the one part AND……………a foreign firm
having its principal place of business at…………..(hereinafter called “B”) of the
other part.

WHEREAS “A” is engaged in the manufacturing and marketing

of………….and has considerable engineering know-how and technical
information and equipment regarding said……………..and their method of
manufacture.

AND WHEREAS “A” is desirous of manufacturing in India and marketing

in India and other countries of various types of items which are set out in
Schedule “A” hereto annexed (hereinafter referred to as PRODUCTS) on the
terms and conditions herein contained.

NOW THEREFORE IT IS AGREED between the parties that :

1. Know how” means and includes all inventions, processes, patents,

engineering and manufacturing skill and other technical information whether
patent or patentable or not which are presently owned by “B” or which may be so
owned, during the term of this agreement including without limitation :

- Technical and engineering data, calculations and information.

- Design data, calculations and information.
- Details of layout of works, including details and specification of machinery
- All other forms of recovered information, technique and design in making
of jigs, tools, dies, patterns and moulds.

2(a) “B” shall fully and promptly furnish “A” with such “know-how” as “A” may
require from time to time during the term of this agreement in connection
with the manufacture of the products.
(b) “B” will depute ……………technicians at the expense of “A” to held to
establish and operate the plant at…………….and to train………..Indian
technicians in its work in…………….at expense of “A”.

© “A” at their expense, shall procure and maintain patents in India on such
inventions and improvements made by “A” : as “A” in their sole discretion
shall choose. “B” shall also have the right to use the invention and
improvements in all countries outside Indian and shall take full title to
such procured by “B” outside India. However, “B” shall not, without the
consent of “A”, licence any third party under said patents except its
subsidiaries, its parent company or other subsidiaries of the parent
company.

(d) “A” shall manufacture the PRODUCTS in strict accordance with the said
know-how, the STANDARD of quality embodied therein or as may be set
from time to time by “B”. To ensure the performance of this provision, “B”
shall have the right to inspect at reasonable intervals and during business
hours the facilities of “A” to the manufacture of the said PRODUCTS.

3. Subject to other provisions of this agreement, “B” hereby grants to “A”.

(a) an exclusive licence to make in India the products by the use of any or all
of “Bs” know-how.
(b) a non-exclusive licenses to use and sell the said PRODUCTS throughout
the world.

4(a) in consideration of “B” having agreed to disclose to “A” the latest method
of manufacture of PRODUCTS and other processes and having further
agreed to supply technical advice and date, “A” agrees to pay “B” a sum
of …………..which due and payable in installments as follows.

i) upon effective date.

ii) upon delivery by “B” of the complete design and engineering
documents.
iii) within………….months after tender or certificate of Discharge of
guarantees.

……………………..
Total ……………………..

In consideration of “B” for having agreed to disclose to “A” the latest

method of manufacture of products and other process, and having further
agreed to supply technical advice and date, “A” will arrange to allot
“B”…………shares atRs……….each without any payment by “B”
(b) “A” further agrees to pay to “B” a royalty of………..per cent of the net
selling price of the products covered by the agreement for a period
of……….years from the date of execution of the agreement. The net
selling price would means the ex-works price of the products covered
(less the landed cost of all imported components) including ocean freight,
insurance, customs duties payable thereon, etc., irrespective of the source
of import. Such royalty payments are subject to Indian taxes.

5(a) “A” shall render to “B” bi-annual/annual reports on or before the last day
of………..following each calendar year with respect to which royalties
are payable under this agreement, stating the amount of PRODUCT
manufactured in the plant during the preceding year the amount of royalty
due and payable with respect thereto. At the time of rendering such
reports A shall pay to B the amount of royalty stated therein to be due and
payable.

(b) A agrees to keep complete records of the account concerning the

products which are the subject- matter of this agreement, which records
shall be open to inspection of B ‘its appointed representative agreeable to
both parties, during regular business hours for verifying the payments due
to B under this agreement .

6. All payments due by A to B under the agreement are to be made in

…………………….. to B's account in any bank hit designates.

7(a) “A” shall maintain secrecy at all time during this agreement of all the know
how, drawings and the like disclosed by “B” to “A” and/or pursuant to
the terms herein or about which “A” learns during the performance of
this agreement.

(b) “A” will, however, be free to sub-license the technical know-how, product
design/engineering design under the agreement to another Indian
party/parties, should it become necessary. The terms of such sub-licence
will, however, be as mutually agreed to by all parties concerned including
“B” and will be subject to the approval of the Government.

8. This agreement shall become effective after it has been duly approved
and signed by “A” and “B” and the approval of the Government of India
has been obtained thereto.

9(a) This agreement shall remain effective for a period of……….. years from
the date of signing the agreement. Upon the expiration of this agreement,
the KNOW HOW THEREFORE delivered to “A” shall remain its property
for its full and free use thereof.
 (b) Subject to the approval of the Indian Government, this agreement may
be renewed in whole or in part for further period by mutual agreement.

10. This agreement shall be binding upon and ensure to the benefit of the
successors and assigns of the respective parties hereto, and the
obligations hereunder shall not be assignable by either party without
written consent being first obtained from the other.

11. This agreement embodies entire understanding of the parties as to its

subject matter, and it shall not be amended except in writing executed by
both parties to the agreement.

12. Either party may by notice in writing to the other terminate this
agreement in the event of :

(a) Any default by such other party in the performance or observation of any
of its obligations under this agreement which is not remedied to the
satisfaction of the party giving such notice within ninety (90) days following
delivery of such notice, such notice to contain reasonable particulars of
such default and to state the intention to terminate the agreement under
this clause unless such default is made good or remedied.

(b) Judicial proceedings for bankruptcy, composition with creditors,

sequestration of assets for creditors, or receivership instituted by or
against such other party, insolvency of such other party or its failure to
meet its obligations as they mature for any material period of time.

© Liquidation , compulsory or voluntary of such other party except in

connection with an amalgamation, reconstruction, merger, consolidation,
re-organisation or disposition of assets as a going concern voluntarily
undertaken and with a view to the continuance of the business by the
transferee thereof, provided, however, that upon such event the business
entity continuing the business formerly carried on by such other party
shall, in an appropriate instrument delivered to the other party to this
agreement, undertake to perform all of the obligations of such other party
hereunder.

13. Neither party shall be in default under this agreement by reason of its
failure or delay in the performance of its obligations is such failure or
delay is caused by acts of God, Government laws and regulations, strikes,
lock-outs, war or any other cause beyond its control and without its fault
or negligence.

14. All disputes, questions, or differences, etc., arising in connection with this
agreement shall be referred to a single arbitrator in India in case parties
agree upon one, otherwise two arbitrators in India are to be appointed by
 each party in accordance with and subject to the provision of the
Arbitration & Conciliation Act, 1996, or any other enactment or statutory
modification thereof for the time being in force.

15. Notices and other communications under the agreement shall be in

writing, or by established cable, radio or facsimile service, addressed as
indicated in the description of parties above or as either party may request
in writing, and the effective date of each is the date of its repaid deposit in
the mail for dispatch by air or such service properly addressed.

16. The agreement should be construed in accordance with and be governed

by the laws of India.

IN WITNESS WHEREOF, the parties hereto have executed this

agreement as of the date first above written.

I. NATURAL ENVIRONMENT:

Over the last 20 years, the human population has increased by a third,
global trade has tripled, and per capita income has gone up by 40%. Annual
emissions of the main greenhouse gas, carbon dioxide, have also
increased by one third.

SHRINKING RESOURCES
CHANGING WORLD

BIODIVERSITY

Sixteen thousand species are threatened with extinction. Habitat loss is a major
factor as many forests are cleared for agriculture. The UN estimates the global
annual loss of primary forest is 50,000 km2.

WATER
The availability of
fresh water will
decline, according to
the UN, who project
that by 2025 1.8bn
people will be
affected by water
scarcity. Sanitation is
also a major issue, as
contaminated water is
the greatest single
cause of human disease and death. The state of the world's fisheries is also
touched on by the report which says many fish stocks are overexploited, while
the demand for fish is expected to rise alongside growing populations.

II. Environmental Convention:

Environmental law is a complex and interlocking body of statutes, common law,

treaties, conventions, regulations and policies which, very broadly, operate to
regulate the interaction of humanity and the rest of the biophysical or natural
environment, toward the purpose of reducing or minimizing the impacts of human
activity, both on the natural environment for its own sake, and on humanity itself.
Environmental law draws from and is influenced by principles of
environmentalism, including ecology, conservation, stewardship, responsibility
and sustainability. From an economic perspective it can be understood as
concerned with the prevention of present and future externalities.

INTERNATIONAL CONVENTIONS AND AGREEMENTS ON

ENVIRONMENTAL ISSUES: Some examples:

Convention on International Trade in Endangered Species of Wild Fauna

and Flora (CITES)

The main objectives of this convention are the protection of endangered species
prominent in international trade through appropriate trade control measures and
monitoring the status of such species.

Basel Convention - Convention on the Control of Transboundary Movement

of Hazardous Wastes and their Disposal

The main objectives of the convention are the reduction of the production of
hazardous waste and the restriction of transboundary movement and disposal of
such waste.
It also aims to ensure that any transboundary movement and disposal of
hazardous waste, when allowed, is strictly controlled and is undertaken in an
environmentally sound and responsible way. Locally, draft regulations are being
prepared in an effort to control the movement of such waste.

Convention on Biological Diversity (CBD)

The aim of the CBD is to effect international cooperation in the conservation of

biological diversity and to promote the sustainable use of living natural resources
worldwide. It also aims to bring about the sharing of the benefits arising from the
utilisation of natural resources.

United Nations Framework Convention on Climate Change (UNFCCC)

The United Nations Framework Convention on Climate Change was signed by

154 governments in Rio de Janeiro during the United Nations Conference on
Environment and Development (UNCED) in June 1992. The convention
addresses the threat of global climate change by urging governments to reduce
the sources of greenhouse gases. The ultimate objective of the convention is to
stabilize greenhouse gas concentrations in the atmosphere at a level that would
prevent dangerous interference with the climate system of the world.

Convention on Prior Information Consent (PIC) - Rotterdam

The Convention will ensure obligatory detailed information exchange between

countries on hazardous chemicals and pesticides allowing informed decision-
making on the national use of such chemicals.

Antarctic Treaty

The main purpose of the Antarctic Treaty is to regulate relations between

countries involved in research in Antarctica.
Included in the provisions of the treaty are that Antarctica shall be used for
peaceful purposes only, to promote international cooperation for the exchange of
information and the freedom of scientific investigation.

World Heritage Convention - Convention Concerning the Protection of the

World Cultural and Natural Heritage
The convention aims to promote cooperation among nations to protect all forms
of natural and cultural heritage that are of such outstanding universal value that
their conservation is of concern to all people. UNESCO adopted the convention
in 1972. At present 144 countries are parties to it.

Montreal Protocol - Protocol for the Protection of the Ozone Layer

The protocol is aimed at ensuring measures to protect the earth's ozone layer,
which were designed to restrict the use of chlorofluorocarbons (CFCs) and
halons. Parliament has approved the ratification of the Copenhagen
Amendments to the Protocol and the necessary steps are now being taken for
the instrument for ratification to be deposited..

The International Convention for the Regulation of Whaling (IWC)

South Africa is a founder member of the IWC and has a proud record regarding
the conservation of whales and research on whale management.

KYOTO Protocol:

The Kyoto Protocol is an international agreement linked to the United Nations

Framework Convention on Climate Change. The major feature of the Kyoto
Protocol is that it sets binding targets for 37 industrialized countries and the
European community for reducing greenhouse gas (GHG) emissions .These
amount to an average of five per cent against 1990 levels over the five-year
period 2008-2012.
The major distinction between the Protocol and the Convention is that while
the Convention encouraged industrialised countries to stabilize GHG
emissions, the Protocol commits them to do so.
Recognizing that developed countries are principally responsible for the
current high levels of GHG emissions in the atmosphere as a result of more
than 150 years of industrial activity, the Protocol places a heavier burden on
developed nations under the principle of “common but differentiated
responsibilities.”
The Kyoto Protocol was adopted in Kyoto, Japan, on 11 December 1997 and
entered into force on 16 February 2005. 184 Parties of the Convention have
ratified its Protocol to date. The detailed rules for the implementation of the
Protocol were adopted at COP 7 in Marrakesh in 2001, and are called the
“Marrakesh Accords.”

The Kyoto mechanisms -

Under the Treaty, countries must meet their targets primarily through national
measures. However, the Kyoto Protocol offers them an additional means of
meeting their targets by way of three market-based mechanisms.
The Kyoto mechanisms are:
 Emissions trading – known as “the carbon market"
 Clean development mechanism (CDM)
 Joint implementation (JI).
The mechanisms help stimulate green investment and help Parties meet their
emission targets in a cost-effective way.

Monitoring emission targets

Under the Protocol, countries’ actual emissions have to be monitored and precise
records have to be kept of the trades carried out.

Registry systems track and record transactions by Parties under the

mechanisms. The UN Climate Change Secretariat, based in Bonn, Germany,
keeps an international transaction log to verify that transactions are consistent
with the rules of the Protocol. Reporting is done by Parties by way of submitting
annual emission inventories and national reports under the Protocol at regular
intervals. A compliance system ensures that Parties are meeting their
commitments and helps them to meet their commitments if they have problems
doing so.

Adaptation
The Kyoto Protocol, like the Convention, is also designed to assist countries in
adapting to the adverse effects of climate change. It facilitates the development
and deployment of techniques that can help increase resilience to the impacts of
climate change.

The Adaptation Fund was established to finance adaptation projects and

programmes in developing countries that are Parties to the Kyoto Protocol. The
Fund is financed mainly with a share of proceeds from CDM project activities.

The road ahead

The Kyoto Protocol is generally seen as an important first step towards a truly
global emission reduction regime that will stabilize GHG emissions, and provides
the essential architecture for any future international agreement on climate
change.

By the end of the first commitment period of the Kyoto Protocol in 2012, a new
international framework needs to have been negotiated and ratified that can
deliver the stringent emission reductions the Intergovernmental Panel on Climate
Change (IPCC) has clearly indicated are needed.

National Laws:
In India, the following Acts and Rules govern the various aspects of
environmental regulation -
  The Water (Prevention and Control of Pollution) Act, 1974
 The Water Prevention and Control of Pollution Cess Act, 1977
 The Air (Prevention and Control of Pollution)Act, 1981
 The Environment (Protection) Act, 1986
 The Batteries (Management and Handling) Rules, 2001
 The Municipal Solid Wastes (Management and Handling) Rules, 2000
 The Recycled Plastics Manufacture and Usage Rules, 1999
 The Rules for the Manufacture, Use, Import and Export and Storage of
Hazardous micro-organisms
 Genetically engineered organisms or cells, 1989
 The Manufacture, Storage and Import of Hazardous Chemical Rules, 1989
 The Hazardous Wastes( Management and Handling ) Rules, 1989
 The Bio-Medical Waste ( Management and Handling ) Rules, 1998
 Dumping and disposal of fly ash discharged from coal or lignite based
thermal power plants, 1999
 Noise Pollution( Regulation and Control ) Rules, 2000
 The Ozone Depleting Substances ( Regulation and Control )Rules, 2000
 The 2-T Oil ( Regulation of Supply and Distribution) Order, 1998
 The Public Liability Insurance Act, 1991
 The National Environment Appellate Authority Act, 1997
 The National Environment Tribunal Act, 1995
 Forest (Conservation) Act, 1980
 The Biological Diversity Act, 2002

Example:
Environmental Regulation

Threats to Indian Petrochemical industry -

 Environmental hazards concerns
 Disposal concerns
 Industrial effluents are disposed off openly into water bodies and thus
contaminating ground water level
 Low quality consciousness
 Insufficient safety measures
 Safety norms are not at par with world standard
 Insufficient basic infrastructure for the petrochemical industry
 Prevalence and use of old technology
 Unorganized industry and operates in small clusters

The demand for Indian Petrochemical products is high mainly because of its
quality, competitive pricing and above all for its environment friendly
petrochemical products. India's low cost, high-end petrochemical products,
environment friendly manufacturing expertise, and developing world class
infrastructure are the main leveraging factors for the rise of this industry. India
offers world class and environment friendly petrochemicals at a substantial
discount compared to its western counterparts. Indian environmental
regulation are as per international standards and adhere to the Kyoto
 protocol.

III. Environmental Action plans and programs:

INTEGRATED ENVIRONMENTAL MANAGEMENT (IEM)

 IEM is a philosophy that is concerned with finding the right balance
between development and environment concerns. It provides a framework
of published guidelines to ensure that environmental considerations are
taken into account at every stage of the project, process or policy. The
difference between IEM and Environmental Impact Assessment (EIA) is
that IEM is the entire process of looking at the environment from every
angle, whereas EIA is just one analytical tool which gathers the analyses
of environmental information for one particular project or situation.

ENVIRONMENTAL AUDITING (Accounting & Auditing)

 Environmental auditing is a process used mainly in commerce and

industry to measure how well environmental policies, programmes and
plans are being implemented in practice. The process uses checklists and
questionnaires (sometimes called "audit protocols") to understand how
successfully environmental measures are being implemented and tries to
help to improve systems by constructive criticism.

ENVIRONMENTAL IMPACT ASSESSMENT (EIA)

 EIA is a process that produces a research report which examines the
environmental impact (positive and negative) of a project or development
on a particular area. It looks at different alternatives to a project to assist
the decision makers in deciding which type of project will best suit an area
or particular environment while having the least negative environmental
impact. The EIA is a planning tool and can only provide guidance to
decision makers such as politicians. It will present a set of alternatives
indicating the benefits and drawbacks of each alternative. This will then
assist the decision maker in deciding whether the project may go ahead
and in what form and under which conditions it should go ahead.

ENVIRONMENTAL RISK AND LIABILITY

 Environmental risk describes the possibility (the technical word is the
"probability") of an environmental accident (such as the spill of wastes or
chemicals polluting a river) occurring. Environmental liability refers to the
exposure of the responsible company or institution to the possibility or risk
of an environmental accident or disaster in a given situation. (For
example, a factory that has no procedures to deal with spills will have a
 greater environment liability in the eyes of insurance companies and the
authorities than a factory that has taken precautions and made plans.)
Environmental risk and liability describe the readiness and preparedness
of organizations and individuals to deal with and respond to environmental
disasters, problems and accidents.

ENVIRONMENTAL ECONOMICS
 A major problem of environmental economics has been defined as the
selection of a strategy for the management of the environment which best
promotes the collective welfare of society. Economists view the
environment as a reservoir of natural resources (some renewable and
others non-renewable). However, problems arise when the following
question is asked: What is of greater value to the community - industrial
development, which creates wealth, or unspoiled scenery, which creates
and supports high quality of life? The question to be asked is how the
private cost (to the manufacturer) of environmental pollution (usually zero)
can be reconciled with the public cost (often considerable)? This
underlines the inability of traditional market forces to prevent deterioration
of the environment.

INTEGRATED POLLUTION AND WASTE MANAGEMENT (IP&WM)

 Integrated Pollution and Waste Management is an approach adopted by
Government to deal with the current problems relating to waste
management and pollution. A new framework for legislation, regulations,
policies and information is being developed which will simplify pollution
control and ensure better management and protection of the environment.
The policies include greater transparency and better availability of
pollution and environmental information to the public.

ISO 14000
 ISO stands for "International Organization for Standardization". This is an
international organization that designs and writes codes of practice (called
standards) to ensure that actions and processes are carried out in a
correct and uniform manner. This is especially important where operations
require that equipment must be made to fit different countries' systems
and the tolerance or margin for error is very small. ISO 14000 is an
international standard for environmental management, which sets
guidelines on how to operate environmental management systems in
different companies in different countries. There are a number of different
detailed standards in the ISO 14 000 series, e.g. ISO 14 001 -
Environmental Management Systems, ISO 14 010 - Guidelines for
Environmental Auditing and ISO 14 040 - Life Cycle Assessment.
***************
 FOREIGN INVESTMENT POLICY-FDI
& FIIA. Foreign Direct Investment
Policy-FDI
RBI-Automatic FIPB

100 74 49 26 100 74 49 26

Flori-Horticulture Ground Scheduled Insuranc Tea Basic & ARCs Defence

handling air e Cigarette Cellular production
Mining-Gold, (air)-NRI transport services DTH
minerals, silver, 100 (NRI- Courier (FDI+FII) FM radio-
coal & lignite 100%) services ISP 20%
(Captive) Private Commodity
banking Non- exchange Newspaper
Alcohol-distillation (FDI+FII) news
Basic & channels Credit News
Hazardous Non- Cellular information channels
chemicals, scheduled services Magazine company
Industrial air Journals
explosives, Drugs transport ISP Refining
& Pharma (PSU)

Power Single
brand
Airports product
(Greenfield) retailing
(51%)
Construction
development
projects, SEZs

Industrial parks

Refining
(private)

Telecom
equipments
Wholesale trading

NBFCs

All Remaining 100% FDI-Automatic, subject to regulations applied viz. PSU

reservation etc.

B. Foreign Institutional Investments-FIIs

This surge in FII investment has led to the cumulative net investments by FII in to
Indian equities to total US$ 66.8 billion by the end of 2007, since December
1993, when FIIs were allowed to enter India. This is a clear index of how bullish
this category of investors has been on the prospects of the Indian market.

Government Initiatives

 The ceiling for overall investment for FIIs is 24 per cent of the paid-up
capital of the Indian company,
 20 per cent of the paid-up capital in the case of public sector banks.

 The ceiling of 24 per cent for FII investment can be raised up to sectoral
cap/statutory ceiling, subject to the approval of the board and the general
body of the company passing a special resolution to that effect.

 Allowed foreign individuals, corporates and other investors such as hedge

funds to register directly as foreign institutional investors.
 SEBI has FII investment limit in government securities and corporate
bonds being increased to US$ 8 billion.
 Institutional investors--including FIIs and their sub-accounts--have been
allowed to undertake short selling, lending and borrowing of Indian
securities from February 1, 2008. (Temporarily recently banned, Oct 2008)
 SEBI has simplified the registration norms for FIIs and sub-accounts.
 it has allowed investment managers, advisors or institutional portfolio
managers in the NRI category to be registered as FIIs.

Reference Handouts MBM 208 Unit 5.

Globalization can be traced to times when Buddhism spread from India to
China in Ist century AD. That was when cultural links between both countries
were established. By 1300 AD, the Song Dynasty in China linked Europe and
China by land and sea across Eurasia and the Indian Ocean. The year 1300
saw the creation of the Ottoman Empire which spanned Europe, North Africa,
and the Middle East, and connected the dynasties in Central Asia and India.

This led to the expansion of trading activities between Europe and Asia. By
1300, networks of trade ran from England to China, France, Italy, across the
Mediterranean to Egypt, and then to Central Asia (the Silk Route). The trade in
commodities continued well into the 17th century. By 1800, the Atlantic and
Indian Ocean systems were connected to one another through the flow of
commodities and by the operations of the British, French, and Dutch overseas
companies.

The economic conditions that prevailed in the eighteenth century continued well
into the nineteenth century. With the introduction of railways and steamships,
transportation costs came down significantly, and this created new circuits of
capital accumulation. In the twentieth century, technological developments were
further reducing natural barriers like geographical distance. The cost of
information processing and communication fell significantly in the last few
decades, accelerating the pace of globalization.

Firms go abroad for organizational and environmental reasons. Organizational

factors are internal to the organization, while environmental reasons are external
to the organization. Internal reasons might range from wanting to exploit
worldwide market imperfections to opportunities that arise in different stages of
the lifecycle of a firm’s product. There are six ways to enter a foreign market.
They are: exporting, turnkey projects, licensing, franchising, setting up a joint
venture with a host country firm, and setting up a wholly-owned subsidiary in the
host country.

An organization goes through five stages of evolution: domestic, international,

multinational, global, and transnational stages before becoming a metanational
corporation. The classification is based on the firm’s orientation at each stage. To
be competitive, companies have to constantly innovate and make their own
products obsolete. Competition has transformed the marketplace from a seller's
market to a buyer's market where the customers' focus is on value. Metanational
companies see the world as a place with specialized knowledge pockets: market
intelligence, technology and capabilities, scattered around. These companies
sense the untapped potential in these knowledge pockets, and try to exploit it to
the fullest extent.
Measuring globalization:
Globalization has had an impact on different cultures around the world.
Japanese McDonald's fast food as an evidence of international integration.
Looking specifically at economic globalization, demonstrates that it can be
measured in different ways. These center around the four main economic flows
that characterize globalization:
 Goods and services, e.g. exports plus imports as a proportion of national
income or per capita of population
 Labor/people, e.g. net migration rates; inward or outward migration flows,
weighted by population
 Capital, e.g. inward or outward direct investment as a proportion of
national income or per head of population
 Technology, e.g. international research & development flows; proportion of
populations (and rates of change thereof) using particular inventions
(especially 'factor-neutral' technological advances such as the telephone,
motorcar, broadband)

As globalization is not only an economic phenomenon, a multivariate approach to

measuring globalization is the recent index calculated by the Swiss think tank
KOF. The index measures the three main dimensions of globalization: economic,
social, and political. In addition to three indices measuring these dimensions, an
overall index of globalization and sub-indices referring to actual economic flows,
economic restrictions, data on personal contact, data on information flows, and
data on cultural proximity is calculated. Data is available on a yearly basis for 122
countries, as detailed in Dreher, Gaston and Martens (2008). According to the
index, the world's most globalized country is Belgium, followed by Austria,
Sweden, the United Kingdom and the Netherlands. The least globalized
countries according to the KOF-index are Haiti, Myanmar the Central African
Republic and Burundi.A.T. Kearney and Foreign Policy Magazine jointly publish
another Globalization Index. According to the 2006 index, Singapore, Ireland,
Switzerland, the U.S., the Netherlands, Canada and Denmark are the most
globalized, while Indonesia, India and Iran are the least globalized among
countries listed.

Effects of globalization
Globalization has various aspects which affect the world in several different ways
such as:
 Industrial - emergence of worldwide production markets and broader
access to a range of foreign products for consumers and companies.
Particularly movement of material and goods between and within national
boundaries.
 Financial - emergence of worldwide financial markets and better access to
external financing for borrowers. Simultaneous though not necessarily
purely globalist is the emergence of under or un-regulated foreign
exchange and speculative markets.
 Economic - realization of a global common market, based on the freedom
of exchange of goods and capital.
 Political - some use "globalization" to mean the creation of a world
government, or cartels of governments (e.g. WTO, World Bank, and IMF)
which regulate the relationships among governments and guarantees the
rights arising from social and economic globalization. [13] Politically, the
United States has enjoyed a position of power among the world powers; in
part because of its strong and wealthy economy. With the influence of
globalization and with the help of The United States’ own economy, the
People's Republic of China has experienced some tremendous growth
within the past decade. If China continues to grow at the rate projected by
the trends, then it is very likely that in the next twenty years, there will be a
major reallocation of power among the world leaders. China will have
enough wealth, industry, and technology to rival the United States for the
position of leading world power.
 Informational - increase in information flows between geographically
remote locations. Arguably this is a technological change with the advent
of fibre optic communications, satellites, and increased availability of
telephony and Internet.
 Language - the most popular language is English
o About 75% of the world's mail, telexes, and cables are in English.
o Approximately 60% of the world's radio programs are in English.
o About 90% of all Internet traffic is using English.
 Competition - Survival in the new global business market calls for
improved productivity and increased competition. Due to the market
became worldwide not specific area, there are many industries around the
world. Industries have to upgrade their products and use technology
skillfully for facing the competition and increasing their competitive.[16]
 Cultural - growth of cross-cultural contacts; advent of new categories of
consciousness and identities which embodies cultural diffusion, the desire
to increase one's standard of living and enjoy foreign products and ideas,
adopt new technology and practices, and participate in a "world culture".
Some bemoan the resulting consumerism and loss of languages. Also see
Transformation of culture.
 Ecological- the advent of global environmental challenges that might be
solved with international cooperation, such as climate change, cross-
boundary water and air pollution, over-fishing of the ocean, and the spread
of invasive species. Since many factories are built in developing countries
with less environmental regulation, globalism and free trade may increase
pollution. On the other hand, economic development historically required a
"dirty" industrial stage, and it is argued that developing countries should
not, via regulation, be prohibited from increasing their standard of living.
 Social (International cultural exchange) - increased circulation by people
of all nations with fewer restrictions.
o Spreading of multiculturalism, and better individual access to
cultural diversity (e.g. through the export of Hollywood and
 Bollywood movies). Some consider such "imported" culture a
danger, since it may supplant the local culture, causing reduction in
diversity or even assimilation. Others consider multiculturalism to
promote peace and understanding between peoples.
o Greater international travel and tourism
o Greater immigration, including illegal immigration
o Spread of local consumer products (e.g. food) to other countries
(often adapted to their culture).
o Worldwide fads and pop culture such as Pokémon, Sudoku, Numa
Numa, Origami, Idol series, YouTube, Orkut, Facebook, and
MySpace. Accessible to those who have Internet or Television,
leaving out a substantial segment of the Earth's population.
o Worldwide sporting events such as FIFA World Cup and the
Olympic Games.
o Incorporation of multinational corporations in to new media. As the
sponsors of the All-Blacks rugby team, Adidas had created a
parallel website with a downloadable interactive rugby game for its
fans to play and compete.

 Technical
o Development of a global telecommunications infrastructure and
greater transborder data flow, using such technologies as the
Internet, communication satellites, submarine fiber optic cable, and
wireless telephones
o Increase in the number of standards applied globally; e.g. copyright
laws, patents and world trade agreements.
 Legal/Ethical
o The creation of the international criminal court and international
justice movements.
o Crime importation and raising awareness of global crime-fighting
efforts and cooperation.

Whilst it is all too easy to look at the positive aspects of Globalization and the
great benefits that are apparent everywhere, there are also several negative
occurrences that can only be the result of or major motivating factors that inspire
some corporations to globalize. Globalization – the growing integration of
economies and societies around the world – has been one of the most hotly-
debated topics in international economics over the past few years. Rapid growth
and poverty reduction in China, India, and other countries that were poor 20
years ago, has been a positive aspect of globalization. But globalization has also
generated significant international opposition over concerns that it has increased
inequality and environmental degradation.

3. GLOBALISATION:
3.1. Concept & History:

The International Monetary Fund defines globalization as the growing

economic interdependence of countries worldwide through increasing volume
and variety of cross-border transactions in goods and services, free international
capital flows, and more rapid and widespread diffusion of technology.
Meanwhile, the International Forum on Globalization defines it as the present
worldwide drive toward a globalized economic system dominated by
supranational corporate trade and banking institutions that are not accountable to
democratic processes or national governments.

Globalization has many facets like Cultural, Economic & Political. Culturally,
globalization is defined as a process of growing interdependence between all
people of this planet. People are linked together economically and socially by
trade, investments and governance. These links are spurred by market
liberalization and information, communication and transportation technologies.

Cultural global ties also grow through globalization as news ideas and fashions
through trade, travel and media move around the globe at lightning speed. Global
brands such as Coca-Cola, Nike & Sony serve as common reference to
consumers all over the World. An individual in China enjoys the same soft drink
as an individual in Puerto Rico--at opposite ends of the globe. However, these
ties may also cause strains: for example Western Ideas of freedom of expression
may clash with Islamic views on Religious tolerance. And if not strains, critics
contend this is really an imposition of cultural imperialism in order to preserve
economic interests.

The economic aspects stressed in globalization are trade, investment and

migration. The globalization of trade entails that human beings have greater
access to an array of goods and services never seen before in human history.

From German cars, to Colombian coffee, from Chinese clothing, to Egyptian

cotton, from American music to Indian software, human beings may be able to
purchase a wide range of goods and services. The globalization of investment
takes place through Foreign Direct Investment, where multinational companies
directly invest assets in a foreign country, or by indirect investment where
individuals and institutions purchase and sell financial assets of other countries.
Free migration allows individuals to find employment in jurisdictions where there
are labor shortages.

In the end, the political aspects of globalization are evidenced when governments
create international rules and institutions to deal with issues such as trade,
human rights, and the environment. Among the new institutions and rules that
have come to fruition as a result of globalization are the World Trade
Organization (WTO), the Euro currency (Euro), the North American Free Trade
Agreement (NAFTA), to name a few. Whether a government is to consciously
open itself to cross-border links, is the central question of this aspect.

History:

A global economy is an unprecedented phenomenon, not to be confused with

economic internationalization. In fact, a world economy has existed since the
16th century, based on the development of international trade, foreign direct
investment and migration.

Globalization can be traced to times when Buddhism spread from India to China
in 1st century AD. That was when cultural links between both countries were
established. By 1300 AD, the Song Dynasty in China linked Europe and China by
land and sea across Eurasia and the Indian Ocean. The year 1300 saw the
creation of the Ottoman Empire which spanned Europe, North Africa, and the
Middle East, and connected the dynasties in Central Asia and India.

This led to the expansion of trading activities between Europe and Asia. By 1300,
networks of trade ran from England to China, France, Italy, across the
Mediterranean to Egypt, and then to Central Asia (the Silk Route). The trade in
commodities continued well into the 17th century. By 1800, the Atlantic and
Indian Ocean systems were connected to one another through the flow of
commodities and by the operations of the British, French, and Dutch overseas
companies.

The economic conditions that prevailed in the eighteenth century continued well
into the nineteenth century. With the introduction of railways and steamships,
transportation costs came down significantly, and this created new circuits of
capital accumulation. In the twentieth century, technological developments were
further reducing natural barriers like geographical distance. The cost of
information processing and communication fell significantly in the last few
decades, accelerating the pace of globalization.

Firms go abroad for organizational and environmental reasons. Organizational

factors are internal to the organization, while environmental reasons are external
to the organization. Internal reasons might range from wanting to exploit
worldwide market imperfections to opportunities that arise in different stages of
the lifecycle of a firm’s product. There are six ways to enter a foreign market.
They are: exporting, turnkey projects, licensing, franchising, setting up a joint
venture with a host country firm, and setting up a wholly-owned subsidiary in the
host country.

An organization goes through five stages of evolution: domestic, international,

multinational, global, and transnational stages before becoming a metanational
corporation. The classification is based on the firm’s orientation at each stage. To
be competitive, companies have to constantly innovate and make their own
products obsolete. Competition has transformed the marketplace from a seller's
market to a buyer's market where the customers' focus is on value. Metanational
companies see the world as a place with specialized knowledge pockets: market
intelligence, technology and capabilities, scattered around. These companies
sense the untapped potential in these knowledge pockets, and try to exploit it to
the fullest extent.

Other Globalization Time-Lines (Modern Time):

In general use within the field of economics and political economy,
however, it is a history of increasing trade between nations based on stable
institutions that allow firms in different nations to exchange goods and
services with minimal friction.

The period of the gold standard and liberalization of the 19th century is often
called "The First Era of Globalization". This era grew along with industrialization.
In essence, it was argued that nations would trade effectively, and that any
temporary disruptions in supply or demand would correct themselves
automatically. The institution of the gold standard came in steps in major
industrialized nations between approximately 1850 and 1880, though exactly
when various nations were truly on the gold standard is contentiously debated.

Globalization in the era since World War II has been driven by trade negotiation
rounds, originally under the auspices of GATT, which led to a series of
agreements to remove restrictions on "free trade". The Uruguay round led to a
treaty to create the World Trade Organization or WTO, to mediate trade disputes.
Other bi- and trilateral trade agreements, including sections of Europe's
Maastricht Treaty and the North American Free Trade Agreement have also
been signed in pursuit of the goal of reducing tariffs and barriers to trade.

(Source: http://www.legalserviceindia.com/articles/glob_is.htm)

Stages:
 First Wave: globalization of colonization (3/4th of world colonized by UK,
France, Spain, Portugal)
 Second wave: Self-reliance, Independence and decolonization
 Third wave: Religious Globalization (Missionaries from west came to east &
vice versa)
 Fourth wave (Modern Era): Economic Globalization.

Multinational Corporations:

Though there is no universally acceptable definition of MNCs they may

be generally defined as companies that operate in more than one
country and invest directly in operations instead of being involved in
licensing, franchising, etc. The operations are not just confined to sales
but also involve manufacturing and R&D. MNCs tend to be oligopolistic
and dynamic in sensing and exploiting local opportunities.

The various subsidiaries of an MNC enjoy substantial autonomy in

decision making, except in some critical areas, which are handled by the
parent firm. MNCs can be vertically or horizontally integrated. They can
also take the form of conglomerates, joint ventures, or strategic
alliances. The growth of MNCs in the last few decades may be attributed
to the revolution in information technology and the removal of
restrictions on capital flows by several countries around the globe. Many
theories have been framed to explain the evolution of MNCs.

Organizational Structure of MNCs

Organizational structure is a representation of the formal reporting relationships
within an organization. Span of control refers to the maximum number of
subordinates a manager can effectively supervise. A narrow span of control
means fewer number of people reporting to a manager and a wide span means
more subordinates reporting to one manager.

While a narrow span of control creates a tall organization with many managers
and centralized decision making, wide span creates a flat organization with fewer
managers and more delegation of authority. The degree to which authority is
delegated determines centralization and decentralization.

Though centralization helps avoid conflict of interest that could arise in a

decentralized environment, it generally leads to slower, ineffective and inefficient
decision-making. Horizontal differentiation is concerned with how the
departments in an organization function together. An organization based on
functions is the traditional and the most logical.

But a firm offering many product lines, will find this structure less successful. In a
product division based organizational structure, product heads are responsible
for all functions relating to a product. This enables the managers to gain
expertise of various functions relating to the product. Marketing plans can vary
among product groups and need not be tied up with the overall organizational
marketing plan.

Most MNCs in their initial stages of globalization employed an international

division covering certain regions of the world to supervise the functions in those
regions. But conflicts could arise between the functional heads and the heads of
the international division.

WorldWide Area Structure and Strategic Business Units (SBU) are more popular
forms of organizational structure in big corporations. SBUs function as
independent organizations with a separate income statement and balance sheet.
But the challenge of globalization and the growth in technology have brought
about more complex organizational structures like the Matrix structure and the
management networks.

Matrix organizations are a hybrid of the functional and divisional structures.

Normally, this results in a subordinate having to report to two bosses. But matrix
structures can prove very effective without any conflict in the reporting
relationships, if they are well chalked out. Network or virtual organizations use
technology to collect and disseminate information. They identify customer
requirements and deliver products and services through a network of specialists.

Modes of Entry/ Internationalisation:

 Exporting
 Turnkey Projects

 Licensing

 Franchising

 Joint Ventures

 Wholly owned Subsidiaries

The advantage of exporting is that it facilitates realization of experience curve

economies and prevents cost of setting up manufacturing operations in another
country. Disadvantages include high transport costs, trade barriers and problems
with local marketing agents. Turnkey projects allow firms to export their process
technology where FDI is not permitted.

The disadvantage is that the firm may create competitors in the process. The
main advantage of licensing is that the licensee bears the cost and risk of
opening a foreign market. The disadvantages include the risk of losing
technological know-how to the licensee.

The advantage of franchising is similar to that of licensing and the disadvantage

is that the franchiser has to keep strict control over the franchisee. The
advantage of joint ventures is the partners share the costs and risk of opening a
foreign market and of gaining knowledge and political influence. The
disadvantage is the risk of losing control over technology.

The advantages of wholly owned subsidiary include tight control over

operations and technology. However, the firm has to bear all the costs and risks
of opening a foreign market. We have also seen that the multiple measures of
risk should be taken into consideration while selecting an entry mode. We also
discussed strategic alliances and its advantages and disadvantages.
The advantage of strategic alliance is that it facilitates entry into foreign market
and enables partners to share the fixed costs and risks associated with new
products and processes. The disadvantage is that firms may sometimes have to
give away technological know-how and market access to the alliance partner.

To make the alliance work, factors to be taken into consideration are selection of
partner, structure of the alliance and management of the alliance. The key issues
involved in managing alliances are building trust and learning from each other.

 Continuum of Internationalization:
International –Multinational/Transnational-Global

 Entry strategies:
Export-Licensing-Franchising-Turnkey projects-subsidiary-Joint ventures

 Organizational structure:
International division-Functional-Geographic-Product-Matrix-Network

Monday, September 8, 2008

Performance of India's External Sector during 2007-08
The external sector of the Indian economy has progressed well during 2007-08
on the whole. As per the information from the Reserve Bank of India (RBI),
exports reached US $ 159 billion during 2007-08 from US $ 128 billion during the
same period in 2006-07 recording an impressive growth of 23.7%. However,
imports too have increased to US $ 249 billion in 2007-08 from US $ 191 billion
in 2006-07, thus leading to a trade deficit amounting to US $ 90 billion during
2007-08. This was compensated by large inflows of receipts from services
exports and private transfers that led to a relatively comfortable current account
deficit of 1.49% of gross domestic product (GDP) during the year.

The major items that India exported during the year 2007-08 are agriculture and
allied products, ores and minerals, manufactured goods and petroleum, crude
and products, and their share in the total exports are 11.36%, 5.66%, 63.58%
9.39% and 15.64%, respectively. On detailed examination it is seen that growth
in exports has largely been in primary products like sugar (95%), rice (87%), oil
meal (62.4 %), spices (49%) and iron ore (47 %). In fact, the share of agriculture
and allied activities in total exports has seen a marginal rise from 10.04 % in
2006-07 to 11.36 % in 2007-08. Engineering exports, which account for 35% of
manufactured exports of India, actually saw a dip in growth rate from 36% in FY
2007 to 24% in FY2008, which is a matter of concern since this can be occurring
as a result of falling demand in the backdrop of global slowdown and economic
recession in the US. Among the total exports, Agriculture & Allied products export
increased by 42.46%, Petroleum Crude and Petro-products by 33.3%, Ores &
Minerals by 28.75%, and Manufacturing Goods by 19.19%, over the previous
year. Destination-wise, although the US remained the principal export market, its
share declined to 13.0 per cent during 2007-08 from 14.9 per cent in the previous
year. The other major destinations were the UAE (9.7 per cent), China (6.8 per
cent), Singapore (4.3 per cent), and the UK (4.1 per cent). During 2007-08,
India’s exports to the EU, North America, Eastern Europe and Asian developing
countries showed an accelerated growth, while that to OPEC, African developing
countries and Latin American developing countries showed deceleration.

According to the World Economic Outlook released in July 2008, the growing use
of export restrictions by food exporting countries (which includes India too) to
raise domestic food supplies and lower domestic prices for ensuring food security
has put pressure on world prices. Export restrictions by some major rice
exporting countries have contributed substantially to the run-up in rice prices in
2008.

The trend in growth in invisible receipts continued with 26.2 per cent during 2007-
08, which was broadly comparable with that of 28.3 per cent in 2006-07, mainly
due to the momentum maintained in the growth of software services exports,
travel, transportation, along with the steady inflow of remittances from overseas
Indians. However, appreciation of the value of Indian rupee vis-à-vis US dollar
from Rs. 45.22 in 2006-07 to Rs. 40.18 in 2007-08 raised apprehensions that it
might adversely affect India’s software and the business process outsourcing
(BPO) industry.

The major items, which India imported during the year 2007-08 are petroleum
and petro products, bulk consumption goods, capital goods, textiles, chemicals &
related products and gold and silver, and their share in the total imports are
33.38%, 2.22%, 15.63%, 1.03%, 7.81% and 7.47%, respectively. India saw the
import bill for petroleum and petro-products rising to US $ 79.6 billion in 2007-08
from US $ 57.1 billion in 2006-07 owing to rising international crude prices.

The value of total trade in goods and services as percentage of GDP at market
price declined to 45.8% in 2007-08 from 47.2% in 2006-07. The value of
merchandise trade deficit during 2006-07 was US $ 64.9 billion, which rose to a
level of US $ 90.1 billion in 2007-08. The trade deficit on non-oil account during
2007-08 amounted to US $ 25.9 billion against US $ 20.9 billion in the previous
year.

As per the World Economic Outlook released in September 2007, world trade
volume had been projected to increase by 7.4% in 2008. Although the latest
estimates released in July 2008 show that global real GDP growth on a
purchasing power parity basis is expected to decelerate from 5.0 percent in 2007
to 4.1 percent in 2008 and further to 3.9 percent in 2009, which can adversely
affect India’s trade performance in 2008-09. Foreign direct investment (FDI) in
India has increased from US $ 22.1 billion in 2006-07 to US $ 32.4 billion in
2007-08. Portfolio investment has increased from US $ 7003 in 2006-07 to US $
29385 in 2007-08. The net capital inflows rose substantially to US $ 25.4 billion in
Q4 of 2007-08 from US $ 15.6 billion in Q4 of 2006-07. The major sources of
capital inflows were external commercial borrowings (ECBs), foreign direct
investment (FDI), short-term trade credit and overseas borrowings by the banks.
The share of ECBs in the total external debt increased from 4.54% in 2007 to
5.29% in 2008. Total external debt as percentage to gross domestic product
(GDP) increased from 18.50% in March 2007 to 18.86% in March 2008. Short-
term external debt as percentage to GDP increased from 2.88% in March 2007 to
3.78% in March 2008. Long-term external debt as percentage to GDP reduced
from 15.63% in March 2007 to 15.08% in March 2008. Capital account balance
as a percentage of GDP increased from 4.99 % in March 2006-07 to 9.21% in
March 2007-08. The foreign exchange reserves of India increased to US $ 309
billion in 2007-08 from US $ 199 billion in 2006-07.

******************
Unit 4: Reference Handouts/ BBM 505

Foreign Institutional Investors

Last Updated: July-September 2008

Positive tidings about the Indian economy combined with a fast-growing market
have made India an attractive destination for foreign institutional investors (FIIs).

FIIs showed huge interest in 2007, pumping in the highest ever net investment of
US$ 17.2 billion in the equity markets and were instrumental in the Bombay
Stock Exchange (BSE) and National Stock Exchange (NSE) clocking record
index levels of over 20,000 and 6,000, respectively. In fact, during the year, FIIs
were net buyers in 10 out of 12 months, turning net sellers in the rest, primarily to
make up the losses on account of the sub-prime crisis in the US.

Out of the total net inflows, a whopping 70 per cent was invested through the
instruments of Foreign Currency Convertible Bonds (FCCBs), Qualified
Institutional Placements (QIPs), and initial public offerings (IPOs). Of these, in
the current year, all corporates in India raised around US$ 11-13 billion of
FCCBs, QIPs raised US$ 3.2 billion in 2007 and IPOs - India Inc has raised a
record US$ 12.41 billion through public issues --IPOs and FPOs--in the fiscal
2007-08. India's mobilisation of funds through public equity offerings more than
doubled this year as against US$ 5.94 billion mobilised in 2006-07, data
compiled by primary market tracking firm Prime shows. The remaining 30 per
cent was invested through overseas offers, preferential offers and conversion of
warrants. Of these, outstanding NRI deposits at end-March 2008, stood at US$
43.7 billion. Also, investments in securities have also gone up. Out of the US$
299.23 billion foreign currency assets as on 31 March 2008, US$ 103.56 billion
were invested in securities.

This surge in FII investment has led to the cumulative net investments by FII in to
Indian equities to total US$ 66.8 billion by the end of 2007, since December
1993, when FIIs were allowed to enter India.

This is a clear index of how bullish this category of investors has been on the
prospects of the Indian market.

Government Initiatives

FIIs are allowed to invest in the primary and secondary capital markets in India
through the portfolio investment scheme (PIS). Under this scheme, FIIs can
acquire shares/debentures of Indian companies through the stock exchanges in
India.

The ceiling for overall investment for FIIs is 24 per cent of the paid-up capital of
the Indian company, and limit is 20 per cent of the paid-up capital in the case of
public sector banks. The ceiling of 24 per cent for FII investment can be raised
up to sectoral cap/statutory ceiling, subject to the approval of the board and the
general body of the company passing a special resolution to that effect.

To further increase FII participation in the Indian market, the government and
SEBI have taken several measures:

 Allowed foreign individuals, corporates and other investors such as hedge

funds to register directly as foreign institutional investors.
 SEBI has FII investment limit in government securities being increased to
US$ 5 billion from US$ 3.2 billion.
 Institutional investors--including FIIs and their sub-accounts--have been
allowed to undertake short-selling, lending and borrowing of Indian
securities from February 1, 2008.
 SEBI has simplified the registration norms for FIIs and sub-accounts.
 Significantly, it has allowed investment managers, advisors or institutional
portfolio managers in the NRI category to be registered as FIIs.

Consequent to the liberalisation of registration norms, the number of foreign

institutional investors (FIIs) registered with the Securities and Exchange Board of
India (SEBI) has increased to 1403 as on June 27, 2008 as compared with just
1051 FIIs a year back.
Simultaneously, the upgradation of India's sovereign ratings combined with the
improvement in the macro-economic situation and growth fundamentals has led
to a near tripling of FII investments in the debt market. Total investment in the
country's debt market till November amounted to US$ 1.59 billion as against US$
487 million in the corresponding period in 2006.
Also, with the government raising the investment limit for the FIIs in the
Government Securities, the FIIs are rushing in to buy Government paper. As of
27 June, 2008 FIIs have already invested US$ 3.87 billion in the debt market, as
against US$ 2.29 billion in debt at the close of 2007. Earlier in May 2008, SEBI
had hiked the investment allocations to FIIs in both government and corporate
debt collectively by US$ 3.5 billion, taking the total investment limit to US$ 8
billion.
 Foreign Technology Collaboration in India

Abstract:
The main aim of the Foreign Technology Collaboration in India is its
technological development. Efficiency and productivity of Indian industries can
be increased with use of improved technology through Foreign Technology
Collaborations.

Foreign Technology Collaboration-Glimpses

Foreign Technology Collaboration in India permits transfer of technology by
the means of Government approval or through the automatic route delegated
by RBI. The collaboration induces the required amount of technological
development and promotion of technologically advanced industries. Foreign
Technology Collaboration in India is undertaken with the objective of
improving technology levels in the Indian industries. This helps to increase the
efficiency and productivity of the industries in India.

Foreign Technology Collaboration-Methods of approval

The methods of approval Foreign Technology Collaboration in India helps in
effective transfer of technical aspects. The transfer of foreign technology plays
an important role in the Foreign Direct Investments. With the introduction of
the 1991 Economic Policy, foreign investments started inflowing in large
amounts. The Central government has allowed the transfer of technology in
various industrial sectors. Significant technology transfers have taken place
since the economic reforms.

The Central Government presented the Statement on Industrial Policy in 1991,

which provided simplified methods for the better governance of the Foreign
Technology Agreements. Sec 39C deals with Foreign Technology
Agreements. There are certain standardized clauses for the approval of the
Foreign Technology Collaboration in India.
The approval techniques follow two methods, namely automatic approval and
government approval

Government Approval
The manufacturing and products should be compliant with the small scale
industries Proposals which involve previous trademark agreement, joint
ventures, technology transfer, etc In case of an extension of the foreign
technology collaboration agreements which had been automatically approved
earlier

Automatic Approval
The royalty paid is 1 % in case of domestic sales and 2 % in case of exports
as granted under automatic route for use of the trademark foreign collaborator

The royalty to be paid is restricted to 5 % in case of domestic sales, 8 % in

case of exports and total payment should be 8 % on sales for a period of 10
years

The royalty paid is 5 % in case of domestic sales and 8 % in case of exports

as granted under automatic route for wholly owned subsidiaries

Foreign Technology Agreements in India

The Foreign Technology Agreements in India plays an

important part in the technological development of the
Indian industries. The agreements are permitted through
Government approval or by RBI governed automatic route.

Foreign Technology Agreements-Glimpses

Foreign Technology Agreements in India caters to the growth of the
technology in the Indian industries. The primary purpose of the agreement is
to induce the required amount the technological development and promotion
of technologically advanced industries. The foreign technology is transferred
from foreign sources such as research and development agencies, foreign
parent companies, and other sources to the Indian counterparts. The transfer
of foreign technology takes places by the means of foreign direct investments
and foreign technology collaboration agreements.

Foreign Technology Agreements in India permits transfer of

technology by the means of Government approval or through the
automatic route delegated by RBI.
Automatic Approval-Foreign Technology Agreements in India
 The RBI grants automatic approval by the means of the regional offices
to Indian industries for foreign technology collaboration
 The payments pertaining to the technology transfer should not exceed
US$ 2 million
 The royalty to be paid is restricted to 5 % in case of domestic sales, 8
% in case of exports and total payment should be 8 % on sales for a
period of 10 years
 The royalty period should not exceed 7 years from the date of starting
of the business or 10 years from the date mentioned in the agreement
 The royalty paid is 1 % in case of domestic sales and 2 % in case of
exports as granted under automatic route for use of the trademark
foreign collaborator
 The royalty paid is 5 % in case of domestic sales and 8 % in case of
exports as granted under automatic route for wholly owned subsidiaries

Government Approval-Foreign Technology Agreements in India

Government approval is required in the following cases -
 Proposals which requires licensing
 The manufacturing and products should be compliant with the small
scale industries
 Proposals which involves previous trademark agreement, joint
ventures, technology transfer, etc
 In case of an extension of the foreign technology collaboration
agreements which had been automatically approved earlier

 Proposals with no parity with the norms of the automatic approval

Standard Conditions Attached to Approval for Foreign Technology
Agreements

The Standard Conditions Attached to Approval for Foreign

Technology Agreements are one of the major tools for
analyzing the agreement pertaining to foreign transfer of
technology.

Standard Conditions Attached to Approval for Foreign Technology

Agreements helps in effective inflow of foreign direct investments in India. The
criteria for the approval of the Foreign Technology Agreements are -

Standard Conditions Attached to Approval for Foreign Technology

Agreement
 The NRI holdings should not exceed the amount mentioned in
 the approval letter.
 The calculation of the royalty would be done, based on the net ex-
factory sale price of the product not including the excise duties and
subtracting the cost of standard bought-out components and the cost of
imported components, including insurance, ocean freight, customs
duties, etc.
 The royalty payment is contained to the licensed capacity and 25%
excess pertaining to products needing industrial licensing or on units
mentioned in the approval letter.
 For products not requiring industrial license, the restrictions are not
applicable.
 A prior approval from the Central Government is necessary for the
payment of royalty in case, the production crosses the quantity
mentioned in the agreements.
 In case the orders are not been carried out during the time period of the
agreement, the royalty is not payable beyond that period.
 The least guaranteed royalty is not allowed.
 Lump sum are to be paid by means of three equated installments such
as the first one would be paid subsequent to the approval of agreement
proposal by the Reserve Bank of India and it is registered to the foreign
exchange, the second installment is given after the legal transfer of the
documents pertaining to the technological know how, and the final
installment is to be given after the
 production commences or after 4 years from the time of the approval.
 The exchange rates of the date of payments are followed in case of any
payments.
 For hiring of foreign technicians, no permit is required, even if it is not
mentioned in the approved agreement.
 In case of sending Indian personnel to abroad for training, the company
should approach the RBI.

 The payments in case of foreign testing of basic products and materials

are authorized by RBI.
Procedures for Approvals of Foreign Technology Agreements

The Procedures for Approvals of Foreign Technology

Agreements were presented by the Central Government in
the Statement on Industrial Policy in 1991. The Sec 39C contains the clauses
of the methods for better functioning of the Foreign Technology Agreements.

Approvals of Foreign Technology Agreements-At a glance

Procedures for Approvals of Foreign Technology Agreements helps in smooth
settlement of the transfer of technical know how. With the introduction of the
1991 Economic Policy, foreign investments started inflowing in large amounts.
 The transfer of foreign technology plays an important role in the Foreign Direct
Investments. The Central government has allowed the transfer of technology
in various industrial sectors. The economic policies elucidated the foreign
exchange regulatory approvals for transfer of technology.

The Central Government presented the Statement on Industrial Policy in 1991,

which provided simplified methods for the better governance of the Foreign
Technology Agreements. The section dealing with the Foreign Technology
Agreements is Sec 39C.

Procedures for Approvals of Foreign Technology Agreements-Sec 39C

 The high priority industries would be given automatic approval under
the norms of RBI, for foreign technology agreements, subject to a
maximum limit of payments up to Rs. 1 crore.
 The royalty to be paid is restricted to 5 % in case of domestic sales, 8
% in case of exports and total payment should be 8 % on sales for a
period of 10 years
 The royalty period should not exceed 7 years from the date of starting
of the business or 10 years from the date mentioned in the agreement
 The royalty rates would be calculated in accordance with the
standardized methods
 Industries apart from high priority ones would be allowed by the means
of automatic approval in case no free foreign exchange is required in
case of payments.
 Any other kinds of proposals would require particular approval under
the general procedures
 Permissions pertaining to foreign testing of developed technological
applications, employing foreign technicians
 The manufacturing and products should be compliant with the small
scale industries

 In case of an extension of the foreign technology collaboration

agreements which had been automatically approved earlier.

Globalization (or globalisation), although often described as the cause of much turbulence and change, is
in fact the umbrella term for the collective effect, the change itself. Globalization (i.e. the aggregate change
we observe in our factories, storefronts, indeed generally across our economies and lifestyles) is caused by
four fundamental forms of capital movement throughout the global economy. The four important capital
flows are:

 Human Capital (i.e. Immigration, Migration, Emigration, Deportation, etc.)

 Financial Capital (i.e. Aid, Equity, Debt, Credit & Lending, etc.)
 Resource Capital (i.e. Energy, Metals, Minerals, Lumber, etc.)
 Power Capital (i.e. Security Forces, Alliances, Armed Forces, etc.)
Most of the stresses and complexities confronted in the general macro affairs of countries, communities,
and the interactions between them, can be traced to these four flows. Connectivity available via cheaper
telecommunications and modes of travel-- made more accessible to more people, facilitates these
interactions at a rate unprecedented in history. Cultural and political frictions at all levels can thus be
explained as arising from the difference in opinion between two or more parties about the origination,
treatment, timing, ownership or value of one or more of the capital flows.

Meaning and debate:

The International Monetary Fund defines globalization as the growing economic interdependence of
countries worldwide through increasing volume and variety of cross-border transactions in goods
and services, free international capital flows, and more rapid and widespread diffusion of technology.
Meanwhile, The International Forum on Globalization defines it as the present worldwide drive
toward a globalized economic system dominated by supranational corporate trade and banking
institutions that are not accountable to democratic processes or national governments. While notable
critical theorists, such as Immanuel Wallerstein, emphasize that globalization cannot be understood
separately from the historical development of the capitalist world-system the different definitions
highlight the ensuing debate of the roles and relationships of government, corporations, and the
individual in maximizing social welfare within the globalization paradigms. Nonetheless, it is clear
that globalization has economic, political, cultural, and technological aspects that may be closely
intertwined. Given that these aspects are key to an individual's quality of life, the social benefits and
costs brought upon them by globalization generate strong debate.

The economic aspects stressed in globalization are trade, investment and migration. The globalization of
trade entails that human beings have greater access to an array of goods and services never seen before in
human history. From German cars, to Colombian coffee, from Chinese clothing, to Egyptian cotton, from
American music to Indian software, human beings may be able to purchase a wide range of goods and
services. The globalization of investment takes place through Foreign Direct Investment, where
multinational companies directly invest assets in a foreign country, or by indirect investment where
individuals and institutions purchase and sell financial assets of other countries. Free migration allows
individuals to find employment in jurisdictions where there are labor shortages.

Critics of free trade also contend that it may lead to the destruction of a country's native industry,
environment and/or a loss of jobs. Critics of international investment contend that by accepting these
financial schemes a country loses its economic sovereignty and may be forced to set policies that are
contrary to its citizen's interests or desires. Moreover, multinational companies that invest in a country may
also acquire too much political and economic power in relation to its citizens. Finally, migration may lead
to the exploitation of workers from a migrant country and the displacement of workers from a host country.
Critics of globalization also contend that different economic systems that either augment or supplant
globalization may maximize social welfare more efficiently and equitably.

The political aspects of globalization are evidenced when governments create international rules and
institutions to deal with issues such as trade, human rights, and the environment. Among the new
institutions and rules that have come to fruition as a result of globalization are the World Trade
Organization, the Euro currency, the North American Free Trade Agreement, to name a few. Whether a
government is to consciously open itself to cross-border links, is the central question of this aspect.

Social activist and non-profit organizations such as Amnesty International and Greenpeace are also
becoming more global in scope. Some of these organizations take issue with the economic and political
aspects of globalization as they fear that economic interests either subvert the nation state in its ability to
protect its citizens from economic exploitation, or support governments that violate the human rights of
their citizens.

Cultural global ties also grow through globalization as news ideas and fashions through trade, travel and
media move around the globe at lightning speed. Global brands such as Coca-Cola, Nike & Sony serve as
common reference to consumers all over the World. An individual in China enjoys the same soft drink as
an individual in Puerto Rico--at opposite ends of the globe. However, these ties may also cause strains: for
example Western Ideas of freedom of expression may clash with Islamic views on Religious tolerance. And
if not strains, critics contend this is really an imposition of cultural imperialism in order to preserve
economic interests.

The other aspect of globalization is the revolutionary change in technology, particularly in transport and
communication, which ostensibly creates a global village. In 1850 it took nearly a year to sail around the
World. Now you can fly around the world in a day, send an email anywhere almost instantly, or be part of
the 1.5 billion viewers watching the final match of the World Cup. Transportation costs have come down as
result of technological advances that make foreign markets more accessible to trade. Tuna caught in the
North Atlantic may be served the next day at a Sushi restaurant in Japan. Finally, billions of dollars in
assets and currencies are exchanged daily around the globe by electronic means at virtually no cost.
Globalization spreads everything.

History:
Since the word has both technical and political meanings, different groups will have differing
histories of "globalization". In general use within the field of economics and political economy,
however, it is a history of increasing trade between nations based on stable institutions that allow
firms in different nations to exchange goods and services with minimal friction.

The term "liberalization" came to mean the acceptance of the Neoclassical economic model which is based
on the unimpeded flow of goods and services between economic jurisdictions. This led to specialization of
nations in exports, and the pressure to end protective tariffs and other barriers to trade. The period of the
gold standard and liberalization of the 19th century is often called "The First Era of Globalization". Based
on the Pax Britannica and the exchange of goods in currencies pegged to specie, this era grew along with
industrialization. The theoretical basis was David Ricardo's work on Comparative advantage and Say's Law
of General equilibrium. In essence, it was argued that nations would trade effectively, and that any
temporary disruptions in supply or demand would correct themselves automatically. The institution of the
gold standard came in steps in major industrialized nations between approximately 1850 and 1880, though
exactly when various nations were truly on the gold standard is contentiously debated.

Globalization in the era since World War II has been driven by trade negotiation rounds, originally under
the auspices of GATT, which led to a series of agreements to remove restrictions on "free trade". The
Uruguay round led to a treaty to create the World Trade Organization or WTO, to mediate trade disputes.
Other bi- and trilateral trade agreements, including sections of Europe's Maastricht Treaty and the North
American Free Trade Agreement have also been signed in pursuit of the goal of reducing tariffs and
barriers to trade.

Nature and existence of globalization:

There is much academic discussion about whether globalization is a real phenomenon or only an
analytical artifact (a myth). Although the term is widespread, many authors argue that the
characteristics attributed to globalization have already been seen at other moments in history. Also,
many note that such features, including the increase in international trade and the greater role of
multinational corporations, are not as d Some authors prefer the term internationalization rather
than globalization. In internationalization, the role of the state and the importance of nations are
greater, while globalization in its complete form eliminates nation states. So, they argue that the
frontiers of countries, in a broad sense, are far from being dissolved, and therefore this globalization
process is not happening, and probably will not happen, considering that in world history,
internationalization never turned into globalization (the European Union and NAFTA are yet to
prove their case).

Some maintain that globalization is an imagined geography; that is, a political tool of ruling neo-liberalists,
who are attempting to use certain images and discourses of world politics to justify their political agendas.
Writers of books such as No Logo claim that by presenting a picture of a globalized world, the Bretton
Woods institutions can demand that countries open up their economies to liberalization under Structural
Adjustment Programmes that encourage governments to fund privatization programmes, ahead of welfare
and public services.

Characteristics:
Globalization / internationalisation has become identified with a number of trends, most of which
may have developed since World War II. These include greater international movement of
commodities, money, information, and people; and the development of technology, organizations,
legal systems, and infrastructures to allow this movement. The actual existence of some of these
trends is debated.
 Economically
o Increase in international trade at a much faster rate than the growth in the world economy
o Increase in international flow of capital including foreign direct investment
o Creation of international agreements leading to organizations like the WTO and OPEC
o Development of global financial systems
o Increased role of international organizations such as WTO, WIPO, IMF that deal with
international transactions
o Increase of economic practices like outsourcing, by multinational corporations
 Culturally
o Greater international cultural exchange,
o Spreading of multiculturalism, and better individual access to cultural diversity, for
example through the export of Hollywood and Bollywood movies. However, the
imported culture can easily supplant the local culture, causing reduction in diversity
through hybridization or even assimilation. The most prominent form of this is
Westernization, but Sinicization of cultures also takes place.
o Greater international travel and tourism
o Greater immigration, including illegal immigration
o Spread of local foods such as pizza, Chinese and Indian food/Pakistani Food to other
countries (often adapted to local taste)
o World-wide Fads and Pop Culture such as Pokemon, Sudoku, Numa Numa, Origami,
Idol series, YouTube, MySpace, and many others.
o Increasing usage of foriegn phrases. Example... "Amigo" and "Adios" are Spanish terms
many non-speaking spanish people in the US understand, Most Americans understand
some French, Spanish or Japanese without actually knowing the language.
 Development of a global telecommunications infrastructure and greater transborder data flow,
using such technologies as the Internet, communication satellites and telephones
 Increase in the number of standards applied globally; e.g. copyright laws and patents
 Formation or development of a set of universal values
 The push by many advocates for an international criminal court and international justice
movements (see the International Criminal Court and International Court of Justice respectively).
 It is often argued that even terrorism has undergone globalization, with attacks in foreign countries
that have no direct relation with the own country.

Barriers to international trade have been considerably lowered since World War II through international
agreements such as the General Agreement on Tariffs and Trade (GATT). Particular initiatives carried out
as a result of GATT and the WTO, for which GATT is the foundation, have included:

 Promotion of free trade

o Of goods:
  Reduction or elimination of tariffs; construction of free trade zones with small or
no tariffs
 Reduced transportation costs, especially from development of containerization
for ocean shipping.
o Of capital: reduction or elimination of capital controls
o Reduction, elimination, or harmonization of subsidies for local businesses
 Intellectual property restrictions
o Harmonization of intellectual property laws across nations (generally speaking, with
more restrictions)
o Supranational recognition of intellectual property restrictions (e.g. patents granted by
China would be recognized in the US)

Anti-globalization:
Critics of the economic aspects of globalization contend that it is not, as its proponents tend to imply,
an inexorable process that flows naturally from the economic needs of everyone. The critics typically
emphasize that globalization is a process that is mediated according to elite imperatives, and typically
raise the possibility of alternative global institutions and policies, which they believe address the moral
claims of poor and working classes throughout the globe, as well as environmental concerns in a more
equitable way. In terms of the controversial global migration issue, disputes revolve around both its
causes, whether and to what extent it is voluntary or involuntary, necessary or unnecessary Increase in
international flow of capital including foreign direct investment Critics of the economic aspects of
globalization contend that it is not, as its proponents tend to imply, an inexorable process that flows
naturally from the economic needs of everyone. The critics typically emphasize that globalization is a
process that is mediated according to elite imperatives, and typically raise the possibility of alternative
global institutions and policies, which they believe address the moral claims of poor and working
classes throughout the globe, as well as environmental concerns in a more equitable way. In terms of
the controversial global migration issue, disputes revolve around both its causes, whether and to what
extent it is voluntary or involuntary, necessary or unnecessary; and its effects, whether beneficial, or
socially and environmentally costly. Proponents tend to see migration simply as a process whereby
white and blue collar workers may go from one country to another to provide their services, while
critics tend to emphasize negative causes such as economic, political, and environmental insecurity, and
cite as one notable effect, the link between migration and the enormous growth of urban slums in
developing countries. According to "The Challenge of Slums," a 2003 UN-Habitat report, "the cyclical
nature of capitalism, increased demand for skilled versus unskilled labour, and the negative effects of
globalisation "in particular, global economic booms and busts that ratchet up inequality and distribute
new wealth unevenly" contribute to the enormous growth of slums.

Various aspects of globalization are seen as harmful by public-interest activists as well as strong state
nationalists. This movement has no unified name. "Anti-globalization" is the media's preferred term; it can
lead to some confusion, as activists typically oppose certain aspects or forms of globalization, not
globalization per se. Activists themselves, for example Noam Chomsky, have said that this name is
meaningless as the aim of the movement is to globalize justice. Indeed, the global justice movement is a
common name. Many activists also unite under the slogan "another world is possible", which has given rise
to names such as altermondialisme in French.

Economic arguments by fair trade theorists claim that unrestricted free trade benefits those with more
financial leverage (i.e. the rich) at the expense of the poor. Many "anti-globalization" activists see
globalization as the promotion of a corporatist agenda, which is intent on constricting the freedoms of
individuals in the name of profit. Some "anti-globalization" groups argue that globalization is necessarily
imperialistic, is one of the driving reasons behind the Iraq war and is forcing savings to flow into the
United States rather than developing nations; it can therefore be said that "globalization" is another term for
a form of Americanization, as it is believed by some observers that the United States could be one of the
few countries (if not the only one) to truly profit from globalization.
Some argue that globalization imposes credit-based economics, resulting in unsustainable growth of debt
and debt crises. The financial crises in Southeast Asia, that began in the relatively small, debt-ridden
economy of Thailand but quickly spread to Malaysia, Indonesia, South Korea and eventually was felt all
around the world, demonstrated the new risks and volatility in rapidly changing globalized markets. The
IMF's subsequent 'bailout' money came with conditions of political change (i.e. government spending
limits) attached and came to be viewed by critics as undermining national sovereignty in neo-colonialist
fashion. Anti-Globalization activists pointed to the meltdowns as proof of the high human cost of the
indiscriminate global economy.

The main opposition is to unfettered globalization (neoliberal; laissez-faire capitalism), guided by

governments and what are claimed to be quasi-governments (such as the International Monetary Fund and
the World Bank) that are supposedly not held responsible to the populations that they govern and instead
respond mostly to the interests of corporations. Many conferences between trade and finance ministers of
the core globalizing nations have been met with large, and occasionally violent, protests from opponents of
"corporate globalism".

Some "anti-globalization" activists object to the fact that the current "globalization" globalizes money and
corporations, but not people and unions. This can be seen in the strict immigration controls in nearly all
countries, and the lack of labour rights in many countries in the developing world.

Another more conservative camp opposed to globalization is state-centric nationalists who fear
globalization is displacing the role of nations in global politics and point to NGOs as encroaching upon the
power of individual nations. Some advocates of this warrant for anti-globalization are Pat Buchanan and
Jean-Marie Le Pen.

The movement is very broad, including church groups, national liberation factions, left-wing parties,
environmentalists, peasant unionists, anti-racism groups, anarchists, those in support of relocalization and
others. Most are reformist, (arguing for a more humane form of capitalism) while others are more
revolutionary (arguing for a more humane system than capitalism). Many have decried the lack of unity and
direction in the movement, but some such as Noam Chomsky have claimed that this lack of centralization
may in fact be a strength.

Protests by the global justice movement have forced high-level international meetings away from the major
cities where they used to be held, into remote locations where protest is impractical.

Pro-globalization (globalism):
Supporters of democratic globalization can be labelled pro-globalists. They consider that the first
phase of globalization, which was market-oriented, should be completed by a phase of building global
political institutions representing the will of world citizens. The difference with other globalists is
that they do not define in advance any ideology to orient this will, which should be left to the free
choice of those citizens via a democratic process.

Supporters of free trade point out that economic theories of comparative advantage suggest that free trade
leads to a more efficient allocation of resources, with all countries involved in the trade benefiting. In
general, this leads to lower prices, more employment and higher output.

Libertarians and other proponents of laissez-faire capitalism say higher degrees of political and economic
freedom in the form of democracy and capitalism in the developed world are both ends in themselves and
also produce higher levels of material wealth. They see globalization as the beneficial spread of liberty and
capitalism.

Critics argue that the anti-globalization movement uses anecdotal evidence to support their view and that
worldwide statistics instead strongly support globalization:
  the percentage of people in developing countries living below US$1 (adjusted for inflation and
purchasing power) per day has halved in only twenty years, although some critics argue that more
detailed variables measuring poverty should instead be studied.

 Life expectancy has almost doubled in the developing world since WWII and is starting to close
the gap to the developed world where the improvement has been smaller. Child mortality has
decreased in every developing region of the world. Income inequality for the world as a whole is
diminishing.

 Democracy has increased dramatically from almost no nation with universal suffrage in 1900 to
62.5% of all nations in 2000.

 The proportion of the world's population living in countries where per-capita food supplies are less
than 2,200 calories (9,200 kilojoules) per day decreased from 56% in the mid-1960s to below 10%
by the 1990s.

 Between 1950 and 1999, global literacy increased from 52% to 81% of the world. Women made
up much of the gap: Female literacy as a percentage of male literacy has increased from 59% in
1970 to 80% in 2000.

 The percentage of children in the labor force has fallen from 24% in 1960 to 10% in 2000.

 There are similar trends for electric power, cars, radios, and telephones per capita, as well as the
proportion of the population with access to clean water.

However, some of these improvements may not be due to globalization, or may be possible without the
current form of globalization or its negative consequences, to which the global justice movement objects.

Some pro-capitalists are also critical of the World Bank and the IMF, arguing that they are corrupt
bureaucracies controlled and financed by states, not corporations. Many loans have been given to dictators
who never carried out promised reforms, instead leaving the common people to pay the debts later. They
thus see too little capitalism, not too much. They also note that some of the resistance to globalization
comes from special interest groups with conflicting interests, like Western world unions. However, there
are also many anti-capitalist who are against the World Bank and the IMF because they believe they are too
capitalist and only in interests for profit.

Others, such as Senator Douglas Roche, O.C., simply view globalization as inevitable and advocate
creating institutions such as a directly-elected United Nations Parliamentary Assembly to exercise
oversight over unelected international bodies.

Other uses:
"Globalization" can mean:
 Globalism, if the concept is reduced to its economic aspects, can be said to contrast with economic
nationalism and protectionism. It is related to laissez-faire capitalism and neoliberalism.
 It shares a number of characteristics with internationalization and is often used interchangeably,
although some prefer to use globalization to emphasize the erosion of the nation-state or national
boundaries.
 Making connections between places on a global scale. Today, more and more places around the
world are connected to each other in ways that were previously unimaginable. In geography, this
process is known as complex connectivity, where more and more places are being connected in
more and more ways. Arjun Appadurai identified five types of global connectivity:
 o Ethnoscapes: movements of people, including tourists, immigrants, refugees, and
business travellers.
o Financescapes: global flows of money, often driven by interconnected currency markets,
stock exchanges, and commodity markets.
o Ideoscapes: the global spread of ideas and political ideologies. For example, Green Peace
has become a worldwide environmental movement.
o Mediascapes: the global distribution of media images that appear on our computer
screens, in newspapers, television, and radio.
o Technoscapes: the movement of technologies around the globe. For example, the Green
Revolution in rice cultivation introduced western farming practices into many developing
countries.

Although Appadurai's taxonomy is highly contestable, it does serve to show that globalization is
much more than economics on a global scale.

 In its cultural form, globalization has been a label used to identify attempts to erode the national
cultures of Europe, and subsume them into a global culture whose members will be much easier to
manipulate through mass media and controlled governments. In this context, massive legal or
illegal immigration has been allowed, mainly in European countries.
 The formation of a global village closer contact between different parts of the world, with
increasing possibilities of personal exchange, mutual understanding and friendship between
"world citizens", and creation of a global civilization.
 Economic globalization there are four aspects to economic globalization, referring to four different
flows across boundaries, namely flows of goods/services, i.e. 'free trade' (or at least freer trade),
flows of people (migration), of capital, and of technology. A consequence of economic
globalization is increasing relations among members of an industry in different parts of the world
(globalization of an industry), with a corresponding erosion of national sovereignty in the
economic sphere. The IMF defines globalization as the growing economic interdependence of
countries worldwide through increasing volume and variety of cross-border transactions in goods
and services, freer international capital flows, and more rapid and widespread diffusion of
technology (IMF, World Economic Outlook, May, 1997). The World Bank defines globalization
as the "Freedom and ability of individuals and firms to initiate voluntary economic transactions
with residents of other countries".
 In the field of management, globalization is a marketing or strategy term that refers to the
emergence of international markets for consumer goods characterized by similar customer needs
and tastes enabling, for example, selling the same cars or soaps or foods with similar ad
campaigns to people in different cultures. This usage is contrasted with internationalization which
describes the activities of multinational companies dealing across borders in either financial
instruments, commodities, or products that are extensively tailored to local markets. Globalization
also means cross-border management activities or development processes to adapt to the
emergence of a globalized market or to seek and realize benefit from economies of scale or scope
or from cross-border learning among different country-based organizations.
 In the field of software, globalization is a technical term that combines the development processes
of internationalization and localization.
 Many, such as participants in the World Social Forum, use the term "corporate globalization" or
"global corporatization" to highlight the impact of multinational corporations and the use of legal
and financial means to circumvent local laws and standards, in order to leverage the labor and
services of unequally-developed regions against each other.
 The spread of capitalism from developed to developing nations.
 "The concept of globalisation refers both to the compression of the world and the intensification of
consciousness of the world as a whole" - Benedikt Kiesenhofer
 Measurement of globalization:
To what extent a nation-state or culture is globalized in a particular year has until most recently been
measured employing simple proxies like flows of trade, migration, or foreign direct investment. A
more sophisticated approach to measuring globalization is the recent index calculated by the Swiss
think tank KOF. The index measures the three main dimensions of globalization: economic, social,
and political. In addition to three indices measuring these dimensions, an overall index of
globalization and sub-indices referring to actual economic flows, economic restrictions, data on
personal contact, data on information flows, and data on cultural proximity is calculated. Data are
available on a yearly basis for 122 countries. According to the index, the world's most globalized
country is the USA, followed by Sweden, Canada, the United Kingdom, and Luxembourg. The least
globalized countries according to the KOF-index are Togo, Chad and the Central African Republic.

Global Falsehoods: How the World Bank and the UNDP Distort the Figures on Global Poverty:

According to Professor Michel Chossudovsky ,until the 1998 financial meltdown ("black September"
1998), the World economy was said to be booming under the impetus of the "free market" reforms.
Without debate or discussion, so-called "sound macro-economic policies" (meaning the gamut of budgetary
austerity, deregulation, downsizing and privatisation) continue to be heralded as the key to economic
success and poverty alleviation. In turn, both the World Bank and the United Nations Development
Programme (UNDP) have asserted authoritatively that economic growth in the late 20th Century has
contributed to a reduction in the levels of World poverty. According to the UNDP, "the progress in
reducing poverty over the 20th century is remarkable and unprecedented... The key indicators of human
development have advanced strongly."

The Devastating Impacts of Macro-economic Reform are casually denied:

The increasing levels of global poverty resulting from macro-economic reform are casually denied by G7
governments and international institutions (including the World Bank and the IMF); social realities are
concealed, official statistics are manipulated, economic concepts are turned upside down.

The World Bank framework deliberately departs from all established concepts and procedures (eg. by the
US Bureau of Census or the United Nations) for measuring poverty. It consists in arbitrarily setting a
"poverty threshold" at one dollar a day per capita. It then proceeds (without even measuring) to deciding
that population groups with a per capita income "above one dollar a day" are "non-poor".

The World Bank "methodology" conveniently reduces recorded poverty without the need for collecting
country-level data. This "subjective" and biased assessment is carried out irrespective of actual conditions
at the country level. The one dollar a day procedure is absurd: the evidence amply confirms that population
groups with per capita incomes of 2, 3 or even 5 dollars a day remain poverty stricken (ie. unable to meet
basic expenditures of food, clothing, shelter, health and education).

Authoritative" World Bank Numbers:

These authoritative World Bank numbers are those which everybody quotes, --ie. 1.3 billion people below
the poverty line. But nobody seems to have bothered to examine how the World Bank arrives at these
figures.

The data is then tabulated in glossy tables with "forecasts" of declining levels of global poverty into the
21st Century. These World Bank "forecasts" of poverty are based on an assumed rate of growth of per
capita income, --ie. growth of the latter implies pari passu a corresponding lowering of the levels of
poverty. Its a numerical game!

The UNDP Framework:

While the UNDP Human Development Group has in previous years provided the international community
with a critical assessment of key issues of global development, the 1997 Human Development Report
devoted to the eradication of poverty broadly conveys a similar viewpoint to that heralded by the Bretton
Woods institutions. The UNDP's "human poverty index" (HPI) is based on "the most basic dimensions of
deprivation: a short life span, lack of basic education and lack of access to public and private resources".

Based on the above criteria, the UNDP Human Development Group comes up with estimates of human
poverty which are totally inconsistent with country-level realties. The HPI for Colombia, Mexico or
Thailand, for instance, is of order of 10-11 percent (see Table 1). The UNDP measurements point to
"achievements" in poverty reduction in Sub-Saharan Africa, the Middle East and India which are totally at
odds with country-level data.

The human poverty estimates put forth by the UNDP portray an even more distorted and misleading pattern
than those of the World Bank). For instance, only 10.9 percent of Mexico's population are categorised by
the UNDP as "poor". Yet this estimate contradicts the situation observed in Mexico since the mid-1980s:
collapse in social services, impoverishment of small farmers and the massive decline in real earnings
triggered by successive currency devaluations. A recent OECD study confirms unequivocally the mounting
tide of poverty in Mexico since the signing of the North American Free Trade Agreement (NAFTA).

Double Standards in the "Scientific" Measurement of Poverty:

"Double standards" prevail in the measurement of poverty: the World Bank's one dollar a day criterion
applies only to the "developing countries". Both the Bank and the UNDP fail to acknowledge the existence
of poverty in Western Europe and North America. Moreover, the one dollar a day criterion is in overt
contradiction with established methodologies used by Western governments and intergovernmental
organisations to define and measure poverty in the "developed countries".

In the West, the methods for measuring poverty have been based on minimum levels of household spending
required to meet essential expenditures on food, clothing, shelter, health and education. In the United
States, for instance, the Social Security Administration (SSA) in the 1960s had set a "poverty threshold "
which consisted of "the cost of a minimum adequate diet multiplied by three to allow for other expenses".
This measurement was based on a broad consensus within the US Administration.

Conversely, if the US Bureau of Census methodology (based on the cost of meeting a minimum diet) were
applied to the developing countries, the overwhelming majority of the population would be categorised as
"poor". While this exercise of using "Western standards" and definitions has not been applied in a
systematic fashion, it should be noted that with the deregulation of commodity markets, retail prices of
essential consumer goods are not appreciably lower than in the US or Western Europe. The cost of living in
many Third World cities is higher than in the United States.

Moreover, household budget surveys for several Latin American countries suggest that at least sixty
percent of the population the region does not meet minimum calorie and protein requirements. In Peru, for
instance, following the 1990 IMF sponsored "Fujishock", 83 percent of the Peruvian population according
to household census data were unable to meet minimum daily calorie and protein requirements. The
prevailing situation in Sub-Saharan Africa and South Asia is more serious where a majority of the
population suffer from chronic undernourishment.

The investigation on poverty by both organizations take official statistics at face value. It is largely an
"office based exercise" conducted in Washington and New York with few insights or awareness of "what is
happening in the field". The 1997 UNDP Report points to a decline of one third to a half in child mortality
in selected countries of Sub-Saharan despite the slide in State expenditures and income levels. What it fails
to mention, however, is that the closing down of health clinics and the massive lay-offs of health
professionals (often replaced by semi-illiterate health volunteers) responsible for compiling mortality data
has resulted in a de facto decline in recorded mortality. The IMF-World Bank sponsored macro-economic
reforms have also led to a collapse in the process of data collection.

Table 1
THE UNDP'S HUMAN POVERTY INDEX
Selected Developing Countries Country Poverty Level
(percent of the population below the poverty line)
Trinidad and Tobago 4.1
Mexico 10.9
Thailand 11.7
Colombia 10.7
Philippines 17.7
Jordan 10.9
Nicaragua 27.2
Jamaica 12.1
Iraq 30.7
Rwanda 37.9
Papua New Guinea 32.0
Nigeria 41.6
Zimbabwe 17.3

Source: Human Development Report 1997, table 1.1, p. 21

Table 2
POVERTY IN SELECTED G7 COUNTRIES, BY NATIONAL STANDARDS

Countries Country Poverty Level

(percent of the population below the poverty line)
United States (1996)* 13.7
Canada (1995)** 17.8
United Kingdom (1993)*** 20.0
Italy (1993)*** 17.0
Germany (1993)*** 13.0
France (1993)*** 17.0

Source:
*US Bureau of Census,

** Centre for International Statistics, Canadian Council on Social Development

***European Information Service.

Beyond globalism and antiglobalism:

This essay has aimed to refute many of the arguments put forward by the anti-globalization movement and
has tried to show that globalism is not a reactionary plot by powerful sharks but the revolutionary activity
of many small fish, navigating the oceans and freely communicating with each other.

The arguments of the anti-globalization movement lead us back into the crushing embrace of Big Brother
the nation state, which has never been the defender of the local community and the protector of the
individual person.

The "think globally act locally" message has been turned upside down by the anti-globalizers who act
globally (from Seattle to Prague, from Gothenburg to Genova) while thinking along very narrow and short-
term lines. The main focus should not be on the MacDonaldÕs outlets of this world but on the MacArthur
(the generals) and the McCarthy (the politicians); otherwise they will always prevail with their nefarious
interventions even after hamburgers and fast food have gone out of fashion.

Globalism is, for many people, the only way to escape political oppression, economic poverty, cultural
alienation. However, even this grand vision of emancipation and progress connected to globalism does not
represent the core of the matter, being still full of limitations and distortions linked to a discourse based on
globalism versus antiglobalism.

The real issue is not globalization vs. anti-globalization but liberation vs. subjection, especially with
reference to the nation state with its protected cohort of monopolistic producers and parasitic consumers
(the bureaucracy, the army, etc.).What is at stake is not globalism or localism but freedom and nothing else
than freedom.

We do not need to pile up data or write long treatises to show that freedom is a human value and servitude
is not, that the earth belongs to humankind for the care of present and future generations and is not the
closed territorial racket of national rulers and their corrupt or credulous appendages.

For this reason, whenever and wherever a debate on globalization takes place, after listening carefully to
the various positions and arguments put forward and having worked out in our mind all the possible
implications, we should sincerely ask ourselves: where is freedom? who is really advocating freedom? how
can we better develop freedom?
According to the answers we should know where we stand.

Terrorism and Globalisation:

According to the E-journal. ISSN 1505-1161. October 2002 by Asta Maskaliunaite, already from the 1970s
terrorism has been considered one of the global problems, and, actually, almost all the states of the world
have experienced terrorist attacks in the last three decades. Although the tactics resembling terrorism is
traced as early as the Jewish struggle against the Roman empire, it is the end of the 1960s that marks the
beginning of the contemporary terrorist activities, an era of what has been called age of terrorism. Several
events of that time influenced both the increasing usage of terrorist tactics in attempt to influence the
political agenda and the appearance of the word terrorism in the everyday language, especially in the
media. These events: death of Che Guevara in 1967, which showed the shortcomings of guerrilla warfare,
the student uprisings of the 1968 having a similar influence on the view of impact of such type of revolts
and the Six Day War of June 1967 that gave an impetus for an increasing use of the term terrorism by the
Western media.

The debate about the impacts of the terrorist network on the development of globalization is much more
controversial. In this sphere two main conflicting ideas can be distinguished: there are authors who claim
that terrorism would slow down globalization processes and there are ones who argue exactly the opposite
that it would speed up the processes of integration worldwide. The arguments for the strengthening of
globalization received even more credibility because of the events that followed the September 11 attacks
and the rhetoric that president Bush’s administration adopted after them. Enhancing the free trade was one
of the main arguments of this rhetoric. In fact the processes of globalization seemed to advance after these
events as United States received a possibility to both assert its leadership and transfer the blame over the
world recession on the works of terrorists.

Such optimistic views, however, can hardly be sustained in the view of the current events. While it is rather
clear that the processes of economic globalization will not halt, the form it takes is far from the one that has
been dreamed of by the various activists of global civil society organizations. Hence, it is very doubtful that
the terrorist attacks and the need to respond to the terrorist threat would greatly enhance the creation and
development of the global civil society

Conclusions:
Various debates about the mutual impact of terrorism and globalization show the multifaceted relationship
between the two phenomena. Summarizing briefly the arguments exposed so far it could be said that
globalization provides means for the global terrorism by its technological advances; it also gives causes for
such a terrorism primarily by creating great discrepancies in the economic conditions in various countries
of the world. While analyzing the relationship between globalization and causes of terrorism, it is also
perceived as a resistance to the domination of the United States in the world. The world itself, in words of
Baudrillard, resists domination. These arguments lead are connected with the idea that terrorism became
truly a global actor, which is confirmed by the fact that such organizations as al Qaeda achieve truly global
dimensions. It uses global networks and advances causes that are deeply connected with the way the
politics of the world function.

On the other hand, the analysts who promote the idea that because of the threat of terrorism the process of
globalization will be just advanced also have important arguments. The process of globalization does not
seem to have stopped and the form of it is not much different from the one experienced before the
September 11th attacks either. To the contrary, the assertion of hegemony by United States has recently
reached rather impressive dimensions. The world is gathered around the United States in its fight against
terrorism, which also means the affirmation of its dominant position in the world.

However, contrary to the more optimistic views of the global civil society activists and some social
scientists, there is not much multilateralism and mutual cooperation between the states and societies to be
seen. In this sense, the process of globalization was not advanced by the terrorist attacks and no sense of a
need of multilateral cooperation between the countries for countering the threat of terrorism was created.

As a final point, it could be argued that terrorism has an effect on globalization, but exactly a reverse one
than intended, that instead of weakening the position of hegemonic power, it actually reinforces it. Hence,
again, it could be argued that we are spinning in some kind of vicious circle where the shape of
globalization, which we witness, engenders terrorism and terrorism itself enforces exactly this kind of
globalization based on a hegemony of the United States.

Author’s Note:
I have tried to put forward my humble effort in dealing with the particular concept of Globalisation. If I
have committed any mistakes , I beg to be forgiven as it is only an endeavour. I am indebted to the various
authors from the Internet from whom I have taken the various concepts and references, a list of which is
given below in the footnote. I am also indebted to Sri Ashis Mallick, Teacher- in -Charge , and all the
Professors of Sarsuna Law College ( Professors Kana Mukherjee, Anindita Adhikari, Sumana
Roychowdhury, Atashi Roy Khaskel, Ishtiaque Ahmed and Surekha Somabalan) for helping and
encouraging me in writing this article.

Endnotes
1.see, for example, Weinberg, Davis. 1989. Introduction to Political Terrorism. New York, p.19
2.Laqueur, Walter. 1987. The Age of Terrorism. London: Weidenfeld and Nicolson.
3.see, for example, Guelke, Adrian. 1995. The age of terrorism and the international political system.
London: I.B.Tauris, p.2-3
4.Laclau, Mouffe. 1985. Hegemony and socialist strategy : towards a radical democratic politics. London:
Verso.
5.Schmid, Jongman. 1988. Political terrorism: a new guide to actors, authors, concepts, data bases,
theories, and literature. Amsterdam: North Holland, Transaction Books, p.28
6.Crenshaw Martha. 1983. "Reflections on the Effects of Terrorism" in Crenshaw, Martha, ed. Terrorism,
Legitimacy and Power. The Consequences of Political Violence. Middletown: Wesleyan University Press.,
p.2
7."... we know intuitively that this is a revolution and that that is only a riot, but we could not say what riot
and revolution are; we will speak of them without really knowing them. Could we define them? That would
be arbitrary or impossible. (Veyne, Paul. 1984. Writing history: an essay on epistemology. Middletown,
Conn.: Wesleyan University Press, p.132).
8.Chomsky, Noam. 2001. "September 11th and Its Aftermath: Where is the World Heading?" in
http://www.infoshop.org/news6/chomsky_india_lecture.html
9.Scholte, Jan Aart. 2000. Globalization: a critical introduction. New York: St.Martin’s Press. p.44-46
10. http://www.marxists.org/francais/marx/works/1848/01/km18480107.htm.
11. United Nations Development Programme, Human Development Report, 1997, New York, 1997, p. 2.)
12. For a methodological review on the measurement of poverty see Jan Drewnowski, The Level of living
Index, United Nations Institute for Social Research and Development (UNRISD), Geneva, 1965. See also
the extensive research on poverty thresholds conducted by the US Bureau of the Census.
13. See World Bank, World Development Report, 1990, Washington DC, 1990.
14. See World Development Report, 1997, table 9.2, chapter 9.
15. Ibid., chapter 9, table 9.2.
16. Ibid., p. 5.