State-owned enterprises, like their private-sector counterparts, can retain the profits of oil production, providing a significant incentive for governments to retain or regain control of this lucrative industry. Whether the motive is economic (i.e. profit) or political (i.e. state control), “foreign companies and investors are finding that national and local rules and regulations are increasingly aimed at favouring domestic companies at their expense. Multinationals are now competing as never before with state-owned enterprises armed with significant financial and political support from their governments. Ian Bremmer, “The Long Shadow of the Visible Hand,” Wall Street Journal, May 22, 2010, accessed December 21, 2010, online.wsj.com/article/SB10001424052748704852004575258541875590852.html. This contrasts with more authoritarian governments, where democracy is not in force or is only a symbolic process. China is one of the most visible examples, with its strong government and limited individual rights. However, over the past two decades, China has found a new balance on the extent to which the state plans and manages the economy. While the government remains the dominant force, controlling more than a third of the economy, more and more private companies have emerged. China has managed to combine government intervention with private investment to develop a robust, market-oriented market economy – all within a communist form of government. This system is commonly referred to as the “socialist market economy with Chinese characteristics.” The Chinese are eager to present their version of combining an authoritarian form of government with a market economy as a better alternative model for young economies like those in Africa.
This new combination has also raised more questions for companies facing new issues – such as privacy, individual rights and the protection of intellectual rights – as they try to do business with China, which is now the world`s second-largest economy behind the United States. China`s model of authoritarian government and market economy has sometimes leaned in favor of companies, usually Chinese, that know how to handle the nuances of this new system. The Chinese government`s control of the internet, for example, has helped boost Chinese search engine Baidu, which generates more than 73 percent of Chinese search engine revenue. Baidu censors itself and, as a result, has seen its revenue increase after Google reduced its activities in the country. Rolfe Winkler, “Internet Plus China Equals Screaming Baidu,” Wall Street Journal, November 9, 2010, accessed December 21, 2010, online.wsj.com/article/SB10001424052748703514904575602781130437538.html. The study of political systems is vast and complex. A political systemThe system of politics and government in a country; It regulates a comprehensive set of rules, regulations, institutions and attitudes. is essentially the system of politics and government in a country. It regulates a comprehensive set of rules, regulations, institutions and attitudes. A major distinguishing feature of political systems is the philosophy of each system on the rights of the individual and the group, as well as the role of government. The philosophy of any political system affects the policies that govern the local economy and the business environment. China`s political stability has had an impact on the level of foreign trade activity in China after the Tiananmen Square massacre that significantly declined in many areas, including tourism and foreign investment.
While companies that do not yet operate in China are reluctant to invest in China, countries already involved in investment activities seem to be waiting for a quiet period during which economic progress will resume, believing that China will not expel foreign investors in the meantime. Existing joint ventures and foreign production facilities are unlikely to be closed under the current regime, but political stability remains a big issue for foreign investors. At the same time, China`s economic growth and reforms since 1978 have dramatically improved the lives of hundreds of millions of Chinese, increased social mobility, and expanded the scope of personal freedom. This meant greater freedom of movement, employment opportunities, educational and cultural research, career and housing choices, and access to information. In recent years, China has also passed new criminal and civil laws that offer additional guarantees to citizens. Village elections were held in more than 90% of China`s one million villages. We can see how the political and economic ideologies that define countries affect their legal systems. Essentially, there are three main types of legal systems, there are customary law, civil law, and religious or theocratic law. Most countries actually have a combination of these systems, creating hybrid legal systems. The most direct effects on business can be observed in Islamic law.
Sharia as Islamic law has clear guidelines for aspects of life. For example, cases in Islamic law are directly affected by the concept of interest. Under Islamic law, banks cannot charge or profit from interest. Until recently, governments were able to directly apply rules and regulations according to their political and legal philosophies. The internet has started to change this as sellers and buyers have easier access to each other. Nevertheless, countries still have the opportunity to regulate or empower companies to comply with their rules and regulations. As a result, global companies monitor and assess the political and legal climate in the countries where they currently operate or hope to operate in the future. Politically, a country`s government may try to protect jobs or certain industries.
Some industries may be considered essential for national security purposes, such as defense, telecommunications, and infrastructure – for example, a government may be concerned about who owns their country`s ports. National security issues can affect both a country`s imports and exports, as some governments may not want advanced technological information to be sold to hostile foreign interests. Some governments use trade as retaliation when another country is politically or economically unjust. On the other hand, governments can influence trade to reward a country for its political support in global affairs. Civil lawA legal system based on a detailed set of laws that form a code and how the law is applied to facts. is based on a detailed set of laws that form a code and focus on how the law is applied to facts. It is the most widely used legal system in the world. Religious lawAlso known as theocratic law; This legal system is based on religious guidelines. is also known as theocratic law and is based on religious guidelines.
The best-known example of religious law is Islamic law, also known as Sharia, Islamic religious law, which addresses all aspects of daily life; With regard to economics and finance, the law prohibits the collection of interest on money and other joint investment activities, including hedging and short selling. Islamic law governs a number of Islamic nations and communities around the world and is the most widespread religious legal system. Two other religious legal systems are Jewish halakha and the Christian canonical system, neither of which is practiced at the national level in any country. The Christian canonical system is observed in Vatican City. Let`s briefly discuss how the political and economic ideologies that define countries affect their legal systems. Essentially, there are three main types of legal systems – customary law, civil law, and religious or theocratic law. Most countries actually have a combination of these systems, creating hybrid legal systems. The common law system is often found in the former British colonies and is based on the legal history of the country, previous court decisions on cases, and how laws are applied in certain situations. Judges of a common law system have the power to interpret the law in unique circumstances for an individual case. Countries such as the United States, Australia and India use common law systems.
In civil law, laws are based on detailed written rules and codes. Judges have less flexibility and only the power to enforce the law. The France, Germany and Russia work with a civil law system. Some counties have a legal system based on religious teachings. Countries like Pakistan, Saudi Arabia, Iran and Middle Eastern countries follow Islamic laws based on the sacred principles of the Qur`an. It is very important for international companies to interpret the law by country and its impact on their business activities. Before we can assess the impact on the economy, let`s first take a look at the different political and legal systems. Today, we live in a global economy where we use products made in one country and packaged in another. Companies have crossed the borders of countries and spread around the world in search of the availability of raw materials, cheap labor, talent and the market for their products.
However, doing business internationally is completely different from doing business in your home country. When doing business in other countries, businessmen should be familiar with the country`s culture, the behavior of the people, the country`s legal system, political environment and economic conditions. Source: Energy Intelligence Group, “Petroleum Intelligence Weekly Ranks World`s Top 50 Oil Companies (2009),” press release, December 1, 2008, accessed December 21, 2010, www.energyintel.com/documentdetail.asp?document_id=245527. It may seem obvious that companies would prefer to operate in open and democratic countries; However, it can be difficult to determine which countries meet the democratic criteria.