ASSIGNMENT QUESTION

ASSIGNMENT QUESTION



ASSIGNMENT QUESTION 1:

Despite threats to globalisation, the global business environment will continue to improve, according to the latest business environment rankings from the Economist Intelligence Unit. This will help fuel a recovery in foreign direct investment (FDI), following the lean years of the first part of this decade. Rising protectionism, security risks and macroeconomic imbalances in leading OECD countries pose significant threats to the baseline outlook. However, globalisation is not about to be derailed. The global trend for liberalisation and deregulation will continue to be underpinned by powerful factors such as regional integration, increasing competitive pressures on multinational corporations and competition among countries for foreign investment.

Average world GDP growth in 2006-2010 will slow from the 2005 peak, but remain high by historic standards. Progress in further international trade liberalisation will be slow. Nevertheless foreign trade and exchange regimes will be freer than at any time since the early part of the 20th century. The quality of infrastructure, especially in ICT, and of financial systems will improve in most countries. Reform of labour and product markets, even if frequently halting and subject to strong opposition, will continue.

The position of the UK, which several years ago ranked as high as second, has steadily slipped in the league tables (to 7th place for 2006-2010). The UK remains one of the world's most open destinations to foreign investors at a time when protectionist impulses are becoming apparent in the EU and elsewhere. However, according to Philip Whyte, the Economist Intelligence Unit's Senior Economist for Western Europe, "the attractiveness of the UK's business environment is threatened by sizeable macroeconomic imbalances, an increasingly complex and burdensome tax system, weak productivity, and a sub-standard transport infrastructure."

The UK continues to score well across a range of categories of the business environment covered by the Economist Intelligence Unit's forward-looking model for assessing the comparative attractiveness of countries as investment locations. Its strengths include a favourable attitude to free enterprise and competition, its flexible labour markets, and the depth and sophistication of its capital markets. A number of factors will, however, increasingly weigh on the UK's attractiveness as a business location. Macroeconomic stability is threatened by financially over-extended British households. The tax regime is becoming increasingly burdensome, unpredictable and complex. Tangible improvements to the UK's congested and unreliable land transport infrastructure will be slow to materialise. And the UK will struggle to close its productivity gap not only with the US, but also European countries such as France. The UK's low productivity is the result of skills deficiencies (both at managerial and lower levels), tight planning restrictions (which inhibit competition), and the country's comparatively low spending on research and development (R&D).

These labour-movement connections and reciprocal influences, of course, are part of a wider network of profound and enduring relationships between Australians and Britons. Some 98 per cent of the early twentieth-century Australian population had migrated from Britain and Ireland. Ties and visits to family and friends 'back home' and 'down under' have remained extremely ...