The Brothers Karamazov by Fyodor Dostoevsky Essay

The parable of the Grand Inquisitor is told by Ivan to Alyosha found in the novel, The Brothers Karamazov by Fyodor Dostoevsky. Both Ivan and Alyosha are brothers. The difference is in their respective religions wherein Ivan is a dedicated atheist while Alyosha is a monk. The parable is an important component of the novel and also one of the most famous passages in modern literature because it contains ideas about human freedom and nature. The parable also consists of a fundamental ambiguity. The leadership of the Grand Inquisitor is based on his amazing and exceptional strength to have freedom that has endured that majority of the human beings found it so terrible. From his point of view, only people who have knowledge enough to lie and who have the strength to endure suffering by being forced to make lies can rule over those people who want to stay weak, disillusioned and obedient. The Grand Inquisitor made an accusation against Christ of only speaking to the strong in spirit and can endure freedom while he is enforcing dogmatic solutions and continues his ministry to the weak. This style of leadership by the Grand Inquisitor can be compared to the leadership of Socrates. The Socratic method is described as the series of questions that are prolonged and answers that will refute a moral principle by letting the opposing argument to come up with a conclusion that will contradict the person’s original point of view. Socrates developed this style as a way to examine, refute or shame the opponent into reversing his earlier opinion. The Grand Inquisitor challenges the very essence of human life, the concept of evil and the free will of man. The concept of freedom is being examined and is described using a perspective that is bleak and contemptuous. The ideologies of man is being depicted as being a destructive force that has brought down humanity into chaos and anguish. The parable can be perceived as an attack on religion and God but a closer look will reveal a conclusion that remains the opposite. It is concluded that the Grand Inquisitor becomes the explanation for the crucial need for a religious institution. The context of the parable may be a shock to religious advocates. God will visit the earth in the form of flesh and blood. He performs miracles and is imprisoned in a cell by a man who punishes him for giving free will to mankind. It is clear from the beginning of the story that Alyosha is religious while Ivan is being cynical in his position on the matter. After the Grand Inquisitor becomes aware of the presence of God here on earth, he orders his men to capture him. The depiction of the Inquisitor has contradicted the description of God’s human form. The Inquisitor is being presented as a formidable, cold and judgmental and sinister. Another contrast that can be found between God and the Inquisitor is the reaction of the crowd to both of them. The people displays a fearful obedience as their behavior towards the Inquisitor and not the same adoration and awe like before. It is noted here that the people is quick to abandon God who in such a short time before they were all so enamored with. The weakness of man as a theme and the need for a rigid government will begin will begin to come out. A lengthy monologue follows which is delivered by the Grand Inquisitor to God. The lecture talks about the Inquisitor’s reprimand for freedom. The Inquisitor is speaking against the internal freedoms that are borne out of man’s free will. He describes how freedom has enslaved humanity and placed the human race into a state of disorder and chaos. He confronts God on this error and boldly declares that the human race will reject Him ultimately. The argument of the Inquisitor is difficult to refute as the ability of man to differentiate the good from the evil is undoubtedly questionable. The freedom of the will permits every individual to have a different system of morals or in some instances having no morals at all. If one will put into consideration the violence and the deprivation that is happening in the world everyday, it seems that man cannot manage the freedom that he enjoys with his will. The many choices and responsibilities, the moral decisions that he has to make on a daily basis has already overwhelmed so many. The mind has the ability to create an environment of its own by making hell out of heaven. This ability of the mind is what the Inquisitor has spoken of and has claimed that it has led to the destruction of mankind. There are many people who make choices in their lives that paved the way for the creation of circumstances that are hellish in nature. It is not the responsibility of free will that comes with it that overwhelms mankind. The reference of evil and the existence of God can also be found in the Confessions of Augustine. A person only needs to look around the world and have the realization later on that something is not quite right. The existence of evil is one of the challenges that have puzzled many Christians and those that are not for that matter. For most of Ausgustine’s life, he tried to find a solution for it. The question of the existence of evil can be reworded in many ways. One approach could be to address the source and beginnings of evil that will prompt a series of statements that will eventually form an argument with reason. It is said that God is the creator of all things. Evil is also a thing so therefore God also created evil. If the first arguments were true, then there is no escape to the solution. This formula is frustrating for the whole of Christianity. God would not be known as good if he intentionally created evil. Augustine has approached the problem from a certain angle. He questions if there is any convincing proof that God exists. If there is any proof that would suggest and lead to the conclusion that he really does, then God could not possibly be capable of creating evil. Evil must have come from something else. He also had an observation that evil could not be selected because there really is no certain evil thing to choose. A person can only turn away from good preferring a lesser good over a greater good since everything is good. For when the will abandons what is above itself, and turns to what is lower, it becomes evil – not because that is evil to which it turns, but because the turning itself is wicked† (Augustine 2007). Evil is therefore an act of choosing the lesser good over th greater good. To him, evil comes from the free will of the people. Evil was a perversion of the free will in man who turned away from God in preference of lesser things. Back to the Grand Inq uisitor, Satan or evil has obviously grown impatient by the values of kindness, humility and love that he has found to have no defenses and forced to capitulate. He is powerless with the overwhelming humility that he is forced not to live up to his threat of burning Christ at the stake. The prisoner is released and is allowed to walk freely and safe. Before the release, the prisoner gave a valedictory kiss on the lips of the inquisitor. Satan was a rebel in heaven. Because he wanted to rule, he preferred hell. In the continuing political power struggle, he has claimed the world to be his own and has a message for Christ to keep out of his world. The ends justify the means. The previous statement aptly characterizes a consequentialist’s way of reasoning. The outcome or result of an action when beneficial is morally right regardless of the means to get the end result. Consequentialists for example think of what they want, how they are going to get it and what the good in it is if they take action towards their goal. Deolontologists would be thinking of the rationality of an action and base it on a moral rule to know if it is right or wong. Comparing the personal identity of both theories, consequentialists consider the will, reason and desires as important in determining morality. Meanwhile, deolontologists consider only will and reason because they believe that desires only distract the mind from thinking rationally. Desires reflect emotions and in deolontology, there is no room for that because the moral rule is to be followed. Regardless if they want to do something or not, they must perform their duty because the performance of it is morally right. The rationality of consequentialism is in getting what you want out of that action. You want to achieve something because it is beneficial for you. Therefore you think of actions to take that would lead to the things you want and bring you the greatest good. Reason dictates the actions of deontologists. It is in reasoning that deolontologists discover what is right or wrong based on moral principles. The primary source for evaluating morals in consequentialism is the consequence of an action while in deolontology, it is the actions themselves. The virtue of consequentialism may be the feeling of having maximized the utility available. For deolontologists who are performing their moral duties, it the feeling of having done the right thing. However, both of these theories have criticisms in their arguments. One of the criticisms by Anscombe state that in consequentialism, it is not clear what one ought to do because the validity of the action is based on the consequences. As compared to deolontology, the theory suggests what one should do because the validity of an action is based on moral principles. These moral principles have a definite description of what is right and wrong. In another criticism by Thomas Nagel, consequentialism should not encompass those actions that are morally wrong but produced positive results in the long run. An example of this would be an uprising by the people of a country. The action of the people may be considered treason and according to the moral rule, that action is wrong. Because of the uprising, the corrupt government was toppled and it was replaced by new government that is elected by the people. Consequentialism is an ethical theory that in which the consequences of a particular action becomes the basis for an acceptable judgment on that action. It finds the source of a moral value in a good situation and results into a consequence of that action. Many forms of consequentialism exist and the most common is utilitarianism. The theory puts emphasis on the â€Å"good† as the center of its concept. Utilitarianism holds that actions that result to the greatest good to a greater number of people are considered to be moral actions. The outcome of an action makes that action either moral or immoral. In consequentialism, emphasis is given to the results or consequences in analyzing what is right and wrong in our actions. If the result of an action has a positive outcome then it is considered as moral and therefore right. Likewise if the action produces negative outcomes, the action becomes wrong and immoral. Deontology is another ethical theory that is of Greek origin, deos which means duty and logos as science. Using its etymological meaning, deontology becomes the science of duty. The theory argues that understanding our moral duty and its regulations to help us decide on the right choice. If we do our duty, we are doing the right thing. Doing our duty is considered a moral behavior. The theory states that we are obeying God when we do our duty for it is He that determines it and its regulations. The moral actions of deontology are separate from the consequences brought about by those actions.

Go Lovely Rose: An Explication Essay

Topic Sentence 1: The lover has emphasized sweetness and loveliness of his lady by comparing her to rose. Proof 1: He seems to be disappointed by the fact that his warm love has not been requited by the lady he loves. His impassioned address to the rose – â€Å"Go, lovely Rose† – is an instance of apostrophe, a figure of speech effectively used. This comparison not only highlights the lady’s beauty, it also underscores its fragility. Proof. 2. It is the philosophy of hedonism that preached here. The pleasures of human life are indeed short-lived; so lovers should not waste valuable time in prolonged courtship. They should confess their love and accept the bliss of love. He is full of regret that her shyness does nothing but â€Å"wastes her time and me,† (l. 2) Proof 3. The poet reminds his beloved that death is the inevitable end of everybody’s life, therefore they should live fully and happily before death can seize them. His contemplative mood reminds him of the fact that each day brings all creatures closer to the grave. The rose which symbolizes beauty and sweetness may remind her of the common fate of all living creatures: â€Å"Then die — that she †¦May read in thee;†(ll. 16-18) A realization of this kind may change her mind and requite his love. Topic Sentence 2 : He urges the lady to enjoy the warmth of attention she is receiving from her lover rather than feel embarrassed by it. It is a pity that she â€Å"shuns to have her graces spied†(l. 7) He argues that her beauty would have been wasted if she lived in a desert. Then there would be no one to appreciate her beauty. The existence of beauty is only justified if there are viewers to admire it. Proof. 1. The Puritanical coyness of the ladylove seems to be an impediment to the fulfillment of his love and it only deepens his gloom. Living in isolation may make her more covetable and attractive, but it is unwise â€Å"not blush so to be admired. † (l. 15) The etymological meaning of the word â€Å"blush† is to â€Å"redden† which is derived from the Middle English blusshen, from Old English blyscan to redden, according Merriam-Webster Dictionary. The red color is associated with a lady in love and also with rose which is often chosen by lovers as a gift to express their love. Proof. 2. In this poem we find the recurrent theme of carpe diem reinforced as in John Donne’s â€Å"To His Coy Mistress† and other poems. Even the things â€Å"wondorous sweet and fair† (l. 20 ) are not beyond the jurisdiction of ageing and death. Proof 3. The lover asserts that beauty is useless unless there is some one to admire it. Her beauty would have gone unnoticed if she were born and brought up in a desert. The beauty of human form is revealed by light and therefore it would be unwise to conceal it by blushing as he says, â€Å"not blush so to be admired. † (l. 15) Topic Sentence 3: He reminds his coy mistress that it is a privilege to be the object of male attention, and it is wise not to spurn it. Proof 1: In the final stanza he reiterates the central theme of carpe diem – human life is short, therefore enjoy it. He makes an appeal to her to â€Å"Suffer herself to be desired† (l. 14) and not to withdraw from public gaze out of false modesty. The metaphor of light and darkness is very apt. Beauty is hidden in darkness; similarly love is marred by its concealment. As light reveals beauty, so love is denied by withdrawal. Lovers should express their feelings spontaneously. Proof 2: If we think of eternity, the span of human youth and beauty is indeed very brief. The span of human life is indeed short. Even three scores and ten or more is a very brief period to fulfill one’s desires. Reflection on the fleeting nature of the life one should make one conscious of its limitations and lead to a meaningful life in which there is no time to waste. Proof 3: The rose is a beautiful flower with sweet fragrance, but it is also short-lived. It stands for the beauty as well as vulnerability of life. The use of the word â€Å"resemble† to mean â€Å"compare† is archaic according to Merriam-Webster 11th Collegiate Dictionary. Conclusion: The lover in the poem (not necessarily the poet) attempts to persuade his lady to share his positive outlook on life and enjoy life to the brim. He is very modern in outlook. What he says is better appreciated in the twentieth or twenty-first centuries. Closing statement: The message to the lady is a universal one: every lover feels that lovers should not suppress their feelings under the cover of social respectability. They must not delay their decision to choose their mate as human life may not grant him or her another opportunity. Restate thesis: The poem explores a lover’s complaint to his lady about the need for eschewing her coyness and reciprocate his love by responding quickly as human life is ephemeral. Human life should be lived happily and meaningfully in which there is no scope for wasting time in vain modesty. Work Cited Waller, Edmund. â€Å"Go, Lovely Rose†. http://classicpoetryaloud. podomatic. com/entry/2007-12-04T00_24_07-08_00 (The text of the poem. Accessed on 12/29/08) Merriam-Webster 11th Collegiate Dictionary. 2003. Version 3. 0 (CD-ROM) 29-Dec-08

Seven pounds Essay Example | Topics and Well Written Essays - 750 words

Seven pounds - Essay Example Tim Thomas, the main character of the film performed by Will Smith, suffers from a crash accident and kills seven people. Tim wants to save the lives of seven people. He donates his organs to other people. This is unusual type of films challenges the contemporaries with an interesting way of plot’s interpretation. The essence of the film In the last episode Tim wants to help Connie Tepos (Elpidia Carrillo) and saves her life and the lives of her two children. The last two people, saved by Tim, are Ezra Turner (Woody Harrelson) and a blind meat salesman playing the piano. The last donation is made for Emily Posa (Rosario Dawson), when Tim wants to donate a heart for her. Finally, he starts falling in love with this girl. A story of their feelings is impressive and the audience has a perfect opportunity to think about the essential and basic feelings of every individual–love and intimacy. There is no doubt that these guys would have perfect relations, but Tim’s sins do not let him go and his conscience and mind gain power over his emotions and feelings. Therefore, this film is not only about physical pain, but also about emotional and psychological sufferings. There is much darkness and depression in this film, but there is no doubt that there are much spiritual issues in this film. ... Moral values are substituted by monetary and financial concerns. The main character of Will Smith is described in the following way: â€Å"His breeziness becomes a shallow act, and his smile becomes downright eerie, a strained mask that hides pain, wards off hostility and expresses aggression all at the same time. It's a smile with dead  eyes† (LaSalle, 2008). Nevertheless, a feeling of love reincarnate his dead eyes and he is able to be inspired by one of the greatest feelings of the world. There is much romanticism in this film, as well as there is much drama. This film is for different tastes and the audience thankfully follows the development of the events in the film. Will Smith persuades the viewers that the most precious thing in the world is life. He made people lose their lives, but in the result of this horrible accident he did not suffer from having lost his own life. He compensated his debt in the face of God and he is strong enough and a rather responsible perso n to show that he is emotionally stable and spiritually strong person. The actions of Tim are reviewed in the following way: â€Å"But all the narrative trickery and emotional manipulation only serves to put Ben further out of the audience's reach, as he moves through the plot like a single-minded Terminator without motivations we can grasp† (Critical Analysis of Seven Pounds). On the one hand, the main character of the film is self-concentrated and a reserved person, but on the other hand, he is a connecting link between different aspects of the film’s world. Sentimental performance of Will Smith is both dramatic and philosophic. The audience is puzzled by the ability to wonder about the real essence and the central plot of the film (Film review – Seven Pounds 2008). A perfect

Media Ethic personal statement Essay Example | Topics and Well Written Essays - 500 words

Media Ethic personal statement - Essay Example ay I decide to report events can either create peace or chaos in a certain situation and therefore, I must constantly adhere to the highest principles of media ethics as I go about completing my tasks on the job. I was amazed to learn that as a media practitioner, I would oftentimes find myself at the crossroads of having to deal with news manipulation versus reporting the truth, or having to choose between public interest and the right of a person to privacy, and most specially, I found myself highly concerned by the fact that the interests of the media when it comes to reporting and informing the public may oftentimes find roadblocks in terms of our national laws. As a journalist, I would definitely have my work cut out for me in the future. But, if I had chosen to take the path of entertainment media instead, I would find myself having to deal with the ethics of censorship and the right of people to choose. There is also the problem posed by conflict of interest regarding product placement in shows that I might become involved with. Not to mention having to deal with the constant stereotyping in Hollywood that often leads to the presentation of taboo topics that most audience members and censors may deem unethical. However, since i trained for the job, I will know exactly how to strike a very delicate balance among all the factors involved. It wont be easy but, thanks to my ethics classes, I will know exactly how to handle the situation should it arise. Having been educated by our classes in the various types of ethics involved in media relations, I have come to realize that ethics as a moral philosophy is something that I shall have to deal with on a daily basis in my line of work because I will be constantly defending and recommending concepts of right and wrong to various people whom I work with very closely. That is because I now understand that every action I choose to take will result in certain positive or negative consequences for other people.

Internet crimes Research Paper Example | Topics and Well Written Essays - 1500 words

Internet crimes - Research Paper Example It is becoming common to see it on the news or listening to people complaining that they found some purchases on their credit card bills that they know nothing about and never bought them. The past week CNN showed a report about Sara who was send to life in prison; because she was a leader of global organization, committing crimes through the Internet by stealing credit cards ,stealing government secret information, selling weapons to terrorist groups and selling drugs around the world. Slowly the members of the organization started to fall one by one, it took a long time because they were not only from different countries but also different continents and here is the difficulty. This was the first difficulties and not least, this case was pending in the court for years , it was not like other cases; there are no concrete nor concrete evidence in addition to all this there were no witnesses saw the moment of criminals commit crimes and this was the real challenge for the prosecution. Tools execution of the crime was unusual, as the items used did not iclude a knife, pistol nor usual weapon. In some situations, they were creating fake pages to sell things. Most of the victims were not familiar with the internet on the other hand some were specialists and even professionals. II. Governments C. Cyber Crime Targeting Governments Governments in different countries are focused on issues regarding national security that are associated with internet crimes. For instance, the military has been applying e-mails as a preferred way of communicating. Furthermore, increased development of World Wide Web has led to significant induction in the public domain (Middleton, 2013). Therefore, World Wide Web became a point to be utilized as a virtual medium by criminals. In fact, due increased growth of terrorism, these criminals have commenced to adopt technology as one of their tools to execute their attacks against governments. In this case, terrorists are increasingly applying i nternet as a way of disseminating their ideology and facilitating their ability to undertake their activities against a large society and governments. Terrorist organizations focus on using internet to make attempts of disrupting communication hubs, which affects various governments. Therefore, through internet crimes these terrorist are able to undertake substantial activities that has a great effects that cause loss to the governments (Middleton, 2013). Military application of information has a significant role in the context of national security and this can affect decision-making processes. Other attackers are focused on hampering activities undertaken by intelligence and counter-intelligence in virtual medium such as military activities and management of information among advanced nations (Agustina, 2012). Furthermore, attackers are able to disrupt information’s network of advanced nations via virtual medium. Therefore, due to cost effectiveness of virtual medium, develo ping countries have applied their techniques in order to attain military supremacy through the internet, but this has led to increased vulnerability and compromised national security (Middleton, 2013). B. Internet Crime Reports There are cyber crimes units made by governments and law enforcement agencies deals with internet crimes through teams that are focused on tracking down cyber criminal. For instance, in America, Federal Bureau of Investigation (FBI) has a unit

Leadership and entrepreneurship Essay Example | Topics and Well Written Essays - 2250 words

Leadership and entrepreneurship - Essay Example Most of the basic organizational problems such as distorted structural design, poor morale of managers and employees, communication gaps, resistance to change, inefficient controls, iniquitous salary structure, scarcity of resources, incompatibility with external environment and so on are attributed to poor leadership. Entrepreneurship on the hand, which is derived from the French word â€Å"entrprende†, as defined by the famous economist Adam Smith as, â€Å"the economic agents who transform demand into supply for profits†. One of the definitions of the term, includes, the founding of an enterprise which apparently includes all those associated with it such as the decision makers, the stakeholders and the initiators of business or a business idea. In conclusion, entrepreneurs are leaders who develop and grow enterprises. (Stephen Robins, 2004) Bill Gates or McDonald could well be considered as entrepreneurs due to their sheer vision and dedication of converting a business idea into a profitable and economically viable business option. The size of the business rarely affects the leadership qualities. For example, a leader of a national or international enterprise / organization, commands wide – spread influence over a large number of people while the influence of the leader of a small work group in an organization is relatively limited in scope. However this does not affect the fact that they leaders in their own right and fulfill all the duties and responsibilities of an entrepreneur. In a formal organizational setting, a leader enjoys a position of command and exercise power over their subordinates in order to get the work done and achieve the entrepreneurial goals laid down by the organization. The larger the group the greater the difficulties in exercising control over their subordinates. In such a situation, the leadership roles are often distributed among the subordinates, chosen

Analyze one week of world economy Essay Example | Topics and Well Written Essays - 500 words - 3

Analyze one week of world economy - Essay Example For Instance, Shares in the US fell to about 1.6% with those in China dropping to 2.1% (FXSreet n.p). Essentially, the US economy in the last week had a negative economic index after weeks of positive show in the market. The -4 index manifest in the world largest economy is still the best in many years after the 2008 recession. The US economy has in the past week suffered significantly with numbers dropping in key sectors of the economy effectively slowing growth. The snow and bad weather has been sighted as one of the negative consequences weighing down on the US economy in recent weeks. The labor market registered lower work rates with a significant number of people filing for unemployment benefits. Despite the numerous challenges experienced in the last week, the stock market was bully on 5th registering positive indices. Though the Japanese economy gained the most among the world largest economies, the EU remained extensively versatile and bullish. The rate of inflation registered a negative value in the last week with unemployment falling significantly. The monetary regime in the EU has remained relatively stable to the dollar effectively making the banks to lower the interest rates. Japan was bullish in the market based on a number of fundamental facts (FXSreet n.p). To begin with, The Japanese economy registered a fall in the rate of inflation, though not to the expected levels. The low oil markets impacted positively to the market with most of the prices falling. While the Chinese president announced of the intentions to grow the economy by 7%, various departments of the economy recorded negative numbers with the overall impact being 2.1% (Economic Calendar n.p). The rate of inflation was high with unemployment rates remaining on a downward trend. It is imperative to note that the Chinese market has suffered a number of setbacks and going by the

Critically evaluate the organisational impact of mergers and Essay

Critically evaluate the organisational impact of mergers and acquisitions on the enlarged tourism firm - Essay Example Mergers and acquisitions need to be carefully considered, well planned and executed with great care because, although a decision to have an enlarged firm can provide an opportunity for growth, a failed execution can be costly, resulting in others attempting to takeover or control a part of the business. A merger or an acquisition is followed by a period of uncertainty in the enlarged organization as change managers try to execute plans and transform a vision into reality. It is necessary to try and pay attention to the human resources in the enlarged organization along with trying to utilize economies of scale and synergies, because those who have been interacting with the previously separate organizations can feel insecure, angry and frustrated with the change. Thus mergers and acquisitions bring about a period of uncertainty and chaos as spectators as well as share markets decide if the business decisions that were made or their executions have been sound. This brief essay presents a discussion of the organizational impact of mergers and acquisitions on the enlarged tourism organization. Mergers and acquisitions have been very popular in nearly all sectors of the economy in the past decade because corporations have felt that there is a need to utilize economies of scale and to take advantage of the strengths which have been developed in specific organizations to provide lower operating costs in order to thrive in competitive times (Andersson, 2000, Pp. 1 – 10). In the tourism sector, mergers and acquisitions have had an impact on hotel chains as well as airlines and an increasingly larger number of firms have tried to join hands in order to survive or thrive. Shocks such as the September 11 terrorist attacks as well as higher aviation fuel costs, have encouraged firms associated with the airline or hotel businesses to combine their strengths in order to become economically competitive. An example of a recent merger in the airline

Portraying paintings Essay Example | Topics and Well Written Essays - 750 words

Portraying paintings - Essay Example Then there is the musical instrument to the far right—a bit more frivolous an object, and a sword near the center—certainly not as common as a book. There is also a sort of musical instrument with the skull, which is the obvious focal point of the painting. The wooden flute is set near its mouth, almost to look as though the skull is playing it. In fact, perhaps the skull is smiling as it plays a whimsical tune. Also interesting, however, is the light source, a small window, presumably near the ceiling. The light illuminates only the skull, and leaves the other images in relative darkness, as if to say that what is important in the picture is the reminder of death, rather than the other â€Å"Vanities of Human Life† that are portrayed. Death, the artist seems to suggest is another of these vanities, however, as the skull plays upon its flute almost whimsically. Perhaps he is trying to tell us that death is the most beautiful vanity of all, as it removes us from t he other banalities of existence. In John Keats’ poem, â€Å"When I Have Fears That I May Cease to Be†, we see the two most common themes of Keats’ entire body of poetry—those of unrequited love, and fear of death—here together in one poem. He uses the sonnet form, with three quatrains and a rhyming couplet at the end. (This can also be seen as an octet and sestet). The natural divisions in the form of the poem organize his fears about love and death.

Leadership and Management in Healthcare Essay Example for Free

Leadership and Management in Healthcare Essay There is an increase in societal changes and demands in the nursing profession today. It is vital that nurses keep up to date with what is happening in their profession. This is attainable by becoming a member of professional organizations (American Nurses Association, 2014). The three major categories of nursing organizations include: national, state, and international. These professional nursing organizations have large memberships and maintain state and national links that help increase the knowledge of its members regarding current trends in legislation, employment, and clinical practices. The purpose of this paper is to discuss professional organization in the nursing industry, discuss how nurse leaders can use professional nursing organizations to maintain actions in the nursing and health care industry. Selected Professional Organization Nursing organizations keep nurses aware of the current trends and politics that impact the nursing profession. A fundamental part of the American Nurses Association, the Florida Nurses Association (FNA) is categorized within the state level that supports education, research, and assistance to nurses in need. FNA has been a great advocate for nurses from all areas of specialty (Florida Nurses Association, 2014). FNA is known as the â€Å"political watch dog for nurses and health care† and has an influential presence in Tallahassee. Its main goal is to protect the privileges and rights of nurses and make sure that the voice of nurses is heard at the capital (Dandurant, 2012). Current Political Issues The use of the titleâ€Å"Doctor† among nurses with Doctorate Degree in Nursing Practice (DNP) is one current issue addressed through FNA. Such issue is one of the most tackled issues among the medical group who is campaigning against doctoral nurses to shun away from calling themselves as doctors. As stated by the medical group, DNP’s should give the public and their patients explanations regarding their status otherwise will face criminal charges as they are not medical doctors (Florida Nurses Association, 2014). The Florida Medical Association has brought this controversy to legislative level known as State Bill 612 sponsored by Senator Bill Galvano. FNA Lobbyists aim to repeal this bill and view this as a diversion to legislators in the Florida health care plans. Professional Organization and Political Action In advocating for nurses and nursing, it is vital that leaders stay up to date of the political issues. Nursing organizations lobby legislatures and U.S Congress regarding significant issues that impact nursing. Advocating for increased nurses in the â€Å"Patient Protection and Affordable Act† is a good example. It is essential that everyone is knowledgeable about health and politics (American Nurses Association, 2014). Education is beneficial and plays a vital role through this process. It can be done through newsletters, media campaigns, e-mails, telephone calls, internet, and publications. Maintaining Awareness of Political Action Staying current with the health care policy is important in protecting the nursing practice, its scope, as well as the domain which nurses work (Gallager, 2010). Hence, safety and quality, nursing care will be continuously improved. FNA keeps nurse leaders informed of legislative issues such as nursing shortage, staffing ratios, safety in the work environment, and patient advocacy. Through professional organizations and meetings, leaders will be cognizant of information as it relates to the state and national level of health care. It is critical to have a voice in nursing issues. In order to achieve it, one has to be active in the professional organizations, stay aware of all levels of policy development, and works in collaboration with various organizations in the interest of nursing. In order to help ensure that policy enhances good health care,  nurses need to play an active role in the development and modifications in health policy (Dandurant, 2012). Conclusion Joining a professional organization is vital in one’s professional growth. Health care policies and laws impact not only the nurses’ work environment but the patients’ and their safety as well. The core of health policies is safety and quality care. It is essential that nurse leaders are knowledgeable regarding policies as it relates to nursing for a successful lobbying for the profession References American Nurses Association. (2014). Member benefits. Retrieved from: http://www.nursingworld.org Dandurant, K., (2012). Nurses influence health policies. Seacoastonline. Retrieved from: http://www.Seacoastonline.com Florida Nurses Association (2014). About FNA. Retrieved from http://wwwwfloridanurses.org Gallager, R., (2010). Quality is not an irreconcilable difference. Nursing management,4(8).18-20.

Development of the Caspian Oil and Gas Sector

Development of the Caspian Oil and Gas Sector Caspian Oil Gas Role of FDI in Economic Development of Azerbaijan, Kazakhstan and Turkmenistan Abstract This paper underlines the foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and its role in economic development of each country. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. The first part of this paper overviews the Caspian region and its oil and gas reserves. More specifically this part summarises the role of foreign direct investment in oil and gas industry and how it promotes economic development of Caspian basin countries, namely Azerbaijan, Kazakhstan and Turkmenistan. The second part presents the theoretical framework of foreign direct investment. This part also reviews the previous empirical findings on types, determinants and motives of foreign direct investment. The part 3 comparatively analysis foreign direct investment performance in selected countries and factors which may influence the ability of a country to attract foreign investment. This part also overviews the investment climates in Azerbaijan, Kazakhstan and Turkmenistan. Part 4 concludes. Key Words: FDI, Caspian Sea region, Oil and Gas, Azerbaijan, Kazakhstan, Turkmenistan. 1 Introduction The Overview of the Caspian Sea Region It is wide recognized that foreign direct investment (FDI) can play an important role in the development process of many countries and it is much required. Economies in transition, such as those in Central Asia and the Caucasus, are no exception as they realize the important role of FDI in strengthening their transition process. While some of them have sizable deposits of oil, gas and minerals which are major attractions to foreign investors, others, being less endowed, have more difficulty to attract FDI to their fledgling industrial and service sectors. But in even those countries which are well endowed with natural resources, there is a thrust to diversify their economies away from over-dependence on those resources and to develop viable value-added manufacturing industries and services. FDI can play a major catalytic role in this process. Just a decade years ago the areas on each side of the Caspian Sea – Central Asia to its east side and the Transcaucasia to its west were largely unknown. These regions were provinces of the Soviet Empire important to the outside world neither politically nor economically. Now its is well known that the Caspian Sea is largest land-locked body of water on Earth, bordered by Azerbaijan, Russia, Kazakhstan, Turkmenistan and Iran – the Caspian basin countries (see Map 1). Amongst the five countries only Iran is a member of the Organization of Petroleum Exporting Countries. Kazakhstan, Azerbaijan and Turkmenistan became independent after collapse of Soviet Union in 1991. Once a centre of global commerce, the Caspian Sea region has languished in obscurity ever since the rise of the sailing ship rendered the Silk Road obsolete a half millennium ago (Olcott, 1998). After discovery of oil and gas resources in the Caspian offshore and shore areas, this region became very important oil and gas sector in global context. Moreover, owing to energy security and geopolitical reasons, the Caspian region became very attractive for the West. Azerbaijan became one of the world’s first oil sectors after crude oil production started in Baku in the middle of 19th century. The oil production in Central Asia started in the beginning of the 20th century. Azerbaijan recorded about 70% of Soviet oil production by end of 1940. The former Soviet Union controlled almost all natural resources in Soviet Republics. At the time of their independence, Soviet republics were quasi-states (Olcott, 1998). Each republic has its own president and prime minister, local and national legislatures. The political and economic liberalisation of the Soviet Union in the mid-1980s attracted foreign investors and oil and gas companies interested in exploration and production prospects. The collapse of the Soviet Union gave further opportunities for the liberalisation of investment regulations. By the late 1990s the Caspian region was comparatively politically stable region, and a number of countries significantly improved investment regimes to their oil and gas sectors. Historically, energy industry in Azerbaijan, Russia, Kazakhstan, Turkmenistan and Uzbekistan is very important sector for the economy growth of these countries. However, poor management of natural resources and poor investment climate in these countries lead to disparities emergent between the countries in socio-economic terms. Nowadays, it is well recognized that foreign investment plays a vital role in the development of the oil and gas sector for such countries as Azerbaijan, Kazakhstan and Turkmenistan and significantly stimulates social and economic development of each of these countries. 1.2 Research Questions The presence of potentially vast oil and gas reserves is a part of the foreign investment attraction into the Caspian Sea region. On the other hand, it is important to note that while the quantity of proven reserves undoubtedly plays a significant role in estimating a region’s production and export potential, the other decisive factors for attraction foreign direct investment into this region are undeveloped market, cheap labour and cheap inputs and weak competition. This paper focuses on foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan; and on what foreign direct investment strategy in each country are based. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and performance by each country. The significant number of researches in regard to foreign direct investment mostly explains the investment strategy in the developed countries, when limited study has done on investment in less-developed countries or emerging countries. The selected countries Azerbaijan, Kazakhstan and Turkmenistan are transition countries and to a certain extent new participants in the competition to attract foreign investment. These countries can offer many potential advantages to foreign investor, especially in oil and gas sector of business. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. There is no much research which explores the determinants of investment in Azerbaijan, Kazakhstan and Turkmenistan, the stereotypes and perceptions that foreign investors have about these countries and what could be done to increase the foreign direct investment flow into these countries. This paper surveys these parts by investigating the multinational oil companies operating in Azerbaijan, Kazakhstan and Turkmenistan. The data from different energy agencies were gathered for comparative analysis of oil and gas data as well as foreign direct investment in different countries. This would not only let one to have a picture of various state strategies related to foreign investment, but could also provide the valuable outlook of the most advantageous approach for transition countries in doing business with foreign investors. 1.3 The Legal Status of Caspian Sea A large share of oil and gas reserves in Central Asia and Caucasus are thought to lie under he Caspian Sea. The question of the ownership of those resources, including the right to license and tax their development, is being argued by the Caspian littoral countries. The legal debate over the Caspian Sea can be tracked back to the 1921 Treaty to Moscow, reaffirmed in 1935, which declared that the inland Caspian Sea belonged to Russia (Kemp, 2000). Later Russia sent a note to the United Nations dated from 5th October 1994, where Russian Ministry of Foreign Affairs stated that the Caspian Sea should not be subject to the provisions of international maritime law (International Energy Agency, 1998). The importance of the application of international law is that a â€Å"sea† under the 1982 Law of the Sea Convention would be subject to separation into national zones for the development of its mineral resources. Russia stated that until all five of the Caspian littoral states (Azerbaijan, Russia, Kazakhstan, Turkmenistan, and Iran) came to a common decision on some other arrangement, the legal status of the Caspian Sea was subject only to the provisions of the more general (Treaty of Friendship between Iran and the USSR of 26 February 1921 and Treaty between Iran and the USSR on Trade and Maritime Navigation of 26 March 1940). Nevertheless, the ongoing legal uncertainty does not seem considerably decreased foreign investment in the Caspian Sea region. Advantageous geological prospects, with potential of a major oil and gas resource base, show significant motivations for companies to invest in this important producing region, preferably from the beginning of its development. 1.4 Current Production and Proven Reserves in Caspian Region Caspian oil presents a lot of opportunities for world oil markets and for the region itself (Energy Charter Secretariat, 2008): The appearance of new production sources would expand world oil supplies. Major quantities of Caspian oil would ease the pressure on the Persian Gulf production capacity and provide an additional hedge against oil supply disruptions Profits from oil exports could stimulate economic growth and improve the standard of living in the Caspian energy-rich counties. The availability of Caspian energy supplies in world markets will likewise improve the prospects for economic growth and political stability in the Caspian basin countries. Nowadays the Caspian Sea region is important, but not major supplier of crude oil to world markets, based upon estimates by British Petroleum (BP) and the Energy Information Administration (EIA). In 2005 the Caspian region produced 2.1 million barrels per day, or 2 per cent of total world production (see Table 1). Kazakhstan’s production rapidly increased since the late 1990s, accounted for 67 per cent and Azerbaijan for 22 per cent of regional crude oil production in 2005. The Caspian Sea region’s comparative contribution to world natural gas supplies is larger than that for oil. Gas production of 3.0 trillion cubic feet per year in 2005 was 3 percent of world production (Energy Information Administration, 2006). Turkmenistan is the largest producer; with production of 2.0 trillion cubic feet per year, it accounts for almost two-thirds of the region’s gas production. (see Figure 1). Unlike oil, the region’s proven reserves of natural gas are a higher proportion of the world total than is its natural gas production. The estimate of proven reserves of natural gas in the Caspian Sea region for the end of 2006 published by Energy Information Administration is 232 trillion cubic feet per year, which represents 4 per cent of the world total (see Table 2). Table 1Oil Production in the Caspian Sea Region 1. Proven reserves are defined by the EIA 2. Possible reserves 3. Other estimates (EIA/IEO 2006) 3.45 million barrels per day, (World Oil, 10 March 2004) 3 million ^Only Caspian area oil and gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Table 2Gas Production in the Caspian Sea Region ^Only Caspian area gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Figure 1 Gas Production in Caspian Sea region (1992-2004) Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. 1.5 Role of Oil and Gas in the Economic Development of Caspian Region The development of oil and gas resources in the Caspian region is mostly important for the development of economies in the Central Asian and Transcaucasia. In 1995 the energy sector’s share of gross domestic product (GDP) was an estimated 14.6 percent in Azerbaijan, 10.1 percent in Kazakhstan, 10.2 percent in Turkmenistan (International Energy Agency, 1998). Foreign investment attracted to the oil and gas sector in Caspian region could offer significant profits for the region’s governments and stimulate investment in other economic sectors. The attract foreign investment the host Governments should take discreet measures to ensure the development of an sufficient legal and administrative infrastructure, including institution building and personnel training, to handle the inflow of oil related revenues and to help ensure the countries’ efficient and equitable development. International Monetary Fund (2003) expressed concerns that unless regional governments introduce further administrative reforms, they risk being overwhelmed by new oil wealth. Particularly, corruption is a peril. Economic development motivated by foreign investment in the oil and gas industry helps to guarantee the financial independence of the Central Asian and Transcaucasian states. The transition to the market economy and the economic dislocations originated by collapse of Soviet Union left Azerbaijan, Kazakhstan and Turkmenistan without adequate funds to develop oil and gas resources. Governments of these countries are looking for private investment (mainly from foreign companies) that would play significant role in the development of oil and gas industry. Besides financial capital, a foreign investor brings a modern technology to local industry, including environmentally sound production techniques and modern management approaches. The Caspian Sea region countries are competing with each other for foreign investment. Oil and gas companies have a wide choice of where to make investment. The foreign investor considers the opportunities that offer the best financial returns. However, the investment climate is vital for company’s decision on where to invest. As a result, Kazakhstan and Azerbaijan took considerable steps in creating attractive investment climates. Kazakhstan concentrated on building a body of law applicable to all projects, while Azerbaijan focused primarily on modified production sharing agreements (International Monetary Fund, 2003). By the beginning of 1998, cumulative foreign direct investment in the oil and gas sectors of Central Asia and Transcaucasia had reached an estimated 3 billion of American dollars, nearly one third of which was placed in 1997. Future investment commitments in the region from contracts already signed total over 40 billion of America dollars (International Energy Agency, 1998). So far most foreign investment has been in Kazakhstan and Azerbaijan. Gas-endowed Turkmenistan started to attract foreign investment later than the others due to Government dictatorship and poor investment climate. Caspian oil development has gained a great deal of political and commercial momentum since the first foreign companies came there at the end of 1980s (Ruseckas, 2000). Since then the most important external factor influencing Caspian oil development is the price of oil. Principally if oil prices remain at present high level it is possible the more optimistic projects will be started. The Caspian Sea region could possibly produce approximately 4 million barrels per day by 2010. In any case, the Caspian Sea states require a stable legal regime to develop, produce, transport and market its natural resources. 1.5.1 Summary data on Azerbaijan Owing to extensive oil reserves, Azerbaijan is a major oil producer since the middle of the last century. Between 1990 and 1995 Azerbaijan’s gross domestic product dropped 58 percent (International Energy Agency, 1998). Oil production fell by only 25 percent mainly because of continuing oil product exports to neighbouring countries and an increasing use of heavy fuel oil in domestic power stations to alternative for imported gas. Due to the tightening of monetary and budgetary policies, the fiscal deficit dropped from 11.4 percent of gross domestic product in 1995 to less than 2 percent in 1996. In 2006 Azerbaijans real gross domestic product grew by 31 percent when the oil production in this region significantly increased. Azerbaijans anticipate for sustained economic growth is in its managing of large oil and natural gas resources in the Caspian Sea region, through effective management of the resulting revenue stream, and non-oil sector diversification (Energy Information Administration, 2006). During the beginning of transition most Azerbaijan onshore oil fields were in decline and required momentous new investment to develop large-scale offshore projects and to reconstruct existing fields. Since independence Azerbaijan signed several agreements with foreign oil companies. While maintaining full state ownership over energy companies, Azerbaijan was quick to invite foreign investors to assume a direct role in the development of its hydrocarbon reserves (Thompson, 2004). In 1992 most of the Azerbaijan oil sector assets were merged in two state oil companies – Azerineft and Azneftkimiya. The new merger was called the State Oil Company of the Azerbaijan Republic or SOCAR. While Government organizations handle production and exploration agreements with foreign companies, SOCAR is body to all international companies developing new oil and gas projects in Azerbaijan. After the first commercial oil flows through the Baku-Tbilisi-Ceyhan pipeline during summer 2006 and the increasing oil production from the Azeri-Chirag-Guneshli project, oil revenues are expected to contribute to a doubling of Azerbaijan’s gross domestic product by 2008 (Thompson, 2004). Energy Information Administration (2007) reports that though the oil sector represented around 10 percent of Azerbaijan’s gross domestic product in 2005, it is already projected to double to almost 20 percent of gross domestic product in 2007 (see Table 3). To manage the revenues, former President of Azerbaijan Heydar Aliyev formed a State Oil Fund in 1999, which is designed to use money obtained from oil-related foreign investment for poverty reduction, education and raising rural living standards. As of the end of 2006, the State Oil Fund reported assets of almost 2 billion US dollars, but the fund’s assets are expected to increase to 36 billion US dollars by 2010 (Energy Information Administration, 2006). Table 3Azerbaijan: Economy and Energy (in millions US dollars) 2003 2004 2005 2006 2007 2010 Oil Production (thousand barrels per day) 320 319 441 648 860 1,300 Oil Exports (thousand barrels per day) 215 204 314 521 721 N/A Foreign Direct Investment 3,285 3,556 1,680 -219 -4,750 476 FDI in Oil Sector 3,246 3,461 1,459 -573 -5,198 366 Oil Sector Revenue 886 946 1,337 2,921 5,272 19,417 As share of total rev (%) 42% 38% 39% 51% 59% N/A As share of total GDP (%) N/A N/A 9.8% 15% 19.7% 43.3% Oil Fund Assets 816 972 1,394 1,936 3,093 36,387 Source: Energy Information Administration: Short Term Energy Outlook, 2007; International Monetary Fund (IMF), Article IV Consultation, Staff Report, No 07/191, June 2007 1.5.2 Summary Data on Kazakhstan As it was the case in most other former Soviet Union countries, Kazakhstan’s first attempts at economic reform were effectively taken in response to Russias one-sided price reforms in 1992. After Kazak oil production had suddenly declined for two years in the end of 1993, inflation had out of control. The efforts to create an economic union with Russia and other former Soviet Union countries didn’t meet expectations of the Kazakh Government. Looking at the dynamic Asian economies as a model, the Kazakh Government turned to market style policies. However, the government increased hard budget constraints and restrictive monetary policies due to attempts to solve non-payment problem through state financing. The remained net debts after netting out inter-industry arrears were financed from Government budget and the central bank. In 1993 International Monetary Fund (IMF) granted Kazakhstan a one-year standby package. To maintain IMF collaboration and to stop the decline in gross domestic product, the Kazakh government implemented a second stabilisation program in 1995. But this time hard budget constraints and monetary policy were strengthened by excluding of government financing of net positions in inter-enterprise debts and retreating government guarantees for loans granted by foreign and domestic banks. In the middle of 1996, the International Monetary Fund approved an Extended Fund Facility (EFF) of 446 million US dollars for three years (IMF, 2003). According to International Monetary Fund (2003) the decision was made in light of a wide-ranging three-year reform programme submitted by the government, as well as the positive longer term prospects for production and exports of energy and non-ferrous metals. In 1996, Kazakhstan experienced its first positive economic growth since 1989. 1.5.3 Summary Data on Turkmenistan Preceding the collapse of the Soviet Union approximately 8 percent Turkmenistan’s gross domestic product was generated by gas exports to the rest of the USSR mostly to Belarus, Ukraine and the Caucasus. Another 5 percent of gross domestic product was earned from cotton exports. Gas and cotton exports continue to be used to cover the import of considerable amounts of grain and capital equipment from other former Soviet Republics. While estimates for the fall of gross domestic product between 1990 and 1995 vary depending on how adjustments to official gross domestic product are made, International Monetary Fund and European Bank of Reconstruction and Development agree on about -35 percent (IMF, 2003). This is much less than the 58 percent drop in Turkmen gas production. The rest of the economy is basically agricultural. The cotton industry has been less affected by the downfall of the Soviet Union. The government gradually liberalised some prices beginning in 1992. A presidential decree of 1995 removed price controls on all products except for about 50 items, including energy. The government introduced the manat as the national currency in 1993. In 1995 it unified the previously separate official and commercial exchange rates, which subsequently became determined by inter-bank auctions for foreign exchange. Between 1992 and 1995 the government compensated for the shortfall in revenue from taxes on gas production and exports by cutting expenditures and replacing subsidies to the economy with additional allocations of credit at largely negative interest rates. Controlled prices were adjusted repeatedly but declined in real terms for natural gas and for oil products through 1994. The share of gas related revenues in the central budget declined from 60 percent in 1992 to under 20 percent in 1995, which lowered the share of total budgetary revenue in GDP from 40 percent to 10 percent during this period. Due to drastic expenditure cuts in government wages and investment, including maintenance, the central budget deficit remained fairly stable over this period. It also helped that new excise taxes were introduced in 1995 on petrol (55 percent) and diesel (60 percent). This resulted in some recovery of government capital spending. The easy money policy was changed slowly in 1995 and 1996. During this time foreign exchange surrender requirements of state-owned enterprises to the Foreign Exchange Reserve Fund (FERF) were increased to 50 percent for gas and oil exports, and the money allocated directly to the central budget. Prior to that, this fund had been used to award credits to the economy, contributing to monetary expansion. In 1995 and 1996, bank credit allocation was reduced, real interest rates rose (due to credit auctions with deregulated interest rates), and reserve requirements for banks were increased. However, the pursuit of these policies was not smooth, in part due to the limited political autonomy of the Central Bank. Nevertheless, inflation decelerated by 50 percent towards the end of 1995 and is estimated to have been 445 percent in 1996, and 21 percent in 1997. Despite plummeting gas exports in recent years, Turkmenistan’s current account was slightly positive in 1994 and 1995, as long as arrears owed to the country are not taken into account. If such arrears are counted the 1995 balance swings from an estimated surplus of 54 million US Dollars to a deficit of 289 million US Dollars. The situation has probably continued to deteriorate due to weak gas exports. 2 Theoretical Frameworks 2.1 Overview of Foreign Direct Investment Theories There is variety of empirical studies on theoretical models explaining foreign direct investment (FDI) and its determinants. The various approaches from different disciplines such as economics, international business, organisation and management explain numerous characteristics of this phenomenon. The following dissimilar methods, explaining foreign direct investment as the location decision of multinational enterprises are mostly acknowledged in empirical literature on FDI: Ownership advantages as determinants of foreign direct investment (including monopolistic advantage and internalisation theory) based on imperfect competition models and the view that multinational enterprises (MNEs) are firms with market power (Hymer, 1960; Buckley and Casson, 1979; Kindleberger, 1969; Caves, 1971 for ownership advantages) Determinants according to the Neoclassical Trade Theory and the Heckscher-Ohlin model, where capital moves across countries due to differences in capital returns (for example Markusen et al, 1995,pp. 98-128; Aliber, 1970); Determinants of foreign direct investment in Dunning’s ownership-location-internalization (OLI) framework, which brought together traditional trade economics, ownership advantages and internalisation theory (Dunning, 1977; 1979); Determinants of foreign direct investment according to the horizontal FDI model or Proximity- Concentration Hypothesis (Krugman, 1983; Markusen, 1984; Ethier, 1986; Horstmann and Markusen, 1992; Brainard, 1993); Determinants of foreign direct investment according to the vertical FDI model, Factor-Proportions Hypothesis or the theory Development of the Caspian Oil and Gas Sector Development of the Caspian Oil and Gas Sector Caspian Oil Gas Role of FDI in Economic Development of Azerbaijan, Kazakhstan and Turkmenistan Abstract This paper underlines the foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and its role in economic development of each country. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. The first part of this paper overviews the Caspian region and its oil and gas reserves. More specifically this part summarises the role of foreign direct investment in oil and gas industry and how it promotes economic development of Caspian basin countries, namely Azerbaijan, Kazakhstan and Turkmenistan. The second part presents the theoretical framework of foreign direct investment. This part also reviews the previous empirical findings on types, determinants and motives of foreign direct investment. The part 3 comparatively analysis foreign direct investment performance in selected countries and factors which may influence the ability of a country to attract foreign investment. This part also overviews the investment climates in Azerbaijan, Kazakhstan and Turkmenistan. Part 4 concludes. Key Words: FDI, Caspian Sea region, Oil and Gas, Azerbaijan, Kazakhstan, Turkmenistan. 1 Introduction The Overview of the Caspian Sea Region It is wide recognized that foreign direct investment (FDI) can play an important role in the development process of many countries and it is much required. Economies in transition, such as those in Central Asia and the Caucasus, are no exception as they realize the important role of FDI in strengthening their transition process. While some of them have sizable deposits of oil, gas and minerals which are major attractions to foreign investors, others, being less endowed, have more difficulty to attract FDI to their fledgling industrial and service sectors. But in even those countries which are well endowed with natural resources, there is a thrust to diversify their economies away from over-dependence on those resources and to develop viable value-added manufacturing industries and services. FDI can play a major catalytic role in this process. Just a decade years ago the areas on each side of the Caspian Sea – Central Asia to its east side and the Transcaucasia to its west were largely unknown. These regions were provinces of the Soviet Empire important to the outside world neither politically nor economically. Now its is well known that the Caspian Sea is largest land-locked body of water on Earth, bordered by Azerbaijan, Russia, Kazakhstan, Turkmenistan and Iran – the Caspian basin countries (see Map 1). Amongst the five countries only Iran is a member of the Organization of Petroleum Exporting Countries. Kazakhstan, Azerbaijan and Turkmenistan became independent after collapse of Soviet Union in 1991. Once a centre of global commerce, the Caspian Sea region has languished in obscurity ever since the rise of the sailing ship rendered the Silk Road obsolete a half millennium ago (Olcott, 1998). After discovery of oil and gas resources in the Caspian offshore and shore areas, this region became very important oil and gas sector in global context. Moreover, owing to energy security and geopolitical reasons, the Caspian region became very attractive for the West. Azerbaijan became one of the world’s first oil sectors after crude oil production started in Baku in the middle of 19th century. The oil production in Central Asia started in the beginning of the 20th century. Azerbaijan recorded about 70% of Soviet oil production by end of 1940. The former Soviet Union controlled almost all natural resources in Soviet Republics. At the time of their independence, Soviet republics were quasi-states (Olcott, 1998). Each republic has its own president and prime minister, local and national legislatures. The political and economic liberalisation of the Soviet Union in the mid-1980s attracted foreign investors and oil and gas companies interested in exploration and production prospects. The collapse of the Soviet Union gave further opportunities for the liberalisation of investment regulations. By the late 1990s the Caspian region was comparatively politically stable region, and a number of countries significantly improved investment regimes to their oil and gas sectors. Historically, energy industry in Azerbaijan, Russia, Kazakhstan, Turkmenistan and Uzbekistan is very important sector for the economy growth of these countries. However, poor management of natural resources and poor investment climate in these countries lead to disparities emergent between the countries in socio-economic terms. Nowadays, it is well recognized that foreign investment plays a vital role in the development of the oil and gas sector for such countries as Azerbaijan, Kazakhstan and Turkmenistan and significantly stimulates social and economic development of each of these countries. 1.2 Research Questions The presence of potentially vast oil and gas reserves is a part of the foreign investment attraction into the Caspian Sea region. On the other hand, it is important to note that while the quantity of proven reserves undoubtedly plays a significant role in estimating a region’s production and export potential, the other decisive factors for attraction foreign direct investment into this region are undeveloped market, cheap labour and cheap inputs and weak competition. This paper focuses on foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan; and on what foreign direct investment strategy in each country are based. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and performance by each country. The significant number of researches in regard to foreign direct investment mostly explains the investment strategy in the developed countries, when limited study has done on investment in less-developed countries or emerging countries. The selected countries Azerbaijan, Kazakhstan and Turkmenistan are transition countries and to a certain extent new participants in the competition to attract foreign investment. These countries can offer many potential advantages to foreign investor, especially in oil and gas sector of business. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. There is no much research which explores the determinants of investment in Azerbaijan, Kazakhstan and Turkmenistan, the stereotypes and perceptions that foreign investors have about these countries and what could be done to increase the foreign direct investment flow into these countries. This paper surveys these parts by investigating the multinational oil companies operating in Azerbaijan, Kazakhstan and Turkmenistan. The data from different energy agencies were gathered for comparative analysis of oil and gas data as well as foreign direct investment in different countries. This would not only let one to have a picture of various state strategies related to foreign investment, but could also provide the valuable outlook of the most advantageous approach for transition countries in doing business with foreign investors. 1.3 The Legal Status of Caspian Sea A large share of oil and gas reserves in Central Asia and Caucasus are thought to lie under he Caspian Sea. The question of the ownership of those resources, including the right to license and tax their development, is being argued by the Caspian littoral countries. The legal debate over the Caspian Sea can be tracked back to the 1921 Treaty to Moscow, reaffirmed in 1935, which declared that the inland Caspian Sea belonged to Russia (Kemp, 2000). Later Russia sent a note to the United Nations dated from 5th October 1994, where Russian Ministry of Foreign Affairs stated that the Caspian Sea should not be subject to the provisions of international maritime law (International Energy Agency, 1998). The importance of the application of international law is that a â€Å"sea† under the 1982 Law of the Sea Convention would be subject to separation into national zones for the development of its mineral resources. Russia stated that until all five of the Caspian littoral states (Azerbaijan, Russia, Kazakhstan, Turkmenistan, and Iran) came to a common decision on some other arrangement, the legal status of the Caspian Sea was subject only to the provisions of the more general (Treaty of Friendship between Iran and the USSR of 26 February 1921 and Treaty between Iran and the USSR on Trade and Maritime Navigation of 26 March 1940). Nevertheless, the ongoing legal uncertainty does not seem considerably decreased foreign investment in the Caspian Sea region. Advantageous geological prospects, with potential of a major oil and gas resource base, show significant motivations for companies to invest in this important producing region, preferably from the beginning of its development. 1.4 Current Production and Proven Reserves in Caspian Region Caspian oil presents a lot of opportunities for world oil markets and for the region itself (Energy Charter Secretariat, 2008): The appearance of new production sources would expand world oil supplies. Major quantities of Caspian oil would ease the pressure on the Persian Gulf production capacity and provide an additional hedge against oil supply disruptions Profits from oil exports could stimulate economic growth and improve the standard of living in the Caspian energy-rich counties. The availability of Caspian energy supplies in world markets will likewise improve the prospects for economic growth and political stability in the Caspian basin countries. Nowadays the Caspian Sea region is important, but not major supplier of crude oil to world markets, based upon estimates by British Petroleum (BP) and the Energy Information Administration (EIA). In 2005 the Caspian region produced 2.1 million barrels per day, or 2 per cent of total world production (see Table 1). Kazakhstan’s production rapidly increased since the late 1990s, accounted for 67 per cent and Azerbaijan for 22 per cent of regional crude oil production in 2005. The Caspian Sea region’s comparative contribution to world natural gas supplies is larger than that for oil. Gas production of 3.0 trillion cubic feet per year in 2005 was 3 percent of world production (Energy Information Administration, 2006). Turkmenistan is the largest producer; with production of 2.0 trillion cubic feet per year, it accounts for almost two-thirds of the region’s gas production. (see Figure 1). Unlike oil, the region’s proven reserves of natural gas are a higher proportion of the world total than is its natural gas production. The estimate of proven reserves of natural gas in the Caspian Sea region for the end of 2006 published by Energy Information Administration is 232 trillion cubic feet per year, which represents 4 per cent of the world total (see Table 2). Table 1Oil Production in the Caspian Sea Region 1. Proven reserves are defined by the EIA 2. Possible reserves 3. Other estimates (EIA/IEO 2006) 3.45 million barrels per day, (World Oil, 10 March 2004) 3 million ^Only Caspian area oil and gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Table 2Gas Production in the Caspian Sea Region ^Only Caspian area gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Figure 1 Gas Production in Caspian Sea region (1992-2004) Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. 1.5 Role of Oil and Gas in the Economic Development of Caspian Region The development of oil and gas resources in the Caspian region is mostly important for the development of economies in the Central Asian and Transcaucasia. In 1995 the energy sector’s share of gross domestic product (GDP) was an estimated 14.6 percent in Azerbaijan, 10.1 percent in Kazakhstan, 10.2 percent in Turkmenistan (International Energy Agency, 1998). Foreign investment attracted to the oil and gas sector in Caspian region could offer significant profits for the region’s governments and stimulate investment in other economic sectors. The attract foreign investment the host Governments should take discreet measures to ensure the development of an sufficient legal and administrative infrastructure, including institution building and personnel training, to handle the inflow of oil related revenues and to help ensure the countries’ efficient and equitable development. International Monetary Fund (2003) expressed concerns that unless regional governments introduce further administrative reforms, they risk being overwhelmed by new oil wealth. Particularly, corruption is a peril. Economic development motivated by foreign investment in the oil and gas industry helps to guarantee the financial independence of the Central Asian and Transcaucasian states. The transition to the market economy and the economic dislocations originated by collapse of Soviet Union left Azerbaijan, Kazakhstan and Turkmenistan without adequate funds to develop oil and gas resources. Governments of these countries are looking for private investment (mainly from foreign companies) that would play significant role in the development of oil and gas industry. Besides financial capital, a foreign investor brings a modern technology to local industry, including environmentally sound production techniques and modern management approaches. The Caspian Sea region countries are competing with each other for foreign investment. Oil and gas companies have a wide choice of where to make investment. The foreign investor considers the opportunities that offer the best financial returns. However, the investment climate is vital for company’s decision on where to invest. As a result, Kazakhstan and Azerbaijan took considerable steps in creating attractive investment climates. Kazakhstan concentrated on building a body of law applicable to all projects, while Azerbaijan focused primarily on modified production sharing agreements (International Monetary Fund, 2003). By the beginning of 1998, cumulative foreign direct investment in the oil and gas sectors of Central Asia and Transcaucasia had reached an estimated 3 billion of American dollars, nearly one third of which was placed in 1997. Future investment commitments in the region from contracts already signed total over 40 billion of America dollars (International Energy Agency, 1998). So far most foreign investment has been in Kazakhstan and Azerbaijan. Gas-endowed Turkmenistan started to attract foreign investment later than the others due to Government dictatorship and poor investment climate. Caspian oil development has gained a great deal of political and commercial momentum since the first foreign companies came there at the end of 1980s (Ruseckas, 2000). Since then the most important external factor influencing Caspian oil development is the price of oil. Principally if oil prices remain at present high level it is possible the more optimistic projects will be started. The Caspian Sea region could possibly produce approximately 4 million barrels per day by 2010. In any case, the Caspian Sea states require a stable legal regime to develop, produce, transport and market its natural resources. 1.5.1 Summary data on Azerbaijan Owing to extensive oil reserves, Azerbaijan is a major oil producer since the middle of the last century. Between 1990 and 1995 Azerbaijan’s gross domestic product dropped 58 percent (International Energy Agency, 1998). Oil production fell by only 25 percent mainly because of continuing oil product exports to neighbouring countries and an increasing use of heavy fuel oil in domestic power stations to alternative for imported gas. Due to the tightening of monetary and budgetary policies, the fiscal deficit dropped from 11.4 percent of gross domestic product in 1995 to less than 2 percent in 1996. In 2006 Azerbaijans real gross domestic product grew by 31 percent when the oil production in this region significantly increased. Azerbaijans anticipate for sustained economic growth is in its managing of large oil and natural gas resources in the Caspian Sea region, through effective management of the resulting revenue stream, and non-oil sector diversification (Energy Information Administration, 2006). During the beginning of transition most Azerbaijan onshore oil fields were in decline and required momentous new investment to develop large-scale offshore projects and to reconstruct existing fields. Since independence Azerbaijan signed several agreements with foreign oil companies. While maintaining full state ownership over energy companies, Azerbaijan was quick to invite foreign investors to assume a direct role in the development of its hydrocarbon reserves (Thompson, 2004). In 1992 most of the Azerbaijan oil sector assets were merged in two state oil companies – Azerineft and Azneftkimiya. The new merger was called the State Oil Company of the Azerbaijan Republic or SOCAR. While Government organizations handle production and exploration agreements with foreign companies, SOCAR is body to all international companies developing new oil and gas projects in Azerbaijan. After the first commercial oil flows through the Baku-Tbilisi-Ceyhan pipeline during summer 2006 and the increasing oil production from the Azeri-Chirag-Guneshli project, oil revenues are expected to contribute to a doubling of Azerbaijan’s gross domestic product by 2008 (Thompson, 2004). Energy Information Administration (2007) reports that though the oil sector represented around 10 percent of Azerbaijan’s gross domestic product in 2005, it is already projected to double to almost 20 percent of gross domestic product in 2007 (see Table 3). To manage the revenues, former President of Azerbaijan Heydar Aliyev formed a State Oil Fund in 1999, which is designed to use money obtained from oil-related foreign investment for poverty reduction, education and raising rural living standards. As of the end of 2006, the State Oil Fund reported assets of almost 2 billion US dollars, but the fund’s assets are expected to increase to 36 billion US dollars by 2010 (Energy Information Administration, 2006). Table 3Azerbaijan: Economy and Energy (in millions US dollars) 2003 2004 2005 2006 2007 2010 Oil Production (thousand barrels per day) 320 319 441 648 860 1,300 Oil Exports (thousand barrels per day) 215 204 314 521 721 N/A Foreign Direct Investment 3,285 3,556 1,680 -219 -4,750 476 FDI in Oil Sector 3,246 3,461 1,459 -573 -5,198 366 Oil Sector Revenue 886 946 1,337 2,921 5,272 19,417 As share of total rev (%) 42% 38% 39% 51% 59% N/A As share of total GDP (%) N/A N/A 9.8% 15% 19.7% 43.3% Oil Fund Assets 816 972 1,394 1,936 3,093 36,387 Source: Energy Information Administration: Short Term Energy Outlook, 2007; International Monetary Fund (IMF), Article IV Consultation, Staff Report, No 07/191, June 2007 1.5.2 Summary Data on Kazakhstan As it was the case in most other former Soviet Union countries, Kazakhstan’s first attempts at economic reform were effectively taken in response to Russias one-sided price reforms in 1992. After Kazak oil production had suddenly declined for two years in the end of 1993, inflation had out of control. The efforts to create an economic union with Russia and other former Soviet Union countries didn’t meet expectations of the Kazakh Government. Looking at the dynamic Asian economies as a model, the Kazakh Government turned to market style policies. However, the government increased hard budget constraints and restrictive monetary policies due to attempts to solve non-payment problem through state financing. The remained net debts after netting out inter-industry arrears were financed from Government budget and the central bank. In 1993 International Monetary Fund (IMF) granted Kazakhstan a one-year standby package. To maintain IMF collaboration and to stop the decline in gross domestic product, the Kazakh government implemented a second stabilisation program in 1995. But this time hard budget constraints and monetary policy were strengthened by excluding of government financing of net positions in inter-enterprise debts and retreating government guarantees for loans granted by foreign and domestic banks. In the middle of 1996, the International Monetary Fund approved an Extended Fund Facility (EFF) of 446 million US dollars for three years (IMF, 2003). According to International Monetary Fund (2003) the decision was made in light of a wide-ranging three-year reform programme submitted by the government, as well as the positive longer term prospects for production and exports of energy and non-ferrous metals. In 1996, Kazakhstan experienced its first positive economic growth since 1989. 1.5.3 Summary Data on Turkmenistan Preceding the collapse of the Soviet Union approximately 8 percent Turkmenistan’s gross domestic product was generated by gas exports to the rest of the USSR mostly to Belarus, Ukraine and the Caucasus. Another 5 percent of gross domestic product was earned from cotton exports. Gas and cotton exports continue to be used to cover the import of considerable amounts of grain and capital equipment from other former Soviet Republics. While estimates for the fall of gross domestic product between 1990 and 1995 vary depending on how adjustments to official gross domestic product are made, International Monetary Fund and European Bank of Reconstruction and Development agree on about -35 percent (IMF, 2003). This is much less than the 58 percent drop in Turkmen gas production. The rest of the economy is basically agricultural. The cotton industry has been less affected by the downfall of the Soviet Union. The government gradually liberalised some prices beginning in 1992. A presidential decree of 1995 removed price controls on all products except for about 50 items, including energy. The government introduced the manat as the national currency in 1993. In 1995 it unified the previously separate official and commercial exchange rates, which subsequently became determined by inter-bank auctions for foreign exchange. Between 1992 and 1995 the government compensated for the shortfall in revenue from taxes on gas production and exports by cutting expenditures and replacing subsidies to the economy with additional allocations of credit at largely negative interest rates. Controlled prices were adjusted repeatedly but declined in real terms for natural gas and for oil products through 1994. The share of gas related revenues in the central budget declined from 60 percent in 1992 to under 20 percent in 1995, which lowered the share of total budgetary revenue in GDP from 40 percent to 10 percent during this period. Due to drastic expenditure cuts in government wages and investment, including maintenance, the central budget deficit remained fairly stable over this period. It also helped that new excise taxes were introduced in 1995 on petrol (55 percent) and diesel (60 percent). This resulted in some recovery of government capital spending. The easy money policy was changed slowly in 1995 and 1996. During this time foreign exchange surrender requirements of state-owned enterprises to the Foreign Exchange Reserve Fund (FERF) were increased to 50 percent for gas and oil exports, and the money allocated directly to the central budget. Prior to that, this fund had been used to award credits to the economy, contributing to monetary expansion. In 1995 and 1996, bank credit allocation was reduced, real interest rates rose (due to credit auctions with deregulated interest rates), and reserve requirements for banks were increased. However, the pursuit of these policies was not smooth, in part due to the limited political autonomy of the Central Bank. Nevertheless, inflation decelerated by 50 percent towards the end of 1995 and is estimated to have been 445 percent in 1996, and 21 percent in 1997. Despite plummeting gas exports in recent years, Turkmenistan’s current account was slightly positive in 1994 and 1995, as long as arrears owed to the country are not taken into account. If such arrears are counted the 1995 balance swings from an estimated surplus of 54 million US Dollars to a deficit of 289 million US Dollars. The situation has probably continued to deteriorate due to weak gas exports. 2 Theoretical Frameworks 2.1 Overview of Foreign Direct Investment Theories There is variety of empirical studies on theoretical models explaining foreign direct investment (FDI) and its determinants. The various approaches from different disciplines such as economics, international business, organisation and management explain numerous characteristics of this phenomenon. The following dissimilar methods, explaining foreign direct investment as the location decision of multinational enterprises are mostly acknowledged in empirical literature on FDI: Ownership advantages as determinants of foreign direct investment (including monopolistic advantage and internalisation theory) based on imperfect competition models and the view that multinational enterprises (MNEs) are firms with market power (Hymer, 1960; Buckley and Casson, 1979; Kindleberger, 1969; Caves, 1971 for ownership advantages) Determinants according to the Neoclassical Trade Theory and the Heckscher-Ohlin model, where capital moves across countries due to differences in capital returns (for example Markusen et al, 1995,pp. 98-128; Aliber, 1970); Determinants of foreign direct investment in Dunning’s ownership-location-internalization (OLI) framework, which brought together traditional trade economics, ownership advantages and internalisation theory (Dunning, 1977; 1979); Determinants of foreign direct investment according to the horizontal FDI model or Proximity- Concentration Hypothesis (Krugman, 1983; Markusen, 1984; Ethier, 1986; Horstmann and Markusen, 1992; Brainard, 1993); Determinants of foreign direct investment according to the vertical FDI model, Factor-Proportions Hypothesis or the theory