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| The Different Kinds Of Savings Account Posted: 19 Mar 2008 10:34 PM CDT It’s always advisable to try and put some money aside for a rainy day, so that if you meet an unexpected expense or repair bill you’ll be able to cope financially. It’s also prudent to save some of your income as an investment for your future, especially in these days of uncertain pension prospects. Many people choose to invest in stocks and shares as over time this is likely to provide the best return, but for the majority of us the security of a bank savings account is more attractive. That being said, what kind of savings account should you choose? The other kind of account is the deposit account, which has no stipulation as to how you pay money into it. You can put in small amounts as and when you can afford it, or you can deposit a large amount when you open the account and leave it there, or a mixture of the two. These accounts come in three basic flavours, depending on how easily you need to get at your money. Firstly, the instant access type of deposit account places no restrictions on when you can withdraw your cash. Next, the interest penalty type of account will let you withdraw as you wish, but won’t pay any interest for the months in which a withdrawal is made. Finally, a notice account requires you to give thirty, sixty, or even ninety days notice before you make a withdrawal, or you’ll be hit with substantial interest penalties. In general, the easier it is to get at your money, the less interest you’ll earn. Of course, this will vary from bank to bank, and you might be able to find an easy access account with a better interest rate than a notice account with a different bank, but the general rule holds. For these accounts, you need to trade off the likelihood of needing access to your money against the extra gains you could make by locking it away. There’s one other kind of savings or investment account which takes this idea of access restrictions to the extreme, namely bonds. With these accounts, you invest a lump sum in the account which is then locked away for a specified number of years, with no access at all. In return, you’ll either get a preferential fixed interest rate which is much more attractive than normal accounts, a variable rate guaranteed to be better than average accounts over the length of the term, or a return linked to stock market performance with a guaranteed minimum return, These accounts will almost always give the best return out of all the types, but are only suitable for long term investments where you are certain you won’t need to access your funds before the term is up. I suggest you to read more information at www.recursion.info, www.doktermuda.com, and dengarblogku blog.         |
| Central and Eastern Europe (CEE), Global Recession and Foreign Direct Investment (FDI Posted: 19 Mar 2008 05:08 AM CDT How will the credit crunch of 2007 affect foreign direct investment in Central and Eastern Europe? What if it develops into a full scale recession in the West and especially in the USA? It is instructive to study the effects on the region of a previous recession at the beginning of the decade (2000-2002). The brief global recession of the early years of this decade - which was neither prolonged, nor trenchant and all-pervasive, as widely predicted - had little effect on Central and Eastern Europe’s traditional export markets. According to a 2003 report by the Vienna Institute of Economic Studies, FDI flows to the countries of central Europe were halved in the first quarter of 2002, despite their looming membership in the European Union (realized in May 2004). During 1999-2003 export transactions were frequently delayed and privatizations attracted scant interest.Net FDI flows in 2003, says the EBRD, came to a mere 7.2 billion euros, compared to 22.6 billion euros in the preceding year. The Vienna Institute erroneously predicted a particularly bleak year for Poland and a Czech economy redeemed only by sales of state assets in the energy sector. Yet its statistics failed to cover reinvested profits. These amounted to $1.5-2 billion in Hungary alone - equal to its average annual FDI. I suggest you to read more information at www.recursion.info, www.doktermuda.com, and dengarblogku blog. In reality, the picture was mixed. Forecasts prepared in November 2002 by the United Nations Conference for Trade and Development (UNCTAD) showed marked declines in FDI in Moldova, Estonia, Hungary, Poland, Slovakia, Macedonia and Ukraine. Flows rose in Albania, Bulgaria, the Czech Republic, Latvia, Lithuania and Slovenia, and remained unchanged in Bosnia and Herzegovina, Croatia, Romania and Russia, said UNCTAD. Foreign direct investment (FDI) in Lithuania grew by at least 15 percent in 2003. Its FDI stock - accumulated in its decade of independence - exceeded c. $4 billion, or c. $1000 per capita, as early as end-2002. Pace has picked up dramatically in the past six years in many second-tier investment destinations in central and east Europe, including Slovakia, and formerly war-torn Macedonia and Armenia. Of the latter’s $600 million in post-communist foreign inflows - two thirds have been placed since 1999. Prime investment locales, like the Czech Republic, or Hungary, are still attracting enthusiastic fund managers, multinationals and bankers from all over the world. In a startling inversion of roles, Russia became a net exporter of FDI. According to official figures - which are thought to under-report the facts by half - Russia invested abroad more than $3 billion every single year since 2000. This is double the figure in 1999 and translates into $300-500 million in annual net outflows of foreign direct investment. Moreover, the bulk of Russian capital spending abroad is directed at rich, industrialized countries. The republics of the former Soviet Union see very little of it, though Russian stakes there have been growing by 25 percent annually ever since the 1998 meltdown. Russia’s energy behemoths compete, for instance, with western mineral and oil extraction companies in Kazakhstan and Azerbaijan. Levels of worldwide FDI declined by more than 50 percent - to c. $730 billion - between 2000 and 2001. Yet, astoundingly, the major downturn in emerging markets’ FDI in 1999-2002 had largely bypassed the region. Net private capital flows - both FDI and portfolio investment - shot up six-fold from $1 billion in 2000 to $6 billion a year later. Most of the surge occurred in the Balkans and the Commonwealth of Independent States (CIS). According to the European Bank for Reconstruction and Development (EBRD) in its Transition Report Updates, the region grew by 4.3 percent in 2001 and by 3.3 percent p.a. the years after. In 2006 alone, eastern Europe’s GDP shot up by 6.2% and FDI flows amounted to $50 billion. This performance as projected to have been repeated in 2007. This is way more than most developed and emerging markets managed. Eight countries in central and east Europe drew rating upgrades, only two (Moldova and Poland) were downgraded. Some countries fared better than others. Slovakia sold, in March 2002, 49 percent of its gas transport company for $2.7 billion. Slovenia booked yet another record year in 2002 due to the long-deferred privatization of its banking sector and to the sale to foreign investors of assets originally privatized to cronies, insiders and communist-era managers. The Slovenian Business Weekly correctly expected the country to draw in more than $600 million in 2002 - up 50 percent on 2001. In the western Balkans, only Croatia stood out as an inviting and modernization-bent prospect. Yugoslavia (Serbia and Montenegro) reawakened, too. It has privatized cement companies and rationalized the banking sector with a view to becoming a preferred FDI destination. In the first 6 months of 2002, it garnered $100 million in realized deals and another $60 million in commitments. Ironically, during the brief global recession, Romania and Bulgaria (both of which joined the European Union - EU - in 2007) were laggards, though intermittent privatization in both countries was counterbalanced by cheap and skilled workforces in their growing and labor-intensive economies. Macedonia spent those years futilely reviewing, with a view to annulling, at least 30 suspect privatization deals. This did not endear its kleptocracy to anyhow reluctant multinationals. Per capita, FDI stock is highest in the Czech Republic ($3000), Estonia ($2600) and Hungary ($2400). These are followed by Slovenia ($2000), Slovakia ($1800), Croatia ($1700) and Poland ($1200). All, with the curious exception of Croatia, have joined the EU in 2004. The total realized FDI in 2000-2002 in central Europe amounted to more than $50 billion, with Poland and the much smaller Czech Republic attracting the most ($14 billion each), followed by the Slovak Republic ($7 billion) and Hungary ($5 billion). The regional FDI stock comes to a respectable $100 billion. Southeastern Europe (the politically correct name for the Balkans), excluding Greece and Turkey, attracted rather less - c. $12 billion in realized FDI in 2000-2. Croatia topped the list with $3.8 billion, followed by Romania ($3.3 billion), Bulgaria ($2.3 billion), Macedonia ($1.1 billion), Yugoslavia ($0.7 billion) and Albania and Bosnia-Herzegovina ($0.5 billion each). Yet, the Balkans, impoverished and war-scarred as it is, accumulated a surprising $22 billion in FDI stock. According to the 2003 Investment Guide for Southeast Europe, published by the Bulgarian Industrial Forum, the share of FDI per GDP is much higher in the Balkans than it is, for example, in Russia. In 2001, the ratio was c. 5 percent in Bulgaria, 7.5 percent in Croatia and about 12 percent in Macedonia. The former USSR as a whole enjoyed $57 billion in FDI between 1991-2002. The bulk of it went to Russia ($23 billion) and the Baltic states ($8 billion). In 1999-2002, Ukraine absorbed $1.9 billion in FDI flows - one half the receipts of the puny Baltic trio: Lithuania, Latvia and Estonia. Belarus and Moldova scarcely registered, each of them with barely above three fifths the FDI in Albania, or ravaged and precariously balanced Bosnia-Herzegovina. The weight of FDI in the local economies cannot be overstated. Two fifths of the exports of countries as disparate as the Czech Republic and Romania are produced by foreign affiliates. In some countries - like Romania - 40 percent of all sales are generated by foreign-owned subsidiaries. The banking sectors of many - including Bulgaria, Croatia, the Czech Republic and Macedonia - are mostly owned by outside financial institutions. Foreigners bring access to global markets, knowledge and management skills and techniques. They often transfer technology and train a cadre of local executives to take over once the expats are gone. And, of course, they provide capital - their own, or gleaned from foreign banks and investors, both private and through the capital markets in the west. Initially, foreign investors provoked paranoid xenophobia almost everywhere in these formerly hermetically sealed polities. Deficient legal and regulatory frameworks, rapacious insiders, venal politicians, militant workers, opaque and politically compromised institutions, disadvantageous tax regimes and a hostile press obstructed their work during the first half of the 1990s. Yet, gradually, the denizens of these countries came to realize the advantages of FDI. Workers noticed the higher wages paid by foreign-owned plants and offices. The emergent class of shareholders, invariably members of the powerful nomenclature, having sucked their firms dry, sought to pass the carcasses to willing overseas investors. Currently - with a few notable exceptions, such as Belarus - multinationals and money managers are actively courted by eager governments and keen indigenous firms. Proofs of this grassroots turnaround in sentiment and priorities abound. FDI is a good proxy for a country’s integration with the global economy. It is an important component in A.T. Kearney and Foreign Policy Magazine’s Globalization Index. The Czech Republic made it in 2002 to the 15th place (of 62 countries), higher than New Zealand, Germany, Malaysia, Israel and Spain, for instance. Croatia in 22nd rung and Hungary in the 23rd slot compare to Australia (21) and outflanked the likes of Italy (24), Greece (26) and Korea (28). Slovenia was not far behind (25), followed by Slovakia (27), Poland (32) and Romania (40). Even hidebound Ukraine made it to the 42nd place, ahead of Sri Lanka (44), Thailand (47), Argentina (48) and Mexico (49). Russia lagged the rest at the 45th location. A.T. Kearney’s Global Business Policy Council - a select group of corporate leaders from the world’s largest 1000 corporations - publishes the FDI Confidence Index. It tracks FDI intentions and preferences. Its September 2002 edition ranked 60 countries which, together, account for nine tenths of global FDI flows. The companies interviewed were responsible for $18 trillion in sales and seven out of every ten FDI dollars. Revealingly, central and east European countries made it to the first 25 places. Poland, right after Australia, preceded Japan, Brazil, India and Hong-Kong, for instance. The Czech Republic, Hungary and Russia - closely grouped together - were found more alluring than Hong-Kong, the Netherlands, Thailand, South Korea, Singapore, Belgium, Taiwan and Austria. Russia - whose economy improved dramatically since 1998 - leaped from beyond the pale (i.e., below the top 25) to 17th place. Hungary moved from 21 to 16. The report concludes with these incredible projections: “Russia … could well be a target for almost as many first-time investments as the United States … China, Russia, Mexico and Poland combined … are expected to accumulate about one quarter of all proposed new investment commitments.” This is part of a more comprehensive trend: “Europe has become the most attractive destination for first time investments. More than one third of global executives are expected to commit investments for the first time in Europe over the next three years 2003-6 (especially in) Russia, Poland and the Czech Republic.” A relatively new phenomenon is cross-border investments by one country in transition in another’s economy and enterprises. At four percent of Slovene FDI stock, the Czech Republic has invested in Slovenia as much as the United States, or the United Kingdom. Slovenes and Bulgarians have ploughed capital into the banking, industrial and food processing sectors in Macedonia. Hungarians in Serbia, Czechs in Romania, Croats in Slovenia - are common sights. Traditional FDI destinations feel threatened by the surging reputation of central and, to a lesser extent, east Europe. In a series of articles he published on radio Free Europe/Radio Liberty prior to the EU’s enlargement eastwards, Breffni O’Rourke summed up Irish anxieties expressed by his interviewees thus: “There’s a certain unease developing in Ireland as the 10 Central and Eastern European candidate countries move toward full membership in the European Union. The Irish are not unaware that the Czechs are heirs to a fine tradition of precision manufacturing; that the Poles are considered quick-thinking and innovative; that Bulgarians have a way with computers; that the Baltic nations have powerful Scandinavian supporters; and that Romania has extraordinarily low costs to offer investors. In fact, rising costs - in comparison to the Eastern candidate nations - are one of Ireland’s main worries. The question troubling the Irish is: Could incoming Eastern member states prove so attractive for foreign investment that the country would find itself eclipsed?” According to UNCTAD, global FDI flows amounted to a record 1.5 trillion USD in 2007. Southeast Europe and the CIS (Commonwealth of Independent States) enjoyed robust, record-setting inflows, the seventh year in a row (up 41% on 2006 to a new record of 98 billion USD), emanating mainly from transnational corporations. Capital went to both extraction industries and privatization deals. But 2007 appears to have been the swan song of FDI. Cross-border M&A (Mergers and Acquisitions) activity - the locomotive of FDI - virtually collapsed in the last quarter of 2007. Increasing risk aversion throughout the global financial system may result in the drying up of credit. Inflation - or, rather, stagflation - is again rearing its ugly head. Wildly fluctuating exchange rate won’t help, either.         |
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