The Political And Legal Systems Of Indonesia

The Political And Legal Systems Of Indonesia 1. Country profile: Indonesia is located in the southeast part of Asia. Indonesia stretches 5120 km along the equator and has 13000 islands between Australia and Asia. Due to this there has been an influence on the social, cultural, economic and political life of the country. Indonesias total area is 80% sea mass. Java, Sumatra, Kalimantan, Papua and Sulawesi are the five a largest island of which java is the most populated island, a total population of 125 million (CIA 2010). Jakarta is the capital of Indonesia. Indonesia has a tropical climate which consists of two seasons summer from May to September and the rainy season from October to April. Indonesia experiences rain during both the seasons. The fourth most populated country in the worlds is Indonesia with a population of 242.96 million (CIA 2010). Indonesia is the largest Muslim country. It is an ethnically diverse country with more than 300 languages. http://mapoftheunitedstates.files.wordpress.com/2008/03/indonesia_.jpg Figure 1: Indonesia Map Sources: CIA Website 2010 2. Political system and Legal systems: Indonesia today is Southeast Asias most vibrant democracy. The Indonesians enjoy a level of political freedom. The present improved political system now encourages freedom and equality for the people of Indonesia. Figure 2: Political system of Indonesia Source: Indonesia 2009: An official handbook The three key branches of the Indonesian government are The executive branch The legislative branch The judicial branch 2.1 Executive branch: The president is the head of the state and government, in turn is on top of the executive branch. Under him is the vice-president, cabinet ministers and also non-departmental agencies. He is also the commander-in-chief of the armed forces. The main role of the president is to govern his nation, make policies and look in to the foreign affairs. The president has the power to assign and reject the cabinet ministers. One of the main roles of the president is to assign the judge for the Supreme Court. 2.2 Legislature branch: This branch consist a representative body which is the peoples consultative assembly or (MPR). The MPR has the right to question the integrity of the president. The MPR has two lower chambers i.e the Peoples Representative Council or the (DPR) and the Regional Representatives Council or (DPD). 2.3 Judicial branch: The Indonesian judicial system has three main courts i.e. the high court, Supreme Court and the district courts. The Supreme Court is the highest level. These courts have the rights to exercise both civil and criminal cases. Indonesia has different courts for different matters, religious courts, military courts and administrative courts. Firstly all the civil disputes are handled in a state court and then forwarded to the high court. A commercial court exists to handle bankruptcy and commercial matters. The three branches of the legal system in Indonesia are The notaries Advocates Legal consultants. A notary is appointed by the Department of Justice Human Rights who is trained legally to notarise deeds. A notary prepares and executes the formal deed called the notarised deed, it is also known as the authentic deed. The legal documents require notarised deeds. The role of the notary is to make sure that the parties have considerable amount of proof for their deeds and the deed is executed properly. The notary should be present when a party plans to start a company. A notary is appointed by the government and his duty does not include giving legal advice. These parties need to get legal advice before they meet the notary. The main duties of the notary are to prepare and verify the documents. The parties are free to choose any notary they want. Advocates are lawyers who practice privately and have formal legal training. The main duty of the advocates is to focus on litigation but they can also provide general legal advice. For advice on foreign transaction experienced lawyers are needed.Hiring a good and trust worthy lawyer is essential for doing business in Indonesia. Some of the important laws relevant for businesses in Indonesia are given below: The Law on Investment The Labour Law The bill on Mineral and Coal Mining The Oil and Gas law The Shipping Law Law on Disputes and Conflict resolution Corporate Law Land rights Few tips for the foreign investors There should not be any restrictions on the type of business the company is planning to start. A good notary is a must to set up a business. The employees who have an important position should be paid well. Build good relations with the company and the society. 3. Economic system Under the leadership of Suharto who was the president of Indonesia for over three decades the economy had witnessed two major financial crises. This was during 1997- 98 and 2008. Indonesian economy is directly dependent on three main sectors, Agriculture Manufacturing Service. These crises were direct result of corrupt politicians, natural disasters, disturbances in the society and terrorism. The result was that the economy suffered which in turn caused in drop of employment opportunities and loss of manpower that migrated in search of employment. The graph shows the distribution of workforce among the three key economic sectors. Indonesias Employment Figure 3: Indonesian Employment Source: Economy Watch The three main sectors that constitute the Indonesian Economy are: Primary Sector: Agriculture by far is the largest employment sector. Some of the common produce is rice, pork, coffee, tea, cocoa, spices, rubber, eggs, copra, palm oil and peanuts. Indonesia stands 4th in world market for the production of coffee and rice. Secondary Sector: Nearly 27.9% of Indonesians GDP comes from the manufacturing sector (EIU 2010). Tertiary Sector: Service sector has for long has been the pillar of Indonesian economy contributing nearly 38.5% towards the countrys GDP. Global financial crises slowed down the IT sector. However, it has been predicated to contribute up to 15% towards the compound annual growth rate (CAGR) during the period of 2010-2014 (EIU 2010) . Hospitality industry has surprisingly started contributing towards Indonesian economy. The tourism industry flourished with no major impact due to the global recession. 4. Economy: Indonesia has the largest economy in Southeast Asia. It is a market based economy with a significant involvement of the state. There are a large number of state owned enterprises (SOEs). Indonesia is considered as an emerging economy. In the end of 2009 the GDP was $540.3 billion and the per capita GDP was $2717. The GDP growth in 2010 reached 5.9% and to further accelerates to an average of 6.2 % a year in 2011-2014. In terms of GDP industrial sector is the largest (46.9%), followed by services (37.2%) and agriculture (15.9%)  [i]  . Indonesia is a major exporter of oil (US Department of State 2010) Indonesia is market leaders in the production of palm oil and one of the main producers of rubber, coal, liquefied natural gas and cocoa. Some of the prime industries are mining, petroleum and natural gas, cement, textiles and chemical fertilizers. There is a reduction in the poverty of the population. Indonesian economy has been improving after some major financial crisis in the past, thus investing on Indonesian Economy would be associated with low risk. Growth in GDP by field of business from 2005 to 2009: Growth (%) 2007 2008 2009 Agriculture 3,5 4,8 4,13 Mining and Quarrying 2 0,5 4,37 Manufacturing 4,7 3,7 2,11 Electricity, Gas and Water Supply 10,3 10,9 13,78 Construction 8,6 7,3 7,05 Trade, Hotels and Restaurants 8,4 7,2 1,14 Transportation and Communications 14 16,7 15,53 Finance, Rental and Business Service 8 8,2 5,05 Services 6,6 6,4 6,40 GDP 6,3 6,1 4,55 Sources: Bank Indonesia and Asian Development Bank 2010 Distribution of GDP by field of business from 2005 to 2009: Distribution of GDP (%) 2007 2008 2009  [ii]   Agriculture 13,8 13,7 15,3 Mining and Quarrying 8,7 8,3 10,5 Manufacturing 27,4 26,8 26,4 Electricity, Gas and Water Supply 0,7 0,7 0,8 Construction 6,2 6,3 1,0 Trade, Hotels and Restaurants 17,3 17,4 13,4 Transportation and Communications 7,3 8 6,2 Finance, Rental and Business Service 9,4 9,5 7,2 Services 9,3 9,3 5,6 Sources: Bank Indonesia and Asian Development Bank 2010 4.1 Inflation Rate: According to the financial report in April 2011 Indonesian inflation rate stood at 6.16 %. During the period between 1997 to 2010, Indonesian inflation rate averaged between 13.26% and reaching its all time high of 82.4% in the third quarter of 1998 and reached a all time low record of -1.17 % in first quarter of 2000. 4.2 Social Economy: The population of Indonesia stood at 232.4 million during 2010. It has a healthy percentage of population who are young. The median age is 27.2 years and the population growth is 1.175%. Looking at the age structure, 28.4% of the population is between 0-14 years, 67.5% are between 16-67 and 5.8% over 65 years. Life expectancy is 70.46 years. As of February 2011, labour force was 116.5 million. When dividing the labour force by sector, one finds that agriculture employs the most people (42.1%), closely followed by the services sector (39.3%). 18.6% are employed in the industrial sector. The table shows the distribution of the employment among the major industries. Industry # of employees % Agriculture, Livestock, Forestry, Fishery 42,689,635 41.83 Mining and Quarrying 1,062,309 1.04 Manufacturing 12,440,141 12.19 Electricity, Gas, Water 207,909 0.20 Construction 4,733,679 4.64 Trade, Hotels, Restaurants 20,684,041 20.27 Transportation, Storage, Communication 6,013,947 5.89 Finance, Real estate and Business services 1,440,042 1.41 Community, Social and Personal services 12,778,154 12.52 Source: Indonesia 2008: An Official Handbook Indonesias official unemployment level is currently 7.4 %; a decrease from former levels of unemployment between 8 and 9 %. 5. Cultural issues Indonesias workforce values is as given below: http://www.geert-hofstede.com/graphs/hofstede_indonesia.gif Figure 5: Geert Hofstedeà ¢Ã¢â‚¬Å¾Ã‚ ¢ Cultural Dimensions Sources: Geertz Hofstede 2009 The above graph indicates that Indonesians are generally inclined towards distribution of power in a pyramid like structure as opposed to individualism which is promoted in western cultures. Culture is a multi layered which incorporates a multitude of aspects which has to be closely understood before any new venture is planned. Below figure outlines a few key determinants which constitutes a culture, Figure: Cultural Norms Source: International Business, Asia pacific edition. The Indonesian culture is quite different from the western culture. Tradition is very important for the Indonesians even though they live in a modern society. This does not mean they dont welcome the western culture. Indonesians are proud of their background and are not very keen on learning about different cultures. They in turn expect the foreigners to invest time and effort in learning their culture. In order to build good relations with the Indonesians it is better to learn their language and culture. This wont be an obstacle since the Indonesians are friendly and polite people. To establish itself it is mandatory for business to invest and participate in the development of the social structure and economy of Indonesia. Variables such as gender, age, marital status and education affect the ease with which personal and commercial relationships are formed. In order to penetrate and govern smooth operations it is advised to nominate older and mature executives to be in charge as opposed to young executives. It has been proved that aggressive nature of pursing business has many risks associated as the social structure calls for investing time in nurturing and building relationships adhering to the cultural norms which in turn will lead to successful business operations. 6. Ethical Issues: The most common ethical issues encountered are employment practices, human rights, environmental regulations, corruptions and the moral obligations. Skilled labour is more of a commodity in Indonesia as the local companies invest minimal time and effort on training their staffs. Investing on training and development is one of the key initiatives that have to be undertaken by any new ventures. Recent trends show employees value the time and money invested in training and development which in turn leads to increased loyalty and increase production. Drastic changes in management policies have to be subtle and well planned, as this might lead to insecurity and misunderstanding. It is suggested to seek assistance from independent auditors to review any human rights violations that might indirectly affect the business. But recent trends suggest minimal human right violations. Environmental regulations in Indonesia are still being formalized and this in turn posts a challenging dilemma of adhering to the policies which is far inferior to that of the home nations environment policies. Added measures have to be put in place to maintain the delicate balance of the local surroundings and ensuring minimal impact to the environment. Corruption in Indonesia has been a long standing issue. Recent change in the government structure has not been to counter this major concern. This has been a major determinant for foreign investors to shy away from Indonesian markets. To negate this factor the organizations culture and leadership should draft a code of ethics against corruption. And emphasize all business practices to strictly adhere to these ethics. 7. Trade: Due to the improvement in Indonesias trade the economy had seen a lot of positive changes. This change has increased employment opportunities, has reduced poverty and increased the status of the middle class. Indonesia has been able to recover well after the financial crisis when compared to the neighboring countries. Because of this Indonesia can increase its share in the global market and increase the domestic sales. For this to happen successfully Indonesia needs to reform its trade structure and reduce the tariffs and quotas. Even though there has been a drastic growth in the export of the countries resources, it has not made any progress in the exports of manufactured products. The main concern of the producers in Indonesia is they cannot compete with the producers who manufacture with reduced costs. One of the main reasons for Indonesias products to be weak in competition is the low level of connectivity. The high cost of transportation is one of main causes in the declining of trade. Trade between countries might be cheaper than trading among the islands. Transportation using trucks is inconvenient because of the poor roads in Indonesia. Another main disadvantage that reduces international trade is the low performance of Indonesias main ports. Just-in-time production is not possible in Indonesia because of the inefficient and expensive transports. Another issues concerning international trade is licensing and policies imposed by the government. Indonesia does not encourage in improving the logistics which deprives them of new technologies. 8. Investment opportunities by sector: Indonesian economy has great potential for foreign investments, as it is a large country with ample natural resources, mining and energy, forestry, agriculture, and marine resources, many of which are not exploited yet. The country has a very large and inexpensive workforce as well as a significant market. Indonesia has been experiencing a steady annual economic growth and this growth is continuing for years. 8.1 Energy: As an emerging economy, Indonesia depends heavily on an increased production domestically of energy resources. Energy is the largest export product and the second largest import product. When considering both the exploited/developed and unexploited/undeveloped energy resources, there is still a great potential for increased trade and investment in the energy sector. 8.2 Oil, gas and coal: Among the countries in Asia, Indonesia is among the top ranked country as it has proven gas reserves of about 3.18 trillion. It is predicated that the requirement is likely to increase in local power plants. Due to disappointing exploration by major players, oil production has decreased during the last decade. Its currently consumes nearly 1.2 million bbl/d of oil which makes it a net importer. The country has invested heavily on the production of natural gas targeting the export market, but declining oil production has forced them to divert most of its gas production into local markets. 8.3 Telecommunications: Indonesia for several years has been the fastest-growing mobile phone market in the Asia-Pacific region with annual growth rates of up to 60%. Even though Investing on mobile markets has been high its relatively small compared to the cost of establishing a fixed-line network. Millions of Indonesians who otherwise would not have access to telecom services now have a mobile Phone (CIA 2010). 8.4 Infrastructure: Indonesia has experienced rapid growth in the total number of road vehicles, particularly motorcycles, but also cars and trucks. Inadequate infrastructure is therefore often mentioned as one of the main impediments to investments in Indonesia. The government with the help other financial aids, is trying to improve the infrastructure by introducing new projects (Bloomberg 2010). 9. Foreign exchange: Exports are an integral part of Indonesian economy as it generates foreign exchange. This in turn allowed it to acquire raw materials and machinery required for the development. The earnings from Export helped Indonesia to borrow from international financial markets and development agencies. This helped government sponsor developmental projects in Indonesia. Because of the increase in borrowing by 1990 Indonesias total foreign debt was US $ 54 billion. A committee was established in 1991 named The Foreign Debt Coordinating Committee to check the growing foreign debt. Indonesia was funded by World Bank, Netherlands, Japan, Denmark and Asian Development Bank. The supply and demand relationship between international and the domestic market is determined by the foreign exchange rates in Indonesia. In an effort to stabilize the exchange rates the Bank of Indonesia regularly sterilizes the exchange rate. 9.1 Currency: The currency of Indonesia is the Rupiah It is a freely convertible currency. Since the rupiah was subjected to high inflation during the Asian Financial crisis in 1997-98, the rupiah has been considered as risky currency to hold. After the recovery of the economy the currency has been relatively stable. Today, this perception has changed as the solid fundamentals of the economy and sustained high yields underpin the attractiveness of investment. Historical exchange rates: Year IDR/USD IDR/NOK 2004 8,939 1,335 2005 9,704 1,507 2006 9,159 1,431 2007 9,143 1,559 2008 9,699 1,721 2009 9,754 1,675 2010 9,048 1,525 2011 8,590 1,534 Sources: Norges Bank, CIA 10. Financial management: Indonesia Financial sector in Indonesia is divided into banks held by local governments, banks held by state, private sector banks, foreign banks and cooperative banks. However three major players in the microfinance industry which govern the Indonesian markets are the state-owned BRIs, BPRs are small financial institutions and pawning company. Since 1986 the BRI unit has been profitable and has operated as an autonomous entity since its 1987. The Indonesian Movement for Microfinance Development (GEMA PKM) which is an organization comprising representatives of the government, NGOs, financial institutions, the business sector, universities, and research institutes. There primary objective is to partner in the drafting of a Microfinance Act, also formulating some best practices which would aid in poverty reduction and for the growth in economy. One such change was to introduce Tax Laws to fix corporate income tax to 25% from 2010.Description Description Final Income Tax Rate (%) Rentals of land and buildings 10% Proceeds from transfers of land and building rights 5% Interest on time or saving deposits and on Bank of Indonesia Certificates (SBIs) other than that payable to banks operating in Indonesia and to government approved pension funds 20% Interest on bonds other than that payable to banks operating in Indonesia and to government approved pension funds 15% Sale of exchange-traded shares on the Indonesian stock exchange 0.1% Forward contract derivatives 2.5% T ax Rate (%) The primary agenda in front of National Committee is to draft out issues and road blocks that are elevating poverty; It also organizes meeting between business and institutions in order to identify and assess policies that are currently imposed on small businesses and MFIs; They are in the process of accelerating the passage of a new Credit Collateral Law that will simplify distribution of microcredit system. 11. Recommendation: Indonesia remains as attractive destination to invest, but has been found vulnerable to multiple risks. Therefore is it imperative for Organizations to take a proactive approach while considering investment options. Below are some of the strengths which will aid in decision making and also some of the weaknesses that have to be assessed in order to formulate an effective risk management strategy. Weakness Low investment rate Limited bank intermediation Infrastructure deficiencies Persistent corruption and lack of transparency Interethnic tensions exacerbated by high unemployment and poverty Strengths Strengthened banking sector Diversity of natural resources (agricultural, energy, mining) High competitiveness underpinned by low labour costs Consolidation of political stability Dynamic tourism 12. Conclusion: The above report provides a high level overview of the feasibility and associated risk involved in investing in Indonesia. The current business environment posts several challenges some of the main issues are bureaucracy which lacks transparency, uncertain legal structure, poor infrastructure and lacks security. But recent trends all point towards organizations exploring developing economics in search of expansion as the market has tremendous opportunities. Decentralization of power is not adding in smooth investment as this structure introduces further levels of bureaucratic process. Adding to the above mentioned problems Indonesia has been prone to natural calamities which add to the existing risks. 13. Executive Summary: As the fourth most populated country in the world, Indonesias large domestic market offers a wide range of investment opportunities for foreign and domestic investors. This report will try to assess some of the key elements such as the political system and legal system asses the favorability and ease of investment in Indonesian markets. Then the report shifts its focus on the economic system which by far is one of the most important factors that directly influences investment decisions. Economic growth which has been predicated to be in the range of 5% and 7 % for the next five years, which shows proactive approach by the Indonesian government to attract FDI. The projected FDI by 2014 is expected to reach approximately US$222 billion. The government has made amendments to reduce income tax on cooperates and fixed it to a flat rate of 25%. The licensing process has been made easy to encourage investments in the mining and shipping sectors. Decentralization of government sectors has acted as a major road block in simplifying the licensing process for foreign organizations to invest in Indonesian markets. Indonesia currently has some of the largest deposits of natural gas and oil resources across Asia. According to the recent trends and investigating the various sectors contributing towards the current situation, Indonesia can be considered as a medium risk investment opportunity. It is recommended to take a cautious approach in investing in Indonesian markets. Foreign investments should consider investing on Indonesian Limited Liability Company to reduce potential risks. Also opening small branch offices and assessing the market condition is the most suitable option of investment.

The Institute For Pak Afghan Relations Politics Essay

The Institute For Pak Afghan Relations Politics Essay Pakistans interaction with Afghanistan has been influenced and fashioned by the historical legacy of pre-1947 Afghan-British Indian relations. This legacy laid the basis for the development of an acrimonious bilateral relationship between the two states after 1947, which was complicated by the Cold War power politics. The nineteenth century geo-strategic rivalry between the Great Britain and Tsarist Russia (the so-called Great Game) on the Afghan chessboard created an environment of mistrust and suspicion against foreign powers in the eyes of the Afghans. The relations were further aggravated by the three Anglo-Afghan wars (1838-1842; 1879-1880; 1919-1920). The unsettled borders in the northwest of British India, where the writ of the British government was not fully enforceable, gave Afghanistan an opportunity to create security problems in the days of British Raj and more so after their departure from the subcontinent. Pakistan, therefore, inherited an unfriendly neighbor on its we stern border, making it difficult to formulate a policy of having friendly ties with Afghanistan. Its security threat perception as being sandwiched between a hostile India in the east and an irredentist Afghanistan in the west compelled Pakistan to seek a friendly regime in Kabul. Afghanistans territorial claims on the Pashtu-speaking areas of Pakistan coupled with the pro-Indian posture of its ruling elites further reinforced Pakistans strategic belief that a hostile Afghanistan ill served Pakistans security needs. The logical corollary of this threat perception was that, regardless of its costs and difficulties, Pakistan had to pursue a sub-imperial engagements in Afghanistan to secure a client regime, which would not only give it a strategic depth against India but would also help stabilize its volatile western border. The Soviet invasion of Afghanistan forced Pakistan to wage, with the support of western and Arab allies, a proxy war in Afghanistan and ultimately forced Soviets to withdraw from Afghanistan. Since the end of the Cold War, Pakistan continued its forward policy in Afghanistan mainly through the support of the Hizb-i-Islami of Gulbadin Hikmatyar and, later, through the Taliban. Following the events of Sep.11, 2001 the political landscape of South Asia transformed dramatically. The September 11 incident provided Pakistan with an opportunity to reconsider its Afghan policy and regain its lost status in the international community. Pakistan took a U-turn in its Afghan policy and became a front line state in the US war against terrorism and helped topple its erstwhile Taliban allies from power. Though this course of action helped Pakistan get out of regional as well as international isolation, its long involvement with the Afghan groups locked in internal struggle for power has left it with fewer friends and more enemies in Afghanistan, particularly among the literate urban middle class and non-Pashtuns. Its relations with Afghanistan continue to be bedeviled with skepticism and fear, even as both countries are cautiously revitalizing bilateral relations. Though the historical, geographical, cultural, religious, ethnic, security and economic affinities and interdependence between Pakistan and Afghanistan are bound to play their role in strengthening the relations between the two countries, there are certain stumbling blocs in Pak-Afghan relations like Pak-Afghan border issue, the Pashtunistan issue, Afghanistans skepticism on Pakistans resolve to fight war on terrorism; and Pakistans strong reservations over Indian anti-Pakistan activities from Afghanistan. For improving the relations both Pakistan and Afghanistan need to allay their mutual misperceptions and distrust. The ongoing blame game by the two countries led an Afghan expert to write, Owing to increasing Taliban insurgency in Afghanistan, one cannot hope for any improvement in the security situation in the war-ravaged country. The embattled Afghan government is expected to become even more critical of Pakistan in future on account of the increase in Taliban attacks. Pakistan is likely to reply in the same currency, and there are already signs that its tone in denying accusations of support for Taliban is becoming aggressive. The fireworks will continue, and it would be futile to expect any major improvement in their uneasy political and diplomatic ties in the near future. It is in this context that we felt the need to establish a research organization that will identify examine and analyze the factors that continues to adversely affect relations between the countries that have so many overlapping layers of common history, culture, religion, geography and security. We believe that if both the countries were able to allay their mutual misperceptions, distrust, and suspicions the relations between the two are bound to improve. The relationship between Afghanistan and Pakistan are symbiotic in nature. When Afghanistan pains, Pakistan bleeds and vice versa. Both are destined to sink or sail together and now time has come for them to think conjointly to find ways and means for putting an end to recurring power vacuums in this region, which frequently sucks in external state actors. About IPAR IPAR provides the analysis, training and tools that prevent and end regional conflicts, promotes stability and professionalizes the field of regional peace building. It is essential that the Pakistan Afghanistan, adopt a regional approach to find out solution to their existing problems and play an active part in preventing, managing, and resolving regional conflicts to achieve a lasting peace and stability on both sides of the Durand line. Mission Statement The Institute of Pak-Afghan Relations is an independent, nonpartisan, non-governmental, progressive think tank working for comprehensive cooperation between Afghanistan and Pakistan, which would provide a solid basis for multi-disciplinary cooperation. The IPAR emphasizes the vital importance of brotherly relations in pursuance of policies of mutual respect, non-interference and peaceful coexistence and recommends further expansion of economic, social, and cultural relations between the two countries. Its goals are to help: Prevent and resolve regional conflicts Promote post-conflict stability and development Increase conflict management capacity, tools, and intellectual capital by empowering others with knowledge, skills, and resources. Aims and Objectives Emphasizing the deep historic, religious, spiritual, cultural and commercial bonds among Afghanistan and Pakistan, IPAR focuses especially on the treatment of terrorism, extremism and militancy, bilateral cooperation in political and economic fields, and regional and international issues of common concern. The institute will work for the following objectives: Improving bilateral relation between Pakistan and Afghanistan culminating into a perennial strategic partnership carried forth to coming generations; Supporting programs that foster independent research, enabling our scholars to produce articles, reports, and books and hold roundtables that analyze Pak afghan foreign policy issues and to make concrete policy recommendations; Sponsoring Independent Task Forces to produce reports with both findings and policy prescriptions on the most important foreign policy issues; and Providing up-to-date information and analysis on Pak-Afghan relations; Programs and Activities In order to achieve the above goals, the Institute undertakes a unique combination of activities, including the following: Performing cutting edge research, to produce  publications  for practitioners, policymakers, and academia. Building mutual trust and confidence by Parliamentary exchanges complement political-level interaction and promoting people-to-people contacts including the exchange visits of journalists, poets, writers, musicians and artistes. Educating students  about conflict, organizing study tours, and increasing the peace building capabilities of future leaders. Supporting policymakers  by providing analyses, policy options, and advice, as well as by sponsoring a wide range of region-oriented working groups. Expertise The Institute draws on a variety of resources in fulfilling its mandate, including Institute staff, grantees, fellows, and a broad set of governmental and non-governmental partners: Institute Specialists: The Institute employs specialists with both geographic and subject-matter expertise. These experts are leaders in their fields. They come from the government, military, NGOs, academia, and the private sector. Partners/Grantees: The Institute works with an extensive network of partners, including non-profits, academic institutions, government agencies, international organizations, and the military. Publication IPAR approach is grounded in field of research. Our surveys and policy analyses are informed by the work of a team of researchers, reporters and political analysts located in different areas of Pak-Afghan region. Based on information and assessments from the field, the institute produces analytical reports, weekly updates and policy briefings containing practical recommendations targeted at key national and international decision-makers. We also publish survey-based reports, research journal and books, providing in-depth analysis of various issues.

Technology and Art :: essays research papers

Does size matter? In the world of technology, it all depends on the consumer. The first generations of televisions were designed in a very simple form. Most were square, made of wood, and had a round dial to change channels. Nowadays, we have many different shapes and functions for televisions. Culture and technology have had a large impact on the development of the design and features of the modern television. The design of the television has drastically changed over time. For example, the 1948 Fada model was large in volume and it had a convex and oval shaped screen. It had four knobs used to tune and change channels. The structure was made of wood and it included a fairly large speaker underneath the twelve inch screen. The television only had access to thirteen channels. The dial simply shows that the culture did not have access to many channels. Past televisions were simple because the lifestyle was simple. People did not need hundreds of channels and massive screens to be satisfied. Modern televisions now come in various sizes and have features to accommodate the consumers. For example, the Philips-Magnavox 50FD9955 is thin and has a fifty inch (diagonal) rectangular flat screen. This television can be placed almost anywhere imaginable. It can be hung on a wall or even on the ceiling. The large size of this television represents modern society’s need for bigger and better things. It has an on/off button, two channel buttons, two volume buttons, and other various buttons for adjusting the color. The channel buttons on the modern television represent the unlimited number of channels. The structure is made of metal and plastic and it includes a speaker on each side. The plastic body is easier to mold, cheaper to produce, and easier customize the color. The television comes with standard audio/video jacks, cable jacks, and an S-Video jack to accommodate VCRs, DVD players, camcorders, and other accessories. These additional features did not just appear overnig ht, they developed with society to satisfy their needs. Television is designed around its culture. In the past, watching television was a way for families to be together. Everyone gathered around the television and watched the same show. Families did not have the luxuries of owning more than one television and having hundreds of channels. Today, almost every room in the house has a television. People in different rooms are now able to watch their own shows.

The Meaning of Life Essay example -- essays research papers

The Meaning of Life The most difficult thing in life is finding something worth living for. The second most difficult thing is knowing when you've found it...... by Jamie Andreas Okay, let's be light hearted for once. Let's not talk about some heavy subject. Let's pick something more down to earth and fun. How about the meaning of life? Yes, the meaning of life, and the purpose of our lives. Teen-agers (that group of people who are most likely to begin to play the guitar) love to think about this. Since they are about to embark on that part of life called "being an adult", they like to question whether there is anything about it that makes it worth the bother. A 17 year old student once put it to me very poignantly. He said, â€Å"When I look at the world, and I see what most of the adults I know are doing with their lives, and how they feel about their jobs, it is not very inspiring. I listen to people tell me I should play the game, and work hard to get good grades, so I can get a good job and all that. It all seems to have about as much meaning as going in to the library and memorizing the entire card catalog! What for? What's the point?" And I said to him â€Å"You are exactly right. There is no point. There is no meaning to life." And I firmly believe that. I am going to make two points now. One, there is no meaning to life; you must create the meaning of life, and most especially, your life. And two, there most definitely is a purpose to life, and especially to your life, but you must discover it. These two ideas work together. Once you find your purpose, you will be able to see the "meaning" of your life. What does the word "meaning" mean? People are always asking what is the meaning of life, what is the meaning of death, what is the meaning of me losing my job, losing my hair, etc, etc. Well, you see the point is, there is no answer to the question because it is the wrong question. Only a person who doesn't know what the word meaning means will ask that question. Meaning means "to recognize a significance beyond the thing itself, or in other words, "to point to something beyond itself" And the recognition of that significance, seeing how anything you look at points to something beyond itself, is a creative act on the part of every individual, and it is also the responsibility of every individual. When ... ...ur purpose. Move toward what feels good. B.B. King, Eric Clapton, Jimi Hendrix, all have used nothing but the five notes of a minor pentatonic scale their whole lives! It is all they need for what they want to say. Maybe you need to learn to read music, maybe you don't. Maybe you need to know many chord inversions and scales, maybe you don't. It depends on what you want to say with your music. And what you want to say depends on how you feel. How do you feel? Maybe you are frustrated and confused when you think about this. That is good. Frustration is a push on the back, to get you moving, so you will look around and make discoveries. Make sure you use it that way. Don't stay in one place, or the push on the back will knock you over! The rule for the artist, for the musician, must be "if it feels good, do it". Following your feeling is how that feeling becomes "solidified" into a piece of music, so that it can be communicated and felt by someone else. Bad music is made by people who don't actually feel their feelings. They may not know it, but their music has no meaning, and no purpose. Have you found something worth living for? Is it waiting to be recognized?

When Books were Burned Fahrenheit 451 Essay -- Government Literature C

The Time Books were Burned Fahrenheit 451 The novel, Fahrenheit 451, by Ray Bradbury, is a science fiction novel that introduces a world controlled by the government. Humans are not accepted in this new world. Television has replaced family. The people live the present through television. The firemen are seen as flamethrowers, the destroyers of books. The people living in this society have no reminders or memories of history or the past. In Fahrenheit 451, the society has a strict set of values and beliefs. The government has constructed its own matrix for the people in the society to abide by. It is forbidden for books to be read or seen. Books are not to be read; they are to be destroyed without a question. Since the government has such a tight hold on society, the citizens have no clue as to what is happening in their world. In Fahrenheit 451, the government has demanded that the harshest measures be put on books, which in this case is the burning of the books. Books are considered to be evil because they make people ques tion and think. In this world people believe that when books and new ideas are available to society, conflict and unhappiness take place. I believe that the government feels that by eliminating the world of conflict and controversy, that it will put an end to dispute and allows people to stay happy all the time. In Part One, The Hearth and the Salamander, Guy Montag is introduced as a thirty-year-old fireman in the twenty-fourth century. Montags role as a fireman is destroying all the books he finds along with the homes he finds them in. At first it was pleasurable for Montag to burn up books. At this point he believes he is happy. He is a smiling fireman. The smile, just like his burnt-corked face, is a m... ... are model citizens, in our own special way; we walk the old tracks, we lie in the hills at night, and the city people let us be. This group of people, instead of carrying books with them, they each just memorize as many books as they can. The purpose is to one day, when the world is changed, to be able to re-copy the books once again into written form. Montag has changed dramatically throughout the novel. He is now able to think for himself, make his own decisions, and even tell people what to do, such as Faber. This is major change from the beginning of the book when Montag was nothing more then nave. He was only a timid machine of society. Bradbury promotes the idea in the novel that man should think for themselves, not let the government or television do their thinking for them. Work Cited Bradbury, Ray. Fahrenheit 451. New York: Ballantine Books, 1953.

Shame by Dick Greogry

Trey Swearingen ENG 100 Instructor: Charley Duvaal March 7, 2013 word count: 1643 Psychological Effects of Poverty The psychological effects of poverty on children are embarrassment and public humiliations of dealing with poverty. Imagine going to school without breakfast, much sleep and clothes that may still be wet from the night before since they didn’t dry due to a lack of appropriate appliances.Many people face these hardships everyday and they learn to cope with them in the best way they can. In the short story â€Å"Shame† by Dick Gregory, he writes about him life and how he went through those same things as a kid growing up in poverty. He clearly shows that poverty brings much privation as well as a great deal of shame. However, there are still ways to gain pride and happiness. This story shows that by emulating somebody you respect, even a very poor person can derive pride from small actions, which the average person sees as insignificant. Related essay: Shame is Worth a TryThey have to deal with being put in a stereotype for â€Å"poor† or â€Å"lower income† people. The psychological effects of poverty on children are the lowering of self-esteem, being isolated, and becoming determined. So what is it exactly that creates a rift between children from low income homes and those living above the poverty line? For one, these children lack the stability that comes with a higher income home. This means not having the things that other children have, from adequate nutrition to weather appropriate clothing.In addition, less income generally means there are fewer opportunities for activities and learning experiences. Gregory tells of his shame of living in poverty, and having only one set of clothes and a jacket that welfare gave to all the poor children. Gregory writes, â€Å"There was shame in wearing the brown and orange and white plaid mackinaw the welfare gave to 3,000 boys. Why did it have to be the same for everybody so when you walked down the street the people could see you were on relief? † (194). He is expressing how inadequate he felt compared to children from higher means.He saw that they were able to afford nicer things. Children face monumental hardships in our country because of poverty or the condition of not possessing the means to afford basic human needs. Children are under a lot of pressure in today’s society to excel in everything they do: from school to sports. Being a child in poverty adds even more stress that can ultimately be detrimental to a child. Poverty causes a rift in children who live above the poverty line and those below the poverty line. In general, children from homes living under the poverty line have poorer performance in school.Emotional development is lower in poverty children than those children who live in homes whose income is above the poverty line. In the short story, â€Å"Shame†, Richard is a poor boy without a father, l iving in the ghetto. However, there is a girl at school named Helene that he is in love with. Unlike Richard, Helene is well off, wears clean clothes, and is very smart in school. Richard tries very hard to be like Helene. He melts the ice water from the grocery store so he should be able to wash his clothes for the next day of school. The only reason he goes to school is for her. Everyone else condemns his behavior.Nobody understands that the reason why he does not function like everyone else was because when he gets up in the morning he does not have breakfast. Nobody realizes that he is just another boy who wants to be recognized and seen as just a normal kid like everyone else. They do not comprehend how hard he is trying to accomplish that. While everybody else is having fun after school, he is shining shoes just to get a little change so he could get by. When the day comes that the kids pledge their fathers' money to the Community Chest, naturally Richard wants to match Helene 's pledge.However, when Richard gets up to match Helene's amount, the teacher becomes upset at Richard. She said, firstly, that the money is for â€Å"him and his kind,† and therefore, if he is able to give, he has no reason to be receiving relief. Secondly, she said that he did not even have a daddy. The story shows many different aspects in which poor people suffer, and also things that they may derive pride from that we do not understand. It also shows that the emotions that they show and actions that they do, regardless of how weird or unimportant they seem, may provide great relief and happiness to a poor person.Growing up in poverty can take a toll on anyone; not having money can affect the biggest of people, and the smallest, black or white, male or female. Many people living in poverty have to deal with the stereo-types and there are many of those. Dick Gregory writes in his essay â€Å"The teacher thought I was a troublemaker. All she saw from the front of the room was a little black boy who squirmed in his idiot’s seat and made noises and poked the kids around him. I guess she could not see a kid who made noises because he wanted someone to know he was there† (192).This excerpt from his story describes the stereo-types of stereo-types, assuming that this little boy is a bad seed because of his color and financial background. Many emotional aspects are damaged in life because of many reasons, being poor can have a damaging result on your Self- Respect. People tormenting you, teasing you, making you feel unworthy, and unwelcome, unappreciated can ruin your self- esteem, making you feel exactly what they said you are. Gregory writes about a man in his story, a wino, which was living in poverty as well.The old man was hungry, went to a restaurant and to eat, and when it was time to pay he had no money. Gregory writes â€Å"The old wino sat down at the counter and ordered twenty-six cents worth of food. He ate it like he really enjoy ed it. When the owner, Mister Williams, asked him to pay the check, the old wino didn’t lie or go through his pocket like he suddenly found a hole. He just said: â€Å"Don’t have no money. † The owner yelled: â€Å"Why in hell you come in here and eat my food if you don’t have no money? That food cost me money. Mister Williams jumped over the counter and knocked the wino off his stool and beat him over the head with a pop bottle. The he stepped back and watched the wino bleed. Then he kicked him, and kicked him again† (195). Gregory made it strongly clear that this man had lost all self respect for him self, to just let the owner rag on him, and beat him. Poverty can make you feel worthless and like you do not deserve respect from anyone. Poverty can affect anyone; I have dealt with poverty first hand. When I was in eighth grade I went on a mission trip with my church to New Orleans.It was right after hurricane Katrina had hit and everything was de stroyed. Damage estimated was in the tens of billions of dollars. At least one million people in Louisiana, Mississippi and Alabama were without electrical power, and it took weeks to fully restore service to all affected regions. Clean drinking water was scarce, and the flood waters were covering city streets that were contaminated with gas from ruptured gas lines, chemicals and human waste, raising a serious danger of infectious disease.Poverty affected almost every single person in New Orleans. It was a heartbreaking trip but I was glad to be able to help people rebuild their houses and help them start new lives. I have also dealt with shame and how it can also make you feel worthless. I personally felt sad when I read parts in â€Å"Shame† about his teacher embarrassing him. This reminded me of a time when I was in elementary school. One day, in my fourth grade class, my teacher, Miss Brooks, called on me to give the answer to a geography problem the class was working on. Although I was not afraid to speak out in class, most of the class was having problems with this particular problem, so I was not too confident I had the right answer. However, I gave the answer I had anyway, and it turned out to be wrong. At first, I was not too upset, but almost immediately, Mrs. Brooks began to laugh, and then the whole class started to laugh. I felt so sad and embarrassed that I almost fainted and fell out of my chair. I always remember that day as one of the saddest days of my life. These are just a few examples of how poor people can get pride and happiness from small actions that we do not understand.Also, we see how they can sometimes be misunderstood when they do these actions. In general, we should try to be more yielding and considerate of such people. We should see ourselves in these situations and try to understand. In conclusion, many children are in need of our attention. The best we can offer them is positive remarks and acknowledgment. Whatever we t ell them stays in their memory for a long time and would affect their thought processes. As seen in the â€Å"Shame† essay, the child felt humiliated by the teacher’s criticism. That criticism made him realize how different he really is.

Automobile Industry China Essay

? China became the world’s largest automobile producer and market in 2009 with annual sales of nearly 14 million vehicles. The market continues to expand in 2010. In the first nine months of 2010, automobile production reached 13. 08 million units, a 36. 1 percent increase from a year ago. The China Association of Automobile Manufacturers (CAAM) raised its forecast for annual sales to reach a record 17 million this year, matching the highest annual total ever reached in the United States. Industry growth has been primarily driven by rising domestic demand stemming from rising incomes, a growing middle class, and by supportive industry policies from the Chinese government. The Chinese automotive industry remains very fragmented. In addition, Chinese central government officials fear that unchecked expansion of China’s auto industry encouraged by local authorities could harm the wider economy, and that excess capacity must be stopped. Hence, the central government continues to push for mergers and acquisitions (M&A) in the automotive industry which will support the emergence of a few leading national companies. China’s weak R&D, domestic innovation and design capabilities are key challenges to its international competitiveness. With the government’s encouragement, domestic firms have opted for strategic partnerships with foreign players, aiming to facilitate technology transfer and improve domestic design and engineering capabilities. The Chinese government has implemented a number of tax adjustments and subsidies for automobile purchases to encourage hybrid electric vehicles, pure electric vehicles and traditional vehicles of small engine displacement. Beijing has gradually introduced higher automobile emission standards for new vehicles. Plans to develop hybrid electric and pure electric vehicle production capabilities are part of a broader, environmentally friendly strategy to develop the auto industry. Market opportunities exist especially in the following areas: o Developing domestic innovation capabilities (e.g. vehicle design and engineering, hybrid electric and pure electric engines, electric motors and electric controls) o Productivity and quality upgrade (e. g. engines, transmissions, electronic control systems and safety systems) o Mergers and acquisitions (both in China and in Israel) o Clean transportation technologies 3 China’s Automotive Sector – Prepared for IEICI Updated November 2010 (Original April 2009) ? ? ? ? ? ? o Advanced manufacturing technologies o Supply of essential automotive components/systems to OEMs (e. g.electronic control systems and safety systems) ? The following automotive segments in China are considered to be highly competitive and it will likely be difficult for Israeli firms to penetrate the market unless they have an extreme competitive advantage: Fabric for seats/interiors, seat covers, floor mats, curtains, aluminum die casting, rubber bumpers, electronic harness cables, antennae, speakers, electric starters, vehicle cleaning products, window films, A/C compressors, fuel and oil and air filters. 1. MARKET OVERVIEW ? ? China’s automotive market has the most growth potential in the world; per capita car ownership is still remarkably low at 4. 78% and is expected to grow significantly. Domestic whole-vehicle manufacturers and automotive suppliers are still extremely fragmented (government-supported consolidation is imminent in the near future); challenges remain for domestic R&D and design. With government subsidies and tax incentives, China is aiming to establish an early footing in the production of low-emission and environmentally friendly automobiles. Component imports surged by 130% in the first half of 2010; 60% of imported components were drivetrains, engines or automotive body components. ? ? 1. 1 GENERAL OVERVIEW Market Growth Primarily fueled by domestic and partly by foreign demand, China’s rapidly expanding automotive industry has outpaced the nation’s already impressive GDP growth rates in recent years. Domestically, rising incomes and encouragement from the Chinese government for the urban population to obtain drivers licenses have spurred the demand for passenger vehicles. The booming passenger vehicle market has led to a soaring demand for automotive components. Internationally, automotive manufacturers faced with decreasing margins and profitability have sought out more affordable supply chain solutions, looking to China as a potential source for lower cost automotive components. Unlike developed markets for passenger vehicles, where growth in demand has been largely stagnant, China’s domestic demand for new automobiles has skyrocketed in the past years. Strong car sales in China in 2009 pushed the auto market to the largest in the world, and 2010 is set follow the positive trend. 4 China’s Automotive Sector – Prepared for IEICI Updated November 2010 (Original April 2009). Source: China Association of Automotive Manufacturers (CAAM) In the first nine months of 2010, automobile sales reached 13. 08 million units, up 36. 1% from a year ago. Over 9 million of the total sales were passenger cars and 3. 24 million were commercial vehicles. CAAM predicted that the 2010 annual sales will reach a record of 17 million units. It is widely believed that China’s automotive market currently has the most growth potential in the world. China’s 2009 per capita private car ownership was 4. 78%, far less than the 40% average of developed countries, and even less than other emerging markets such as Russia, Brazil and India. This is a strong indication that China’s domestic market is far from being overly saturated. According to CAAM predictions, growth in the auto industry will remain strong until 2020 with annual growth expected to consistently range from 13 to 15 percent. The total number of vehicles will jump from 67 to 150 million. Sales in larger tierone and tier-two cities as well as rural areas should keep growing at a rapid pace over the next few years and high growth areas will move from eastern China to the central and western regions. Market Players There are currently more than 100 whole-vehicle manufacturers and nearly 8,000 automotive parts manufacturers in China, located primarily in Southern, Eastern, and Northeastern and central China (see the map on the right). Together, the top ten passenger vehicle manufacturers (seven of which are joint ventures (JVs) make up almost 90% of China’s market share (see the table below). Nearly every major global vehicle manufacturer has established JV operations in China. 5 China’s Automotive Sector – Prepared for IEICI Updated November 2010 (Original April 2009). Top 10 Passenger Vehicle Manufacturers in China (2009) Rank 1 2 3 4 5 6 7 8 9 10 Source: CAAM Company SAIC1 FAW2 Dongfeng Chana (incl. Hafei) Beijing Auto Guangzhou Auto Chery BYD Brilliance Geely Others HQ Shanghai Changchun Wuhan Chongqing Beijing Guangzhou Hefei Shenzhen Shenyang Taizhou JV Partner GM, VW VW, Toyota, Mazda PSA, Nissan, Honda Ford, Mazda, Suzuki Hyundai Daimler Honda, Toyota, Isuzu, Fiat N/A N/A BMW, Toyota N/A Sales (Unit) 2,705. 5K 1,944. 6K 1,897. 7K 1,869. 8K 1,243. 0K 606. 6K 500. 3K 448. 4K 348. 3K 329. 1K 1,750K Market Share 19. 83% 14. 25% 13. 91% 13. 70% 9. 11% 4. 45% 3. 67% 3. 29% 2. 55% 2. 41% 12. 84% Import Positive demand growth for automobiles and components has not only caused domestic industry development, but has led to increased attention from leading foreign automotive manufacturers eager to expand into the rapidly growing market. Foreign automotive manufacturers have also been encouraged by lower import tariffs, which have been lowered for whole vehicles from 70-80% to 25% since China joined the World Trade Organization (WTO). Import tariffs on Semi-Knocked-Downs (SKDs) and Complete-Knocked-Downs (CKDs) have dropped from 50% to 25%, while import tariffs on vehicle components have dropped from 15% to 10%. 1 2 Shanghai Automotive Industry Corporation First Auto Works 6 China’s Automotive Sector – Prepared for IEICI Updated November 2010 (Original April 2009) China’s automotive import growth was slowed due to weaker demand caused by the global economic crisis of 2009. Annual total import were USD 33. 1 billion in 2009, representing a year-onyear increase of only 5. 34%. Assisted by government incentive programs and China’s economic recovery, China’s auto import total bounced back from a sluggish 2009, surging by 130% to USD 27. 22 billion in the first half of 2010. Imported European luxury cars had a remarkable 237. 2% increase in 2010 compared to the same period the previous year. China’s automotive component imports grew to USD 12. 7 billion in the first half of 2010, a 90% increase over the same period of 2009. Drivetrain, engine and automotive body components accounted for over 60% of the total component imports (see chart). More than 80% of the imported components came from Japan, German, Korea, and the United States. The main groups of imported automotive components to China can be divided into three categories: ? Japanese and Korean OEMs and Tier I suppliers: Generally these companies tend to only use suppliers from their country of origin. For example, Toyota typically sources components from Japanese JVs or Wholly Owned Foreign Enterprises (WFOEs) on the mainland, or directly imports from Japan. Such practice tends to result from strict quality requirements, cultural compatibility and logistical concerns. German OEMs and Tier I suppliers: These companies typically import components in the areas where Chinese suppliers are weak (e. g. safety systems for high-end passenger cars). The US and French OEMs operating in China have not increased their automotive component imports as much as their peers for different reasons. US OEMs have steadily increased their sourcing from local Chinese suppliers for vehicles manufactured in China to stay competitive, and French OEMs are facing a shrinking market share in China. ? ? Chinese OEMs are emerging buyers of imported automotive components, especially in the segments of hybrid and electric vehicles and Chinese-brand luxury vehicles. 7 China’s Automotive Sector – Prepared for IEICI Updated November 2010 (Original April 2009) Export The impact of the economic crisis in 2008-2009 forced many multinational companies to reduce their sourcing of automotive vehicles and components from China. According to CAAM, China exported a total of 369,600 units in 2009 worth USD 5. 19 billion, which was down by 46% from 2008. China’s auto exports rebounded as the global market recovered in 2010, with 250,100 vehicles exported in the first six months (up 55. 93% year-on-year). Passenger vehicle exports surged 115. 93% to 116,500 units, while commercial vehicle exports increased 25. 50% to 133,900 units. Algeria, Vietnam and Egypt were the major whole-vehicle export destinations in the first half of 2010. The auto component’s export growth has witnessed even more impressive growth than whole-vehicles. Exports increased 54. 11% to reach USD 18 billion in the first half year of 2010, with drive system components exceeding 50% of the total by value. More than 50% of the components were exported to the USA, Japan, South Korea, Germany and the United Kingdom. 1. 2 MARKET STRUCTURE Supplier Landscape The automotive supplier landscape in China is extremely fragmented. According to CAAM, there are approximately 8,000 automotive enterprises scattered across various segments including full vehicle manufacturing, vehicle refitting, motorcycle production, engine production and automotive parts manufacturing. Most of these companies specialize in lower-end parts and lack the capital needed to invest in production of higher quality products. Seven of China’s ten largest components manufacturers are foreign companies, and about 70% of the country’s USD 160 billion auto supply market is occupied by foreign companies or joint ventures. There are approximately 120 OEMs in total, 40% of which produce passenger vehicles. One of the key contributors to the fragmentation of the automotive market as a whole is that Chinese suppliers serve a large amount of separate OEMs. The world’s leading automotive companies are all well-established in China. OEMs are represented by Ford, General Motors (GM), Volkswagen (VW), Daimler, BMW, PSA, Mazda, Nissan, Honda, Toyota, Hyundai, and tier-one international companies including Bosch, Delphi, Denso, Johnson Controls, Lear, Magna, Visteon, Yazaki, ZF, Arvin Meritor and TRW. 8 China’s Automotive Sector – Prepared for IEICI Updated November 2010 (Original April 2009) Most of the international automaker and component manufactures have invested heavily in China in attempts to gain a competitive edge. For example, GM, Ford and Jaguar Land Rover have established their Asia Pacific headquarters in China. GM, VW and Honda have also opened China R&D centers and have begun to design car models specifically for the Chinese consumer. International automotive components companies have also expanded their presence in China. For instance, BorgWarner recently opened a China Technical Center. ZF announced the establishment of its Asia Pacific headquarters in Shanghai as well as a new Shanghai R&D center. Eaton’s Asia Pacific headquarters is in Shanghai. Rapid expansion from international firms has let to foreign-invested automotive components suppliers holding 70% of the Chinese market share. Most of the top Chinese automotive parts manufacturers are wholly owned domestic companies such as ASIMCO, Wanxiang, Hongteo, Fuyao, Dicastal, Wanfeng and others. These companies could be potential competitors or partners for Israeli companies. In response to the soaring domestic demand, Chinese automotive component manufacturers have ramped up their production capacities significantly, but this has also led to an increase in quality complaints. Key Challenges for the Domestic Industry Chinese suppliers are now looking beyond the domestic market and improving their production process to emerge as true global competitors. However, further investment in R&D is still required before Chinese manufacturers can truly compete globally, as the industry still lacks technological capability and suffers from quality issues. China’s Automotive Sector – Prepared for IEICI Updated November 2010 (Original April 2009) Flagship Domestic Automotive Companies Chery Automotive (Chery) ? Founded in 1997 and now has an annual production capacity of 650,000 vehicles, 400,000 engines, and 400,000 sets of gearboxes. ? Continues to expand into the overseas market and has established plants in 16 countries becoming the biggest Chinese vehicle exporter for seven consecutive years. ? Chery Automobile Test & Technology Center opened in July 2010, which became the largest auto lab in Asia. The company will invest RMB 2. 4 billion in 2010 to accelerate its new model development. ? Chery now owns a full set of manufacturing and R&D facilities, including four car plants, two engine plants, a gearbox plant, an automobile engineering research institute, an automobile planning and design institute and an automobile test & technology center. ? Have extensive technological and business relationships with overseas auto companies. Chery signed an agreement with Chrysler to produce Chery made cars under the Chrysler brand to be sold in the United States and Mexico. ? Chery Quantum Auto. Ltd is a joint venture between Chery and Quantum LLC under an Israeli Group. They aimed to invest USD 334 million in 2010 to develop high-end cars and SUVs for the overseas market. 9 R&D capability Chinese automotive component manufacturers are able to manufacture products when they are provided with designs and specifications, however most of them lack design, engineering and R&D capabilities. Owing to weak R&D and engineering capabilities, many local suppliers have opted to enter into technical collaborations or JVs with leading international suppliers with the goal of facilitating the transfer of technology and improve basic product engineering capabilities. A growing number of Chinese auto parts suppliers have begun to invest in and acquire western firms. Domestic R&D capabilities of Chinese automotive part manufacturers have historically been limited due to the small-scale of most operations and a shortage of investment in laboratory facilities in comparison to international firms. Taking steps to remedy the situation, the Chinese government has continued to encourage investment in R&D for core systems, such as engines, transmission systems, steering systems, brake systems and driving control systems. Safety and reputational issues Incidents and product recalls have raised questions about the quality and safety standards of Chinese manufactured automotive components. According to the 2009 China Automotive Product Quality & After Service Quality report, among the 9359 complaints documented about Chinese made cars, 19. 5% were related to engine problems; 10. 5% to steering systems; 10. 7% to braking systems; 18. 5% to automobile accessories and electronics; and the remaining 40. 8% related to the gearbox, clutch, front and rear axles, suspension systems and air conditioning systems. As a result of complaints and recalls, as well as other non-automotive related manufacturing scandals in China including melamine milk, contaminated pet food, and anti-freeze laced toothpaste, Chinese manufactures are facing serious issues about their reputation. This is a problem local manufacturers will have to overcome if they want to increase their competitiveness on the global stage. The drivers are in place for Chinese domestic manufacturers to move to the forefront of the global automotive industry, but substantial domestic investment in R&D and improvements on quality and reputation are a necessary prerequisite. 1. 3 EMERGING INDUSTRY TRENDS Industry Drivers The rapid expansion of the Chinese automotive industry has been largely attributed to the growth in domestic demand for passenger vehicles and international demand for affordable automotive components. The Chinese government also continues to play an important role in encouraging the growth of the industry. 10 China’s Automotive Sector – Prepared for IEICI Updated November 2010 (Original April 2009) Tier II and Tier III cities emerge as market growth engines In 2010, most multinational automakers have included a focus on Central and Western China markets into their strategies in order to capture future growth opportunities. For example, Volkswagen is ramping up capacity of its Chengdu plant more than doubling its production of Sagitars and Jettas from 150,000 to 350,000. GAIC Toyota (a JV between Guangzhou Automobile Industry Corporation and Toyota) is considering building a small and price-competitive car to target the lower end of the market. The JV also announced plans to expand its dealership network across central and Western China. Central and western China have emerged as the main growth engine of the automotive market. According to CAAM, automobile sales in second and third-tier cities in the first nine months of 2009 surged 41 percent and 51 percent respectively, while sales in the firsttier cities increased by 34 percent. Domestic demand has been fueled by rising incomes and a growing middle class creating a larger consumer culture. The purchase of an automobile is increasingly becoming a symbol of financial success. In the past, the focus has been on coastal cities. Since 2009, tier II and tier III cities have emerged as the strongest market growth engines (see more details on your left) Even though large cities in China are facing serious traffic congestion issues, Chinese have not been deterred about making new automobile purchases. China overtook the U. S. as the world’s number one automotive market in January 2009. The positive developments in the passenger vehicle industry have benefitted both domestic auto manufacturers (which are emerging from their infancy stages and developing competitive capabilities) and major international automotive giants (which have increased investment into China to expand their presence). However, with per capita car ownership was still only 4. 78% in 2009, still far below the 40% average in developed countries. This is a strong sign that domestic demand for passenger vehicles will remain high in years to come. The domestic aftermarket for automotive components is increasingly becoming an important driver of the industry. More than thirteen million cars are sold annually in China which is leading to a growing market for automobile repairs and further stimulating domestic demand for automotive components. International demand for automotive components has also increased as international automotive firms face pressures to reduce costs and take advantage of more economical alternatives abroad. China’s inexpensive labor force presents an attractive option for producing lower-cost automotive components, which were initially primarily for the international aftermarket but are increasingly being used by international OEMs. The majority of leading international automobile OEMs have established global sourcing offices, R&D centers as well as regional headquarters in China. 11 China’s Automotive Sector – Prepared for IEICI Updated November 2010 (Original April 2009) Finally, the Chinese government continues to play an important role in driving the industry. Post-WTO accession concessions have resulted in lower import tariffs, giving international automotive firms more access to the domestic market. Beijing has actively encouraged the establishment of JV R&D centers with preferential tax policies designed to facilitate the transfer of knowledge and technology. The government has pledged substantial funds towards automotive technology innovation, upgrades, and the R&D of alternative-fuel automobiles and components. They are also setting restrictions and quotas requiring all vehicles that are used for government use to be produced domestically. Industry Consolidation China is determined to restructure its automotive industry, with the hopes of changing the market from many fragmented manufactures to two or three dominant domestic firms. According to the State Council’s regulations released in early September 2010 which called for greater industrial consolidation, the automobile industry was at the top of the list of targeted sectors. The State Council set the goal of reducing the number of major automakers who are responsible for 90% of domestic sales output, from 14 to 10. Under the plan two or three companies would dominate the industry, responsible for producing more than three million vehicles annually, while four others would have annual output capacity of 1. 5 million units. The State Council named the following four groups as potential industry heavyweights, urging them to take advantage of consolidation opportunities: FAW; Dongfeng; China’s Automotive Sector – Prepared for IEICI Updated November 2010 (Original April 2009) Flagship Domestic Automotive Companies Shanghai Automotive (Group) Corp (SAIC) Industry ? Headquartered in Shanghai, it is one of the top three auto groups in China. ? Mainly engaged in the manufacturing, sales and R&D for passenger cars, commercial vehicles and auto components. ? The company is ranked 223 of the Fortune 500 companies with consolidated revenue of US$33. 6 billion in 2009. ? Sold over 2. 7 million vehicles in 2009, making up almost 20% of China’s market. ? SAIC invested over 10 billion RMB on new model development in the past 3 years, and will launch hybrid and electric vehicles in 2010 and 2012. ? Acquired Nanjing Automotive (Group) Corp (NAC) in 2007 and became the largest manufacturer in China with a consolidated annual production of 2 million units. ? SAIC has opened branches in the USA, Europe, Hong Kong, Japan and Korea. It has established a long-term cooperation with GM and Volkswagen. SAIC and GM formed Shanghai GM and the Pan Asia Technical Automotive Center (PATAC) in 1997 and launched 8 additional China joint ventures, including SAIC-GM-Wuling, GMAC-SAIC Automotive Finance Company, and General Motors SAIC Investment Limited. ? Shanghai Volkswagen (a joint venture between SAIC and Volkswagen AG) recently announced it will build a fifth assembly plant in Jiangsu. The plant will have an annual production capacity of 300,000 vehicles and start operation by the end of 2012. 12 SAIC and Chang’an. Additionally, it named four regional leaders that it encouraged to consider regional consolidation: Beijing Automobile; Guangzhou Automobile; Cherry and Sinotruck. All of these companies are passenger vehicle manufacturers with the exception of Sinotruck which manufactures heavy-duty trucks (sales of over 125,000 units in 2009). Industry analysts predict that the coming wave of M&As within the automotive sector could see a deal that breaks the USD 1 billion mark, more than doubling the largest deal to date which was the USD 450 million purchase of General Motors’. Nexteer steering components unit by a joint venture established by Beijing’s Tempo Group and the Beijing government. Global Expansion As the leading automotive market, China automakers are accelerating global transformation to increase their presence in the overseas market. Zhejiang Geely Holding Group (one of China’s largest independent carmakers) recently completed its acquisition of Ford Motor’s Volvo brand for USD 1. 5 billion. This is an indication that Chinese automakers have begun to recognize the power of strong brand reputation. Geely’s Volvo bid is the largest takeover in Chinese auto industry and will provide a pattern for Chinese carmakers to expand aboard and acquire companies with a strong reputation. Beiqi Foton, China’s leading commercial automaker followed Geely’s step and announced its global expansion plan. This includes setting up a production base in Russia by 2012 with an annual capacity of 100, 000 vehicles and building five other plants in Brazil, India, Russia, Mexico and Thailand before 2015. New Energy Vehicle: Focus of Future Development High oil prices, air pollution, and China’s commitment to reduce carbon emissions have led the automotive industry to explore alternative energies. The Chinese government has launched policies and incentives to stimulate the development of new energy vehicles, including electric (hybrid, plug-in and battery), fuel cell, and hydrogen-powered. China has identified new energy vehicle as one of the seven emerging strategic industries. Many estimate China will become the world’s largest new energy vehicle market by 2020. The Energy Saving and New Energy Vehicle Development Plan (2011-2020) and the Automotive Industry 12th Five-year Plan (2011-2015), two of the key policies expected to guide the development of new energy vehicle industry, are expected to come out by the end of 2010. The Ministry of Industry and Information Technology (MIIT) is the principal drafter of these plans which are later submitted to the State Council for approval. The plans set the following key targets for the new energy vehicle industry by the end of 2020: ? In the following five years China will aggressively support the development of key components of energy efficient and new energy automobiles. For electric motors and 13 China’s Automotive Sector – Prepared for IEICI Updated November 2010 (Original April 2009) ? ? batteries manufacturers, China hopes that three to five â€Å"backbone† enterprises will emerge with their combined market share exceeding 60%. China will produce 5 million new energy vehicles and become the number one producer of new energy vehicles in the world by 2020; Average fuel economy of passenger vehicles will be 4. 5 L/100 kilometers by 2020, the same as European standards. The plans will become the backbone policy for the entire new energy vehicle industry, as it provides direction for public funding, sector focus and industry structuring. Most important to pay attention to is that Chinese companies are likely to reap the most benefits from these structured strategies. To support indigenous innovation, the Chinese government has stated that the two or three key new energy vehicle component manufacturers will most likely be domestic companies, either state-owned or private. 2 REGULATORY OVERVIEW ? Government tariffs on automotive imports are in compliance with WTO rules, but minimum capital barriers still exist for foreign investors. The government has created some incentives to spur R&D partnership, and regulations for foreign distributers have been eased somewhat. The government has plans to implement higher auto emissions standards for new cars in China. So far four regions have implemented â€Å"China IV† emission standards (Beijing, Shanghai, Nanjing and Guangdong Province). The Chinese government views the development of the new energy vehicle industry in China as a top priority and has introduced a wide range of subsidies and policies in its favor. ? ? China’s automotive industry supply chain is very broad with many components such as import and export, manufacturing, environmental protection, technology upgrades and quality control. As such, the industry is regulated by a range of government organs, both at the national and sub-national level. The below chart illustrates the key central level regulators of the automotive industry, and their relevant responsibilities. 14 China’s Automotive Sector – Prepared for IEICI Updated November 2010 (Original April 2009) The automotive industry is subject to a number of laws and regulations. The key regulations that are relevant to Israeli companies are addressed below. 2. 1 FOREIGN ACCESS TO THE CHINESE AUTOMOTIVE MARKET Trade The Chinese auto sector is competitive and has a well-developed supply chain. Imports of foreign-made auto parts will likely decrease as OEMs continue to increase their local capacities. At the same time, higher quality Chinese auto parts are increasingly being integrated into the global supply chain. Currently the import tariff for whole vehicles is 25% and for automotive components is 10%. 15 China’s Automotive Sector – Prepared for IEICI Updated November 2010 (Original April 2009) Investment Foreign businesses must meet a number of requirements in order to access China’s automotive market. The Chinese government has set requirements for minimum registered capital when a firm wants to establish an automotive facility which is RMB 500 million (USD 75 million3) for automobile financing, RMB 500 million (USD 75 million) for engine production and RMB 10 million (USD 1. 5 million) for an R&D center. All projects are subject to government approval. Foreign firms looking to produce passenger vehicles cannot set up WOFEs, but must partner with a local Chinese firm in the form of a JV, with the foreign partner’s stake limited to 50%. On the other hand, China offers fiscal and financial incentives to attract foreign investment in R&D strategies as part of the central government’s strategy to speed up the transfer of international technology. China currently provides tax incentives for enterprises engaged in research and development activities, allowing R&D enterprises to deduct 50% of R&D expenses. Suppliers are most often required to localize or invest in China and Israeli companies interested in tapping into the vast Chinese market will need to consider establishing a local presence. IPR Issues in China While the protection of intellectual property rights (IPR) remains a contentious issue for companies in China, the country’s laws and regulations have progressed considerably in recent years, with the large majority now compliant with requirements of the WTO’s TRIPS agreement. The main challenge surrounding IPR protection in China is the lack of effective enforcement of the existing regulations. Enforcement issues arise from a range of root causes, including the relatively recent introduction of IPR legislation and concept of intellectual property in general, the absence of a fully independent judicial system, and provincial officials’ often protective attitude towards local job creating counterfeiting industries. While most foreign companies considering business operations in China may have to accept an unavoidable degree of IPR infringement, there are nevertheless a number of actions that a company can take in order to limit their IPR-related risk: ? ? ? Ensure to register your patents, copyrights, or trademarks with the relevant bureaus Ensure that your trade or other.