Assignment:
BACKGROUND
Emerging market economies experienced a decade of rapid growth and has been considered an attractive destination for different forms of foreign investments. Having led a global boom and then helped pull the world economy out of the global recession between 2008 and 2009, some emerging economies have slowed down and faced significant challenges recently. Do you still see emerging markets an attractive investment destination?
PROJECT TOPIC
To invest or have a long-term presence in a foreign country, you will have to deal with additional risks not present in domestic business activities. The additional risks are socalled country risks in international business. The objective of this project is to identify and evaluate country risks that may decrease the expected return of a cross-border investment (portfolio and/or foreign direct investment) in an emerging market economy of your choice. Listed below are some examples of countries you may want to focus on:
1. Argentina
2. Russia
3. China
4. India
5. Brazil
6. South Korea
7. Turkey
8. Poland
9. Romania
10. Ukraine
METHODOLOGY
Your team project has three components: a written report and two classroom presentations. Your report should follow the format stated below:
An executive summary (within one page)
Part I. Provide a general overview of the nation's international investment environment by elaborating on at least three of the following aspects:
• Overall economic size and stability (GDP, demographics, socioeconomic state, urban/rural, 10-year general macro-economic data, general economic, financial, political, and social stability, etc.)
• Business infrastructure
• Legal/bureaucratic environment (imports, local manufacture, taxation, etc.)
• Competition in market
• Managerial and labor climate/resources
• Financial viability (profit margin, currency, profit repatriation, etc.)
• Business culture
Based on the overview, discuss the pros and cons of investing in the country. Identify the major soft and hard barriers that may hold you back from making cross-border investment in the particular economy.
Part I should not exceed 10 pages.
Part II. The key of your project is the second part, where you will evaluate the nation's economic and financial risks based on both quantitative and qualitative information. A detailed and data-supported risk analysis may at least cover the following aspects:
• International liquidity
o Short-term foreign debt as a percentage of total foreign exchange reserves
o Current account balance
o Current-account-to-GDP ratio
• Financial vulnerability
o Banking system's and the corporate sector's foreign liabilities
o Volatilities of equity prices
o Volatilities of foreign exchange rates
o Nonperforming loans carried by private banks and non-bank financial institutions
• Policy sustainability
• Contagion risk
o Trade and financial linkage with the rest of the world
o Sovereign credit rating
• Political uncertainty
Finally, include a concluding section where you briefly discuss your investment strategy based on your analysis in Part I and Part II. Your investment strategy may cover your international business/investment recommendation, the type of industry to enter, and preferred entry mode and strategy, etc.
You will submit a typed report based on your analysis. The report will be double-spaced, about 20 pages and will have an appendix that contains exhibits, such as maps of the country, tables, charts, and graphs. It is important that you use/present data to support your arguments. As with all papers, grammar counts and spelling counts. Please make sure that all group members read and edit the paper before it is submitted.
The project (Part I and Part II, including your conclusions) will be presented to the class in two separate sessions (Please see the class schedule for specific dates). Ten to fifteen minutes will be allocated to each team in each presentation. Allow approximately five minutes for questions from your classmates or the instructor. Develop appropriate visual supports. If you use slides, please keep text to a minimum and emphasize graphics, including but not limited to maps, graphs, pictures, and data charts. Self-made video / movie may also be included if all the team members agree to do so.