Political Legal Economic Risk Analysis Term Paper

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Political, Legal, Economic Risk Analysis

Spain is the eighth biggest industrialized economy in the Organization for Economic Cooperation and Development -- OECD and the fifth biggest nation within the EU as regards population, output and production. Spain has undergone a remarkable change since the last thirty years. Progressing from a somewhat a poor agrarian economy, it has witnessed speedy economic progress and is presently a modern, fully industrialized nation. Since the past decade sincere efforts by successive governments have pushed economic reforms placing the Spanish economy on a robust structural standing with the result that since the last five years the Spanish economy has come to be amongst the front ranking European economies. The International Monetary Fund in its preliminary Conclusions on the 2001 Article IV Consultation has ranked Spain as the most dynamic economy of Europe. (Doing Business in Spain: An Introductory guide to the market)

Turkey on the other hand has initiated moves to transform its legal, legislative, institutional and economic environment since 1963, when it was the signatory of the Ankara Agreement. This pact envisioned a process of gradual political and economic integration which would lead Turkey to full membership after a period of 22 years. Recently, Turkey has initiated moves to restructure its economic, institutional, administrative and judicial settings with the long-term goal of taking on the challenge of global competition as a strong partner of the EU. Turkey has reacted to important economic crises with total structural reforms of its financial and regulatory institutions, thereby showing its reliability as a strategic partner of the EU. (Turkey a new corporate world for Europe)

Analysis:

II. 1. Spain:

(a) Political Risks: Presently, the Spanish government respects every right of its citizen completely, following a Constitutional amendment and it also has no official religion. The Constitution annulled the Roman Catholic Church as the official state religion even though more than 90% of the population is Catholic. The citizens are at liberty to enter into and move out of the country without any permission from the government. Men and women possess, legally the identical rights to start a new business venture and also for equal job opportunity. The country accords dignity of the individual, every right a person inherits regardless of sex, the free development of the personality, inclusive of religion, the obedience for the law and other individual's rights constitute the foundations of the Spanish Constitution and lifestyle. Spain has a multiparty system and has freedom of speech. Even though the citizens enjoy freedom of speech, none is penalized by thinking or expressing anything which differs from the standard, the government normally and cunningly publicizes of all those opinions that does not relate to it in the public media. (Spain: Economic Policy Analysis)

Spain was changed to a parliamentary monarchy, implying that the elected government came into office through democratic elections. Spain is a free country in which the freedom of speech is defended and applied in practice. However, the police administration is not citizen friendly and apart from fighting criminals, they use their might against innocent and respectful citizens. But the citizens do not feel being intimidated by the police force. Therefore Spain is a safe place even though crimes happen, and the police are to be given credit for the same. The country supports the right to private property which is established in the Constitution. Private business are also recognized and given protection by the Spanish laws and Constitution. (Spain: Economic Policy Analysis)

(b) Legal Risks: Spain's Constitution which has been effective since 1978 consists of every set of laws applicable to every citizen in Spain thereby making no difference among the citizens of Spain. Moreover, the Constitution as the important proponent of legal laws, the country has also the legal system that is a civil law system. This implies that laws are not formed by Court decisions. But, case laws issued by the Supreme Court are extremely valued as a source of explanation and application of the law. The legal system of Spain is that the decisions of the Court can be challenged in case they do are not in conformity with the case law made by the Supreme Court on the same matter in two judgments at the minimum. In the absence of an applicable law, custom has the force of law, subject to the provision that it is corroborated and is not against the moral standards or public order.

The general principles of law are those which arise from the legal rules that are the causal basis of the legal system. General principles might be applicable when there is the absence of legislation and custom. But in the case of citizens to justice and applying these laws which safeguard the rights of all and each individual in Spain there is discrimination and not every citizen possess the same possibilities. Similar to other nations, rich people have the monetary power to hire better lawyers and thus have better chances to have more fair or might be unfair but trials which go in their favor. For example, mention may be made of the case of Banesto, wherein one of the most widely recognized and successful bankers in Spain never got punished by the monetary scandals he had been carrying out in his tenure as the Director of the Spanish Bank, Benesto. On the contrary others who may have done some thing wrong have been penalized with, in comparison and proportionally, with worse charges. (Spain: Economic Policy Analysis)

(c) Economic Risks: As per Spanish law, taxable income is decided as the difference between the income earned and expenses which are being deductible. Presently Spanish residents with earnings over 21,035.42 annually, are responsible to make the income tax and declaration in excess of this amount attracts a progressive tax structure.

The tax period correlates with the calendar year; however this tax is evaluated on different rates for residents and non-residents. As regards Corporate Tax, Spanish resident companies are treated as such when the company was incorporated under the Spanish law. Even though tax rates applicable to the net income of corporations is normally 35%, some special categories of companies like foundations, cooperatives, associations and investment funds may apply a lower tax rate of 30%. (Doing Business in Spain: Types of Corporations)

This special tax structure applies to small and medium sized companies having a net turnover below 1,502,530.3. These companies might also receive tax incentives like deduction of leasing installments paid. Value Added Tax -- VAT is applicable in Spain which is paid by the end consumer which is collected as a percentage of the price. This tax is applicable to commercial activities in Spain entailing the production and distribution of goods as also the provision of services. The standard rate of VAT is 16% in case of majority of the goods and services. (Doing Business in Spain: Types of Corporations)

1. 2. Turkey

(a) Political Risks: The political crisis through which Turkey passed in the 1970s left the country with little option than to open up to the rapidly globalizing economy. The massive structural reforms of the Turkish private sector happened a full decade prior to those in Central & Eastern Europe. Of course since 1996 Turkish industrialists were compelled to fight it out on equal terms on price as well as quality with their European competitors. The country continues to be unique among the new accession states in having embarked upon a bold step in the absence of firm commitment to political partnership. The country is also unique in the sense that it has made this transformation without the help of substantial financial aid from Europe. Liberalization and lowering of tariff barriers during the 1980s and 1990s, the lifting of much of the political patronage system due to the structural reforms being taken with the support of the International Monetary Fund -- have led to much transparent and effective economic management. Successive governments have embraced to the cause of liberation, and during the end of the present decade, Turkey can experience competitive markets in telecommunications, electric power and natural gas. (Turkey a new corporate world for Europe)

(b) Legal risks: Turkey has struggled a lot in order to come a long way; however what we see in the recent years is that a whole level of constitutional and legal reforms placing Turkey along with the practices in the European Union -- EU. According to a survey which was being carried out by the European Commission's Enterprise Directorate General in 2002, made way for the innovation policy framework, whereby steps were taken in order to promote innovation activities in enterprises and business innovation interfaces which was inclusive of cooperation among the large as well as the small businesses and also between the academia or the intellectual lot and the industry in Turkey.

The result was that the legal and administrative settings being witnessed in Turkey is considered to be more hostile. The atmosphere which was considered to be favorable to business development in a general level…[continue]

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