International Business of Botswana Country - Essay Example

International Business of Botswana Country Botswana - A country in Africa After its independence in 1966 Botswana, in a few decades, has moved to adeveloping nation from a poor and underdeveloped economy. Its major export of diamonds is the basis of economic growth of the country. Moreover, the place is also an important source of income through tourism and foreign investment. Seventy percent of the land is covered by Kalahari Desert in the southwest of the country with salt ranges in the north (Botswana, 2007). Political structure of the country Botswana is a pure democratic nation which practices fair elections every time. The consistency in the political system of the country, with its general elections taking place after every five years, depicts a true positive picture for its prosperity and economic development (Background Note: Botswana, 2007). When Botswana appeared on the face of the map, there was no army for the defence and protection of the country. In 1977 Botswana Defence Force was formed and today almost 12000 armed men are an integral part of the system (Botswana, 2007). Economic scenario of the country The government of Botswana has perfectly maintain the outflow of diamonds for the economic well being of the country and from last three decades Botswana is a leader in the production of quality diamonds. Thus, the revenue generated from diamond mining is very rightly used to carry out the essential expenditures of the country (Background Note: Botswana, 2007). The other chief sources of income in Botswana include tourism and cattle industry. Before 1971 the market was based on agriculture and farming, but then diamond mining started that heightened the economic growth and also increased the per capita income of the country as compared to many other African countries (The World Fact Book, 2007). Whenever we consider the economic structure of a place, we cannot deny the fact that there are some threatening issues related to that area which have an immense effect on the expansion and progression of the nation. Similarly, Botswana is dealing with the victims of HIV- AIDS as the country has the second highest infection rate and as a result huge amounts are needed to tackle the problem every year (Structure of the economy, 2007). In addition to it, the nation is also facing crisis in the employment sector. A large number of population is unemployed and the government is taking keen interest in facilitating the service sector. Cultural values of Botswana In the northern areas of Botswana trained and skilful women are working in their villages. They are famous for weaving and crafting. Moreover, few writers of that part of the world are famous for their work primarily Bessie Head, who wrote about Botswana until her death in 1986 (Binsbergen, 2002). In the same manner people from different fields have entered the global market in order to promote the culture of Botswana and to strengthen its economy in the world (Botswana, 2007). Botswana - International trade today and 25 years back After the independence of Botswana in 1966, agriculture had been its major economic sector. Its main emphasis had been on agricultural goods which shared about forty percent (40%) of the Gross Domestic Product of Botswana and forms the basic exports of the country. Even today the primary sector contributes highest to the country's GDP, which now, not only includes agricultural goods but also mining. Now Botswana is on the path of diversification. It is working hard to diverse its economy and emphasizing more on manufacturing goods and mining than on agricultural goods. Its main manufacturing products include meat products, dairy products, textiles, chemical and leather products, wooden products and many others. In 1983 the mining sector contributed 52.6 percent to the GDP (Kapunda, 2003, 3). The major exports of Botswana are focused to Common custom area, USA, UK, Zimbabwe and to other European countries. In the year 1985 the total exports of Botswana amounted to be 1,384,284000 with the 91.5 percent share of minerals and meat. This figure increased to 10,063,156000 in 2001 with a contribution of manufacturing goods and decrease in the export of minerals and meat. Botswana is struggling hard to enhance its manufacturing sector, which contributes a very small figure to country's exports. In 1995, the manufacturing goods contributed 26.4 percent to the country's exports, which was higher than ever before, and consisted of vehicle parts. Even after 1995 this figure has declined and reached 8.2 percent in 2001. . Mining sector has a major share in the country's exports but it contributes only approximately 3.5% to the formal employment level (Kapunda, 2003, 9). The exports of Botswana have seen a changing trend with the passage of time, with more focus of exports to UK than to USA and other countries. Although Botswana is striving hard to increase its exports but still it has a negative trade balance. The trade balance of Botswana was $34.4million deficit in 1992 which has now reached to $101.7million deficit in 2007. The imports have shown a significant increase from the year 1992 to the year 2007 whereas exports figure has almost remained constant. Botswana imports most of the goods from USA, UK, South Korea and other European countries. Its major imports comprise ofedible items, machinery and transport equipment, textiles, petroleum products, wood and paper products, metal and metal products (Kapunda, 2003, 9). Trade balance from the year 1997 to 2007 (Foreign Trade Statistics, 2007) In U.S. million dollars Year Exports Imports Trade Balance 1992 46.6 12.2 34.4 1993 24.9 8.2 16.7 1994 22.7 13.6 9.1 1995 35.7 21.3 14.4 1996 29 27 2 1997 43.1 24.5 18.6 1998 35.6 19.9 15.7 1999 33.4 16.9 16.5 2000 31.5 41 -9.5 2001 43.3 20.8 22.5 2002 31.7 29.3 2.4 2003 25.9 13.7 12.2 2004 54.1 73.5 -19.4 2005 67.3 178.2 -110.9 2006 26.9 252.1 -225.2 2007 41.6 143.3 -101.7 Government's approach towards international trade and co-operation with other countries The government of Botswana is trying hard to improve its deficit trade balance. Its aim is to increase the production and export of manufacturing goods, which, presently, contribute a very small share to the total exports of the country. Botswana has good trade relations with many countries and the government has signed trade agreements with Zimbabwe, India, Malawi, China, Czech Republic, Cuba, Slovakia, Romania, Russia, and Republic of Korea. The country is also a member of Southern Africa Development Community (SADC), World Trade Organization (WTO), Southern Africa Customs Union (SACU) and United States African Growth and Opportunity Act (AGOA).Recently, the government has signed an Economic Partnership Agreement (EPA) with European Union (EU). According to this agreement Botswana exports will be duty free and quota free for EU (Kapunda, 2003, 9). The Ministry of Trade and Industry is a separate department in the government sector of Botswana, which is responsible for domestic as well as international trade policies. When a trade policy is designed, it is presented in a national seminar where people, from all spheres of life, are free to give their opinions regarding to that policy. Currently, the government of Botswana is working on the formulation of National Trade Policy and National Export Development Strategy. In addition to it, it is also focusing on foreign investment to create a valuable, global image of the country (Kotler, 2003, 56). The Competitive Advantage of Nations (Porter's Diamond) After globalization small firms and businesses think that for them it is a disadvantage to compete the international markets with other huge giants. Now the competition is more complex and difficult, but one should know that this is actually a true competition and in such a manner you can understand and perceive your position in an absolute and accurate manner (Porter's Diamond, 2007). According to Porter there is an advantage for nations that compete in the international markets. In my opinion, here I can simply relate this theory with the diamond mining in Botswana. In factors of production, it is easy to relate the natural resource of a country with diamonds as Botswana has a competitive edge over other countries because it produces large amounts of diamonds and approximately its 70 percent exports are based on it (Porter's Diamond, 1998). The country can vary in its production of diamonds to diversify and increase the product mix. Porter also emphasizes on the demand conditions for products and services. Through export readings we realize that the demand for diamonds is very high in the international market and the country can achieve higher gains. While considering Botswana and its culture we need to consider the demographic changes that always have an impact on the production demand and supply and the consumers buying behaviour. Besides that, one has to keep into account the population growth factor because in developing countries if growth rate heightens then it would create problems associated with the fulfilment of needs and wants that would then become impossible to solve (Usunier, 1996). "Within society decisions about people's lifestyles, spending, consumption, investment, employment and political activities are all influenced by a range of cultural values and beliefs which are shared generally and among specific groups" (Peattie, 1995). Trading between countries helps in obtaining low cost products and services. Nowadays we see Pizza Hut, Burger King, and Mc Donald's everywhere in the world. They are more appreciated than the local restaurants. Today there are a lot of companies who have made their brands global and are working successfully worldwide e.g. Pepsi, Nokia, Sony, Coca Cola etc (Doole & Lowe, 2004). In the similar way, Botswana can work by using its comparative advantage theory in which a country can exchange its product from other country's product or services. Recommendations for improvements in Botswana's international trade strategy Since independence, Botswana has been working on the improvement of its manufacturing sector but still it has not achieved its desired goals. The primary goods still form the basis of its exports. The trade balance of Botswana is in deficit from so many years and the value of its imports is much higher than its exports. One reason for this deficit trade balance is that its import commodities comprise of manufacturing goods and other more valuable goods than its exports, which significantly consists of primary products. The government of Botswana has to take appropriate steps in order to improve its economic conditions and have to follow a proper planned strategy. It has to provide production to the local industry which is faced with a huge competition with the international market in manufacturing goods. The government should restrict the import of some of the secondary goods so that the local industry would prosper and the production of such goods will increase domestically. Loans and incentives should also be offered to the industrial sector so that more employment opportunities would be created and outputs would rise. As a result, the tertiary as well as secondary sector of the economy would boost up and exports will increase. Botswana has also recently signed an Economic Partnership Agreement (EPA) with European Union which will hopefully give better results to its economy if it would be benefitted properly. The increase in exports will improve the employment level and the producers will enjoy high returns and thus local as well as foreign investments will automatically rise. Bibliography "Background Note: Botswana". 2007. Bureau of African Affairs October 2007. 8th December 2007. http://www.state.gov/r/pa/ei/bgn/1830.htm Binsbergen, W. 2002. "Botswana's Ethnic Structure- An abortive research proposal". Brave Pages.com. 8th December 2007. http://ethnicity.bravepages.com/ethnicity/botswana.htm "Botswana". 2007. Wikipedia: The Free Encyclopedia. 8th December 2007. http://en.wikipedia.org/wiki/Botswana "Botswana". 2007. Commonwealth Secretariat. 9th December 2007. http://www.thecommonwealth.org/YearbookHomeInternal/138171/ "Botswana". 2007. CIA The World Fact Book. 9th December 2007. https://www.cia.gov/library/publications/the-world-factbook/geos/bc.html#Intro "Botswana". 2007. Infoplease- All the knowledge you need. Pearson Education Inc. 9th December 2007. http://www.infoplease.com/ipa/A0107353.html "Country Profile: Botswana". 2007. BBC News. 9th December 2007. http://news.bbc.co.uk/1/hi/world/africa/country_profiles/1068674.stm Doole, Isobel &Lowe, Robin., 2004, Strategic Marketing Decisions in Global Market, Thomson Learning EMEA, UK. "Foreign Trade Statistics". 2007. U.S. Census Bureau. 9th December 2007 http://www.census.gov/foreign-trade/balance/c7930.html#2007 Kapunda, Stephen M. 2003. Industrial Development and Trade in Botswana. http://www.essa.org.za/download/2003Conference/KapundaSM_Industrial%20Development%20And%20Trade%20In%20Botswana.pdf Kotler, Philip 2003, Marketing Management Education, Inc., United States of America. Peattie, Ken 1995 Environmental Marketing Management Pitman Publishing, Great Britain. "Porter's Diamond", 1998. Lecture 5. 10th December 2007. http://pacific.commerce.ubc.ca/ruckman/competitiveadvofnations.htm "Porter's Diamond". 2007. Mind Tools Ltd. 10th December 2007 http://www.mindtools.com/pages/article/newSTR_92.htm Structure of the Economy", 2007. 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