Academic journal article Journal of Financial Management & Analysis

Financial Management Indicators to Aid Decision Making (Statistics)

Academic journal article Journal of Financial Management & Analysis

Financial Management Indicators to Aid Decision Making (Statistics)

Article excerpt

Monitored by

Om Sai Ram Centre for Financial Management Research

Mumbai, INDIA

HIGHLIGHTS

The Arabian Gulf countries have received little attention in the literature, even though they are very interesting to examine. They are distinct in many ways, for example, they are heavily reliant on oil as their major source of income and government revenue. They haVe seen significant growth in government size over the last three decades, while the price of oil peaked in the early 1980s and has mostly fallen since, except in the last two years.

Except for the last two years, the rate of economic growth in the Gulf countries has generally slowed in the last decade. Some of these countries have experienced budget deficits for the first time, others have seen their government budget deficits continually increasing. For example, Oman's budget deficit as a percentage of G.D.P. in 1998 reached 6.6 per cent, Bahrain's figure is also around 5.8 per cent, where as United Arab Emirates, for the first time, has seen a government budget deficit of 3 per cent of its G.D.P. Accurate data for Kuwait and Saudi Arabia are not available. However, all other indicators point to those two countries as experiencing more fiscal and financial difficulties than the rest of the G.C.C. The current fiscal difficulties of the G.C.C. countries are usually attributed to the downward movements in the price of oil and the huge expenditures the second Gulf war inflicted on these economies. The above Table gives a brief introduction to the G.C.C. economies and their main economic indicators.

Also, data reveal how much the economies of the G.C.C. are depending on government expenditure. The average size of the government between 1975-1995, as measured by average ratio of real government spending to real G.D.P., is almost 47 per cent. Needless to say that, in the past, this large size of government was essential. Governments did embark on huge projects to build the basic infrastructures of the modern states of the Gulf. Also, they have made genuine efforts to redistribute the newly acquired wealth among their own citizens. However, in the current new state of affairs, and with the fiscal difficulties these countries are experiencing, all efforts should be made to guarantee that government spending is not unproductive and government size is close to optimal.

Thus, during the 1990s and till now, the Gulf countries have attempted to find new ways to secure more government revenues. Also, they have opted to scrutinize government expenditures using different means and ways. Accordingly, the need to change fiscal policies in these countries and to reexamine the government si -e h.'s proved to be a practical necessity. In addition, the new wave of economic literature calling for diminishing and/or changing the role of government in the development process, in general, has reinforced and justified these countries' positions.

BACKGROUND INFORMATION

Statistics on foreign investment in the People's Republic of China are not released in a systematic way, and are drawn from a variety of sources and are often unaccompained by their statistical basis and assumption. The above statistical data were largely supplied by the Ministry of Foreign Economic Relations and Trade of the Chinese Government : but even those are sometimes incomplete and inconsistent. In addition, the official and other sources are often inconsistent in the definitions of the various forms of foreign direct investment. Furthermore, the decentralisation of various approval and other functions relating to foreign trade and foreign investment over recent years has introduced an additional element of uncertainty in the compilation of statistics. The statistical information provided can therefore serve as an indicative and useful guide to prospective foreign investors. Article 14 of the Law of the People's Republic of China on Wholly-owned Enterprises (promulgated in April 1986) stipulates that,

wholly-owned foreign enterprises must setup account books within the territory of China, conduct independent accounting, submit accounting statements in accordance with regulations, and accept the supervision of the finance and tax authorities. …

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