American Intercontinental University
Unit 1 Individual Project
FIN630 International Financial Markets
April 5, 2013
This paper will discuss the advantages and disadvantages of starting a Greenfield Production Facility in one of two places Estonia or Turkey. The paper will then conclude with my recommendation to Acme as to which foreign country is best suited for their investment.
International Financial Market
As a multinational enterprise that is considering establishing a Greenfield Production Facility in or outside the European Union will represent a major investment in the chosen region. When considering a potential country make sure that the production facility space will encompass manufacturing as well as office space as to create as many new jobs as possible for the region’s economy. With that said the two proposed foreign countries to choose from will be Estonia a member of the European Union and Turkey a non-member of the European Union. Currency of Estonia and Turkey
Estonia is the most northern Baltic State and a member of the European Union as of 2011 it has used the Euro as its form of currency (Europea.eu, n.d.). As with any currency there are advantages and disadvantages. In this case the largest advantage of the Euro is this form of currency is the only form of currency utilized between the 17 of the 27 countries that make up the European Union. This means that the need for an exchange of currency between the 17 members has been removed. This brought on another great advantage which is no need for an exchange rate between the members. This alone cut down on high interest rates and inflation brought on by exchange rates. The disadvantages of Estonia and the other 16 members of the European Union sharing Estonia’s Euro as one currency is they are no longer able to alter or adjust economic and monetary policies to remove any economic declines in their individual country. In this disadvantage also comes the exchange rate not being able to be altered to assist in regional economic improvements and expansions. Granted these may seem like great disadvantages, but with Estonia being a member of the European Union there is great increase in stability and promotion of economic collaboration between its members. Being a member of the European Union and being a member that utilizes the Euro means that there is a common monetary policy. Turkey is not a member of the European Union and utilizes the Turkish Lira as their form of currency (National Geographic, 2013). The Turkish Lira is a convertible currency that in the past has had little restrictions placed on it. This has made for a less stable Turkish Lira due to such a high level of inflation in this economy. There are advantages to Turkey’s currency some being joint investments and tax agreements with the United States. These agreements warrant the removal of double taxation and promise a return of investment with the Turkish Lira as a convertible currency. On a positive note for Turkey consumer prices rose 0.30 percent and their annual inflation lessened to 7.03 percent (Central Bank of the Republic of Turkey, 2013). Trade Policies in Estonia and Turkey
Estonia has a great advantage being a member of the European Union as it alone is the largest trader on the globe. The European Union accounts for 20% of the world’s imports and exports (Europa.eu, 2013). The European Union has one trade policy for all 27 members that aid in opening world trade for the richest and the poorest of the members alike. As the world’s greatest trader the European Union is a member of the World Trade Organization. The advantages are that this organization aids the European Union in creating bilateral trade regulations, trade liberalization, and maintainable growth. The European Union strives through the World Trade Organization to sustain a fairer more stable international trade system (European Commission, 2013). This kind of...
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