Development of the Caspian Oil and Gas Sector

Development of the Caspian Oil and Gas Sector Caspian Oil Gas Role of FDI in Economic Development of Azerbaijan, Kazakhstan and Turkmenistan Abstract This paper underlines the foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and its role in economic development of each country. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. The first part of this paper overviews the Caspian region and its oil and gas reserves. More specifically this part summarises the role of foreign direct investment in oil and gas industry and how it promotes economic development of Caspian basin countries, namely Azerbaijan, Kazakhstan and Turkmenistan. The second part presents the theoretical framework of foreign direct investment. This part also reviews the previous empirical findings on types, determinants and motives of foreign direct investment. The part 3 comparatively analysis foreign direct investment performance in selected countries and factors which may influence the ability of a country to attract foreign investment. This part also overviews the investment climates in Azerbaijan, Kazakhstan and Turkmenistan. Part 4 concludes. Key Words: FDI, Caspian Sea region, Oil and Gas, Azerbaijan, Kazakhstan, Turkmenistan. 1 Introduction The Overview of the Caspian Sea Region It is wide recognized that foreign direct investment (FDI) can play an important role in the development process of many countries and it is much required. Economies in transition, such as those in Central Asia and the Caucasus, are no exception as they realize the important role of FDI in strengthening their transition process. While some of them have sizable deposits of oil, gas and minerals which are major attractions to foreign investors, others, being less endowed, have more difficulty to attract FDI to their fledgling industrial and service sectors. But in even those countries which are well endowed with natural resources, there is a thrust to diversify their economies away from over-dependence on those resources and to develop viable value-added manufacturing industries and services. FDI can play a major catalytic role in this process. Just a decade years ago the areas on each side of the Caspian Sea – Central Asia to its east side and the Transcaucasia to its west were largely unknown. These regions were provinces of the Soviet Empire important to the outside world neither politically nor economically. Now its is well known that the Caspian Sea is largest land-locked body of water on Earth, bordered by Azerbaijan, Russia, Kazakhstan, Turkmenistan and Iran – the Caspian basin countries (see Map 1). Amongst the five countries only Iran is a member of the Organization of Petroleum Exporting Countries. Kazakhstan, Azerbaijan and Turkmenistan became independent after collapse of Soviet Union in 1991. Once a centre of global commerce, the Caspian Sea region has languished in obscurity ever since the rise of the sailing ship rendered the Silk Road obsolete a half millennium ago (Olcott, 1998). After discovery of oil and gas resources in the Caspian offshore and shore areas, this region became very important oil and gas sector in global context. Moreover, owing to energy security and geopolitical reasons, the Caspian region became very attractive for the West. Azerbaijan became one of the world’s first oil sectors after crude oil production started in Baku in the middle of 19th century. The oil production in Central Asia started in the beginning of the 20th century. Azerbaijan recorded about 70% of Soviet oil production by end of 1940. The former Soviet Union controlled almost all natural resources in Soviet Republics. At the time of their independence, Soviet republics were quasi-states (Olcott, 1998). Each republic has its own president and prime minister, local and national legislatures. The political and economic liberalisation of the Soviet Union in the mid-1980s attracted foreign investors and oil and gas companies interested in exploration and production prospects. The collapse of the Soviet Union gave further opportunities for the liberalisation of investment regulations. By the late 1990s the Caspian region was comparatively politically stable region, and a number of countries significantly improved investment regimes to their oil and gas sectors. Historically, energy industry in Azerbaijan, Russia, Kazakhstan, Turkmenistan and Uzbekistan is very important sector for the economy growth of these countries. However, poor management of natural resources and poor investment climate in these countries lead to disparities emergent between the countries in socio-economic terms. Nowadays, it is well recognized that foreign investment plays a vital role in the development of the oil and gas sector for such countries as Azerbaijan, Kazakhstan and Turkmenistan and significantly stimulates social and economic development of each of these countries. 1.2 Research Questions The presence of potentially vast oil and gas reserves is a part of the foreign investment attraction into the Caspian Sea region. On the other hand, it is important to note that while the quantity of proven reserves undoubtedly plays a significant role in estimating a region’s production and export potential, the other decisive factors for attraction foreign direct investment into this region are undeveloped market, cheap labour and cheap inputs and weak competition. This paper focuses on foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan; and on what foreign direct investment strategy in each country are based. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and performance by each country. The significant number of researches in regard to foreign direct investment mostly explains the investment strategy in the developed countries, when limited study has done on investment in less-developed countries or emerging countries. The selected countries Azerbaijan, Kazakhstan and Turkmenistan are transition countries and to a certain extent new participants in the competition to attract foreign investment. These countries can offer many potential advantages to foreign investor, especially in oil and gas sector of business. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. There is no much research which explores the determinants of investment in Azerbaijan, Kazakhstan and Turkmenistan, the stereotypes and perceptions that foreign investors have about these countries and what could be done to increase the foreign direct investment flow into these countries. This paper surveys these parts by investigating the multinational oil companies operating in Azerbaijan, Kazakhstan and Turkmenistan. The data from different energy agencies were gathered for comparative analysis of oil and gas data as well as foreign direct investment in different countries. This would not only let one to have a picture of various state strategies related to foreign investment, but could also provide the valuable outlook of the most advantageous approach for transition countries in doing business with foreign investors. 1.3 The Legal Status of Caspian Sea A large share of oil and gas reserves in Central Asia and Caucasus are thought to lie under he Caspian Sea. The question of the ownership of those resources, including the right to license and tax their development, is being argued by the Caspian littoral countries. The legal debate over the Caspian Sea can be tracked back to the 1921 Treaty to Moscow, reaffirmed in 1935, which declared that the inland Caspian Sea belonged to Russia (Kemp, 2000). Later Russia sent a note to the United Nations dated from 5th October 1994, where Russian Ministry of Foreign Affairs stated that the Caspian Sea should not be subject to the provisions of international maritime law (International Energy Agency, 1998). The importance of the application of international law is that a â€Å"sea† under the 1982 Law of the Sea Convention would be subject to separation into national zones for the development of its mineral resources. Russia stated that until all five of the Caspian littoral states (Azerbaijan, Russia, Kazakhstan, Turkmenistan, and Iran) came to a common decision on some other arrangement, the legal status of the Caspian Sea was subject only to the provisions of the more general (Treaty of Friendship between Iran and the USSR of 26 February 1921 and Treaty between Iran and the USSR on Trade and Maritime Navigation of 26 March 1940). Nevertheless, the ongoing legal uncertainty does not seem considerably decreased foreign investment in the Caspian Sea region. Advantageous geological prospects, with potential of a major oil and gas resource base, show significant motivations for companies to invest in this important producing region, preferably from the beginning of its development. 1.4 Current Production and Proven Reserves in Caspian Region Caspian oil presents a lot of opportunities for world oil markets and for the region itself (Energy Charter Secretariat, 2008): The appearance of new production sources would expand world oil supplies. Major quantities of Caspian oil would ease the pressure on the Persian Gulf production capacity and provide an additional hedge against oil supply disruptions Profits from oil exports could stimulate economic growth and improve the standard of living in the Caspian energy-rich counties. The availability of Caspian energy supplies in world markets will likewise improve the prospects for economic growth and political stability in the Caspian basin countries. Nowadays the Caspian Sea region is important, but not major supplier of crude oil to world markets, based upon estimates by British Petroleum (BP) and the Energy Information Administration (EIA). In 2005 the Caspian region produced 2.1 million barrels per day, or 2 per cent of total world production (see Table 1). Kazakhstan’s production rapidly increased since the late 1990s, accounted for 67 per cent and Azerbaijan for 22 per cent of regional crude oil production in 2005. The Caspian Sea region’s comparative contribution to world natural gas supplies is larger than that for oil. Gas production of 3.0 trillion cubic feet per year in 2005 was 3 percent of world production (Energy Information Administration, 2006). Turkmenistan is the largest producer; with production of 2.0 trillion cubic feet per year, it accounts for almost two-thirds of the region’s gas production. (see Figure 1). Unlike oil, the region’s proven reserves of natural gas are a higher proportion of the world total than is its natural gas production. The estimate of proven reserves of natural gas in the Caspian Sea region for the end of 2006 published by Energy Information Administration is 232 trillion cubic feet per year, which represents 4 per cent of the world total (see Table 2). Table 1Oil Production in the Caspian Sea Region 1. Proven reserves are defined by the EIA 2. Possible reserves 3. Other estimates (EIA/IEO 2006) 3.45 million barrels per day, (World Oil, 10 March 2004) 3 million ^Only Caspian area oil and gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Table 2Gas Production in the Caspian Sea Region ^Only Caspian area gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Figure 1 Gas Production in Caspian Sea region (1992-2004) Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. 1.5 Role of Oil and Gas in the Economic Development of Caspian Region The development of oil and gas resources in the Caspian region is mostly important for the development of economies in the Central Asian and Transcaucasia. In 1995 the energy sector’s share of gross domestic product (GDP) was an estimated 14.6 percent in Azerbaijan, 10.1 percent in Kazakhstan, 10.2 percent in Turkmenistan (International Energy Agency, 1998). Foreign investment attracted to the oil and gas sector in Caspian region could offer significant profits for the region’s governments and stimulate investment in other economic sectors. The attract foreign investment the host Governments should take discreet measures to ensure the development of an sufficient legal and administrative infrastructure, including institution building and personnel training, to handle the inflow of oil related revenues and to help ensure the countries’ efficient and equitable development. International Monetary Fund (2003) expressed concerns that unless regional governments introduce further administrative reforms, they risk being overwhelmed by new oil wealth. Particularly, corruption is a peril. Economic development motivated by foreign investment in the oil and gas industry helps to guarantee the financial independence of the Central Asian and Transcaucasian states. The transition to the market economy and the economic dislocations originated by collapse of Soviet Union left Azerbaijan, Kazakhstan and Turkmenistan without adequate funds to develop oil and gas resources. Governments of these countries are looking for private investment (mainly from foreign companies) that would play significant role in the development of oil and gas industry. Besides financial capital, a foreign investor brings a modern technology to local industry, including environmentally sound production techniques and modern management approaches. The Caspian Sea region countries are competing with each other for foreign investment. Oil and gas companies have a wide choice of where to make investment. The foreign investor considers the opportunities that offer the best financial returns. However, the investment climate is vital for company’s decision on where to invest. As a result, Kazakhstan and Azerbaijan took considerable steps in creating attractive investment climates. Kazakhstan concentrated on building a body of law applicable to all projects, while Azerbaijan focused primarily on modified production sharing agreements (International Monetary Fund, 2003). By the beginning of 1998, cumulative foreign direct investment in the oil and gas sectors of Central Asia and Transcaucasia had reached an estimated 3 billion of American dollars, nearly one third of which was placed in 1997. Future investment commitments in the region from contracts already signed total over 40 billion of America dollars (International Energy Agency, 1998). So far most foreign investment has been in Kazakhstan and Azerbaijan. Gas-endowed Turkmenistan started to attract foreign investment later than the others due to Government dictatorship and poor investment climate. Caspian oil development has gained a great deal of political and commercial momentum since the first foreign companies came there at the end of 1980s (Ruseckas, 2000). Since then the most important external factor influencing Caspian oil development is the price of oil. Principally if oil prices remain at present high level it is possible the more optimistic projects will be started. The Caspian Sea region could possibly produce approximately 4 million barrels per day by 2010. In any case, the Caspian Sea states require a stable legal regime to develop, produce, transport and market its natural resources. 1.5.1 Summary data on Azerbaijan Owing to extensive oil reserves, Azerbaijan is a major oil producer since the middle of the last century. Between 1990 and 1995 Azerbaijan’s gross domestic product dropped 58 percent (International Energy Agency, 1998). Oil production fell by only 25 percent mainly because of continuing oil product exports to neighbouring countries and an increasing use of heavy fuel oil in domestic power stations to alternative for imported gas. Due to the tightening of monetary and budgetary policies, the fiscal deficit dropped from 11.4 percent of gross domestic product in 1995 to less than 2 percent in 1996. In 2006 Azerbaijans real gross domestic product grew by 31 percent when the oil production in this region significantly increased. Azerbaijans anticipate for sustained economic growth is in its managing of large oil and natural gas resources in the Caspian Sea region, through effective management of the resulting revenue stream, and non-oil sector diversification (Energy Information Administration, 2006). During the beginning of transition most Azerbaijan onshore oil fields were in decline and required momentous new investment to develop large-scale offshore projects and to reconstruct existing fields. Since independence Azerbaijan signed several agreements with foreign oil companies. While maintaining full state ownership over energy companies, Azerbaijan was quick to invite foreign investors to assume a direct role in the development of its hydrocarbon reserves (Thompson, 2004). In 1992 most of the Azerbaijan oil sector assets were merged in two state oil companies – Azerineft and Azneftkimiya. The new merger was called the State Oil Company of the Azerbaijan Republic or SOCAR. While Government organizations handle production and exploration agreements with foreign companies, SOCAR is body to all international companies developing new oil and gas projects in Azerbaijan. After the first commercial oil flows through the Baku-Tbilisi-Ceyhan pipeline during summer 2006 and the increasing oil production from the Azeri-Chirag-Guneshli project, oil revenues are expected to contribute to a doubling of Azerbaijan’s gross domestic product by 2008 (Thompson, 2004). Energy Information Administration (2007) reports that though the oil sector represented around 10 percent of Azerbaijan’s gross domestic product in 2005, it is already projected to double to almost 20 percent of gross domestic product in 2007 (see Table 3). To manage the revenues, former President of Azerbaijan Heydar Aliyev formed a State Oil Fund in 1999, which is designed to use money obtained from oil-related foreign investment for poverty reduction, education and raising rural living standards. As of the end of 2006, the State Oil Fund reported assets of almost 2 billion US dollars, but the fund’s assets are expected to increase to 36 billion US dollars by 2010 (Energy Information Administration, 2006). Table 3Azerbaijan: Economy and Energy (in millions US dollars) 2003 2004 2005 2006 2007 2010 Oil Production (thousand barrels per day) 320 319 441 648 860 1,300 Oil Exports (thousand barrels per day) 215 204 314 521 721 N/A Foreign Direct Investment 3,285 3,556 1,680 -219 -4,750 476 FDI in Oil Sector 3,246 3,461 1,459 -573 -5,198 366 Oil Sector Revenue 886 946 1,337 2,921 5,272 19,417 As share of total rev (%) 42% 38% 39% 51% 59% N/A As share of total GDP (%) N/A N/A 9.8% 15% 19.7% 43.3% Oil Fund Assets 816 972 1,394 1,936 3,093 36,387 Source: Energy Information Administration: Short Term Energy Outlook, 2007; International Monetary Fund (IMF), Article IV Consultation, Staff Report, No 07/191, June 2007 1.5.2 Summary Data on Kazakhstan As it was the case in most other former Soviet Union countries, Kazakhstan’s first attempts at economic reform were effectively taken in response to Russias one-sided price reforms in 1992. After Kazak oil production had suddenly declined for two years in the end of 1993, inflation had out of control. The efforts to create an economic union with Russia and other former Soviet Union countries didn’t meet expectations of the Kazakh Government. Looking at the dynamic Asian economies as a model, the Kazakh Government turned to market style policies. However, the government increased hard budget constraints and restrictive monetary policies due to attempts to solve non-payment problem through state financing. The remained net debts after netting out inter-industry arrears were financed from Government budget and the central bank. In 1993 International Monetary Fund (IMF) granted Kazakhstan a one-year standby package. To maintain IMF collaboration and to stop the decline in gross domestic product, the Kazakh government implemented a second stabilisation program in 1995. But this time hard budget constraints and monetary policy were strengthened by excluding of government financing of net positions in inter-enterprise debts and retreating government guarantees for loans granted by foreign and domestic banks. In the middle of 1996, the International Monetary Fund approved an Extended Fund Facility (EFF) of 446 million US dollars for three years (IMF, 2003). According to International Monetary Fund (2003) the decision was made in light of a wide-ranging three-year reform programme submitted by the government, as well as the positive longer term prospects for production and exports of energy and non-ferrous metals. In 1996, Kazakhstan experienced its first positive economic growth since 1989. 1.5.3 Summary Data on Turkmenistan Preceding the collapse of the Soviet Union approximately 8 percent Turkmenistan’s gross domestic product was generated by gas exports to the rest of the USSR mostly to Belarus, Ukraine and the Caucasus. Another 5 percent of gross domestic product was earned from cotton exports. Gas and cotton exports continue to be used to cover the import of considerable amounts of grain and capital equipment from other former Soviet Republics. While estimates for the fall of gross domestic product between 1990 and 1995 vary depending on how adjustments to official gross domestic product are made, International Monetary Fund and European Bank of Reconstruction and Development agree on about -35 percent (IMF, 2003). This is much less than the 58 percent drop in Turkmen gas production. The rest of the economy is basically agricultural. The cotton industry has been less affected by the downfall of the Soviet Union. The government gradually liberalised some prices beginning in 1992. A presidential decree of 1995 removed price controls on all products except for about 50 items, including energy. The government introduced the manat as the national currency in 1993. In 1995 it unified the previously separate official and commercial exchange rates, which subsequently became determined by inter-bank auctions for foreign exchange. Between 1992 and 1995 the government compensated for the shortfall in revenue from taxes on gas production and exports by cutting expenditures and replacing subsidies to the economy with additional allocations of credit at largely negative interest rates. Controlled prices were adjusted repeatedly but declined in real terms for natural gas and for oil products through 1994. The share of gas related revenues in the central budget declined from 60 percent in 1992 to under 20 percent in 1995, which lowered the share of total budgetary revenue in GDP from 40 percent to 10 percent during this period. Due to drastic expenditure cuts in government wages and investment, including maintenance, the central budget deficit remained fairly stable over this period. It also helped that new excise taxes were introduced in 1995 on petrol (55 percent) and diesel (60 percent). This resulted in some recovery of government capital spending. The easy money policy was changed slowly in 1995 and 1996. During this time foreign exchange surrender requirements of state-owned enterprises to the Foreign Exchange Reserve Fund (FERF) were increased to 50 percent for gas and oil exports, and the money allocated directly to the central budget. Prior to that, this fund had been used to award credits to the economy, contributing to monetary expansion. In 1995 and 1996, bank credit allocation was reduced, real interest rates rose (due to credit auctions with deregulated interest rates), and reserve requirements for banks were increased. However, the pursuit of these policies was not smooth, in part due to the limited political autonomy of the Central Bank. Nevertheless, inflation decelerated by 50 percent towards the end of 1995 and is estimated to have been 445 percent in 1996, and 21 percent in 1997. Despite plummeting gas exports in recent years, Turkmenistan’s current account was slightly positive in 1994 and 1995, as long as arrears owed to the country are not taken into account. If such arrears are counted the 1995 balance swings from an estimated surplus of 54 million US Dollars to a deficit of 289 million US Dollars. The situation has probably continued to deteriorate due to weak gas exports. 2 Theoretical Frameworks 2.1 Overview of Foreign Direct Investment Theories There is variety of empirical studies on theoretical models explaining foreign direct investment (FDI) and its determinants. The various approaches from different disciplines such as economics, international business, organisation and management explain numerous characteristics of this phenomenon. The following dissimilar methods, explaining foreign direct investment as the location decision of multinational enterprises are mostly acknowledged in empirical literature on FDI: Ownership advantages as determinants of foreign direct investment (including monopolistic advantage and internalisation theory) based on imperfect competition models and the view that multinational enterprises (MNEs) are firms with market power (Hymer, 1960; Buckley and Casson, 1979; Kindleberger, 1969; Caves, 1971 for ownership advantages) Determinants according to the Neoclassical Trade Theory and the Heckscher-Ohlin model, where capital moves across countries due to differences in capital returns (for example Markusen et al, 1995,pp. 98-128; Aliber, 1970); Determinants of foreign direct investment in Dunning’s ownership-location-internalization (OLI) framework, which brought together traditional trade economics, ownership advantages and internalisation theory (Dunning, 1977; 1979); Determinants of foreign direct investment according to the horizontal FDI model or Proximity- Concentration Hypothesis (Krugman, 1983; Markusen, 1984; Ethier, 1986; Horstmann and Markusen, 1992; Brainard, 1993); Determinants of foreign direct investment according to the vertical FDI model, Factor-Proportions Hypothesis or the theory Development of the Caspian Oil and Gas Sector Development of the Caspian Oil and Gas Sector Caspian Oil Gas Role of FDI in Economic Development of Azerbaijan, Kazakhstan and Turkmenistan Abstract This paper underlines the foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and its role in economic development of each country. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. The first part of this paper overviews the Caspian region and its oil and gas reserves. More specifically this part summarises the role of foreign direct investment in oil and gas industry and how it promotes economic development of Caspian basin countries, namely Azerbaijan, Kazakhstan and Turkmenistan. The second part presents the theoretical framework of foreign direct investment. This part also reviews the previous empirical findings on types, determinants and motives of foreign direct investment. The part 3 comparatively analysis foreign direct investment performance in selected countries and factors which may influence the ability of a country to attract foreign investment. This part also overviews the investment climates in Azerbaijan, Kazakhstan and Turkmenistan. Part 4 concludes. Key Words: FDI, Caspian Sea region, Oil and Gas, Azerbaijan, Kazakhstan, Turkmenistan. 1 Introduction The Overview of the Caspian Sea Region It is wide recognized that foreign direct investment (FDI) can play an important role in the development process of many countries and it is much required. Economies in transition, such as those in Central Asia and the Caucasus, are no exception as they realize the important role of FDI in strengthening their transition process. While some of them have sizable deposits of oil, gas and minerals which are major attractions to foreign investors, others, being less endowed, have more difficulty to attract FDI to their fledgling industrial and service sectors. But in even those countries which are well endowed with natural resources, there is a thrust to diversify their economies away from over-dependence on those resources and to develop viable value-added manufacturing industries and services. FDI can play a major catalytic role in this process. Just a decade years ago the areas on each side of the Caspian Sea – Central Asia to its east side and the Transcaucasia to its west were largely unknown. These regions were provinces of the Soviet Empire important to the outside world neither politically nor economically. Now its is well known that the Caspian Sea is largest land-locked body of water on Earth, bordered by Azerbaijan, Russia, Kazakhstan, Turkmenistan and Iran – the Caspian basin countries (see Map 1). Amongst the five countries only Iran is a member of the Organization of Petroleum Exporting Countries. Kazakhstan, Azerbaijan and Turkmenistan became independent after collapse of Soviet Union in 1991. Once a centre of global commerce, the Caspian Sea region has languished in obscurity ever since the rise of the sailing ship rendered the Silk Road obsolete a half millennium ago (Olcott, 1998). After discovery of oil and gas resources in the Caspian offshore and shore areas, this region became very important oil and gas sector in global context. Moreover, owing to energy security and geopolitical reasons, the Caspian region became very attractive for the West. Azerbaijan became one of the world’s first oil sectors after crude oil production started in Baku in the middle of 19th century. The oil production in Central Asia started in the beginning of the 20th century. Azerbaijan recorded about 70% of Soviet oil production by end of 1940. The former Soviet Union controlled almost all natural resources in Soviet Republics. At the time of their independence, Soviet republics were quasi-states (Olcott, 1998). Each republic has its own president and prime minister, local and national legislatures. The political and economic liberalisation of the Soviet Union in the mid-1980s attracted foreign investors and oil and gas companies interested in exploration and production prospects. The collapse of the Soviet Union gave further opportunities for the liberalisation of investment regulations. By the late 1990s the Caspian region was comparatively politically stable region, and a number of countries significantly improved investment regimes to their oil and gas sectors. Historically, energy industry in Azerbaijan, Russia, Kazakhstan, Turkmenistan and Uzbekistan is very important sector for the economy growth of these countries. However, poor management of natural resources and poor investment climate in these countries lead to disparities emergent between the countries in socio-economic terms. Nowadays, it is well recognized that foreign investment plays a vital role in the development of the oil and gas sector for such countries as Azerbaijan, Kazakhstan and Turkmenistan and significantly stimulates social and economic development of each of these countries. 1.2 Research Questions The presence of potentially vast oil and gas reserves is a part of the foreign investment attraction into the Caspian Sea region. On the other hand, it is important to note that while the quantity of proven reserves undoubtedly plays a significant role in estimating a region’s production and export potential, the other decisive factors for attraction foreign direct investment into this region are undeveloped market, cheap labour and cheap inputs and weak competition. This paper focuses on foreign direct investment strategy formulation process in the three energy-rich countries of the Caspian Region: Azerbaijan, Kazakhstan and Turkmenistan; and on what foreign direct investment strategy in each country are based. The study comparatively analysis the investment climate in three selected countries and more specifically it examines the foreign direct investment in oil and gas industry and performance by each country. The significant number of researches in regard to foreign direct investment mostly explains the investment strategy in the developed countries, when limited study has done on investment in less-developed countries or emerging countries. The selected countries Azerbaijan, Kazakhstan and Turkmenistan are transition countries and to a certain extent new participants in the competition to attract foreign investment. These countries can offer many potential advantages to foreign investor, especially in oil and gas sector of business. The research examines the investment climate in Azerbaijan, Kazakhstan and Turkmenistan and factors influencing the foreign investor’s decision-making in oil and gas sector. There is no much research which explores the determinants of investment in Azerbaijan, Kazakhstan and Turkmenistan, the stereotypes and perceptions that foreign investors have about these countries and what could be done to increase the foreign direct investment flow into these countries. This paper surveys these parts by investigating the multinational oil companies operating in Azerbaijan, Kazakhstan and Turkmenistan. The data from different energy agencies were gathered for comparative analysis of oil and gas data as well as foreign direct investment in different countries. This would not only let one to have a picture of various state strategies related to foreign investment, but could also provide the valuable outlook of the most advantageous approach for transition countries in doing business with foreign investors. 1.3 The Legal Status of Caspian Sea A large share of oil and gas reserves in Central Asia and Caucasus are thought to lie under he Caspian Sea. The question of the ownership of those resources, including the right to license and tax their development, is being argued by the Caspian littoral countries. The legal debate over the Caspian Sea can be tracked back to the 1921 Treaty to Moscow, reaffirmed in 1935, which declared that the inland Caspian Sea belonged to Russia (Kemp, 2000). Later Russia sent a note to the United Nations dated from 5th October 1994, where Russian Ministry of Foreign Affairs stated that the Caspian Sea should not be subject to the provisions of international maritime law (International Energy Agency, 1998). The importance of the application of international law is that a â€Å"sea† under the 1982 Law of the Sea Convention would be subject to separation into national zones for the development of its mineral resources. Russia stated that until all five of the Caspian littoral states (Azerbaijan, Russia, Kazakhstan, Turkmenistan, and Iran) came to a common decision on some other arrangement, the legal status of the Caspian Sea was subject only to the provisions of the more general (Treaty of Friendship between Iran and the USSR of 26 February 1921 and Treaty between Iran and the USSR on Trade and Maritime Navigation of 26 March 1940). Nevertheless, the ongoing legal uncertainty does not seem considerably decreased foreign investment in the Caspian Sea region. Advantageous geological prospects, with potential of a major oil and gas resource base, show significant motivations for companies to invest in this important producing region, preferably from the beginning of its development. 1.4 Current Production and Proven Reserves in Caspian Region Caspian oil presents a lot of opportunities for world oil markets and for the region itself (Energy Charter Secretariat, 2008): The appearance of new production sources would expand world oil supplies. Major quantities of Caspian oil would ease the pressure on the Persian Gulf production capacity and provide an additional hedge against oil supply disruptions Profits from oil exports could stimulate economic growth and improve the standard of living in the Caspian energy-rich counties. The availability of Caspian energy supplies in world markets will likewise improve the prospects for economic growth and political stability in the Caspian basin countries. Nowadays the Caspian Sea region is important, but not major supplier of crude oil to world markets, based upon estimates by British Petroleum (BP) and the Energy Information Administration (EIA). In 2005 the Caspian region produced 2.1 million barrels per day, or 2 per cent of total world production (see Table 1). Kazakhstan’s production rapidly increased since the late 1990s, accounted for 67 per cent and Azerbaijan for 22 per cent of regional crude oil production in 2005. The Caspian Sea region’s comparative contribution to world natural gas supplies is larger than that for oil. Gas production of 3.0 trillion cubic feet per year in 2005 was 3 percent of world production (Energy Information Administration, 2006). Turkmenistan is the largest producer; with production of 2.0 trillion cubic feet per year, it accounts for almost two-thirds of the region’s gas production. (see Figure 1). Unlike oil, the region’s proven reserves of natural gas are a higher proportion of the world total than is its natural gas production. The estimate of proven reserves of natural gas in the Caspian Sea region for the end of 2006 published by Energy Information Administration is 232 trillion cubic feet per year, which represents 4 per cent of the world total (see Table 2). Table 1Oil Production in the Caspian Sea Region 1. Proven reserves are defined by the EIA 2. Possible reserves 3. Other estimates (EIA/IEO 2006) 3.45 million barrels per day, (World Oil, 10 March 2004) 3 million ^Only Caspian area oil and gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Table 2Gas Production in the Caspian Sea Region ^Only Caspian area gas production Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. Figure 1 Gas Production in Caspian Sea region (1992-2004) Source: Energy Information Administration (EIA): Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, July 2006. 1.5 Role of Oil and Gas in the Economic Development of Caspian Region The development of oil and gas resources in the Caspian region is mostly important for the development of economies in the Central Asian and Transcaucasia. In 1995 the energy sector’s share of gross domestic product (GDP) was an estimated 14.6 percent in Azerbaijan, 10.1 percent in Kazakhstan, 10.2 percent in Turkmenistan (International Energy Agency, 1998). Foreign investment attracted to the oil and gas sector in Caspian region could offer significant profits for the region’s governments and stimulate investment in other economic sectors. The attract foreign investment the host Governments should take discreet measures to ensure the development of an sufficient legal and administrative infrastructure, including institution building and personnel training, to handle the inflow of oil related revenues and to help ensure the countries’ efficient and equitable development. International Monetary Fund (2003) expressed concerns that unless regional governments introduce further administrative reforms, they risk being overwhelmed by new oil wealth. Particularly, corruption is a peril. Economic development motivated by foreign investment in the oil and gas industry helps to guarantee the financial independence of the Central Asian and Transcaucasian states. The transition to the market economy and the economic dislocations originated by collapse of Soviet Union left Azerbaijan, Kazakhstan and Turkmenistan without adequate funds to develop oil and gas resources. Governments of these countries are looking for private investment (mainly from foreign companies) that would play significant role in the development of oil and gas industry. Besides financial capital, a foreign investor brings a modern technology to local industry, including environmentally sound production techniques and modern management approaches. The Caspian Sea region countries are competing with each other for foreign investment. Oil and gas companies have a wide choice of where to make investment. The foreign investor considers the opportunities that offer the best financial returns. However, the investment climate is vital for company’s decision on where to invest. As a result, Kazakhstan and Azerbaijan took considerable steps in creating attractive investment climates. Kazakhstan concentrated on building a body of law applicable to all projects, while Azerbaijan focused primarily on modified production sharing agreements (International Monetary Fund, 2003). By the beginning of 1998, cumulative foreign direct investment in the oil and gas sectors of Central Asia and Transcaucasia had reached an estimated 3 billion of American dollars, nearly one third of which was placed in 1997. Future investment commitments in the region from contracts already signed total over 40 billion of America dollars (International Energy Agency, 1998). So far most foreign investment has been in Kazakhstan and Azerbaijan. Gas-endowed Turkmenistan started to attract foreign investment later than the others due to Government dictatorship and poor investment climate. Caspian oil development has gained a great deal of political and commercial momentum since the first foreign companies came there at the end of 1980s (Ruseckas, 2000). Since then the most important external factor influencing Caspian oil development is the price of oil. Principally if oil prices remain at present high level it is possible the more optimistic projects will be started. The Caspian Sea region could possibly produce approximately 4 million barrels per day by 2010. In any case, the Caspian Sea states require a stable legal regime to develop, produce, transport and market its natural resources. 1.5.1 Summary data on Azerbaijan Owing to extensive oil reserves, Azerbaijan is a major oil producer since the middle of the last century. Between 1990 and 1995 Azerbaijan’s gross domestic product dropped 58 percent (International Energy Agency, 1998). Oil production fell by only 25 percent mainly because of continuing oil product exports to neighbouring countries and an increasing use of heavy fuel oil in domestic power stations to alternative for imported gas. Due to the tightening of monetary and budgetary policies, the fiscal deficit dropped from 11.4 percent of gross domestic product in 1995 to less than 2 percent in 1996. In 2006 Azerbaijans real gross domestic product grew by 31 percent when the oil production in this region significantly increased. Azerbaijans anticipate for sustained economic growth is in its managing of large oil and natural gas resources in the Caspian Sea region, through effective management of the resulting revenue stream, and non-oil sector diversification (Energy Information Administration, 2006). During the beginning of transition most Azerbaijan onshore oil fields were in decline and required momentous new investment to develop large-scale offshore projects and to reconstruct existing fields. Since independence Azerbaijan signed several agreements with foreign oil companies. While maintaining full state ownership over energy companies, Azerbaijan was quick to invite foreign investors to assume a direct role in the development of its hydrocarbon reserves (Thompson, 2004). In 1992 most of the Azerbaijan oil sector assets were merged in two state oil companies – Azerineft and Azneftkimiya. The new merger was called the State Oil Company of the Azerbaijan Republic or SOCAR. While Government organizations handle production and exploration agreements with foreign companies, SOCAR is body to all international companies developing new oil and gas projects in Azerbaijan. After the first commercial oil flows through the Baku-Tbilisi-Ceyhan pipeline during summer 2006 and the increasing oil production from the Azeri-Chirag-Guneshli project, oil revenues are expected to contribute to a doubling of Azerbaijan’s gross domestic product by 2008 (Thompson, 2004). Energy Information Administration (2007) reports that though the oil sector represented around 10 percent of Azerbaijan’s gross domestic product in 2005, it is already projected to double to almost 20 percent of gross domestic product in 2007 (see Table 3). To manage the revenues, former President of Azerbaijan Heydar Aliyev formed a State Oil Fund in 1999, which is designed to use money obtained from oil-related foreign investment for poverty reduction, education and raising rural living standards. As of the end of 2006, the State Oil Fund reported assets of almost 2 billion US dollars, but the fund’s assets are expected to increase to 36 billion US dollars by 2010 (Energy Information Administration, 2006). Table 3Azerbaijan: Economy and Energy (in millions US dollars) 2003 2004 2005 2006 2007 2010 Oil Production (thousand barrels per day) 320 319 441 648 860 1,300 Oil Exports (thousand barrels per day) 215 204 314 521 721 N/A Foreign Direct Investment 3,285 3,556 1,680 -219 -4,750 476 FDI in Oil Sector 3,246 3,461 1,459 -573 -5,198 366 Oil Sector Revenue 886 946 1,337 2,921 5,272 19,417 As share of total rev (%) 42% 38% 39% 51% 59% N/A As share of total GDP (%) N/A N/A 9.8% 15% 19.7% 43.3% Oil Fund Assets 816 972 1,394 1,936 3,093 36,387 Source: Energy Information Administration: Short Term Energy Outlook, 2007; International Monetary Fund (IMF), Article IV Consultation, Staff Report, No 07/191, June 2007 1.5.2 Summary Data on Kazakhstan As it was the case in most other former Soviet Union countries, Kazakhstan’s first attempts at economic reform were effectively taken in response to Russias one-sided price reforms in 1992. After Kazak oil production had suddenly declined for two years in the end of 1993, inflation had out of control. The efforts to create an economic union with Russia and other former Soviet Union countries didn’t meet expectations of the Kazakh Government. Looking at the dynamic Asian economies as a model, the Kazakh Government turned to market style policies. However, the government increased hard budget constraints and restrictive monetary policies due to attempts to solve non-payment problem through state financing. The remained net debts after netting out inter-industry arrears were financed from Government budget and the central bank. In 1993 International Monetary Fund (IMF) granted Kazakhstan a one-year standby package. To maintain IMF collaboration and to stop the decline in gross domestic product, the Kazakh government implemented a second stabilisation program in 1995. But this time hard budget constraints and monetary policy were strengthened by excluding of government financing of net positions in inter-enterprise debts and retreating government guarantees for loans granted by foreign and domestic banks. In the middle of 1996, the International Monetary Fund approved an Extended Fund Facility (EFF) of 446 million US dollars for three years (IMF, 2003). According to International Monetary Fund (2003) the decision was made in light of a wide-ranging three-year reform programme submitted by the government, as well as the positive longer term prospects for production and exports of energy and non-ferrous metals. In 1996, Kazakhstan experienced its first positive economic growth since 1989. 1.5.3 Summary Data on Turkmenistan Preceding the collapse of the Soviet Union approximately 8 percent Turkmenistan’s gross domestic product was generated by gas exports to the rest of the USSR mostly to Belarus, Ukraine and the Caucasus. Another 5 percent of gross domestic product was earned from cotton exports. Gas and cotton exports continue to be used to cover the import of considerable amounts of grain and capital equipment from other former Soviet Republics. While estimates for the fall of gross domestic product between 1990 and 1995 vary depending on how adjustments to official gross domestic product are made, International Monetary Fund and European Bank of Reconstruction and Development agree on about -35 percent (IMF, 2003). This is much less than the 58 percent drop in Turkmen gas production. The rest of the economy is basically agricultural. The cotton industry has been less affected by the downfall of the Soviet Union. The government gradually liberalised some prices beginning in 1992. A presidential decree of 1995 removed price controls on all products except for about 50 items, including energy. The government introduced the manat as the national currency in 1993. In 1995 it unified the previously separate official and commercial exchange rates, which subsequently became determined by inter-bank auctions for foreign exchange. Between 1992 and 1995 the government compensated for the shortfall in revenue from taxes on gas production and exports by cutting expenditures and replacing subsidies to the economy with additional allocations of credit at largely negative interest rates. Controlled prices were adjusted repeatedly but declined in real terms for natural gas and for oil products through 1994. The share of gas related revenues in the central budget declined from 60 percent in 1992 to under 20 percent in 1995, which lowered the share of total budgetary revenue in GDP from 40 percent to 10 percent during this period. Due to drastic expenditure cuts in government wages and investment, including maintenance, the central budget deficit remained fairly stable over this period. It also helped that new excise taxes were introduced in 1995 on petrol (55 percent) and diesel (60 percent). This resulted in some recovery of government capital spending. The easy money policy was changed slowly in 1995 and 1996. During this time foreign exchange surrender requirements of state-owned enterprises to the Foreign Exchange Reserve Fund (FERF) were increased to 50 percent for gas and oil exports, and the money allocated directly to the central budget. Prior to that, this fund had been used to award credits to the economy, contributing to monetary expansion. In 1995 and 1996, bank credit allocation was reduced, real interest rates rose (due to credit auctions with deregulated interest rates), and reserve requirements for banks were increased. However, the pursuit of these policies was not smooth, in part due to the limited political autonomy of the Central Bank. Nevertheless, inflation decelerated by 50 percent towards the end of 1995 and is estimated to have been 445 percent in 1996, and 21 percent in 1997. Despite plummeting gas exports in recent years, Turkmenistan’s current account was slightly positive in 1994 and 1995, as long as arrears owed to the country are not taken into account. If such arrears are counted the 1995 balance swings from an estimated surplus of 54 million US Dollars to a deficit of 289 million US Dollars. The situation has probably continued to deteriorate due to weak gas exports. 2 Theoretical Frameworks 2.1 Overview of Foreign Direct Investment Theories There is variety of empirical studies on theoretical models explaining foreign direct investment (FDI) and its determinants. The various approaches from different disciplines such as economics, international business, organisation and management explain numerous characteristics of this phenomenon. The following dissimilar methods, explaining foreign direct investment as the location decision of multinational enterprises are mostly acknowledged in empirical literature on FDI: Ownership advantages as determinants of foreign direct investment (including monopolistic advantage and internalisation theory) based on imperfect competition models and the view that multinational enterprises (MNEs) are firms with market power (Hymer, 1960; Buckley and Casson, 1979; Kindleberger, 1969; Caves, 1971 for ownership advantages) Determinants according to the Neoclassical Trade Theory and the Heckscher-Ohlin model, where capital moves across countries due to differences in capital returns (for example Markusen et al, 1995,pp. 98-128; Aliber, 1970); Determinants of foreign direct investment in Dunning’s ownership-location-internalization (OLI) framework, which brought together traditional trade economics, ownership advantages and internalisation theory (Dunning, 1977; 1979); Determinants of foreign direct investment according to the horizontal FDI model or Proximity- Concentration Hypothesis (Krugman, 1983; Markusen, 1984; Ethier, 1986; Horstmann and Markusen, 1992; Brainard, 1993); Determinants of foreign direct investment according to the vertical FDI model, Factor-Proportions Hypothesis or the theory

Advantages and Disadvantages of the Materialism Essay

Greek Philosophy: materislistic approach of the presocratics advantages and disadvantages The advantages and disadvantages of the materialistic approach of the pre Socratic philosophers. Please support your points by referring to the texts in Kirk and Raven, and discuss at least three philosophers . The pre Socratic philosophers marked an epoch in human ideas. Although it might seem stupid to suggest that everything is made of water or that the earth floats on a cushion of air, these ideas came from the people who are responsible for the way we see the world today. The advances that the materialistic approach of the pre Socratic philosophers made to humanities understanding of nature was considerable to say the least. This essay will discuss the advantages and disadvantages of the materialistic approach of the pre Socratic philosophers. It will start by dealing with Thales who Aristotle called the first philosopher. He can be seen as the catalyst of philosophy in ancient Greece. The essay will also deal with Thales’s friend and student Anaximander time and finally it will discuss Heraclitus. But first a look at something at the cutting edge of modern science that the pre Socratics paved the way for. At a place known as Cern in Geneva there is a machine called a large hydron collider. A machine that is expected to detect the Higgs Boson or God Particle as it is often called. This is the only standard model particle not yet to be observed and one believed to explain the origin of mass in the universe. You might wonder how this ties in with philosophy in 624 B.C., but it was here that people began their search for the Higgs Boson, although we did not know it by that name at the time. It was the pre Socratics who suggested that there was a basic substance from which all things are made and they who tried to explain what this basic substance was. Considering the lack of facility in around 500 B.C. to experiment and find what this material is made of, it is nothing short of astounding to see how close to the truth some of these philosophers got by using reason and their intellect. The idea that there is a single substance out of which everything is sourced known as material monism. It claims that the source of nature is something  physical and that there is only one such thing. It was in Ionia that material monism began. The Ionians â€Å"Within the space of a century Miletus produced Thales, Anaximander, and Anaximenes, each dominated by the assumption of a single primary material, the isolation of which was the most important step in any systematic account of reality†[1] The first of the Ionians was Thales of Miletus. The advantages of Thales’s materialistic approach were as follows: He revolutionised the way the ancient Greeks thought. He got them to recognize rational argument over all other sorts of authority and separated the natural world from the supernatural world.[2] Before Thales explanations of natural events were merited on aesthetic sensibility. The authorities for knowledge were poets like Homer who explained natural events with mythology. They claimed that divine muses inspired them and people believed that divine humanoid creatures known as the gods controlled nature[3]. Thales however understood that there were laws and routines that nature abided by and that events in the natural world could be predicted by observing the nature and using the information you receive understand it. Thales’s famous prediction of a solar eclipse convinced people to believe that there were patterns in nature which came about from natural events that could be rationalised. One of Thales main philosophical concerns was to find out what the basic substance of the world was. He believed it to be water. Why he believed this can only be speculated. We might see this as naà ¯ve but â€Å"From Thales onward, all inquiry into the nature of phenomena tended towards one end: The answer to the question, what is the nature of the whole? That is, what is the nature of the reality behind the phenomena? For Aristotle and therefore for us also, science and metaphysics begin together with Thales, the first man to have attempted to answer this question, and attempt an answer to this question, and therefore the first man known to have posed it†[4] To begin the search for a rational behind the natural world as Thales did was a giant leap for man kind. His ideas were refined by another Ionian who was probably a student of Thales. A man called Anaximander. Anaximander took the basic frame of Thales’s thought and put his own ideas into it. By this I mean he also believed that there was a source substance. However Anaximander’s materialistic approach had an advantage over Thales’s by â€Å"separating his explanatory entity from the entities that need explaining†[5]. Anaximander’s physis did not face some of the problems that Thales’s did, such as how is fire explained if everything is water? His explanatory entity was the focal point of his thought. He called it the unbound or apeiron. We cannot observe the Unbound but its existence Anaximander infers because of its explanatory role. This idea of the Unbound had solutions to two problems faced by Thales’s physis: 1) How does the basic substance give rise to the plurality of objects we observe around us? and 2)How does the world maintain itself?. His solution to problem 2) was: â€Å"the natural manifestation of physical law, imposing a lawfulness upon continually struggling opposites, and thereby maintaining equilibrium within the cosmos†[6]. And 1) â€Å"In Anaximander’s system the apeiron is both the source out of which everything derives and also the unifier within nature†[7]. I would like to also note startling evidence of Anaximander’s genius is his work in zoogony. â€Å"His intelligent observation that man (with nine months gestation and many years helplessness) could not have survived the primitive conditions without protection of some kind†[8] Shows for sight to Darwin’s theory of evolution. Heraclitus This essay will now deal with Heraclitus as his approach to answering what the nature of the universe was slightly different. The advantage of his philosophy was that it shed light on ideas that hadn’t been considered before. Heraclitus theory was that there was a law by which all things abided which he called the logos. He believed that everything was in opposition the strife between these opposites was what kept balance making all things one. He also claimed that everything was in a constant state of change, like a river is constantly flowing or in constant flux it is always the same river but always completely different. â€Å"Heraclitus’ thought possessed a comprehensive unity which seems completely new. Practically all  aspects of the world are explained systematically, in relation to a central discovery that natural changes of all kinds are regular and balanced, and that the cause of this balance is fire, the common constituent of things that was also termed th eir Logos.†[9] It is this idea of fire being that is the main disadvantage of Heraclitus’s approach. It is like taking a step forward with the logos and then going to steps back to the idea that one of the elements is the basis of all things. Although the idea of an all consuming fire does describe his Logos well it works better as a metaphor to describe the Logos than fire being the Logos itself. Conclusion To conclude the materialistic approach of the pre Socratics had many advantages. It was the catalyst for modern thought and it can be seen as the beginning of philosophy and science as we know it today. The use of rational argument over super-natural forms of authority showed that people’s thoughts could be progressed and altered by people to come after them. It is true that philosophy is a continuous dialogue that continues through the generations which has created a subject that can be said to define humanities search truth. The progression of thought because of this approach has lead to how we think today. The essay has outlined how Thales, Heraclitus and Anaximander made observations about the world that showed rational approaches to describe what the temporal world is. We still use this approach to find the Higgs Boson however we have the equipment to test our theories. It was a disadvantage of the pre Socratics that their theories were often far beyond their means of tes ting. But in conclusion the materialistic approach of the pre Socratic philosophers was a step in the right direction for philosophy. Bibliography: †¢ Kirk and Ravin, The Presocratic Philosophers A Critical History With A Selection of Texts (Cambridge University Press, 1957SparkNotes Editors. â€Å"SparkNote on Presocratics.† SparkNotes LLC. n.d.. http://www.sparknotes.com/philosophy/presocratics/ (accessed October 23, 2009) †¢ Kathleen Freeman The Pre-Socratic Philosophers A Companion to Diels, â€Å"Fragmante der Vorsackratiker† (Oxford Basil Blackwell 1946) †¢ Jonathan Barnes, The Presocratic Philosophers Vol. 1 Thales to Zeno (Routledge and Kegan Ltd 1979) ———————– [1] Kirk and Ravin, The Presocratic Philosophers A Critical History With A Selection of Texts (Cambridge University Press, 1957) .p.73 [2] SparkNotes Editors. â€Å"SparkNote on Presocratics.† SparkNotes LLC. n.d.. http://www.sparknotes.com/philosophy/presocratics/ (accessed October 23, 2009). [3] SparkNotes Editors. â€Å"SparkNote on Presocratics.† SparkNotes LLC. n.d.. http://www.sparknotes.com/philosophy/presocratics/ (accessed October 23, 2009). [4] Kathleen Freeman The Pre-Socratic Philosophers A Companion to Diels, â€Å"Fragmante der Vorsackratiker† (Oxford Basil Blackwell 1946) [5] SparkNotes Editors. â€Å"SparkNote on Presocratics.† SparkNotes LLC. n.d.. http://www.sparknotes.com/philosophy/presocratics/ (accessed October 23, 2009). [6] SparkNotes Editors. â€Å"SparkNote on Presocratics.† SparkNotes LLC. n.d.. http://www.sparknotes.com/philosophy/presocratics/ (accessed October 23, 2009). [7] SparkNotes Editors. â€Å"SparkNote on Preso cratics.† SparkNotes LLC. n.d.. http://www.sparknotes.com/philosophy/presocratics/ (accessed October 23, 2009). [8] Kirk and Ravin, The Presocratic Philosophers A Critical History With A Selection of Texts (Cambridge University Press, 1957) .p.142 [9] Kirk and Ravin, The Presocratic Philosophers A Critical History With A Selection of Texts (Cambridge University Press, 1957).p.212

The edocrine system

The endocrine system The endocrine system is a collection of ductless glands which are positioned through the whole body. The endocrine glands pass their secretions of hormones directly into the blood stream so that they are always adjacent to blood vessels. Hormones are chemicals in the body produced and secreted in the body that regulate the function of a particular tissue or organ (Bing dictionary). These chemical messengers transfer information from one set of cells to another.Despite many chemicals being transmitted and circulated around the body via the bloodstream, each one only acts n the cells that are genetically programmed to receive and respond to its message. Hormone levels can be influenced by many factors including stress, infection and changes in the balance of fluids within the body. A gland is a group of cells that produce and secrete chemicals (http://kidshealth. org/parent/general/body_basics/ endocrine. html). A gland will select and eliminate waste materials fro m the blood, then process it and secrete the end product for use at another location in the body.Endocrine glands release more than 20 major hormones straight into the loodstream and from here they can be transported to the cells in other parts of the body. There are many major glands that make up the endocrine system and these include the: hypothalamus, pituitary, thyroid, parathyroid, adrenals, pineal body and the reproductive glands (testes for males and ovaries for females). The pancreas is also involved in secreting hormones which are involved with the maintaining of blood sugar levels within the body.The pancreas is also associated with the digestive system as it produced hydrolytic enzymes which aid with digestion. Neuro- endocrine system The nervous and endocrine systems control all the biological processes within the body and they can almost control one another. The nervous system can stimulate or inhibit the release of certain hormones while the endocrine system can promot e of inhibit nerve impulses. Hypothalamus The hypothalamus is found in the lower part of the brain and is a collection of particular cells.It has key links with the nervous system and the endocrine system and has an important role in secreting hormones. The nerve cells in the hypothalamus control the pituitary gland by producing certain chemicals that can timulate or supress hormone secretions from the pituitary gland. The pituitary gland is moderately small and is located at the base of the brain beneath the produced hormones that control other endocrine glands within the body. The hypothalamus can convey information sensed by the brain to the pituitary gland to make any changes that could be influenced by factors like emotions and seasonal changes.The pituitary Gland The pituitary gland is divided into 2 sections: Anterior lobe This regulates the activity of the thyroid, adrenals, and reproductive glands. It also roduces growth hormone which stimulates the growth of bone and other body tissues. It also produces prolactin which stimulates mammary gland growth and activates milk production in females. Thyrotropin is another hormone produced and this stimulates the thyroid gland to produce thyroid hormones. Corticotrophin is produced which causes the adrenal glands to produce certain hormones.Follicle- stimulating hormone (FSH) is also produced and affects ovaries in females and stimulates the development of oocytes. It also affects the testes of males and stimulates the production of sperm. Luteinizing hormone (LH) affects the ovaries in females and stimulates ovulation, the formation of the corpus luteum and results in secretion of oestrogen and progesterone. It affects the testes of males and stimulates the production of testosterone. The pituitary gland also secretes endorphins. These are chemicals that act on the nervous system and allow us to reduce our sensitivity to pain.It also triggers the reproductive organs to release sex hormones such as testostero ne in males, and estradiol and progesterone in females which play a part in the menstruation cycle. Posterior lobe This releases antidiuretic hormone and this encourages reabsorption of water by the kidneys. The posterior lobe also produces the hormone called oxytocin and this helps induce labour and produces milk in the mammary glands of females. Another hormone produced in the posterior lobe is Melanocyte-stimulating hormone (MSH) and this helps with the darkening of the skin. Hull. R, Anatomy & Physiology for Beauty and Complementary Therapies, the Write Idea Ltd, 2009) Thyroid The thyroid is positioned in the lower region of the neck at the front and it produces a hormone called thyroxine. This is an amino acid derivative and increases the metabolic rate and heart rate. It also promotes growth within the body. Another development also, and helps with body temperature and plays a role in metabolism. Calcitonin is another hormone formed which targets bones and lowers the level of calcium in the blood.The production and release of these thyroid hormones is controlled by Thyrotropin and this is secreted by the pituitary gland. If a person has more thyroid hormones circulating in the blood stream, the chemical reactions within the body will occur much quicker. Parathyroids There are 4 small glands that are attached to the thyroid called the parathyroids. These release a hormone called parathyroid hormone and this adjusts the level of calcium in the blood with the help of calcitonin, which is also formed in the thyroid. (http://kidshealth. rg/teen/your_body/body_basics/endocrine. html). It also decreases the level of phosphate in the blood and promotes the formation of calcitriol by the kidneys. Thymus The thymus gland plays an important role in the immune system and secretes numerous hormones. One of these is thymosin and this promotes the growth of T- Cells which are a type of white blood cell. (Hull. R, Anatomy & Physiology for Beauty and Complementary Therap ies, the Write Idea Ltd, 2009). Adrenal Glands The adrenal glands are situated above each kidney and release many hormones that are important in the body.The adrenal glands are divided into 2 sections and each one has a particular function: Adrenal cortex The adrenal cortex produces steroid hormones that are essential in the body. These hormones are grouped into mineralcorticoids, glucocorticoids and sex hormones. This produces corticosteroids that regulate water and salt balance in the body. They also play a role in the bodys response to stress and help maintain metabolism. The adrenal glands also produce mineralcorticoids (mainly aldosterone) and this acts on the kidneys.It regulates the mineral content of the blood by increasing blood levels of sodium and water, it also decreases blood levels of potassium. Sex hormones called androgens and oestrogens are also produced in the adrenal cortex and these have a small contribution to sex drive and libido. The adrenal medulla in innerva ted by neurones of the sympathetic branch of the ANS and can quickly release hormones called catecholamines. One example of this is epinephrine (also known as adrenaline) and this produces many effects which are related to short-term stress response.It is also responsible for the â€Å"fght or flight† response which is triggered during times of stress. This increases blood pressure and heart rate (from own personal notes). Another hormone called norepinephrine (also known as noradrenaline) plays a role in the body's response to stress. It decreases the rate of digestion and stimulates cellular metabolism. Pineal Gland The pineal gland is located in the middle of the brain and it secretes a hormone alled melatonin and this regulates sleep patterns in the body.Reproductive glands In males the reproductive gland is the testes. It produces a hormone called testosterone which regulates the development and maintenance of secondary sex characteristics. In females the reproductive gl and is the ovaries. A hormone produces is estradiol which regulates the development and maintenance of secondary sex characteristics. Another hormone produced is progesterone and this prepares the uterus for pregnancy and is involved in the regulation of the menstrual cycle in females. PancreasThe pancreas is also involved in secreting hormones around the body and also links with the digestive system as it secretes digestive and hydrolytic enzymes. The pancreas produces 3 hormones. Insulin: this is secreted from the beta-cells of the islets of Langerhans in the pancreas and is secreted in reply to a raised blood glucose concentration. The effect of insulin is that is lowers blood glucose concentration to normal levels. The modes of action for this are that it stimulates the absorption of glucose from the blood by the muscle fibres, liver cells and adipose cells.

Stop Hypertension Diet - 872 Words

Introduction The Dietary Approaches to Stop Hypertension (DASH) diet is a diet often used in patients with high blood pressure. This diet is high in fruit and vegetables, low-fat dairy products, and low in animal protein, which has been shown to keep a patient’s blood pressure at a normal level (Taylor, Fung, Curhan, 2009). This healthy diet encourages healthy eating with low sodium levels, which is the key to lowering blood pressure. It is a nurse’s job to provide education and encourage a DASH diet in patients with high blood pressure, but there have been some studies that show a decrease in kidney stone occurrence in patients who are on this diet. Dash-Style Diet Associates with Reduced Risk for Kidney Stones In a study done by†¦show more content†¦al, 2009). Urinary Lithogenic Risk Profile in Recurrent Stone Formers with Hyperoxaluria: A Randomized Control Trial Comparing DASH-Style to Low-Oxalate Diet In 2013, a study was done by a group of doctors comparing the effects of the DASH diet to an oxalate-restricted diet in preventing kidney stones by monitoring the urinary supersaturation of calcium oxalate (Noori et. al, 2014). They hypothesized the DASH diet would work better than the low-oxalate diet in lowering the urinary calcium oxalate supersaturation thus lowering the risk for kidney stones (Noori et. al, 2014). To test this hypothesis, they have a group of twenty people on a low-oxalate diet while the other twenty-one were on the DASH diet. The doctors collected 24-hour urine samples at the beginning and at the end of the study to test the urine calcium oxalate levels. As hypothesized, the DASH diet resulted in a decrease in calcium oxalate supersaturation when compared to the low-oxalate diet (Noori et. al, 2014). According to Noo ri et. al (2014), the suspected reasoning was the DASH diet included a high calcium intake which allowed for more calcium to be available in the intestinal lumen to bind with oxalate this resulting in more oxalate being excreted rather than absorbed. The doctors thought the reduced intake of protein in the DASH diet lead to a decrease in the oxalate synthesis thus leading to a decreased saturation (Noori et. al, 2014). With these findings, the doctorsShow MoreRelatedThe Height Of Dietary Methods For Stop Hypertension ) Diet Plan1558 Words   |  7 PagesThe DASH (Dietary Approaches to Stop Hypertension) diet plan is the first which aims to avoid hypertension and, by doing so, to reduce the risk of various heart diseases. It is also an ideal diet plan to maintain good overall health. As a full-time student I frequently have little time to prepare a meal which is full of all the nutrients one requires. 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Human Milk Versus The Motherly Instinct And Traditional...

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1994 Mexican Currency Crisis - 4565 Words

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Community Health Critical Reflection and the Learning Organization

Question: Discuss about the Community Health for Critical Reflection and the Learning Organization. Answer: 1. Social determinants of health are conditions where people live, work, grow, born, age and includes the wider set of systems and forces that shape the daily life conditions. The systems and forces include the systems and economic policies social norms, development agendas, political systems and social policies. Experiencing the living conditions shape the health of a population rather than the lifestyle choices and medical treatments. A social determinant of health perspective is a view point that investigates and justifies the health condition of an individual or a group. Various factors are responsible for shaping the health and experiencing the living conditions that form the perspective. Decisions of the government in the public policy domains are also responsible for shaping the living conditions (Braveman Gottlieb, 2014). The income that an individual receives through social assistance, family benefits and employment determines the availability and quality of affordable hous ing, recreational opportunities and social and health services that determine the living experience. From the perspectives of high levels of psychological and physiological stress, people suffer from adverse material and social living conditions. The prime reasons for these stressful living conditions are poor quality of housing, low income, inadequate working conditions, low income and insecure employment. Stress is further increased by mistrust, social isolation and supportive relationships and leads to prolonged biological reactions straining the physical body. Implications of policies should focus on the problem source for reducing stress and improving the conditions of living experience for the people by the decision makers and the elected representatives (Suhrcke Kenkel, 2015). The perspectives of income are the most important social determinant of health and the income level shapes the overall condition of living by affecting the psychological and physiological functions. Basic prerequisites of health like housing and food security are the social determinants of health that are determined by income. Lower income population is often faced by material and social deprivation and this makes them unable to afford the basic prerequisites. This also leads to the social exclusion of the people and they fail to participate in the recreational, educational and cultural activities. Consequently, it affects the health and reduces their ability to perform (McMurray Clendon, 2011). Policy makers and government need to address this concern by increasing the wage levels and providing support to the disadvantaged individual or group. Reducing income inequalities is also another effective step for improving the overall community health. Education forms another important social determinant of health perspective and more educated the people, more healthy they tend to be. Education level is connected and correlated with the various social determinants of health like working conditions, employment security and income levels. It becomes easier to raise the socioeconomic ladder with higher education for getting access to the economic and societal resources. When the literacy rate is increased, the understanding of self-promotion of health develops (Pockett Beddoe, 2015). People develop sophisticated skills and attain the understanding regarding the beneficial and harmful factors of health. Policy makers, therefore, should focus on developing a curriculum for the school students so that consciousness for a healthy life is attained at an early age. Support should also be provided to the underprivileged children who cannot afford schooling. 2. The society is benefited by taking action on a social determinant of health perspective in improving the health and wellbeing of the community. Since the social determinants of health can be viewed from various perspectives, it can be said that from each perspective, the society is benefited by taking action on them. From the perspective of stress, it is evident that physiological and psychological stress leads to straining of the mind and body (Marmot et al., 2012). Chronic stress leads to prolonged biological reactions and chances of recovery diminish under such circumstances. Therefore, to avoid diseases of the immune system and cardiovascular system, action has to be taken to reduce the stress. This can be done by improving the living experiences of the people by practicing healthy eating habits and taking up physical leisure activities (Chambers Walker, 2012). Healthy eating habits provide the energy to cope up with the daily stress and healthy living programs enhance the qu ality of life of the individuals. Taking up of physical leisure activities promotes the de-stressing and therefore, taking up of drugs is avoided for relieving the stress symptoms. All these factors enhance the living experience and therefore, a healthy community is developed. The perspective of income is the most important social determinant of health and therefore, influences the most in determining the health of the community. Meeting the basic prerequisites of health can greatly influence the health of the community and therefore taking action on this perspective can be beneficial for the society. Income inequality has been the biggest factor for issuing the health of the people based on income and balancing the income of the people can bring about a positive change. Progressive taxation can be an effective way to bring about the income inequality and this can bring equal health in the community by promoting the living experience (Keleher, 2011). Enhancing the levels of assistance and increasing the minimum wage of the people who are disabled or unable to work can benefit their health by coming out of their disadvantage. The educational perspective of social determinant of health is not only beneficial for the society in terms of earning bigger income, but also helps them to practice better and healthy living habits. Higher education facilitates to acquire greater knowledge on self-care practices and avoids the chances of getting indulged in poor health conditions. Therefore, action has to be taken to improve the educational status of the community as higher literacy rate is directly related to better living experiences. More resources are gained and greater ability is achieved with higher education and it is of paramount importance to attain healthier lifestyles (Benach et al., 2014). Taking the action at the school level education will be beneficial as it will be helpful for the individuals from an early age. In addition, appropriate arrangements for the schooling and higher education of the children of low-income families has to be done to promote the health improvement program at all levels of th e community and building up a healthier society devoid of illness. 3. The public health approach to healthcare is a powerful and unique way to address and perceive the local and national issues of health. It deals with the entire community and is focused on the health and wellbeing of the community dwellers. It includes interventions that are population based and aims at preventing an issue or health condition by limiting disability and death. The public health approach to healthcare has a number of roles and responsibilities that involve assessment, policy development and assurance. Assessment is the statistical analysis of the health status of a community by collecting data on the health problem (Drummond et al., 2015). Policy development involves the implementation of the scientific knowledge in the process of decision making and assurance makes sure that appropriate health services are received by the community dwellers. Social work is of utmost importance in public health response and this can be justified by citing two examples of public health where social work plays a pivotal role. Two of the cases where social workers play a major role are the prevention and transmission of HIV/AIDS disease and promoting the health of the aged population. HIV/AIDS is recognized as a global pandemic that has affected the communities and its dwellers worldwide and exerts economic and social implications (Baldwin, 2016). Social workers help to tackle the epidemic and counsel the patients suffering from HIV infection. Intervention is conducted by estimating the crisis of the situation by providing case management philosophies. They serve to educate the general population and the groups that are at high risk to develop the disease for reducing the risk of the infection. Social workers support the implementation and development of the health management programs including the prevention and educational strategies for m eeting the requirements of the HIV-infected patients (Shelby, Aronstein Thompson, 2014). They are responsible for advocating the lobby for just and equitable distribution of the available resources, support structures and services and provision of the essential medications. The aged population needs care for living a healthy life and social workers help them to stay independent and mobile. This in return increases the quality of life for the individual and their family. They provide referral services, counseling and assessment for the promotion of health in various settings for healthy living experiences of the older adults. They act to increase the research alliances and information sharing. Test interventions are implemented for improving the quality of life and ensuring better health for the older adults. They advocate the maintenance and development of the infrastructures of the community for safe accommodation of the older adults. This helps them to mobilize and get socially engaged that promotes their physiological and psychological state of health. Community competence is improved by the social workers that eventually helps the older population to enhance their health literacy and supports them to practice healthy behaviors (Payne, 2014). Social workers also work towards community management for making the community a better place to live for the seniors. They work to reduce the potential barriers for the elderly existing in the neighborhood for the promotion of healthy aging like insufficient external lightings and poor condition of roads and paths. References Baldwin, M. (2016).Social work, critical reflection and the learning organization. Routledge. Benach, J., Vives, A., Amable, M., Vanroelen, C., Tarafa, G., Muntaner, C. (2014). Precarious employment: understanding an emerging social determinant of health.Public Health,35(1), 229. Braveman, P., Gottlieb, L. (2014). The social determinants of health: it's time to consider the causes of the causes.Public Health Reports,129. Chambers, A.H. Walker, R. (2012). Introduction to health promotion. In P. Liamputtong, R. Fanany G. Verrinder (Eds.). Health, illness and well-being (pp. 107-124). South Melbourne: Oxford University Press. Drummond, M. F., Sculpher, M. J., Claxton, K., Stoddart, G. L., Torrance, G. W. (2015).Methods for the economic evaluation of health care programmes. Oxford university press. Keleher, H. (2011). Public health. In H. Keleher C. MacDougall (Eds.). Understanding health (3rd ed., pp. 17-32) South Melbourne: Oxford University Press. Marmot, M., Allen, J., Bell, R., Bloomer, E., Goldblatt, P. (2012). WHO European review of social determinants of health and the health divide.The Lancet,380(9846), 1011-1029. McMurray, A. Clendon, J. (2011). Community health and wellness: A socio-ecological approach (4th ed). Marrickville, NSW: Elsevier (pp. 5-27) Payne, M. (2014).Modern social work theory. Palgrave Macmillan. Pockett, R., Beddoe, L. (2015). Social work in health care: An international perspective. International Social Work Shelby, R. D., Aronstein, D. M., Thompson, B. J. (2014).HIV and social work: A practitioner's guide. Routledge. Suhrcke, M., Kenkel, D. (2015). Social determinants of health: early childhood development and education.Promoting Health, Preventing Disease The Economic Case: The Economic Case, 237.