Sergei MATYUSHENKO
ATYRAU, Aug 29 (THE GLOBE)
�We wish to present our region to investors once again,� the Akim of Atyrau region announced.
Imangali Tasmagambetov believes that the Atyrau region is attractive thanks not only to hydrocarbon raw materials, but also to the transport and communication infrastructure.
�What we are doing, follows lead of the policy of the state leader regarding investment attractiveness,� Mr. Tasmagambetov emphasised.
According to the Akim, the 100th anniversary celebration program is based on the scientific conference, which is to reveal the potential of their region for investors. Namely from this conference, all jubilee events will start.
As far as the celebration program is concerned, Imangali Tasmagambetov said that the old stadium had been reconstructed and on September 2 there would be a great celebration performance, in which both Russian and Kazakhstan stars would take part. On September 3, in the morning, the head of the state will arrive. At first he will go to the ancient settlement Saraichik, the capital of Golden Orda of the 13th century, which is situated at a distance of 30 km from Atyrau. A memorial complex has been erected there. The complex consists of 3 objects: the complex itself, a mosque and a museum. The complex will be inaugurated by Nursultan Nazarbaev. Then in Atyrau Nazarbaev will meet heads of Chevron, Mr. Mazke, shareholders of OKIOC and the Caspian Pipeline Consortium (CPC), and other investors. The President will stipulate once more the strategy in the power complex.
Then the President will meet governors of regions bordering on Russian Federation, as this meeting is traditional. Later Nazarbaev will inaugurate the reconstructed bridge and a solemn meeting will be held in the local drama theatre. On September 4, the last day of the celebration, the horse-sport holiday, baiga will be held in the hippodrome within the town.
The Akim of the Atyrau region said that the celebration was financed by Chevron, the main sponsor (US$ 4 million for reconstruction of the bridge and houses� facades); OKIOC had invested US$ 2.5 million to construct the museum of regional studies; and KazakhOil and KazTransOil, which had invested to organisational moments about US$ 500 000 each. �Not a single penny was taken from either the local or republican budgets,� Mr. Tasmagambetov emphasised.
In addition, Mr. Tasmagambetov said that about 500 honourable guests had been invited to the event. Besides the head of the state and many members of the government, almost all leaders of companies-shareholders of OKIOC, Tengizchevroil and the head of CPC will take part in the celebration of the 100th jubilee of the Kazakhstan oil. �Our celebration will also be visited by representatives of big foreign and local oil companies. Maybe, Victor Chernomyrdin will also take part in the event,� the Akim stated.
ATYRAU, Aug 27
(THE GLOBE)
�To my mind, the government should not sell 10% of its 25% share in the JV �Tengizchevroil� (TCO),� the Akim of Atyrau region announced on Friday in Atyrau.
Imangali Tasmagambetov said that his opinion was grounded on the fact that from 2001 the republic would annually gain dividends in the amount of US$ 150 million.
In his opinion, the sale of the Kazakhstan�s share in TCO will negatively influence the company�s operations.
According to the charter of TCO, even if the republic�s share decreases, nevertheless Kazakhstan will preside at the meeting of the company�s Board of directors, as all enterprises are located and functioning in the territory of RK.
According to Mr. Tasmagambetov, the republic would be able to withstand the difficult situation without any sale of its share in the JV, if another alternative variant to overcome the budget crisis, which forced the government to take this decision, was found.
However, this decision is a prerogative of the government.
ATYRAU, August 28
(THE GLOBE)
On Friday, representatives of K�cell and Kazakhtelecom announced the introduction of the world�s most widely spread digital cellular communication of GSM standard in Atyrau.
According to the finance director of K�cell, the switchboard for 8000 cellular subscribers, installed in Atyrau, is functioning thanks to the modern digital international telephone station 5 ESS of Kazakhtelecom installed in 1994.
�By this moment, the company has invested US$ 3 million to Atyrau region to install and put into exploitation cellular communication equipment,� Mustafa Guzelsevdi said.
According to experts� evaluation, the pay off period of the project, the representative of K�cell emphasised, was 2.5 years. It is planned that the company will additionally utilise in this field US$ 12 million. In the result of a half-a- year work of �Kazakhstanskaya sotovaya�, citizens of Almaty, Astana, Shymkent, Taraz, Karaganda, Temirtau and Kapchagai are using services of mobile communication. Mustafa Guzelsevdi is confident, that within a year the network of K�cell will practically cover all big settlements in the republic.
At the present time, the total number of subscribers of K�cell has exceeded 10000. The initial capacity of communication stations in Kazakhstan is intended for 158 000 subscribers.
In addition, the financial director of the company emphasised that it was also significant that the company had provided about 100 local specialists with working places, excluding personnel working in companies-official distributors of K�cell.
K�cell, which was found by the Turkish company �Turkcell� (51%) and �Kazakhtelecom� (49%), is planning to invest in this year about US$ 57 million to the development of the cellular standard GSM.
The company will further follow the policy of availability for everyone and widening the range of modern telecommunication services.
Jack ENEN
ALMATY, Aug 28
(Specially for THE GLOBE)
The basis for these comments emanate from over five years of experience operating an oilwell servicing business in the Mangistau Region in Western Kazakhstan under the present economic system in Kazakhstan. The company made a significant contribution of enhanced production of oil for the Republic of Kazakhstan. This experience in the oilwell servicing industry exposed business life as it truly functions in the Republic of Kazakhstan.
This article will examine the differences between doing business, for example in Midland, Texas, USA, in the oilfield service business versus the Republic of Kazakhstan. We will consider only a few of the differences for the sake of brevity. The main topics to be discussed are the need for reform, tax law - need for change, the present tax code, suggested short-term tax relief, the need for more government and business cooperation, free market training about risk and reward, upfront court fees - the impact, open communication in government, especially in the Oblast, and the tenure of employee contracts.
The need for reform
In working through the system in Kazakhstan, many mistakes can occur because Western free market business logic, used to establish a small business with an entrepreneurial spirit in a supposedly post communist culture, faces many problems. There is an absence of understanding of the real value of economic contribution to the country from the actual growth of dynamic small, thriving businesses. Small to mid-size businesses, in any sector of the economy, are fundamental to economic development, revenue contribution to the budget, and job creation. They become job opportunities for countless displaced workers from government downsizing or privatization.
What is needed to excite new foreign investors into Kazakhstan, in all sectors of business, is major reform in the government�s approach to attracting inward investment. The present country economic policies are basically an extension of principles employed under a prior communist government. In the Oblasts level of government, there is little change from the thinking since 1991. This fact makes it difficult to interact between Western investors and local bureaucratic agencies throughout the country. Free market principles are preached at high levels of government, but are not understood or practiced at the lowest level of government. This lower level of government has the most dramatic, negative day-to-day impact on small to mid-size businesses attempting to function inside the Kazakh culture.
Most of the companies that invest in the Republic of Kazakhstan enter into partnerships such as joint ventures or production sharing contracts with the government. There are certain protections and incentives afforded to foreign companies under these arrangements. Major accounting firms or law offices registered in the Republic can more effectively address these issues. This article will be confined to pointing out a few of the operating differences between East and West that confront anyone that intends to establish a small to midsize branch of a foreign corporation in Kazakhstan. There are major opportunities in Kazakhstan, but it must be realized that you will face difficulties everyday in a culture that is significantly different from the West.
In most developing countries that practice free market principles, efforts are made to strengthen their investment climate by providing incentives to attract businesses. All of the countries, regions, and cities of the world are competing for economic development dollars. The absense of enthusiasm and participants in recent Kazakhstan inward investment forums and seminars should sound an alert that reforms are long overdue. The Republic of Kazakhstan is rich in hydrocarbon resources with a vast potential for development. These resources could attract a major development of small to mid-size businesses in the Republic if some changes in government economic policy was adjusted to support and partner with these companies. The balance of this article will examine a few of the differences and suggested changes that may enhance the investment climate in the Republic of Kazakhstan.
The tax law - need for change
The tax law must be changed for any small company to survive and grow in Kazakhstan. The timing of the obligation to pay taxes can ruin a business. When you write an invoice for services rendered, you will be expected to pay taxes whether or not that you ever receive payment from your clients. If you are paid on time, you would have the funds to pay the tax on a timely basis. In the USA, quarterly tax payments are paid based on anticipated receipts of funds. If an overpayment is made, the government, at the end of the tax period, refunds your money. In Kazakhstan, if you pay too much tax, you will, under the current vibrant activity to keep all money for the budget, not enjoy a refund.
It is a serious mistake to continue to work when clients violate the payment terms of their contracts. When you write the invoice, you owe the tax. [At this writing, we understand that the law has been changed whereby you now pay the tax after your receive your payment from a client] Unless you receive your money upfront in Kazakhstan for all your service work [which we strongly recommend], you should stop working immediately when your clients exhibit �deadbeat� tendencies. If you continue to work in good faith, you will be responsible for all taxes, fines, and penalties. The government will relentlessly pursue the service provider for taxes, penalties, and fines and totally ignore your �deadbeat foreign clients� that don�t pay for your services. Have your cash in hand before tax day and under no circumstances continue to work on more than thirty (30) days credit in Kazakhstan.
If you are not timely in tax payments, any funds deposited in your local bank account will be confiscated. The freezing of your corporate bank account is a common occurrence. If you do work in Kazakhstan with an outstanding tax debt, although your contract provides for payment abroad, the tax police will force your client to pay you in your local bank account. When such payment is made, the tax police will confiscate your funds. If your client abides by their contract and makes payment abroad, the tax police will confiscate an amount of money equal to the amount of your invoices from your client�s account.
And don�t think about negotiating a long term payout with the tax authorities to retain some operating funds in your company. Flexible thinking does not exist in the post communist era. Everyone in government has his or her job as per instructions from the top or strict laws. They will not deviate from their designated tasks or their individual interpretation of Kazakh law.
The banking system is based on the communist ideal where all payments were wire transferred funds between government agencies. All funds moved between banks. In Kazakhstan, you will need to present contracts to your bank to affect payment. To move funds abroad, you�ll need a contract in place in your bank, also. If you are not a registered branch, your client will deduct twenty percent withholding tax from your invoices; if you are registered in Kazakhstan you will need to add twenty percent value added tax.
The present tax code
If the tax code continues and remains unchanged, the service providers, who complete their work, should not be liable for the harsh tax penalties imposed when their clients are delinquent in payment. Consistency is needed in the application of tax laws. There have been too many adjustments and changes in the past few years. The investor needs to know that stability will exist in tax laws for the term of the investment for a minimum of three years. There should be a �hot line� in the highest level of the tax Inspectorate for addressing grievances of tax payers when they feel that their rights are being abused.
Suggested short-term tax relief
A tax holiday can be an investment incentive especially attractive to small to midsize business. For example, income tax could be waived for three years as an attraction to invest in Kazazkhstan. The tax holiday could be predicated on the value of the investment, the number of jobs created; more jobs, greater income tax relief. A formula could be developed that would reward the investor and the government. The collection of VAT would continue, but companies should only be required to make tax payments to the government after income is collected. The government should always remember that it is competing for investment dollars with other countries in the Region or anywhere else in the world. But in fairness, Kazakhstan does have some tax holiday relief that can best been explained by professional Kazakh tax consultants.
And, tax holidays for capital equipment imports should be considered as an enticement for foreign companies to establish manufacturing plants in the Republic of Kazakhstan. Such imports into Kazakhstan should be exempt from import duties and taxes. This incentive could be combined with expanded free trae zones throughout the Republic to encourage small to mid-size business development. Kazakhstan has a vast reservoir of educated and skilled labor that could be used in creating new businesses.
As an example, a model based on the Maquiladora industry in Mexico, that has produced many quality jobs, should be evaluated and debated. There is every reason to believe that Kazakhstan, under the right reforms, could compete with the Peoples Republic of China for manufacturing or assembly of products to export abroad. This could be an economic engine for job creation with accompanying increased revenue for the budget. This has enormous potential and promise for the energy sector.
These are some minor policies that could be adopted by the Republic of Kazakhstan to attract more foreign investors to this country in the energy and other sectors. These ideas have been employed in other developing countries around the word to enhance economic development. The government should understand that reforming economic policies to attract more inward investment may result in less short-term revenue, but reforms will return more income to the budget through long-term economic growth and job creation. This principle is always difficult to grasp in developing nations that focus primarily on the receipt of short-term revenue.
The need for more government and business cooperation
The Oblasts should encourage greater cooperation between government and business. One way this could be done is to have frequent meetings between small to mid-size businesses and the tax inspectorate, the tax police, the prosecutors, and members of the court to understand and deal with the problems that all groups encounter working with each other. The local government�s role should be more centered on assisting foreigners in solving their problems encountered in the Kazakh culture rather than punishing foreigners when they make mistakes. After all, the foreigner is a guest in Kazakhstan.
Free market training about risk and reward
Introduce studies in existing business schools to teach and focus on more training about free market and accounting principles. This is especially important to people that are furloughed by downsizing as a result privatizing. Free market training and an understanding of the real meaning of risk and reward may lead some students towards creating a business and jobs. It would also be a good idea for bureaucrats from the post communist world to attend these courses to learn about Western business practices to increase their understanding of how foreign companies operate. This would be very helpful for local government and foreign investors.
For example, foreign companies have substantial foreign expenses; a fact that is not often understood or accepted by the Oblast tax police. Foreign expense deductions are allowed at the sole discretion of the local tax authority. Under current law, fines and penalties on unpaid taxes are levied against the service provider, not the non-paying customer. This is unjust and can place the survival of small to mid-size businesses in jeopardy.
Upfront court fees - the impact
Today, the court in Kazakhstan charges any business three percent (3%) of the value of a claim to file a lawsuit. In the West, the court fees are agreed and settled in the court judgments. This small percentage could be a substantial burden on small companies, and in fact may preclude the filing of a suit, especially on large claims. The fee should be deducted from the proceeds of the award after the suit is settled. Also, some flexibility needs to be exercised in the interpretation of the law. In many cases there are conflicting laws in the same booklets that detail the laws of the Republic of Kazakhstan. Too often, when there are conflicting laws on the books, a bureaucrat will select the law that bets fits his or her purpose.
The courts should enforce contracts at all levels. There should be arbitrators in Kazakhstan for dispute resolutions inside the country. International arbitration is far too expensive for small to mid-size businesses. A partnership in attaining economic development between government agencies and small to midsize businesses should focus on solving problems through negotiations and counseling, not severe punishment which can destroy a business, jobs, and have a devastating effect on economic development.
Open communication in government, especially in the Oblast
Very often, the tax people don�t talk with the prosecutors; the prosecutors don�t talk with customs, and so on. It would be useful to have the meetings as discussed previously between the government agencies and small to mid-size businesses. The top of the government in Astana should encourage more cooperation and openness in the local governments in the Oblasts to work with small to midsize businesses to create more jobs, provide for more economic development, which, in turn, raises more taxes for the budget.
The tenure of employee contracts
When you operate as a service company in Kazakhstan, be very careful with your local employment contracts. If you sign a contract with a Kazakh employee for one year, you will legally be liable for the wages, taxes, and pension fund contributions based on the term of the contract. For example, if you sign one year contracts and shortly thereafter stop working and terminate your employees you will be responsible for payment of their salaries on the balance of the contracts.
Employees have the right to file suit in court and you will be obligated to pay salaries, taxes, and benefits. Structure your employee contracts in line with the tenure of your contract with your clients. In fact, it would be helpful to have a clause in your service contract with your clients to protect you against this liability in case of early client termination of your contract. As with taxes, your payment obligation continues in concert with the tenure of the employee contract although your client may not make a payment to you.
The conclusion
The above comments are a few salient points that potential investors and the Republic of Kazakhstan should consider when reform is being debated and changes are put into place to attract investment in the energy or any other business sector. Reform of the tax policy should be very high on the improvement list. Payment of taxes should occur only after income is received. The Republic has an educated and skilled work force. The problem for businesses, on a day-to-day basis, reside in the post-communist bureaucracy in the Oblasts.
The energy sector has tremendous potential opportunities for the establishment of job creating service companies. For a service company to operate effectively and profitably, reforms such as the few discussed above, must be implemented. The Republic of Kazakhstan needs to attract new small to mid-size foreign businesses. These suggested reforms should be debated and changes should be made sooner, rather than later, to avoid social unrest that will certainly occur with pending high unemployment rates in the Oblasts.
Capital will follow opportunity. But, Capital also flees oppression. When the Republic of Kazakhstan clearly defines the opportunities and modifies laws to permit the free market system to function smoothly, where risk and reward is balanced, many candidates to establish a vibrant small to mid-size business infrastructure will appear. Until then, growth will be mostly relegated to the multi-national investors that are known for high dollar investments, but small job creation.
The most effective opportunity for enhanced economic development and job growth in any country will be achieved by expanded growth of the small to mid-size business sector. Inward investment should be high on the list of priorities of the government. This can be facilitated through the immediate implementation of realistic business incentives and tax reforms that will attract energy service and manufacturing industries into the Republic of Kazakstan.
The companies, for whom the author of the attached article serves as Director, were not paid for all the goods and services that they provided under contract and on a professional basis for the following companies:
1. JSC Mangustaumunaigaz, currently being acquired by Central Asia Petroleum, has not paid ENKAZ Limited $5,000,000.00 in approved invoices for the past 2-3/4years. ENKAZ Limited improved oil production for the state, but the state has not paid for the services provided under contract. The service provider,ENKAZ Limited, is being deprived of payments for services that benefited the Republic of Kazakhstan.
2. Atlantic Caspian Resources PLC., London, England, acquired a 50% interest in Kezbi Anglo Caspian Munai, a joint venture intended to produce oil in the non-oil producing Kemenistoye Field in Western Kazakhstan. Anglo Caspian Resources PLC was awarded 80% of any potential oil in exchange for paying all the �hard costs� associated with rehabilitating the field. [Source: Atlantic Caspian Resources PLC. Prospectus, March 1999].Atlantic Caspian Resources PLC., through the JV with Kezbi, owes ENKAZ Limited over $800,000.00 for the materials and services provided under contract in the Kemenistoye Field. Although, the contract called for payment upon presentation of invoices, ENKAZ Limited extended credit based on hollow promises. This debt is 12 months overdue.
3. Formerly Triton Vuko, now Nations Energy, Houston, Texas, through their Joint Venture partner Karazhambasmunaigaz, which they control, has not paid CATKAZ Limited over $140,000.00 for catering services. While they refuse to face up to their debt, they were most enthusiastic in accepting the services as provided and approved every invoice for payment. This debt is overdue by 10 months.
Because ENKAZ and CATKAZ were not paid by the above �deadbeat� companies working in Kazakhstan, they did not have the cash to pay to the budget. This means that the government is a big loser alongside the service companies. If the state and foreign investors would honor their contracts with service providers in Kazakhstan and make payments as scheduled, then money would be available for payroll and the government�s budget. It is obvious when �deadbeat� investors don�t meet their moral and ethical obligations under their contracts, the service companies and the government suffer immensely.
Transparent, non defensible, unethical excuses may be offered for their failure to meet their payments, but the undeniable fact remains that all three of the above companies benefited significantly from the work performed by ENKAZ and CATKAZ Limited.
As of July 1999, with interest on unpaid debt being calculated at 1-1/2 % per month for JSC Mangistaumunaigaz and Atlantic Caspian Resources, and interest on upayed debt, in accordance with the contract calculated at 1% per month for Karazhanbasmunaigaz, the individual debt stands at:
1. MMG - $7,901,646.71 [ENKAZ, Limited] MMG/CAP/Kazak Oil - last payment October 1996 - 2-3/4 years ago.
2. Karazhanbasmunaigaz [formerly Triton Vuco, now Nations Energy]- $149,076.32 [CATKAZ Limited] - last payment November 12, 1998 - 10 mo
3. Atlantic Caspian Resources PLC. [ENKAZ/CATKAZ Limited] - $1,243,426.24 last payment September 1998 - 12 months ago.
Tax, employee payroll, and pension fund contributions to the government of the Republic of Kazakhstan would be substantial if the �deadbeats� would pay their debts. The total of the approved, but unpaid invoices exceeds $9,500,000.00. That is a substatial amount for the services provided and accepted by the clients and a substantial loss for the foreign investor, i.e. ENKAZ and CATKAZ Limited, and the Republic of Kazakhstan. When operating and being paid in Kazakhstan, ENKAZ/CATKAZ provided over 200 Kazakh jobs and met a monthly tax and payroll of over 8 million tenge per month. When the above companies stopped paying, the government also lost revenue through job layoffs and stoppage of work by ENKAZ/CATKAZ.
Note to the reader: If you need back-up proof for these numbers, it is readily available. ENKAZ and CATKAZ have signed acceptances of services from the clients for the principle amounts as outlined above. Interest in some cases is provided for in the contract, in other cases it is charged at acceptable international standards which is at a slightly low rate than provided for in Kazakh law.
E.K.
Nygmet IBADILDIN
ALMATY, August 25
(THE GLOBE)
The wave of merges has filled all large business. News about merges in the automobile and oil business does not leave pages of the leading newspapers all over the world. Analysts suggest different versions, customers guess, and directors in their interviews refute analysts and say what profits customers will have.
A merge is not a trend of a capricious fashion, it is the dictates of the severe time. Further we will consider the main reasons caused the merge of Trans-nationals; and basing on the example of �Exxon� and �Mobil� will consider facts and figures accompanying such a merge.
What is a TNC?
It is very difficult to answer to this easy question, as to all easy questions. We may say a widely used word �globalisation�, but this will just add more doubts. We offer you to consider the phenomenon of a Trans-national corporation during the epoch of globalisation, and a merge as one of the strategies, which TCN, being pressed by globalisation, has to accept. According to the definition, TNC is a corporation, which conducts its operations in two and more countries. There are a lot of TNC, but the largest ones are known all over the world. McDonalds, Mitsubishi, Exxon � everybody knows these names, as these companies work all over the world. Profits of many biggest corporations are comparable with the value of gross national products of many countries. We may talk about accurate calculations, terms, and comparison of different-level aspects. But the fact is the fact: at the present time some corporations, which have plants, ships, satellites, shareholders, and money (the latter is the main thing), are more influential than some states having armies, state bureaucracy, populations and the above-mentions GNP. Thanks to globalisation, business is able to conduct operations in two and more countries. Or globalisation appeared thanks to business, which conducted its operations in two or more countries. Today�s cheapness of transport charges, containerisation, development of communications, reduced tariffs (all these are attributes of globalisation) promote business of TNC.
If a corporation conducts its business in several countries, i.e. it may afford transport charges or expenses towards establishment of the enterprise in a new place, this corporation�s capacity obviously exceeds capacities of local competitors. First of all, it is financial capacities and technological equipment. The largest TNC have everything called �Intangible assets�, which means impalpable assets, i.e. a company has a stable reputation, and the name of the company is associated with a high quality of its products. Obviously, both �Exxon� and �Mobil� own all these things.
Partners of TNC are countries where these companies make their business. All countries need investments: many TNC are able to invest themselves or to guarantee an investment inflow. Developing countries especially need partnership with TNC, as these countries suffer from chronic deficit of money and are technologically underdeveloped. TNC may offer developing countries investments to technologies, and advance management experience. While countries of the third world suggest cheap manpower, which does not make such high demands as in the West, privileged taxation up to tax vacations, and �liberal� ecological zones.
Why do TNC, e.g. �Exxon� and �Mobil� merge?
First of all, as any other business, TNC is looking for a way to increase profitability reducing or optimising their expenses. The rules are common: if you spend less, you will gain more. Take care of the pence and the pounds will take care of themselves. Stoppage of cross and doubling operations results at once in an obvious economy. In case of �Exxon� and �Mobil�, within three years the merged corporation is expected to economise at least US$ 2.8 billion per annum, and will annihilate 9000 working places all over the world, i.e. 7% of the total number of 122.7 thousand of working places. Besides, concentration of the capital allows, �at best� to use company�s resources more effectively. In other words, they will be able to realise things, which cannot be realised separately. Hence, large-scale projects will be more real, than for each of them separately.
The value of assets will also increase. At the same time, possibilities to attract banking capital will increase as well. The merge is expected to raise the rate of shares. According to conditions of the contract, one share of �Mobil� will be converted to 1.32015 shares of �Exxon�. In the result, shareholders of �Mobil� will have approximately 30% of the new company, while shareholders of �Exxon� � 70%. The value of the transaction on the giants� merge came to US$ 76.6 billion, that broke the previous record (US$ 55 billion) of the merge of oil companies �British Petroleum� and �Amoko�. Naturally, the main reason of the merge is a tough competitiveness and the fall of the world�s prices of hydrocarbon raw materials. There is a lot of oil, oil has been found in both Egypt and Trinidad. The break of the USSR made the Caspian resources available. All these facts do not promote raising of oil prices. Explaining the reasons of the transaction, Raymond Lee, the chief manager of the new merged company announced: �Both parties participating in the merge have inter-supplementing operations. The merge improves such important for business advantages as functional and geographical variety and financial power, that is extremely significant for success under the condition of constantly fluctuating prices.�
The monopolisation of the market of oil and oil products was the main caution. Everybody knows that in 1911 �Standard Oil� was reorganised. �Exxon� is a successor of �Standard Oil New Jersey�, while �Mobil� � of �Standard Oil New York�. That is why critics of the merge of �Mobil� and �Exxon� name this transaction �Rockfeller�s vengeance�. The chief manager responded to this that the merged corporation would control less than 4% of the world�s products and 11% of the world� oil sales, while OPEC controlled 40% of the world�s oil market. However, in some regions people significantly fear the monopolisation, i.e. monopolisation of separate sectors is possible, but concentration of price decisions in hands of a limited number of managers may cause negative consequences. The issue regarding the merge of these companies will be considered at a high level in USA. It is noteworthy that in the last year �Mobil� spent US$ 5.3 million for federal lobbying, while �Exxon� � US$ 5.2 million. (Information of �Central for Responsive Politics�).
All Over the Globe is published by IPA House.
© 1998 IPA House. All Rights Reserved.