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Journal of the good research in Cambodia , Opportunity of Financial Investment in Cambodia by Dr. Chhiv Thet
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EDITORIAL BOARD
Editor –in - Chief
Prof. (Dr). Kao Kveng Hong
Angkor Khemara University, Cambodia
Cambodia University of Specialties, Cambodia
Assistant and Members
Prof. (Dr.) Chhiv Thet
Paññāsāstra University of Cambodia, Cambodia
H. E. (Dr.) Mik Saphanaret
Bayon Book Publishing and National University of Management, Cambodia
Prof. (Dr.) Sao Lim Houth
Angkor University, Cambodia
Prof. (Dr. h.c.) Tithsothy Dianorin
Angkor University, Cambodia
Lect. Ma Bun Seng Rithy, PhD Candidate
Cambodia University of Specialties, Cambodia
Prof. Met Vichet
Vanda Accounting Institute, Cambodia
Prof. Leng Dina
Bayon Book Publishing Manager, Cambodia
INTERNATIONAL EDITORIAL ADVISORY BOARD
Prof. (Dr.) Daniel Esteban Odin
The Business University of Costa Rica, Central America
Prof. (Dr.) Kvenghong Kao
St. Clement University, United Kingdom (UK)
Prof. (Dr.) George Reiff
EIILM University; India, Universidad Empresarial, Central America
Prof. (Dr.) Frederick U. Ozor
University of Gambia, West Africa
Prof. (Dr.) Arif Anjum
Managing Editor, International Journal of Management Studies, India
Prof. (Dr.) Andrew Ssemwaga
Kigali Independent University, West Africa
Prof. (Dr). Jayanta K. Nanda
Ravenshaw University, India
Prof. (Dr). Oyat Christopher
Gulu University, Northern Uganda, East Africa
Vol. 1, No. 2, July – December, 2013
IAJDR is the Official International Academic Journal of the University Group and Bayon
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Editor-in- Chief, International Academic Journal of Development Research. However, the views
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LANGUAGE POLICY:
IAJDR is an English Language publication and the Editorial Board aims to ensure that contributors
use grammatically correct and idiomatically appropriate English language. However, for many of
our contributors English is a second and even third language and from time to time a strict language
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highest English standards. We also hold it to be important that material be not over edited, providing
its message is considered to be clear to the majority of our readers. The general objective that
IAJDR is to create conditions whereby all informed persons are able to contribute to the ongoing
debates, regardless of their English language competence and their lack of familiarity with accepted
journal protocols.
IMPORTANT DISCLAIMER
The publishers, authors and editors are not responsible for the results of any actions on the basis of
information in this work, nor for any errors or omissions. The publishers, authors and editors
expressly disclaim all and any liability to any person, whether a purchaser of this publication or not,
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Web Site: www.ams-groups.com, www.bayonbook.com
Email: [email protected]
CONTRIBUTIONS: Contributions should be forwarded to
Prof. (Dr.) Kao Kveng Hong [email protected] or [email protected]
Prof. Leng Dina at [email protected] or [email protected]
Please note the Notes to Contributors at the back of this edition
International Academic Journal of Development
Research (IAJDR) Vol. 1 No.2, July-December, 2013
Contents Title Page
1. Capital Structure Analysis of Oil Industry:
A case study of Bharat Petroleum Corporation Limited (INDIA).
-Dr. S. K. KHATIK 1-20
2. History of Restriction of the Use and Display of Foreign
Educational Credentials through laws and decrees in
Germany from 1939 to 2012
-Georg Reiff 21-42
3. Glocal Operation Management
Step Ahead For Effective Supply Chain Managers
-Dr.Shakti Prasad Mohanty and Dr.Sanjay Kumar Rout 43-45
4. The Developing Concept Of The Professional The Nature
And Future Of Professionalism, And Its Implications For Academics,
Executives And Public Administrators
-Dr. Daniel Valentine 46-51
5. Relevance of Physics Education Programmes of The University of
the Gambia To the Teaching of Senior Secondary School
Physics in the Gambia.
- Dr.Nya Joe Jacob 52-73
6. Collective Learning and Knowledge Development in the Evolution of
Regional Clusters of High Technology SMEs in Europe
-Dr .David Keeble And Dr.Frank Wilkinson 74-91
7. Opportunity Of Financial Investmen In Cambodia
-Dr. Chhiv S. Thet 92-123
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
1
Capital Structure Analysis of Oil Industry – A case study of
Bharat Petroleum Corporation Limited (INDIA).
Dr. S. K. Khatik (Ph.D., M. Phil, M.Com)*
ABSTRACT
Capital structure, or what is generally known as capital mix, is very important to control the overall
cost of capital in order to improve the earnings per share of shareholders. After globalization and
liberalization, various financial sector reforms were started by governments, such as reducing rates
of interest, Sale of Shares of PSUs etc., which directly affected the capital structure planning of
firms. Due to this situation, the oil industry also reorganized their capital structure. The financing
of a capital structure decision is a significant managerial decision. Initially, the company will have
to plan its capital structure at the time of its promotion. Subsequently, whenever funds have to be
raised for finance and investment, a capital structure decision is involved. In this research article,
researchers try to evaluate the concept of capital structure, capital structure planning and patterns
of capital structure in BPCL Ltd. We found that BPCL uses the maximum possible reserve fund and
long-term debt in their capital structure planning. During the study period, the company raised
more and more long-term funds to meet their development and expansion needs because debt is a
cheaper source of finance, especially from 2005-06 onwards when rates of interest decreased
regularly in the Indian capital market. But in this study it is found that EBIT is greater than the cost
of capital, which was favorable for the company, but it is also giving alarming indication for the
company because debt capital has been increasing continuously and it leads to financial risk. These
things may cause losses in near future.
Keywords: Debt-Equity, Financial Leverage, Capital Gearing, Solvency, Debt Services,
Proprietary funds
I. Introduction
Capital structure is the mix of debt and equity
securities that are used to finance companies
assets. It is defined as the amount of permanent
short-term debt, preferred stock, and common
equity used to finance a firm. Financial
structure is sometimes used as synonymous
with capital structure. However, financial
structure is more comprehensive in the sense
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
2
that it refers to in aggregate; the amount of total
current liabilities, long-term debt, preferred
stock and common equity used to fiancé a firm.
Therefore, capital structure is only a part of
financial structure, which refers mainly to the
permanent sources of the firm s financing.
Nonetheless, the present study considers the
source, which does not explicitly fall under the
definition of capital structure.
Decision on capital structure formulation or
long term financing is influenced by multiple
factors. Much of the focus as laid in the
research on the subject pertains to the target
capital structure, which the firm believes the
best in terms of the financial goals. Financial
economics has made a significant progress in
explaining the incentives that make companies
choose particular financing policies .In the last
two decades, a number of choices have been
proposed to explain the variations in the debt
equity ratio among firms. Increasingly the
profession is moving beyond an examination of
the basic leverage choice to the more detailed
aspects of financing decisions
The term capital structure is used to represent
the proportionate relationship between debt and
equity. Equity includes paid up share capital,
share premium, reserves and surplus (retained
earnings). Debt includes debenture and long-
term loans. The estimation of capital
requirements for current and future needs is
important for a firm and equally important is
the determining of the capital mix. Equity and
debt are the two principal sources of finance for
a business. ―The financing decisions have two
components. First, to decide how much total
funds are needed and, second, to decide the
source or their combinations to raise such
funds. The total quantity of fund needed,
however, depends upon the investment decision
of the firm. Given that the firm has good
estimates of how much capital funds are
needed, the problem then remains one of
determining the best mix of different sources to
be used in raising the required funds. The
process that leads to the final choice of the
capital structure is referred to as the capital
structure planning.‖ The financing of a capital
structure decision is a significant managerial
decision. The company will initially have to
plan its capital structure at the time of its
promotion. Subsequently, whenever funds have
to be raised to finance investment, a capital
structure decision is involved. ―In order to run
and manage a company funds are needed right
from the promotional stage up to the end,
finances play an important role in a company‘s
life. If funds are inadequate, the business
suffers and if the funds are not properly
managed, the entire organization suffers. It is,
therefore, necessary that a correct estimate of
the current and future need of capital be made
to have an optimum capital structure, which
will help an organization to run its work
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
3
smoothly and without any stress.‖ Estimation
of capital requirement is necessary, but the
formation of a capital structure is important.
According to Gerstenbeg ―Capital structure of a
company refers to the composition or make up
of its capitalization and it includes all long-term
capital resources viz.; loans, reserves, shares
and bonds.‖ The capital structure is made up of
debt and equity securities and refers to the
permanent Financing of a firm. It is composed of
long-term debt, preference share capital and
shareholder funds. Keeping this background in
view, an attempt has been made by the researchers
to evaluate the ‗capital structure‘ of BPCL which
are leading oil refineries in public sector in India.
II. About the Company
BPCL is one of the leading
petrochemical company in India. In the
financial year 2011-12, the total revenue from
operations was 2, 11,972.97 Crores. On 24th
January 1976, the Burmah Shell Group of
Companies was taken over by the Government
of India to form Bharat Refineries Limited. On
1st August 1977, it was renamed Bharat
Petroleum Corporation Limited. Opening up of
the Indian economy in the nineties brought with
it more competition and challenges, kindled by
the phased dismantling of the Administered
Pricing Mechanism (APM) and emergence of
additional capacities in the region in refining
and marketing. It was also the first refinery to
process newly found indigenous crude
(Bombay High), in the country. It has four
main refineries are located in Mumbai, Kochi,
Numaligarh and Bina. BPCL imports products
depending upon the domestic demand supply
scenario. BPCL on a regular basis imports its
LPG requirements mainly from the Middle
East. Occasional there are import requirements
of Gasoil, Kerosene, Gasoline and Base Oil.
BPCL exports products from its refineries on a
regular basis. The products which are exported
regularly are Fuel Oil, Naphtha and Base Oil
(Group II). Products exports are done on both
FOB and CFR basis. Both import and export of
products are done through tender. Tender
invitations are only sent to counterparties who
are registered with BPCL. Companies
interested in registering with BPCL for
buying/supplying products.
III. Objectives of study
This research study fulfils the following
objectives:
i. To examine the capital structure pattern
and policy of BPCL Ltd.
ii. To examine the relationship between
profitability and capital structure
Company.
iii. To give suggestions for improvement of
the capital structure position of BPCL.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
4
IV. Hypotheses of the study
Following are the null hypotheses of the study:
i. There is no significant difference in
debt and equity capital in BPCL.
ii. There is no significant difference in
EBIT and EBT in BPCL.
V. Limitations of the study
i. This study is based on an analysis of
the financial statement for 10
financial years i.e. 2003-2012 of
BPCL.
ii. For the analysis of capital structure,
only secondary data, which are
derived from the annual reports, has
been taken in this study.
VI. Data and Research Methodology
To analyze the capital structure of
BPCL, secondary data, collected from the
annual reports of the company, was used along
with other published material of the companies.
For the analysis of capital structure, the annual
reports from the year 2002-03 to 2011-12 used
in this study. For an analysis of the capital
structure of the company, the ratios of capital
structure, common size statement and trend
analysis techniques are used. Statistical
techniques, such as mean growth rate and
coefficient of variation, are also used in
relevant areas. To make calculation much
easier and logical, the data are approximated in
the relevant places. For the analysis of the
capital structure of BPCL, the following ratios
related to capital structure are used:
Debt equity, Interest coverage
Funded debt to total capitalization,
Fixed asset to net worth
Proprietary fund Ratio, Solvency
Fixed assets to long-term funds, Capital
gearing
Total investment to long-term liabilities,
Reserve to equity capital
Financial leverage, Earnings per Share.
VII. Appraisal of capital structure
The capital structure of a company consists of
debt and equity securities, which provide
Finance for a firm. An optimum capital
structure is one that maximizes the market
Valuation of the firm‘s securities in order to
minimize the cost of its capital.
VIII.Findings with detailed discussion
Debt Equity Ratio: The debt-equity ratio is
calculated to measure the extent to which debt
financing has been used in a business. The ratio
indicates the proportionate claims of owners
and outsiders against the firm‘s assets. The
purpose is to get an idea of the cash available to
outsiders on the liquidation of the firm. As a
general rule there should be an approximate
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
5
mix of owner‘s funds and outsider‘s funds in
financing the firm‘s assets. However, the
Capital structure analysis of the oil industry
owners want to carry on their business with a
maximum of outsider‘s funds in order to
reduce the risk of their investments and to
increase their earning per share by paying a
lower fixed rate of interest to outsiders. On the
other hand, outsiders want those Shareholders
(owners) to invest and risk a proportionate
share of their investments. Therefore, the
interpretation of this ratio depends upon the
financial policy of the firm and upon the firm‘s
nature of business.
Total Debt
Debt Equity Ratio = —————
Total Equity
Table no.1. Debt Equity Ratio (Rs. In Crores)
Source: Compiled from the annual reports of BPCL. (From 2003 - 2012)
Interpretation
According to table no. 1, the debt equity ratio
for the year 2003 was 0.85:1. The ratio then
decreased in the year 2004 which was then
0.60:1. This ratio then increased and was 0.76:1
in the year 2005 and in the year 2006 the debt
equity ratio again increased and was 1.06:1.
This ratio further increased and was 1.19:1 in
the year 2007. In the year 2008 the debt equity
ratio was 1.41:1 and in the year 2009 the ratio
Year Debt(Rs.) Equity(Rs.) Debt-Equity Ratio
2003 4032.42 4,747.43 0.85
2004 3512.12 5,849.72 0.6
2005 4850.64 6388.43 0.76
2006 9729.44 9139.43 1.06
2007 12211.8 10273.5 1.19
2008 16503.7 11676.8 1.41
2009 22410.7 12128.1 1.85
2010 23054.5 13086.7 1.76
2011 19979.4 14057.6 1.42
2012 25861.2 14913.9 1.73
Mean 14214.6 10226.2 1.26
S.D. 8058.95 3400.59 0.42
C.V. 56.69% 33.25% 33.27%
Growth Rate 541.33% 214.15% 104.15%
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
6
was at its maximum when it was 1.85:1. The
debt equity ratio then decreased in the year
2010 when it was 1.76:1 and then further
decreased in the year 2011 when it was 1.42:1.
In the year 2012 the ratio was 1.73:1. The
overall average of debt equity ratio for the
period of the study was 1.26:1 and the standard
deviation was 0.42.The coefficient of variation
for the debt equity ratio was 33.27% and the
growth rate for the same was 104.15%.
Funded Debt to Total capitalization: The
ratio establishes a link between the long-term
funds raised from outsiders and total Long-term
funds available in the business. Funded debts to
total capitalization are also one of the important
ratios that explain the capital structure position
of a company. There is no rule of thumb but,
still, the lesser the reliance on outsiders the
better it will be. Also, the smaller the ratio the
better it will be. That the portion of debt
finance increases. It means that, in the study
period, the company has taken long-term
borrowing and ratio increases due to decreases
in free reserves.
Funded Debt
= —————————
Total Capitalization
Table no.2. Funded Debt to Total Capitalization Ratio (Rs. In Crores)
Year Funded
Debt(Rs.) Total Capitalization(Rs.)
Funded Debt to Total
Capitalization Ratio
2003 4032.42 8,779.84 0.46
2004 3512.12 9,361.84 0.38
2005 4850.64 11239.1 0.43
2006 9729.44 18868.9 0.52
2007 12211.8 22485.4 0.54
2008 16503.7 28180.6 0.59
2009 22410.7 34538.8 0.65
2010 23054.5 36141.2 0.64
2011 19979.4 34037 0.59
2012 25861.2 40775.1 0.63
Mean 14214.6 24440.8 0.54
S.D. 8058.95 11373.4 0.09
C.V. 56.69% 46.53% 16.57%
Growth Rate 541.33% 364.42% 38.09%
Source: Compiled from the annual reports of BPCL. (From 2003 - 2012)
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
7
Interpretation
Table no 2, depicts that the funded debt to total
capitalization ratio was 0.46:1 in the year 2003.
The funded debt to total capitalization ratio in
the year 2004 was 0.38:1 and the ratio for the
year 2005 was 0.43:1. In the year 2006 the
funded debt to total capitalization ratio was
0.52:1 and the ratio for the same was 0.54:1 in
the year 2007. In the year 2008 the ratio was
0.59:1 and in the year 2009 the ratio was
0.65:1. In the year 2010 the funded debt to total
capitalization ratio was 0.64:1 and the ratio in
the year 2011 was 0.59:1. The ratio for the
same was 0.63:1 in the year 2012. The overall
average of the funded debt to total
capitalization ratio was 0.54:1 and the standard
deviation was 0.09. The coefficient of variation
for the funded debt to total capitalization ratio
was 16.57% and the growth rate for the same
was 38.09%.
Proprietary Ratio: This ratio established the
relationship between shareholders funds and
the total assets of the firm. The components of
this ratio are shareholder‘s funds and total
assets. As the proprietary ratio represents the
relationship of owners funds to total assets, the
higher the ratio (the share of the shareholders in
the total capitalization of the company) the
better is the long-term solvency and, from the
capital structure point of view, this ratio
indicates the extent to which the assets of the
company can be lost without affecting the
interest of the creditors of the company.
Proprietary Funds
Proprietary Ratio = ————————
Total Assets
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
8
Table no.3. Proprietary Fund Ratio (Rs. In Crores)
Year Proprietary Fund(Rs.) Total Assets(Rs.) Proprietary Fund Ratio
2003 4,747.43 23,140.63 0.21
2004 5,849.72 25,225.43 0.23
2005 6388.43 28755.74 0.22
2006 9139.43 39361.3 0.23
2007 10273.5 45592.53 0.23
2008 11676.8 55496.22 0.21
2009 12128.1 61373.34 0.2
2010 13086.7 69459.46 0.19
2011 14057.6 73006.91 0.19
2012 14913.9 83337.37 0.18
Mean 10226.2 50474.89 0.21
S.D. 3400.59 20238.1 0.02
C.V. 33.25% 40.10% 8.64%
Growth Rate 214.15% 260.13% -12.77% Source: Compiled from the annual reports of BPCL. (From 2003 - 2012)
Interpretation
From table no.3, it is known that the
proprietary fund ratio was 0.21:1 in the year
2003 and the proprietary ratio was same for the
year 2004, 2006 and 2007 with value of
0.23:1. The proprietary ratio in the year 2005
was 0.22:1. In the year 2008 the ratio was
0.21:1 and the ratio in the year 2009 was
0.20:1. The proprietary fund ratio was same in
the year 2010 and in the year 2011 when it was
0.19:1 and in the year 2012 it was 0.18:1. The
overall average of the proprietary fund ratio
was 0.21:1 and the standard deviation was 0.02.
The coefficient of variation for the proprietary
fund ratio was 8.64% and the growth rate for
the same was -12.77%.
Solvency Ratio: The ratio indicates the
relationship between the total liabilities of
outsiders to total Assets of a firm. This ratio is
a small variant of equity ratio and can be
simply calculated as 100 – equity ratio.
Generally, the lower the ratio of total liabilities
to total assets, the more satisfactory or stable is
the long-term solvency position of a firm.
External Liabilities
Solvency Ratio = —————————
Total Assets
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
9
Table no.4. Solvency Ratio (Rs. In Crores)
Year External Liabilities(Rs.) Total Assets(Rs.) Solvency Ratio
2003 12027 23,140.63 0.52
2004 11922.2 25,225.43 0.47
2005 14018.6 28755.74 0.49
2006 19136.4 39361.3 0.49
2007 23485.6 45592.53 0.52
2008 31084 55496.22 0.56
2009 35242 61373.34 0.57
2010 40185.7 69459.46 0.58
2011 41937.7 73006.91 0.57
2012 52093.7 83337.37 0.63
Mean 28113.3 50474.89 0.54
S.D. 13390.8 20238.1 0.05
C.V. 47.63% 40.10% 8.83%
Growth Rate 333.14% 260.13% 20.27%
Source: Compiled from the annual reports of BPCL. (From 2003 - 2012)
Interpretation
According to table no. 4, the solvency ratio in
the year 2003 was 0.52:1 which decreased and
was at its lowest in the year 2004 to 0.47:1.
The solvency ratio was the same for the year
2005 and 2006 when it was 0.49:1. In the year
2007 the solvency ratio then increased and was
0.52:1. The solvency ratio again increased in
the year 2008 when it was 0.56:1. The ratio
further increased and was same for two years
i.e., for 2009 and 2011 when it was 0.57:1. In
the year 2010 the solvency ratio was 0.58:1 and
in the year 2012 the solvency ratio was at its
maximum when it was 0.63:1. The overall
average of the solvency ratio was 0.54:1 and
the standard deviation was 0.05. The
coefficient of variation for the solvency ratio
was 8.83% and the growth rate for the same
was 20.27%.
Fixed Assets Ratio: The ratio establishes the
relationship between fixed assets and
shareholders fund. If the ratio is less than
100%, it implies that owner‘s funds are more
than total fixed assets and the shareholders
provide a part of the working capital. When the
ratio is more than 100%, it implies that owner‘s
funds are not sufficient to finance the fixed
assets and the firm has to depend upon
outsiders to finance the fixed assets. There is no
‗Rule of thumb‘ to interpret this ratio but 60%
to 65% is considered to be a satisfactory ratio
in the case of an industrial undertaking. The
ratio of fixed assets to net worth indicates the
extent to shareholders funds is into fixed assets.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
10
Net Fixed Assets
Fixed Assets Ratio = ————————
Net Worth
Table no.5. Fixed Assets Ratio (Rs. In Crores)
Year Net Fixed Assets(Rs.) Net worth(Rs.) Fixed Assets Ratio
2003 6,366.22 4,747.43 1.34
2004 7,453.48 5,849.72 1.27
2005 8348.67 6388.43 1.31
2006 11085.5 9139.43 1.21
2007 11833.4 10273.54 1.15
2008 12735.4 11676.84 1.09
2009 14003.3 12128.11 1.15
2010 16187.1 13086.71 1.24
2011 17011.6 14057.62 1.21
2012 17731.4 14913.86 1.19
Mean 12275.6 10226.17 1.22
S.D. 3819.66 3400.59 0.07
C.V. 31.12% 33.25% 5.93%
Growth Rate 178.52% 214.15% -11.34%
Source: Compiled from the annual reports of BPCL. (From 2003 - 2012)
Interpretation
From table no.5, it is known that the
fixed assets ratio was 1.34:1 in the year 2003
which was the maximum. In the year 2004 the
fixed assets ratio decreased and was 1.27:1 and
then the fixed assets ratio increased and was
1.31:1 in the year 2005. The fixed assets ratio
decreased and was the same for two years i.e.,
2006 and 2011 when it was 0.21:1. In the year
2007 the fixed assets ratio then decreased when
it was 1.15:1 and was the same in the year 2009
as well. In the year 2008 the fixed assets ratio
was 1.09:1. The fixed assets ratio then
increased in the year 2010 when it was 1.24:1
and in the year 2012 the fixed assets ratio was
1.19:1. The overall average of the fixed assets
ratio was 1.22:1 and the standard deviation was
0.07. The coefficient of variation for the fixed
assets ratio was 5.93% and the growth rate for
the same was -11.34%.
Fixed Assets to long-term funds: The ratio
indicates the extent to which the total assets are
financed by the long-term funds of the firm.
Generally, the total of fixed assets should be
equal to total long-term funds. But, where fixed
assets exceed the total of long-terms funds it
implies that the firm has been financing a part
of the fixed assets out of liquid funds or
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
11
working capital, which is not a good policy.
And, if the total long-term funds are more than
the total fixed assets, it means that a part of the
working capital requirements are being met out
of the long-term funds of the firms:
Fixed Assets
= ———————
Long term funds
Table no.6. Fixed Assets to Long Term Funds Ratio (Rs. In Crores)
Year Net Fixed Assets(Rs.) Long Term Funds(Rs.) Fixed Assets to Long
Term Funds Ratio
2003 6,366.22 8,779.84 0.73
2004 7,453.48 9,361.84 0.8
2005 8348.67 11239.07 0.74
2006 11085.5 18868.86 0.59
2007 11833.4 22485.37 0.53
2008 12735.4 28180.58 0.45
2009 14003.3 34538.76 0.41
2010 16187.1 36141.21 0.45
2011 17011.6 34037.03 0.5
2012 17731.4 40775.08 0.43
Mean 12275.6 24440.76 0.56
S.D. 3819.66 11373.42 0.14
C.V. 31.12% 46.53% 24.26%
Growth Rate 178.52% 364.42% -40.03%
Source: Compiled from the annual reports of BPCL. (From 2003 - 2012)
Interpretation
Table no 6, shows that the fixed assets to long
term funds ratio in the year 2003 was 0.73:1
and in the year 2004 the ratio was 0.80:1. In the
year 2005 the fixed assets to long term funds
ratio was 0.74:1 and in the next year it was
0.59:1. The ratio for the year 2007 was 0.53:1
and in the year 2008 it was 0.45:1 and it was
same for the year 2010 as well. In the year
2009 the fixed assets to long term funds ratio
was 0.41:1 and in the year 2011 the fixed assets
to long term funds ratio was 0.50:1. At the end
in the year 2012 the ratio was 0.43:1. The
overall average of the fixed assets to long term
funds ratio was 0.56:1 and the standard
deviation was 0.14. The coefficient of variation
for the fixed assets to was 24.26% and the
growth rate for the same was -40.03%.
Long term funds ratio : Interest coverage
Ratio Net income to debt service ratio or
simply debt service ratio is used to test the debt
servicing capacity of a firm. The ratio is also
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
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known as interest coverage ratio or Coverage
ratio or fixed changes cover or times interest
earned. This ratio is calculated by dividing the
net profit before interest and tax by fixed
interest charges. It indicates the interest-paying
capacity of a firm.
Operating profit
= ——————————
Fixed Interest Charges
Table no.7. Interest Coverage Ratio (Rs. In Crores)
Year EBIT(Rs.) Fixed Interest
Charges(Rs.)
Interest Coverage
Ratio (Times)
2003 2,239.48 245.95 9.11
2004 2,740.49 104.97 26.11
2005 1496.15 139.8 10.7
2006 654.61 247.41 2.65
2007 3300.31 532.67 6.2
2008 3269.76 672.47 4.86
2009 3170.48 2166.37 1.46
2010 3377 1010.95 3.34
2011 3495.67 1100.78 3.18
2012 3683.76 1799.59 2.05
Mean 2742.77 802.1 6.96
S.D. 937.76 679.71 7
C.V. 34.19% 84.74% 100.57%
Growth Rate 64.49% 631.70% -77.52%
Source: Compiled from the annual reports of BPCL. (From 2003 - 2012)
Interpretation
According to table no. 7, the interest coverage
ratio was 9.11 times in the year 2003 and the
same in the year 2004 was 26.11 times, which
was the maximum, then it decreased and was
10.70 times in the year 2005. The interest
coverage ratio in the year 2006 was 2.65 times
which increased in the year 2007 and was 6.20
times. The interest coverage ratio was 4.86
times in the 2008 and in the year 2009 the
interest coverage ratio was 1.46 times. This
ratio increased in the year 2010 when it was
3.34 times which then decreased in the year
2011 to 3.18 times. The interest coverage ratio
in the year 2012 was 2.05 times. The overall
average of the interest coverage ratio was 6.96
and the standard deviation was 7.00. The
coefficient of variation for the interest coverage
ratio was 100.57% and the growth rate for the
same was -77.52%.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
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Capital Gearing ratio: The term capital
gearing is used to describe the relationship
between equity share capital, including reserves
and surpluses, and preference share capital and
other fixed interest-bearing loans. If preference
shares capital and other fixed interest-bearing
loans exceed the equity share capital including
reserves the firm is said to be highly geared.
The firm is said to be have a low gearing ratio
if preference shares and other fixed interest-
bearing loans are less than the equity capital
and reserves.
Equity Share Capital
= —————————————————
Preference shares & Long Term Loans
Table no.8. Capital Gearing Ratio (Rs. In Crores)
Year Equity(Rs.) Preference Share &
Long Term Loans(Rs.) Capital Gearing Ratio
2003 4,747.43 4032.42 1.18
2004 5,849.72 3512.12 1.67
2005 6388.43 4850.64 1.32
2006 9139.43 9729.44 0.94
2007 10273.5 12211.83 0.84
2008 11676.8 16503.74 0.71
2009 12128.1 22410.65 0.54
2010 13086.7 23054.5 0.57
2011 14057.6 19979.41 0.7
2012 14913.9 25861.18 0.58
Mean 10226.2 14214.59 0.9
S.D. 3400.59 8058.95 0.36
C.V. 33.25% 56.69% 39.30%
Growth Rate 214.15% 541.33% -51.02%
Source: Compiled from the annual reports of BPCL. (From 2003 - 2012)
Interpretation
From table no.8, it is known that the capital
gearing ratio was 1.18:1 in the year 2003 and
the ratio in the year 2004 was 1.67:1. The
capital gearing ratio was 1.32:1 in the year
2005 and in the year 2006 it was 0.94:1. In
the year 2007 the capital gearing ratio was
0.84:1 and in the year 2008 the capital gearing
ratio was 0.71:1. The capital gearing ratio was
0.54:1 in the year 2009 and in the year 2010
the ratio for the same was 0.57:1. The capital
gearing ratio in the year 2011 was 0.70:1 and
it was 0.58:1 in the year 2012. The interest
coverage ratio in the year 2012 was 2.05
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
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times. The overall average of the capital
gearing ratio was 0.90 and the standard
deviation was 0.36. The coefficient of
variation for the capital gearing ratio was
39.30% and the growth rate for the same was
-51.02%.
Total Investment to long term Funds:
The next ratio is calculated by dividing total
long-term funds by long-term liabilities.
Shareholders‘ funds and long-term liabilities
are components of total investments, and
debentures and long-term loans are
components of long-term liabilities,. This
ratio explains the position of long-term
liabilities in total investments. Normally, a
lower portion of long-term liabilities in total
investments is considered good in case of
solvency position of business.
Total Investment
= ——————————
Long term Liabilities
Table No.9. Total Investments to Long Term Liabilities Ratio (Rs. In Crores)
Years Long Term
Funds(Rs.)
Long Term
Liabilities(Rs.)
Total Investments to Long
Term Liabilities Ratio
2003 8,779.84 4032.42 2.18
2004 9,361.84 3512.12 2.67
2005 11239.1 4850.64 2.32
2006 18868.9 9729.44 1.94
2007 22485.4 12211.83 1.84
2008 28180.6 16503.74 1.71
2009 34538.8 22410.65 1.54
2010 36141.2 23054.5 1.57
2011 34037 19979.41 1.7
2012 40775.1 25861.18 1.58
Mean 24440.8 14214.59 1.9
S.D. 11373.4 8058.95 0.36
C.V. 46.53% 56.69% 18.65%
Growth Rate 364.42% 541.33% -27.59%
Source: Compiled from the annual reports of BPCL. (From 2003 - 2012)
Interpretation
According to table No. 9, the total investment
to long term liabilities ratio in the year 2003
was 2.18:1 which then increased in the next
year to 2.67:1. The total investment to long
term liabilities ratio in the year 2005 was 2.32:1
and the ratio then decreased and kept on
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
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decreasing. In the year 2006 the ratio was
1.94:1. The total investment to long term
liabilities ratio in the year 2007 was 1.84:1 and
it was 1.71:1 in the year 2008. The total
investment to long term liabilities ratio in the
year 2009 was 1.54:1 and for the year 2010 the
ratio was 1.57:1. The total investment to long
term liabilities ratio was 1.70:1 in the year 2011
and it was 1.58:1 in the year 20 12. The
overall average of the total investment to long
term liabilities ratio was 1.90 and the standard
deviation was 0.36. The coefficient of variation
for the total investment to long term liabilities
ratio was 18.65% and the growth rate for the
same was -27.59%.
Reserve fund to equity share capital: The
next ratio establishes the relationship between
reserves and equity share capital. The ratio
indicates that how much profit does the firm
generally retain to fund for future growth. The
higher the ratio, the better is the position of the
firm generally:
Reserves & Surplus
= ———————————
Equity Share Capital
Table no.10. Reserve Fund to Equity Share Capital Ratio (Rs. In Crores)
Years Reserve Fund (Rs.) Equity Share
Capital(Rs.)
Reserve Fund to Equity
Share Capital Ratio
2003 4,447.43 300 14.82
2004 5,549.72 300 18.5
2005 6088.43 300 20.29
2006 8777.88 361.54 24.28
2007 9912 361.54 27.42
2008 11315.3 361.54 31.3
2009 11766.57 361.54 32.55
2010 12725.17 361.54 35.2
2011 13696.08 361.54 37.88
2012 14552.32 361.54 40.25
Mean 9883.09 343.08 28.25
S.D. 3375.84 28.2 8.17
C.V. 34.16% 8.22% 28.93%
Growth Rate 227.21% 20.51% 171.51%
Source: Compiled from the annual reports of BPCL. (From 2003 - 2012)
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
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Interpretation
Table no 10, shows that in the year
2003 the reserve fund to equity share capital
ratio was 14.82:1 which was the lowest and
then the ratio increased and it kept on
increasing for the remaining study period. In
the year 2004 the reserve fund to equity share
capital ratio was 18.50:1 and in the year 2005
the reserve fund to equity share capital ratio
was 20.29:1. The ratio in the year 2006 was
24.28:1 and in the next year i.e. in 2007 the
reserve fund to equity share capital ratio was
27.42:1. The ratio for the same was 31.30:1 and
it was 32.55:1 in the year 2009. The ratio in the
year was 35.20:1 and it increased to 37.88: 1 in
the year 2011 and further increased in the year
2012 to 40.25:1. The overall average of the
reserve fund to equity share capital ratio was
28.25 and the standard deviation was 8.17. The
coefficient of variation for the reserve fund to
equity share capital ratio was 28.93% and the
growth rate for the same was 171.51%.
Financial leverage: The term financial
leverage refers to the use of fixed charges, such
as a debenture, and the use of variable charges
or securities, such as equity shares, in the
financial structure and total assets of the firm.
So, the financial leverage refers to the presence
of a fixed Charge in the income statement of
the firm. This fixed charge is fixed in amount
and does not vary with the changes in the
EBIT, whereas the return available to the
equity shareholders, which is a residual
balance, is affected by the changes in EBIT.
EBIT
= —————
EBT
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
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Table no.11. Financial Leverage Ratio (Rs. In Crores)
Years EBIT(Rs.) EBT(Rs.) Financial Leverage Ratio
2003 2,239.48 1993.537 1.12
2004 2,740.49 2635.515 1.04
2005 1496.15 1356.348 1.1
2006 654.61 407.195 1.61
2007 3300.31 2767.644 1.19
2008 3269.76 2597.287 1.26
2009 3170.48 1004.11 3.16
2010 3377 2366.05 1.43
2011 3495.67 2394.89 1.46
2012 3683.76 1884.17 1.96
Mean 2742.77 1940.67 1.53
S.D. 937.76 745.74 0.6
C.V. 34.19% 38.43% 39.29%
Growth Rate 64.49% -5.49% 74.04%
Source: Compiled from the annual reports of BPCL. (From 2003 - 2012)
Interpretation
According to table no.11, the financial leverage
ratio in the year 2003 was 1.12:1 and in the
year 2004 the ratio was 1.04:1. This ratio
increased in the year 2005 when it was 1.10:1.
The financial leverage ratio in the year 2006
further increased and was 1.61:1. In the year
2007 the financial leverage ratio was 1.19:1
and this ratio in the year 2008 was 1.26:1. This
ratio was highest in the year 2009 when it was
3.16:1 and then it decreased in the year 2010 to
1.43:1. The financial leverage ratio in the year
2011 was 1.46:1 and in the year 2012 the ratio
increased to 1.96:1. The overall average of the
financial leverage ratio was 1.53 and the
standard deviation was 0.60. The coefficient of
variation for the financial leverage ratio was
39.29% and the growth rate for the same was
74.04%.
Earnings per Share (EPS)
Total earnings divided by the number of
share. Companies often use a weighted
average of shares outstanding over the
reporting term. EPS can be calculated for
the previous year ("trailing EPS"), for the
current year ("current EPS"), or for the coming
year ("forward EPS"). Note that last year's EPS
would be actual, while current year
and forward year EPS would be estimates.
Net profit after preference dividend
= ———————————————
No. of Equity Share
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
18
Table no.12. Earnings per Share (Rs. In Crores)
Years Earnings for Equity
Shareholders(Rs.)
No. of Equity
Shares
Earnings per
Share
2003 1,250.03 30 41.67
2004 1,694.57 30 56.49
2005 965.8 30 32.19
2006 291.65 36.15 8.07
2007 1805.48 36.15 49.94
2008 1580.56 36.15 43.72
2009 735.9 36.15 20.36
2010 1537.62 36.15 42.53
2011 1546.68 36.15 42.79
2012 1311.27 36.15 36.27
Mean 1271.96 34.31 37.4
S.D. 452.62 2.82 13.47
C.V. 35.58% 8.22% 36.01%
Growth Rate 4.90% 20.50% -12.95%
Source: Compiled from the annual reports of BPCL. (From 2003 - 2012)
Interpretation
From table no.12, it is known that the earning
per share for the year 2003 was Rs.41.67 which
increased to Rs.56.49 in the year 2004. The
earning per share for the year 2005 was
Rs.32.19 and it was Rs.8.07 in the year 2006.
The earning per share for the year 2007 was
Rs.49.94 and in the year 2008 the earning per
share was Rs.43.72. The earning per share was
Rs.20.36 for the year 2009 and in the year 2010
the earnings per share was Rs.42.53. The
earning per share for the year 2011 was
Rs.42.79 and it was Rs.36.27 in the year 2012.
The overall average of the earning per share
was Rs.37.40 and the standard deviation was
13.47. The coefficient of variation for the
earning per share was 36.01% and the growth
rate for the same was -12.95%.
Testing of Hypothesis
H01 : The Coefficient of Correlation
between Debt and Equity was 0.70
which shows a positive relation between
Net profit and Net sales. It means that
both Debt and Equity were moving in
the same direction but relatively at a
moderate pace. When Students t test
was calculated with these two
parameters, the calculated value of t=
38.81 was less than the table value of t=
2.305. Hence the null hypothesis is
rejected and alternate hypothesis stands
accepted. It shows that there is
significant difference between Debt and
Equity during the period of study.
H02 : The Coefficient of Correlation
between EBIT and EBT was 0.96 which
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
19
shows a higher positive relation
between Current Assets and Current
Liabilities. It means that both EBIT and
EBT were moving in the same direction
but relatively at a higher pace. When
Students t test was calculated with these
two parameters, the calculated value of
t= 3.82 was more than the table value of
t= 2.305. Hence the null hypothesis is
rejected and alternate hypothesis stands
accepted. It shows that there is
significant difference between EBIT
and EBT during the period of study.
Findings and Suggestions
The Debt Equity position of the
company is not adequate as per the
financial aspect, because a company can
easily employ a debt capital up o 2:1
times. This will be adequate for the
company as per the Indian scenario.
During the study period it has employed
less debt capital in the business. But
after 2005-06 the debt capital has been
increasing up to 2011-12, which is good
sign for the company. Company enjoys
worth of debt capital in their business.
Funded debt to total capitalization in the
beginning stage was not satisfactory but
it gradually increased till 2011-12.
Proprietary ratio was low during the
period of study. It needs upliftment of
this ratio for better future prospects.
Solvency ratio of the firm was
satisfactory. Fixed assets to net worth of
the firm was also not satisfactory. Fixed
assets to long term loans was
satisfactory as the firm was having good
financial policies.
Interest coverage ratio of the firm was
satisfactory. It was able to overcome the
Financial risk and able to bear the
financial cost timely.
Capital gearing ratio observed low
gearing value in the starting years and
then it shifted to high gearing value in
remaining years.
Financial Leverage of the firm was
satisfactory as it was able to pay the
interest on long term loans and
advances timely.
In the beginning years the firm does not wanted
to take financial risk as the amount of debt
capital employed in the business was low. But
BPCL have return on capital employed greater
than the rate of interest, then after the company
increased the debt capital. The capital structure
of the firm may be adequate, but it may require
some improvement in the debt capital position
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
20
of the business as per the nature of the
business. The company should make better
investment avenues for utilization of huge
amount of reserves and surplus.
References
Annual reports of bpcl from 2003 to 2011-12
Balwani, N. (2000) Accounting and Finance
for Managers, Amexcel Publisher‘s
Private Ltd., p.772.
Banerjee, S.K. (2000) Financial Management,
S. Chand and Company, New Delhi.
Bhalla, V.K. (1997) Financial Management
and Policy, 1st ed., Anmol Publications,
Engler, G.N. (Ed.) (1973) Managerial Finance:
Cases and Readings, Inc, Dalla. Galgotia
Publishing Company, New Delhi, p.860.
Guthmann, H.G. and Dougall, H.E. (1995)
Corporate Financial Policy, 4th
ed.,
Prentice Hall of India Pvt. Ltd, pp.84-85.
Hampton, J.J. (1998) Financial Decision-
Making, Concepts, Problem and Cases,
Prentice Hall of India Pvt. Ltd, New
Delhi.
Jagdish, Prakesh, Rao and Shukla (1996)
Administration of Public Enterprise in
India, Himalaya Publishing Company,
New Delhi.
Khan and Jain (1997) Financial Management,
Tata McGraw Hill Publishing
Company, New Delhi. New Delhi.
Pandey, I.M. (2000) Financial Management
Theory and Practices, Vikas Publishing
Company, New Delhi.
Rustagi, R.P. (2000) Financial Management,
Theory, Concept and Problems, 2nd ed.,
Wachowicz, V.H.J.C. (1998) Fundamental of
Financial Management, 9th ed.,
Prentice Hall Inc, New Delhi.
Walker, E.W. (1974) Essentials of Financial
Management, Prentice Hall of India Pvt.
Ltd, New Delhi.
* Dr. S. K. KHATIK (Ph.D., M. Phil, M.Com)
Professor & Head, Department of
Commerce, Barkatullah University,
BHOPAL.
Dean, Faculty of Commerce, Barkatullah
University , Bhopal. Chairman, Board of
Studies Commerce, Barkatullah University,
BHOPAL.
Mobile: 9425382036
E-Mail: [email protected]
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
21
History of Restriction of the Use and Display of Foreign Educational
Credentials through laws and decrees in Germany from 1939 to 2012
Dr. Georg Reiff*
ABSTRACT
Contemporary Germany is usually known as a democratic country, deeply integrated into the US-
American dominated Western political bloc. However, little-known to the general public, there are
obviously legal remnants that stem from the previous infamous Hitler Regime. After seeing some
fellow alumni from a non-German distance learning university in 2007 encountering problems in
Germany, I decided to investigate deeper the underlying legal structure and legal principles. The
objective was to shed light whether or not the problems of those fellow alumni were caused not only
by old laws for example coming from Imperial times but by legal principles that were directly
created during the Hitler times in Germany. On a secondary basis, it was also scientifically sound
to investigate whether or not such severe restrictions like in Ger-many occur in other countries as
well and on what principles they are based. As an instrument of inquiry the historical method of
comparison as specified first by Bern-heim in 1889 and others afterwards has been used. Due to the
fact that all legal texts are documented online through the German Government very well and up to
date, they are without disambiguation regarding the sources, and so it was entirely possible to draw
up a less than desirable picture of how foreign educational credentials are treated in contemporary
Germany with the indirect help of German authorities. The achievement was not only an
explanation of how come that foreign credentials in Germany oftentimes cause such trouble for the
holder but the very reason behind a structure that actually hunts down perceived perpetrators in a
way unbecoming for any Western democratic state became obvious – the use of false legal
principles stemming in full from a totalitarian state in a totalitarian time.
Key Words: History of Restriction, Display, Foreign Educational Credential, Decrees,
laws.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
22
I. Introduction
In these times of globalization, the world
moves closer together and this also applies to
the field of education and the use of foreign
educational credentials. Also, more and more
people inside and outside Germany wish to
pursue their studies and continuing education
together while having a professional career.
The establishment of UNESCO is for example
a major step in recognizing this change in
international education early on. Often studies
take place even outside the German jurisdiction
or we have the case where non-Germans
migrate to Germany in order to live and work
there and further their respective careers.
II. Background and Context
The oldest university in Europe, the University
of Bologna, was founded in 1088. In Bologna,
the interests of the Holy Roman Emperor of
German Nation were crucial for the
development of an effective university
education for lawyers. Competition to the
papacy as a secular power was dependent on
this in order not to depend on and to deal
exclusively with monks and clergy as civil
servants. Instead there was the aim to build up
a work force of non-clergy civil servants as
well within the empire.
The development of universities, especially
established for the Legal Education can be
considered a separation process from the
educational monopoly of the Church that lasted
from the end of Rome in 476 until then. The
contrary was for example the emergence of the
University of Paris. By centralizing education
in a single school of higher education it was
supposed to better monitor theologians and
therefore avoid heresies. Its name is related to
the times of Robert de Sorbon, who once
started teach-ing with 5 penniless students in
order to give them a theological education long
before the creation of the University of Paris.
The members of the Sorbonne, founded by
Papal Bull were under the Pope‘s rule and
ecclesiastical jurisdiction and not at all under
the legal authority of the French king.
The French king also confirmed this. The
jurisdiction was exercised by the Chancellor of
the University who was not a member of the
university, but acted as a representative of the
bishop. He also awarded the academic degrees.
The University of Paris and its degrees were
the templates for almost all Western uni-
versities, particularly the British, among them
prominently Oxford University and the German
universities. Thomas Aquinas studied e.g. in
Paris and entered the faculty 1248 as a teacher
of philosophy with such acclaim that he
received the titles of Doctor Universalis and
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
23
Doctor Angelicus. One can consider those titles
as the blue prints for later doctoral programs.
Originally, the doctorate was therefore a purely
religious matter and the first three doc-tors in
the sense of ecclesial dignity thus are the
Doctors of the Church, Ambrose, Jerome and
Augustine. Pope Gregory I, however, saw the
trend of times and quickly changed the law in
order to make the doctorate also the highest
degree for all faculties.
This historical course of events is ultimately the
reason why churches in the U.S. till today hand
out merely religiously motivated doctorates to
their bible scholars and dig-nitaries according
to the old tradition. Such doctoral church
honours, however, should not be considered as
exactly equal compared to that what modern
academic degrees are.
Like the doctorate, the bachelor degree is also
an academic degree since the 13th Cen-tury,
albeit the lowest ranking. It was also awarded
first at the University of Paris.
The middle level between Bachelor and Doctor
is the Master of Arts (Magister Ar-tium), which
has its precedence in antiquity and throughout
the Middle Ages as conclusion of the studies of
the seven liberal arts (Septem Artes Liberalis).
It means something like "Master of Arts" in a
wider sense and is therefore not limited to
artistic areas. Historical example of this degree
is in turn again from the University of Paris at
which the German mystic Meister Eckhart
(Master Eckhart in English) re-ceived his
master's degree in 1302, when he passed the
final exam in Paris. He then worked as a
teacher at the University of Paris, and at the
same time he became the first provincial of his
religious order in Germany.
III. Overview of the History of
Restrictions of Foreign Degrees
The first occurrence of a restriction in
Germany for the use of foreign degrees
occurred under the knocked out Weimar
Constitution in 1939 when ―Imperial
Chancellor‖ and then already de facto
totalitarian dictator Adolf Hitler promulgated a
new law governing the use of foreign degrees
in Germany. The law was aimed predominantly
at Jewish scholars who often had titles and
degrees from foreign Torah Colleges, but it
also applied to many opposition persons who
were not in line with the purification mania of
National Socialist ideologists. It is noteworthy
that in 1939 though formally in existence, the
democratic constitution of the Weimar
Republic had already been knocked out for six
years by the so-called Enabling Act of 1933.
This Act permitted the National Socialist
Regime to act at will outside the provisions of
the democratic constitution in order to
implement rules and regulations according to
their totalitarian will.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
24
In regards to foreign education, the National
Socialists expressed their totalitarian views in a
law named the Academic Degree Act
(Akademisches Grad Gesetz). This was
promulgated in June 1939. In particular,
Section 1 of the law provided that:
German nationals who obtained an
academic degree from a foreign
university were required to seek
permission from the Imperial Minister
for Science, Education and Peoples
Education to display (display and use in
public) this degree.
The permission (for displaying the
degree) could be given in general in
regards to academic degrees from
certain foreign universities.
It is further stated (Section 2) that:
Among the requirements which are
mentioned in Section 1, the Imperial
Minister for Science, Education and
Peoples Education can withdraw a
previously given permission for
displaying a foreign academic degree
and in the case of a general permission
(Section 2:2) the Minister can order the
withdrawal (of the permission) in
individual cases.
In July 1939, a Decree was issued entitled:
―Regulation Implementing the Law on the use
of Academic Titles‖ (AkaGrGDV) and
Schwarz-Rot-Goldene Titelträger, page 32,
Schneekluth Publishers, 1971 . This regulation
referred to Section 8 of the Act and prescribed
that:
An application for authorization to
display a foreign degree (Section 2:1
and Section 3 of the Act) must be
presented directly to the Minister for
Science and Education. The application
shall contain the following:
matriculation certificate, study and audit
evidence or a certified copy of the
award certificate and a certified
translation into German, all must be
accompanied by: curriculum vitae.
As to be considered a temporary stay (in
Germany) in the sense of Section 3:2 of
the Act, the subject‘s stay may not
exceeds the period of three months.
Following the license (to
use/display/mention a foreign degree), a
certificate is is-sued to the applicant.
The aforementioned provisions shall not
apply in cases where the approval has
been given generally for displaying a
particular foreign university‘s degrees
according to Section 2:2 of the Act.
The withdrawal of a domestically
conferred university degree is to be
decided by a committee consisting of
the Rector of the University and the
Deans. At universities, where
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
25
structuring into faculties (departments)
is missing, the deans are replaced by
two lecturers of the university appointed
for a period of five years by the
Imperial Minister for Science and
Education.
The decision of the Committee shall be
effective upon delivery. Notification is
in accordance with the rules of civil
procedure regarding servicing one of its
motions.
The decision on a waiver of a
withdrawal (Section 4:4) is possible
after consulting the aforementioned
Committee according to Section 3:1 of
this Regulation.
The validity of this specific regulation ended
together with the Academic Degree Act in
2007, surviving its creator by 62 years.
However, we shall see (below) that exactly
those legal principles, which governed the
Academic Degree Act and especially the
‗Regulation Implementing the Law on the use
of Academic Titles‘ have been incorpo-rated in
the General Permission Decree from April
2000 and the Educational State Laws that
followed.
The following paragraphs set out what has
changed in recent years in the understanding of
the law nationally and the state laws of
Germany and what one has to look at the
various levels of regulations. However, this
dissertation will show that even the new laws in
Germany that lead on the surface to the transfer
of responsibility regarding presentation of
educational credentials towards the citizens, no
matter whether they are local or foreign, are
deeply tainted. I would have agreed with this
relatively reasonable approach by the
legislature till I noticed that there has taken
place a simple compilation of previous laws
and regulations which are based on quite
draconic law principles from a non-democratic
dictatorial time. Therefore, it should also be
mentioned that Germany is in an unprecedented
way the hardest jurisdiction when it comes to
the use of foreign credentials and that does in
my opinion not really go along with the
principle of alleged open-mindedness that the
Federal Republic of Germany wants to make
the world-public and her own populace believe
in.
This present dissertation here is the first of its
kind that has been made available for foreign
academicians and also workers who are
credential holders and intend to work and live
in the Federal Republic of Germany. As part of
the European Union it is only natural that
mobility of the work force of all of Europe and
the world will bring far more foreign credential
holders to Germany than in the past. As
German regulations are more than just strict
and hardly comparable to the regulations in
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
26
other regions of the world, this dissertation is
intended to spare the reader legal hassle,
embarrassment and possible court appearance
and fines in Germany. A book for the general
public is planned immediately afterwards.
1. Displaying and Using a
Degree - Then and Now:
Having noted the contents of the Law,
we need to consider a definition for
‗displaying, mentioning and using a degree‘
(einen Grad führen). To display, mention, use
(führen) a degree publicly in Germany means
the following:
Putting the academic title on a letter
head
Putting the academic title on a business
card
Putting the academic title on bell
Mentioning the title more than once
when talking to another individual, even
at different occasions
But, it is the opinion of this author that the
Germans had and still have: (1) a rigid idea of
what constitutes holding a degree; (2) no regard
for free speech in the matter. Further, I will
argue that the law (Section 4:3) opens the door
wide for individual dis-crimination in that an
individual can be forbidden to hold a foreign
academic degree even if the use of his specific
foreign alma mater was generally permitted in
Germany. The ‗lucky ones‘, whose foreign
degrees were recognized, had them
―nostrificated‖, i.e. converted into matching
German degree, a process only known to most
of us through the recognition of our driver‘s
licenses when we change the country of resi-
dence.
2.The Legal Position Today
The 1939 Act and the accompanying
Regulation was only revoked in 2007
(Bundesrecht aufgehoben durch Art. 9 Abs. 2 G
v. 23.11.2007. To understand this long delay
we need to refer to what happened to Germany
after the 8th of May 1945. Germany lost the
WW II and the winners had a problem as they
had enabled United Nations basic structures
and the Atlantic Charter before the end of the
war. According to the legal basics prescribed it
was not permitted to annex other country‘s
territory. Although, German territory was
annexed and mainly given to Poland (and half
of the East German Province East Prussia to the
Soviet Russians themselves) whose eastern
territory in turn was annexed by Soviet Russia
and incorporated mainly into Belo Russia).
Thus, to facilitate an on-going presence in
Germany, the Allies of WWII did simply not
―close down‖ the Weimar Republic (still
German Realm or German Empire) but
partitioned it into three parts and erected two
puppet states, one in the West, Federal
Republic of Germany, one in the Middle,
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
27
German Democratic Republic GDR (nowadays
historically erroneously called East Germany)
and a third part that was separated, emptied of
the prevalent German population by ethnic
cleansing and given to Poland and then Soviet
Russia as described above.
The West German ‗puppet state‘ FRG
prevailed over the Communist counterpart, the
German Democratic Republic‘ due to its
economic strength and in 1990 the GDR was
incorporated in the FRG with the blessing of all
former Allies of WW II. As the an-nexation
still cannot be legally finalized according to
current international law, as a shrewd legal
solution the Federal Republic of Germany
claimed to be identical with the German Realm,
in regards to the territory ―partially identical‖.
So we have the schizophrenic fact that on one
hand the FRG has dropped for herself all
claims of the lands that have been given to
Poland. On the other hand, due to the FRG‘s
claim to be the German Realm it must maintain
to accept a population that can show, for
example, a German family name or a German
grandfather or grandmother from the annexed
third part of Germany. We will encounter
effects of this internationally little known fact
later on within the educational laws of
contemporary Germany.
This annexation issue is also the reason why to
date a German constitution does not exist, but a
surrogate constitution called ―Basic Law‖. In
addition, it is the reason why there is no
formally correct peace treaty between Germany
and its former enemies but the so-called 2+4
Treaty that defines and approves certain
changes in the FRG‘s status and is presented
usually as the equivalent of a Peace Treaty.
This legal gymnastics is illustrated best as
something similar to the Operating System,
Windows, with all its contemporary layers of
modern user interfaces, under which we find
the old-fashioned DOS system. If we compare
the old laws of the German Realm with DOS,
and if we compare the contemporary laws of
the Federal Republic of Germany with modern
Versions of Windows Operating Systems, we
see what is expressed in Article 123 of the
Basic Law of the FRG.
Contemporary Germany has some underlying
laws of the German Realm and some
regulations developed by the former Allied
Occupiers (SHAEF) that are still in force. As
the Allies of WW II, mainly the US, brought
their ideas of laws into the Federal Republic of
Germany, it goes without saying that education
became an affair of the federal states in
Germany as well. And so the above-mentioned
Academic Degree Law from 1939
(Akademisches Grad Gesetz) survived its
creator Mr Hitler for five decades and was
incorporated into State law and Statutes. With
the advent of the European Union, however,
those old legal structures have led to friction
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
28
and an increasing number of legal actions have
put the FRG leadership under pressure to effect
change. For instance, EU Directive 89/48/EEC,
established in 1988, stipulates that there may
not be any form of discrimination against
degrees from membership states of the EU, so
in April 2000 Germany‘s Permanent
Conference of State Education Ministers,
promulgated the General Permission Decree
and all 16 states agreed to implement the
provisions till the dead line in 2005.
3. What do the 16 German State
Laws Say Today?
The General Permission Decree from
2000 and all State laws require that a foreign
degree must come from a university/college
that is recognized as such in the country of
origin. Furthermore, the conferred degree must
be recognized by the country of origin.
However, some state laws only require that the
university/college itself be recognized. In Table
1, those states marked with ―1‖ permit foreign
degree if the university/college is
governmentally recognized. Those marked ―2‖
require that not only the university/college but
also the degree itself must be recognized
explicitly by the government. Honorary degree
must always come from institutions that are
gov-ernmentally permitted to issue the
corresponding academic degree. Concerning
this, only a few states permit the use of an
abbreviated degree (marked with ―3‖), whereas
the hardline states require the degree written in
complete words (marked ―4‖). There is one
state (Mecklenburg) that discriminates openly
against transfer of academic credits from
private academies located in Germany and
elsewhere towards academic degrees at foreign
universities as practiced, for example, by the
University of Wales7 in the United Kingdom.
The state is indicated with ―5‖. Another state
(Hesse) indicates that the foreign degree must
be considered ‗an academic degree according
to European regulations‘; this remains obscure
as no EU law is mentioned, neither is there any
indication given that the regulation requires
observance of the educational laws of the 27
EU Member states. This ‗exceptionally
intelligent work‘ of German jurisprudence is
marked with ―6‖.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
29
Table 1: Indications of the Requirements of
State Laws Relating to Foreign Degrees8
(Refer Text)
Baden-Württemberg 1 4
Bavaria 1 3
Berlin 2 4
Brandenburg 2 4 5
Bremen 1 3
Hamburg 1 4
Hesse 2 3 6
Mecklenburg-Pomerania 2 4
Lower Saxony 2 3
North Rhine Westphalia 1 3
Rhineland Palatine 2 4
Saarland 2 4
Saxony 2 3
Saxony-Anhalt 2 4
Schleswig-Holstein 2 4
Thuringia 1 4
4.The General Permission Regulation
Grundsätze für die Regelung der
Führung ausländischer Hochschulgrade im
Sinne einer gesetzlichen Allgemeingen
ehmigung durch einheitliche gesetzliche
Bestimmungen (Beschluss der
Kultusministerkonferenz vom 14.04.2000)
Basic principles for regulating the use / display
/mention of foreign higher educational degrees
in terms of a general statutory authorization by
uniform legislation (Resolution of the
Education Minister Conference of 14.04.2000)
1. Ein ausländischer Hochschulgrad, der
aufgrund eines nach dem Recht des
Herkunftslandes anerkannten Hochschul
abschlusses nach einem ordnungsgemäß durch
Prüfung abgeschlossenen Studium verliehen
worden ist, kann in der Form, in der er
verliehen wurde unter Angabe der verleihenden
Hochschule geführt werden. Dabei kann die
verliehene Form ggf. transliteriert und die im
Herkunftsland zugelassene oder nachweislich
allgemein übliche Abkürzung geführt und eine
wörtliche Übersetzung in Klammern
hinzugefügt werden. Eine Umwandlung in
einen entsprechenden deutschen Grad findet
mit Ausnahme zugunsten der nach dem
Bundesvertriebenengesetz Berechtigten nicht
statt. Entsprechendes gilt für staatliche und
kirchliche Grade.
1. A foreign higher education degree,
which was awarded according to the law of the
country of origin as a recognized academic
degree after due study concluded by
examination, can be used/ displayed/
mentioned in the wording in which it was
awarded while also mentioning the awarding
higher education institution. Furthermore, the
original wording of the award may be
transliterated (into Latin letters) and the permit-
ted acronym or the evidently generally used
abbreviation may be used/ displayed/
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
30
mentioned and a literal translation (into
German) may be added in brackets.
A conversion into a corresponding German
degree does not take place except for those
entitled according to the Federal Displaced
Persons Law (from the former Eastern
Provinces, which are now de facto parts of
Russia and Poland). The same applies to
governmental and ecclesiastical degrees.
2. Ein ausländischer Ehrengrad, der von einer
nach dem Recht des Herkunftslandes zur
Verleihung berechtigten Hochschule oder
anderen Stelle verliehen wurde, kann nach
Maßgabe der für die Verleihung geltenden
Rechtsvorschriften in der verliehenen Form
unter Angabe der verleihenden Stelle geführt
werden. Ausgeschlossen von der Führung sind
Ehrengrade, wenn die ausländische Institution
kein Recht zur Vergabe des entsprechenden
Grades im Sinne der Ziffer 1 besitzt.
2. A foreign honorary degree, awarded by an
authorized higher education institution or
another (authorized) body according to the law
of a country of origin can be used/ dis-played/
mentioned according to applicable law in the
wording in which it was awarded while also
mentioning the awarding body. Excluded from
(the General Permission of) being used/
displayed/ mentioned are honorary degrees if
the foreign institution did not have the right to
award the corresponding academic degree
according to Article 1.
3. Die Regelungen unter Ziffer 1 und Ziffer 2
geltend entsprechend für Hochschultitel und
Hochschultätigkeitsbezeichnungen.
3. The regulations under paragraph 1 and
paragraph 2 shall apply accordingly for aca-
demic titles and academic designations.
4. Soweit Vereinbarungen und Abkommen der
Bundesrepublik Deutschland mit anderen
Staaten über Gleichwertigkeiten im
Hochschulbereich und Vereinbarungen der
Länder in der Bundesrepublik Deutschland die
Inhaber ausländischer Grade abweichend von
den Ziffern 1 bis 3 begünstigen, gehen diese
Regelungen nach Maßgabe landesrechtlicher
Umsetzung vor.
4. Where agreements and treaties of the Federal
Republic of Germany and agreements of the
(federal) states with other countries regarding
equivalences in higher education, favour the
holders of foreign degrees deviating to
paragraphs 1 to 3, these regulations prevail the
implementation of state law.
5. Eine von den Ziffern 1 bis 3 abweichende
Grad- und Titelführung ist untersagt. Durch
Titelkauf erworbene Grade dürfen nicht geführt
werden. Wer einen Grad führt, hat auf
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
31
Verlangen einer Ordnungsbehörde die
Berechtigung hierzu urkundlich nachzuweisen.
5. Using/ displaying/ mentioning degrees and
titles differently as prescribed in paragraphs 1
to 3 is not permitted. Titles acquired through
title peddling may not be used/ displayed/
mentioned. A person who uses/ displays/
mentions a degree has to prove the justification
for this by certificate at the request of a
regulatory authority. Translation by George
Reiff, 2012.
Law regarding the Universities of the
State of North Rhine-Westphalia, version of the
University Liberty Law from 31.10.2006, the
law came into power on 1st of January 2007
§ 69 Verleihung und Führung von Graden
Awarding and Displaying/using/mentioning
degrees:
(1) Grade dürfen nur verliehen werden, wenn
innerstaatliche Bestimmungen es vorsehen.
Bezeichnungen, die Graden zum Verwechseln
ähnlich sind, dürfen nicht vergeben werden.
(1) Degrees may only be conferred if interstate
regulations provide for this. Denominations
that can be confused with degrees cannot be
awarded.
(2) Von einer staatlichen oder staatlich
anerkannten Hochschule in Deutschland oder in
einem anderen Mitgliedstaat der Europäischen
Union einschließlich der Europäischen
Hochschulen in Florenz und Brügge sowie der
Päpstlichen Hochschulen in Rom verliehene
Hochschulgrade sowie entsprechende staatliche
Grade können im Geltungsbereich dieses
Gesetzes in der verliehenen Form geführt
werden. Ein sonstiger ausländischer
Hochschulgrad, der auf Grund einer Prüfung im
Anschluss an ein tatsächlich absolviertes
Studium von einer nach dem Recht des
Herkunftslandes anerkannten Hochschule
ordnungsgemäß verliehen wurde, kann in der
verliehenen Form unter Angabe der
verleihenden Institution geführt werden. Die
verliehene Form des Grades kann bei fremden
Schriftarten in die lateinische Schrift
übertragen werden; ferner kann die im
Herkunftsland zugelassene oder dort
nachweislich allgemein übliche Abkürzung
geführt sowie eine wörtliche Übersetzung in
Klammern hinzugefügt werden. Die Sätze 2
und 3 gelten für ausländische staatliche und
kirchliche Hochschulgrade entsprechend. Eine
Umwandlung in einen entsprechenden
inländischen Grad ist ausgeschlossen.
2 Degrees awarded by governmental or
governmentally recognized higher education
institutions in Germany or another member
state of the European Union inclusive the
European University in Florence and Bruges
and also the Papal University in Rome and
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
32
corresponding governmental degrees can be
used/displayed/ mentioned in the wording they
were awarded within reach of this law. Another
foreign higher education degree that was duly
awarded based on an examination following a
real study at a higher education institution can
be used/mentioned/displayed in the conferred
wording while mentioning the awarding
institution. The original wording of the award
may be transliterated into Latin script and the
commonly used or officially permitted acronym
in the country of origin can be displayed and a
literal translation (into German) can be added
in brackets. The Sentences 2 and 3 apply for
foreign governmental and ecclesiastical higher
education degrees accordingly. A conversion
into a domestic degree is not possible.
(3) Ein ausländischer Ehrengrad, der von einer
nach dem Recht des Herkunftslandes zur
Verleihung berechtigten Hochschule oder einer
anderen zur Verleihung berechtigten Stelle
verliehen wurde, kann nach Maßgabe der für
die Verleihung geltenden Rechtsvorschriften in
der verliehenen Form unter Angabe der
verleihenden Stelle geführt werden. Absatz 2
Sätze 3 bis 5 gelten entsprechend.
3. A foreign honorary degree, awarded by an
authorized higher education institution or
another authorized body according to the law of
a country of origin can be used /displayed
/mentioned, according to applicable regulations
in regard to the award, in the wording it was
awarded while also mentioning the awarding
authority. Paragraph 2, Sentence 3 to 5 apply
accordingly.
(4) Die Absätze 2 und 3 gelten für die Führung
von Hochschultiteln und Hochschultätigkeits-
bezeichnungen entsprechend.
4. Paragraphs 2 and 3 apply accordingly to the
use/display/mention of university titles and
university denominations.
(5) Soweit Vereinbarungen und Abkommen der
Bundesrepublik Deutschland mit anderen
Staaten über Gleichwertigkeiten im
Hochschulbereich und Vereinbarungen der
Länder der Bundesrepublik Deutschland die
Betroffenen gegenüber den Absätzen 2 bis 4
begünstigen, gehen diese Regelungen vor.
5. Where agreements and treaties of the Federal
Republic of Germany with other countries
regarding equivalences in higher education
(equivalence treaties), and agreements of the
states (the Länder) in the Federal Republic of
Germany favour the persons in question with
foreign degrees compared with paragraphs 2 to
4, these regulations (agreements and treaties)
prevail.
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33
(6) Das Ministerium kann in begründeten
Fällen durch Rechtsverordnung für bestimmte
Grade, Institutionen und Personengruppen
Ausnahmen regeln, die Betroffene gegenüber
den Absätzen 2 bis 5 begünstigen. Das
Ministerium kann ferner durch
Rechtsverordnung für bestimmte Grade eine
einheitliche Schreibweise in lateinischer Schrift
sowie einheitliche deutsche Übersetzungen
vorgeben.
(6) The Ministry may regulate through decree
exceptions in reasonable cases for institutions
and groups that favour those persons in
question compared with Paragraphs 2 to 5.
Moreover, the Ministry can regulate through
decree a unified way of display in Latin script
and a unified German translation.
(7) Von den Absätzen 2 bis 6 abweichende
Grade und Titel sowie durch Titelkauf
erworbene Grade dürfen nicht geführt werden.
Wer einen Grad führt, hat auf Verlangen der
zuständigen Behörden die Berechtigung hierzu
urkundlich nachzuweisen. Eine von den
Absätzen 2 bis 6 abweichende Grad- oder
Titelführung kann vom Ministerium oder einer
von ihm beauftragten Behörde untersagt
werden. Wer vorsätzlich gegen Satz 1 oder eine
Anordnung nach Satz 2 oder 3 verstößt, handelt
ordnungswidrig. Ordnungswidrig handelt
ferner, wer vorsätzlich Urkunden ausstellt oder
beschafft, in denen ein nach den Absätzen 1 bis
6 sowie Satz 1 nicht führbarer Grad verliehen
wird. Die Ordnungswidrigkeit kann mit einer
Geldbuße bis zu 500.000 Euro geahndet
werden. Zuständige Verwaltungsbehörde für
die Verfolgung und Ahndung von
Ordnungswidrigkeiten nach Satz 4 und 5 ist das
Ministerium oder eine von ihm beauftragte
Behörde.
(7) Displaying/using/mentioning degrees and
titles differently as mentioned in the Paragraphs
2 to 6 is not permitted and purchased degrees
are not permitted for use/ display/ mention. A
person using/displaying/mentioning a degree or
university title has to prove eligibility for this
through (producing the) certificate upon request
of the authority in charge. Usage /display
/mention diverging from Paragraphs 2-6 of a
degree or title can be forbidden by the ministry
or by an authority put in charge. A person
acting premeditated against Sentence 1 or a
decree according to sentences 2 or 3, is guilty
of a misdemeanor. A person premeditatedly
issuing or procuring certificates in which a
degree is awarded that cannot be
used/displayed/mentioned according to
Paragraphs 1 to 6 and Sentence 1 is guilty of a
misdemeanor. The misdemeanor can lead to a
fine of 500,000 EUR. The relevant
administrative authority according to sentences
4 and 5 is the Ministry, or a department put in
charge by it.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
34
(8) Die Landesregierung kann an Personen, die
außerhalb der Hochschule wissenschaftliche,
künstlerische oder kulturelle Leistungen
erbracht haben, die die Anforderungen nach §
36 Abs. 1 Nr. 3 und 4, § 36 Abs. 1 Nr. 3 und 5,
§ 36 Abs.2 oder § 36 Abs. 3 erfüllen, den Titel
einer Professorin oder eines Professors
verleihen.
8. The State Government can confer
professorships onto persons that rendered
outside the university scientific, artistic or
cultural efforts satisfying the requirements
according to Paragraph 36, Sentence 1, Number
3 and 5, Paragraph 36, Sentence 2 or Paragraph
36, Sentence 3.
Verordnungüber die Führung von
akademischen GradenVom 31. März 2008 (Fn
1)Aufgrund des § 69 Abs. 6 des Gesetzes über
die Hochschulen des Landes Nordrhein-
Westfalen (Hochschulgesetz – HG) vom 31.
Oktober 2006 (GV. NRW. S. 474), zuletzt
geändert durch Artikel 2 des Gesetzes zur
Neuregelung des Kunsthochschulrechts vom
13. März 2008 (GV. NRW. S. 195), wird
verordnet:
(1) Inhaberinnen und Inhaber von
Doktorgraden, die von einer staatlichen oder
staatlich anerkannten Hochschule in
Deutschland oder in einem anderen
Mitgliedstaat der Europäischen Union
einschließlich der Europäischen Hochschulen
in Florenz und Brügge sowie der Päpstlichen
Hochschulen in Rom verliehen und in einem
wissenschaftlichen Promotionsverfahren
erworben sind, können anstelle der im
Herkunftsland verliehenen Bezeichnung die
Bezeichnung „Dr.― ohne fachlichen Zusatz und
ohne Herkunftsbezeichnung führen.
2Men and women owning a doctorate obtained
from a governmental or governmentally
recognized tertiary institution in Germany or
any other member country of the EU including
the European Universities in Florence and the
Papal University in Rome, and obtained
through research process, can use ―Dr.‖ without
mentioning the field of expertise and the
awarding institution instead of the awarded
denomination of the degree of the country of
origin.
(2) Absatz 1 gilt nicht für Grade, die die
Bezeichnung „Doktor― enthalten, jedoch ohne
Promotionsstudien und ohne Promotionsver
fahren vergeben wurden („Berufsdoktorate―),
oder die nach den rechtlichen Regelungen des
Herkunftslandes nicht der dritten Ebene der
Bologna-Klassifikation der Studienabschlüsse
zugeordnet sind („kleine Doktorgrade―).
Sentence 1 does not apply to degrees which
contain the denomination doctor but were
awarded without research process and are not
allocated to the third level of the Bologna
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
35
Classification for degrees (―small doctor
degrees‖; properly: professional doctorates).
(1) Inhaberinnen und Inhaber der nachstehend
genannten russischen Doktorgrade können
anstelle der im Herkunftsland verliehenen
Bezeichnung die Bezeichnung „Dr.― ohne
fachlichen Zusatz, jedoch mit Angabe der
verleihenden Einrichtung, führen:
kandidat biologiceskich nauk
kandidat chimiceskich nauk
kandidat farmacevticeskich nauk
kandidat filologiceskich nauk
kandidat fiziko-matematiceskich nauk
kandidat geograficeskich nauk
kandidat geologo-mineralogiceskich nauk
kandidat iskusstvovedenija
kandidat medicinskich nauk
kandidat nauk (architektura)
kandidat psichologiceskich nauk
kandidat selskochozjajstvennych nauk
kandidat techniceskich nauk
kandidat veterinarnych nauk.
2/Fn2 Owners of Russian doctor degree as
listed below, can use the acronym „Dr.―
without mentioning the field of expertise while
mentioning the awarding institution instead of
using the generally evidently permitted
acronym of the country of origin:
kandidat biologiceskich nauk
kandidat chimiceskich nauk
kandidat farmacevticeskich nauk
kandidat filologiceskich nauk
kandidat fiziko-matematiceskich nauk
kandidat geograficeskich nauk
kandidat geologo-mineralogiceskich nauk
kandidat iskusstvovedenija
kandidat medicinskich nauk
kandidat nauk (architektura)
kandidat psichologiceskich pauk
kandidat selskochozjajstvennych nauk
kandidat techniceskich nauk
kandidat veterinarnych nauk.
(2) Inhaberinnen und Inhaber des in den
Vereinigten Staaten von Amerika erworbenen
Grades „Doctor of Philosophy― – abgekürzt
„Ph.D.― –, können, sofern die verleihende
Einrichtung von der Carnegie Foundation for
the Advancement of Teaching als „Research
University (high research activity)― oder als
„Research University (very high research
activity)― klassifiziert ist (Carnegie-Liste), die
Abkürzung „Dr.― ohne weitere Zusätze führen.
2Owners who obtained the US degree ―Doctor
of Philosophy‖- acronym: PhD - can use the
acronym „Dr.― without mentioning anything
else if the awarding institution has been
classified by the Carnegie Foundation for the
Advancement of Teaching (Carnegie List) as
Research University (high research activity) or
Research University ( very high research
activity).
(3) Inhaber von folgenden Doktorgraden
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
36
1. Australien: „Doctor of …― (mit jeweils
unterschiedlicher Abkürzung)
2. Israel: „Doctor of …― (mit jeweils
unterschiedlicher Abkürzung)
3. Japan: „Doctor of …― (hakushi …)
4. Kanada: „Doctor of Philosophy― (Abkürzung
„Ph.D.―)
können anstelle der im Herkunftsland
zugelassenen oder nachweislich allgemein
üblichen Abkürzungen die Abkürzung „Dr.―
jeweils ohne fachlichen Zusatz und
Herkunftsbezeichnung führen.
(3) Owners of the following doctor degrees:
1. Australia: „Doctor of …― (with respectively
different major)
2. Israel: „Doctor of …― (with respectively
different major)
3. Japan: „Doctor of …― (hakushi …)
4. Canada: „Doctor of Philosophy― (acronym
„Ph.D.―)
can use ―Dr.‖ without mentioning the field of
expertise and the awarding institution instead
of the awarded denomination of the degree of
the country of origin.
(4) Die gleichzeitige Führung mehrerer
Bezeichnungen aufgrund eines Grades ist nicht
zulässig. 4Using/displaying/mentioning
multiple denominations on the basis of one
degree is not permitted.
Diese Rechtsverordnung tritt am Tage nach
ihrer Veröffentlichung in Kraft. Zum selben
Zeitpunkt tritt die Verordnung über die
Führung ausländischer Doktorgrade vom 9.
Dezember 2005 (GV. NRW. 2006 S. 4) außer
Kraft.
Der Minister für Innovation, Wissenschaft,
Forschung und Technologie des Landes
Nordrhein-Westfalen
This decree becomes valid at the day after its
promulgation. At the same time the decree
regarding the display/use/mention of foreign
doctor degrees from 9th of December 2005
(North Rhine Westphalia Gazette 2006 Page 4)
is lifted.
The Minister
For Innovation, Science, Research and
Technology of the State of Northrhine-
Westphalia
How to legally use and display a foreign degree
in North Rhine Westphalia that are non-EU and
non-favoured?
According to the state law, degrees from
English influenced countries have to be held as
follows:
John Doe, MBA (Doetown University)
John Doe, PhD (Doetown University)
And as follows, if they come from a Latin
influenced country like for example former
French, Portuguese or Spanish colonies:
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
37
Dr. (Universidad de Doetown) John Doe
A special exception is certainly a female holder
of a Spanish doctorate as she is forced to hold
the degree as Dra. for doctora.
The German Constitution and Free Speech
The German Constitution and Free Speech
This is a difficult question because, as stated
above, Germany does not have a constitution.
Since 1949, the Federal Republic of Germany
has operated a surrogate constitution called
Grundgesetz, i.e. ―Basic Law‖. This is still the
case in 2010 despite that fact that Germany was
supposedly given independence from Allied
rule in 199113. Since that time, German
politicians have failed to introduce a real
constitution within a real German republic.
But even the surrogate constitution has a free
speech provision, which in Germany is referred
to as ―Meinungsfreiheit‖ (freedom of
expression) in Article 5, Section 114 of the
Basic Law. Two statements under this Article
are of special interest here:
(1) Every person shall have the right freely to
express and disseminate his opinions in speech,
writing, and pictures and to inform himself
without hindrance from generally accessible
sources. Freedom of the press and freedom of
reporting by means of broadcasts and films
shall be guaranteed. There shall be no
censorship.
(2) Art and scholarship, research, and teaching
shall be free. The freedom of teaching shall not
release any person from allegiance to the
constitution.
If ―censorship‖ is unacceptable, how is it that a
German citizen is not permitted to mention a
qualification they have obtained? Further,
where is academic freedom in scholarship,
research and teaching when a teacher is
prevented from writing his academic degree on
a blackboard?
The Universal Declaration of Human Rights
from 1948 declared in the preamble that:
―Whereas disregard and contempt for human
rights have resulted in barbarous acts which
have outraged the conscience of mankind, (we
look for) the advent of a world in which human
beings shall enjoy freedom of speech and belief
and freedom from fear and want are proclaimed
as the highest aspiration of the common
people‖.
Similarly, Article 10 of the European
Convention on Human Rights16 makes clear
that:
―This right shall include freedom to hold
opinions and to receive and impart information
and ideas without interference by public
authority‖.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
38
These provisions have been re-emphasized
once again in the Treaty of Lisbon of 2009 as
follows:
Article 6 (ex Article 6 TEU)
1. The Union recognises the rights, freedoms
and principles set out in the Charter of
Fundamental Rights of the European Union of
7 December 2000, as adapted at Strasbourg, on
12 December 2007, which shall have the same
legal value as the Treaties.
The provisions of the Charter shall not extend
in any way the competences of the Union as
defined in the Treaties.
The rights, freedoms and principles in the
Charter shall be interpreted in accordance with
the general provisions in Title VII of the
Charter governing its interpretation and
application and with due regard to the
explanations referred to in the Charter, that set
out the sources of those provisions.
2. The Union shall accede to the European
Convention for the Protection of Human Rights
and Fundamental Freedoms. Such accession
shall not affect the Union's competences as
defined in the Treaties.
3. Fundamental rights, as guaranteed by the
European Convention for the Protection of
Human Rights and Fundamental Freedoms and
as they result from the constitutional traditions
common to the Member States, shall constitute
general principles of the Union's law.
These directives appear to be in opposition to
German regulations governing the citing of
qualifications not approved by the State. Thus
far, the German government has operated
contrary to such international and EU
requirements with complete impunity.
IV. Conclusion
The sixteen Educational State Laws and the
General Permission Decree from 2000 of the
Federal Republic of Germany have nearly the
same provisions as the Academic Degree Act of
1939 from the German Realm. It is evident that
the Academic Degree Act and its
accompanying Regulation were fully
incorporated and very actively employed in the
Federal Republic of Germany from the
beginning of its conception in 1949, and that it
only reluctantly ushered in the General
Permission Decree and the State Education
Laws in the years 2000 to 2005. It is important
to remember that:
The provisions of the Academic Degree
Act were introduced by a deformed
Weimar Republic which for six years
had been changed to a totalitarian by the
Enabling Act of 1933. The provisions of
the Act were made by a totalitarian
system that was strongly biased against
anything and everything ―foreign‖
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
39
The most important implication in the
current State Laws is that they neither
ushered out, nor eased, nor abolished
the discriminatory provisions within the
Academic Degree Act. These survive
today within the provisions of the
General Permission Decree and all 16
State Laws. The only change was a shift
from the need for individuals intending
to use a foreign degree in the Federal
Republic of Germany to get permission
to so do from a government commission
in favour of placing full legal
responsibility on the individual to not
use a degree openly that did not have
official approval.
V. In short
Provisions like the withdrawal of degrees for
persons being ―unsuitable‖ are to be found in
the 1939 decree AkaGrGDVVO as much as in
half of the Higher Education state laws of today
A provision for a general permission of certain
degrees can be found in the 1939 decree
AkaGrGDVVO inasmuch as in all current state
laws Where the 1939 decree AkaGrGDVVO
prescribes a kind of license to be obtained, all
Higher Education state laws of Germany
―offer‖ a license-like document where they will
state a recommendation how to display a
foreign degree legally. Also, the same function
is taken on by the so called ANABIN list
(www.anabin.de) where so called
―recommendations‖ as of acronyms and wanted
and unwanted universities in Germany are
listed. These legal circumventions of a direct
licensure have been created in order to avoid
court suits through the population and the EU.
Especially the formula ―wenn sie nach dem
Recht ihres Heimatstaates zur Führung des
akademischen Grades befugt sind = according
to the laws of the country of origin permitted to
display‖ in regards to a general permission to
display a foreign degree, applies already in § 3
of the 1939 decree AkaGrGDVVO in as much
as it does in all Seeming favouritism for
Degrees from the European Union results
directly from the Lisbon Convention of 1997: It
is noteworthy that it was only ratified in
Germany in November 2007 – 10 years after
the fact! It is also an indicator that the German
authorities are fully aware of their
undemocratic laws regarding foreign
educational credentials and change them only
minutely upon application of outside pressure.
Reference to current international law shows
that the Educational Laws prevalent in the
Federal Republic of Germany (FRG) break the
provisions of the Universal Declaration of
Human Rights and that this practice has been
blatantly pursued from the foundation of the
Federal Republic of Germany over six decades.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
40
Further, the FRG has not adhered to its own
proclamation of freedom of speech (Basic Law,
Article 5, Sections 1 and 3) in prosecuting
people who have mentioned more than once
that they have a foreign degree and fining them
€2 000 to €20,000 and recording a criminal
conviction according to Criminal Code §132a
(Unauthorized Use of Official Titles)!
Germany is now operating within the
supranational EU structure and is more or less a
Federal State within the European Union EU.
How is it possible that the FRG may surmount
European Law Provisions like Article 10 of the
European Convention on Human Rights, which
clearly states that Freedom of Expression is
protected with impunity? How is it that the
FRG is still bringing its citizens before court
for a speech crime, when they were simply
wishing to inform their fellow citizens and
business partners of their academic credentials?
VII. Evaluation
What once set out to be a paper about some
legal abnormities in Germany turned out to
become the stuff from which dissertations are
made. Little did I know at the beginning of my
investigation into the German laws regarding
foreign educational credentials that the laws
themselves would reveal a picture of a society
and country that is absolutely different
compared with what is transported to the
outside world. Germany is fostering foreign
immigration for over 5 decades now but the
people are still too cowed to stand up for
themselves and demand equal recognition of
the credentials. I have made clear by displaying
and translating all 16 state laws, the General
Permission Decree from 2000 and the
Academic Degree Laws and Decrees from
1939 that laws have changed little and that
under the guise of democracy in the field of
foreign educational credentials there is still bias
that stems from another time and another
political system – the letter nobody wishes to
experience anymore in our times. Giving
evidence with contemporary sources that are
unanimous plentiful and governmental is
certainly a streak of luck and made the use of
the historical method more than easy in this
case.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
41
References:
1. http://www.loc.gov/teachers/, (October
2011)
2. http://avalon.law.yale.edu/wwii/atlantic.a
sp (September 2011)
3. http://www.britannica.com/EBchecked/t
opic/554821/Robert-de-Sorbon,
(September 2011)
4. http://historymedren.about.com/od/aentri
es/a/11_aquinas.htm, (September 2011)
5. http://plato.stanford.edu/entries/meister-
eckhart/, (October 2011)
6. http://www.dhm.de/lemo/html/dokument
e/ermaechtigungsgesetz/index.html,
(September 2011)
7. http://www.buzer.de/gesetz/1582/index.h
tm, (September 2011)
8. http://www.buzer.de/gesetz/220/index.ht
m, (September 2011)
9. http://europa.eu/legislation_summaries/o
ther/c11022b_en.htm, 2011
10. http://www.kmk.org/fileadmin/veroeffent
lichungen_beschluesse/2000/2000_04_1
4-Fuehrung-ausl-HS-Grade.pdf,
September 2011
11. http://www.mk.niedersachsen.de/downlo
ad/5812, February 2012
12. http://www.schure.de/22210/akgradvo.ht
m, February 2012
13. http://www.wissenschaft.nrw.de/objekt-
pool/download_dateien/hochschulen_un
d_forschung/flyer_Juli_2011.pdf,
February 2012
14. http://www.wissenschaft.nrw.de/objekt-
pool/download_dateien/hochschulen_un
d_forschung/doktorverordnung20081.pd
f, March 2012
15. http://www.landesrecht.sachsen-
anhalt.de/jportal/;jsessionid=0DC7A77A
B3A10BF8CD1BE81E12EAC1FA.jpj4?
quelle=jlink&query=HSchulG+ST&psm
l=bssahprod.psml&max=true&aiz=true#j
lr-HSchulGST2010pP19, May 2012
16. http://www.buzer.de/gesetz/220/index.ht
m, October 2012
17. http://www.kmk.org/fileadmin/pdf/ZAB/
Konventionen_und_Uebereinkommen_v
on_Europarat_UNESCO/Lissabonkonve
ntion.pdf, October 2012
18. http://www.globeinvestor.com/servlet/Ar
ticleNews/story/BWIRE/20041221/2004
1221005728
http://www.sueddeutsche.de/karriere/prozess-
um-umstrittenen-leichenpraeparator-von-
hagens-durfte-professorentitel-fuehren-
1.1402563
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
42
*Dr George Reiff is Professor for History at
EIILM University in India.
He holds a Master degree from Universidad
Empresarial and a PhD from Bundelkhand
University. As a former Ambassador of the
Parlement Mondial, George has travelled
widely to promote peace and understanding.
He now serves as a Representative of the
Bunyoro Kingdom, a constitutionally
empowered Kingdom in Uganda and also as
Chapter Commander for Thailand of the
Order of the Knights of Rizal of the
Philippines.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
43
Glocal Operation Management
Step Ahead for Effective Supply Chain Managers
Dr. Shakti Prasad Mohanty and Dr. Sanjay Kumar Rout*
Many people involved in modern
organizations agree that globalization has a
significant impact on the way we do business.
Particularly during the past few decades, the
concept of a global marketplace or global
economy has influenced both industry and
individual consumers alike. Today we find
numerous global multi-brand as well as single-
brand in our vicinity. In this age of
Globalization we hear about the concept of
GLOCAL OPERATION; Go-Global Be Local.
Some of the leading brands have initiated &
implemented this very concept. This concept
implies, Make your Product available
throughout the Globe as a Local Market
produce. For example: Volvo, Toyota, Pepsi,
McDonald‘s, Subway, Addidas, and Nike etc.
In this Glocal Operation, the most important
role is essayed by Effective Supply Chain. By
effective supply chain, we mean the supply
chain process be economical & qualitative.
Overall, glocalisation has created a more
competitive and connected economic
environment, offering both opportunities and
threats to organizations. The distance and time
between different countries, consumers and
businesses has effectively been compressed by
through new technology, communication
channels, more efficient transportation and
logistics and greater networking between
organizations.
Businesses now have more options than
they have had in the past in regards to where
and how they produce their products, which
markets and consumers they should target and
how they should communicate with both their
suppliers and buyers. Organizations
increasingly find that they must rely on
effective supply chains, or networks, to
compete in the global market and networked
economy. In Peter Drucker's (1998) new
management paradigms, this concept of
business relationships extends beyond
traditional enterprise boundaries and seeks to
organize entire business processes throughout a
value chain of multiple companies.
Glocalisation presents many challenges to
organizations in regards to the supply chain.
The global marketplace has made supply and
demand more volatile and hard to forecast as
there is a greater reliance on different
organizations spread over great distances. This
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
44
can make it difficult for managers to maintain
an adequate level of control over their
operations. There is also increased competition
from low cost (and often lower quality)
products from overseas markets. In recent
decades, globalization, outsourcing, and
information technology have enabled many
organizations, such as Dell and Hewlett
Packard, to successfully operate collaborative
supply networks in which each specialized
business partner focuses on only a few key
strategic activities. This inter-organizational
supply network can be acknowledged as a new
form of organization. However, with the
complicated interactions among the players, the
network structure fits neither "market" nor
"hierarchy" categories. It is not clear what kind
of performance impacts different supply
network structures could have on firms, and
little is known about the coordination
conditions and trade-offs that may exist among
the players.
In the 21st century, changes in the business
environment have contributed to the
development of supply chain networks. First, as
an outcome of globalization and the
proliferation of multinational companies, joint
ventures, strategic alliances, and business
partnerships, significant success factors were
identified, complementing the earlier "just-in-
time", lean manufacturing, and agile
manufacturing practices. Second, technological
changes, particularly the dramatic fall in
communication costs (a significant component
of transaction costs), have led to changes in
coordination among the members of the supply
chain network. In general, such a structure can
be defined as "a group of semi-independent
organizations, each with their capabilities,
which collaborate in ever-changing
constellations to serve one or more markets in
order to achieve some business goal specific to
that collaboration". Global supply chains pose
challenges regarding both quantity and value.
Supply and value chain trends include:
Globalization, Increased cross-border sourcing,
Collaboration for parts of value chain with low-
cost providers, Shared service centers for
logistical and administrative functions,
Increasingly global operations, which require
increasingly global coordination and planning
to achieve global optimums & Complex
problems involve also midsized companies to
an increasing degree.
These trends have many benefits for
manufacturers because they make possible
larger lot sizes, lower taxes, and better
environments (e.g., culture, infrastructure,
special tax zones, or sophisticated OEM-
Original Equipment Manufacture) for their
products. There are many additional challenges
when the scope of supply chains is global. This
is because with a supply chain of a larger
scope, the lead time is much longer, and
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
45
because there are more issues involved, such as
multiple currencies, policies, and laws. The
consequent problems include different
currencies and valuations in different countries,
different tax laws, different trading protocols,
and lack of transparency of cost and profit.
Essentially, globalization has made the supply
chains for many products more complex and
challenging to manage. In the past, one
company supplied the raw materials, the
manufacturer produced the product, a logistics
business managed the storage and
transportation and the retailer would sell the
product. However, current supply chains often
incorporate multiple suppliers, different
manufacturers to produce each component, an
assembler to put the components together, a
transport company, storage provider and
multiple retailers operating all over a country or
even the world. This longer supply chain places
even greater importance on effective supply
chain management.
*Shakti Prasad Mohanty,
Functional Consultant (International
Trade & SCM), Visiting Faculty
*Sanjay Kumar Rout,
Functional Consultant & Researcher
(International Business, HRM &
Business Innovation)
Email= [email protected] ( facebook
, twitter) [email protected]
( linkedin ) skype id = sanjaykrout Ph =
+91-8270657298
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
46
The Developing Concept Of The Professional
The nature and future of professionalism, and its implications for academics,
executives and public administrators
Dr. Daniel Valentine*
This article is based in part on presentations made by the author at conferences of the Institute of
Management Consultants held in Lagos and Port Harcourt in May 2013.
What do we mean by professionalism? It is a
question to which much hard thinking and
careful writing are being devoted in our time.
This essay examines the development of
modern thinking about professionalism,
particularly as it applies to those working
within public administration. Never have
professionals been under such pressure as
today, as the demands on public services are
raised in all territories due to increased
scrutiny, calls for improved efficiency and
inter-departmental working, and the growth of
public cynicism about government services.
―Profession‖ in the full sense requires a single
professional body that regulates entry and
conduct, which limits the number of
professions to just a few such as medics,
lawyers and architects. The term ―profession‖
is in common usage much wider than this
(Farmer, 1995) and the concept of
―professional conduct‖ wider still. It is the
wider concept of ―profession‖ that we will
examine in this article. What are these
standards of professional attitude and conduct
that the holder of any job could abide by? A
few examples could be:
Being aware of the standards of
behaviour and output that the public
and others might reasonably expect.
A sense of collegiality, meaning
respect for colleagues.
Ensuring that you have the relevant
knowledge at all times, and refusing to
perform a job for which you are not
qualified (whether by credentials or
experience).
Knowing and abiding by all laws of
the territory that you are working in
and all universal and professional
ethical norms
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
47
Understanding what the client wants,
and being honest about the results that
you can deliver.
Never doing harm to the client, which
will mean refusing to carry out orders
that you believe will harm the client.
Being ready to quit rather than carry
out work of an unlawful or harmful
nature.
Seeking feedback from anybody who
might be able to provide it (clients,
customers, manager, colleagues,
friends and family).
Keeping your personal skills sharp,
even those that you use rarely.
Keeping up to date with current
thinking and practice.
This article will use Valentine‘s definition
(2013) of professionalism as presented below,
and examine the three overlapping categories
in turn.
The first category contains the elements of
knowledge that all professionals share:
I. Core knowledge
This means the ―body of knowledge‖ that
professionals learn during their entrance to
the profession. Professions each have
different ways of capturing and transmitting
this knowledge, usually a mixture of
classroom learning and learning through
observing experienced practitioners. Each
practitioner can have confidence that all other
practitioners possess the same body of basic
knowledge because of the rigors of the
professional training and induction.
II. Up to date
Most knowledge degrades over time due to
technological change, legal changes, cultural
changes and new ways of thinking. The
professional anticipates a long career over
which many things will change, and so must
equip him/herself with channels of new
knowledge, such as training sessions,
conferences and professional journals.
(Maister, 1993)
III. Experienced
The professional does not have mere ―book-
knowledge‖ but also ―knowledge in use‖.
Whilst the book-knowledge is freely available
to all, it is the understanding of how this
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
48
information is applied that makes the
professional of great value.
The second category contains aspects of the
practice of professionalism.
IV. Evidence-based approach
The professional imitates the natural science
in following an established routine for
gathering, documenting and acting on
evidence. (McSwite, 1997) The professional
understands the difference between fact and
opinion, and between evidence and
supposition.
V. Respectful
The professional treats clients with respect.
Clients may have many names (such as
customers, patients etc) but should always be
treated with care. (Mumby, 1988) The use of
courteous language and the practice of
making others feel valued is not just ―good
PR‖ but is natural conduct that flows from the
real respect that the professional has for
others.
VI. Confidentiality
The professional is often in a priviledged
position regarding private information
concerning his/her client and should
understand both the law and professional
protocol with regards to gathering, handling,
sharing, storing and transmitting information.
(Maister, 1997)
VII. High Standards
The professional maintains high standards of
work in both the process followed and the
work output. Standards will sometimes
change following reviews and new
legislation, so the professional must keep up
to date.
VIII. Reflective
The professional has a degree of autonomy
because of his/her position, sometimes a great
deal of autonomy. Therefore the professional
must be able to criticize his/her own work
while it is being carried out and after it has
been completed. (Cunliffe and Jun, 2005) The
professional undertakes continual review of
their actions, attitudes and results with the
aim of continual self-improvement.
The third category covers the attitudinal
aspects of professionalism.
IX. Vocational passion
The professional is not just doing ―a job‖ but
is following ―a calling‖. (Adams & Balfour,
1998) The professional is involved in a life-
time pursuit and only true passion for their
work will carry them through.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
49
X. Multiple loyalties
The professional has divided loyalties. The
duties to different groups, such as their
employer, their colleagues, their team
members, the public, and their profession will
often be at odds. Where duties appear to
conflict, the professional will reflect and take
advice, but will not compromise their
professional standards. Conflicts are common
in the professional life for instance, the need
for speedy task completion will often conflict
with the need to do a thorough job, and the
duty to be open with your staff may conflict
with the duty to keep management
information confidential.
XI. Higher purpose
The professional is not a mere ―time-server‖
but has an important role in society. The
professional is aware of their contribution to
societal well-being, and uses this inspiration
to drive him/herself to maintain high
standards of process and outout, even when
the current task is uninspiring. (Jun, 1994):
XII. Service & sharing
The professional thinks not primarily of their
own self-interest, but the needs of their
employer, their clients, their staff, the public
and their profession. (Maister, 2000) The
professional is aware that they are an example
to others, and that he/she has the chance to
change many people‘s lives for the better. The
professional often sacrifices their own time
and pleasure to serve the needs of others. The
professional is especially dedicated to serving
their professional community by developing
others and sharing best practice. (Argyris,
1991)
The professional is always reflecting, always
learning, and always improving. Each
professional should have their own ―action
plan‖ for personal improvement. Here are two
ideas that may be useful:
Find a professional friend who you
can share thoughts and questions with,
and meet once a fortnight to discuss
mutual progress on the twelve aspects.
Read the Drucker (1999) article and
reflect on:
o How can I objectively assess my
performance?
o What are my strengths?
o What are my values?
o What can I/do I want to
contribute?
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
50
References
Adams, G. B.,& Balfour, D. L. (1998):
Unmasking administrative evil, Sage
Argyris, C. (1991): Teaching smart people
how to learn. Harvard Business
Review, 69, 99-109
Cunliffe, A.L. and Jun, J.S (2005): The Need
for Reflexivity in Public
Administration, Administration &
Society; 37; 225
Drucker, P. F. (1999): Managing oneself.
Harvard Business Review, 77(2), 64-
75
Farmer, D. J. (1995): The language of public
administration: Bureaucracy,
modernity, and postmodernity,
University of Alabama Press
Jun, J. S. (1994): Philosophy of
administration, Daeyoung Moonhwa
International
McSwite, O. C. (1997): Legitimacy in public
administration: a discourse analysis,
Sage
Maister, D (1993): Managing the
Professional Services Firm, Free
Press
Maister, D (1997): The Trusted Advisor, Free
Press
Maister, D (2000): True Professionalism: The
Courage to Care About Your
People, Your Clients, and Your
Career, Free Press
Mumby, D. K. (1988): Communication and
power in organizations: Discourse,
ideology and domination, Ablex.
Valentine, D (2013): Decision-making for
consultants, The Institute of
Management Consultants Public
Lecture, May 25th
, Port Harcourt,
Nigeria
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
51
*Dr Daniel Rossall Valentine is a
graduate of St. Andrews University
(Economics) and King‘s College London
(Philosophy & Theology). He is a faculty
member of INSEEC Business School, Paris;
Birkbeck College, University of London;
Dean of London Graduate School; and Editor
of Governance Voice, a journal which
specialises in research & opinion on corporate
governance, regulation, ethics & reporting.
Before his academic career, Daniel worked
fulltime in Financial Communications, most
recently as Head of Investor Relations &
Financial Communications for a FTSE 100
company. Daniel‘s teaching & research
interests include Micro Economics, Marketing
Strategy, Public Relations, & Corporate
Governance. Daniel will be moving to Oxford
University in September 2013. He may be
contacted at [email protected]
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
52
Relevance of Physics Education Programmes of The University of the
Gambia To the Teaching of Senior Secondary School Physics in the
Gambia.
Nya Joe Jacob*
ABSTRACT
In this research, an attempt is made to determine the relevance of the Physics Education
Programmes of The University of the Gambia to the teaching of senior secondary physics in the
Gambia. The Physics Department of The University of the Gambia is selected on the basis of the
fact that it is the only National University in the Country. The instrument used was the Discrepancy
Content Analysis Model (DCAM) in which six major senior secondary content areas in Physics
were listed. They were then qualitatively compared with the Physics Department of the University
of the Gambia Physics Education Frequency counts, percentages and t-test. The major finding was
that the University of the Gambia Physics Education programmes were relevant to the current
senior secondary physics curriculum in the Gambia.
Keywords: Physics education, Gambia educational programmes, Relevance of physics
education, Physics curriculum in Gambia, Problems facing physics teaching.
I. Introduction
Physics is one of the most difficult subjects
taught in schools. A number of students are
even more daunted with its use of mathematics.
In a study done in UK from 1985 to 2006, it
was found that there was 41 percent decrease in
the number of entries to A-level examinations
in sciences. This decreasing trend is similar in
other countries. Despite this trend, physics
remains an integral part of the educational
system. It is through physics that new
methodologies were developed that helped
improve the quality of life, including things
such as automobiles and modern construction.
Society's reliance on technology represents the
importance of physics in daily life. Many
aspects of modern society would not have been
possible without the important scientific
discoveries made in the past. These discoveries
became the foundation on which current
technologies were developed. Discoveries such
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
53
as magnetism, electricity, conductors and
others made modern conveniences, such as
television, computers, phones and other
business and home technologies possible.
Modern means of transportation, such as
aircraft and telecommunications, have drawn
people across the world closer together --- all
relying on concepts in physics. In 1999 during
the World Conference on Science (WCS), the
UNESCO-Physics Action Council considered
physics an important factor in developing
solutions to both energy and environmental
problems. Physics seeks to find alternative
solutions to the energy crisis experienced by
both first world and developing nations. As
physics help the fields of engineering, bio-
chemistry and computer science, professionals
and scientists develop new ways of harnessing
preexisting energy sources and utilizing new
ones. In the United Nations Millennium
Summit held in 2000, it was recognized that
physics and the sciences will play a crucial role
in attaining sustainable development. Physics
helps in maintaining and developing stable
economic growth since it offers new
technological advances in the fields of
engineering, computer science and even
biomedical studies. These fields play a crucial
role on the economic aspect of countries and
finding new and better ways to produce and
develop products in these fields can help boost
a country's economy. Similarly, the
International Union of Pure and Applied
Physics (IUPAP) asserted that physics will
generate the necessary knowledge that will lead
in the development of engines to drive the
world's economies.
Physics - the study of matter, energy and their
interactions - is an international enterprise,
which plays a key role in the future progress of
humankind. The support of physics education
and research in Gambia is important because:
1. Physics is an exciting intellectual
adventure that inspires young people
and expands the frontiers of our
knowledge about Nature.
2. Physics generates fundamental
knowledge needed for the future
technological advances that will
continue to drive the economic engines
of the world.
3. Physics contributes to the technological
infrastructure and provides trained
personnel needed to take advantage of
scientific advances and discoveries.
4. Physics is an important element in the
education of chemists, engineers and
computer scientists, as well as
practitioners of the other physical and
biomedical sciences.
5. Physics extends and enhances our
understanding of other disciplines, such
as the earth, agricultural, chemical,
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
54
biological, and environmental sciences,
plus astrophysics and cosmology -
subjects of substantial importance to all
peoples of the Gambia.
6. Physics improves our quality of life by
providing the basic understanding
necessary for developing new
instrumentation and techniques for
medical applications, such as computer
tomography, magnetic resonance
imaging, positron emission tomography,
ultrasonic imaging, and laser surgery.
When a crime occurs, scientists use the branch
of physical science called Forensics to help
solve the crime. Forensic science helps police
officials recognize fingerprints, match DNA to
a suspect and decipher evidence left at the
crime scene. This branch of physical science
helps ensure that police officers can identify,
apprehend and charge criminal offenders. DNA
evidence, which forensic scientists use to place
a defendant at the scene of a crime, is highly
valuable in a court case because it is usually
indisputable.
When you listen to your favorite song through
your stereo, you may not think about the
research and time scientists put into creating
such an interesting device. Scientists refer to
the study of sound waves as "acoustic science."
This form of physical science studies how
sound waves travel and interact with other
objects. Companies use acoustic science to
determine how to create speakers that have a
clear sound. An understanding of acoustic
science also helps producers make clear audio
tracks for movies and allowing someone with
impaired sight to see well. Optics is the branch
of physical science that studies how light
travels through objects and how eyes perceive
the effects of light. The study of optics led to
the invention of vision enhancing lenses. Using
lenses to bend light can allow you to see
objects from long distances or view
microscopic objects. Bending light can also
sharpen a person's vision, the development and
application of fuel is also a branch of physical
science. When you need to discover a new
energy source and how to tap into that energy,
you are using a branch of physical science. You
benefit from the discoveries of energy
production any time you drive your car, turn on
a light or turn on your hot water faucet. Some
energy sources are more beneficial and stronger
than others. Energy production scientists strive
to find the most efficient and safe fuels to keep
you living in comfort.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
55
II. Gambia Educational System
The Gambia operates on a 6-3-3-4 system:
Education level Years of study/age Certificate/Exam/Degree
Lower Basic School 6 years/ages 7–13 Grade six Placement Exam
Upper Basic School 3 years/ages 13–16 Basic Education Certificate Exam
Senior Secondary School 3 years/ages 16–19 West African Senior Secondary
Certificate Examination (WASSCE)
University (undergrad) 4 years Bachelor‘s degree
University (grad) 1+ years Master‘s degree
Language: The sole official language of
instruction throughout the Gambian educational
system is English. Lower Basic and Upper
Basic Schools (Grades 1-9): Until 2002,
primary education lasted for six years and led
to the Primary School Leaving Certificate
(phased out). Secondary education was divided
into junior secondary schools, which offered a
three-year course leading to the Junior School
Leaving Certificate, and Senior Secondary
schools which offered a three-year course.
Since 2002, a new unified basic education
system was introduced covering 1-9 years,
through an automatic transition with no
examination at the end of the lower basic cycle.
The cycle is divided into two cycles: lower
basic (Grades I–VI) and upper basic (Grades
VII–IX). There are 368 Lower basic schools
and 89 Upper basic schools in the Gambia.
There is another type of school system called
the basic cycle schools which is a combination
of the lower and upper basic school (grades 1-
9). All Gambian students take the Basic
Education Certificate Examination (BECE) at
the end of grade 9 (ninth grade) in nine or ten
subjects. Admission to Senior Secondary/High
School is competitive. The vast majority of
Gambian students attend government schools
(75%); there are a growing number of private
and international private secondary schools in
the country offering Cambridge IGCSE/ O
Levels or the Government‘s WASSCE.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
56
Source: National Statistic Abstract, academic year 2006/2007.
Senior Secondary School (SSS): Senior
secondary education (Grades 10–12) is for
pupils between the ages of 16 and 19 years.
Secondary schools offer a variety of subjects in
science, arts and commerce. At the end of
Grade 12, pupils sit for the West African
Secondary School Certificate Examinations
(WASSCE) conducted by the West African
Examinations Council. Students in all the 55
Senior High Schools take a Core curriculum
consisting of English Language, Integrated
Science, Mathematics, and Social Studies. Each
student also takes three or four Elective
subjects, chosen from one of seven groups:
Sciences, ―Arts‖ (social sciences and
humanities), or Commerce (visual arts or home
economics). The secondary school transcript
should contain a letter or percentage grade for
each subject, for each of three terms, for the
three years of senior secondary school,
equivalent to the tenth through twelfth grades.
Students‘ Term Reports (transcript) contain
rank in class for each subject as well as grades
for class-work. At the end of Senior
Secondary/High School (twelfth grade), all
students take the West African Senior
Secondary Certificate Examination, or
WASSCE, or IGCSE for some of the private
schools. These exams are given nationwide in
May-June each year, but the results are not
available until the following October.
The minimum university standard for
admission to post-secondary education is 5
credits on the WASSCE, including credits in
math and English. Students are expected to
retake exams in subjects they have failed.
The academic year runs from September to July
with a long vacation from: July to September
which also coincides with the rainy season in
The Gambia.
Higher Education: The University of The
Gambia, created in 1999, offers programs
which lead to a Bachelor's Degree after four
years of study in Humanities and Social
Studies, Economics and Management Science,
and Nursing and Public Health; and six years in
Total Number of schools Age group 574 % of Total
Total Number of Basic cycle
schools(combination of the lower and
upper basics school)
7-19 62 11%
Total number of lower basics school 7-13 368 64%
Total number of upper basics school 13-19 89 16%
Total number of senior secondary school 16-19 55 10%
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
57
Medicine and Surgery. Another institution, The
Gambia College, offers non-degree certificates
and diplomas in Agriculture, Science,
Education, Nursing and Midwifery and Public
Health, Catering, Management Development
and vocational training. Higher technical and
vocational education is offered at the Gambia
Technical Training Institute which offers
courses leading to the examinations of the City
and Guilds of London Institute and the Royal
Society of Arts.
The Ministry of Higher Education, Research,
Science and Technology (MoHERST) was
establishment in 2007. The ministry's
departments are the Directorate of Higher
Education, Directorate of Research and
Planning and the Science and Technology
Directorate.
The mission of the ministry is to :
Provide access to relevant and high
quality education;
provide high quality higher education
services
make science & technology the engine
of growth;
ensure gender equity in education;
promote the principle of lifelong
learning;
promote innovation in science and
technology;
promote research in science and
technology;
ensure sustainable environmental
growth.
Before 1999, The Gambia had no university.
This meant that students intending on higher
education were compelled to go overseas with
very few returning back to Gambia. As a result
of this failure the University of The Gambia
was established in 1999 to train and retain
skills in the country. Since 2005 the institution
has been assisted by the Norwegian Education
Trust Fund to put together a plan of action to
identify possible areas of expansion to meet the
needs of the labour force.
Physics is one of the science subjects
taught at the senior secondary level of the
Gambia educational system. Despite the
importance of this subject as one of the
fundamental ingredients of technology, it is
plagued by persistent low enrolment and poor
performance of students (Balogun, 1985;
Akanbi 1983; Daramola, 1982; Dial, 1972;
Jordan, 1971). Notable among the causes
identified to be responsible for the unsteady
state of Physics teaching in Gambia secondary
schools are: very limited number of
professionally trained teachers. (Bajah, 1975;
Daramola, 1982, 1987), inadequate laboratory
facilities and exposure (daramola, 1982); and
poor science background of students at the
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
58
junior secondary level of education (Daramola,
1982, 1987, Ogunniyi, 1977). This researcher
believes that the training received by Physics
teachers at the University of the Gambia might
affect both enrolment and performance of
students in Physics.
There have not been many studies to evaluate
the curriculum of higher educational
institutions. Tikhomirov (1968) said that in
USSR, every pupil must study Physics
regardless of his/her future vocation. He also
stated that the key to the general, economic,
cultural and scientific progress in the Soviet
Union was its science teacher and that every
field of study in the USSR has its special
teachers. Michelson (1984) found that graduate
teachers of Darke University were satisfied
with their training. From Saggaf‘s study
(1981), it has been revealed that the English
curriculum of King Abdul-Aziz University,
Mecca, did not meet the student – teachers‘
needs and interest. Thiensuwan (1983)
evaluated Art teacher education programmes at
Chulalongkorn University Bangkok, Thailand.
His findings revealed inadequacy in Art
subject. Nwosu (1990) examined the content
and curriculum development process of
Nigerian tertiary teacher education as well as
its response to the demands of national
development from 1932 to 1987. His findings
revealed serious neglect of the Nigerian tertiary
teacher education curriculum. Irrelevance of
curriculum to teachers‘ needs may be a major
obstacle to students‘ progress and enrolment
even as reported by Jegede (1984),
Oguntimehin (1987) and Willison and
Garibaldi (1976). Hence, the training of
science teachers should not be taken lightly.
This is because the efficiency of any institution
depends on the academic competence of the
teaching staff which in turn is predicated on the
quality and level of the education received by
the teachers. It is very important that
secondary school science teachers are properly
trained since ‗no educational system can rise
above the quality of its teachers‘ (FRN, 1981,
p. 38). This is the rational for this study.
Attempts were therefore made to answer the
following research questions:
1. To what extent are the Physics
components of the Physics Education
curriculum of the University of the
Gambia, relevant to the senior
secondary Physics programmes in the
Gambia ?
2. Do the University of the Gambia run
Physics Education programmes which
are more relevant to the senior
secondary Physics curriculum?
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
59
On the basis of the above research questions,
the following hypotheses were generated:
Hι There is no statistically significant
difference in the ratings of the relevance
of The University of the Gambia
Physics Education programmes to the
senior secondary Physics curriculum.
H2 There is no statistically significant
difference in the rating of the relevance
of the B.Sc. (Ed) Physics Education
programme of the University of the
Gambia..
H3 There is no statistically significant
difference in the ratings of the relevance
of the Physics Education programme
run by the Gambia College to the senior
secondary Physics curriculum.
III. Research Methodology
Instrument Design: The instrument used for
this study was a researcher designed tool used
to ascertain the availability or otherwise of the
six content areas of the senior secondary
Physics curriculum of the Physics education
programmes of The University of the Gambia
.The instrument ,called Discrepancy Content
Analysis Model (DCAM), was an adapted
version of the input and process evaluation of
the CIPP model of Stufflebeam (1971) and the
Discrepancy Model of Provus (1971).
Each physics content was rated on a two option
scale (Not available = 0, Available = 1). When
a content was available in The University of the
Gambia, it was awarded one mark. Non-
availability attracted zero mark. If the
University scored twenty-five points out of a
total of thirty-six (about 90%) it would be
considered as having a Physics education
programme that was relevant to the senior
secondary Physics curriculum.
IV. Instrument Validation
The instrument was given to three Science
educators in the Department of Curriculum
Studies and Educational Technology,
University of the Gambia, two Physics Lecturer
in the physics department of the University of
the Gambia, and two Physics teachers in St
Peter Senior Technical Secondary School,
Lamin and Nusrat Senior Secondary School in
the Gambia. The contents listed initially were
forty-two but they were reduced to thirty-six.
The criterion given by the experts especially
the Physics teachers and a Physics educator
was that there were repetions in the list
submitted by the researcher.
V. Pilot Study
The Pilot study was performed using The
University of The Gambia. Three weeks after
receiving feedbacks, another set was posted to
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
60
the same Universities. The two responses were
correlated, using the Pearson‘s Product
Moment Correlation Coefficient. A coefficient
of 0.80 was obtained. The same procedure was
followed for the Gambia Colleges. A
Coefficient of 0.86 was obtained.
VI. Procedure for Data Collection
Copies of the instrument were sent to the Heads
of Physics Departments of the University of the
Gambia and Gambia College to complete. The
researcher who is also a Physics Lecturer in the
University of the Gambia visited them to
interact with the Heads of Departments so as to
make the assignment quicker.
VII. Results
The major research question for this study was:
To what extent are the Physics components of
the University of the Gambia Physics education
programmes relevant to the senior secondary
school Physics curriculum?
In an attempt to provide a solution to the above
question, the scores for the University of the
Gambia and The Gambia Colleges in a test of
relevance were computed and the mean scores
for the two types of institutions were obtained.
The means score for the University of the
Gambia was 91.39% while that for the Gambia
colleges was computed to be 96.67%. This
implies that both the University of the Gambia
and the Gambia College ran relevant Physics
Education programmes.
The Physics Education programme run by the
University was 91.39% relevant to the senior
secondary Physics curriculum while the
Physics education programme run by the
Gambia Colleges was 96.6% relevant to the
senior secondary Physics curriculum. Tables 1,
2 and 3 indicate the above results.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
61
Table 1
Relevance of University Physics Education Programme to the Senior Secondary Physics
Curriculum
S/No Universities Physics Education
Programme available
Relevant SS Physics
topics available in
Universities (Total
possible Score = 36)
Percentage of the
SS Physics topics
available in the
Universities
01 University of the
Gambia.
B. Sc Ed 36 100.00
02 Gambia College P.T.C 18 50.00
03 Gambia College A.T.C 30 83.33
Table 2
Relevance of Physics Education Programme of The University of the Gambia and Gambia
College to the senior secondary Physics Curriculum
S/No College of Education Relevant SS Physics topics
available in the Gambia
College and University of
the Gambia.
Percentages of the SS
Physics topics available in
the Gambia College and the
University of the Gambia.
01 University of the Gambia 35 97.22
02 Gambia College 33 91.67
Table 3
Comparison of the Relevance of University of the Gambia and the Gambia College of
education Programme to the senior secondary Physics programme.
Higher Institutions Number Mean Scores Degree Relevance
University of the Gambia 1 91.39 Very relevant
Gambia College (P.T.C/ A.T.C) 2 96.67 Very relevant
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
62
Hypothesis 1
There is no statistically significant difference in
the ratings of the relevance of University of the
Gambia and Gambia College of Physics
education programmes to the Senior Secondary
School Physics Curriculum.
The scores and mean scores of the University
of the Gambia and those of the Gambia College
in a test of relevance were computed. The
mean scores were then compared and tested
using the t-test statistic for significant
difference. The mean score (91.39) for the
University of the Gambia versus 96.67 for the
Gambia College yielded a computed t-value
of 1.062 which is not significant at 0.05 level.
On the basis of the result obtained, the null
hypothesis 1 above was rejected. Table 4
indicates the result of the t-test run for
Hypothesis 1.
Table 4
Results of t-test computation of the relevance of The University of the Gambia Physics
Education programmes to senior secondary Physics curriculum.
Higher
Educational
Institutions
Number Df Mean Score Standard
Deviation
t-value Probability
Level
University of the
Gambia
1 18 91.30 11.60 1.062 NS 0.05
Gambia College
.
2 18 96.67 2.86
NS = Not significant
Hypothesis 2
There is no statistically significant difference in
the rating of the relevance of the B.Sc. (Ed)
Physics Education programme of the
University of the Gambia and that of the P.T.C
/ A.T.C of the Gambia College to the Senior
Secondary Physics curriculum.
The mean scores for the University of the
Gambia in a test of relevance were calculated.
These mean scores were subjected to the t-test
statistic. According to the results shown in
table 5 below, no statistically significant
difference was reported at the 0.05 significant
level. Hypothesis 2 was therefore accepted.
P.T.C = Primary Teachers Certificate, A.T.C =
Advance Teacher Certificate.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
63
Table 5
Result of t-test computation of the relevance of Physics Education Programmes of The
University of the Gambia to Senior Secondary Physics Curriculum
University Number of
core courses
Df Mean Score Standard
Deviation
t-value Probability
Level
University of
the Gambia
5 4 84.442 18.05 1.527 NS 0.05
NS = Not significant
Hypothesis 3
There is no statistically significant difference in
the rating of the relevance of the Physics
Education programme of Gambia Colleges to
the Senior Secondary Physics curriculum.
Mean scores for the Gambia Colleges were
calculated. The mean scores were then
compared, using the t-test statistic. Table 6
shows the results. The obtained t-value of
0.785 is not significant at the 0.05 level.
Hypothesis 3 was therefore also accepted.
College of
Education
Number of
courses
Df Mean Score Standard
Deviation
t-value Probability
Level
Gambia
College
5 4 96.110 2.83 0.023 0.05
Gambia
College
5 4 97.220 3.10
NS = Not significant
Summary of Major Findings
Findings from this study indicate that:
1. The University of the Gambia and the
Gambia Colleges ran Physics
education programmes that were
relevant to the Gambia senior
secondary Physics curriculum.
2. The Universities of the Gambia ran
Physics Education programmes that
were relevant to the Gambia senior
secondary Physics curriculum.
3. The Gambia College ran Physics
Education programmes (P.T.C /A.
T.C) that were relevant to the
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
64
Gambia senior secondary Physics
curriculum.
VIII. Discussions
The results presented in this Research work
indicated that the University of the Gambia and
the Gambia College claimed to be running
Physics Education programmes which were
relevant to the senior secondary Physics
curriculum.
Hypothesis 1 was confirmed by the result in
table 4. It indicated that the Physics Education
programmes offered by both the University of
the Gambia and the Gambia College were rated
by respondents to be relevant to the Gambia‘s
senior secondary Physics curriculum.
The result obtained from hypothesis 2 is to be
expected since majority of the staff are from
the University of the Gambia and the Gambia
College. Also, the idea of selecting external
respondent from St. Peters Technical Senior
Secondary School and Nusrat Senior Secondary
School might have possibly allowed for similar
curricula in those Senior Secondary Schools..
Results obtained from hypothesis 3 confirmed
that Gambia Colleges ran Physics Education
programmes (P.T.C /A.T.C ) that were relevant
to the senior secondary Physics curriculum.
This is contrary to expectation, since The
Gambia College were not expected to train
Senior Secondary Science teachers primarily.
Indeed, they were, as they still largely are,
expected to train teachers for junior secondary
General science.
It is therefore desirable for The University of
the Gambia Physics Education programmes to
be relevant to Senior secondary school Physics
curriculum because the teachers are trained to
teach at that level. The University of the
Gambia‘ Physics Education programmes can be
made more relevant if Physics teacher-trainers
familiarize themselves with the Senior
Secondary Physics curriculum and plan
academic programme to cater for the academic
needs of prospective senior secondary Physics
teachers.
The Ministry of Higher Education is also
implored to intensify its monitoring machinery
in order to ensure that The University of the
Gambia and Gambia College run identical
Physics Education programmes which would
cover the content of the joint agreed senior
secondary Physics curriculum.
In the light of the above findings it might be
worthwhile to sample opinions of senior
secondary Physics teachers concerning the
appropriateness of the training they received in
relation to the job they are doing.
It is also considered a profitable exercise for
future investigation to carry out similar
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
65
researches into other subjects that are usually
combined with Physics in the University of the
Gambia in order to promote a more meaningful
career development of The Gambia senior
secondary Physics teachers.
In summary, physics is viewed as an essential
part of the educational system of The Gambia.
We therefore urge Gambia Ministry of Basics
and Secondary Education to seek advice from
physicists and other scientists on matters of
science policy, and to be supportive of the
science of Physics. This support can take many
forms such as:
National programs to improve physics
teaching at all levels of the educational
system.
Building and maintaining strong
departments of Physics in the
University of the Gambia and Gambia
College with opportunities for grants to
support research.
Scholarships and fellowships for both
undergraduate and graduate students
studying physics.
Adequate funding for national
laboratories and the formation of new
ones as appropriate.
Funding and facilitating international
activities and collaborations.
The contribution of physics to all
aspects of life, material and non-
material, will be essential for the
foreseeable future.
Physics currently faces serious
problems in the world. Many of these
problems affect science in general, but a
number are specific to physics.
Actions are needed to assure the
continued health of physics research,
teaching and cultural influence. Some
form of 'contract' between physicists
and the Gambia will be required.
These research emphasized that the problems
physics faces are not related to the subject
matter but to its relations with the Gambian
student and the perceptions of the Gambia
society. By 'physics', we include the physical
sciences in general and we affirm the growth of
interdisciplinary fields and the trend for areas
such as astronomy, cosmology, environmental
studies and biophysics to become ever more
closely linked with all aspects of physics.
Physics is a central part of our culture
and will continue to inspire many
people. Physics reveals important
universal truths notwithstanding certain
strands of postmodern thought.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
66
Physics will continue to underpin all
science and technology for the
foreseeable future.
Physics is and will continue to be
essential for analyzing and solving
urgent environmental and energy
problems.
Physics plays a unique educational role:
Physics is global and constitutes our
best 'anti-Babel'. Generations of
physicists of the most diverse political
and cultural backgrounds have
collaborated on the basis of shared
understanding and shared ideals.
Physics sets standards of rational
thought in the face of irrationality; it
upholds the primacy of observation.
Many people feel that science robs the
world of meaning and this deeply
affects their attitude to science. Science
is felt by many people to be 'cold' and
'alienating'.
Modern forms of irrationality are
becoming widespread and sometimes
involve outright opposition to scientific
attitudes and even scientific knowledge.
There is sometimes an unfortunate,
even dangerous, political aspect.
There is a serious 'authority problem' in
modern life with few people able to
make rational judgments as to who or
what to believe. This is reflected in a
widespread relativism improperly
invoking Einstein. Similarly,
Heisenberg is improperly invoked in
promoting the idea that everything is
uncertain anyway. The widespread
tendency to adopt conspiracy theories is
a potentially dangerous aspect of this
problem. There is a corresponding
tendency in academe in the form of
social constructivism; in extreme form
this denies that science can
progressively approach universal truth.
External pressures, sometimes
commercial in nature and often
exacerbated by funding problems, lead
to damaging conflicts within subject
areas. Damaging conflicts also arise
between subject areas, particularly
under pressure of inadequate funding.
In the Gambia there is a squeeze on
industrial research as a result of 'short-
termism'.
Science teaching and research face
specific local problems.
It is precisely the nature of many of
these items which makes greater
support for science an urgent matter in
the Gambia.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
67
IX. Recommendation
The Ministry of Basic and Secondary
Education, Ministry of Higher
Education of the Gambia Should ---
Promulgate a declaration affirming the
vital importance of basic physical
science and the need to protect and
support curiosity-led physics.
Affirm the importance of making a
substantial effort to educate and inform
the youth of the Gambian. . A guideline
should be established recommending
that, say, 1% of money spent on
research should be made available for
public awareness-building.
Provide substantial support for the
improvement of the teaching of physics
in all senior secondary schools in the
Gambia, at all levels from school to
university.
The Ministry of Basic and Secondary
Education should--promulgate the principle
that physics should be taught by persons who
have been trained to become physics teachers.
Reliable information concerning curricula in
the Gambia should be established and made
widely accessible. Support is required for
teachers, for example by enhancing their
prestige and providing continuing education
and personal development.
establish means for supporting physics within
the new democracies of Gambia. This should
be done by facilitating international
collaboration and by encouraging the support
of physicists in the country. Find ways to
support and utilize for mutual benefit the
reservoir of advanced expertise in the Gambia.
The long-term health of physics requires the
establishment of guidelines linking R&D
expenditure to gross national product (GNP) at
a level appropriate to the economic state of the
country. In addition, there should be guidelines
and standards for coherent and stable national
science policies; these policies should be
developed in close consultation with national
scientific communities.
The impact of globalization on all our
institutions and our value systems was a
common element in many contributions. It is
clear that physics will have a key role to play in
studying and solving the global environmental
and energy problems the world will face in the
coming century. Globalization was felt in
another way: while some of the problems listed
below are particular to specific regions, there
was nevertheless very much common ground in
the identification of the general problems faced.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
68
X. Challenges faced by Physics
Teaching in the Gambia.
These Research identified many difficulties
faced by physics as an 'institution' and as a
subject in schools and universities. These
difficulties do not arise from its own subject
matter and in particular the research affirmed
that the subject is certainly not 'worked out.'
Nevertheless, physics as an activity and as an
academic subject does face problems and some
of the specific points are:
For many students, physics can seem
remote from their everyday concerns.
This is true also for the general public.
This is in great measure because
physics is abstract and lacks
visualizable elements (particularly
modern microscopic physics, with
astrophysics an exception). This
presents a problem for teachers and
those communicating with the student.
The fact that physics is essentially
mathematical also presents special
problems. While the mathematical
language is a main strength of physics
as a discipline, it is a major obstacle in
the way of communicating the meaning
of physics to the students..
Many school science curriculums are
relatively static and remote from
exciting contemporary developments
and unrelated to important
contemporary issues such as medicine,
energy and the environment. This is in
spite of the direct relevance of physics
to all these issues.
Physicists have acquired a negative
image in some parts of the society, not
least because of the association with
nuclear weapons.
The public has no clear picture of how
society has benefited from physics and
how physics is essential for solving
environmental and energy problems.
There is no 'physics industry' in the
sense that, for example, there is a
'chemical industry' and a 'biotechnology
industry'. The following two problems
are, in part, consequences of this.
Students in schools are unaware of the
career possibilities enabled by
education in physics which exist even in
the University of the Gambia in which
high-technology industry is not strong.
Physics faces problems in the university
of the Gambia: there are fewer students,
and many appear to be less able.
Sometimes, multi-disciplinary courses
at undergraduate level add to the
downward trend in the academic level
of courses. This lowering of standards
also occurs as a result of pressure to
'satisfy the students'. The supply of
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
69
students to do B.Sc Ed ( physics) is
highly susceptible to economic
circumstances and Gambia frequently
face a serious shortage.
In the Country there is a squeeze on
pure research and a growing
requirement for researchers to justify
their work in terms of economic
benefits.
In Gambia there is a serious lack of
competent and enthusiastic physics
teachers.
Physics is particularly subject to
competition from pseudo-science. This
is an aspect of the authority problem:
the public is confused as it is confronted
with a mixture of information and
misinformation through the media,
including the Internet.
XI. Remedies to the Problems faced
by physics Teaching in the Gambia.
Politicians at the highest levels are
beginning to find that the prestige
arising from national success in pure
science is of value in international
negotiations. A related fact is that, in
the Gambia, it is success in science
(along with sport) which most arouses
national pride.
In the country, there is a higher than
ever interest in popular science. This
point has been emphasized by
professionals in the popular science
business, and is also clear from the
number of books published.
Our defence of physics, as well as
science in general, must find ways of
exploiting these hopeful points. It was
pointed out that 'The resource of the
21st century is knowledge...‘ and
certainly physical knowledge will be an
important part of this.
The Researcher identified a number of areas
where action by the physics Teacher and its
friends, including those involved in teaching
physics, could be of great benefit:
Physicist Should ---
present a united front, suppress
factional fighting, show respect for
different subject areas. (We are
vulnerable to 'divide and rule'.)
deal responsibly with the public, avoid
exaggeration, be honest and should not
infringe conventions relating to peer
review and publication.
assume more responsibility in the issues
of the global environment, sustainable
growth or equilibrium and the energy
problem. Physics will have a key role to
play in finding an acceptable solution to
these problems .
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
70
Facilitate improved means for scientists
to advise (and enter into dialogue with)
government and other public
organisations. (Interaction should be
both ways and involve the grass roots
scientists.)
find ways of using the expertise of
sociologists to explore in greater depth
the cause and nature or anti-scientific
feeling; this could even lead to entente
between physics and some part, at least,
of the world of sociology. This could be
of great benefit. An urgent problem
requiring study is the way the media
treat pseudo-science in modern
pluralistic societies.
find ways to encourage industry to
support long term and curiosity-led
research. Governments should be
persuaded to encourage, facilitate or
enforce this (through tax laws, etc.).
participate in research involving both
scientists and economists which shows
the long-term influence of scientific
research on GNP. This should be done
in a way which includes such things as
the contribution of the training which is
an important byproduct of pure
research.
XII.Conclusion
Physics teaching must respond to changing
social and also scientific circumstances. There
is much value in courses which relate the
important findings and perspectives of
cosmology etc. to common human needs and
aspirations. Teachers should recognize the
value of relating physics teaching to matters of
everyday importance, including environmental
and energy issues. Teachers should emphasize
that it is everybody's moral duty to have an
elementary understanding of the physics of the
threatened global environment. The abstract
aspects of physics should be moderated at the
introductory level. There are many 'modern
physics' topics which can be made very
accessible with imaginative teaching methods
involving pupil activity. A case was put that
they can be made more accessible and more
relevant than some traditional topics if they are
presented with appropriate explanations.
Evidently there is a need for continuing debate
concerning the teaching of physics in schools.
There is no accepted general solution to the
apparently contradictory requirements of, on
the one hand, attracting talented young people
into physics and preparing them for university
level studies, and, on the other hand, teaching
physics in a way that does not repel and
alienate future citizens. Research should be
conducted on the anomaly that represents the
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
71
low participation of women in physics in the
Gambia as compared to others and remedies
should be sought. We should do this in the first
place because of the human fulfillment and
beneficial productivity which is currently being
lost. There is further potential benefit: the
remedy may substantially improve the public
status of physics in general.
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International Academic Journal of Development Research (IAJDR) Vol. 1, No 2, July-December, 2013
74
Collective Learning and Knowledge Development in the Evolution of
Regional Clusters of High Technology SMEs in Europe
Dr. David Keeble and Dr. Frank Wilkinson *
ABSTRAC
KEEBLE D. and WILKINSON F. (1999) Collective learning and knowledge development in the
evolution of regional clusters of high technology SMEs in Europe, Reg. Studies 33, 295—303. This
paper outlines the aims and objectives of the TSER Network on Networks, Collective Learning and
Research and 1 ethnology Development in Regionally Clustered High Technology Small and
Medium Sized Enterprises (SMEs), and considers evolutionary trajectories of European regional
clusters of such SMEs in the 1990s. It reviews the development of ideas concerning regional
clustering, from Marshall‘s industrial districts, through innovative milieux, to notions of regional
untraded interdependencies, networks and collective learning. Particular attention is paid to how
firms and regions develop competences and new knowledge as the basis for successful innovation.
It concludes by outlining the focus of individual papers.
Key Words: Collective Learning, Knowledge, Development, Evolution, Regional Clusters,
Technology
I. Introduction
This Special Issue of Regional Studies contains
a series of original research papers contributed
by members of the European research network
on Networks, Collective Learning and
Research and Technology Development (RTD)
in Regionally Clustered High Technology
Small and Medium Sized Enterprises. This
network, whose meetings have been funded by
Directorate-General XII for Science, Research
and Development of the European Commission
under the Targeted Socio-economic Research
Initiative of the Fourth Framework
Programme, has been studying the role and
importance of research and technology link-
ages in the evolution and competitiveness of
selected European regional clusters of
innovative high technology SMEs. These
linkages, which are both local and global,
involve universities and public research
institutes, other technology based SMEs and
large firms. A major focus of the network‘s
investigation has been to try to assess the
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
75
extent and importance for successful SME
innovation and knowledge development in
these regional clusters of ‗collective learning
processes‘, operating through regional linkages
and networking between firms and odier
organizations, by flows of highly-skilled
workers within the regional scientific, research
and professional labour market, and by
localized processes such as new firm spin-off.
Network members have also attempted to chart
the evolutionary trajectory of, and changes in
the role of SMEs in, the selected European
high technology regional clusters in the 1990s.
The regions studied and the researchers
involved are: Cambridge (David Keeble, Clive
Lawson, Barry Moore, Frank Wilkinson and
Elisabeth Garnsey); Oxford (Helen Lawton
Smith); Grenoble (Michel de Bernardy);
Sophia-Antipolis (Christian Longhi); Munich
(Rolf Sternberg and Christine Tamasy); the
Dutch Randstad (Egbert Wever); Pisa,
Piacenza and NE Milan (Roberta Capello and
Roberto Camagni); Goteborg (Asa Litidholm
Dahlstrand); Helsinki (Ilkka Kauraneri and
Erkko Autio); and Barcelona (Pere Escorsa,
Ramon Maspons andjaume Vails), with theor-
etical contributions from Edward Lorenz. The
Network has been co-ordinated by David
Keeble and Frank Wilkinson of the ESRC
Centre for Business Research, University of
Cambridge, with Clive Lawson as Network
Rapporteur. While not all network members
have contributed to this Special Issue, the
individual papers which follow are gready
indebted to the collective endeavours and
debates of the whole network.
During the course of its work, the network has
produced four substantive reports on die
development of these European regional
clusters of high technology SMEs. These cover
the following themes: regional institutional and
policy frameworks; university research links
and spin-offs; networks, links and large firm
impacts; and collective learning processes and
knowledge development (KEEBLE and LAWSON,
1996, 1997a, 1997b, 1998). A Final Report on
the network‘s findings is due for submission to
the European Commission by March 1998.
II. Collective Learning, High
Technology Smes, and European
Regional Evolutionary Trajectories
in the 1990s
The specific aim of the set of papers presented
in this Special Issue is to assess the extent and
significance of ‗regional collective learning‘
processes of different kinds in understanding
the innovative activity and recent evolution of
high technology SMEs in the European
regional clusters involved. In the papers, the
terms ‗high technology‘, ‗technology-
intensive‘ and ‗technology- based‘ are used
interchangeably to refer to firms and industries
whose products or services embody new,
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
76
297 innovative and advanced technologies
developed by the application of scientific and
technological expertise. Such firms almost
invariably regard such expertise and resultant
technological leadership as the firm‘s major
competitive advantage, and are usually defined
in practice by high R&D-intensky (high levels
of R&D expenditure and/or employment
relative to turnover or total workforce)
(AYDALOT and KEEBLE, 1988: KEEBLE, 1992).
SMEs are usually defined as smaller
independent, owner-managed enterprises with
a workforce of less than 250 employees.
Defining, conceptualizing and theorizing die
notion of ‗regional collective learning‘ is a
major task of the first paper in this Special
Issue by Lawson and Lorenz, and is also
discussed later in this and in subsequent
papers. A simple definition at the outset,
however, is that regional collective learning
involves ‗the creation and further development
of a base of common or shared knowledge
among individuals making up a productive
system which allows them to co-ordinate their
actions in the resolution of die technological
and organisational problems they confront‘
(LORENZ, 1996). The creation and development
of such a localized knowledge base can
involve both conscious and unconscious
mechanisms, an example of die former being
research collaboration between local SMEs or
between an SME and a local university,
examples of the latter being the movement of
‗embodied expertise' and know-how in the
form of researchers, managers and skilled
workers within the regional labour market and
via entrepreneur spin-off from existing local
firms or organizations to create new
technology-intensive firms.
All but one of the seven European high
technology regions which feature in this
Special Issue — Cambridge, Grenoble,
Sophia-Antipolis, Munich, Goteborg, Pisa/
Piacenza/NE Milan, and the Randstad — are
classified by a recent OBSERVATOIRE DES
SCIENCES ET DES TECHNIQUES (OST), 1998, p.
47, study in the highest level (type 1 out of
eight types) of European science and
technology intensive regions based on regional
output of patents and scientific publications.
The exception (Goteborg, classified in type 2)
simply reflects the statistical impact of
exceptionally large Swedish regions. All
contain a substantial cluster ofhigh technology
SMEs, the number of and employment in
SMEs in these clusters having generally grown
considerably since the 1970s. The origin and
nature of these high technology SME clusters
vary, the Munich and Italian cases, for
example, being dominated by manufacturing
firms while Sophia-Antipolis and the Randstad
have developed mainly as clusters of service
firms. While many are focused on universities
or public research institutes, some have been
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
77
strongly influenced by large local high
technology manufacturing companies. In the
1990s, however, vigorous SME resurgence in
these clusters following the early 1990s
recession appears to have been accompanied
by some signs of convergence in growth
processes (KEEBLE and LONGHI, 1998). This
reflects diversification and technology
combination in new dynamic sectors
(information and telecommunications
technologies, Internet and multimedia
applications, biotechnology), continuing SME
spinoffs and growth in critical mass, new
characteristics of die globalization process of
large firms, and new or enhanced
characteristics of the organization of produc-
tion by SMEs. Large global firms appear now
to be seeking explicidy to embed their R&D
activities within such clusters in order to gain
access to highly localized research and
technology competences, while specialized
SMEs in these growing clusters often exhibit
high levels of inter-firm networking and use of
local business support and institutional
resources, hanii- in-hand with active
globalization of their markets.
In the light of this introduction, the remainder
of this paper seeks to provide a broad
conceptual perspective on some of the key
themes which recur in subsequent papers, and
to highlight the particular contribution of each
to understanding the role of collective learning
in the recent development of European
regional clusters ofhigh technology SMEs.
III. Organizat ion, Knowledge
And Learning: Industria l
Distric ts And Innovative
Mil ieux
Until relatively recently mainstream
economics made little of industrial
organization or the relational aspects of inter-
firm linkages apart from suspecting them of
being in restraint of trade. Coase explained the
reason for this: economists think ‗of the
economic system as being co-ordinated by the
price mechanism‘ (COASE, 1937, p. 387) and
‗having regard to the fact that if production is
regulated by price movements production
would be carried out widiout any organisation
at all, well might we ask, why is there any
organisation?
(ibid., p. 388). From such a perspective, the
role of organization is simply to economize on
transaction costs.
In Marshalls work, however, organization and
knowledge are central to the evolutionary
trajectory of capitalism. He argued:
Capital consists in a great part of knowledge
and organisation.... Knowledge is our most
powerful engine of production; it enables us to
subdue Nature and force her to satisfy our
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
78
wants. Organisation aids knowledge; it has
many forms, e.g. that of a single business, that
of several businesses in the same trade, that of
various trades relatively to one another; and
that of the state providing security to all and
help for many. The distinction between public
and private property in knowledge and
organisation is of great and growing
importance: in some respects of more
importance than between public and private
property in material things; and pardy for that
reason it seems best sometimes to reckon
Organisation apart as a distinct agent of
production‘ (MARSHALL, 1952, p. 115).
In Marshall the central role of organization is
‗the ―integration‖ of the increased subdivision
of function, or ―differentiation‖, as it is called,
[which] manifests itself with regards to
industry in such forms as the division of
labour, and the development of specialised
skills, knowledge and machinery (ibid., p.
201).
For Marshall, market success depended on
increased specialization and the development
of more effective industrial organization. One
way in which this came about was from the
concentration of production in particular areas
in what Marshall (ibid., p. 225) described as
‗industrial districts‘. The benefits of such
localization include an increase in the degree
and specialization of skills and their diffusion
throughout the community so as to create an
abundant supply of appropriately qualified
labour, the growth of subsidiary trades and
specialized services, and increased use of
highly specialized machinery made possible
by the combined demand of many firms. The
concentration of firms in close geographical
proximity allows all to enjoy the benefits of
large scale industrial production and of
technical and organizational innovations
which are beyond the scope of any individual
firm.
Marshall‘s industrial districts effects are long
term, cumulative and depend on co-operation
in knowledge creation and innovation:
When an industry has thus chosen a locality tor
itself it is likely to stay there long: so great are
die advantages which people following the
same skilled trade get from near
neighbourhood to one another The mysteries
of the trade become no mysteries; but are as it
were in the air, and children learn many of
them unconsciously. Good work is rightly
appreciated, inventions and improvements in
machinery, in processes and the general
organisation of the business have their merits
prompdy discussed: if one man starts a new
idea, it is taken up by others and combined
with suggestions of their own; and thus
becomes the source of further good ideas
(ibid., p. 225). And: ‗the broadest, and in some
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
79
respects the most efficient forms of
constructive co-operation are seen in a great
industrial district where numerous specialised
branches of the industry have been welded
almost automatically into an organic whole‘
(MARSHALL, 1920, p. 599).
For Marshall the driving force in industrial
districts is freedom of industry and enterprise,1
Nevertheless, trade associations had a co-
operative role to play in coordinating
production and standardizing products but he
also argued that such benefits could accrue
automatically by the individual efforts of
entrepreneurs within industrial districts.
Moreover, although firms could benefit from
scientific and other specialized services
provided by formal associations, without the
profit incentive staff of the associations ‗may
be found lacking in energetic enterprise‘ and
the proliferation of such institutions ‗might dry
up many of the sources of truly original
inventions‘ (ibid., chapter XII, book III, pp.
606—7). For similar reasons, public sector
intervention had a positive though limited role
to play in the development of industrial
organization and technical progress (ibid., pp.
666—72).
Individualistic initiative and free enterprise are
therefore the central driving force of economic
progress in Marshall Collective action may
foster individual success but it risks blunting
initiative and inhibiting competition. For
Marshall, the importance of the localization of
production within industrial districts is that it
creates an environment more favourable to
individual success. These positive external
economies to individual firms stem,
fundamentally, from their geographical
proximity rather than any institutional
structuring. The close proximity of firms
within a particular industry provides
opportunities for entrepreneurs to specialize
and for the district as a whole to secure
economies of scale (both static and dynamic)
denied to isolated individual firms because of
internal restrictions on growdi. They can
therefore afford to stay small and concentrate
their initiative and inventiveness on what they
do best. By doing so they create, in turn, an
environment which improves the competitive
position of the locality.
Marshall‘s analysis has played a significant
role in theorizing the success oflocal clusters
of small manufacturing firms in northern and
central Italy and elsewhere — so much so that
they have been labelled ‗Marshallian industrial
districts‘. However, contemporary analyses of
these industrial districts put much greater
stress than did Marshall on the collectivist and
institutional basis for successful co-ordination.
Emphasis is placed on the influence of
community — defined as family and other
social relationships, rules of behaviour
embedded in those relationships, and more
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
80
formal institutions such as churches and
political parties — in guaranteeing standards
of behaviour which engender trust and co-
operation and thereby strengthen inter-firm
networks. Within industry, trade associations
are seen as playing a central role in providing
technical, financial, marketing, training and
other services. Trade associations also
represent employers in their dealings with
local and central government and with
organized labour. In turn, government
establishes by social, company and other
legislation a framework of standards which
underpins the equitable and co-operative
relationships between firms (Sengenberoer er
al., 1990). An important feature of modem
industrial districts is, then, what Amin
andTHRlFT, 1994, 1995, p. 102, have
described as ‗institutional thickness‘2 (see
KEEBLE et al., this issue). The outcome is
seen as competitive success based on high
rates of process arid product innovation, the
rapid diffusion of new' techniques and good
design, high quality and -wide variety in
products (BRUSCO and Sabel, 1981).
The importance of MarshaU‘s theory of
organization, especially when compared with
its impoverished version rooted in transaction
costs, is the central role given to technical and
organizational change, inter- as well as intra-
firm relations and the importance of learning in
the process of knowledge formation. These
have emerged as the central concerns of social
scientists studying the process of technical
change and particularly the evolution of high
technology industries and regions. In this
context, European researchers have adopted
the term ‗innovative milieu‘ (milieu
innovateur: see AYDALOT, 1986; AYDALOT and
KEEBLE, 1988; CAMAGNI, 1991; RATTI et al.,
1997) to describe the local clustering of highly
innovative producers of high technology
products and services.
The main mechanisms for knowledge
transmission and learning in innovative
milieux include: interrelationships between
suppliers and customers and the makers and
users of capital equipment; formal and
informal collaborative and other links between
firms in particular sectors;3 inter-firm mobility
of workers in localized markets for high skill;
and the spin-off of new firms from existing
firms, universities and public sector research
laboratories. Labour mobility and new firm
spin-offs transfer knowledge ‗once and for all‘
and/or serve to establish an ongoing link
between the firms and with research
institutions via the maintenance of personal
relationships. More one-off milieu effects
include imitation, emulation and reverse
engineering but, in this case, proximity is more
important dian sustained interaction and
enduring relationships.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
81
Capello (in this issue) has provided a schema
of die emergence of innovative milieux by
listing the preconditions for the various stages
of development. Specialized areas emerge
from simple geographical proximity with the
growth of stable inter-SME linkages and the
establishment of a local labour market for die
required skills. These provide continuity over
time for local technological and scientific
know-how. Industrial districts develop from
specialized areas as close social interaction and
supportive institutions generate high trust and
encourage informal and tacit knowledge
transfers. This leads to industrial atmosphere,
external economies and savings in transaction
costs. From cooperative relations and the free
flow of knowledge, synergies and innovative
capacity evolve and the industrial district
becomes an innovative milieu. The hallmark of
the innovative milieu is that the localized
labour markets, inter-firm relationships and
firm spinouts enrich the local knowledge base
and enable exploitation of localized collective
learning capabilities to develop profitable new
products and processes.
It should be noted that progression from each
stage depends on achieving the appropriate
pre-conditions. Moreover, although the
achievement of the innovative milieu stage
reinforces the stability of the labour market and
inter-SME links and increases the opportunity
for spin-out activity, these positive feedbacks
are not guaranteed in the long run. The
continuous accumulation of knowledge could
lock firms into obsolete and increasingly non-
competitive technological trajectories. In these
circumstances, collective learning processes
which function as ‗barriers to entry‘ to
outsiders may be transformed into ‗barriers to
exit‘ for insiders (BIANCHT, 1989). Learning
from knowledge sourced externally is therefore
an essential ingredient for the continued
success of an innovative milieu (CAMAGNI, 1991:
KEEBLE et al., this issue).
IV. Competences , Knowledge
And Learning
Competences determine what are die technical,
marketing, managerial and other capabilities of
organizations and therefore their competitive
performance. The dynamic capabilities of
organizations are their ability to modify their
competences so as to improve business
performance. The basis of competences is the
knowledge organizations hold that is embodied
in their routines and procedures. Shared
knowledge of the technical, marketing,
organizational and other aspects of the
productive system enables organizational
members to effectively communicate with one
another and co-ordinate their joint activities. In
turn, learning serves to incorporate new
information into the knowledge base by which
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
82
the competences of organizations are improved
and new ones developed. As the knowledge
base of competences is necessarily shared by
the members of the organization, and is
enhanced by their participation in the
organizations activities, learning is essentially
a collective activity.
Knowledge is either codifiable (and therefore
readily transferred) or tacit (and therefore not
readily transferable beyond the context in
which it is embedded). Tacit knowledge,
importandy, is specific to organizational and
geographic locations and this increases its
internal circulation but impedes its external
accessibility. Learning processes which absorb
information and generate and diffuse
knowledge (of bodi sorts) are collective
activities which form part of the background
and experience of each organization Their
effectiveness depends on the quality of social
interaction and lines of communication. These
are enhanced by a shared social and cultural
environment from which develop common
routines, norms and standards which depend
upon trust and the willingness to co-operate.
The ability to form and maintain effective
social relations is therefore a key competence.
Learning depends on combining diverse
knowledge which becomes incorporated into
organizations‘ routines in an incremental
manner. The development of the competences
of organizations is therefore path dependent.
Organizations learn by consolidating new
information into their knowledge base which is
fiirther enhanced by the practical experience of
implementing the modified operating systems.
However, established competences may prove
obstacles to the adoption of radical innovations
so that organizational progress may require
dis-learning. In a similar way, whilst close
inter- and intra-firm linkages are important for
initiating and diffusing incremental change,
they may also form obstacles to the spread of
radical new ideas which requires openness to
the outside.
V. Organization, Networking and
Untraded Interdependencies
To understand the organization of production
and business operations it is necessary to put
them in their historical, socio-cultural,
institutional and spatial context. In this respect,
increasing attention has been paid to business
networks. In an authoritative recent review,
YEUNG, 1994, p. 476, defines a ‗business
network‘ as *an integrated and co-ordinated
set of ongoing economic and non-economic
relations embedded within, among and outside
business firms‘, a definition broad enough to
include geographical groupings of SMEs,
transnational corporations and the linkages
between them. Localized clusters of high
technology SMEs may exhibit a considerable
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
83
degree of intraregional networking in which
collective learning is a club good from which
outsiders are excluded (CAPELLO, this issue).
More generally, these territorial clusters are
characterized by what SLORPER, 1995, has
termed ‗untraded interdependencies‘ which
extend beyond traditional customer/supplier
and servicing relationships to embrace formal
and informal collaborative and information
networks, interactions through local labour
markets, and shared conventions and rules for
developing communications and interpreting
knowledge.
However, internal networks are not the only
consideration for high technology districts.
The markets for their products are often world-
wide (KEEBLE et al., 1998) so that questions
arise as to how such locally concentrated firms
develop external links. A related issue is how
large transnational firms relate to local clusters
in which they, or dieir branch establishments,
may be located. This is of particular relevance
as transnational firms are increasingly
decentralizing their learning processes and the
development of their core competences so as
to benefit from linkages with, and
embeddedness within, a particular local
innovative milieu, as noted earlier.
Increasingly, networks internal to innovative
large firms and with localized firms are
becoming complementary, mutually
reinforcing mechanisms designed to develop
synergies with a particular milieu so as to
increase the innovative capacity of the large
firm. However, to the extent that this requires
the corporation to become engaged in
collective learning processes within regional
clusters, benefits can be expected to spill over
to small firms with significant milieu effects
(see STERNBERG and TAMASY, this issue). It
is therefore important to recognize that know-
ledge transmission and collective learning may
be fostered by cultural, institutional and
geographical proximities often in combination.
It also follows that networks and dependencies
may be within, between and outside firms and
although they may not be traded (or even
tradable) they may have significant effects on
the competitive performance of organizations.
VI. Innovation Processes
Innovation requires the development of new
vocabularies and concepts to enable the
creation of new knowledge and these changes
are the greater the more radical the innovation.
As Lawson and Lorenz argue (in this issue),
innovation should be understood as a cycle
involving interaction between tacit and
articulated knowledge. A pre-condition for this
process is the building of shared values, norms
and technical understanding so that often
diverse knowledge can be shared. The second
stage is when individuals with diverse and
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
84
complementary knowledge come together and
collectively seek to explain their ideas about a
new product or technology. This requires the
members of the group to articulate early ideas
about new developments by clarifying their
notions and developing new- concepts which
are mutually comprehensible within the group.
Modified in this way. new knowledge becomes
easier to combine with that of known techno-
logies and methods in the process of building
testable prototypes. At the fourth stage the new
product or process goes into production and,
with this, the knowledge underlying the new
competences, which was articulated in the
initiation and development phases, becomes
increasingly tacit and forms the basis for new
knowledge creation by learning by doing and
incremental technical change.
To an important excent the second stage is
crucial because it is at diis stage diat the cross-
fertilization between science, engineering
production, marketing and other specialisms is
achieved. In this collective effort, it is essential
that the contribution of each is sufficiently
understandable to the others. This is facilitated
by shared tacit knowledge which enables the
individuals involved to effectively formulate
and resolve technical problems. The analysis
of innovation from this perspective forces
recognition of influences which do not stop at
the research, science and technology base of
firms or regions at given points in time, and
necessitates recognition of the dynamic and
evolving interplay between information,
codifiable and tacit knowledge and
competence (AMIN and WILKINSON, 1999). The
specificity of tacit knowledge and compet-
ences means that externally derived
information requires converting if it is to be
readable within internal knowledge and
learning systems. The absorption of radically
new codifiable knowledge requires the devel-
opment of new, or the modification of, existing
tacit knowledge if competences are to evolve
effectively. The problems of the absorption of
change may be eased if the relevant tacit
knowledge is shared by the creators and users
of new knowledge so that effective
interpretative mechanisms can develop. For
any organization, then, the successful
generation, diffusion and utilization of new
ideas can be expected to involve interactions
between internally and externally generated
codifiable and tacit knowledge extending to
the range of suppliers, customers and research
institutions to which it relates. What is notable
in this important respect is the increasing
externalization of research and development
from large corporations and the growth of
business service firms specializing in the
production of technological competence and
knowledge. These operate as intermediaries
between firms and die scientific community
serving as providers of ‗quasi-generic‘
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
85
knowledge extracted by means of repeated
interactions with their customers and the
scientific community in which computer
communication systems play a pivotal role.
The outcome is an increasing
institutionalization of markets for knowledge
in which such firms provide a bridge for
incorporating scientific knowledge into tacit
knowledge, learning processes and
competences of firms (ANTONELLI, 1999).
The ability to share and utilize diverse
knowledge is an important pre-condition for
the success of high technology regions. In
some cases this emerges from a rich history of
local interaction between users and producers
of the technology (DE BERNARDY, this issue)
or from the activities of technology consultants
(LAWSON and LORENZ, this issue). In other
cases the critical factor may be the way die
multidisciplinary culture of a local university,
combined with a history of spin-offs, serve to
diffuse it widely amongst local producers
(LINDHOLM DAHLSTRAND, this issue). Links
between large and small firms are important in
Munchen and Grenoble as is the role of
technical universities. In Sophia-Antipolis no
such pre-conditions existed, but have begun at
last to emerge because of new developments in
the 1990s, again resulting in the successful
combining of different technologies within
new innovative firms (LONGHI, this issue).
VII. Individual Papers and Their
Focus
The paper by Lawson and Lorenz identifies the
key ideas in the capabilities literature and
shows how they can be usefully extended to
develop a conception of collective learning
among regionally clustered firms. In
elaborating this framework, the paper explores
the relationship between codifiable and tacit
knowledge in the innovation process. The
claim that tacit knowledge, because it is
difficult to transfer in the absence oflabour
mobility, may constitute a basis for sustained
regional competitive advantage is also
investigated. The closing section uses case
study material based on Minneapolis and
Cambridge to illustrate the importance for
innovation of a regional capability for
combining and integrating diverse knowledge,
and of the sources of such capabilities as pre-
conditions for successful high technology
regions.
The Keeble et ah, paper then applies the
concept of regional collective learning to
understanding the recent growth of high
technology SMEs in the Cambridge region,
and demonstrates empirically from an original
interview survey of local firms the extent and
role of three different learning processes,
namely: spin-offs; local networking and
linkages; and labour market recruitment. Two
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
86
important features of this paper are its stress 011
the parallel importance of wider national and
global networks for the innovative activity of
R&D intensive SMEs in Cambridge, and its
discussion of the extent and nature of recent
collective initiatives which seek to enhance the
regions ‗institutional thickness‘ (AMIN and
THRIF T, 1995) and innovative capacity.
Sophia-Antipolis, the government-funded
science park inland from the Cote d‘Azur in
southern France, represents an historically
totally different type of high technology
region. In reviewing its evolution from a
collective learning perspective, Longhi‘s paper
shows how the insertion ofbranch units of
large international firms and public research
institutes into a relatively empty space meant
that, if anything, the new development
internalized high technology capabilities
within large organizations. Attempts to
stimulate local technological transfer from this
knowledge base failed due to the insufficient
numbers of highly qualified workers to
support the formation of a local labour market.
In the 1990s, however, the capabilities of
Sophia-Antipolis to generate a milieu effect
have significantly improved with the
relocation of departments of the University of
Nice to die science park, increased
encouragement of spin-offs by public research
institutes and large firm downsizing resulting
in significantly increased small firm formation
and strengthening of links between large and
small firms as the former externalized an
increasing proportion of their R&D activities.
The result is a striking ‗endogenization‘ of a
previously externally controlled ‗satellite
platform‘.
The development of collective learning
capacities in Grenoble is reviewed by De
Bernardy, who stresses how the region‘s rich
mix of public research institutes, universities,
large firms and technology-based SMEs has
created over time a critical mass of scientific
and managerial competences, a density of
informal and formal inter-firm and
organization networks, and a professional
milieu, which has enabled the regions economy
to restructure itself through the development of
new innovative products and firms, in the face
of external technological and market
challenges. A particular feature of De Bernardy
s compelling story of this ‗dynamic innovation
system‘ is his identification of different types
of technology based SMEs, each with different
interaction networks and patterns of depend-
ence on regional collective learning capacities
and other local firms and organizations.
Capello‘s paper argues that ambiguities exist
in the definitions of learning and collective
learning She suggests that ‗club externality‘ is
a distinguishing feature of collective learning
which has ‗continuity‘ and ‗dynamic
synergies‘ in common with learning Her
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
87
empirical analysis based on three Italian high
technology manufacturing milieux reveals that
the largest group of firms combines external
learning with more traditional benefits of
industrial district membership (cultural
proximity and industrial atmosphere), with a
small group which is more autonomous with
mainly internal learning processes, and an
even smaller group characterized by socialized
mechanisms of spatial transfer of knowledge
(collective learning). A positive relationship
between labour turnover and innovation
supports the idea that collective learning is an
important feature of radical product innovation
while both radical and incremental product
innovation is associated with the cultural
proximity of the workforce.
The paper by Sternberg and Tamasy uses an
array of indicators of R&D intensity to identify
Munich as Germany‘s leading high technology
region with a broad industrial base. It identifies
two dominant reasons for Munich‘s emergence
as a leading European high technology cluster,
namely the presence of large firms such as
Siemens, and the regional impact of federal
R&D and military expenditure channelled to
the region in part by influential regional
political advocacy. At the same time, the
region is characterized by numerous
technology-based SMEs, and ‗an innovative
environment‘ characterized by ‗intensive
intraregional co-operative networking‘. Special
attention is paid to the role of Siemens and
especially its connections to R&D intensive
SMEs. Rather than dominating them and
threatening their independence, Siemens
enjoys diverse and often informal co-operative
links in innovation with local SMEs.
The focus of Lindholm Dahlstrands
contribution is specifically on the role of
technology intensive spinoffs as a key process
in the development of collective learning in the
Goteborg region which, despite major
restructuring of old manufacturing industries,
has witnessed substantial growth of new high
technology SMEs since the 1980s. Most such
spin-offs have emerged either from Chalmers
University of Technology or from the region s
larger firms, while there is a surprisingly high
incidence of local labour market recruitment
and mobility of technical staff. Both these
processes result in the diffusion and
combination of embodied technological
expertise, and hence the development and
strengthening of a regional collective learning
capacity. Interaction with spin-off ‗parents'
does however diminish over time, with a
corresponding increase in the importance of
wider national networks, as in the Cambridge
case.
Finally, and as an important qualification of
the emphasis in this Special Issue on the
benefits of spatial proximity in SME
innovative activity, Wever and Stam‘s paper
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
88
shows that in the case of the Netherlands,
regional clusters of small high technology
firms scarcely exist. While most such firms are
concentrated in the Randstad, this spatial
pattern, in a small and homogeneous country,
applies to firms generally. Moreover, the
innovative linkages of technology intensive
SMEs in the Utrecht area are national, not
regional. Most such firms are engaged in the
provision of technology intensive services, and
supply national markets. A significant
minority are spin-offs from large foreign-
owned computer firms. The paper thus
highlights the limits of a regionally bounded
approach to high technology SME growth
when dealing with the particular case of a
small, culturally homogeneous economy with
open borders situated at the heart of an
integrating Europe.
Acknowledgements—The Network is greatly
indebted to Anita Biggs and Linda Brosnan of
the ESRC Centre for Business Research,
whose cheerful efficiency as successive
Network secretaries has been invaluable. The
Network also gratefully acknowledges the
support and encouragement of Virginia
Vitorino, liaison officer in DG XII.
NOTES
1. A term Marshall preferred to
‗competition‘ because of the need for a
term ‗that does not imply any moral
quality, whether good or evil, but
which indicates the undisputed facts
that modem business and industry are
characterised by more self reliant
habits, more forethought, more
deliberate and free choice‘ (Marshal!,
1952, p. 25).
2. A term that no doubt Marshall would
haw appreciated although he would
probably have preferred ‗organizational
thickness‘.
3. Recent unpublished research by
Hughes, 1998, based on a large 1997
survey ofR&D intensive British SMEs,
reveals that such firms report engaging
in collaborative or partnership
arrangements with other firms
significantly more frequently than less
R&D intensive firms, and that high
technology service firms most
frequently collaborate with 'firms in the
same line ofbusiness‘ (73% of collabor-
ating firms) with customers (52%)
being the second most frequent partner;
for high technology' manufacturing
firms, this pattern is reversed (48% and
71%, respectively). Suppliers came
third and universities/higher education
institutions fourth in both cases.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
89
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Opportunity of Financial Investment In Cambodia
Dr. Chhiv S. Thet*
ABSTRACT
The financial markets have performed a vital function within global financial and economic system.
The financial market is the heart of global financial system, which were mobilizing and allocating
savings from the households and setting the interest rates and prices of financial assets (Rose and
Marquis, 2008). The financial market was used as a facilitator between lenders and borrowers or
sellers and buyers of financial instruments such as stock, bond and other securities. Besides, it
channels savings to the business firms and institutions needing more funds for business and
investment project and meet their business spending. Thus, the financial market offers the
significance to the financial system like financing, financial information, equities and corporate
governance and financial investment. The flow of funds through financial market around the world
divided into different segments depends on characteristics of financial claims being traded. One of
the most importance divisions is the money market and capital markets to finance for short-term
and long-term investments raised by business firms, government units and other organizations
(Rose, 2003). Therefore, in order to sustain the financial system in the country, it‘s necessary to
develop the capital and money markets to support the economic growth. When the financial markets
were developed, the financial investment mechanism also produced, that is, corporations,
government units and other institutions have chance to raise funds through issuance of financial
instruments such as stock, bond and other securities to support the business and investment project.
In this regards, investors also take an opportunity to invest their money into the securities
investment. The opportunity is a choice for corporations to plan their investment development in the
future and build their value depends on the capability of management with confidence of publics
(Myers, 1977). Also, it is an expectation of companies to find possibility to enlarge their investment
project in the future and paying compensation to the shareholders and debtors in dividend and
interest (Smith, 1986). The study aims to describe and focus on the opportunities and challenges of
financial investment in Cambodia.
Key Words: Financial Market, Security Market, Stock Market, Opportunity of Financial,
Financial Investment, Investment in Cambodia.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
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I. Background
Cambodia is developing financial
markets aiming to deal with risks arising in the
financial system and also, remove obstacles to
the financial development and build an
alternative mechanism for financing and
investment. Moreover, Cambodia today is
attempting to integrate into the financial
globalization, and especially into ASEAN‘s
financial integration in 2015.
Accordingly, the Government of
Cambodia has to improve the national
economic growth and poverty reduction which
was set out the Financial Sector Development
Strategy (FSDS) 2006-2015 (RGC, 2007) for
strengthening the financial system through the
capital market development for improving
benefits to support the national economic
growth and assure Cambodia‘s competitiveness
within the globalization framework.
The FSDS is a major strategy and
roadmap to establish the Securities Market of
Cambodia in order to mobilize the savings and
capital for financing the government units and
business firms to raise funds for investment and
business projects, besides the banking system.
However, the securities market is newest to
Cambodia, which was required building the
strong laws and regulations and international
standard accounting and auditing system to
insure the transparency, accountability, and
good governance for both issuers and investors
to perform the financial investment in the good
manners, fairness and confidence. The
Securities Market of Cambodia (CSX) was
established on July, 2011 and it is a new
mechanism of the financial investment to
improve the local financial and economic
system to meet the existed banking system. The
mechanism allows government units and
corporations to take this opportunity to obtain
finance from the capital markets through
issuance of financial assets such as equities and
debt securities and other assets. At the same
time, publics and investors take this
opportunity to invest their money into the
financial assets to obtain earnings from the
interest rate, dividend and price appreciation of
financial securities.
In this context, the mechanism provided
the opportunity and benefits to development of
Cambodia‘s financial and economic system in
order to improve the national economic growth
by producing more goods and services to
complete the requirement of the domestic
markets.
Although, financial investment is a
source of economic growth, but it is a basis of
financial crises, because this mechanism has
created many challenges in the country, the
most capital flow in the capital markets is a
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94
source of debt and currency crisis. Moreover,
most important concerns is that most of people
are still not participative in the securities
investment because their knowledge is still low
and limited in terms of investment awareness,
speculation, risk reduction, management and
protection of investor‘s right, transparency and
good governance, securities market operation,
and securities laws and implementation of
regulations and other policies involving
financial investment.
Therefore, in order to assure
Cambodia‘s financial investment process
operates effectively and efficiently. Cambodia
has to build strong laws and regulations to
insure that those policies were efficiently
carried out and protection of investor right
along with public awareness education as well
as confidence of investor. If do not so,
Cambodia has to face many challenges to this
investment. Because of the financial investment
is an opportunity for all corporations to develop
their investment in the future; but their value
has to depend on company‘s management
competence with publics‘ confidence. For
securities issuance proportion of companies
must be lower than company‘s total assets and
properties (Myers, 1977) and paying
compensation to shareholders and debtors in
dividend and interest (Smith, 1986).
Although, the financial investment provides
benefits to the national economy growth, but it
take along famous risks with the financial
globalization and financial infrastructure were
not yet properly implemented (Misking, 2003),
the financial globalization may bring the
country fall into the financial crisis because of
imperfection and other impact of external
factors in the global financial markets which
created the fraud, frighten behaviors and
attacking for speculation, even if, those
countries have a strong economic basis (Sergio,
2004).
II. Literature Review
The financial system has great
significant roles in daily lives. It‘s very
necessary to mobilize all resources to the
business firms and government units to produce
goods and services for everyday lives. The
system also allows people to transform their
money to borrowers through financial markets
with participation of financial intermediaries,
financial assets, and financial regulators. The
financial system has seven basic functions:
savings function, wealth and liquidity
functions, credit and payments functions, risk
protection and policy functions and in addition,
the system has creation of the savings and
investment‘s flow (Rose, 2003) as following:
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95
Savings: households have used their
money remaining from expenditure and
paying tax for savings and business
firms use their income remaining from
tax payment, dividend and other
expenses for savings. Also, Government
units can do savings unless those units
have surplus income more than their
current expenses.
Investment: capital flow from financial
markets can support investment. The
corporations and public institutions
require more funds for constructing the
building, equipment, and purchasing
raw materials and goods for inventory
and producing goods and services. As
for government institutions also need
the capitals for building schools,
hospitals, roads, and support the public
services for developing productivity,
labor forces and standard of living.
The financial market has a vital function
in the global economic system and it‘s a heart
of global financial system (Rose, 2003). It
participates in economic growth for every
country in the world by allocating and
absorbing the savings from households and
companies through investment of financial
assets and transforms those savings to the
business firms and other institutions need more
funds. In economy, financial markets
encourage entrepreneurs and government units
for long-term investment development such as
projects of technological diffusion, capital
allocation, equity, risk management, corporate
governance and finance, human resource
management, financial services and
coordination between investors and issuers in
the financial investment.
The financial markets help business
firms and government units to raise funds for
investment, besides the banking system. If
there are no financial markets, the business
firms and institutions are really met difficulties
in finding lenders themselves. John Gurley and
Edward Shaw (1960) pointed out that each
business firms, households, and governments
are active in the financial system and markets,
they must conform to the following identity
(Rose, 2008):
(E) Current expense, (R) current income (∆FA)
holdings of financial assets
(∆D) paying outstanding debt and equities
Deficit budget: E>R; ∆D>∆FA=> borrower
Surplus budget: R>E; ∆FA>∆D => lenders
Balance budget: R = E; ∆D=∆FA=> neither
R – E = ∆FA - ∆D
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This context showed that financial
market has a great important function in
transforming savings into the financial
investment to strengthen the economic health
and power. If households didn‘t use savings
into investment, so, the national economic
strength was shortened and the country‘s
revenue begins to fall down in the future
because of reduction on consumption expense
and living standard in country begins fall down,
as for unemployment rate was increased.
Some economists realized that the role
of financial system is acceleration for long-
term economic growth through capital
mobilization. Merton (2005) determined that
previous economic crises happened in Asian
countries in 1998 because of their careless on
financial market development, mostly did not,
so, which are caused the economic growth of
those countries began to fall down deeply.
Merton also affirmed that American economy
in the twentieth century has greatly relied on
the financial markets and strive to reduce usage
of the banking system. On the contrary, some
countries in Asia still mostly relied on the
banking system than the financial markets,
which was easily suffered. Based on the previous
experiences, when banking crisis happened, it is
really involved from one country to another country
due to the financial globalization and the regional
integration. So, the financial crisis was affected on
neighboring countries and then reaching to other
countries in the region and next, the world.
Financial market development also
creates a mechanism for financial investment in
country. This mechanism was defined as the
current commitment of money and other
resources in the expectation to gather future
benefits. Individuals purchase shares
anticipating that future proceeds from shares
that will justify both the time with their money
and risk of investment which were tied up (Zvi,
Alex and Alan, 2008) and it involves
expectation of positive return rate after
sufficient analysis has been made and degree of
risk which dictates the principal and future
income value be relative certain (Johnson,
1978). Funds of individual are used to generate
more income for them who are shareholders of
corporations and they are not required to
control any business of the company
(Australian Corporation Acts, 2001).
Based on Australian Corporation Acts
(2001) and Peter S. Rose (2003) showed that
the financial investment mechanism involving
between lenders and borrowers in the financial
markets. So, the lenders always were the
surplus budget units and individuals intend to
invest financial assets such as stock and bond,
generally defined as an ―obligations or debt
contracts‖ in money terms, that borrower of
funds has to issue the financial instruments
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97
0
(promissory note) to the holders of securities or
investors (Cooper and Fraser, 1993).
Base on the Brownian models for
financial markets that‘s work of Robert C.
Merton and Paul A. Samuelson, as extensions
to the market models of Harold Markowitz and
William Sharpe (Tsekov, 2010). This model
aims to define the concepts of financial markets
and financial assets, portfolios, gains and
wealth. The assets have prices evolving
continuously in time and require an assumption
of perfectly divisible assets and a frictionless
market, meaning that no transaction costs occur
either for buying or selling. Another
assumption is that asset prices have no jumps
that is; there are no surprises in the market. The
model consist of N + 1 financial asset, where
one of these assets, called a bond or money-
market, is risk free while the remaining N
assets was called stocks, are risky. The
financial markets are defined in this formula:
M = (r,b,δ,σ.A,S(0))
A share of a bond (money market) has price S0
(t) > 0 at time (t) with S0 (0) = 1, is continuous,
{F (t); 0 ≤ t ≤ T} adapted, and has finite
variation. It can be decomposed into an
absolutely continuous part Sa (t) and
a singularly continuous part, by Lebesgue's
decomposition theorem as define below:
And
As the result in a stochastic differential
equation (SDE), we have:
This gives:
Thus, it can be easily seen that if S0a (t) is
absolutely continuous (i.e. A (.) = 0), then the
price of bond evolves like the value of a risk-
free saving account with instantaneous interest
rate r (t), which is random, time-dependent and
F (t) measurable.
Stock prices are modeled as being
similar to the bonds, except with a randomly
fluctuating component called its volatility. As a
premium for the risk originating from these
random fluctuations, the mean rate of return of
stock is higher than that of a bond.
In this case, if, the number of stocks (N) is
greater than dimension (D), it can be seen that
there are (N–D) stocks whose volatiles. So, the
number of stocks (N) is not greater than the
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
98
(Ioannis and Steven, 1991)
dimension (D) of the underlying Brownian
motion process.
Let S1 (t) ... SN (t) is the strictly positive prices
per share of the N stocks, which the continuous
stochastic processes are satisfying:
Here, gives the volatility of
the N stock, while bn(t) is its mean rate of
return.
In case of the discounted stock prices are:
Myers (1977) said that financial
investment opportunity is a choice for all
corporations and institutions to develop their
investment in the future, but their value must
depend on management‘s competence and
asset‘s issuance proportion of companies must
be lower than company‘s total assets and
properties. Also, Smith (1986) affirmed that
financial investment opportunity is an
expectation of companies to find possibility to
enlarge their investment project in the future
and paying compensation to the shareholders
and debtors in dividend and interest.
The financial globalization may
improve the financial sector development and
plays the best functions in the country‘s
financial system to help demanders of funds to
develop the business and investment project.
The functions of financial sector development
including: (1) use of free-cash flow and (2)
improvement of the financial infrastructure to
reduce the asymmetric information (Schmukler,
2004). Also, Stulz (1999) affirmed that
financial globalization can improve the
country‘s financial infrastructure through
strengthening the issuers and investors base on
principle of efficiency, transparency and
competition. There are some methods for
modernizing financial infrastructure including:
(1) improving of stronger competition in
allocating the capitals for investment project
and the efficient income generation, (2)
acceptation of international accounting
standard to improve transparency, (3)
introducing the financial intermediaries to
improve the financial sector toward a
international boarder. As for Crockette (2000)
also affirmed that the financial globalization
creates a technical connection of specific
financing outcome within domestic and global
markets and enables the foreign banks can join
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
99
with the local banks to improve financial
infrastructure to the developing countries,
which are carrying out the financial
globalization.
Graff (1999) confirmed that there are
four possibilities linking financial sector
development and economic growth: (1)
financial sector development and economic
growth are not connected, in the modern
European economic development in the 17th
century showed that the economic growth was
the outcome of certain growth, but the financial
sector development was the financial
institutional improvement, (2) the financial
sector development followed by economic
growth and (3) the financial sector
development is a reason of economic growth
and (4) the financial sector development is a
obstacle for economic growth referring to
uncertainty of securities investment and
financial crises.
Garresten, Lensink and Sterken (2004)
showed that there is connection between the
economic growth and capital market
development, primarily, the stock market,
which was measured by the market
capitalization, the listed securities and income.
Also, Niewerberg (2006) said that the stock
market development determined economic
growth of country. Based on the findings of
previous research of professors Laura, Victor
and Andreas (2008) studied on the involvement
of capital market development and economic
growth in Romania showed that there is really
involved between the capital market
development and economic growth by using
capital market variables:
1. Size variable:
Market capitalization and number of
listed shares,
Liquidity variables: trading volume and
liquidities proxy,
Volatility variables: Bucharest Stock
Exchange Index
2. GDP:
GDP growth rate
Real GDP
GDP growth rate per capita
Based on analysis in linear
regression and vector autoregressive methods
showed that regression (R1) and (R2) has
positively correlated between the economic
growth and the capital market development.
Particularly, it reflects the market capitalization
and economic growth is strongly correlated, the
trade volume on the capital market and real
GDP reflects a feed-back effect.
Although, financial globalization
provides benefits to the national economy
growth, but it also take along the risks when
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
100
starting an operation of financial globalization
and famous risk of the financial globalization is
the financial crisis. The current financial crisis
and crisis‘s augmentation always happened
after the developing countries have integrated
themselves within the global financial
liberalization and financial markets, which
were the main sources of financial crisis such
as the financial crises in Asia 1997, Russia and
Brazil in 1999, and Ecuador in 2000 and
Turkey and Argentine in 2001 and Uruguay in
2002. Misking (2003) confirmed that if the
financial infrastructure were not yet properly
implemented, thus the financial globalization
may weaken the health of financial system in
the country. Usually, financial system is not
operated as our intention because the lenders
and investors are facing asymmetric
information. Sergio (2004) said that the
financial globalization may bring the country
fall into the financial crisis because of
imperfection and other impact of external
factors in the global financial markets which
created swindle, frighten behaviors and
attacking for speculation, although, those
countries have the strong economic basis.
In reality, in Asia, there are two sources
of Asian financial crisis: (1) Current account
crisis: the crisis happened due to the
developing courtiers contain the imbalances of
the budget and payment because of their
commitment to accelerate the national
economy, so, they had to improve bigger
investment development by attracting the
foreign investment funds into the countries
which those funds have surplus of the local
savings to improve goods and services and
financing to support the construction and real
estate. For that reason, it might put the country
into the bigger deficit of current account.
Moreover, the quantities of import has sharply
increased and the quantities of export has
strongly dropped in the countries and
additionally, at that time, the price of oil on the
international market is increasing together with
foreign debt is bigger. So, this circumstance
might expand the deficit of current account is
biggest in country. (2) Capital account crisis:
due to deeply-surplus capital flow to finance
the deficit of current account and component of
those funds is debt and currency crisis that is an
original cause of banking system and currency
crisis. For currency crisis: due to the foreign
currency flow quickly poured out of those
deficient countries, as a result, the international
institutions were afraid to provide loan and
funds to those countries. Along with, banking
crisis is also happened because of internal
credit crisis of the country was strongly
reduced.
The world financial crisis started in
August 2007 in USA as subprime mortgage
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
101
crisis happening due to the imbalance of world
finance and liberalization of the global
financial markets. The crisis can be attributed
to a number of factors pervasive in both
housing and credit markets, factors which
emerged over a number of years. Causes
proposed include the inability of homeowner to
make their mortgage payment, overbuilding
during the boom period, risky mortgage
products, increased power of mortgage
originators, high personal and corporate debt
levels, financial products that distributed and
perhaps concealed the risk of mortgage default,
bad monetary and housing policies,
international trade imbalances, and
inappropriate government regulation. Excessive
consumer housing debt was in turn caused by
the mortgage-backed security, credit default
swap, and collateralized debt obligation, sub-
sectors of the finance industry, which were
offering irrationally low interest rates and
irrationally high levels of approval to subprime
mortgage consumers because they were
calculating aggregate risk using Gaussian
copula formulas that strictly assumed.
The European sovereign debt is the
financial crisis that has made difficult or
impossible for some countries in the euro area
to repay or re-finance the government debt
without assistance of third parties. The
European sovereign debt crisis resulted from a
combination of complex factors with
globalization of finance; easy credit conditions
during the 2002–2008 period that encouraged
high-risk lending and borrowing practices; the
2007–2012 global financial crisis; international
trade imbalances; real-estate bubbles that have
since burst; the 2008–2012 global recession;
fiscal policy choices related to government
revenues and expenses; and approaches used by
nations to bail out troubled banking industries
and private bondholders, assuming private debt
burdens or socializing losses. The Credit
default swap market also reveals the beginning
of the sovereign crisis.
Accordingly, Government of Cambodia
had carefully begun to develop the local capital
market. Specially, they made and adopted the
policy, which was called the Vision and
Financial Sector Development Plan for 2001-
2010 (FSDP), which was a long-term strategy
for financial sector development in order to
achieve the sound and market-based financial
system and then revised it as FSDP 2006-2015
aiming to provide strategy, guidance, and
framework to support the financial sector
development, particularly, is the roadmap to
establish the financial markets in Cambodia.
Cambodia is developing the financial
markets based on three reasons:
In the short term, addressing the risks
arising in the financial system
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
102
In the intermediate term, removing
obstacles to financial development in
other sectors
In the longer term, developing an
alternative mechanism for financing and
investment
Cambodia‘s economy today grew since
2010, after seriously fallen in 2009 which
affected on main sectors such as garment,
construction and tourism. Even if, the banking
system now is progressive, but financial sector
was in the first phase, its infrastructure could
not sustain the financial markets. So, Cambodia
is facing many challenges of financing from
banking system and the financial asset
gathering of big banks that might lead to the
systematic risk and high spending for
intermediaries.
Thus, the quantity of savings
mobilization in Cambodia now is still limited if
compared to the neighboring countries in
ASEAN. The gap between the saving and
investment sharply increased from -0, 7% in
2006 and also to -0.7% in 2010, so, Cambodia
could not relied only on the foreign savings
from abroad, it is necessary to encourage local
resource mobilization through the capital
markets and, moreover, the capability of center
bank is still unable fully to support the financial
system in the country. For financial products is
still focus on small sectors of credit and
savings. The money market and inter-banking
is still not operating. So, financing has relied on
the banking that an original source of financial
crisis in Asian 1997.
The absence of long-term financing,
human resources, and competences of
management and monitoring might lacking of
convinced credit, rural financing, payment
system, and information exchange, which are
main source of challenges. Insurance sector is
not yet fully support financial system, the
foreign insurance companies have operated the
life insurance services, although, the capital
source from the insurance sector is unable to
support the capital markets of Cambodia.
The Cambodia Securities Exchange
(CSX) was established on July 2011 as public
enterprise with government shareholding of
55% and the remaining stake held by the Korea
Exchange, a well-known securities exchange,
the Republic of Korea. The CSX is a platform
of securities trading and used as a mechanism
to raise funds for business and investment
development.
However, there was only one company
listing in 2011, so far, there is no more
companies listed in the CSX for securities
trading and also, the transactions are allowed to
be settled in U.S. dollars for a transitional
period of three years. Eventually, the stock
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
103
market has to boost the foreign exchange
market and requires upgrading the currency
market. Also, the bond market is not yet
developed due to lacking some components to
support the market and the principal ratio to
determine the value of issuance and other
involving mechanisms.
Even though, the stock market development is
good for short-term and long-term economic
growth, but there are many challenges for
recent situation of financial globalization of
Cambodia. The systematic risk and speculative
bubble should take into account in terms of the
imperfection and fraud in the financial market
causing failure of financial stability in the
country. Actually, Cambodia requires solving
challenges for CSX development because the
institutional investors from Japan, Korea and
China have also taken a bite of recent IPO but
whether those interests can be sustained for
long term or not. The corruption is also a big
concern even the government passed an anti-
corruption law in 2010, but the fear is still in
mind of investors and also the lack of the
capital market infrastructure and capacity
building can be challenging to the investors,
who are not familiar with the Cambodia
securities market.
III. Research Objectives
The research study aims to observe the of
financial investment mechanism occurring of
the capital market development in Cambodia.
Specially, this study intends to determine the
main objectives as following:
To define the mechanism of financial
investment supporting the economic
development of Cambodia.
To identify the benefits of financial investment
supporting the economic development of
Cambodia.
Find out the challenges of financial
investment affecting on Cambodia economy
development.
IV. Research Methodology
Descriptive research method has been
used in the study, which applied both deductive
and inductive research approaches. The data
collection were used in this survey are the
primary and secondary data. The structured
questionnaires are used to collect the primary
data with other specific information from the
institutional and individual investors. The
secondary data are also collected from the
government organizations, the National Bank
of Cambodia, SECC, Ministry of Finance and
Economy, the stock exchanges, WB, ADB,
IMF, EIC, NGOs and corporations, research
institutions and other institutions.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
104
According to Tong yang Security 2012,
the key investors are about 300. The
populations from the institutional and
individual investors were selected as
respondents in this research. The convenience
sampling technique used in the survey by
drawing the samples from interviews based on
the proximity to researcher. As the result, we
select 120 respondents from the population size
300.
The study used the research tools of
Relevant Insights: sample size and margin of
error were calculated the level of confidence,
response percentage; sample sizes and margins
of error to test the significant differences in
convenience sample. As result, showed that the
convenience sampling was undertaken is
appropriate because it is about precision,
tolerance for risk and cost meaning that when
the study use the population size 300, we got
the sample size 120 and 95% of confidence
level and 5.3% of margin error. So, it was
assumed that at 95% confidence level is more
certain, but less precise to make sure the true
value falls in it. By the way, it was decided to
use affordable means to reach
representativeness of the target population.
Looking to the sample size calculation
of the Indochina Countries (Cambodia, Laos,
and Vietnam) found as in the normal
distribution table below:
Survey
Sample Size
Margin Of Error
Percent*
2,000 2
1,500 3
1,000 3
900 3
800 3
700 4
600 4
500 4
400 5
300 6
200 7
100 10
50 14
*Assumes a
95% level of
confidence
The table of calculation showed that if
the level of confident 95 per cent was taken and
the sample size from 100 to 200, Hence, the
Margin Error is about seven per cent. The
sample size is conformed to Taro Yamane
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
105
formula (1967), which was used to calculate
the sample sizes is shown below. A 90 per cent
confidence level and precision level (P) = 0.7
are assumed for this equation.
N
n = ————
1 + N(e)2
Where n is the sample size, N is the population
size (300), and e is the sampling error (0.07).
This formula was applied and the result of the
sample size are as below:
N 300
n = ————— = ——————— = 121
1 + N(e)2
1 + 300 (0.07)2
So, the result of the sample size is 121 (≈120),
the research was selected the investors 120 to
be the respondents in this survey.
To avoid the bias in selecting the respondents
the Systematic Random Sampling was used.
Data analytical methods were used the
quantitative and qualitative designs. The
primary data is analyzed by the quantitative
design basing on statistics and tabulation,
average calculation, percentage and growing
ratio in order to show and interpret those data.
The secondary data was also analyzed and
evaluated by the qualitative design in order to
make the conclusion and to meet further
information because the questionnaires are not
fully covered and questioned. So, the analysis
in this research is used both primary and
secondary data to validate on development of
financial investment in Cambodia is really
providing an opportunity or challenge to
Cambodian macroeconomics and financial
sector development.
V. Opportunity Of The Financial
Investment
The survey was done in order to analyze
on the research theme of the financial
investment opportunity based on the specific
variables for measuring and classified into
three categories; mechanism of financial
investment, benefits of financial investment
and challenges of financial investment in
Cambodia.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
106
VI. Financial Investment
Development
Table 1: sources of financing were used for
current business improvement.
The table 1 illustrates that 52
respondents or 43.33% out of 120 respondents
receive the financing from bank. This is the
highest percentage, if compared to other 4
sources and then, 35% or 42 respondents got
the financing from individuals, and 11.67% or
14 respondents received the financing beside
system and 6.67% or 8 respondents got the
financing from abroad while only 4
respondents got the financing from other
sources. This is a lowest percentage of those
respondents.
Table 2: offering of financing sources for
current business development.
The table 2 illustrates that 72
respondents or 60% out of 120 respondents
point out that the current financing source in
the country is not enough for them to develop
business. This is the highest percentage and
only 40% or 48 respondents told the the current
financing source in the country is anough for
them to develop business. This is a lowest
percentage of our respondents.
Sources of
Financing Frequency Percentage
Financing from
bank 52 43.33
Financing from
individuals 42 35.00
Financing beside
system 14 11.67
Financing from
abroad 8 6.67
Financing from
other sources 4 3.33
Total 120 100
Current
financing
sources
Frequency Percentage
Enough 48 40
Not enough 72 60
Total 120 100
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
107
Table 3: chance of CSX development to
support the new financing source.
The table 3 illustrates that 90
respondents or 75% out of 120 respondents
pointed out that the CSX development in
Cambdia is available chance for them in order
to find new financing for business development
besides banking system. This is the highest
percentage and only 25% or 30 respondents
told that the CSX development at this time, it‘s
unavailable for them to raise fund because of
current economical situation of Cambodia is
not so good. This is a lowest percentage of our
respondents.
Table 4: Chance of fund raising in CSX to
support the business project.
Table 4 illustrates that 85 respondents
or 70.83% out of 120 respondents told that they
have a chance to raise fund in the CSX for
supporting their business project. This is the
highest percentage and only 29.17% or 35
respondents said that they have no chance to
raise fund in the CSX. This is a lowest
percentage of our respondents.
Table 5: Chance of Income Generation
From Securities Investment.
The table 5 illustrates that 92
respondents or 76.67% out of 120 respondents
have no chance to generate further income from
securities investment. This is the highest
percentage and only 23.33% or 28 respondents
said that they have chance to generate further
income from securities investment. This is a
lowest percentage of our respondents.
Chance of CSX
development Frequency Percentage
Available 90 75
Unavailable 30 25
Total 120 100
Chance for
income
generation
Frequency Percentage
Have chance 28 76.67
No chance 92 23.33
Total 120 100
Chance of fund
raising in CSX Frequency Percentage
Have chance 85 70.83
No chance 35 29.17
Total 120 100
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
108
Table 6: Purpose to list the company in the
CSX for financing to support the business
development.
The table 6 illustrates that 62
respondents or 51.67% out of 120 respondents
told that they have purpose to list their
companies in the CSX for financing the
business project development and supporting of
their cash flow. This is the highest percentage
and only 48.33% or 58 respondents said that
they have no purpose to list their companies in
the CSX for financing. This is a lowest
percentage of our respondents.
Table 7: Preparation of firms to issue the securities
to publics.
Table 7 illustrates that 70 respondents
or 58.33% out of 120 respondents told that their
companies have not yet prepared to issue the
securities to publics. This is the highest
percentage and then, 29.17% or 35 respondents
said that they‘e preparing to issue securities to
publics and only 12.5% or 15 espondents told
that they have a little readiness to issue to
publics. This is a lowest percentage of our
respondents.
Purpose to list in
the CSX for
financing
Frequency Percentage
Yes 62 51.67
No 58 48.33
Total 120 100
Preparation to
issue securities to
publics
Frequency Percentage
A little readiness 15 12.50
Being preparing 35 29.17
Not yet prepared 70 58.33
Total 120 100
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
109
Table 8: Type of securities that your firm
intends to issue for financing.
The table 8 illustrates that 76
respondents or 63.33% out of 120 respondents
prefer to issue stock than the other catagories.
This is the highest percentage and then, 26.67%
or 32 respondents said that their companies
prefer to issue bond and 6.67% or 8
respondents told that they are not at all and
only 3.33% or 4 respondents pointed out that
they like to issue other securities besides stock
and bond. This is a lowest percentage of our
respondents.
Table 9: Intention to develop your firm
into the financial industrial services.
The table 9 illustrates that 32
respondents or 26.67% out of 120 respondents
told that they intends to develop the advisory
firms than the other. This is highest percentage
and then, 23.33% or 28 respondents said that
they like to develop brokerage firms and
19.17% or 23 respondents told that they are not
at all and 15% or 18 respondents pointed out
that they like to do the institutional investors
and next, 15 respondents or 12.5% like to
develop the securities dealing firms and last, 4
Type of
securities Frequency Percentage
Stock 76 63.33
Bond 32 26.67
Other securities 4 3.33
Not at all 8 6.67
Total 120 100
Intention to
develop the
financial service
Frequency Percentage
Brokerage firm 28 23.33
Underwriting firm 4 3.33
Institutional
investor 18 15.00
Securities dealing
firm 15 12.50
Advisory firms 32 26.67
Not at all 23 19.17
Total 120 100
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
110
respondents or 3.33% like to do the
underwriting firms. This is a lowest percentage
of our respondents.
Table 10: purpose to generate extra
income from portfolio investment.
The table 10 illustrates that 90
respondents or 75% out of 120 respondents
told that they have purpose to generate the
income by securities investment. This is the
highest percentage and only 25% or 30
respondents said that they have no purpose to
generate the extra income for individuals by
securities portfolio. This is a lowest percentage
of our respondents.
Table 11: form of earnings for your preference
in securities investment.
The table 11 illustrates that 60
respondents or 50% out of 120 respondents
told that they prefer to take the earnings from
securities invesmeent in the form of dividend .
This is the highest percentage and then, 29.17%
or 35 respondents said that they prefer to take
the earnings from securities invesmeent in the
form of interest and only 12.5% or 15
espondents told that they prefer increasing of
price of securities and last, 10 respondents or
8.33% showed that they do not at all.
Income
generation Frequency Percentage
Yes 90 75
No 30 25
Total 120 100
Form of
Earnings Frequency Percentage
Interest 35 29.17
Dividend 60 50.00
Increasing price 15 12.50
Not at all 10 8.33
Total 120 100
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
111
Table 12: type of securities that you prefer to
invest.
The table 12 illustrates that 60
respondents or 50% out of 120 respondents
prefer to invest stock than the other catagories.
This is the highest percentage and then, 29.17%
or 32 respondents told that they prefer to invest
bond and 8.33% or 10 respondents told that
they are not at all and only 12.5% or 15
respondents pointed out that they like to invest
other securities besides stock and bond.
Table 13: Other benefits to sustain the
Macroeconomics
The table 13 illustrates that 35
respondents or 29.17% and 60 respondents or
50% out of 120 told that this mechanism has
other benefits to sustain macroeconomy such
as creating and increasing of employment and
further tax income. This is the highest
percentage and the last, only 25 respondents or
20.83% showed that this mechanism has
supported strengthening of legal framework
and financial system. This is a lowest
percentage of our respondents.
Type of
securities Frequency Percentage
Stock 60 50.00
Bond 35 29.17
Other securities 15 12.50
Not at all 10 8.33
Total 120 100
Benefits
sustaining
macroeconomics
Frequency Percentage
added tax income 30 25
Creating of
employment 30 25
Legal framework
and financial
system
25 20.83
Both; increasing
of employment
and tax
35 29.17
Total 120 100
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
112
Table 14: awareness of the business firms and
institutions.
The table 14 illustrates that 60
respondents or 50% out of 120 respondents,
they told that they didnt understand so much
about the rules and terms of securities issuance.
This is the highest percentage next, 60
respondents or 50% told at that they have some
understanding and the last, only 20
respondents or 16.67% told that they
understand about the rules and terms of
securities issuance. This is a lowest percentage
of our respondents.
Table 16: basic awareness for securities
investors.
The table 16 illustrates that 60
respondents or 50% out of 120 respondents
didnt have basic awareness of securities
investment This is the highest percentage and
next, 45 respondents or 37.5% told that they
have some understandinding in this regard and
the last, only 15 respondents or 12.5% told that
they have a basic awareness of securities
investment. This is a lowest percentage of our
respondents.
Awareness of
business firms and
institutions
Frequency Percentage
Understanding 20 16.67
Some
understanding 60 50.00
Not understanding 40 33.33
Total 120 100
Basic awareness for
securities investors Frequency Percentage
Understanding 15 12.50
Some understanding 45 37.50
Not understanding 60 50.00
Total 120 100
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
113
Table 17: Risky worries of securities
Investment.
The table 17 illustrates that 75
respondents or 62.5% out of 120 respondents
are worry about risk of securities
investment.This is the highest percentage and
next, 40 respondents or 33.33% told that they
are some worry in this regards and the last,
only 5 respondents or 4.17% told that they are
nothing worry. This is a lowest percentage of
our respondents.
Table 18: Worried risky type of securities
investment.
The table 18 illustrates that 35
respondents or 29.17% out of 120 respondents
told that the worried risky type of securities
investment is unable to pay due to bankruptcy.
This is the highest percentage and last and 32
respondents or 26.67% showed that the worried
risky type of securities investment is unable to
pay dividend by due date and next, 20
respondents or 16.66% each are worried about
unable to pay interest and decreasing of price
Risk of
securities
investment
Frequency Percentage
Worry 75 62.50
Some worry 40 33.33
Nothing worry 5 4.17
Total 120 100
Worried risky
type Frequency Percentage
Increased debt
being unable to
repay the principal
32 26.67
Unable to pay
interest by due
date
10 8.33
Unable to pay
dividend by due
date
30 25.00
Unable to pay due
to bankruptcy 35 29.17
Decreasing of
price due to any
crisis
10 8.33
Other risks 3 2.50
Total 120 100
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
114
due to any their crisis and last only 3
respondent or 2.5% showed that they are worry
about other risks happening in their investment.
This is a lowest percentage of our respondents.
Table 19: confidence of publics to securities
sector development in Cambodia, in term of
legal framework implementation, market
operation, and management efficiency and
investor protection.
The table 19 illustrates that 70
respondents or 58.33% out of 120 respondents,
have not so trust on securities sector
development in Cambodia. This is the highest
percentage and next, 40 respondents or 33.33%
told that they have trust in this regards and the
last, only 10 respondents or 8.33% told that
they have not trust in this matter. This is a
lowest percentage of our respondents.
VII. FINDINGS SUMMARY
Referring to all above analyzed tables
pointed out that Cambodia nowadays has used
the banking system as major financing source
for the business expansion and long-term
investment project.
The findings showed that around 70
percent of investors expressed the lack of
financing source within the business
development and supported to develop the CSX
in the country. In order to resolve the problems,
the Government of Cambodia has found the
Cambodia Securities Market (CSX) in order to
provide the opportunities and benefits to the
business firms and government sectors to raise
more funds for business expansion. At the same
time, the most of them hope to have a chance to
raise more funds besides banking system in
order to generate more income from the
financial investment.
Additionally, the findings pointed out that
around 60 per cent of companies want to list
their firms in the CSX, although; they are not
yet to prepare themselves to list in the CSX, but
they desire to issue and invest the stock and
bond for extra income generation. Additionally,
they intend to contribute into the financial
industrial services by developing the advisory
firms, brokerage firms and underwriting firms.
Moreover, even though, most of investors are
Confidence of
publics Frequency Percentage
Trust 40 33.33
Not so trust 70 58.33
Not trust 10 8.33
Total 120 100
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
115
not aware of financial investment process, but
they wish to invest the stock and bond for
additional income. Additionally, this
mechanism has supported macroeconomics
such as tax income, employment creation and
legal framework improvement as well as
financial sector development.
Furthermore, the result showed that around 70
per cent of the investors are not aware of the
financial investment process, thus; they are so
worry about high risk in the securities
investment in terms of carrying out of the
relevant legal framework, transparent and
efficient market operations and managements
as well as the investor protection and is unable
to repay due to bankruptcy and other crisis.
Also, most of the companies didn‘t have
sufficient knowledge of the financial
investment, so; they assumes that the rules and
conditions of CSX are extreme rigorous for
them to raise funds in the CSX that are main
concerns for unconvincing on the financial
investment process in Cambodia.
Accordingly, based on those results, I would
like to conclude that the financial investment
development in Cambodia today is facing many
problems because the findings showed that
even, most of companies and investors support
to develop the CSX, but they are not yet to
prepare themselves to list into the CSX and
they didn‘t sufficiently have the financial
investment knowledge, thus; they supposed that
the conditions of CSX are extreme rigorous to
raise funds and are so worry about high risk in
the securities investment in terms of carrying
out of the relevant legal framework, transparent
and efficient market operations and
managements as well as the investor protection.
For that reason, which caused most of investors
and companies are hesitant to participate in the
financial investment development in Cambodia.
Although, the financial investment
development in Cambodia today is not yet
profited to the current economy development of
Cambodia, but at least, there is some benefit to
sustain the macroeconomics for instance, tax
income, employment creation and legal
framework improvement as well as financial
sector development. Moreover, most of
companies and investors support to develop the
CSX and they desire to list their firms in the
CSX and plan to issue and invest the stock and
bond for income generation, and intend to take
part in the financial service industry. Thus, this
action is a helpful contribution to support
financial investment development in Cambodia.
International Academic Journal of Development Research (IAJDR) Vol. 1, No. 2, July-December, 2013
116
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*Dr. Chhiv S. Thet is a Professor of
Pannasastra University of Cambodia (PUC),
and Asia Euro University (AEU) and
Cambodia Specialty University (CUS). Dr.
Chhiv holds BBA and Master Degrees in
Public Administration and Political Science and
PhD in Economics. Dr. Chhiv currently is
Assistant Dean of Graduate School of
Management and Economics of PUC and a
Chairman of CMI Cambodia (NGO). Previous
to entering academic work, Dr. Chhiv was a
Government Official in the National Assembly
of Cambodia and he started teaching the
professional courses of the capital markets and
Forex and Derivatives markets since 2008 at
CMI Cambodia and other universities with
cooperation programs in Phnom Penh. He may
be reached at [email protected].
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