Emerging Country in Globalization Process

I. The BALANCE OF PAYMENTS

1. Definition & traits

* The Balance of Payments (BOP) records, on an annual basis, all the transactions in goods & services, in monetary, financial & real assets between a country and the rest of the world.

* The BOP is part of the national accounts which records payments to and receiptes from the rest of the world on an annual basis

* BOP enable to assess & measure the involvement of a country in the world economy

* BOP is prepared as a balance sheet, recorded by double-entry accounting principles

* BOP based on double-entry bookeeping: every transaction is entered on both sides of the balance sheet, as a credit & a debit.

* Credit entries: record items that bring foreign exchange into the country

* Debit entry: record items that would bring a loss of FX

2. Components

The Balance of Payments consists of 2 major blocks, including the Current Account Balance and the Capital & Financial Transactions Account, and 1 minor one: the Official Reserves Transactions.

a. The Current Account Balance (CAB) records a country's foreign currency transactions through international trade. The size of this balance is an indicator of the country's international competitiveness. CAB comprises 3 major items:

* The Balance of Trade & Services

* The Balance of Income

* The Balance of Unilateral Transfers

* The 1st item of CAB, the Balance of Trade & Services, contains

* Trade Balance, which records Merchandise Trade, Import & Export of tangible goods;

* Services Balance, which records Tourism, International Transport, Professional Services in fields of Information Technology, Banking & Finance, Education, Medical & Healthcare etc.

* The 2nd item of CAB, the Balance of Income, mainly records inflow or outflow of interest payments on foreign financial assets, and dividends from subsidiaries abroad of MNCs

* The 3nd item of CAB, the Balance of Unilateral Transfers,...