Consequences of High Interest Rates in the Ghanaian Economy…..

Interest rates are among the closely watched variables in the economy. The media on daily bases record their movement because they affect our everyday lives and have crucial consequences for the health of the economy. They affect personal decisions as whether to consume or save, whether to buy a house and whether to purchase bonds or put funds into a savings account. Interest rates also affect the economic decisions of households or businesses such as whether to put their money in the bank or invest in new equipments for factories.Before continuing, we must understand exactly what interest rates mean. By holding financial instruments , such as loans or bonds. Savers and financial institutions extend credits to those individuals or firms that issue the instruments. The amount of credit extended is the principal amount of the loan or the bond. Those who hold financial instruments do so because they receive payments from the issuers in the form of interest. The percentage return earned is the interest rate or rate of return.Rate of return is the price of credit in financial markets and is usually expressed as a percentage (%) of the total amount borrowed that is to be paid each year (over and above the repayment of the principal, or amount borrowed). Thus, it is the price of credit of the rate of exchange between the present and the future. Rate of returns (r) vary given interest rate (i). It is the value of i that just equates the present value (PV) of the benefits of the extra capital when discounted at i to its cost (Pk). That is, r is defined as : r=MRP/Pk, where: MRP=Marginal Revenue Product Pk= CostWe would however, take a look at how interest rate is calculated, various theoretical analyses that seek to explain the determination of interest rates, distinctions between nominal and real interest rates. Finally, we shall relate it to the case of the Ghanaian economy and look at the consequences of the high interest rates in Ghana. CONCEPTS OF INTEREST YIELD/RA TE Interest yields on financial instruments are thought of in different ways. The most important of these are Nominal Yield Current Yield Yield to Maturity NOMINAL YIELD Assuming that a bond is issued in an amount of 100,000 with an agreement to pay 6000 in interest every year.The annual payment of 6000 is the bond’s annual coupon return. This is simply the fixed amount of interest that the bond yields each year. The nominal yield on a bond is equal to rN= C/F, where rN is the nominal yield, C is the coupon return and F is the face amount of the bond. The annual yield of the 100,000bond with the 6000 coupon yield or return is equal to 6000 / 1000,000=0. 06 or 6 percent. Current Yield The current secondary market price of the bond typically is not the face value of the bond. Bonds often sell in the secondary market at prices that are different from their face value.For this reason, those contemplating on bond purchase often are interested in the current yield of a bond. This e quals to r i =C/P Where ri denotes the current market yield, C is the coupon return and P is the current market price of a bond. For instance, the current market price of a bond with a face value of 100,000 might be 90,000. If the coupon return on the bond is 6,000 per year, then annual current yield on this bond is equal to 6,000/90,000=0. 667 or 6. 7 percent. Yield on Maturity A bond’s yield on maturity is the rate of return if the bond is held until maturity.Calculating this yield can be complicated, however, because the bonds normally differ. Typically, bonds are sold at a discount, below its face value. Hence, other things being equal, the bond holder receives an automatic capital gain if the bond is held to maturity. A capital gain occurs when the value of a financial asset at the time it is redeemed or sold is higher than its market value when it was purchased. Consequently, the bond pays a coupon return. The yield to maturity must account for both the capital gain and the coupon returns that a bond yields to its owner. MEASURING INTEREST RATESThe financial credit market instrument can be classified under four types ?Simple Loan This provides the borrower with an amount of funds (principal) which at the maturity date must be repaid to the lender along with an additional amount known as an interest payment. Supposing, a bank made you a simple loan of 100,000 for one year, you would have to pay the principal of 100,000 in one year’s time along with an additional interest payment of say 10,000 given interest rate to be 10%. Most often, commercial bank loans to businesses are often of this type. ?Fixed payment loan:This provides the borrower with an amount of funds that he is to repay by making the same payment every month, which comprises part of the principal and interest for a given number of years. For example, if you borrowed 100,000, a fixed payment loan might require you to pay 12,600 every year for 25 years. ?Coupon Bond A coupon bond pays the owner of the bond a fixed interest payment every year until the maturity date, when a specified final amount is repaid. For example, a coupon bond with 100,000 face values might pay you a coupon payment of 10,000 per year for 10 years and at the maturity date repays you the face value amount of 100,000. Discount Bond A discount bond is bought at a price below its face value (at a discount) and the face value is repaid at the maturity date. However, unlike the coupon bond, the discount bond makes no interest payment. It just pays off the face value. For example, a discount bond with a face value of 100,000 might be bought for ? 90000 and in a year’s time the owner would be repaid a face value of 100,000. These four types of instruments require payments at different times. Simple loan and discount bonds make payment only at their maturity dates, while fixed payment loans and coupon bonds have payments periodically until maturity.The decision as to which of the instrume nts provides you with more income is difficult since they all make payments at different times. To solve this problem, the concept of present value was invented to provide us with a procedure for measuring interest rate on these different types of instruments, Present Value (PV) approach shows the present value Ao of a known amount An, to be received in ‘n’ years assuming compound interest is at the rate ( i) . The present value (PV) formula is Ao=An/(1+i)n NORMINAL VERSUS REAL RATES OF INTEREST So far we have discussed interest rates only in current cedi terms.There is, however, a problem with this. Inflation can erode the value of interest received when a financial instrument matures. Any individual must take this into account when evaluating how much to save. For instance, supposing that a saver can earn a stated current cedi interest rate or nominal interest rate of r=0. 06(6%) on each cedi that he allocates to a one year bond. Supposing also that the saver expects that prices of goods and services would rise by a factor, ? e=0. 03(3%) Where ? e is expected rate of inflation. This is the rate of inflation that he expects to face.Such inflation would reduce the amount of goods and services that his interest would permit him to purchase. Thus, although the saver earns post interest on the bonds he anticipates the inflation will eat away at that interest and the rate ? e. Hence, the real interest rate that this saver anticipated or his expected inflation-adjusted interest rate is approximately equal r = r-? e r = 0. 06-0. 03=0. 03, Where r = real interest and r = nominal interest rate. In terms of what his savings can buy this saver actually anticipates earnings only 3% on his one year bond.A rate of return in current-cedi terms that does not reflect anticipated inflation is known as Nominal Interest Rate. The anticipated rate of return from holding a financial instrument after taking into account the extent to which inflation is expected to redu ce to the amount of goods and services that this return could be used to buy is termed as Real Interest Rate. The real interest rate is crucial for determining how much the individual desires to save. The reason is that savings is foregone consumption. This individual is likely to give up more consumption if the real rate of return on savings is large.This means that the real interest rate is a crucial determinant of the saving in the nation where this saver is a citizen. Countries with high nominal interest rates often experience very low saving rates because expected inflation is so high. THEORIES OF INTEREST RATES Various theories have been propounded by various economists to explain the determination of interest rates. However we would focus on three main theories namely; †¢Classical theory †¢Neo-classical/Loanable funds Theory †¢Keynesian/Liquidity Preference Theory CLASSICAL /REAL THEORY OF INTEREST RATESThis theory by Marshall and Pigou uses savings and investm ent in determining interest rates. The theory equates investment to demand for capital or supply of bonds (i. e. , sales of bonds). and savings to supply of Capital or Demand for bonds (i. e. purchases of bonds). Hence interest rate is determined when investment equals savings as illustrated below Figure 1. INVESTMENTS – SAVINGS COMBINATION IN THE BONDS MARKET Where B (supply of bonds) = I( investment ) B (demand for bonds )= S (savings) r is the equilibrium rate of interest at where S=IAccording to the classicals, there are only two groups of people in the market to provide bonds; investors and government. Firms sell bonds in order to have capital or funds for investments. The sale of bonds however, depends on the expected rate of returns and the cost in selling the bonds. Hence bond price is expressed as PB=Y/r where PB=Bond Price , Y=rate of returns and r= interest rate, implying an inverse relationship between Bond prices and interest rates, Expected rate of returns is as sumed fixed, and when interest rate rises above the rate of returns, it affects the relationship between investment and interest rate.Assumptions: †¢The classicals assume that, †¢Income is constant †¢The saving-investment schedules are independent of one another Criticisms: †¢Keynes asserts that income is variable and not constant and that the equality between savings and investment is brought about by changes in income and not by variations in the rate of interest. †¢Keynes also states that the saving-investment schedules are not independent of one another THE NEO-CLASSICAL/LOANABLE FUNDS THEORY This theory explains the determination of interest in terms of demand and supply of loanable funds or credit.The theory defines rate of interest as the price of credit which is determined by the demand and supply for loanable funds. According to Prof. Lerner, it is the price which equates the supply of credit or saving plus the net increase in the amount of money in a period to the demand for credit or investment plus net hoarding in the period Demand for Loanable Funds. Three main entities of demand for loanable funds; governments, business men and consumers need them for purposes of investment, hoarding and consumption. Government borrows funds for constructing public works.Business men borrow for the purchase of capital goods and for investment projects. Such borrowings are interest elastic and depend mostly on the expected rate of profit. Individual consumers however may demand loanable funds for the purchase of durable consumer goods like houses. These borrowings are also interest elastic. At lower rates of interest, people borrow more than at higher rates of interest in order to enjoy their consumption now. Supply of loanable funds The supply of loanable funds comes from savings, dishoardings and bank credit.The main sources of supply of loanable funds are private, individual and corporate savings. Savings depend on the level of income. For a given level of income savings will depend on interest rate, and the higher the interest rate the greater will be the inducement to save and vice versa. This saving is referred to as Personal Savings. Corporate savings are the undistributed profits of firms and it also depends on current rate of interest to some extent. High interest rate deters borrowing and thus encourages savings. Dishoarding may also occur when interest rate is high or increases.Thus, one dishoards (ie, releasing hoarded money or idle money holdings), if the cost of holding that money increases as a result of high interest rate. Hence, there is a positive relationship between interest rate and dishoarding. Banks also give credit when the borrowing rate is high. That is when interest rate on credit payable by borrowers is high, hence a positive relationship between interest rate and bank credit. Criticisms: †¢Savings not interest elastic. The theory over emphasis the influence of the rate of interest on savings as interest elastic.Thus, people save not only to earn rate of interest but also for other purposes like precautionary motive, hence savings are interest inelastic. †¢The theory is also criticized for combining monetary factors with real factors making it unrealistic. †¢Equilibrium rate reflects unstable equilibrium. The demand and supply schedules for loanable funds determine the equilibrium rate of interest OR which does not equate each component on the supply side with the corresponding components on the demand side. KEYNESIAN/ LIQUIDITY PREFERENCE THEORYKeynes defines interest rate as the price which equilibrates the desire to hold wealth in the form of cash that is the demand and supply of money determines interest rates. The supply of money is considered fixed and exogenously determined (that is inelastic). Demand for money is also called liquidity preference which is the desire to hold money. In this case, interest rate is the premium which has to be offere d to induce people to hold their wealth in some form other than hoarded money. According to Keynes, speculative demand for money is determined by interest rate and bond prices.He considered the current interest (i) as that which determines the speculative demand for money. The higher the rate of interest, the lower the speculative demand for money. At very low rate of interest people will rather prefer to keep their money in cash than investing in bonds because purchasing of bonds will mean a loss. Determination of interest rates The equilibrium interest rate is determined at a point where the supply and demand for money equilibrates. At the point of liquidity trap, there is the belief that interest rate will not fall but will at a point in time rise hence investors hold money against future rise in interest rate.Criticisms: †¢The theory is considered as indeterminate by Prof. Handson. Keynes asserts the liquidity preference determines the interest rates. The problem is that a new liquidity preference curve would have to be drawn at each level of income. This indicates that income levels will have to be known before otherwise, the supply and demand for money curves cannot tell us what the interest rates will be. †¢Hicks and others were of the view that interest rate is determined by the following; i. Investment demand function ii. Savings function iii. Liquidity preference function iv. Quantity of money function.They are present in Keynes theory but not all are the interest rate analysis. Keynes ignores investment and savings, hence his theory is considered as incomplete. TRENDS IN SAVINGS AND LENDING RATES IN THE GHANAIAN ECONOMY (1994-2004). YEAR19941995199619971998199920002001200220032004 LENDING RATE31. 2440. 5641. 7143. 5838. 536. 54743. 7536. 3632. 7528. 8 DEPOSITE RATE21. 3726. 7532. 2432. 320. 215. 3925. 817. 4312. 4911. 969. 87 INTEREST SPREAD9. 8713. 819. 4711. 2818. 321. 1121. 226. 3223. 8720. 7918. 9 The interest spread was calculated as a difference in the averages of the lending and the deposit rates covering the said period.Between 1997 and 2001, the interest spread increased and subsequently started falling at a slightly varying decreasing rate. This was the period when the lending rates were high 43. 75% in 2001, down from 47% in 2000 because of the high inflation rate and the general turbulence within the economy. The corresponding deposit rate was 17. 43%. Between the years 2001 and 2004, the average interest spread was 23. 66%. This rate of profits of the commercial banks, heralded the spiral influx of foreign banks especially from neighbour Nigeria. It has been taunted that the banking sector is doing very well.In reality there has not been much competition between the existing banks, hence the high lending rate as well as their profits. They tended to act as collusive oligopolies. Recent developments and trends in the banking sector has been that, competition at long last has set in. For instance the Zenit h Bank has unilaterally decided to reduce it’s lending rate 14. 1% with respect to the general rate. This will result in much more innovation in the sector resulting in better banking services and a general reduction in the interest rate as pertained in competitive markets.From the existing trends, especially as indicated in the graph above, other sectors of the economy will take advantages of the low interest rate to boost up investments and hence output with a resultant increase in the GDP. This is the miracle of interest rates. HIGH VERSUS LOW INTEREST RATES IN THE GHANAIAN ECONOMY. In most economies including Ghana, interest rates are largely influenced by the prime rate which is the rate at which the central bank gives over-night loans to the commercial banks. Thus, when Bank of Ghana (BOG) fixes its prime rate, interest rates are adjusted depending on the direction of the prime rate.There is however a positive relationship between prime rate and interest rates. When pri me rate is set high or low interest rates are also fixed relatively high or low. For instance, interest rates followed a declining pattern in 2003. The monetary policy committee of BOG revised the prime rate downwards from 21. 5% in 2003 to 18. 5% in 2004. In line with this downward revision, the commercial banks’ base rates dropped from an average of 29. 0% to 25. 4%. Interest rates for the 91-day treasury bill dropped from 18. 71% at the beginning of the year to 17. 8% at the close of December 2004. The inter-bank interest rate also dropped from 17. 12% in January to 16. 23% at the end of December. Interest rates, however, low or high have both favourable and adverse effects on the economy of a country. During periods of high interest rates investment falls and savings increase and vice versa in the case of low interest rates. The table and graph below shows interest rates, 1998-2004 and interest rate margins respectively. YEAR1998199920002001200220032004 SAVINGS22262929. 2 525. 232319. 25 TIME DEPOSITS914. 7513. 520. 520. 1418. 515. 5Holders of stocks lose during periods of high interest rates and holders of money (cash) gain though money earns zero interest. In periods of economic boom, high interest rates might be needed to check inflation, while low interest rates will be needed to stimulate investments and create employment in recessions. In between these two extremes, interest rates are adjusted up or down depending on prevailing economic conditions. High interest rates will slow down the economy and cripple the private sector. Investors cannot access funds from financial institutions, thus creating low level of investments.It will also be tempting to invest available funds in high yielding bonds than in infrastructural business investments. This will reduce spending, shrink national output and bring down inflation. Low level of investments will therefore create unemployment. The central bank reacts by lowering interest rates using the sight depo sit rate (inter-bank transaction rate with commercial banks also referred to as the key rate). Low interest rates stimulate the economy. Investors can access low-cost capital for investment. Employment increases, and the national output increases.Low interest rates therefore allow for borrowing and spending, but then, inflation will also pick up. As inflation picks up, companies can increase employment, since real wages decrease. Successive increase in interest rate leads to inflation. Inflation however bad for an economy also leads to reducing unemployment rates since there is a negative relationship between inflation rate and unemployment rate. CONSEQUENCES OF HIGH INTEREST RATES IN THE GHANAIAN ECONOMY. High interest rates have certain repercussions in the Ghanaian economy. Prior to 1987, there was a decline in economic growth and development in Ghana due to high interest rates.Current high interest rates on bank loans (over 25%) and treasury bills (17%) have been a serious imped iment to raising capital in the local market. private sector growth in Ghana has been constrained by limited financing opportunity for private investments. High interest rates lead to crowding out of the private sector in the money market; it makes available loanable funds to the government. Thus, lenders of loanable funds shift lending to only the government with the surety that there is 100% safety in retrieving their money since they believe that governments do not die.Studies done in the past show that the growth process in Ghana has been driven mostly by public investments. As a result, some have attributed the lack of accelerated growth to a combination of weak investment and low productivity from the private sector. Hence the current government in its manifesto promised to make the private sector the engine of growth by providing the right socio-economic framework. For example, the government through the monetary policy committee of the bank of Ghana (BOG) managed to reduce t he Bank’s Prime Rate from 21. % in 2003 to 18. 5% in 2004 and currently down from 15. 5% at the beginning of 2006 to 14. 5%. When the prime rate fell, the BOG was expecting a corresponding decrease in commercial bank lending rates but its evident that the private sector is not responding to such developments; commercial bank lending rates have ranged between 18. 5% and 33. 5% as indicated by the Governor of the BOG. This has been a major concern for small and medium scale enterprises that cannot access loans at these exorbitant rates to expand their activities High interest rate may lead to increase in debt ratio that is, when interest rate is set high, cost of governments borrowing increases, interest payments increases and total debt increases. When government wants to finance its debt, it either prints out or borrows money to finance its debt. However if the government wants to avoid the former which usually leads to inflation, it falls on borrowing to finance its debt. Th ese borrowings also attract interest payment which increases the total debt payment in economy.For instance, profile of interest rates in Ghana reveals the real rates ranging from 10% to 21. 7% in 1996 to 1999. The high rates which are more than 100% between 1996 and 1999 worsen the debt burden. It is clear that since1997, borrowing from domestic sources was not even enough to finance the deficit as a result of high interest payments, thus for the last half of the 1990’sthe country had to borrow externally and/or print money to finance the deficit. For instance, in 1995 change in domestic debt was 200. 9 billion cedis but interest payment was 232. billion cedis which is over and above the change in domestic debt. As in year 2000 change in domestic debt was just 855. 5 billion cedis but interest payment was1446. 2 billion cedis over and above the change in debt. Consequently, as a result of the borrowing (i. e. domestic and external) it contributed to a high rate of growth of our debt that led to a state of bankruptcy in which the government failed to honour its debt obligation. As a result, in 2001 the Ghanaian economy was declared H. I. P. C. ?The need for the government to make interest payments on large debt may contribute to inflation.For example ,inflation may result if the government decides to finance interest payment, not by collecting taxes, instead by borrowing. For instance, prior to year 2000, the government of Ghana depended on borrowing to finance its debt as a result inflation recorded at that period was very high ( i. e. 41%). ?At very high rate of interest people hold bonds or save money rather than investing. Inflation occurs as a result of higher prices of goods and services, cost of living become very high, the poor and low income earners suffer economic hardships.Between 1980 and 1983 in Ghana, inflation was very high not forgetting interest rate as well. This led to economic hardships in 1983. ?High interest rate deprives both loca l and foreign investors from investing in the economy. This disturbs economic growth and development. In Ghana, when interest rates are high foreign investors invest in capital goods rather than in productive ventures. In spite of the consequences of high interest rate, there are also some benefits. The truism that high interest rate contributes to high inflation rate reduces unemployment ratio in the economy.In Ghana for instance, the economy has achieved respectable rate of GDP growth averaging over 4% in the 1990s as compared to the negative average growth rate over the period 1970 -1983. However, the average inflation rate fell to about 19% in 1998 relative to 122% in 1983 due to increase in employment levels or a reduction in unemployment levels as one of the factors responsible for this trend. ?High interest rate serves as a tool for monetary control in the economy. Through the use of the open market operation (OMO), where the economy is operating beyond its full employment le vel.That is when it is considered as being hot; the rate of interest can be increased by the central bank in the purchases of previously issued governments bonds. This mops up excess liquidity thereby reducing the money supply in the economy. The result is that demand for money now exceeds money supply thereby bidding up interest rate. This slows down the growth rate to an acceptable level enabling the economy to operate at full employment level. ?During periods of high interest rate, financial institutions records very high turn-overs. Governments tend to earn high tax revenue through taxes charged on banks’ turnovers.The bank of Ghana’s annual report (1997), recorded a high turn-over as a result of high interest rates as shown in the table below . The Central Bank maintained its rediscount rate at 45. 00per cent throughout the year under review. Money market rates were also fairly stable in the year. The 91-day Treasury Bill discount rate for example remained at 42. 80 per cent through November before declining to 42. 48 per cent at the end of the year. The commercial banks’ borrowing rates were also generally stable throughout the year. Rates for savings deposits moved up slightly from 22. 50-31. 0% to 22. 50-32. 00% and the range for call money from 25. 00-31. 00% to 24. 00-34. 00% per annum. The bank’s lending rates however, showed some upward trends. Rates for the Agricultural sector (usually the lowest) moved up from 30. 00 –47. 00% to 35. 00 – 49. 00% per annum while that for the miscellaneous (usually the highest) rose from 41. 50 – 48. 00% per cent to 41. 50 – 51. 00% per annum. INTEREST RATES (Percent Per Annum) 1994199519961997 DecemberDecemberDecemberDecember 1. CENTRAL BANK a. Rediscount Rate (Bank Rate)33. 0045. 0045. 0045. 00 b. Treasury Bill Discount Rate(91days)29. 040. 5042. 8042. 48 2. DEPOSIT MONEY BANKS A. Borrowing Rates. (%) i. Demand deposits4. 00-13. 445. 00-10. 005. 00-10. 005. 00-15. 00 ii. Savings Deposits13. 75-22. 5021. 50-31. 0022. 50-31. 5022. 50-32. 00 iii. Time Deposits 1 month22. 00-26. 5026. 00-32. 5029. 00-37. 0029. 00-37. 00 3 months14. 50-31. 0025. 00-36. 0025. 00-40. 5025. 00-39. 00 6 months14. 75-31. 0022. 75-37. 0032. 00-39. 2532. 00-39. 50 12 months14. 00-31. 0023. 50-36. 0027. 75-39. 5027. 75-39. 75 24 months22. 00-29. 2524. 00-35. 0027. 50-35. 0024. 00-35. 00 36 months26. 50-29. 0035. 0035. 0030. 00-38. 00 iv.Certificate of Deposits13. 75-24. 5023. 50-37. 0025. 00-37. 0025. 00-37. 00 v. Call Money25. 00-33. 5024. 00-34. 00 vi. Any other20. 00-24. 0022. 50-25. 0022. 50-33. 0022. 50-33. 00 B. Lending Rates. (%) i. Agriculture, Forestry & Fishing22. 50-35. 5028. 00-47. 0030. 00-47. 0035. 00-49. 00 ii. Export Trade20. 38-35. 5034. 25-47. 0030. 00-47. 0035. 00-49. 00 iii. Manufacturing26. 00-35. 5033. 00-47. 0039. 00-47. 0039. 00-49. 00 iv. Mining & Quarrying29. 00-37. 5030. 00-47. 5035. 00-47. 5035. 00-49. 00 v. Construction29. 00-37. 5039. 00-47. 5041. 00-47. 5041. 50-49. 00 vi. Other Sector29. 00-37. 039. 00-47. 5041. 50-48. 0041. 50-51. 00 Source: Bank of Ghana During the year under review, total outstanding credit granted by commercial banks to public institutions and the private sector increased by ? 474. 8 billion or 64. 8 per cent to ? 1,207. 2 billion. This compares with an increase of ? 299. 8 billion or 69. 3 per cent in the previous year. The Commerce and Finance sector recorded the highest increase of ? 84. 5 billion followed by Cocoa Marketing sector which registered an increase of ? 78. 2 billion. Significant increases were also recorded in outstanding credit to Manufacturing (? 1. 5 Billion), Construction (? 53. 2 billion), Services (? 49. 7 billion), Mining and Quarrying (? 36. 7 billion) and Import Trade (? 18. 8 billion). Credit for Cocoa financing showed an unusually large increase as a result of financial accommodation given to COCOBOD in the face of a larger than expected crop size. In conclusion, the various levels of interest rate (that is high or low) affect the economy in diverse ways (i. e. positively and negatively). However the optimum benefits derived from those varying levels of interest rates depends on prudent economic management.The interest rate problem does not rest with Government and the Bank of Ghana only but also the commercial banks. The rising rates of interest are acts perpetuated by the banks for more profit and these rates charged by the commercial banks are just too high and that is what hurt investors. In addition, the banks impose charges and commissions which are completely inexplicable. REFERENCES: ?Business and Financial times issue number 689 ?Bank of Ghana Annual report (1997) ?The state of the Ghanaian economy (2004) ?The internet (Nii K. Sowa, CEPA, Inflation and interest rate fixation in Ghana) ?Article by Ampong Owusu Kwabena -Bsc engineering KNUST, Masters in international business (NORWAY), and Masters in Financial Economics (NORWAY). ?Man aging Ghana’s Dept. – Nii K. Sowa, CEPA, Accra ?Henderson and Poole; Principles of Economics ?David C. Colander: Economics ?Miller, R. L and D. D. Van Hoose; Money, Banking and Financial Market ? Miskkin F. S: The Economics of Money and Banking and Financial Markets ? Dr. Henry D. Jackson: An Introduction to Macroeconomics 1999 ? Dr. Henry D. Jackson- McConnell Brue: Economics, 5th Edition.

Human Relations and Scientific Management

Ha Chi K50BF During the period of the nineteen and twenty century, the world industry had reshaped itself with the new present of technology and information transfer in new manner. In the complex situation of the economy, F. W Taylor(1856-1917), published his principles in managing which was called Scientific Management and had been popular as the core managing style for various business models up to now.Scientific Management focuses on logical task provision and maximising productivity based on task performance. A few years after Taylor' death, Elton Mayo(1880-1949) made a significant movement in managing perception rooted in Hawthorne ‘s experiences at an electric company. The new perception quoted that managing an organisation was not only maximising productivity, it was also about satisfy organisation internal people ‘s needs. By this way or another, there are gain and loss, which will be clarified hereafter.To begin with gain by each approach, Scientific in particula r, providing logical principles in working processes in a manner of analysing discrete tasks, finding one best way in practise, choosing suitable people respectively to accomplish the tasks. By this way, clear tasks were for clear individuals which helps increasing productivity by assigning right people for the right jobs, avoiding responsibility denying and easier in measuring work performance.Scientific Management was the orthodox foundation in modern business management models. Later revolution in managing had relied on its principles up to now. Besides that, Human relations Approach did have pretty different in perception. It had pointed out the important in human behaviour at work and the development of management thinking. In this case, managers behaviour was a vital aspect of motivation and improved performance.Furthermore, maintaining good relation among group of people, sharing feelings with staffs emphasised on the needs of social organization and generating working motiva tion as well as creating somehow group values and norm. The importance of organization has been pushed up to a high level that had never mentioned in other Human relations perception. Continuing with the bad sides of both approaches, Scientific Management Approach had ignored the interaction among organisations. Although it motivated employees by monetary reward, it refused to sympathy to employees' concerns and feelings.As a result, works became a routine and boring, workers were treated as manufacturing machines, they were made light of dignity then they gradually losing interest in work. In addition, training process was kind of waste money. It was pointed out that, one in eight trainees was capable to job requirements( porter job). In recent practise, Human Relation Approach are popular in any industries, people choosing a job is not only for high salary, but also appreciate to good working environment, extra incentives and social needs from organisations.Nowadays, Scientific Ma nagement is still relevant to some extent such as work assignments, salary based performance( in hospitality job). Overall, there are different points in this two conceptions. However, Human relations Approach is seemed that more innovate and practical method in business management. The managers decide to use which method or even combination need to consider further factors such as major, economy and so on to establish a good strategy. Case study DELL

In what way is Dr. Faustus an Anti-Catholic Play? Essay

On the face of it, Dr. Faustus is not an anti-Catholic play. Yet, once you have read into it certain aspects of the play – there are many anti-Catholic notions and views that Marlowe has placed within the text. If the reader has no prior knowledge of how the world was in the Sixteenth century, then they would probably not uncover Marlowe’s hidden messages. There are many issues dealt with in the play, yet, they all follow a route to anti-Catholicism. All of the ideas dealt with are reminiscent of the period that Marlowe is writing in, when people did have quite ‘humanist’ views and were hostile towards the Catholic Church because of the lies that they had been telling.The main theme of anti-Catholicism is Dr. Faustus’ rejection of God. For a sixteenth century audience to watch someone reject God and sell their soul to the devil is the most anti-religious thing that they could do. They most probably would have been petrified of what the consequences o f his actions would be. Yet, at the same time, would most probably have admired his courage to stand against an establishment that had ruled their entire lives by preaching falsehoods and in effect stealing from them (through the sales of ‘indulgences’). Also, right from the beginning when we are introduced to Faustus, we find him in Wittenberg – the same place in which the monk Martin Luther lived – an anti-catholic statement in itself as Luther himself opposed the Catholic regime. I believe Marlowe has intentionally set the play in Wittenberg to make a statement right from the beginning that this play is set out to make anti-Catholic notions.The play deals with sin and damnation at the heart of Christianity’s understanding of the world. The play shows us that Faustus’ pride, which causes him to strive for knowledge, may have seemed admirable at the turning point in the Renaissance period, but that this pride and insolence to go against God makes him despaired of God’s mercy. Christian teaching at the time was that if you did not follow Gods rules, you ended up eternally damned to a place called ‘Hell’ – a place that Faustus both believes in and disbelieves throughout the play. Hell is represented as a rather psychological torture in the play rather than a physical one (as Mephistophilis puts it to Faustus). We can get an idea of the attitudes of the people in Faustus’ time by looking at how Marlowe represents Fau stus. We can guess that Marlowe has a negative view of what Faustus did because he compares him to ‘Icarus’ from Greek mythology when he says; â€Å"His waxen wings did mount above his reach, and melting heavens conspired his overthrow. For falling to a devilish exercise† By saying this, Marlowe is expressing that going against God and selling his soul was the ultimate sin that caused Faustus to be damned. The audience’s attitude towards Faustus may have been one of empathy rather than disdain for choosing to sin because at that time it was believed that it was our job to resist the temptations of the devil, like Christ did, but many people were tempted to go against God to find answers other than those written in the Bible, and would have understood his situation. It is not always certain if the play is a true representation of the attitude of a sixteenth century audience as Marlowe was a radical of his time and did have much more extreme views on Catholicism than his peers. Marlowe himself, spent time as a Cleric – even mocking religion and earning a reputation of being an atheist at a time when atheism was a state offence. This maybe being one of the reasons why the play is so anti-catholic because of his anti-religious views and as the most religious of all denominations, Catholicism was probably the easiest target.The first time we see the play’s anti-Catholic view is when Christopher Marlowe gives a sense of something wrong happening at the beginning of Scene III, when Faustus begins to conjure. We get this feeling that something is not quite right when Faustus describes the â€Å"gloomy shadows† and the â€Å"pitchy breath†, the image of darkness and night gives the impression that what Faustus is doing is dangerous and evil. Faustus practises the ‘Black Mass’, which was an anti-Catholic comment as it was praised by Satan worshippers, which would have made this scene extremely horrific for Marlowe’s audience, and definitely seen as a sinful act. Throughout the play, Faustus has doubts about what he is doing and thinks of repenting but it is his pride that keeps him from turning to God and asking for forgiveness. This happens throughout Scene V, where he doubts his actions, thinks of repenting and then because of his pride he becomes resolute again. The good angel tries to help him by saying â€Å"Faustus repent, yet God will pity thee† but he can’t face being humiliated and says, â€Å"My heart’s so hardened I cannot repent!† In the same scene, Faustus says that  he believes Hell is a â€Å"fable†, displaying yet again the anti-Catholic views of the play, as it is a direct comment from the Bible that here are two after-lives â€Å"Heaven† and â€Å"Hell†. By saying that there is no Hell, is saying that he believes that The Bible is lying – a sin against not only the catholic doctrine, but also all Christian religion. He is also writing off everything that he has ever been taught and in an indirect way, preaching to the audience that their whole religious life has also been a ‘fable’ in itself. Here, Dr. Faustus is taking empiricism to the extremes, as he honestly believes that he can sell his soul to the Devil and remain happily on Earth, this also shows Faustus’ extreme arrogance and the fact that he thinks he is superior to the rest of humanity. Scene V is an extremely anti-Catholic scene as it deals with the majority of subjects. One being the matter of the ‘Good Angel’ and ‘Bad Angel’; in this section of the scene, we ponder on the question ‘When is it too late to repent?’ – it is here that the divide in Christian denominations becomes apparent. Catholicism saying that after you have sold your soul, you are beyond the forgiveness of God. Then, the Protestant side, saying that in God’s eyes it is never too late to repent. The ‘Good Angel’ in the play is the one with the Protestant views – a blatant attack on Catholicism by labelling it ‘Bad’, then mocking it in the play. It is very possible that Marlowe wrote Dr Faustus in order to spite those around him – ‘those’ being the Catholics. Marlowe was not a religious man, let alone a Catholic and did not tolerate their beliefs, as evidenced by how clearly the play demonstrates the downfall of a religious man and reinforced themes of anti-Catholicism. It could be said that Marlowe created a man who would be considered an â€Å"ideal† Catholic – after we see him wanting to repent and the way in which he conforms to the people around him very easily, and then Marlowe damned him to eternal suffering; suggesting that during Marlowe’s life, he believed if you were a Catholic you were also damned to eternal suffering and saw no problem with this. Since reading between the lines and going into depth of some of the quotes that Christopher Marlowe so passionately wrote in 1550, it is acceptable to say that there are many aspects of the play that are either intentionally  anti-Catholic or unintentionally anti-Catholic. Yet it is also fair to say that Marlowe has deliberately put some comments into his play that are an attack onto the Catholic Church, its beliefs, practises and its followers.

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HW 2 Essay Example | Topics and Well Written Essays - 500 words

HW 2 - Essay Example Finally, Palestine $6.641 billion, Mauritania$4.183 billion, Somalia $2.372 billion, Djibouti $1.459 billion and Comoros $658 million. The GDP per Capita is equal to $7,364.37 (2668.78billion/362,390,776). France has a GDP per Capita of $35,700 which is almost five times as much as that of the Arab League members. Germany’s GDP per Capita is $39,500 which is more than five times that of the League Members. That of USA is seven times the League’s GDP per Capita at $52,800 while that of Japan is $37,100, and Israel’s is $36,200 both approximately five time the League GDP per Capita. In conclusion, there are disparities in the GDP of the different countries in the Arab League for example Saudi Arabia has the highest GDP at $718.5 billion, and the Comoros has the least at $658 million resulting to a difference of approximately 718 billion. This explains the low GDP per Capita in the League despite different countries like United Arab Emirates having high GDP per

Software Quality Management Essay Example | Topics and Well Written Essays - 2250 words

Software Quality Management - Essay Example The requirement elicitation process for this set of work products was done through several methods like, interviewing end users, conducting workshops on identifying requirements, brainstorming, use cases, role plays and developing a demo of the final product. Additional work products were found for each main product of the basic set and were detailed on how they contribute to the achievement of the outcome. The report is structured with the detailed description of how the requirement analysis for each work product attributes to the successful implementation of each attribute of the outcome. This is followed with the findings of additional work products and their relationship with the basic set. Finally the report is concluded with the analysis of additional characteristics, if any, for each of the work products in the basic set. The first of the basic set of work products that was analyzed was the Spreadsheet software. One of the examples of spreadsheet software was Gnumeric. This deliverable was chosen since it was able to meet the expectations of the end users. The software was able to perform the required functionalities at par with other existing software of same kind. The requirement elicitation of the Gnumeric software was done through brainstorming technique and conducting a research on the requirements of the user needs. The analysis on the post-requirement elicitation process shows that the attributes of the outcome were met successfully. The process of how it met is explained below. (n.d. ,2009) Initially the planning was done among the management levels. The planning was ultimately divided into business, program and project. Once the planning was done, the requirement analysis was documented. The clients were interviewed and brainstormed to identify all possible requirements that they want the software to do. These include the conversion of any kind of data files to CSV or ledger based accounting table format. These requirements were base lined and were documented. They had a version control manager associated with the development team. This had the control of updating the software as and when any changes are done. The software had a help feature which would send the reports of any errors or runtime exceptions to the change management group. This ensured that customer faced bugs are fixed. The online help care associated with the software development team ensured that the customer's needs and future updates are done at the earliest time. (Demiriirs, E. et. al. 1998) The additional work products that help in achieving the entire functionality of the Gnumeric are histogram tool and Image filling work product. These work products helped to achieve the baselined requirements of creating charts from source data. Their special characteristics are that they are easily updatable and platform independent.Requirement Elicitation of Calculator software. The basic criteria for the selection of FreeCalc software in Calculator category, was that it was able to exceed the functionalities and expectations of other work products in the same category. This product detailed on the requirements category, met with the

Compare the electric cars to the hybrid cars Assignment

Compare the electric cars to the hybrid cars - Assignment Example Hybrid vehicle was developed to replace the use of electric vehicles. More electric vehicles are being developed as a result of power and battery management. The concerns about reduction of greenhouse emission of gasses and increasing prices of oil has led to the creation of more and more models of electric cars such as Tesla, Frisker, Karma and Toyota RAV4. Electric and hybrid cars may attract the same kind of customers even though they differ in a number of ways. Studies have shown that wealthier and younger people purchase electric vehicles compared to those who buy hybrid cars. Electric cars are considered more expensive than hybrid vehicles because of the expensive technology employed in the designing the cars. Hybrid vehicles such as Prius have existed for a long time on our roads unlike the electric model that is still new to the market, luxurious and attractive to the people. Hybrid cars utilize more than one sources of power in locomotion. The vehicle combines electric motors and internal fuel combustion energy (Antony, 50). An example of a hybrid vehicle is Toyota Prius. Electric cars, on the other hand, utilize electrical energy as the only energy source. Electric vehicles use electricity that is considered cheaper while hybrid vehicles utilize both gasoline and electric energy. Gas is expensive as a result of the rising cost of fuel in the world. With proper power management system in cars such as Karma and Toyota RAV4 which utilize electricity as an energy source, it will cost less to drive in such cars than using a hybrid car (Voelcker, 69). Hybrid cars, on the other hand, use gasoline that is considered environmentally unfriendly. Due to the current global warming as a result of carbon emission, pressure is for companies and countries to put up measure that will prevent greenhouse gasses from being emitted into the atmosphere. Electric cars are, therefore, one of the options in a

Background of Wal-Mart and Current Challenges-300 Research Paper

Background of Wal-Mart and Current Challenges-300 - Research Paper Example The organization needs to operate as an equal opportunity player in rendering an equitable climate that would contribute in the gaining of employment, fiscal and economic opportunities by both the gender groups working in the organization. Similarly other types of organizational changes also relate to bringing about new policy directions that would help in the reduction of harassment activities in the workplace. The organizational management needs to set strict policy guidelines and regulations aiming at curbing the event of sexual harassment or emergence of pay and employment discriminations (Bell, McLaughlin and Sequeira, 2002, p.71). Moreover further organizational changes can be introduced pertaining to the reduction of hierarchal job layers in the concern such that the organizational structure can be transformed from the vertical to the horizontal state. This strategy rendered would contribute in the development of empowered teams in the concern and also in the enhancement of organizational communication. Rendering organizational flexibility in the concern through the enhancement of empowered teams would contribute in the development of organizational and performance skills of the people in the concern. This model of organ

Wireless devices without Wi-Fi Essay Example for Free

Wireless devices without Wi-Fi Essay 3.1.1 What would happen if wireless devices were not governed by the Wi-Fi Alliance and each vendor had its own standards and protocols? What impact would this have on your personal life or business communications? Personal information and business will slow down due to each vendor having its own standards/protocols. It will also be more vulnerable to attacks and make accessing more difficult. 3.1.2 Give another example of a model that is used to visualize something that is difficult to observe or perceive. How does the model make it easier to understand? Another way of displaying information for easier understanding is to use a flow chart. A flow chart can be used as a step by step guide. 3.1.3 Based on what you already know about networks, what are the different layers you think would be necessary for communication to be mapped to a model? Consider direct connections between host devices and connections that require other routing equipment, such as a hub, switch, or router. 1. Data link 2. Physical 3. Application 4. Network 5. Transport 3.1.4 The granularity of the reference model will often determine the usefulness of the model. What will happen if a model is too general? What will happen if a model is too granular (focused on individual detail)? If the data is too detailed, it may overlap with other information. However if the data is too general, then there may be crucial information missing. 3.1 Review 1. Why would a three-layer model of communication that has the layers  physical, network, and application be insufficient to adequately describe network communication? The model would be insufficient because it would not have the ability to transport data to any other network. 2. What is the history of the OSI reference model? How did it come about and why was it created? Use your textbook and internet research to support your answer. OSI was created in the late 1970s. It was created to define a unifying standard of architecture for networking systems. OSI was meant to be the foundation for what would later be known as the internet but when comparing to TCP/IP protocols, OSI just wasn’t enough to support the rapid growth of the internet. Now, the OSI model is used to explain networking in general terms. OSI is still used today by software/hardware designers to clarify roles in a networking system. 3. What is the history of TCP/IP model? Why was it created? Use your textbook and internet research to support your answer. TCP/IP was developed in the early 1970s, originally as part of a research network the United States Defense Advanced Research Projects Agency (ARPA) developed. However, due to the TCP/IP protocols limitations and flaws, ARPA developed a new network. In the mid-1970s, it was found that TCP was attempting to do too much. This is when they decided to split TCP and IP into two separate layers. In the 1980s, TCP/IP was used to run ARPAnet and also started to expand to other machines and networks, completely evolving ARPAnet. This is how the internet was born. 3.2.1 Using Figure 3-1, define each layer of the OSI model in your own words and state what each layer provides. Use your textbook or internet research to support your answer. Application – Quality of service is established, communication partners are identifies, user authentication and privacy is considered and established. Presentation – Changes data into a form that the application can accept. Session – Manages and terminates connections between applications. Transport – Transfers data between systems, maintains flow control and recovery. Network – Provides switches and routing technologies and creating logical paths. Data link – Data packet is encoded Physical – provides the hardware necessary for sending and receiving data, bit stream 3.2.2 Using Figure 3-2 as a basis, complete the diagram to show the intermediate  encapsulation provided by each layer. Use your textbook and internet research to support your answer. Transport – Segments Network – Packets Data link – Frame 3.2.3 Briefly explain the de-encapsulation steps in the communication of host B receiving a message and host A destined for an active application. Host A will use application for the OS while allowing the PC to still communicate to other devices. Transport will control the data sent and received. The network will place IP addresses to the packets allowing data to be added to the MAC addresses and physical link between host and lines. Exercise 3.2.4 Explain why routing devices do not need the upper layer of the OSI model to route traffic. What is the highest layer of the OSI model used by the router to decide where to forward traffic? The first three layers of the OSI is typically what a router needs to route traffic. The first three layer are physical, data link and network. The highest level the OSI decide where to forward traffic to is the transport layer which is located in the host layers. Lab 3.2 Review 1. How does the abstraction of the physical layer facilitate interoperability across networks using different types of physical wires? IP terminals might be located in different parts of the build making it complex. There are lines coming in and out of the build that might be different than that issued to a company. To try and replace one will be complex, confusing and time consuming if unsure. 2. The OSI model is not directly implemented in networking and often the distinction between the layers will blur in implementation. Why does it endure despite these issues? Use your textbook and internet research to justify your answer. Technicians still use the OSI model because it gives a step by step guide on  how the information is being transported and makes troubleshooting more precise. 3. Given the purpose of each, is it necessary to retain the top three layers of the OSI model as separate entities? Use your textbook and internet research to justify your answer. It is not necessary to keep the top three layers of the OSI model when TCP/IP combines the top three layers of OSI into one layer that ultimately does the same functions. Exercise 3.3.1 Using your textbook and internet research, create a mapping between the TCP/IP model and the OSI reference model. What are the distinct differences between them? One major difference between OSI and TCP/IP is the first three layers of OSI are combined into a single layer in TCP/IP known as the Application Layer. The other difference is the last two layers, Data link and Physical layer are combined into one layer known as Network Access or Link Layer. Exercise 3.3.2 Identify the layer in which each protocol resides according to the TCP/IP model. OSI # OSI Layer Name TCP/IP # TCP/IP Layer Name Encapsulation Units TCP/IP Protocols 7 Application 4 Application Data FTP, HTTP, POP3, IMAP, telnet, SMTP, DNS, TFTP 6 Presentation 5 Session 4 Transport 3 Transport Segments TCP, UDP 3 Network 2 Internet Packets IP 2 Data Link 1 Network Access Frames 1 Physical Bits Exercise 3.3.3 The most common protocols used from this suite are IP, TCP, and UDP. Briefly describe the purpose and function of each of these. Use your textbook and internet research to support your answer. UDP – User datagram protocol – this is a connectionless service the gives best-effort delivery but does not guarantee delivery. This is often used for point-to-point and point-to-multipoint communications such as video conference applications. IP – Internet protocol – Primarily a communications protocol within the internet protocol suite that relays datagrams across network boundaries. Ultimately it establishes the Internet. Delivers packets from the source host to destination hosts based on IP address in the packet header. TCP – Transmission Control Protocol – Core protocol of IP. Known for its reliability and error checking delivery between programs running on computers connected by common networks. Sends data in the form of message units between comp uters using the internet. Lab 3.3 Review 1. UDP is a connectionless protocol, unlike TCP, so there is no feedback on whether a packet was received. When would this type of protocol be used and what is the benefit of using it? Use your textbook and internet research to draw your conclusions. UDP is ideal for when you are managing a large amount of information and you don’t want to use TCP because the operating system won’t be able to support that many sessions at one time. This does not happen frequently as TCP has become more reliable but it still is one example of why you’d rather use UDP. UDP can also get a quick response from another server more quickly. However UDP has been viewed as unreliable because there is no feedback and information can get lost. 2. HTTP is the common protocol used to retrieve web resources in a web browser. This runs over TCP/IP networks using TCP. What characteristics of TCP make its use in this situation desirable? Use your textbook and internet  research to draw your conclusion. The feedback feature in TCP is ideal because you are guaranteed that messages will be sent and received successfully. One common application that is a prime example of TCP and its success is through e-mail. Exercise 3.4.1 The data link layer introduces physical addressing in the form of Media Access Control (MAC) addresses. Each frame header is Ethernet, for example, will contain a source and destination MAC address. Why is this sufficient to route traffic locally without invoking the higher-level logical addressing? Use your textbook and internet research to guide your conclusion. MAC addresses are sufficient enough to route traffic to other networks because the frame header of MAC addresses contains all that is required without having to access higher level logical addresses. Exercise 3.4.2 Choose one of the captured packets. Click the + sign next to the Ethernet entry. This should give you the data link layer information for the frame, including the source and destination MAC addresses. Record the frame number and the source and destination MAC addresses identified by the data link layer heading. You can identify a MAC address by its format; for example, 00: 26: 62: 65: 81: 07 00:26:62:65:81:07 is a MAC address. These are commonly written in hexadecimal shorthand. Exercise 3.4.3 Open a web browser and navigate to a site that you use frequently (or visit www.pearson.com) while the packet capture is active. This will record the individual frames involved in resolving the website and delivering its content to your PC. When you view this traffic in the life packet capture, what protocols do you see invoked? You can find these under the Protocol heading for each frame. Exercise 3.4.4 and Exercise 3.4.5 cannot do because student doesn’t have access to data link layer connection (Omnipeek). Lab 3.4 Review 1. Wireshark give you the ability to save captured traffic. This can be a  great benefit to network administrators, but it can also pose a security risk. What kind of security risks does this present? Use your textbook and internet research to support your conclusion. There are a few risks associated with Wireshark. There is a possibility of a back-door hack, and the security configuration of Wireshark enables it to run in the background after exiting. While running in the background, one can access your routing information, IP addresses, passwords and usernames. 2. The frame encapsulates all other information from the higher layers of the network communication. What kind of information on the network layer encapsulation is available in Wireshark? Using Wireshark, you can track Wi-Fi access, IP addresses, network routings and encrypted packets.

Impact of the Internet for SMEs in Malaysia

Impact of the Internet for SMEs in Malaysia Introduction The Internet According to Hamil (1997) stated that the efficiency and effectively medium used for accessing, organizing, and communicating information is representing the Internet. The presence on the Internet in the advanced economies is establishing from multinational or domestic whether its large or small (Duffy Dale, 2000). There are 888 million users of Internet for worldwide in 2004 and it is expected to growth until 1.35 billion by 2007 (eTForecast, 2004 Internet World Stats, 2005). In the global online population, Asia rank the highest percentage followed by Europe and then North America with Asia is 34, Europe is 29.2 and North America is 24.9 (Internet World Stats, 2005). English is the main medium of instruction for the Internet and the online population is declining for its dominance in the Web while the Chinese and Spanish speaking users are lesser extent but the Japanese users are on the rise (Glreach.com, 2004). The world most populous and developing nations such as China, India, Indonesia, and Brazil has forecasted that there will be a little growth of the internet users (eTForecasts, 2004). Internet use and access is uneven across countries due to global reach as the population of internet users in South Korea is 63.3 per cent, Malaysia is 35.9 per cent, and Thailand is 12.8 per cent. The o verall population internet users of these 3 countries just make up only 3.6 per cent of India population (World States, 2005). According to Peterson et al (1997), the accessing to online market surveys, newspapers and journals, country and industry market research, trade lists of suppliers, agents, distributors, and government contacts in a large number of countries are the reasons of the firms access to Internet. Internet can play a role as intermediaries between producer and users that mainly in collection, collation, interpretation, and distribution of information (Liang et al, 2004 Quelch Klein, 1996). Internet provides a flexible, reliable, and low-cost method if compared to other means of communication such as telephone, fax, and post (Poon Jevons, 1997). In the existing marketing activity, Internet is playing a supporting role (Hazel, 1996). The traditional dominance of fixed location stores will be replaced by a new retail format which is provided by Internet (Evans, 1996 Van Tassel Weitz, 1997). Internet is the means of communicating information about retail organization, products, and services (Bruno, 1997). In the US, retailer view the Internet as an emergence marketing communication tools that used to attracting new customers, penetrating new markets, promoting companys brand, and improving customer retention (Ernst Young, 1997). Small Business Enterprise (SME) and the Internet Small business enterprise is independently owned and operated where it is not dominant in its field, and doesnt engage in new or innovative practices. Neighborhoods grocery stores, fast-food restaurant, hair stylists, dry cleaners, video or record shops, and the veterinarian are an examples of small businesses. Qualitative factors are also important in describing the small businesses. To be classified as small, a small business must have at least two of the following features that are management is dependent, since the manager usually owns the business; capital is supplied and ownership is held by an individual or a few individuals; the area of operations is primarily local, although the market isnt necessarily local; the business is small in comparison with larger competitors in the industry (Washington DC: Small Business Administration, 1985). Perhaps the best definition of small business is the one used by Congress in the Small Business Act of 1953, which states that a small is one that independently owned and operated and is not dominant in its field of operation. The act also authorized the Small Business Administration (SBA) to develop more detailed definition that takes into account such criteria as sales volume and the number of employees in the firm. Incorporating these criteria into workable guidelines for use in determining loans, the SBA has established the upper limits for small firms in this manner (Washington DC: Small Business Administration, 1985). As the global online users growing rapidly, SMEs have discovered unparallel new opportunities in the Internet that are entrepreneurial enough to recognize and take advantage of highly profitable niche markets (Forster, 2000 Poon Swatman, 1997). The researchers found that SMEs in the UK has been characterizes as dynamic, enterprising and ambitious as key role in entrepreneurship and innovation by DTI (DTI, 2000). McCalman (1999), states that the entrepreneurial character of the owner, individual managers or operational teams often associated with the fast growing of the new venture and the high growth and high technology firms appear to be more able and more willing to seize the opportunities afforded by the Internet. The Internet has changed the landscape of the firms in the worldwide and globalization is a key driven role for Internet usage by small firms to expand their operations to other nations. The main strategic factors that associated with successful information, communications, and technology (ICT) is often viewed by the organization learning, entrepreneurship, innovative workplace cultures, and knowledge management enhancement context. The Internet virtually has relevance either directly or indirectly for entrepreneurship management in every aspect of organizational learning (Matlay, 2001 Leitch Harrison, 1999). In the marketing context, Noh and Fitzsimmons (1999) have described complex, creative, and innovation relationship is a significant relationship found between Internet usage and the marketing functions where ICT and entrepreneurial activity strategically linked. The ICT opportunities that the marketing function can respond is depend on sustainable competitive advantage of the organizational changes which is the key to organizational survival (Brady et al, 1999 Komenar, 1997). In order to attract and retain customers, the SMEs have to derive customer service advantages and marketing performance gains by adopted transformative use of ICT (Brady et al, 1999). According to Martin and Matlay (2001), the relationship between marketing functions and ICT adoption in SME would make the firms need to make creative and innovative changes in ordeal to deal effectively with actual and perceived ICT related marketing opportunities due to less attention on strategic SME operations and emphasis mor e on managerial capacity and marketing opportunities. online marketing only the step two in a five stages sequential progress to e-commerce and full ICT integration by a company identifies by DTI adoption ladder. Market analysis and related responses or strategies might be seen as sophistication function for e-use in SMEs (Martin Matlay, 2001). Despite its high level of connectivity and basic e-commerce applications, business appear reluctant to move up the adoption ladder but the DTI adoption ladder model is heavily emphasis on financial based transaction (UK Online, 2000). In the UK, 80 per cent of the SMEs have accessed to the Internet and another much smaller proportion also able to implement and embed new technologies for strategic purposes based on the figures of Internet adoption (UK Online, 2001). The adoption of ICT in the smaller firms has made the impact on SME profitability largely due to high connectivity according to the number of recent benchmarking surveys (UK Online, 2000). The UK government has initiative to promote the use of ICT and has ambitious target for Internet adoption, some has been already achieved (UK Online, 2000). In 2002, the digital marketplace there was 1.5 million SMEs expected to be wired up since 1.7 million businesses already connected and 81 per cent of all firms in one form or another. The national e-economy development had shown the successful outcome of the achievements and impressive of Internet adoption (UK Online, 2000). Information technology is implemented in SME can described as multidimensional change process (Martinsons Chong, 1999 Butter Fitzgerald, 2001). Information technology is playing an important role for training in SME. According to Coates (2000), information technologies represent the drivers of change of all aspect of life. A new corporate culture and management change will form when the electronic commerce fit into organization operations (Fadden, 2000 Hard Knie, 2001). The most important element of implementation of information technology is human resources (Greene et al, 1997). Westhead and Storey (1996) describe that the implementation of information technology can intervene on training aid for change in developing human resources and human capabilities of the organization. Decision making has played a dominant role for owner-manager in SME sector (Jennings Banfield, 1993 Jennings Beaver, 1995). The owner-manager has acted as principal driving force for implementation and adoption of electronic commerce. The role of a person characterized is in conjunction with the nature of managerial activity (Jennings Beaver, 1995). The owner-manager has total control on training. So, Jennings and Beaver (1995) have stated that the extension of the owner-manager role is the provision of organization training. SMEs are operated under uncertain condition (Nooteboom, 1994 Storey, 1994 Acs et al, 1997). Skills and ability of SMEs have change in uncertain environment and SME has adopted (Hendry, 1995 Acs et al, 1997). Recognition of change has relation with the implementation of new technologies (Martinsons Chong, 1999 Coates, 2000 Buttler Fitzgerald, 2001). The Internet adoption in the SME has make SME staff learning through online collaboration. According to Flexwork (2004), a project supported by CEC FP5 IST Programme is a place where EU SME teleworking is gathering at Flexwork. Lawless (2004) stated that both virtual working and face to face contact are still needed as well as those frequent working online also have some face to face contact. The relationship forming through work online has to be considered to maintain well fairly (Walther, 1992). SME has practice team working and it is a most used method currently (Institute of Work Psychology, 1999). Computer World and British Telecom (2003) has stated that beneficiary from the process working online with others is SMEs wish and it must be properly conducted and resourced since there is over 50 per cent of SMEs has no formal IT strategy. ICT based environment is important for future networking platform and it is crucial for SME to cope with it (Ulbrich, 2000) and the need for chang e in SME has to take consideration on collaboration learning through ICT whether it is formal or informal (Fulantelli Allegra, 2003 Williamson et al, 2001). It is an ideal to have online collaborative training or learn cluster (Geer Au, 2002). Collaboration is required for supply chain and SME is a part of the supply chain especially in motor and technologies industry. The trial has been conducted in Athabasca University in Canada to simulate SME members (Athabasca, 2002). Some EU training organization has proposed online collaborative learning systems using virtual classrooms, network or similar (AutoTrainProject, 2000). The individuals in the same SME or separate SME can form the collaboration learning. The increase used of ICTs especially email for internal communication has become a crucial feature of innovativeness of SMEs as well as collaboration between individuals in same or separate SME (Andrew Pettigrew, 1997). Another increased capacity for innovation in SMEs are exter nal networking (Gray Allan, 2000). SMEs and the Internet in Malaysia Small and Medium Industries Development Corporation (SMIDEC) was established on 2nd May 1996 which is an agency under Ministry of International Trade and Industry to promote and coordinate the development of SMEs in Malaysia through specific programs, provide technical support and management counseling services with the cooperation with other agencies, forge linkage industries between SMEs and large companies or multinational companies, and collaborate with other agencies locally and internationally to develop the SMEs (Small and Medium Industries Development Corporation Malaysia, 2008). Malaysia adopted a common definition of SMEs to facilitate the identification of SMEs in the various sectors and subsectors. It has facilitated the government to formulate effective development policies, support programs as well as the provision of technical and financial assistance (Small and Medium Industries Development Corporation Malaysia, 2008). The categories of SMEs in Malaysia consist of manufacturing, manufacturing related services and agro-based industries and another category is services, primary agriculture and information and communication technology (ICT). The enterprise in SMEs in Malaysia varies from micro enterprise, small enterprise, and medium enterprise (Small and Medium Industries Development Corporation Malaysia, 2008). The Malaysia government has recognized that ICT would serve as a foundation to transform Malaysia from a P-based economy to K-based economy. ICT was emphasized as an enabler mainly in manufacturing sector and National Information and Technology Council (NITC) was established and its primary function is to ensure that ICT well integrated in the socio-economic fabric of the nation (Ministry of Science, Technology, and Innovation Malaysia, 2007) In the 9th Malaysia Plan, the strategic plans for Malaysia ICT including the implementation of Digital Content Development, E-Commerce, SSO, Bioinformatics, MyICMS 886 which consist of Content Development, ICT Education Hub, Digital Multimedia Receivers, Communication Devices, Embedded Components and Foreign Ventures. It also includes the launching of MSC Phase II and increasing the number of MSC status companies from 973 to 1236 (Ministry of Science, Technology, and Innovation Malaysia, 2007). According to Ministry of Science, Technology, and Innovation Malaysia facts and figures 2008, the number of main lines subscribers is 588 per 1000 inibitants, number of internet users is 714.3 per 1000 inhibitants, number of broadband subscribers is 96.13 per inhibitants, and number of computer subscribers is 805 per 1000 people in 2007 (Ministry of Science, Technology, and Innovation Malaysia, 2008). The government has embarked on a concerted effort to improve the development of the SME sector. The government has integrated 14 ministries and 60 agencies as a model to approaches the SME to source of information of their businesses and stage of development. The Small and Medium Enterprise Development Council endorsed and launched the SMEinfo Portal as an integration of the Internet adoption and SMEs in Malaysia and a mechanism to enhance the efficiency and effectiveness of dissemination of information to SMEs. Its a one stop online information resource SMEs across all sectors of the economy (SMEinfo, 2008). The SMEinfo Portal is portals that can comprehensive access to information and is a multilingual information portal outreach to wider SMEs as the function as sources of financing and types of financial support by financial institutions, business support programs by ministries and government agencies, training and advisory services, SME Business Adviser Network, managing counseling services, and relevant tools such as financial tools as well as events by ministries and government agencies (SMEinfo, 2008). The important features of the SMEinfo Portal is the SME Business Directory where SMEs can advertise products and services to large potential customers worldwide, sources of raw materials and relevant services by contracting suppliers, and identify potential customers to venture into new market for their products and services (SMEinfo, 2008). Problem Statement According to Ministry of Science, Technology, and Innovation Malaysia facts and figures 2008, the number of main lines subscribers is 588 per 1000 inibitants, number of internet users is 714.3 per 1000 inhibitants, number of broadband subscribers is 96.13 per inhibitants, and number of computer subscribers is 805 per 1000 people in 2007. In UK, there are 80 per cent of SMEs have adopted Internet and another smaller proportion of small businesses also able to implement and embed new technologies for the strategic purpose. The small businesses in Malaysia have less adoption of Internet in business if compare to other countries such as UK and USA. So, the Internet adoptions in small businesses in Malaysia have another prospective such as some are using for information accessed. The Internet adoption for small businesses in UK and USA has been a long history in the industry. The early adopters for the Internet has used for the range of functions such as marketing and advertising, informa tion gathering, customer support and service and electronic transaction. There are several model to conduct the research on the Internet adoption for small businesses such as Rogers model of perceived attributes of the Internet. The firms has asked to rate their perceptions of Internet use for the business. From the previous research, Rogers, (1995) has listed the perceived attributes of the Internet as a strong influence exert on business use as: To what perceptions of innovation attributes for the research contribute to internet adoption for small businesses in Malaysia Research Objectives In this changing technology era, the internet has become more important for everyone to access for information, shopping and communications especially in the business use. So, the purpose of the research for the impact of the internet adoption for small businesses in Malaysia is: To investigate the relationship between innovation attributes and the internet adoption for small businesses in Malaysia. To identify the relationship between relative advantage of internet adoption and small businesses in Malaysia. To identify the relationship between compatibility of internet adoption and small businesses functions in Malaysia. To identify the relationship between complexity of internet adoption and small businesses in Malaysia. To identify the relationship between trialability of internet adoption and small businesses in Malaysia. To identify the relationship between observability of internet adoption and small businesses in Malaysia. Importance of the Study The importance of the study of research project titled The Factors Contribute to Internet Adoption for Small Businesses in Malaysia can be contributed to the industry, education and society. The study of this research can make an impact on industry, education, and society for different reasons. The impact of the study of this research on industry is identification of the potential business growth by small businesses in Malaysia with the Internet adoption. Business of the firm can growth by penetrating different market segments and coverage more geographical areas with using Internet as a marketing tool. Another impact of the study is can make the firm adopt process innovation and product innovation to reduce the cost of the production and capture the value of the customers with the quality products. The entrepreneurial opportunity also could discover on the study of this research. Youth could create entrepreneurial opportunity with the Internet adoption for developing own Electronic Business with the low cost, easy, and convenience method. The study of this research could create job opportunity in the industry especially from IT fields and entrepreneurship field. Besides, the importance of this study also contributes to the education. In education, undergraduates can have an improvement process of acquiring knowledge and information with the Internet adoption on academic. Universities and colleges can provide entrepreneurial skills and knowledge for undergraduates on students entrepreneurship development programs, academics and students organization on free enterprise. It also could increase the understanding of the technology in terms of information system and web development. Lastly, the importance of this study also contributes to the society. The study of this research can make an impact on society by reducing the employment rate for the country with the job creation by small businesses. It could increase the quality living of the society with the easy and conveniences services provide by small businesses on the adoption of the Internet. Foreign relation between people and people or government and government can be improving with the development of the Internet on the small businesses. The economies of the country can growth with the expansion and development of small businesses industry and small businesses can penetrate to another countries using Internet as well as increasing exports business of the country. Organization of Research Project The organization of the research project titled The Factors Contribute to Internet Adoption for Small Businesses in Malaysia overall consist of five chapters with each chapter has different aspects ranging from the different explanation of internet adoption and small businesses from different authors of journals to statistical analysis of the research study. In the chapter one, the definition and explanation of the internet extracted from different authors quote in different journals. The subtopics consist of the Internet, the SMEs and the Internet, and the SMEs and the Internet in Malaysia. In the chapter two, the literature review will extracted the quote from different authors in the journals to organize as a study of the internet adoption contribute to the small businesses in Malaysia. The other reviews of the literature are the relative advantage, compatibility, complexity, trialability, and observability of the Internet adoption in any fields. In the chapter three, the methodology of the research will explain the sources of data collection from primary and secondary data. The hypothesis of the study and the procedures for collecting the samples will be explained here. In the chapter four, the discussions and results will based on the geographic profiles of the small businesses. The chi-square analysis will analyze differentiates of E-Commerce and Small Businesses, differentiates virtual consumer behavior from retail consumer behavior, and the level of understanding of small businesses. The multiple regressions will focus on the entrepreneurs interest in virtual store strategic management. Finally, the chapter five will describe the summary and conclusion of the research. The research will recommend the solutions for the problems of the study. Literature Review Internet Adoption Theory of reasoned action (TRA) (Fishbein Ajzen, 1975), technology acceptance model (TAM) (Davis, 1989), and theory of planned behavior (TPB) (Azjen, 1991) reported as a number of studies of IT adoption. Adam et al (1992) stated that the fundamental determinants of acceptance of IT adoption consist of perceived usefulness and perceived ease of use and it can be widely used in the IT adoption. Perceived usefulness is a major determinant of peoples intention to use computers while perceived ease of use is a significant secondary determinant of peoples intention to use computers by competing two competing models of computer technology usage, TAM and TRA. It can conclude as peoples use of computer technology can be predicted reasonably well from their intentions. The TAM has been selected as a useful basis for starting build a model of adoption of the Internet since TAM is slightly better from an empirical point of view in the comparison of TAM and TPB (Mathieson, 1991). The researchers found that technology acceptance; reasons of using IT and behavior of using IT can derive the definition of the Internet adoption. Besides, the researchers also found the definition of Internet adoption in other context such as supply chain management. Italian firm has made adoption modalities of IT to integrate into supply chain management to make their business growth. According to Chandrashekar and Schary (1999), in order to fit the customer request, the Internet can act as an enabler in depicting the firms. The efficacy and effectiveness of reaching higher level of performance is the integration and information technology (IT) and it can be regard as the most competitive and imitable weapons (Tan, 2001). Porter (2001) stated that modification of supply chain (SC) relationships, boundaries, and mutual influence is an integral part of the Internet in firms strategy. In the former Central and Eastern European, innovation of technology has been introduced into commercial. Famous researchers such as Rogers have been workout to derive the definition of the Internet adoption from the technology innovativeness context. Everett M. Rogers (1995) was formulated the innovation adoption theory. The innovation adoption theory has been widely used in analyzing the adoption of the Internet (Wolcott et al, 2001), various Internet related applications (Black et al, 2001 Polatoglu Ekin, 2001), and software products (Karahanna et al, 1999 Kautz Larsen, 2000). Rogers (1995), regards the perceived new unit of adoption of an individual can be defined as an idea, practice, or object in term of innovation. Rogers (1995), also defined the adoption is a process that members of a society can communicated through certain channels over time. Schumpeter (1934, 1939 1942) has stated that new application of invention, discovery or new or existing knowledge as an innovati on. The innovation also can be defined as the introduction and new development of knowledge derived tools, artifacts, and devices by which people extend and interact with environment (Tornatzky Fleischer, 1990). The related technologies linked closely and innovation is a cluster of Internet adoption and banking (Rogers, 1995). The factors influence the Internet adoption because the traditional modes of communication of the firms in the transitional markets of obtaining information on foreign markets, and communicated through business partners, customers, and distributors are costly and time consuming (Nguyen Nguyen, 2001). According to Rogers (1983), the adoption is an alternative solution where the firm confronted with the problems. The organizations strategies, policies, and actions as well as beliefs, attitudes, and intentions lead to the adoption of IT (Leonard Barton Deschamps, 1995). The adoption of IT for organizations continuously collecting information about target market needs and competitors capabilities and using it to create superior customer value. It is important and valuable for market orientation of an organization (Slater Narver, 1995: 63). Organizations innovativeness on IT facilitates the market orientation so that the forming of market orientation firms could gather information on m arkets and environments (Han et al, 1998 Jaworski Kohli, 1993). Besides, Firm creating and use knowledge influences the organizational factor in learning organization (Sinkula et al, 1997). As learning environment is creates and encourages in learning oriented firms lead to the rise of adoption and implementation of new ideas, process, and products to produce innovative capacity for the firm (Hurley Hult, 1998). Learning and sharing of knowledge opportunities exist among members of learning oriented firms from individual level to organization level (Nonaka Takeuchi, 1995). Slater and Naver (1995), explained that how an organization acquire, process, and use market intelligence is a question to the ability in engagement in adapting the generative learning as a key component of organization learning orientation. The leveraging of superior learning environment is the use of all resources including the behaviors that accompany market orientation (Baker Sinkula, 1999). As stated by the above definition of Internet adoption in the supply chain management context, there are many factors contribute to affect the relationship of the Internet adoption. An easy and fast way in the process of acquiring and sharing information and the efficiency and effectiveness of improve performance are linked to the aspect of Internet adoption (Deeter-Schmeltz Norman-Kennedy,2002 Ronchi, 2003). The mistakes and time reductions and contribution to the order and stock cuts facilitate the better coordination among players of network (Akkermans et al, 2001). The enhancement of business model development providing innovation opportunities and competitive advantages challenge as well as strategic dimensions of SC design are the impact of Internet adoption (Wouters et al, 1999). The cost reductions of product management as well as cheaper and flexible of data exchange and enhancement of data standardization are the impact of IT adoption mechanism in market environment and o rganization management (Malone et al, 1987). The adoption of web based tools could enhance the integration such as EDI and as impact of product complexity (Garcia-Dastugue Lambert, 2003). The standardization and behavioral formalization such as tasks repetitiveness and recognizability was influences by the adoption of ICT (Vacca, 1990 Lomi, 1991 Lorenzoni, 1992). The standardization of SC players in coordinating and performing activities are the affects of ICT (Becker, 2004). The change and variability sourcing are the improvisational aspect of routine which is including tacit knowledge, incorporate operative and applicatory capabilities (Pentland, 2003). Colombo et al (1997) stated that the transparency of process is the free information and knowledge sharing while Winter and Taylor (1996) stated that the reduction of middle management direct communication as an enabling of ICT. On the other hand, technology innovativeness has been adopted in European markets to cater the demand of the consumers in many ways. There are many factors of adoption of technology innovativeness to serve the markets in Central and Eastern European nations. Researchers have investigated and identify the factors of commercialization innovativeness to explain the relationship of Internet adoption contributes to commercial in Ukraine and Austria. According to Dickerson and Gentry (1983), a new innovative service firm must offer increased functional performance than its predecessor can be defined as relative advantage. The primary measurement of relative advantage is assessing an innovations superiority in terms of overall convenience (Polatoglu Ekin, 2001 Tan Teo, 2000). The degree to which an innovation is perceived as relatively difficult understands and use is the definition of complexity (Rogers Shoemaker, 1971). Tornaztky and Klein (1982) stated that the lower rate of adoption means the complex the innovation is. Rogers (1995) defined the compatibility as the degree to which an innovation is perceived as consistent with existing values, past experiences, and the needs of potential adopters. De Ruyter et al (2001) also stated that compatibility is consistent with existing consumer affect, cognition, and behavior. Some researchers also found that consumer perceived risk post as important factors to the ICT adoption (Eastlick Lotz, 1999 Hansen, 2005 Polatoglu Ekin, 2001 Tan Teo, 2000). Relative Advantage Rogers (1995) defined relative advantage as the degree to which an innovation is seen as superior to existing practice. In the competition context, there is another definition for seeing innovation as superior to existing practice. According to Day (1984) and Porter (1987), the competitive advantage can be seen as the objective of the strategy and the result of the competitive advantage is superior performance. The derivations of competitive advantage are from numerous