Risk Management Of Public Debt In Emerging Countries Finance Essay - Free Essay Example

Sample details Pages: 8 Words: 2441 Downloads: 3 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? Overall objective of public debt management is to reduce the countrys fiscal vulnerability by stabilizing the debt ratio dynamics at some desirable level (Melecky 2007). The traditional approach to public debt management analyzes debt sustainability in the absence of risk. The risk management approach, in contrast, shows that risk is minimized if a debt instrument provides insurance against variations in the primary budget and the debt ratio due to uncertainty about output and inflation (Bloomenstien 2005). Don’t waste time! Our writers will create an original "Risk Management Of Public Debt In Emerging Countries Finance Essay" essay for you Create order Risk management, which lies at the heart of government debt management, makes crucial link between the formulation and implementation of debt management strategies (Wheeler 2004). Importance of public debt risk management as appropriate tool of debt control was confirmed by financial crises from the nineties and especially the late 2000s recession, which leave many economies worldwide, both developed and emerging, with high budget deficits and public and external debts. Managing risks associated with sovereign debt is particularly challenging in emerging market economies compared to more advanced economies due to the volatility in the macro environment, as well as the complexity of the debt structure and the underdevelopment of financial markets, which make it harder to use more advanced risk management tools (Bloomenstein 2004). More specifically, particular issues of sovereign debt risk management in EMCs include: Lack of natural stabilizers. EMCs lack the natural stabilizing structural characteristics that allow the use of effective counter-cyclical policies (Garcia and Rigobon 2004). Inefficient government bond market. Emerging debt managers often face difficulties or impossibilities to borrow in nominal terms in the domestic currency in the long-run, which results in less options for fiscal adjustments and more dependency from captive lending agreements. This phenomenon is well-known as original sin (Eichengreen, Hausmann and Panizza 2002). Limitations to benefit from risk-sharing. Many emerging markets are not in the position to benefit from efficient international or domestic risk-sharing, neither to share a significant degree their risks with their creditors (Bloomenstein 2005). High risk of contingent liabilities. Emerging market economies faces high risk of contingent liabilities World Bank Study of public debt dynamics shows that the realization of (implicit and explicit) contingent liabilities contributes nearly 50% to the increase i n public debt in a sample of 21 emerging markets (Anderson 2004). 3. LITERATURE REVIEW Public debt management as the general framework of the public debt risk management has been rarely issue of academic analysis until last two decades, although it has been practiced as a part of economic policy for centuries. Early academic papers in this field were primarily dealing with debt management objectives. Tobin (1963) regard government debt management primarily as a tool for macroeconomic stabilisation, with minimisation of interest costs coming secondary. Baro (1979) recommended tax smoothing as government debt objective, claiming that, if there is a sharp rise in government expenditure during a recession, this should not be compensated with tax increases, but rather be absorbed by a temporary deterioration of the budget balance. Consideration of tax smoothing as debt management objective became first mainstream line of academic reasoning about public debt governance and open the discussion on the issue of optimal debt structure that should provide a hedge against mac roeconomic shocks to the government budget, that is, by choosing a portfolio of securities with returns that co-vary negatively with government consumption and positively with the tax base and, thus, output (Lucas and Stokey, 1983; Barro, 1995; Bohn, 1990; Missale, 1997). Licandro and Masoller (2000) provide analytical solution for the optimal debt structure. Due to the Stabilization and Growth Pact that was introduced to European Monetary Union, budget deficit of member countries has been limited to 3%, thus Missale (2000) set the analytical solution for the optimal debt structure stating budget deficit to GDP as objective function. In general, budget stabilization or tax smoothing approach provides important insights in decision making process in public debt management and emphasized importance of the correlation matrix between key macroeconomic variables like inflation, GDP growth and interest and exchange rates for the optimization of debt structure. However, tax smoothing ap proach as public debt management objective was criticized in terms of their practical accuracy. Alesina, Roubini and Cohen (1997) argue that debt managers ignore the budget stabilisation approach because budgetary policy is not driven by tax smoothing motives. They claim that governments put up with the welfare losses caused by tax rate fluctuations. De Haan and Wolswijk (2005) attribute the lack of practical application of the budget stabilisation approach to the fact that countries find it difficult to investigate how the various macroeconomic variables affect the debt costs and the balance. Furthermore, it is not known what shocks (demand or supply shocks) a country may expect. As a result, it is practically impossible to determine the right hedge for the budget balance in advance. Additional critics that could be addressed to this approach is that it says little about exposure of debt portfolio to risk and costs of debt. New mainstream line of academic reasoning has started a t the beginning of the century, when Sweden Debt Management Office (Bergstrom and Holmlund, 2000) introduced new approach to debt management that set minimization of debt costs an objective of public debt management and employs stochastic process modeling in order to capture stochastic nature of risk factors. Power to the rise of new approach was given by the International Monetary Fund and the World Bank, which Guidelines for the Public Debt Management, issued in 2001, states that the main objective of public debt management is to ensure that the governments financing needs and its payment obligations are met at the lowest possible cost over the medium to long run, consistent with a prudent degree of risk. In practical sense, it means that governments should look for such debt structure that minimize potential loss of adverse shocks and market movements by efficient management of the risks. Additionally, Guidelines clearly stated six types of the risk that governments should manage . Cost minimization approach was widely accepted by debt management authorities worldwide and included as public debt management objective in associated strategies (Wheeler, 2004, pp. 14-15). Correspondingly, large number of academic papers dealing with minimization of a government loss function based on numerical approach has emerged. According to Melecky (2007), recent numerical approaches can be broadly grouped regarding the indicators they produce: Cost at risk (CaR) approach. The main indicator of interest that concerns this group is the CaR measure, whereby cost is typically measured as a ratio to GDP. The standard parts of the simulation the CaR computation is a framework simulating the paths of the underlying economic financial variables which are modeled using usual approaches like term structure modeling of interest rates (Bodler 2002, 2003) or autoregressive modeling of stochastic variables (Bergstrom and Holmlund, 2000). Default probability based on specified go vernments debt-to-GDP default ratio. This approach again uses simulated paths of economic variables and the debt structure to compute the corresponding government debt-to-GDP ratios, but switch the focus from CaR computation to sustainability of debt, using different stochastic modeling approach like Vector Autoregression models (Garcia and Rigobon, 2004) or system of Brownian motion (Xu and Ghezzi, 2004). Default probability based on a distress barrier. This approach work with an explicit measure of sovereign credit risk derived from a contingent claim analysis (Gapen, Gray, Limand Xiao (2005), Gray, Merton and Bodie (2005)) The first comprehensive research that discusses issues of risk management of public debt was conducted by the Organization for the Economic Cooperation and Development (2005), comprising both theoretical advances in the area and debt management authorities practices. However, this research encompasses mostly industrialized countries, paying a little atten tion to the developing and EMCs. Issues of risk management of public debt in emerging market countries still remain insufficiently covered field, although it has been argued that there is significant difference between volatility of macro variables between developed and emerging economies (Bloomenstein and Santiso, 2007). 4. RESEARCH GOALS Structure and level of government portfolio is driven by the government borrowing requirements, which are results of the broader fiscal and monetary policy of the country. Once the borrowing requirements are determined, the question that arises is whether risk management tools, which have been broadly used by business financial institutions like commercial banks or investments fund, could be efficiently applied to the public debt portfolio in order to minimize its costs. The main issue of the thesis is to assess the efficiency of the risk management approach to the mitigation of risk of public debt and the predictability of public debt costs and government loss. Tools for measurement of risk exposure of the public debt are considered and compared in order to investigate whether they could capture complexity of macro environment in EMCs. Then, dynamic modeling of the government loss function is analyzed trough the simulation models to assess robustness of the loss paths to the ad verse market movements. Further, contribution of the risk management approach to the optimization of the debt structure toward insurance of long-term sustainability and identification of appropriate instruments that should be used to hedge risk exposures is investigated. The major research questions based on general research framework are: Which measurement of the risk exposure is more appropriate to use for the assessment of the public debt riskiness? Does risk management approach to public debt management lead to the efficient cost-risk optimization of public debt portfolio? Which types of risks are mostly mitigated by application of risk management approach? Is it possible to structure public debt portfolio to be robust against shocks of supply or demand or sharp changes in interest and exchange rates? Do financial derivatives contribute to the mitigation of public debt risks? The following working hypotheses, which could be amended or refuted in the research process, are derived from the research questions: Risk measure based on VaR approach efficiently capture market risk of government portfolio loss. Application of VaR approach to the dynamic modeling of government loss is more efficient than Vector Autoregression Model (VAR) approach in terms of explanatory power. Optimal structure of the public debt lies at the efficient frontier reflecting risk-cost trade-off. Interest rate, exchange rate and rollover risks are successfully mitigated by risk management tools. Mitigation of operational risks and contingent liability risks are not affected by risk management tools. Maturity of the debt is affected by use of the interest or currency swaps as hedge instruments. The analysis will contribute both to the academic and economic policy fields. Within the academic field, it will give deeper insight how correlations between key macroeconomic variables, original sin and limited choice of market instruments and limited use of the financial instruments affect the efficient applicability of risk management tools to public debt management. Further, it contributes to the public debt offices of the EMCs, which have recognized the importance of the introduction of more sophisticated tools for quantification of the public debt risk. 5. RESEARCH METHODOLOGY The research design follows the deductive approach, starting with the review of the existing theoretical and empirical work as a basis for the operationalization of the hypotheses. In the second stage of the research, hypotheses are empirically tested; nature of the research hypotheses does not require collecting of primary data, thus for the empirical testing only secondary data provided by the relevant financial institutions and statistical offices are considered. In the theoretical part of the research, two sources of literature will be primary used. First, key academic papers published in renowned journals such as Journal of Political Economy, American Economic Review or Journal of Monetary Economics, on the subject of public debt management are reviewed. However, due to the relatively recent origins of the academic, review of already published academic papers is accompanied with numerous working papers which are still under the consideration of the expert public. Second, as the field of public debt is inevitably connected with economic policy practice, large number of public debt strategies, reports and policy papers issued by countrys debt offices and international organizations like World Bank, International Monetary Fund, Organization for Economic Cooperation and Development and Bank for International Settlements is reviewed to complete theoretical and practical advances in the research field. The empirical part of the project starts with the descriptive analysis of secondary data on public debt and other macroeconomic parameters of EMCs. Relevant database will consists of monthly time series of necessary variables. Primarily source of the data will be International Monetary Fund and World Bank statistical data, accomplished with data of national banks and country statistical offices. The central part of the empirical research will be based on the regression analysis and Value-at-Risk analysis. Regarding the time horizons, analysis is longitu dinal, as it is imposed by the nature of the proposed analytical tools. The dependent variable which is modeled is cost of public debt as a measurement of government risk of loss. Independent variables include all macroeconomic variables grounded as relevant by the existing theory subjected to public debt management, as real GDP, public sector borrowing requirements, inflation, interest rates, country risk and exchange rates. In addition, Monte Carlo models are employed to simulate the dynamic of the debt costs, and back testing analysis is used to assess efficiency of the proposed model. Selected countries for the empirical analysis are Hungary, Poland and Czech which are widely recognized as the European EMCs by the world most prominent financial analytic entities. Focus of the empirical research on the only European countries, although practical in the term of data availability, diminish the power of generalization that is implied by deductive approach. However, the conclusion s of the research will be representative for the other emerging economies from the Central and Eastern Europe, regarding the similarity of transition character of their economies. 6. STRUCTURE OF THE THESIS Beside the introduction and conclusion chapters, Thesis consists of two parts, theoretical and empirical. Problem background, research framework and structure of the thesis are presented in the introduction. Theoretical part is divided in three chapters, each dealing with the critical review of the important findings of the existing literature. First chapter deals with the foundations of public debt management as general framework for the managing of the costs and risks of government finance. Second chapter defines risk management tools and discuss the role and various application of them within the public debt management framework. Third chapter analysis previously mentioned specific issues of public debt related to the EMCs. Empirical part consists of four chapters. First chapter gives cross-country analysis of the EMCs public debt risk management policy practices. Second chapter deals with the development of the hypothesis based on the overall literature review from the first part, supported with the findings for the investigated EMCs countries. Third chapter presents methodology, data and limitations of the research. Fourth chapter presents findings of the analysis in line with their critical discussion and implications. Conclusion part gives the comprehensive summary of the most important findings of the thesis and recommendations for the further research issues.

The Moral Distinction Between Civil And Political Rights

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For example, civil and political rights require infrastructures such as a functioning court system, prisons respecting minimum living conditions for prisoners, legal aid, free and fair elections, and so on.† Civil/Political rights: safety and justice, no discrimination or oppression. Physical and mental integrity. Social/Economic rights: right to work, paid vacation, welfare. Rights of a certain group of people Disagree on values → no universalism doesn’t make sense Strong/weak duties with harm/sacrifice the state typically has todo something in order to protect rights. No police, no property Cranston thinks that the rights in the UDHR on the civil-political list fall on theShow MoreRelatedAre There Any Natural Rights?1143 Words   |  5 PagesPatrick Hart in the text â€Å"Are there Any Natural Rights?† argues, that if there are any moral rights, then there exists at least one natural right, the equal right of all men being free. 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Business Law Trade Clauses Inemployment

Question: Discuss about the Business Law for Trade Clauses Inemployment. Answer: 1. Issue The basic issues that originate from the given factual situations are: Whether there is a valid contract between the father and Richard? Whether Richard has any right in law against his father for weekly allowance? Law The above two issues can only be resolved when the basic elements which govern the formation of a valid contract can be analyzed. In Australia, the law of contract governs the elements which are required for the establishment of a valid contract. The law specifies that when an offer is made by an offeror is accepted along with consideration and the parties are capable and have legal intent to abide by the contract, then, a contract is said to be formulated. Thus, from the above definition, the basic elements which are required for the formation of a valid contract are: (The Law Handbook 2016) Offer An offeror is the person who initiates an offer. The intention of the offeror to do or not to any act when communicated to another person (offeree) with a hope of approval, then, such communication is called an offer. An offer must be made by an offeror and must be communicated to an offeree to be valid. An offer can be oral or written and can be made to one person or to the world at large Carlill v Carbolic Smoke Ball Co (1893). However, an offer is only valid when it is clear and without any ambiguity. An unclear offer has no relevance in law (Payne v Cave (1789). (Clark, 2012) Acceptance When the offeror by complying all the legal principles makes a valid offer to an offeree, then, if such an offeree gives his assent to the same, then, it is called an acceptance Latec FinanceLtdv Knight(1969). A valid acceptance only exists when it is made by an offeree to an offeror. An acceptance without the knowledge of an offer is no acceptance. Also, an acceptance must correspond to an offer in order to be valid and binding. (Gillies, 2004). Once an offer and acceptance is made then it results in the formation of agreement which when coupled with capacity, intention and consideration makes a valid contract. Capacity of the parties when a valid offer and acceptance is made by the parties, then, in order to make a valid contract it is necessary that the promises which are exchanged must be made by the parties who are capable to exchange the promises. The parties are capable when they are mentally stable, not unsound and have attained that majority age, that is, they are eighteen years of age Re Walker(1950). If the parties are not capable as per the law of the land, then, the mutual exchange of promises by such parties are not valid and the contracts made by such parties has no relevance in law and makes the contract voidable. But, if a minor enters into a contract with another party and the basis of the contract is for the necessity of the minor of for the benefit of the minor if for the employment of the minor, then, in such cases, the contract are considered to be valid and cannot be rescinded. Such contracts have legal sanctity in law ((De Francesco v Barnum(1890) Nash v. Inman (1908). (Moles Sangha 1998). Intention to create legal relations The offeror and offeree when makes an offer and acceptance respectively, then, it is a settled law that such exchange of promises are binding upon the parties only when such promises are made with a legal intention, if there is absence of legal intent then there is no contractual relationship between the parties even when all the other contractual elements are present (Ermogenousv Greek Orthodox Community of SA Inc (2002). Normally when a contract is of commercial nature then the parties are assumed to be legally intent whereas in domestic relationship the legal intent is absent Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1989). But, this general theory can be disapproved by providing evidence to establish the same. (McKendrick Liu, 2015). Consideration - when the parties makes an offer and the other parties accepts the same, then, it is very necessary that such promises must be supported by consideration (Coulls v BagotsExecutor Trustee Co Ltd. (1967). A consideration is a value in money or kind which must support the promises to make them enforceable in law. a contract without considerations are not enforceable and are gratuitous in nature. (Gillies, 2004). Thus, all the elements of contract must always be present in any contractor to make it binding. Application The analysis of law is now applied to the facts of the case. It is submitted that the father has asked Richard to keep the yard clean. The father used to hire the Gardner for the same job at $350. However, the same job is now offered to Richard at $ 200. Thus, an offer is made by the father to Richard. Richard was a poor student and in order to earn the money he agreed to the said offer. Thus, a valid acceptance is made by Richard. This exchange of offer and acceptance is supported by a valid consideration of $ 200. Also, both Richard and father are major and are of sound mind, thus, are capable to make a contract. Finally, the relationship of father and Richard are non-commercial, thus, generally there is no contract between the two. But, it is submitted that the father made an offer to Richard because he is getting the same job done at much cheaper rate and thus intent to abide by the same. Also, Richard agreed to the job because he was poor and intent o abide by the job to earn money. Thus, both the parties wish to abide by the contract legally. So there is presence of all the contractual elements to establish a valid contract between the two. Conclusion Thus, there is a valid contract between father and Richard and thus Richard can sue the father to claim his weekly allowance. 2. Issue The basic issue that originates from the given factual situation is Can Joe liable to the clause that is incorporated by Frre Bros in the employment contract? Law The application and relevance of non-compete or restrain clauses made part of the employment contract are analyzed in the given part. Clauses which limit or restrict the rights of the employee to indulge in similar kind business which is undertaken by an employer are called restrain or non-compete clauses Write v Gasweld(1991). These are the clauses which are normally relied upon the employer and are made part of the employment contract. Law has given consent to the application of non-compete clauses in employment contract upon various grounds. Such as: (Doherty, 2016). That the reason for the incorporation of the clause is to restrain the employee and such restrain is considered to be valid only when the restrain is for a particular duration which is of a certain time limit. In Smith v Nomad Modular Building Pty Ltd (2007), the court held that the basic retrain of time limit on the employees if up to one year which may be extended up to three years if there are justified reasons to support the same. However, a limitation beyond such time period is not considered to be valid unless and until there are justified reason to support the same. Likewise, a restrain is only permitted to be imposed upon the employee when it is for a specific geographical area. A restrain that an employee will never work in particular areas is not valid and cannot be imposed upon an employee in law. Whenever an employers incorporating a non-compete clauses in an employment contract then it is necessary that such clauses must protect the good will of the company (Stenhouse Australia v Phillips (1974). The basic reason for the implementation of the non-compete clause is that if the employee is permitted to indulge in the similar kind of business then it will certainly affect the goodwill of the company which is earned by the company with hard work and labor. (Gibson Fraser, 2014) Further, the clauses are considered to be very essential when such clauses protect the legitimate interest of the employer. If the clauses have no relevance to protect the interest of the employer but are only made part of the employment contract in order to harass the employee then such clauses has no relevance in law and must not be made part of the employment contract (Woolworths Limited V Mark Konrad Olson (2014) The restrain clauses are also considered to be valid when such clauses protect the confidential information of the company. It is many a times analyzed that if the employee is permitted to indulge in similar kind of business without any time or place restrain, then, such an employee uses the relevant information which is acquire by such an employee while working for his ex-employee (AGA Assistance Australia Pty Ltd v Tokody (2012). And such information is used by the employee for his own benefit which not only hampers the confidentiality of the company but also affects the goodwill of the company in the market. (Hopgood Ganim 2016) Thus, because of the above laid down reasons, it is very necessary that the incorporation of restrain or non-compete clauses are considered to be valid. However, It is not always that the restrain clauses are considered to be valid. Many a times, if it is found that the incorporation of the clauses has breached the public policy or have hampered the legitimate interest of the employee or is of such a lengthy duration that affects the employee in every regard without justifications from the employer, then, in such situations, the clauses are considered to be invalid in nature Nordenfeldt v Maxim Nordenfeldt Guns and Ammunition Company (1894). (Mayor 2016) If the employer has to rely on the clause then it is very necessary him to prove that that application of clauses is very necessary for his legitimate interest. Otherwise the clause has no relevance in law. The law is now applied to the facts of the case. Application Frre Bros and Joe have entered into an employment clauses according to which Frre Bros is an employer and Joe is appointed by Frre Bros. Frre Bros has employed Joe to his acting services for a period of five long years. The employment contract also contains clauses that if Joe undertakes any acting project with any other company apart from Frre Bros, then, the contract is considered to be violated. However, Joe violated this restrain clause of the employment contract and made a contract with Pretty Picture. It is submitted that the contract with five long year restrain is very lengthy and if Frre Bros wants to rely on the same then it is very necessary for Frre Bros to prove that the clause is required to protect its legitimate interest and confidentially of the company. Otherwise, the clause is not valid and is not imposed upon the parties. Conclusion It is thus concluded, that the restrain clauses made part of the employment contract by Frre Bros is only considered to be valid when the clauses protects the legitimate interest, confidentiality and goodwill of Frre Bros. otherwise, Joe can avoid the clauses as the same is for a very long duration and thus hampers Joes legitimate interest and is against public policy. Reference List Brown M (2016) non-compete clause https://www.mayerbrown.com/files/uploads/Documents%5CGuide%20to%20Restrictive%20Covenants/MB_rest_cov_asia.pdf. [Viewed on 11th September 2016]. Clark, J. (2012). Australian Contract Law. Agreement. (online). Available at: https://www.australiancontractlaw.com/law/formation-agreement.html. [Viewed on 20th September 2016]. Doherty, JC. (2016) Non-compete and restraint oftradeclauses inemploymentcontracts (online). Available at: https://www.fglaw.com.au/non-compete-employment/. [Viewed on 20th September 2016]. Gillies, P. (2004). Business law. Federation Press. Gibson, A Fraser, D. (2014) Business Law 2014. Pearson Higher Education AU. Hopgood Ganim (2016) Non-compete Clause (online). Available at: https://www.hopgoodganim.com.au/page/Publications/Industrial_and_Employment_Law_Alert_Recent_court_case_provides_clues_to_successfully_enforcing_non-compete_restraint_obligations_-_31_Aug_2012/. [Viewed on 20th September 2016]. Moles Sangha (1998) consideration (online). Available at: https://netk.net.au/Contract/04Consideration.asp. [Viewed on 20th September 2016]. McKendrick, E Liu, Q. (2015). Contract Law:Australian Edition. Palgrave Macmillan The law HandBook (2016) Elements of contract (online). Available at: https://www.lawhandbook.org.au/07_01_02_elements_of_a_contract/. [Viewed on 20th September 2016]. Case laws Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1989). AGA Assistance Australia Pty Ltd v Tokody (2012). Carlill v Carbolic Smoke Ball Co (1893). Coulls v BagotsExecutor Trustee Co Ltd. (1967). De Francesco v Barnum(1890). Ermogenousv Greek Orthodox Community of SA Inc (2002). Latec FinanceLtdv Knight(1969). Nash v. Inman (1908). Nordenfeldt v Maxim Nordenfeldt Guns and Ammunition Company (1894). Payne v Cave (1789). Re Walker (1950). Smith v Nomad Modular Building Pty Ltd (2007). Stenhouse Australia v Phillips (1974). Write v Gasweld(1991). Woolworths Limited V Mark Konrad Olson (2014).

Applied Business Ethics

Question: Discuss about the Applied Business Ethics. Answer: Introduction Human beings have for a long time been faced with the plague of making the right decision. In each and every day, the business world lives around making decisions and for most of them, making the right one needs one to be thoughtful and considerations while others have no conscious in thinking through a decision. Hospitality, an industry I would really like to join as a future profession is like any other business that is profit driven. In Singapore, in the efforts to increase the profits in the industry and to increase the revenues, the government was at one time seen to settle on decisions that came with a lot of ethical issues in societies. Ethical issues in the hospitality industry have been experienced mostly in the cruise ships engaging in casinos and gambling where the government of Singapore legitimized the gambling as a business like other businesses. Ethical Dilemma Description in Cruise Ships and Casino Gaming In as much as the cruise ship might be having a beneficial advantage to the country, by generating income to and adding up to the economy in Singapore, it is quite unfortunate that it discharges bilge water, sewerage and other waste to the water a few miles from the coast. Such activities are never regulated and they may be a great danger especially to the fishing industry as the waste and other discharge from the ship may cause a massive death of fish (Lo, 2005). Many stakeholders are naturally concerned that these wastes might cause negative impacts to the environment but then, they might not want to interfere and disturb revenue generating business and a part of the Singapores economy. The profit that is enjoyed from the cruise ships does not mean that the directors and other staff should be less ethical. Clearly, a company can be profitable and at the same time reducing the ethical issues through integrity (Balfour, 2006). In the process of using integrity, ethics would be prevailing and the right choices would be made. In the same cruise ships in Singapore, one of the businesses carrying the order of the day is gambling. In as much as casino gaming may seem to be a business like others, it is surrounded with many ethical issues. People engaging in gambling are prone to addiction to the game, might have tribal issues and others may be forced into organized crimes and suicide. While others may find their ways into gaming casinos for business and fun, others might take the opportunity to organized crimes; others may be tempted to commit suicide after losing a lot of money and property as others get addicted to the game. It thus leaves questions as to why the government could just decide to legalize gaming considering it come along with many ethical issues (Grinols Mustard, 2006). Statement of the Problem The aspect of being right or wrong appears to differ from culture to culture although the defending fact is about a persons behavior. An example is the principle of utilitarianism where it is about the good deeds for many people. Singapore is well recognized as one of the governments that are least corrupts different from many countries where corruption has turned to be a plague in the government (Walker Jackson, 2007). Many corporate agencies are full of corrupt administrators and governments are full of graft and bribes and as such people might not question a government running a country being ethical. Singapore, after its government announced that they will be legalizing gambling and allowing the construction of mega resorts with gaming facilities, it appeared that the country was thrown in a debating field about the implications that could come along with the decision. Questions are thus rising on how ethical or unethical the governments are becoming and the implications of the decisions made by these governments to allow building of casinos and the operations of the cruise ship (Lim, 2005). Justification of the Decision The government of Singapore came out to defend its decision to legitimize the integrated resorts claiming that the gambling and all the games in the casinos can be considered a form of entertainment and a worthy investment. Also, they based their justification on economic situations where they had to import some of the raw materials used in building the casinos and as a result, enhancing business relationships with other countries. Another major reason the government gave for legalizing the gambling was that the revenue of the country was falling and it was because many of their citizens were travelling to other states to gamble. One may look at it that the government of Singapore may have wanted to tap into its revenue to prevent the money from being spent out of the country (Banks, 2002). Tourism was also another reason that saw the government allow the construction of the casinos and the operation of the cruise ship. The decision by the country was seen to be aiming at increasing the demands for and the motivation of the tourists to the island state. The government also based its decision of the fact that Singapore appears to the third least corrupt states making their probability to attract many tourists around the world high. It was also anticipated that the casino would be a great opening of many employment opportunities (Sim, 2010). Casino Crime One of the ethical issues surrounding the casino and gambling business is the organized crimes taking place in these places. Crime is one of the factors that the anti-casino movements were seen to argue that will increase as a result of the legalization of the business. In other countries, there have been witnessed cases of assassinations around the casinos where the people gambling in these casinos seem not to be satisfied with the fact that they lose their money or property and thus, organize an assassination of their opponents (Garret, 2004). Proposed Solution to the Ethical Issues around Casino Gaming Before the government had legalized the casinos and gambling in Singapore, there were many forces and arguments for and against the case. Different people had different views concerning casino gaming where a group believed in the ethical part of casinos while others defended their opposition on grounds of the unethical parts causing an ethical dilemma in the case (Toneatto, Ferguson Brennan, 2003). From the beginning, the policy makers in the country had acknowledged the possible negative externalities and gave an assurance that these would be controlled through different measures that were put in place. The government passed the casino control act that issued the license to build the two integrated resorts with casinos in them. There are also statutory boards that were developed to limit the social impacts of the casino gambling and the state has been very strict in the act by progressively tightening the rules over time. There are exclusion measures and limits of visits to the cas ino. The exclusion measures are seen to bar people from entering the casino while the limits of visits puts barriers on the number of visits a person can visit the casino, and that being imposed on registered members (Grinols, 2004). Another measure is on the people operating the casino where they are not allowed to accept credit cards from the local residents and they are as well not permitted to extend credit to the local visitors. In any case the operators appear to breach the regulations; they are to face some disciplinary actions including the imposition of fines, suspension or even termination of their licenses (Werker, 2007). Ever since the casinos in Singapore started working, the regulations governing them have been tightened progressively. The issue of addiction was to be sorted through the enrollment of education programs to through family service centers and community development councils. These bodies were to give gambling addiction information to the public and also trained the staff on the compulsive gambling and how to provide basic counseling to the gamblers (Anderson, 2005). Ethical Theories However, the government should have applied the consequentialism theory with the approach of ethics. The consequential approach emphasizes that an ethical morality is a contingent on the action outcome or its consequence. Therefore, any right ethical actions should produce a positive result (Walker Jackson, 2007). The positive result should outweigh the negative outcome. The casino ACT mainly focused on the local residence hence benefiting them more than the residents. In conjunction with the shareholder's theory, the responsibility of the casino was to raise profits to the shareholders and benefit the residents positively. According to Banks (2002). Understanding the theories of justice comes from the business ethics. However, it has a political aspect due to the control of businesses by the government involvement. The government of Singapore defends its decision to legitimize the integrated resorts claiming that the gambling and all the games in the casinos can also be considered a form of entertainment. The claim is based on the economic conditions and the claim that purchasing of raw materials from other countries will support their relationships. The theory of justice mainly focuses on the creation of liberties equalization hence creating strong friendships and happiness between the other countries with a mutual benefit. Conclusion In each and every day, the business world lives around making decisions and for most of them, making the right one needs one to be thoughtful and considerations while others have no conscious in thinking through a decision. In as much as the cruise ship might be having a beneficial advantage to the country, by generating income to and adding up to the economy in Singapore, it is quite unfortunate that it discharges bilge water, sewerage and other waste to the water a few miles from the coast. Many corporate agencies are full of corrupt administrators and governments are full of graft and bribes and as such people might not question a government running a country being ethical. Singapore, after its government announced that they will be legalizing gambling and allowing the construction of mega resorts with gaming facilities, it appeared that the country was thrown in a debating field about the implications that could come along with the decision. The government passed the casino contr ol act that issued the license to build the two integrated resorts with casinos in them. There are also statutory boards that were developed to limit the social impacts of the casino gambling and the state has been very strict in the act by progressively tightening the rules over time. References Anderson, J. E., (2005). Casino taxation in the United States. National Tax Journal, 58(2), 303 324. Retrieved from https://ntj.tax.org/ Balfour, F. (2006). Macau gaming: Shady past, rosy future. 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