Download - Lemaire Prest
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ModernManagementResearchConference(MMRC)
ISMUNIVERSITYOFMANAGEMENTANDECONOMICS,VILNIUS,LITHUANIA
INSIGTHSINTOTHESUSTAINABLEGROWTHOFBUSINESS
November
19
21,
2009
FOREIGNDIRECTINVESTMENT
INTHEGLOBALCRISISCONTEXT
ANANALYSIS
TO
DECISION
APPROACH
APPLICATION
1
ESCPEurope
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AGENDA
Whatisatstake:reciprocalinterests?
Purpose
and
context
:FGE,
Crisis
and
FDI
Context:initialtopresent
Chosenapproach:
from
environment
analysis
to
entry
decision
PositioningFGEonthegrid
ngo ngconsequenceso t ecr s s
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What is at stake?Reci rocal interests 1
FastGrowingEconomies(FGE)canexpectfromforeigndirect
investments
(FDI)
Directimpactsontechnologyupgrading,onreachinginternationalstandards,on
exportsincrease,onGDPpercapitaincrease..
in
a
short
term
perspective,
speeding
up
international
trade
and
investment
flowscountrysintegration
Indirectimpactsonlegalsystemevolution,onphysicalinfrastructures,on
educationenhancement,onculturalopening..
externalandinternalperspective (integrative)
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What is at stake?Reci rocal interests 2
ore gn rect nvestors areexpect ng rom ast row ng
Economies(FGE)
Expansionoftheirbusinessbeyondtheirareaoforigin,andoptimizationoftheir
valuechain
w eposs y o ocuson es oppor un esan ar ra e e weenvarious
locations
ThroughamoresteadyaccesstoFGEmarketsandresources
expectingfavorablelocalhostingconditionswhichwouldbebothtangibleandintangible
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Purpose of the analysis to decision approach:FGE, and FDI 1
FastGrowingEconomies(FGE)tendtoattractforeigndirect
investments
(FDI)
inanhorizontalizationperspective
inordertoservelocalneeds(FMCG,durables,services,utilities,infrastructures..)
and/orverticalizationperspective
level(costreduction,tangible/intangibleresourceseeking..)
rno an ue c ,
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FDIDECISION
APPROACHES
MACROECONOMICLEVEL
Hostingpoliciesoflocalauthorities
Enhancingvalueofnational/regionalareas
Generatinglocationadvantage*
LOCALISATIONDECISION
ANDDETERMINATIONOFENTRYSTRATEGY
MICRO
ECONOMIC
LEVEL
Searchforopportunitiesabroad
Relyingonownershipadvantages*
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*RegardingDunningsOLItheory
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Init ial context of the approach (1) :from ro ressive inte rat ion to local Crisis
scon rontat ono countryan corporateapproac esta esp ace navar ety
ofgeo/eco/politicalcontexts,characterizedbyareaandtimeframedifferences,
forinstance,
Progressiveintegrationintoaworldeconomicopencommunity,allowingtoenvisage
anorganizedintensificationofFDIflows
ex.Vietnamfacing
WTO
integration
(NguyenNhu&Haughton,2002) Consecutivereintegrationfollowingacyclicalshock thatprovokedforatimeadrying
upofFDIbeforetheirresumptioncanbeconsidered Ar entina
reinte ration
a ter
2001
crisis.
(Carreraetal.,2003)
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Present context of the approach (2) :from Global Crisis to ost cr isis
Addressingearlyassessmentsassumingthatdecoupling wouldprotectFast
GrowingEconomiesfromthefinancialcrisis:
unsophisticatedFGEfinancialsystems,
whichcould
be
dominating
in
these
areas
Inorderto evaluatemoreimportantbutdifferentiatedimpacts,
e err ng ocon ras e s ua ons romacoun ry oano er, romasec or o
another,
9
ButintroducingnewpossibilitiesforFDIandevolvingpositioningofcountriesin
thatperspective
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SUCCESSIVESTEPS
Hence thisex lorator ualitativea roachreliesontwocountr casestudies
(VietnamandArgentina)andongoinglargeranalysis (BRIC)
App y nganenv ronmentana ys sto ec s on ramewor PREST
termsof
FDI
attractiveness
Inordertosuggest,
furtherindepthdevelopments(indexesselection,validationandmeasurement)
globalcrisis)
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ANINDUCTIVEAPPROACH
FromaFDIsexpansionperspective,twocaseshavebeen,then,consideredin
ordertostructuretheanalysis,
ThecaseofthelongprocessofVietnamjoiningtheWTO(Lemaire&Bui,2005/2008) ThecaseofthegradualshorterreopeningprocessofArgentinaafterthecrisisofDecember2001
(LemaireandLopez,2007) Thensomeapplicationshavebeeninitiatedinorderto extendtheapplicationto
TheBRICs,askeyFGE(ImpactofglobalcrisisonFGEforum,2009), Somematureeconomies whichhavebeendeeplyaddressedbythecrisisinordertomeasurethe
recessionconsequencesonFDIflowandnature
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STEP1:
ENVIRONMENTTODECISIONAPPROACH
ugges nganapp ca on, npara e ,o a ana ys s,
inanenvironmenttodecisionanalysisperspective(Lemaire,1993,2000,1997/2003): Relying,first,ontheidentificationofexternalpressuresexertingoneachlocalenvironment
Inorder,then,toevaluatetheresultingchallengesfacedbylocalauthoritiesandforeigninvestors
Leading,atlast,totheidentificationofsectors/modesofpresencebestsuitedtoeachcontext
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ANALYSISPRESTMODELAPPLYINGTOFDI
EXTERNALPRESSURES
ON
FDI
FDI
CHALLENGES
FDI
DECISIONS
POLITICALREGULATORY
TECHNOLOGICAL
PRESSURESWITHOTHERFDIHOSTSWITHOTHERFDIHOSTS
CHALLENGECHALLENGE
ENTRY
MODELEVELOF
COMMITMENT
DECISIONSDECISIONSREREDEPLOYMENTDEPLOYMENT
OFACTIVITIES&GEOTARGETSOFACTIVITIES&GEOTARGETS
CHALLENGECHALLENGE
OFTHELOCALOFFEROFTHELOCALOFFER
CHALLENGECHALLENGEFDIFDI
ECONOMIC&SOCIAL
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EXTERNALPRESSURES
COUNTRYCHALLENGESCOUNTRYCHALLENGES
FDIDECISIONSFDIDECISIONS
PRESSURES
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EXTERNAL PRESSURESWITH EITHER POSITIVE OR NEGATIVE IMPACT ON FGEs FDI ATTRACTIVENESS
-FROM INSIDEFROM OUTSIDE
ORIGINATING
- measuresofde/reregulationdesigned
toadapt
the
framework
supporting
FDIlikelydevelopment,
- attitudeofneighbouring/partnering
countriesaffecting
eco/political
relations
In/decreaseintegrativeinfluencefrom
STRUCTURAL
LongTerm
- measuresofprivatisation
andrestructuringofthepublicsector
and/orStateOwnedcompanies
- adjustmentpoliciesofthemajor
regional,continental,worldmultigov.
internationaleconomicorganizations
IncentivetoadhereInternationalfiscal/
legal conventionsregulatingcorporate
TIME
(transport,
fin.
services,
distribution..)..
sensitivitytopoliticaltensions
..
CONJECTURAL
(crossborder,terrorism)fromtheregion
orbeyond..
stabilityofthepoliticalsystem,State
commitments
and
economic
policies
financialauthoritiesonthe
creditworthinessofthecountry
exposuretoeconomiccrisesand
politicaldisturbances
coming
from
ShortTerm,
strikesandsocialmovements,
interethnictensions,xenophobic
outbreaks..
naturaldisasters..
outsi e
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EXTERNALPRESSURES s
ECONOMIC&SOCIALORIGINATING
-Population
dynamics
in/decreasing
local
-foreign
expectancies
for
better
FROM INSIDEFROM OUTSIDETHECOUNTRY
STRUCTURAL
costeffectiveness
- evolutionofpurchasingpower,middleclass
developmentandpovertyreduction
- In/decreasedavailabilityandaccessibility
conditions
longlastingunder evaluation of foreign
competitors currency
Improvementof localassetsinother
LongTerm ofnaturalresourcesintheMT/LT
-permanence
of
practices
distorting
freecompetition(ex.corruption,State
preferenceforlocalactors)..
countrieshosting FDI
reallocation
of
MNCs
corporate
FDI
portfolio
TIME
PERSPECTIVE- currencyfluctuationsand
rawmaterialsand commodities
worldpriceschanges
drying
up
of
foreign
funding
due
to
- Internallossofconfidence
inthecountryseconomyresultingfrom
unexpected
economicevents
CONJECTURAL
ShortTerm
foreignfinancialcrisis
- abruptshiftsofforeigncustomers
tastes(fashion)
foreigndemandfluctuationforproducts
(e.g.realestatebubblebursting)
bottlenecks insomesectorsof
productiongeneratinginflation
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ecomovesaffectingcustomerscountries
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EXTERNALPRESSURESWITHEITHERPOSITIVEORNEGATIVEIMPACTONFDI
FROM INSIDEFROM OUTSIDE
ORIGINATING
- existenceoflocalcompetencies
developedthrougheducational
system(both
for
production
as
for
- compliancewithinternationalstandards
ofquality,
environment
and
safety
(e.g. ISOstandards)
STRUCTURAL
LongTerm
managementan organ sat on
levelofinfrastructureswithin
thecountryandconnectivitywiththe
RoW(roads,telecommunications,
energysupply,inwater,portand
- complianceforlocalproductsandservices
withthemostdemandingcertification
systems(USandEU)
- logisticalcapability(controlofthesupply
TIME
airportfacilities..)
-access
to
IT
and
communication
systems
(forex.broadbandInternet)as
informationprocessingcapacities
-
, , ..
CONJECTURAL
technologyoriginatingfromexternal
sources,
developmentpotentialoflocalR&D
(resourcesand
structures)
related
to
ShortTermo n erna ona researc ne wor s
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STEP2:
POSSIBLECORPORATEENTRYSTRATEGIES
InordertointroduceacomparativemappingofFGEsattractiveness,
relyingon
two
major
axes
stemming
from
the
previous
analysis,
from
a
thelevelofinfrastructureupgradingbothtangible(utilities,commodities,equipment
,.. , ..
localresources
management (natural
as
intellectual
resources)
thelocalauthoritiestocontrolandlimittheirconsequencesfordomesticasforforeign
actorsasnationalsocialconsistencyandsolidarity.
IndexestobeselectedinconnectionwithmajorFrenchECA
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EXPLORATORYDYNAMICMAPPINGOFFGEs
FDIATTRACTIVENESS
Thisstepbystepanalysistendstoimplythattwomajorfactorscouldbe
retainedtodifferentiatethevariousFGEasFDIstargets
infrastructurelevel
,largely
linked
with
the
structural
dimensions
of
all
three
sets
of
externalpressuresofthePRESTmodel
andinstabilitysensitiveness,largelylinkedwiththeirrespective conjecturaldimensions
Generating
specific
challenges
in
each
FGE,
it
suggests
tothehostingcountriesauthorities,somedirectionstobefollowedinordertoupgrade
theirpositioningandtoattractthemostappropriateinvestments,throughdeveloping,
either,abettercontrolofthecountryssensitivitytoinstabilityandconjecturalshocks,
and/or,measurestoupgradethelargespanofinfrastructuresexpectedbytheirhosts
tothepotentialforeigndirectinvestors,aclearerevaluationofthelocalcontextfroman
toarbitratebetweengoandnogoandtodecideofitsleveloflocalcommitment,
andtoselectactivitiesandobjectiveswhichcouldbeenvisaged,leadingtodesigningitsFDIspossiblelocal
economicmodel
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THE4xiMODELFOURBOXESEXPLORATORYDYNAMICMAPPINGOFFGEsFDIATTRACTIVENESS
INDISPUTABLE INSISTENTINSISTENT
Combining:Combining:Combining:Combining:
HighlevelofcontrolinstabilityHighlevelofcontrolinstability
andofconjecturalshocksandofconjecturalshocks
RelativelylowlevelofRelativelylowlevelof
Capacityto
control
--
instability and conjecturalinstability and conjecturalshocksshocks
--infrastructureinfrastructure
andconjectural
shocks
infrastructureinfrastructure
IMMATURE INOPERATIVE
Combining:Combining:
Low level of controlLow level of control
Combining:Combining:
Low level of controlLow level of controlinstability and conjecturalinstability and conjectural
shocksshocks
Relatively low level ofRelatively low level of
instability and conjecturalinstability and conjecturalshocksshocks
Already high level ofAlready high level of
20Levelofinfrastructuretoupgrade
infrastructureinfrastructure infrastructureinfrastructure
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THE4xiMODELFOURBOXESINITIALLYEXPLOREDCOUNTRIESPOSITIONNING
INDISPUTABLE INSISTENTINSISTENT
Combining:Combining:Combining:Combining:VN
HighlevelofcontrolinstabilityHighlevelofcontrolinstability
andofconjecturalshocksandofconjecturalshocks
RelativelylowlevelofRelativelylowlevelof
Capacityto
control
--
instability and conjecturalinstability and conjecturalshocksshocks
--infrastructureinfrastructure
andconjectural
shocks
infrastructureinfrastructure
IMMATURE INOPERATIVE
Combining:Combining:
Low level of controlLow level of control
Combining:Combining:
Low level of controlLow level of control
ARG
instability and conjecturalinstability and conjecturalshocksshocks
Relatively low level ofRelatively low level of
instability and conjecturalinstability and conjecturalshocksshocks
Already high level ofAlready high level of
21Levelofinfrastructuretoupgrade
infrastructureinfrastructure infrastructureinfrastructure
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THE4xiMODELFOURBOXESexploratoryBRICcontrastedregionalapproach(1)
INDISPUTABLE
Coastal
Capacityto
control Southern
andconjectural
shocks IMMATURE INOPERATIVE
SW India
Russia
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THE4xiMODELFOURBOXESexploratoryBRICcontrastedregionalapproach(2)
INDISPUTABLE
Central
Capacityto
control Northern
China
andconjectural
shocks IMMATURE INOPERATIVE
Brazil
Eastern
NE IndiaRussia
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i O O O S
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THE4xiMODELFOURBOXESFROMCOUNTRYPOSITIONING
INSISTENTINSISTENT FGEPOSITIONING
SustainableSustainable targetedtargeted presencepresence
throughthrough partnershipspartnerships
Overallrecommendedrecommended
Entrystrategy
CapitalintensiveenvisageableCapitalintensiveenvisageable
Sectorsofinfrastructures(e.g.utilities)andSectorsofinfrastructures(e.g.utilities)andTypeofsector
goodsandserviceswithhugeexistinggoodsandserviceswithhugeexisting
demanddemand
toselect
HORIZONTALISATION>VERTICALIZATIONHORIZONTALISATION>VERTICALIZATIONor VERTICALIZATIONor VERTICALIZATION
choicechoice
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THE4xiMODELFOURBOXESCORPORATEOPERATIONALIMPLICATIONS
INDISPUTABLE
INSISTENTINSISTENT
SustainableSustainable targetedtargeted presencepresencethrou hthrou h artnershi sartnershi s
Permanentdiversifiedpresence
100%subsidiary
Capitalintensive
CapitalintensiveenvisageableCapitalintensiveenvisageable
Sectorsofinfrastructures(e.g.utilities)andSectorsofinfrastructures(e.g.utilities)and
goodsandserviceswithhugeexistingdemandgoodsandserviceswithhugeexistingdemand
Allsectors
withdomesticandinternational
existingandpotentialdemand
Capacityto
control
HORIZONTALISATION>VERTICALIZATIONHORIZONTALISATION>VERTICALIZATION
VERTICALIZATION
IMMATURE INOPERATIVE
andconjectural
shocks
Limited/occasionalpresence
MinimalcapitalConditional presence
Throughpartnership
Limitedcapital
Import/Exporttradingactivities
linkedwithnaturalresources
andkeyneeds
HORIZONTALIZATION>
Valorizationoflocaltangibleand
intangibleresourceswithlimited
exposuretodomesticdemand
VERTICALIZATION>
25Levelofinfrastructuretoupgrade
VERTICALIZATIONHORIZONTALIZATION
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INOPERATIVE CORPORATEOPERATIONALIMPLICATIONS
INDISPUTABLE
INSISTENTINSISTENT
SustainableSustainable targetedtargeted presencepresencethrou hthrou h artnershi sartnershi s
Permanentdiversifiedpresence
100%subsidiary
Capitalintensive
CapitalintensiveenvisageableCapitalintensiveenvisageable
Sectorsofinfrastructures(e.g.utilities)andSectorsofinfrastructures(e.g.utilities)and
goodsandserviceswithhugeexistingdemandgoodsandserviceswithhugeexistingdemand
Allsectors
withdomesticandinternational
existingandpotentialdemand
Capacityto
control
HORIZONTALISATION>VERTICALIZATIONHORIZONTALISATION>VERTICALIZATION
VERTICALIZATION
IMMATURE INOPERATIVEINOPERATIVE
andconjectural
shocks
Limited/occasionalpresence
MinimalcapitalConditionalConditional presencepresence
ThroughpartnershipThroughpartnership
LimitedcapitalLimitedcapital
Import/Exporttradingactivities
linkedwithnaturalresources
andkeyneeds
HORIZONTALIZATION>
ValorizationoflocaltangibleandValorizationoflocaltangibleand
intangibleresourceswithlimitedintangibleresourceswithlimited
exposuretodomesticdemandexposuretodomesticdemand
VERTICALIZATION>VERTICALIZATION>
26Levelofinfrastructuretoupgrade
VERTICALIZATIONHORIZONTALIZATIONHORIZONTALIZATION
+
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INDISPUTABLE CORPORATEOPERATIONALIMPLICATIONS
INDISPUTABLEINDISPUTABLE
INSISTENTINSISTENT
SustainableSustainable targetedtargeted presencepresencethrou hthrou h artnershi sartnershi s
PermanentdiversifiedpresencePermanentdiversifiedpresence
100%subsidiary100%subsidiary
CapitalintensiveCapitalintensive
CapitalintensiveenvisageableCapitalintensiveenvisageable
Sectorsofinfrastructures(e.g.utilities)andSectorsofinfrastructures(e.g.utilities)and
goodsandserviceswithhugeexistingdemandgoodsandserviceswithhugeexistingdemand
AllsectorsAllsectors
withdomesticandinternationalwithdomesticandinternational
existingandpotentialdemandexistingandpotentialdemand
Capacityto
control
HORIZONTALISATION>VERTICALIZATIONHORIZONTALISATION>VERTICALIZATION
VERTICALIZATIONVERTICALIZATION
IMMATURE INOPERATIVEINOPERATIVE
andconjectural
shocks
Limited/occasionalpresence
MinimalcapitalConditionalConditional presencepresence
ThroughpartnershipThroughpartnership
LimitedcapitalLimitedcapital
Import/Exporttradingactivities
linkedwithnaturalresources
andkeyneeds
HORIZONTALIZATION>
ValorizationoflocaltangibleandValorizationoflocaltangibleand
intangibleresourceswithlimitedintangibleresourceswithlimited
exposuretodomesticdemandexposuretodomesticdemand
VERTICALIZATION>VERTICALIZATION>
27Levelofinfrastructuretoupgrade
VERTICALIZATIONHORIZONTALIZATIONHORIZONTALIZATION
+
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IMMATURE CORPORATEOPERATIONALIMPLICATIONS
INDISPUTABLEINDISPUTABLE
INSISTENTINSISTENT
SustainableSustainable targetedtargeted presencepresencethrou hthrou h artnershi sartnershi s
PermanentdiversifiedpresencePermanentdiversifiedpresence
100%subsidiary100%subsidiary
CapitalintensiveCapitalintensive
CapitalintensiveenvisageableCapitalintensiveenvisageable
Sectorsofinfrastructures(e.g.utilities)andSectorsofinfrastructures(e.g.utilities)and
goodsandserviceswithhugeexistingdemandgoodsandserviceswithhugeexistingdemand
AllsectorsAllsectors
withdomesticandinternationalwithdomesticandinternational
existingandpotentialdemandexistingandpotentialdemand
Capacityto
control
HORIZONTALISATION>VERTICALIZATIONHORIZONTALISATION>VERTICALIZATION
VERTICALIZATIONVERTICALIZATION
IMMATURE INOPERATIVEINOPERATIVE
andconjectural
shocks
Limited/occasionalpresence
MinimalcapitalConditionalConditional presencepresence
ThroughpartnershipThroughpartnership
Limited
capitalLimited
capitalImport/Exporttradingactivities
linkedwithnaturalresources
andkeyneeds
HORIZONTALIZATION>
ValorizationoflocaltangibleandValorizationoflocaltangibleand
intangibleresourceswithlimitedintangibleresourceswithlimited
exposuretodomesticdemandexposuretodomesticdemand
VERTICALIZATION>VERTICALIZATION>
28Levelofinfrastructuretoupgrade
VERTICALIZATIONHORIZONTALIZATIONHORIZONTALIZATION
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WHATABOUTTHECRISISEFFECTS?
GlobalmayhemhashitquitedifferentlyvariouslargeFGEandsectors: TheexampleofVietnam: crisis,whatcrisis?
Thecontrasted
diagnosis
applying
to
BRICs:
ReorientatesChinesepolicies
ImpactsinalimitedwayIndia
AffectssignificantlyBrazilbutwithinarelativelyshortperiodoftime
Butwithlimitedconsequences(atleastinsomeFGE)onFDI: Differentialof rowthremaine ual ifnotsu erior betweenFGEandmature
economies(5%to7%),hencetheFGEattractivenessremainshigh
FGEspoliciestendtobecomemorefocusedanddemanding(improvingtheirpositioningonthetwoaxes):
capac y ocon ro ns a y g ereconom cmon or ng, g econom cagen smora
acceleratedinfrastructureimprovements(Keynesianpolicies,inboundasmuchasoutbound)
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LIMITSANDFURTHERRESEARCH
Be ondthisex lorator a roachfurtherresearchhastobe ursuedin
orderto,
morepreciselyandcomprehensivelyidentifyandevaluatethe4xi
modelstwoaxesindicators ECA
moresystematically
collect
appropriate
data
in
order
to
position
more
accuratelyeachFGEonthetwoaxesretained correspondent
testand
validate
the
rid
in
cor orate
circles encom assin
different
sectors
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THANKYOUFORYOURATTENTION!
Q&
A
?
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