Download institutional framework for international business

C4
INSTITUTIONAL
FRAMEWORK
FOR
INTERNATIONAL BUSINESS
Copyright @ Oxford University Press
International Business
R. M. Joshi
1
Learning Objectives

To understand the significance of institutional
framework in international business

To discuss the international economic institutions
under the UN system

To outline the international organizations in trade
promotion

To examine the institutional framework to facilitate
international business
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International Business
R. M. Joshi
2
International Economic Institutions
A large number of organizations were set up under the
aegis of the UN to facilitate international trade and
investment so as to provide multilateral institutional
framework for international economic growth.
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International Business
R. M. Joshi
3
World Bank Group

World Bank

The International Bank for Reconstruction and
Development (IBRD)

International Development Association (IDA)

International Finance Corporation (IFC)

The Multilateral Investment Guarantee Agency
(MIGA)

The International Centre for Settlement of Investment
Disputes (ICSID)
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International Business
R. M. Joshi
4
World Bank
The World Bank is a vital source of financial and
technical assistance to developing countries around the
world made up of two unique development institutions:


The International Bank
Development (IBRD)
for
Reconstruction
and
The International Development Association (IDA).
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R. M. Joshi
5
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The International Bank for
Reconstruction and Development
(IBRD)
The IBRD is the oldest of the World Bank Group institutions established in
1944, initially to help Europe recover from the devastation of World War II.
Subsequently it shifted its attention to developing countries that aims to
reduce poverty in middle-income and creditworthy poorer countries by
promoting sustainable development through loans, guarantees, risk
management products, and (non-lending) analytic and advisory services.
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International Business
R. M. Joshi
7
International Development Association
(IDA)
Established in 1960, the International Development
Association (IDA) provides interest-free credits and
grants to the poorest developing countries in order to
boost their economic growth and improve people’s
living conditions.
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International Business
R. M. Joshi
8
UN’s Millennium Development Goals

Eradicate extreme poverty and hunger

Achieve universal primary education

Promote gender equality and empower women

Reduce child mortality

Improve maternal health

Combat HIV / AIDS, malaria, and other disease

Ensure environmental sustainability

Develop a global partnership for development
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International Business
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9
International Finance Corporation
(IFC)
The private sector arm of the World Bank Group, the
IFC, founded in 1956, to promote sustainable private
sector investment in developing countries, helping
reduce poverty and improving people’s lives.
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International Business
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10
The Multilateral Investment Guarantee
Agency (MIGA)
Established in 1988, the MIGA provides noncommercial guarantees (insurance) for foreign direct
investment in developing countries.
It addresses
concerns about investment environments and
perceptions of risk, which often inhibit investment, by
providing political risk insurance. The MIGA’s
guarantees offer investors protection against noncommercial risks, such as expropriation, currency
inconvertibility, breach of contract, war, and civil
disturbances.
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International Business
R. M. Joshi
11
The International Centre for
Settlement of Investment Disputes
(ICSID)
Founded in 1966, the ICSID was designed to facilitate the settlement of
investment disputes between foreign investors and host states. It encourages
foreign investment by providing neutral international facilities for conciliation
and arbitration of investment disputes, thereby helping foster an atmosphere of
mutual confidence between states and foreign investors. Many international
agreements concerning investment refer to the ICSID’s arbitration facilities.
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International Business
R. M. Joshi
12
International Monetary Fund (IMF)
The IMF also known as the ‘Fund’, was conceived at a
UN Conference convened in Bretton Woods, New
Hampshire, US in July 1944 aimed to build a
framework for economic cooperation that would avoid a
repetition of the disastrous economic policies that had
contributed to the Great Depression of the 1930s.
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International Business
R. M. Joshi
13
The United Nations Conference on
Trade and Development (UNCTAD)
In the early 1960s, growing concerns about the place of
developing countries in international trade led many of these
countries to call for the convening of a full-fledged conference
specifically devoted to tackling these problems and identifying
appropriate international actions. The first United Nations
Conference on Trade and Development (UNCTAD) was held in
Geneva in 1964.
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UNCTAD has continued to play a critical role in emphasizing the
development dimension of issues in the fields of international
trade and investment and related areas. In particular, UNCTAD
has been addressing the imbalances of globalization and the need
to overcome the supply constraints of developing countries, so as
to ensure development gains and poverty reduction
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15
UNCTAD-XII
The last UNCTAD XII held in Accra in Ghana during
20-25 April, 2008, based on the theme of ‘addressing
the opportunities and challenges of globalization for
development’.
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16
Generalized System of Preferences (GSP)
It is a non-contractual instrument by which industrialized
(developed) countries unilaterally, and on the basis of nonreciprocity, extend tariff concessions to developing countries.
The GSP was formally accepted in 1968 by UN members at the
second UNCTAD conference in New Delhi.
The GSP offers developing countries tariff reductions, and in
some cases, duty-free concessions for their manufactured exports
and certain agricultural exports as well.
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International Business
R. M. Joshi
17
Common Fund for Commodities
A Common Fund for Commodities (CFC) was
established in 1989 with the objectives:

To serve as a key instrument in attaining the agreed
objectives for the Integrated Programme for
commodities adopted by the UNCTAD.

To facilitate the conclusion and functioning of ICAs
(International Commodity Agreements), particularly
concerning commodities of special interest to
developing countries.
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International Business
R. M. Joshi
18
Global System of Trade Preference
(GSTP) among Developing Countries
Established in 1988, GSTP serves as a framework for
the exchange of trade preferences between developing
countries in order to promote intra-developing-country
trade.
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International Business
R. M. Joshi
19
World Intellectual Property Organization
(WIPO)
Established in 1967 is a specialized agency of the UN
with a mandate from its member states to promote the
worldwide protection of IP through cooperation among
states and in collaboration with other international
organizations.
It is dedicated to developing a balanced and accessible
international intellectual property (IP) system, which
rewards creativity, stimulates innovation, and
contributes
to
economic
development
while
safeguarding public interest.
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International Business
R. M. Joshi
20
United Nations Industrial
Development Organization (UNIDO)
UNIDO, set up in 1966 a specialized agency of the UN to
promote industrialization in developing countries and in countries
with economies in transition. UNIDO helps these countries in
their fight against marginalization in today’s globalized world. It
mobilizes knowledge, skills, information, and technology to
promote a productive employment, a competitive economy, and a
sound environment.
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International Business
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21
Asian Development Bank (ADB)
The Asian Development Bank is a multilateral financial
institution aims to improve the welfare of people in Asia and the
Pacific, particularly the 1.9 billion who live on less than US $2
per day.
It is owned by 67 member countries, 48 from the
region, and 19 from other parts of the globe.
The ADB has an important role to play in making the region free
of poverty, as Asia and the Pacific region are home to two thirds
of the world’s poor.
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International Business
R. M. Joshi
22
United Nations Economic and Social
Commission for Asia and the Pacific
(UN-ESCAP)
Established in 1947, headquarters at Bangkok ESCAP
is the most comprehensive of the UN’s five regional
commissions aimed at developing the Asia-Pacific
region. It fosters cooperation between its 53 members
and nine associate members.
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International Business
R. M. Joshi
23
Organizations for International Trade Promotion
Almost all countries have set-up international trade promotion
organizations. Such organization usually carries out one or more
of the following activities:



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Identifying trade and investment needs of local firms
Keeping a watch on international business environment
affecting country’s trade
Gathering, compiling and disseminating information
Spotting opportunities for international trade and
investment
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24

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Matchmaking between buyers and sellers
Organizing trade missions, trade delegations, buyerseller meets, etc.
Facilitating participation and organizing trade
exhibitions
Networking with foreign trade promoting organizations
Carrying out generic market promotion and marketing
services
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25
Import Promotion Organizations
Many countries are substantially dependent on imports due to limited
availability of their resources or imports heavily due to heavy trade surpluses.
These countries have set up institutional frameworks to promote imports so as
to develop competitive supplier base for its importing firms. Such import
promotion organizations also facilitate the foreign exporting firms to explore
marketing opportunities and identify importers. Major export promotion
organizations include: CBI, JETRO, SIPPO, DIPO etc.
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International Business
R. M. Joshi
26
Institutional Framework for
International Trade in India

Department of Commerce
• Economic Division
• Trade Policy Division
• Foreign Trade Territorial Division
• Export Product Division
• Export Industries Division
• Export Services Division
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27

Department of Commerce
• Subordinate offices

Directorate General of Foreign Trade (DGFT)

Directorate General of Commercial Intelligence and
Statistics (DGCI&S)

Directorate General of Anti-Dumping and Allied Duties
(DGAD)
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Advisory Bodies
• Board of Trade
• Export Promotion Board
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Commodity Organizations
Export Promotion Council
 Engineering
 Project
 Pharmaceuticals

Basic chemicals, pharmaceuticals, and cosmetics

Chemicals and allied products

Leather
 Sports goods
 Gems and jewellery
 Shellac
 Cashew
 Plastic
 Apparel
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
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EOUs and SEZs
Carpet
Cotton textiles
Handicrafts
Handloom
Indian silk
Synthetic and Rayon textile
Wool and woollens
Powerloom
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Commodity Board

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

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

Tea Board
Coffee Board
Coir Board
Central Silk Board
All-India Handlooms and Handicraft Board
Rubber Board
Cardamom Board
Tobacco Board
Spices Board
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Autonomous Bodies
• Agriculture and Processed Food Products Export
Development Authority (APEDA)
• Marine Products Export Development Authority
(MPEDA)
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Service Institutions

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Indian Institute of Foreign Trade (IIFT)
Export Inspection Council (EIC)
Indian Council of Arbitration (ICA)
India Trade Promotion Organization (ITPO)
India Trade Promotion Organization (ITPO)
National Centre for Trade Information (NCTI)
Export Credit Guarantee Corporation (ECGC)
Export-Import bank of India (EXIM Bank)
Indian Institute of Packaging (IIP)
Federation of Indian Export Organizations (FIEO)
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R. M. Joshi
34
Government Participation in Foreign Trade
For supplementing the efforts of the private sector in the
field of foreign trade, the Government of India has set
up a number of trading corporations:

State Trading Corporation (STC)

Minerals and Metals Trading Corporation (MMTC)

Spices Trading Corporation Limited (STCL)

Metal Scrap Trading Corporation (MSTC)
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35
These corporations have provided the essential base for
developing and strengthening efforts relating to specific
commodities
and
products
and
diversifying
the
country's foreign trade.
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International Business
R. M. Joshi
36
States' Involvement in Promoting Exports
The central and state governments have enacted a
number of measures to promote exports such as InterState Trade Council, States’ Cell in Ministry of
Commerce
and
state
government
departments
/
organizations.
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International Business
R. M. Joshi
37
Inter-State Trade Council
Set up in order to ensure a continuous dialogue between
the state governments and Union Territories. It advises
the governments on measures for providing a healthy
environment for international trade with a view to boost
India’s exports.
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International Business
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38
States’ Cell in Ministry of Commerce
As an attempt to involve states in export promotion, the
Union Government has created a State’s Cell under the
Ministry of Commerce.
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39
Institutional Infrastructure for Export Promotion
by State Governments
The State Level Export Promotion Committee (SLEPC) headed by the Chief
Secretary is the apex body at state level promoting exports. It scrutinizes and
approves projects and overseas implementation of union government’s scheme
on Assistance to States for Development of Export Infrastructure and other
activities (ASIDE). Besides most states also promote exports either through
their industries department or a separate establishment.
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40