C 4 INSTITUTIONAL FRAMEWORK FOR INTERNATIONAL BUSINESS Copyright

C 4 INSTITUTIONAL FRAMEWORK FOR INTERNATIONAL BUSINESS Copyright @ Oxford University Press International Business R. M. Joshi 1

Learning Objectives n n 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 Copyright @ Oxford University Press 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. Copyright @ Oxford University Press International Business R. M. Joshi 3

World Bank Group n n World Bank The International Bank for Reconstruction and Development (IBRD) n International Development Association (IDA) n International Finance Corporation (IFC) n n The Multilateral Investment Guarantee Agency (MIGA) The International Centre for Settlement of Investment Disputes (ICSID) Copyright @ Oxford University Press 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: n n The International Bank for Reconstruction and Development (IBRD) The International Development Association (IDA). Copyright @ Oxford University Press International Business 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. Copyright @ Oxford University Press 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. Copyright @ Oxford University Press International Business R. M. Joshi 8

UN’s Millennium Development Goals n Eradicate extreme poverty and hunger n Achieve universal primary education n Promote gender equality and empower women n Reduce child mortality n Improve maternal health n Combat HIV / AIDS, malaria, and other disease n Ensure environmental sustainability n Develop a global partnership for development Copyright @ Oxford University Press International Business R. M. Joshi 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. Copyright @ Oxford University Press International Business R. M. Joshi 10

The Multilateral Investment Guarantee Agency (MIGA) Established in 1988, the MIGA provides noncommercial guarantees (insurance) 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. Copyright @ Oxford University Press 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. Copyright @ Oxford University Press 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 1930 s. Copyright @ Oxford University Press International Business R. M. Joshi 13

The United Nations Conference on Trade and Development (UNCTAD) In the early 1960 s, 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. Copyright @ Oxford University Press International Business R. M. Joshi 14

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 Copyright @ Oxford University Press International Business R. M. Joshi 15

UNCTAD-XII The last UNCTAD XII held in Accra in Ghana during 20 -25 April, 2008, based on theme of ‘addressing the opportunities and challenges of globalization for development’. Copyright @ Oxford University Press International Business R. M. Joshi 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. Copyright @ Oxford University Press International Business R. M. Joshi 17

Common Fund for Commodities A Common Fund for Commodities (CFC) was established in 1989 with the objectives: n n 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. Copyright @ Oxford University Press 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. Copyright @ Oxford University Press 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. Copyright @ Oxford University Press 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. Copyright @ Oxford University Press International Business R. M. Joshi 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. Copyright @ Oxford University Press 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. Copyright @ Oxford University Press 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: n Identifying trade and investment needs of local firms n Keeping a watch on international business environment affecting country’s trade n Gathering, compiling and disseminating information n Spotting opportunities for international trade and investment Copyright @ Oxford University Press International Business R. M. Joshi 24

Matchmaking between buyers and sellers n Organizing trade missions, trade delegations, buyerseller meets, etc. n Facilitating participation and organizing trade exhibitions n Networking with foreign trade promoting organizations n Carrying out generic market promotion and marketing services n Copyright @ Oxford University Press International Business R. M. Joshi 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. Copyright @ Oxford University Press International Business R. M. Joshi 26

Institutional Framework for International Trade in India n Department of Commerce • Economic Division • Trade Policy Division • Foreign Trade Territorial Division • Export Product Division • Export Industries Division • Export Services Division Copyright @ Oxford University Press International Business R. M. Joshi 27

n Department of Commerce • Subordinate offices n Directorate General of Foreign Trade (DGFT) n Directorate General of Commercial Intelligence and Statistics (DGCI&S) n Directorate General of Anti-Dumping and Allied Duties (DGAD) Copyright @ Oxford University Press International Business R. M. Joshi 28

Advisory Bodies • Board of Trade • Export Promotion Board Copyright @ Oxford University Press International Business R. M. Joshi 29

Commodity Organizations Export Promotion Council n Engineering n Project n Pharmaceuticals n Basic chemicals, pharmaceuticals, and cosmetics n Chemicals and allied products n Leather n Sports goods n Gems and jewellery n Shellac n Cashew n Plastic n Apparel Copyright @ Oxford University Press International Business R. M. Joshi 30

n n n n n EOUs and SEZs Carpet Cotton textiles Handicrafts Handloom Indian silk Synthetic and Rayon textile Wool and woollens Powerloom Copyright @ Oxford University Press International Business R. M. Joshi 31

Commodity Board n n n n n Tea Board Coffee Board Coir Board Central Silk Board All-India Handlooms and Handicraft Board Rubber Board Cardamom Board Tobacco Board Spices Board Copyright @ Oxford University Press International Business R. M. Joshi 32

Autonomous Bodies • Agriculture and Processed Food Products Export Development Authority (APEDA) • Marine Products Export Development Authority (MPEDA) Copyright @ Oxford University Press International Business R. M. Joshi 33

Service Institutions n n n n n Indian Institute of Foreign Trade (IIFT) Export Inspection Council (EIC) Indian Council of Arbitration (ICA) 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) Copyright @ Oxford University Press International Business 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: n State Trading Corporation (STC) n Minerals and Metals Trading Corporation (MMTC) n Spices Trading Corporation Limited (STCL) n Metal Scrap Trading Corporation (MSTC) Copyright @ Oxford University Press International Business R. M. Joshi 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. Copyright @ Oxford University Press 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 Inter. State Trade Council, States’ Cell in Ministry of Commerce and state government departments / organizations. Copyright @ Oxford University Press 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. Copyright @ Oxford University Press International Business R. M. Joshi 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. Copyright @ Oxford University Press International Business R. M. Joshi 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. Copyright @ Oxford University Press International Business R. M. Joshi 40