Institutional Suppor? to International Business rar 63 UNIT - I: INTERNATIONAL ECONOMIC INSTITUTIONS AND REGIONAL GROUPINGS Chapter 3 INSTITUTIONAL SUPPORT TO INTERNATIONAL BUSINESS 3.1 Introduction 3.2 Role of IMF ~ 3.3. Role of World Bank 3.4 Role of ILO 3.5 Role of UNCTAD 36 Role of UNIDO 37 Role of ADB 3.8 World Trade Organization (WTO) 3.8.1 Origin 3.8.2 Objectives and Functions 3.8.3 Principles of WTO 3.8.4 Key Subjects in WTO - Objectives Type Questions with Answer - Questions for Self-Practice ———————————————S 3.1 INTRODUCTION: There are several international organizations that fund and assist the development of nations and are important to business. The influence of some of them like IMF, World Bank and Regionalvit vor ike Asian Dev se economic P lopment Bank (ADB) j rlicies and programs ¢f 1 assistance fom th Jicies and conditions as several schem Sons. The IME has 5 a itn ee ea fo erent pes of hcl 25a lems ao Froid Bank and Regional, Developm Assistance from TN" ces of public investment in a number set ee ge countries and sete vite and it is manda pre acta 2 Pge projects funded bY they tht cond Py got tendering, That my asia business in forig| ias.g also stand a chance t0 get sin fos a sistance tothe private sector. «2 rumen B15 (8) (| evelopment Ba | 32. INTERNATIONAL MONETARY FUND (IMP): ‘The International Monetary Fund ((ME) is an internation organization, the idea of which was initiated in 1944 at the Breton Weods Conference and formally created on 27th December, 1955 with 29 member countries, headquartered at Washington, DC re behind establishment of IMF was to assist he ‘The prime objective is countries which were devastated and help in the reconstruction of the world’s intemational payment system post World War I The tnechanism, through which IMP works is that the member Counties contribute funds toa pool through a quota system frm which countries. with payment imbalances. can temporary borrow money and other resource. The IMF is an organization with a membership of 189 (Nau, being the latest entrant on April 128, 2016) countries, working t foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic grovth, and reduce poverty around the A Mestly kelp Bes | He Mstly help Bop institutional Support to Internationa Bs wr 8 countries to adopt sound economic a haere (Organization and Management of IMF: ‘The FUND has a Board of Governors —_ anny net ett of Governor, 24 exrative dizer 2 (a) Board of Governors: All powers of the IMF are vested in its Board of Governors, on which all member Countries are represented. Each member country appoints one governor and one alternate govemor, who may vote when the principal governor i absent. A goverment customarily aproints ts minister of finance, the president of its central bank, or another high-ranking official as its governor. Executive Board: The 24 executive directors (and 24 alternates) of the IMF are responsible for the FUND'S general operations. They function in continuous session at the Fund's headquarters and meet as often as business may requize, usually several times a week. Of the 24 executive directo five are appointed by the countries having the largest quotas (United States, Japan, Germany, France, and the United Kingdom), and the other 19 are elected by regional groups of the remaining members. The IMF’s managing director also serves as chairman of the Executive Board Managing Director and Staff: The managing director, who is chosen by the executive directors, is responsible for the conduct of the ordinary business of the Fund. He is appointed for a five-year term and may not serve concurrently as 2 governor or executive director of the IMF. The managing director chairs meetings of the executive dizectors but may’ vote only in case ofa tie. Role of IMF: ‘The organization's objectives are stated in the Articles of ‘Agreement are as follows: (@) To promote international monetary co-operation through consultation on international monetary problems. (@) To facilitate the expansion and balanced growth of Intemational trade, and to promote high levels of ‘employment and real income. o @viput's™ international Business (88!) (CKM) iput’s™ Inte 6 cer bility, fo promote exchange stal Torrone among mene exchange depres lishment of a multilateral system of in the establishment of al spt a oe aaa ‘eliminate foreign exchang¢ restrictions a id trade, Mihich hamper the growth of 0 i eeeovide. members temporary fonds to come Fe agjustments in their balance of payments, ; maladies igenuibrium in their international balances of degree of disequil payments. a To promote and develop international ta Tobe acatalystin the convertibility of currencies To provide necessary machinery for consultation and stlaboration on international monetary problems al ee me functions: to maintain orderly exchange Q) ‘and to avoid competitive a © © a ® (1) Monitors economic and financial developments and policies, in member countries and at the global level, and give policy advice to its members based on its more than fifty years of experience, Lends to member countries which have balance of paymen's | problems, not just to provide temporary financing but '9| support adjustment and reform policies aimed at correcting | the underlying problems. Provides technical assistance and training in its areas of expertise to the governments and central banks of its membet countries. @ } Insitutlonel Support to International Business ror 6s 33 WORLD BANK: Introduction: The International Bank for Re feconstruction and Development (IBRD), commonly referred to as the World Bank, originated as a result of the Bretton Woods Conference of 1944, is one of the largest sources of development assistance and it has extended assistance to more than 100 developing economies’. The World Bank is like a cooperative, made up of 189 member countries. It is an international financial institution whose purposes include assisting the development of its member nation’s territories, promoting and supplementing private foreign investment and promoting long-range balance growth in international trade. The World Bank was established in December 1945 at the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire, It started functioning in June 1946 and helped in the reconstruction of nations devastated by World War Il, Since 1960s the World Bank has shifted its focus from the advanced industrialized nations to developing third-world countries. ‘The World Bank Group consists of five closely associated institutions, namely International Bank for Reconstruction é Development, (IBRD), International Development Association ({DA), International Finance Corporation (IFC), The Multilateral Investment Guarantee Corporation (MIGA),and The International Centre for Settlement of Investment Dispute (ICSID), each institution playing a distinct role in the mission to fight poverty and improve living standards for people in the developing world. Organizational Structure: ‘The organization of the bank consists of the Board of Governors, the Board of Executive Directors and the Advisory Committee, the Loan Committee and the president and other staff ‘members. All the powers of the bank are vested in the Board of Governors who the supreme policy is making body of the bank. ‘The board consists of one Governor and one Alternative Governor appointed for five years by each member country. Each Governor hhas the voting power which is related to the financial contribution of the Government which he represents.jm ternational Business (881) (CK) | vipa 66 consists of 25 members, 6 of vor ie Oe shareholders, namely the of Erect Te oan ed By he 3s a Theres them ate PP Germany FARCE ne is. Each USA, the pass are elected by ——_ tion to the shares | a a tng Powe PE Ted by the Board of fie ofthe Bank and he | ee jointed by the Board of | Wwisory committee is appoint os ek, The Ady rete bay now. 28 the Te tors Ts committee is consulted by the bank before any ‘Committee. This coms oan is extended to a member country (Objectives of World Banke ‘The following are the objectives mng-run capital tom truction and development. 1 investment for assuring Balance of lanced development of of the World Bank: ember countries for (a) To provide lor economic recons To induce long-run capital Payments (BoP) equilibrium and bal international trade. To provide guarantee for loans granted to small and large units and other projects of member countries. To ensure the implementation of development projects of the member countries. | To promote capital investment in member countries by the following ways; a (@ To provide guarantee on private loans or capitil investment, ‘ If private capital is not available even after providing guarantee, then IBRD provides loans for productive activities on considerate conditions. Functions of World Bank: World Bank is playing primary role of providing loans f development work to” member countries, especially © underdeveloped countries. The World Bank provides long:te™® loans for various development projects of § to 20 years duration. o © @ ) i Insttutionol Support to Internation Business var ‘The main functions can be explained with the help of the following points: (@) World Bank provides various technical services to the ‘member countries, For this purpose, the Bank has established. the Economic Development Institute and a Staff College in Washington () Bank can grant loans to a member country up to 20% of its share in the paid-up capital. “ee (@) The quantities of loans, interest rate and terms and conditions are determined by the Bank itself (@) Generally, Bank grants loans for a particular project duly submitted to the Bank by the member country. (e)_ The debtor nation has to repay either in reserve currencies or in the currency in which the loan was sanctioned. (© Bank also provides loan to private investors belonging to member countries on its own guarantee, but for this loan private investors have to seek prior permission from those ‘counties where this amount will be collected. a ntemational Labour Organisation (ILO) is the most important ‘organisation in the world level and it has been working for the benefit of the workers throughout the world. It was established in the year 1919. * It is a tripartite (Three-party) body consisting of representatives of the Government, Employer, workers. * It functions in a democratic way by taking interest for the protection of working class throughout the world. + It is also working at the international level as a ‘saviour of workers’ ‘protector of poor’ and it is a beacon light for the ‘change of social justice and social security. + It examines each and every problem of the workers pertaining to each member country and discusses thoroughly in the tripartite body of all the countries© international Business (231 vor vipat nt a : pases many Conventions ane Recommendations +1 pases jects like Social Security Basic Human Righy Gfellare Measuresand Collective Bargaining Mae paste of Conventions and Recommendations of Ip + On the Meniry incorporates. its recommenclations carer of protecting te interest of the IabouF against hy exletation of cptalits owes ts origin t0 the philanthpi Seangy of early thinkers and philosophers) and famous am i8eology spert Oven” who being himself an employer took regulating hazardous working conditions of the inte and azo in human conditions under which the worker wring cushed undemeath the giant wheels of production, Painciples that gave the birth to ILO: ome ofthe reasons/factors lead to the establishment of ILO {Universal peace can be established only if itis based on socal | justice and socal justice implies the working of the equitable | conditions of labour. (2) Regulation of labour conditions must be accomplished intemationally because “the failure of any nation to adopt human conditions for labour is an obstacle in the way ofthe cther nations which desire to improve the conditions of Jnbourin their own countries. (0) Examples of methods for improving conditions of labour are indicated as below: G) Establishment of maximum working days and week | (©) Prevention of unemployment | (© Provision of adequate living wage | (@) Protection of labour against sickness, disease and injury arising out of his employment (©) Protection of children women and young persons | (Provision for old-age Toachieve above mentioned objectives and to implement thest principles, the Peace Treaty prescribed that a permanent | ‘organisation should be established and thus, the ILO came into Insttutionol Support to international Business mr 6 existence in the year 1919. Article 1 of the ILO Constitution stipulated that “A permanent organisation is hereby established for the promotion of the objectives set forth inthe preamble to this constitution”. Objectives of ILO: Some of the objectives of ILO are as follows: (@) Full employment and the revising of standards of living. (©) The employment of workers in the occupation in which they can have the satisfaction of giving the fullest measure of their skill and make their contribution to the common well-being. (0 The provision, as means to the attainment of this end, and under adequate guarantees for all concemed, of facilities for, training and the transfer of labour, including migration for ‘employment and settlement. (€) Policies in regard to wages and earning forms and other conditions of work. Calculate to ensure a just share of the fruits of progress to all, and a minimum living wage to all, employed and in need of protection. (©) The effective recognition of the right of collective bargaining, the co-operation of management and labour in the continuous improvement of productive efficiency and the collaboration, of workers and employers in social and economic measures. (©) The extension of social security measures to provide a basic income to all in need of such protection and comprehensive ‘medical care. (® Adequate protection forthe life and health of workers in all ‘occupations. (4) Provision for child welfare and maternity protection. The above can be summarized, that ILO has four principle strategic objectives: ‘© to promote and realize standards and fundamental principles and rights at work. «to create greater opportunities for women and men to secure decent employment. + to enhance the coverage and effectiveness of social protection forall7 wwe ‘+ tostrengthen tripartism and social dialogue. TLO in India-Overview: India, a Founding Member"of the ILO, has been a permanen, member of the ILO Governing Body since 1922. The first 119 Office in India started in 1928. The decades of productive partnership between the ILO and its constituents has mutual trust na respect 2s underlying principles and is grounded in building Sustained institutional capacities and strengthening, capacities of painers. It has a two-direcional focus for socio-economic ‘evelopment: overall strategies and ground-level approaches, ‘The 1LO’s overarching goal is Decent Work, i.e, promoting copportuities for all women and men to obtain decent and, productive work in conditions of freedom, equity, security and Eignity. Decent Work is at the heart of ILO's strategies for teconomic and social progress, central to efforts to reduce poverty fand a means to achieve equitable, inclusive and sustainable evelopment India’s 11th Plan’s vision of faster and inclusive growth through a process which yields broad-based benefits and fensures equality of opportunity forall with a strong emphasis on decent working and living conditions for all. TLO’s current portfolio in India centres around child labour, preventing family indebtedness employment, skills, integrated approaches fr local socio-economic development and livelihoods promotion, green jobs, value-addition into national programmes, ‘micro and. small enterprises, social security, HIV/AIDS, migration, industrial relations, dealing with the effects of globalization, productivity and competitiveness, etc. ‘The Decent Work Technical Support Team (DWT) for South Asia stationed in New Delhi, through its team of Specialists, provides technical support at policy and operational levels to ‘member States inthe sub-region. Vip’ iterations! Busines (281) (cy) 35. UNCTAD: Introduction: Globalization, including a phenomenal expansion of trade, has helped lift millions out of poverty. But not neaely enough people have benefited. And tremendous challenges remain, The need fot Insittional Supper to International susiness = STE n reducing disparities between the rich a w 2 the global evel. Parca. deveopoy seam iy Ace ‘Arca and Latin America realized the importance af global efforts tobe undertsken inthis direction. In order to full his, te United lations Conference on Trade and Development (UNCTAD) came to be slablshed on 208 December, 1964. UNCTAD, wacquartered in Geneva, is a permanent inergovernment established by the United Nations General assay. UNCTAD functions as a forum for intergovernmental deliberations, supported by discussions with experts and exchanges of experience, aimed at consensus building. It undertakes research, policy analysis and data collection for the debates of government representatives and experts. It provides technical assistance tailored to the specific requirements of developing countries, with special attention to the needs of the Teast developed countries and of economies in transition. When appropriate, UNCTAD cooperates with other organizations and donor countries in the delivery of technical assistance. The organisation caries out three key Functions: + 1k functions as a forum for _intergovernmental deliberations, supported by discussions with experts and exchanges of experience, aimed at consensus building It undertakes research, policy analysis and data collection for the debates of government representatives and experts. + It provides technical assistance tailored to the specific requirements of developing countries, with special | attention to the needs ofthe least developed countries and ‘of economies in transition. si Pipe of UNCTAD. “tn Lntrnc aln196¢ i don UNCTAD’ acon | programme and priorities, The various recommendations are | based on the following principles: | TSG) See cou ts te epee igh to ely pose of Be te ie ef ts comers 1 a ere eae wi or ote el sage equity ot Snes sh Pee Oe a novices tea wr ‘vipat international Business (28) (Ckygy internal affairs are the principles which guide trade ang erlatons betwen counties vere shall be no discrimination on the basis of differences weshods and. policies shall be consistent with this principle. Objectives of UNCTAD: | ; "ON General Assembly has laid down certain essential functions of UNCTAD. Accordingly, it shall promote accelerated development of the less developed repions of the workd by Gealing properly with the problem of slow expansion of exports see ertheless developed counties. ‘The objective of UNCTAD is (a) to reduce and eventually eliminate the trade gap between the developed and developing Countries, and (b) and to accelerate the rate of economic growth of the developing world. ‘Other important objectives/ functions of UNCTAD are as follows: (0) To promote international trade between the developed and underdeveloped countries with a view to accelerating, economic development, special emphasis should be laid ‘upon the accelerated development of the underdeveloped countries. (2) To formulate the principles and policies on International trade. @) Tonegotiate multinational trade agreements. @ To make proposals for implementing its principles and policies into effect. © To promote research and support negotiations for commodity agreements, technical elaboration of new trade activities designed to assist in the areas of trade and capital for developing countries © To generally review and coordinate the attivities of other “institutions within the fold of United Nations relating 0 international trade and economic development. (7) To act asa centre for harmonious trade related policies of governments and regional economic groupings. economi Institutional Supporto Interationel Business 36 _ UNID Introduction: ‘The United Nations Industrial Development Organization (UNIDO) was established in 1967, It isa 5 ol ageey of fe . specialized agency o} United Nations. It is a coordinating body central to the promotion of industrial development. Its work is manifested in three main forms: industrial technology coordinating centre, industrial cooperation mediation, collection and systematization of information on industrial issues. Mandate for UNIDO is to promote and accelerate sustainable industrial development in developing countries and economies in transition, and work towards improving living conditions in the world’s poorest countries by drawing on its combined global resources and expertise. UNIDO works with developing countries and economies in transition, where it promotes and accelerates industrialization as a source of economic growth needed to fight poverty. At the same time, it helps protect the environment by supporting clean and. sustainable industrial development. As a technical cooperation agency, it designs and implements programmes focused on three thematic priorities, which directly respond to global development priorities. These priorities are: () Poverty reduction through productive activities: As a primary driver of economic growth and employment creation, the private sector has a central role in poverty reduction and the achievement of the Millennium Development Goals. Private sectorled industrial development makes a significant contribution to bringing about the much needed structural changes that can set the economies of poor countries on a path of sustained economic growth. UNIDO’s services therefore focus on encouraging the ‘creation of decent employment and income to overcome poverty. Now, these services are customized for developing countries and range from industrial policy advice to entrepreneurship and SME development, and from investment and technology promotion to the provision of rural energy for productive uses.