International Business

1 Regional Economic Grouping

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1. IMF-Objectives and Functions.

2. World Bank-Objectives and Functions.
3. ASEAN-Evolution and Structured importance.
4. SAARC.
5. European Union.
6. World Trade Organization.

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 International Monetary Fund
The IMF is an intergovernmental institution established by an international treaty in 1945 to create a
framework for international economic cooperation focusing on balance of payment problems and the
stability of currencies.
IMF headquarters is in Washington D.C , U.S.A
In the beginning ( 1945-2003 ) 29 member countries. In 2019, the number of member countries of IMF
was 189.
IMF was established to promote the health of world economy, international monetary corporation,
exchange stability and arrangements to foster economic growth
To provide assistance to ease the BoP adjustments.

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 International Monetary Fund
IMF was founded on 27th december,1945. During the closing years of World War Second, different
countries realized that there must be a common International Forum for achieving economy cooperation,
promoting International Trade and providing help to needy nations during emergency. So IMF was
formed for this purpose.
World War Second has its adverse effect on global economy. To remedy the situation, an international
monetary conference was convened in 1944, at Bretton Woods in America.
It was attended by the representatives of 44 countries. India also participated therein.
It was decided in this Conference to set up IMF for the economic development of all countries.

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 Objectives of International Monetary Fund
1. To promote International monetary cooperation
2. To ensure exchange rate stability
3. To ensure balanced international trade
4. To eliminate or minimize exchange restrictions by promoting the systems of multilateral payments
5. To minimize imbalance in quantum and duration of international trade.
6. To Provide Aid to Members during emergency
7. To reduce Disequilibrium in Balance of Payments
8. To promote balanced economic development

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 Functions of International Monetary Fund
1. The funds provide a mechanism for improving short-term BOP Position
2. Fund provides a machinery for international consultations
3. Technical Assistance
4. Imparts Training
5. Facilities during emergency
6. It serves as a short-term credit institutions
7. It aims at reducing tariffs and other trade transactions by member countries

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 World Bank
◉ The International Bank for Reconstruction and Development (IBRD), commonly referred to as the
World Bank, 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 opened for business in June 1946 and helped in
the reconstruction of nations devastated by World War II.
◉ Member countries repay the share amount to the World Bank in the following ways:
1. 2% of allotted share are repaid in gold, US dollar or Special Drawing Rights (SDR).
2. Every member country is free to repay 18% of its capital share in its own currency.
3. The remaining 80% share deposited by the member country only on demand by the World Bank.

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 Objectives of World Bank
1. To provide long-run capital to member countries for economic reconstruction and development.
2. To induce long-run capital investment for assuring Balance of Payments (BoP) equilibrium and
balanced development of international trade.
3. To provide guarantee for loans granted to small and large units and other projects of member
countries.
4. To ensure the implementation of development projects so as to bring about a smooth transference
from a war-time to peace economy.
5. To promote capital investment in member countries by the following ways;
(a) To provide guarantee on private loans or capital investment.
(b) If private capital is not available even after providing guarantee, then IBRD provides loans for
productive activities on considerate conditions.
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 Functions of World Bank
1. Granting reconstruction loan to war devastated countries
2. Granting developmental loans to underdeveloped countries
3. Providing loans to government for agriculture, irrigation, power, transport, water supply, education,
health etc.
4. Providing loans to private concerns for specified projects
5. Providing technical, monetary and economic advice to member countries for specific projects
6. Encouraging industrial development of under developed countries by promoting economic reforms

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 World Trade Organization
◉ Headquarters: Geneva, Switzerland
◉ Founded: 1 January 1995
◉ Membership: 164 member states
◉ Formation: 1 January 1995; India is a founder member
◉ Official language: English, French, Spanish
◉ Purposes: Regulation, International trade
◉ The World Trade Organization (WTO) is an intergovernmental organization that is concerned
with the regulation of international trade between nations. The WTO officially commenced on 1
January 1995 under the Marrakesh Agreement, signed by 124 nations on 15 April 1994, replacing
the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the largest
international economic organization in the world.
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 Functions of World TradeOrganization
◉ Administering WTO trade agreements
◉ Forum for trade negotiations
◉ Handling trade disputes
◉ Monitoring national trade policies
◉ Technical assistance and training for developing countries
◉ Cooperation with other international organizations

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 Principles of World TradeOrganization
◉ • Trade Without Discrimination
1. Most favored-nation (MFN): treating other people equally. Under the WTO agreements,
countries cannot normally discriminate between their trading partners. Grant someone a special favor
(such as a lower customs duty rate for one of their products) and you have to do the same for all other
WTO members.
2. National treatment: Treating foreigners and locals equally. Imported and locally-produced
goods should be treated equally — at least after the foreign goods have entered the market. The same
should apply to foreign and domestic services, and to foreign and local trademarks, copyrights and
patents.
◉ • Freer trade: gradually, through negotiation lowering trade barriers is one of the most obvious
means of encouraging trade. The barriers concerned include customs duties (or tariffs) and
measures such as import bans or quotas that restrict quantities selectively
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 Principles of World TradeOrganization
◉ • Predictability: through binding and transparency Sometimes, promising not to raise a trade
barrier can be as important as lowering one, because the promise gives businesses a clearer view of
their future opportunities. With stability and predictability, investment is encouraged, jobs are
created and consumers can fully enjoy the benefits of competition — choice and lower prices. The
multilateral trading system is an attempt by governments to make the business environment stable
and predictable.
◉ • Promoting fair competition The WTO is sometimes described as a “free trade” institution, but
that is not entirely accurate. The system does allow tariffs and, in limited circumstances, other
forms of protection.
◉ • Encouraging development and economic reform. The WTO system contributes to
development. On the other hand, developing countries need flexibility in the time they take to
implement the system’s agreements. And the agreements themselves inherit the earlier provisions of
GATT that allow for special assistance and trade concessions for developing countries.
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 ASEAN
1. ASEAN was created on August 8, 1967, in Bangkok, Thailand. It was founded by Indonesia,
Malaysia, Philippines, Singapore, and Thailand.
2. Brunei Darussalam joined on 8th January, 1984, Vietnam on 28th July, 1995 Laos and Myanmar on
23rd July, 1997 Cambodia on 30th April, 1999.

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 Objevctives of ASEAN
1. Association of Southeast Asian Nation
2. To accelerate the economic growth, social progress and cultural development to strengthen
3. To promote regional peace and stability through abiding justice and the rule of law in relationship
among countries. In 1995 the ASEAN heads of state and government re affirmed that “cooperative
peace and shared prosperity shall be the fundamental goals of ASEAN”.

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 Fundaental Princiles of ASEAN
1. Mutual respect for the independence, equality, territorial integrity and national identity of all the
nations.
2. The right of every state to lead its national existence free for external interference.
3. Non-interference in the internal affairs of the another.
4. Settlement of differences or disputes in peaceful manner
5. Renunciation of the threat or use of force.

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 SAARC
1. South Asian Association for Regional Cooperation is an organization of South Asian Nations,
established on 8th December, 1985.
2. Bangladesh, Bhutan, India, Nepal, Pakistan, Sri Lanka and Maldives were the founding members.
3. Meeting of heads are usually scheduled annually.
4. Meetings of foreign secretaries are held twice in a year.
5. Headquarter- Kathmandu

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 Objective of SAARC
1. To promote the welfare of people of South Asia and to improve their quality of life.
2. To accelerate economic growth, social progress and cultural development in the region
3. To promote and strengthen selective self reliance among the countries of South Asia.
4. To contribute to mutual trust, understanding and appreciation of one another’s problems.
5. To promote active collaboration and mutual assistance in the economic, social, cultural, technical an
scientific field
6. To strengthen cooperation with other developing countries.
7. To strengthen cooperation among themselves in international forums on matters of common interest.
8. To cooperate with international and regional organizations with similar aims and purposes.
9. To maintain peace in the region.

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 Principles of SAARC
1. Respect for territorial integrity, political equality and independence of all member states.
2. Non-interference in the internal matters
3. Cooperation for mutual benefits
4. All decisions to be taken unanimously and need a quorum of all 8 members. All bilateral issues to be
kept aside and only multilateral issues to be discussed without being prejudiced by bilateral issues.

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 European Union
1. The EU is a unique economic and political partnership between 28 European countries that together
cover much of the continent.
2. created in the aftermath of the Second World War.
3. the idea being that countries who trade with one another become economically interdependent and so
more likely to avoid conflict.

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 Functions European Union
1. To get countries using the Euro to enact fiscal policies that will keep the Euro stable.
2. aim to ensure free movement of people, goods, services, and capital
3. countries of the EU are supposed to have uniform laws and policies concerning a variety of things
(like immigration, labor, weights and measures -- all sorts of things).

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 Benefits of European Union
1. European harmony- Europe has managed to heal the divisions which were so painfully exposed in
the World War –II. EU was awarded the Nobel Peace Prize in 2012 for helping to promote peace and
international co-operation.
2. Free trade within the bloc- Free trade and removal of nontariff barriers have helped reduce costs and
prices for consumers.
3. Market access and trade creation- Easier access to each other’s markets & high cost domestic
producers to be replaced by lower cost, and more efficient imports.
4. Flexible Economy- Free movement of labor and capital have helped create a more flexible economy
& the immigration of workers helped to fill labor market shortages.
5. Protection- Firms inside the bloc are protected from cheaper imports from outside, such as cheap
imports from China and Vietnam.

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Thanks!

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