1

INSTITUTIONAL

FRAMEWORK

FOR

INTERNATIONAL BUSINESS

AMIT SINGLA
 Learning Objectives
2

 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
 International Economic Institutions
3

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.
 World Bank Group
4

 World Bank  The World Bank is the

 The International Bank for International Bank for
Reconstruction and Development Reconstruction and
(IBRD) Development (IBRD) and the
 International Development International Development
Association (IDA) Association (IDA). The IBRD
 International Finance Corporation has two affiliates, the
(IFC) International Finance
 The Multilateral Investment Corporation (IFC) and the
Guarantee Agency (MIGA) Multilateral Investment
 The International Centre for Guarantee Agency (MIGA). The
Settlement of Investment Disputes Bank, the IFC and the MIGA are
(ICSID) sometimes referred to as the
“World Bank Group”.
 World Bank
5

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 for Reconstruction and

Development (IBRD)

 The International Development Association (IDA).

 The International Bank for Reconstruction
and Development (IBRD)
6

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.
 International Development Association (IDA)
7

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.
 UN’s Millennium Development Goals
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 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
 International Finance Corporation (IFC)
9

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.
 The Multilateral Investment Guarantee
Agency (MIGA)
10

Established in 1988, the MIGA provides non-

commercial 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 non-
commercial risks, such as expropriation, currency
inconvertibility, breach of contract, war, and civil
disturbances.
 The International Centre for Settlement
of Investment Disputes (ICSID)
11

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.
 International Monetary Fund (IMF)
12

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.
 The United Nations Conference on Trade
and Development (UNCTAD)
13

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

 UNCTAD-XII
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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’.
Generalized System of Preferences (GSP)
16

It is a non-contractual instrument by which industrialized

(developed) countries unilaterally, and on the basis of non-
reciprocity, 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.
 Common Fund for Commodities
17

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.
 Global System of Trade Preference
(GSTP) among Developing Countries
18

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.
World Intellectual Property Organization
(WIPO)
19

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.
 United Nations Industrial Development
Organization (UNIDO)
20

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.
 Asian Development Bank (ADB)
21

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.
 United Nations Economic and Social Commission for
Asia and the Pacific (UN-ESCAP)
22

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.
 Organizations for International Trade Promotion
23

Almost all countries have set-up international trade

promotion organizations. Such organization usually carries
out one or more of the following activities:
 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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 Matchmaking between buyers and sellers

 Organizing trade missions, trade delegations,
buyer-seller meets, etc.
 Facilitating participation and organizing trade
exhibitions
 Networking with foreign trade promoting
organizations
 Carrying out generic market promotion and
marketing services
 Import Promotion Organizations
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 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 (Centre for the
Promotion of Imports from Developing
 Countries (Netherlands), JETRO (Japan External Trade
Organization), SIPPO (Swiss Import Promotion Programme),
etc.
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 Institutional Framework for International
Trade in India
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 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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 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)
 Advisory Bodies
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 Board of Trade

 Export Promotion Board

 Commodity Organizations
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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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 EOUs and SEZs

 Carpet
 Cotton textiles
 Handicrafts
 Handloom
 Indian silk
 Synthetic and Rayon textile
 Wool and woollens
 Powerloom
 Commodity Board
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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
 Autonomous Bodies
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 Agriculture and Processed Food Products Export

Development Authority (APEDA)
 Marine Products Export Development Authority
(MPEDA)
 Service Institutions
34

 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)
 Government Participation in Foreign Trade
35

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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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.

 States' Involvement in Promoting Exports
37

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.

 Inter-State Trade Council
38

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.
 States’ Cell in Ministry of Commerce
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As an attempt to involve states in export promotion, the

Union Government has created a State’s Cell under the
Ministry of Commerce.
 Institutional Infrastructure for Export
Promotion by State Governments
40

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.