UNCTAD Basic Principles and Major Achievements,
UNCTAD is principal organ of United Nations General Assembly (UNGA). It was established
in 1964 and its permanent secretariat is in Geneva.
Its primary objective is to formulate policies relating to all aspects of development including
trade, aid, transport, finance and technology. It ordinarily meets once in four years.
UNCTAD help countries to:
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Understand choices to address macro-level development challenges (GST / Subsidy)
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Achieve beneficial integration into the international trading system
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Diversify economies to make them less dependent on commodities
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Limit their exposure to financial volatility and debt
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Attract investment and make it more development friendly
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Increase access to digital technologies
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Promote entrepreneurship and innovation
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Help local firms move up value chains
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Speed up the flow of goods across borders
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Protect consumers from abuse
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Curb regulations that obstruct competition
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Adapt to climate change and use natural resources more effectively
Achievements of UNCTAD
1. To promote exports of manufactured goods from developing countries, it would be necessary
to offer special tariff concessions to such exports. Accepting this argument, the developed
countries formulated the GSP (Generalized System of Preferences) scheme under which
manufacturers' exports and import of some agricultural goods from the developing countries
enter duty-free in the developed countries. Since imports of such items from other developed
countries are subject to the normal rates of duties, imports of the same items from developing
countries would enjoy a competitive advantage.
2. Wide fluctuations in the prices of commodity products being exported by developing
countries cause hardship to them.
To stabilize the prices of commodities, UNCTAD suggested creation of buffer stock.
A common fund to stabilize the prices of primary products was created under a programme
called integrated programme on commodities. The initial contribution to the fund is 750 million
dollars
3. Large amount of loans are obtained by underdeveloped countries. UNCTAD persuaded the
creditors in the developed countries to write-off a part of the debts accumulated.
Role of IMF
The IMF promotes itself as “an organization of 190 countries, working to foster global
monetary cooperation, secure financial stability, facilitate international trade, promote
high employment and sustainable economic growth, and reduce poverty around the
world.”
It was created in 1944 at the end of World War II, as part of the Bretton Woods Agreement.
The agreement sought to create a monetary and exchange rate management system that might
prevent a repeat of the currency devaluations that contributed to the economic challenges of
that period.
Objectives of IMF
To promote international monetary cooperation
To Ensure Stability in Foreign Exchange Rates
To Eliminate Exchange Control
To Promote Investment of Capital in Backward and Underdeveloped Countries
To facilitate a balanced international trade.
To promote high employment through economic assistance and sustainable economic growth.
To reduce poverty around the world
All of the IMF’s initiatives are self-funded by its members. The organization’s headquarters
is in Washington, D.C.
The IMF's resources mainly come from the money that countries pay as their capital
subscription (quotas) when they become members. Each member of the IMF is assigned a
quota, based broadly on its relative position in the world economy.
IMF Activities (Roles)
The IMF's primary methods for achieving these goals are monitoring capacity building and
lending.
Surveillance
The IMF collects massive amounts of data on national economies, international trade, and the
global economy in aggregate. The organization also provides regularly updated economic
forecasts at the national and international levels. These forecasts, published in the World
Economic Outlook, are accompanied by lengthy discussions on the effect of fiscal, monetary,
and trade policies on growth prospects and financial stability.
Capacity Building
The IMF provides technical assistance, training, and policy advice to member countries
through its capacity-building programs. These programs include training in data collection
and analysis, which feed into the IMF's project of monitoring national and global economies.
Staff from the IMF’s headquarters may meet with country officials in person or remotely, or
work in the country as a resident adviser. The IMF also offers a global network of regional
capacity development centres, and classroom and online training for officials in member
countries
Lending
The IMF makes loans to countries that are experiencing economic distress to prevent or
mitigate financial crises. Members contribute the funds for this lending to a pool based on a
quota system.
IMF lending gives countries breathing room to adjust policies in an orderly manner, paving
the way for a stable economy and sustainable growth.
IMF funds are often conditional on recipients making reforms to increase their growth
potential and financial stability. Structural adjustment programs, as these conditional loans
are known, have attracted criticism for worsening poverty and reproducing colonialist
structures.
Unlike development banks, the IMF does not lend for specific projects. Instead, the IMF
provides financial support to countries hit by crises to create breathing room as they implement
policies that restore economic stability and growth. It also provides precautionary financing to
help prevent crises
Where Does the IMF Get Its Money?
The IMF gets its money through quotas and subscriptions from its member countries. These
contributions are based on the size of the country's economy, making the U.S., with the world's
largest economy, the largest contributor.
What Is the Difference Between the International Monetary Fund and the World Bank?
The International Monetary Fund is primarily focused on the stability of the global monetary
system and monitoring the currencies of the world.
The aim of the World Bank is to reduce poverty across the world and strengthen the low- to
middle-class populations.
The World Bank
The World Bank Group, like the IMF, was created at Bretton Woods in 1944.The group is
self-funded and has its home office in Washington, D.C. Its goal is to provide “financial and
technical assistance to developing countries around the world” in an effort to “reduce
poverty and support development.” It consists of five underlying institutions, the first two
of which are collectively referred to as The World Bank.
1. International Bank for Reconstruction and Development (IBRD). This is the
World Bank's lending arm. It provides financial assistance to credit-worthy, middleand low-income nations.
2. International Development Association (IDA). IDA provides loans and grants to
poor countries.
3. International Finance Corporation (IFC). In contrast to the World Bank, which
focuses its efforts on governments, the IFC provides money and advice to private
sector entities.
4. Multilateral Investment Guarantee Agency. MIGA seeks to encourage foreign
direct investment in developing nations.
5. International Centre for Settlement of Investment Disputes. ICSID provides
physical facilities and procedural expertise to help resolve the inevitable disputes that
arise when money is at the heart of a disagreement between two parties.
Features of IBRD
The International Bank of Reconstruction and Development (IBRD) is a development bank
administered by the World Bank. The IBRD offers financial products and policy advice to
countries aiming to reduce poverty and promote sustainable development. The International
Bank of Reconstruction and Development is a cooperative owned by 189 member countries.
The International Bank of Reconstruction and Development (IBRD) is one of the two major
institutions that make up the World Bank, with the other being the International Development
Association (IDA). The IDA is a financial institution dedicated to making developmental
loans to the world’s poorest countries. The IBRD was founded in 1944 with the goal of
helping war-torn European countries rebuild their infrastructure and their economies.
Following the recovery from World War II, the International Bank of Reconstruction and
Development broadened its mandate to increasing global economic growth and
eliminating poverty. Today, the IBRD focuses its services on middle-income countries or
countries where the per capita income ranges from $1,026 to $12,375 per year.
The goal of the International Bank of Reconstruction and Development is to provide financing
and economic policy advice to help the leaders of middle-income countries navigate the path
toward greater prosperity. It will often help finance infrastructure projects that grow a
country’s economic potential while helping governments manage public finances and
cultivate the confidence of foreign investors.
IBRD’s Services
Through partnership with MICs and creditworthy poorer countries, IBRD offers innovative
financial solutions, including financial products (loans, guarantees, and risk management
products) and knowledge and advisory services to governments at the national and
subnational levels.
IBRD finances investments across all sectors and provides technical support and expertise at
each stage of a project. IBRD’s resources not only supply borrowing countries with needed
financing, but also serve as a vehicle for global knowledge transfer and technical assistance.
Advisory services in public debt and asset management help governments, official sector
institutions, and development organizations build institutional capacity to protect and expand
financial resources.
IBRD supports government efforts to strengthen public financial management as well as
improve the investment climate, address service delivery bottlenecks, and strengthen policies
and institutions.
WTO
Role and Advantage of WTO
Created in 1995, the World Trade Organization (WTO) is an international institution that
oversees the rules for global trade among nations. It superseded the 1947 General Agreement
on Tariffs and Trade (GATT) created in the wake of World War II.
The WTO is essentially an alternative dispute or mediation entity that upholds the
international rules of trade among nations. The organization provides a platform that allows
member governments to negotiate and resolve trade issues with other members. The WTO’s
main focus is to provide open lines of communication concerning trade among its members.
The WTO attempts to mediate between nations in order to benefit the global economy.
Once negotiations are complete and an agreement is in place, the WTO offers to interpret the
agreement in case of a future dispute
The Role of WTO
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Tribunal - The World Trade Organisation serves as a commerce tribunal where
members can protest about other members who disobey the rules of international trade.
Over 400 grievances have been submitted by WTO members since 1995.
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Monitor - The WTO routinely examines the trade policy of its members. These
evaluations determine whether WTO members follow WTO regulations and calculate
the effect of home policy on global commerce.
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Trainer - About 26% of training activities in 2011 were conducted in Africa.
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Optimal Utilisation of the World's Resources - The WTO accords must include special
clauses for the least-developed economies to ensure the best possible use of the world's
resources. These are a few examples of such initiatives with greater trade opportunities,
longer deadlines for implementing obligations, and assistance with developing the legal
infrastructure.
Advantages of WTO
1. Reducing Trade Barriers – One of the most important benefits of WTO is that it helps
in reducing trade barriers such as tariffs, quotas, and subsidies. This makes it easier
for countries to trade with each other, which in turn, helps in increasing economic
growth and reducing poverty.
2. Encouraging Fair Trade – WTO promotes fair trade by ensuring that all member
countries follow the same trade rules and regulations. This helps in creating a level
playing field for all countries, especially developing countries, which often face
discrimination in global trade.
3. Providing a Platform for Negotiation – WTO provides a platform for member
countries to negotiate and resolve their trade disputes. This helps in avoiding costly
trade wars and ensures that disputes are resolved in a peaceful manner.
4. Supporting Developing Countries – WTO provides technical assistance and
training to developing countries to help them improve their trade capacity. This helps
in promoting sustainable development and reducing poverty.
5. Boosting Global Economic Growth – WTO promotes international trade, which in
turn, helps in boosting global economic growth. This creates new job opportunities,
increases productivity, and leads to a better standard of living for people around the
world.
Country Attractiveness
Country attractiveness is a measure of a country’s attractiveness to the international
investors.
‘Country Attractiveness Analysis (CAA)’ provides in-depth screening for selecting and
entering foreign markets. The process for evaluating foreign markets for potential entry
typically consists of three stages – the Preliminary Screening stage, the in-depth
screening page and the final selection.
Preliminary Screening stage
In the Preliminary Screening stage, potential countries are evaluated on macro-level
indicators such as political stability, economic development, geographic distance, etc.
with tools such as PESTEL or CAGE (Culture, Administration, Geography, Economy)
Countries that pass through the preliminary screening process are then examined in
more detail during the In-depth Screening stage. In the second stage, criteria specific
to market success for the industry and product markets are identified, and countries are
evaluated on them. The in-depth screening process is the core of country attractiveness
analysis, since it is critical to business success
In-depth Screening stage
Step 1:
The first step in conducting the CAA involves in identifying the criteria that are critical
to business success. This will be different for different products. For example, the
success factors for a toothpaste category would be Consumer Demand, Consumer
Access to Supply, Competition, Distance, and Regulation. The specific criteria related
to the ‘Consumer Demand’ of a toothpaste will be population, GDP per capita, GDP
growth rate, inflation rate , toothpaste sales growth, toothpaste sales, etc. Similarly, the
specific criteria related to the ‘Supply’ of a toothpaste will be sales-force expenses,
average expenses, and distribution fixed costs . The specific criteria related to the
‘Competition’ factor for a toothpaste will be # of competitors, total marketing
expenditures, # of MNCs, and largest competitor’s share, the lower the better for all
these criteria.
Step 2:
The next step is to weight the importance of each criterion. Weighting each criterion is
necessary since not all criteria are equally important. Some criteria are more important
than others, and these differences need to be taken into account. A common approach
is to allocate 100 points (or 100%) across all of the criteria, where more points (or a
higher percentage) are awarded to criteria that are more important
Step 3:
Third, each country needs to be rated on each criterion. The rating is designed to
determine how well a country performs or is characterized on a particular criterion. A
common rating scale ranges from one to ten, where 1 = very poor and 10 = very good.
Step 4:
Finally, calculate the ‘Assessment’ score for each country by multiplying the weight of
each criterion and its rating.
Final Selection
Based on the assessment scores calculated for each country, one or more countries can be
selected for market entry. The results of the in-depth screening illustrate the relative
attractiveness of the countries investigated. Before making investment decisions, due diligence
analyses will be performed to better forecast costs, revenues, capital (financial, human)
requirements, cash flow, expected rate of return, etc.