Archive Monthly Archives: October 2018

International Investment and Trade

People are talking about international investment and all the big player in that game. Have you ever wondered what does that actually entail? And what are the rules of investment schemes all over the world? What are the governing bodies that make them work?

Some of those questions will be answered here in this article and hopefully, you will have a better understanding of world trade, what exactly goes on in international institutions, and how does this all influence the prosperity of individual countries.

What is International Trade?

post5aThere are many theories in an economy that try and explain what are the principles behind international trade and why is it significant for the development of humankind. What can be abstracted, as a sort of general rule behind the complex trade systems is that countries substitute the lack of certain resources, products or services by trading with other countries?

That was the simplified version of the answer, the complete one will consider a lot of other factors that will influence the continuing makeup of the world trade system. Things like geographic distance and ideological similarities What market does the country have access to will be determined by its presence in international organizations, that have their own agendas? What this entails is that governments of countries have to work together to improve the markets abilities of their own countries and to bust their production and trade.

There is also one rule that addresses the type of product that sovereign countries trade with. Usually, less developed countries trade with raw resources as they do not have the industrial capacities to make products from those resources. More developed countries usually import more raw resources, but they also produce products and offer particular services that are in demand all over the world.

Why do countries invest in other countries?

post5bCountries that have a high level of export of any kind will have enough earnings to invest in less developed countries. And this is the principle that has found the most application in modern neo-liberal capitalism that has opened up the world to globalization.

This process has brought about the dismemberment of national companies and the production of international corporations that are taking over the world’s consumer market. This could not have been possible without international trade and investment. Less developed countries depend on the money they will get from the leading countries of the world because with it they will develop their own production capacities. The country that is investing will have products that are on demand in their country and they will have a low wage workforce. That will cut down the cost of production and create more opportunities for money to flow through the market.

The other part of the international investment is political. Because developed countries usually have sets of rules that they demand from less developed countries to fulfill. Those rules are usually associated with law and general issues linked with the organization and governance of the state.

Worldwide Governance Indicators: What is it and how is it applied?

When we think about all the countries in the world there is a very striking difference between them in the way they are governed and in the amount of political and economic success they have in their endeavors. How does one go about and comparing the different system in order to determine how advanced it is, or what kind of changes it needs so we can think of that country in terms of good governance?

The following article will explain the six different aspects that are taken into consideration when the effectiveness of state governance is brought into question. The analyzing process is conducted by the World Bank and it biased on conducting various research studies and then combining the different findings into a wholesome system of determination. The purpose of this grading is here to help potential investors determine what kind of markets are they going into when they approach a country and it allows the WB to know how their clients progress in their responsibilities towards their creditors.

Voice & Accountability

post4aThis aspect of the grading process analyzes the countries debt and their ability to pay back what is required of them. But it also determinedness whether or not a state is capable of investing in foreign markets and to what extent can she do that.

 Political Stability and Lack of Violence

This factor considers the political and social liberty in a country and determines whether or not it is suitable for major investments. Stability in governance is important both economical and political reasons, no country is willing to invest in a state where there is no stable government to make sure that all the terms of the international agreements are met.

 Government Effectiveness

This aspect of the grading system looks at the countries administrative system and the effectiveness of the said system to pass out reform and arrange all that is necessary for international collaboration and investment endeavors.

 Regulatory Quality

post4bEvery country has governing bodies that are in place to make sure that all the laws are abode by and that everyone pays their share. The institutions that have to implement those procedures and check the public can have various extents of effectiveness.

 Rule of Law

Maybe one of the most important parts of the measurements procedure because it will give us an idea of how well all the other institutions perform in the governance of the entire state. If the law system that is in place is followed through by all its citizens, then it is safe to presume that there will be no problems in a monetary sense as well.

Control of Corruption

The last parameter is not the lest important. There are many countries that have modern governance systems in place but they have high levels of corruption in them. This fact can often be disabling for the economy because investment and the market are not free but in grate control of corrupt politicians and controversial businessman.


Corruption and the Government

Have you ever asked yourself what exactly makes a corrupt country? And how do we know which one is more corrupt than the other? Can we even compare them? The World Bank has designed a system that is in place to analyze the governance competency of the different countries of the world. There are six factors that are considered and one of them is corruption. That makes this political and economic phenomenon wary important to understand if we are to examine how effective a government is in what it has to do.

What is corruption?

post3aWe are all aware of the term, but do we know what exactly it means? Every country has a system of laws in place to protect their citizens in to give them an equal opportunity to succeed in life and their business endeavors. That is most of the countries in the world do this for their citizens.

Other nations of the world that are organized in this way often refuse to trade with countries that do not share their ideological views or ideas. Mainly because similar ideological views entail a similar way of acting in economic transactions and political collaborations.

Sometimes even though a county can declare to have a certain set of rules the ruling class in the said country do not abide by them. That is when we can start talking about a corrupt state, what it entails basically is that the political structure ignores the law and does whatever it seems to think to be the right thing to do. Also, people with the right means can pay the government officials to do certain things for them and to give them additional benefits in their endeavors.

Why Is it Bad?

post3bThe worst thing about corruption is in the fact that it allows some people to make a monopoly on production or trade in the state where corrupt officials function. That also means that public property can be misused and traded with in accordance with the needs of individuals and not the sate as a whole and all its citizens.

Besides those potential foreign investors cannot approach the market because they can easily be pushed out by the corrupt elite or their business can be undermined by the institutions of the state in place to protect from such things. Corruption is a more complex term for a sort of political and economic nepotism that can only help a small number of people in the long run.

The other issue that is at hand is the fact that corruption is most common in countries that are transitioning from one mode of governance to another, or in countries that have high levels of social distress or even war.

Whatever the reason high levels of corruption in any country do not represent a good state of affairs and countries that do display such symptoms are usually ignored by the international community because potential investors do not want to see their money go to wasted because of corrupt individuals in the government.