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.

The Social State vs. The Liberal State

We are all aware of the fact that there is so much political difference between the countries of the world that sometimes they all seem too far apart to make any communication. International institutions exist precisely to help us with such problems and to resolve the tensions between the opposing worldviews. But there are also many similar aspects to political governance that make countries collaborate and work together towards a single goal. That will be the topic of this article. We will look at two political and economic systems that have shaped the modern discussion about the state and the role it should have in the future for governing people.

What are exactly the differences between the two models? And how is this manifested in the countries that have implemented the different ideologies?

Social State or the Parent State

post2aThis form of governance goes back all the way to the enlightenment and the revolutions that came in the midst of those new ideas being born. Socialism, even though it is often associated with communism has actually developed separately as a political perspective. Even Karl Marx wrote about socialism as a stepping stone towards what he envisioned as the global worker’s revolution.

The form of governance is based on the principle that the state should be as a parent to their citizens. What does that mean? The state should not control the market or any other aspect of public life but it should have a say in it. That also means that the main focus of the socialist politician is to ensure funds for socially important aspects of the state.

That is, the state should make free health care and education possible for all its citizens and it should also make sure that there are no socially endangered individuals. Generally, the state cares for its citizens even though it can sometimes cost the country too much money. Governing bodies should balance those things out over time.

Liberalism and the Free Market

post2bAs a complete opposite to communism and to some extent to socialism is what we often term as neo-liberal capitalism. The biggest difference is in the level of influence the state displays over any of its bodies. The state is redundant in social affairs and this is left to the NGO sector.

The state in the idealized version of this governing system should not interfere in the market and therefore should not interfere in social issues unless it is mandatory for ensuring the stability. This system presupposes that bureaucracy is the only thing we need for a successful country.

The market is free as is society, and by this, I mean that elements from society cam mix with each other freely and without any influence from “above”. That way new and exiting forms can come to life, and trade will not stop because it is based on natural reactions between the market and consumers.

Conclusion

Most modern countries try and find a way to balance out the two mentioned ideas of governance and to make the best possible amalgam of them so it is functional for their own country.

 

PAM – Public Accountability Mechanism

Countries all over the world are becoming part of this project and it is safe to say that it is worth the attention that it is getting. What is public accountability and what does it represent? How does it help with international trade and politics? Modern countries in the global system of production and with the free market no longer have a need to hide relevant state related information from the public and from other countries. On the contrary, transparency is considered an important part of today’s international politics. Why is this so?

The answer is simple enough, modern politics is greatly in control of the private sector and private investors have a need to know what is the state of affairs in the country they are willing to take their money to. Before they do so they will need to have some objective parameters to look at and by doing so to determine if the political and economic stability of the country in question is sufficient. The following five parameters all make up this system and once they are analyzed together they give us a complete picture of the socio-economic conditions in one country.

Political financing

post1aThis aspect is concerned with the number of funds that are prescribed for political activities and for the financing of political parties in countries. Having the right balance is key for a good functioning democracy. There should not be too much fonds set aside for political activities as this will be an expense for the country, but enough needs to be given so all the public voices will be heard. Financial Disclosure (combination of income, assets, and conflicts of interest).

This is also important because it gives us an idea of how do the public officials use their position of power and whether or not they display symptoms of corruption and illegal activities. The extent of their wealth and property should be public knowledge.

Conflict of Interest Restrictions

There are situations when a person can pursue certain situations that can benefit them, but they do not. Sometimes this can be symptomatic of states that have bad governance or high level of corruption and low levels of social liberty. Keeping this aspect in check will help potential investors understand what they are dealing with when they want to invest in some foreign country.

Freedom of Information/Right to information

post1bThis aspect is here to help us determine how liberal in the political and social domain is the state in question. What institutions of public informing exist in the county and how well developed is the media system are just some of the conditions that are considered when this factor is determined.

Public Procurement

This last aspect is one of the most important if we want to consider public happiness and the general state of affairs in the state. Every country naturally has a need for import and if the government does not meet al the needs of their people they could have a crisis in their realm.