Institutions Involved in Promoting International Purchasing notes

Institutions Involved in Promoting International Purchasing

  • Institutions involved in promoting international purchasing
  • The role of institutions in promoting international purchasing
  • The role of government in promoting international purchasing
  • Regional blocks involved in international purchasing

6.1 Introduction

There are various institutions involved in international finance transactions, such as  financial institutions, government entities and central banks. Other organizations include microfinance and development institutions, such as the World Bank and the International Monetary Fund.

6.2 Institutions involved in promoting international purchasing

The following are institutions involved in promoting international purchasing

  1. International monetary funds

– It is a global organization founded in 1944

– It aim was to help to stabilize exchange rates and provide loans to countries in need

Functions of  IMF

(a)International monetary co-operation

(b)Promote exchange rate stability

(c)  Help deal with balance of payment adjustment

(d)Help deal with members countries on economic monetary and technical matters

(e) Heal deal with economic crisis by providing international co-ordination

  1. World Trade organization

-Is an international body designed to play the role of watching of trade in goods, services and foreign investment.

Functions of World  Trade Organisation

(a) Administering the WTO trade agreement

(b) Forum of trade organization

(c) Co-operation with other international organization

(d) Administering the mechanism for settling trade disputes among members

(e) Assisting developing countries with training and technical assistance

  1. World Bank

Is an international supported bank that provides financial and technical assistance to developing countries for developing progress e.g bridges, roads, schools etc

Role of the world bank

(a) Granting construction loans to war devastated countries

(b) To provide loans to governments for agriculture, power, transport, water supply, education , health etc

(c)  Promoting foreign investments by granteeing loans provided by other organizations

(d) Encouraging industrials development of under developed countries by promoting economic reforms

(f) Providing technical economic and monetary advice to member countries for specific projects

  1. European Union

    Functions of European Union

(a) To maintain and build on the peace established between its members state

(b)Bring European countries together in practical co-operation

(c)  Ensure European citizens can live in security

(d)Promote economic and social solidarity

(e) Preserve European identity and diversity in globalised world

6.3 Regional blocks involved in international purchasing

(a) ECOWAS (Economic Community of West African State)

The main of the community to promote economic co-operation between all the state with the goal of raising living standard among the population as well as raising economic strength of each member state

Objectives of ECOWAS

  • Creation of a common market between member state
  • Elimination of custom duties and other similar changes in respect of importation and exportation of goods among member state
  • Greater economic competitiveness though economic market
  • Implementation of schedules in the joint development of transport communication energy and other infrastructural facilities
  • The harmonization of fiscal policies

Challenges of ECOWAS

  • Political instability and bad governance that have affected many countries
  • Insufficient political will exhibited by some member state
  • Irregularity in the payment of financial contribution to the budgets in the institutions
  • The failure to involve civil society, private sector and mass market in the process of integration

(b) EAC (East African Corporation)

The role objective of the EAC common market is to widen and deeper co-operation among the partner state in the economic and social fields for the benefit of the partner state and their citizen

Objectives of EAC

  • Enhance research and technology advancement to accerelate economic and social development
  • Sustain the expansion and integration of economic within the community
  • Promote common understanding and co-operation among the nationals of their partner state their economic and social development
  • Strengthen, coordinate and regulate the economic and trade relating among the partner state in order to promote accerelated, harmonious and balanced development
  • Accerelate economic growth and development growth and development of the partner state

(d) EU (European Union)

(e) COMESA (Common Market for Eastern and Southern Africa)

Objectives of COMESA

  • To promote development in all field of economic activity
  • Promote policies and programs to raise the standard of living of its people
  • To co-operate in the promotion of peace stability and security among the members state in order to enhance economic development in the region
  • To co-operate in the strengthening the relation between the common market and the rest of the world

Challenges of COMESA

  • Potential loss of revenue
  • There many countries boarders that encourages illegal imports
  • Given the bureaucratic custom procedure at the board poin there has been delays in clearing goods
  • Costly and inefficient, infrastructure utilities
  • Certain countries impose tarrifs and no tarrif barriers to their COMESA and trading partners eg exercise duty

6.4 Regional Economic Grouping

Refers also as economic integration. It is an economic arrangement between different regions marked by the reduction or elimination of trade barriers and the co-ordination of monetary and physical policy. The aim of economic integration is to reduce cost for both consumers and producers as well as trade between the countries taking  part in the agreement

6.4.1 Importance of Regional Economic Grouping

  • There is a wider selection of goods and services
  • Members of the country population is able to serve job due to their free mobility within a wider area
  • Promote peace among people of the country involved as their interact and co-operate with each other
  • To create a wider market for countries products
  • Specialisation by member country is possible ( is where you major in specific thing)

Demerits of Regional Economic Grouping

  • Creation of trading blocks. It can impose trade barriers against members countries
  • National solvereignity .Requires members countries to give some degree of control over key policies like trade monetary and fiscal policies
  • Many countries develop / produce similar commodities thereby limiting the scope of the trade
  • Benefits of regional integration have been unequally distributed among the different countries
  • Political instability within the countries has limited the success of integration efforts

      6.4.2 Levels of Economic integration  (Regional Economic Grouping)

(a)Free Trade Area .Removes tarrifs among members. Tarrifs are taxes imposed an imported goods

(b) Customs Unions .This involves development of a common trade policy towards others

(c)  Common Markets. Seeks to eliminate intra- market factors of product market

6.4.3 Features of Regional Trading Blocks

  • Less or no restrictions – free access to each others market
  • More goods available for selection
  • They have similar types of goods
  • No tarrifs

6.4.4 Factors accounting for the poor performance of trading blocks

  •  Lack of complementary of members countries productions structures
  • Weak national and regional institutions
  • Lack of co-ordination and harmonization of economic policies
  • Inadequate finding of regional integration process and related institutions
  • Poor design and inadequate sequencing of regional integration arrangement
  • Lack of involvement of other stakeholders , the private etc
  • Inadequate infrastructure

Advantages of Trading Block

(a) Foreign direct investment

(b) Economics of scale

(c) Market efficiency

(d) Access trade with producers outside the trading block

6.5 Reasons  for National Grouping

(a)Trade .Several trading blocks such as COMESA and ECOWAS comes together for trading

(b) Global governance (Economic) eg world bank. Proving finance and research to developing nations aids their economic developments

(c)  Defence . There are defence grouping

(d) Social , Political  and Economic Unions .Aspects of political law society and the economy of member state are governed by the group of nations

Revision Exercise

Example:  What is Regional Economic grouping? Refers also as economic intergration.It is an economic arrangement between different regions  marked by the reduction or elimination of trade barriers and the co-ordination of monetary and physical policy

Exercise 1. State disadvantages of Regional Economic grouping

Exercise 2. State reasons for National grouping

Exercise 3. Highlights objectives of ECOWAS


Further reading

  1. Monczka, R. M., & Giunipero, L. C. (1984, Fall). International Purchasing:
  2. Characteristics and Implementation. Journal of Purchasing and Materials Management

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