Table of Content

1 Executive Summary ……………..................... 2

2 Globalization of Production 3
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3 Trade and Investments (Inflows and Out Flows) 5

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4 Foreign Direct Investments (FDI) 9

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5 Goods Market and Money Market 14

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6 How World Bank try to Restore Balance 15

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7 Priorities to be concerned to empower third 17

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world countries through aid programs
8 Recommendations & Conclusion 18
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9 References 20
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1. Executive Summary

The Triad is a group of three major trading and investment blocs in the international arena: the
United States, the European Union (those located in Western Europe mainly come from nations
that are members of the EU), and Japan. They have been controlling most of the world’s trade
and economy for the past few decades.

Least Developed Countries (Developing Countries), are defined as nations or a sovereign

states with less developed industrial base and a low Human Development Index (HDI) relative
to other countries (United Nations, 2014).

The purpose of this study is to find the economic strength and performance of the Triad counties
with compared to the Developing Countries in the context of following fields. This study
includes both Descriptive and Explanatory perspective of the issue.

1. Globalization of Production
2. Trade and Investments (Inflows and Out Flows)
3. Foreign Direct Investments (FDI)
4. Goods Market and Money Market
5. World Bank’s efforts on creating the balance between Triad and Developing world.

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2. Globalization of Production

The world is moving away from self-contained national economies toward an interdependent,
integrated global economic system. Globalization refers to the shift toward a more integrated
and interdependent world economy. The main constitution of the modern world is spread of
globalization economy. Globalization has a role in the developed countries in the form of
"golden billions". Most of the intellectual and technical potential is determined in Triad
countries and the main trade and investment flows are directed there.

Globalization of Production can be explained as a firm which sources goods and services from
locations around the globe to capitalize on national differences in the cost and quality of factors
of production like land, labor, energy, and capital. Companies can lower their overall cost
structure improve the quality or functionality of their product offering. Historically this has
been primarily confined to manufacturing enterprises. However, with the use of modern
communications technology, and particularly the Internet, service activities are also been
outsources to low-cost producers in developing countries.

2.1 Multi National Enterprises (MNEs) and Globalization

An MNE can sometimes achieve substantially lower costs by going abroad than by producing
at home. If labor expenses are high and represent a significant portion of overall costs, an MNE
may be well advised to look to other geographic areas where the goods can be produced at a
much lower labor price. Further, following reasons also count for the MNE’s to invest in
developing countries.

1. Cost factor of materials. If materials are in short supply or must be conveyed a long
distance, it may be less expensive to move production close to the source of supply than to
import the materials.

2. Cost factor of energy. If the domestic cost of energy for making the product is high, the
company may be forced to set up operations overseas near sources of cheaper energy.

3. Transportation costs. A highly price-competitive product in one country might have to

retail at uncompetitive prices in another country once transportation costs are added.

However, there are certain exceptional cases in recent years where some Canadian
manufacturers have been moving operations across the border to take advantage of lower US
labor unit costs. The above phenomenon makes MNEs move towards developing countries for

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production. This has made high Foreign Direct Investments in developing countries in the past
decade.

2.2 Globalization of Technology

Growing interdependence in technological resources and R&D activities remain largely

concentrated in the Triad countries (US, Japan, EC). The dependence of countries outside
this group on Triad technology is therefore very substantial and transfer of this
technology, generally through direct investment by Triad multinational enterprises, is of
prime importance. Within the Triad, the level of technological interdependence is high and
increasing further, particularly in the new high-tech areas, prompting the coining of terms
such as "techno-globalism". Here too, direct investment plays an important part in
technology transfer and it is increasingly the case that multinationals are decentralizing.

The fact that the productivity growth in the manufacturing sector due to new technologies has
been averaged out by growth in the service part of manufacturing has been hypothesized as one
of the primary explanations for the productivity aspect. According to research, 70% of the
revenues in the computer industry come from products that did not exist two years
previously (Woodall 2016). However, developing countries have attempted a ‘niche’
strategy in developing created assets by specializing in particular new technologies as a
way of achieving competitiveness - Example : India’s growing software sector (Acharya
1995).

However, the failure of the majority of developing countries to exploit these new technologies
has acted as an obstacle in decentralization of production beyond the Triad by MNEs.

2.3 Value Chain of a Product and Globalization

The value chain of a typical product can be listed according to activities in order of the amount
of high-skilled/low-skilled labor used in each. The production process uses the least skilled
labor, and R&D, which all activities are offshored to developing countries. Relative wage of
skilled labor is high in Triad countries. Assuming trade and capital costs are uniform across
activities, there is a point on the value chain, beyond which all activities can be outsourced to
developing countries.

2.4 Stages of Globalization of Production

Gene Grossman and Rossi-Hansberg, 2006 defined two stages of Globalization of Production.
The idea is that in the first phase globalization has been characterized by a first unbundling in

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which end of the necessity of making goods close to the point of consumption. In this first
phase there was trade in goods. The second unbundling has to do with the end of the need to
perform most production stages near each other. In this second phase there exists trade in tasks.

3. Trade and Investments (Inflows and Out Flows)

As indicated earlier two of the drivers of globalization are foreign direct investment and trade.
In These drivers play a crucial role in the development of the economy. It is important to
examine some of the main reasons for Trade and Investments in a Triad vs Developing Nations
context.

3.1 Trade and Investments of Triad Nations and the role of MNEs

Largest and best-known multinationals (MNEs) earn mainly through overseas sales. Triad
firms with the largest foreign assets in 2001 includes Vodafone, British Petroleum (BP) and
General Electric. Triad companies always look outside of their home borders. 65.9 % of Royal
Dutch/Shell’s assets and 78.8 of BP’s assets are in foreign markets, including the markets of
other EU members. In addition, although Switzerland is not in the EU, nearly 60 % of Nestlé’s
assets are outside Switzerland.

In terms of foreign trade in leading multinationals of Triad, over 50 % of Royal Dutch/Shell’s

sales originate outside its home markets (the Netherlands and the UK) and over 80 % of BP’s
sales are from outside the UK. However, among firms with large foreign assets some of them
continue to derive a considerable amount of revenues in their home region. For example,
Vodafone derive 93.1 % of total revenues, respectively, in the European Union even though
over 70 % of their assets are abroad. There are also thousands of smaller firms worldwide that
earn the bulk of their revenue from international customers including developing countries.

Country/ Region Foreign Assets Total Assets Foreign Assets Intra-Regional

as a % of Total Sales as a % of
(Billion USD) (Billion USD)
Assets Total Sales

Vodafone 187.8 207.5 90.5 93.1

General Electric 180.0 495.2 36.4 59.1

British Petroleum 111.2 141.2 78.8 36.3

Vivendi Universal 91.1 123.2 74.0 68.0

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 Deutsche Telekom 90.7 145.8 62.2 93.1

Exxon Mobil 89.4 143.2 62.5 37.5

Ford 81.2 276.5 29.4 66.7

General Motors 75.4 324.0 23.3 81.1

Royal Dutch Shell 73.5 111.5 65.9 46.1

Total Final Elf 70.0 78.5 89.2 55.6

World’s top ten MNE’s in 2000

Source: World Investment Report (2000)

3.2 MNEs in Developing Countries

In early 2000’s, markets in developing countries often started offering more rewarding
opportunities than do Triad markets. This helps to explain why Coca-Cola and IBM now earn
more sales revenue and profits overseas than they do in the United States and why PepsiCo has
become Mexico’s largest consumer Products Company. In Japan, it helps to explain why 74.6
% of Honda’s and over 70 % of Sony’s revenues come from Asian country sales. It also helps
account for the decision by Tesco plc, the British supermarket firm, to expand operations into
Eastern Europe and Asia. Same is true for Wal-Mart, which in recent years has expanded
rapidly and now has stores on four continents and appears on the verge of becoming a major
competitor in the EU thanks to its Foreign Direct Investment in both the UK and Germany.

Some developing country markets are growing much faster than developed countries, and
Foreign Direct Investment provides MNEs with the chance to take advantage of these
opportunities. A good example is China. Over the past few years the Chinese economy has
grown at an annual rate of around 7–9 %.These data also suggest that, as the country continues
to move toward a market-driven economy, MNEs are likely to find a huge demand for goods
and services that cannot be satisfied by local firms alone. Simply put, China is a market where
most multinationals want to have a presence despite the fact that there are many problems in
doing business there.

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3.3 The Global Trade Pattern before the Global Economic Crisis

Similar to the Foreign Direct Investments the Triad countries have been the key up until late
2000’s in world trade and internal trade within Triad was very strong two-way trade flows. The
European Union conducted a large amount of annual trade with Japan and the United States,
and both Japan and the United States did a great deal of trading with both the European Union
and with each other. As per the table the trade of the triad and shows that these three blocs
accounted for 58.7 % of all world imports and over 52.8 % of all world’s exports in 2002. As
a result of such trade it is clear that the triad was the major economic force in the international
arena and impact were extended well beyond the Foreign Direct Investments and trade that
took place among its members until the Global Economic Crisis.

Exports Imports

Country 1993 % of 2002 % of 1993 % of 2002 % of

(Billion Total Total (Billion Total Total
( Billion ( Billion
USD) USD)
USD) USD)

US 494.4 13.1 751.8 11.3 588.2 15.8 1132.9 17.6

European Union 1368.9 36.2 2295.8 34.6 213.7 5.7 2328.3 36.3

Japan 388.2 10.3 457.3 6.9 1387.0 37.3 305.7 4.8

Triad 2251.5 59.6 3504.9 52.8 2188.9 58.9 3766.9 58.7

Rest of the world 1526.0 40.4 3132.0 47.2 1529.6 41.1 2651.7 41.3

World Total 3777.5 100.0 6636.9 100.0 3718.5 100.0 6418.6 100.0

World Trade Data; Source IMF Trade Statistic Year Book (1996, 2003)

One good example is the automotive sector. This was concentrated in the three triad regions of
the United States (North America), Europe, and Japan (Asia). In each of these regions, domestic
producers were significantly more competitive than foreign producers. General Motors, Ford,
and the Chrysler Group of DaimlerChrysler (a US company prior to the merger with Daimler
Benz) each have 28.3%, 21.1%, and 12.9% of the US market for motor vehicles. Together, the
largest three domestic auto makers in the United States have 62.3% of the US market. Imports
account for approximately 15 % of the US market and do not include locally-made Japanese
brands.

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3.4 Recent Changes in the Trade Inflows and Outflows of Developing
Countries

Recent trade patterns suggests that the role of the developing countries in the global economy
has changed over the past few years at a pace of development ahead of these countries. The
volume of foreign trade in the developing countries is growing more rapidly than in
developed countries according to the following table.

In other words, while a few years ago the TRIAD countries (USA, EU, Japan) occupied leading
positions in international trade, at present, the role of developing countries is gradually
increasing. China, India, Brazil in particular could be distinguished in this aspect. In addition,
these countries are now not only target markets, but also the world's largest exporters. However,
the developing countries also take account their own market. Therefore, volume of mutual trade
within developing countries has increased. The development of mutual trade gives
developing countries access to low cost production facilities which meet their
requirements, as well as significantly expands the market for the goods produced in these
countries.

However, it appears that the trade openness of the Triad has been impacted heavily by BREXIT
and Trump win. This will create a huge trade barriers especially within the Triad in future
among growing literature on economic globalization and interdependence in the world.

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4. Foreign Direct Investments (FDI)

Foreign direct investment (FDI) is the ownership and control of foreign assets. In practice,
Foreign Direct Investment usually involves the ownership, whole or partial, of a company in a
foreign country. Also called a foreign subsidiary. The objective of Foreign Direct Investment
is to provide the investing company with the opportunity to actively manage and control a
foreign firm’s activities. This equity investment can take a variety of forms. One is through the
purchase of an ongoing company. Example, Solectron. Another common form of Foreign
Direct Investment is to set up a new overseas operation as either a joint venture or a totally-
owned enterprise.

Many developing countries are recipients of foreign direct investment of transnational

corporations from developed countries. Therefore, the state of economic development and
foreign trade particularly in developing countries depends on the business activity and the
purchasing power in developed countries.

4.1 Foreign Direct Investments (FDI) within Triad Nations

Intra-regional Foreign Direct Investment (IRFDIs) in the triad, 1986–2000 data can be used to
analyze the existed pattern of Foreign Direct Investment in the world. It can be noticed that
Foreign Direct Investment was growing faster within the European Union region of the triad,
rather than globally. It has, however, declined in North America as North American Free Trade
Agreement (NAFTA) has substituted free trade for Foreign Direct Investments. In Asia, there
was a recent decrease in intra-regional Foreign Direct Investments. Japan, the largest source of
Foreign Direct Investment in the region, has only 19.1 % of its Foreign Direct Investment in
other Asian countries. The vast majority of Japanese Foreign Direct Investment is in the United
States and Western Europe.

Intra-regional Outward Foreign Direct Investment (Foreign Direct Investments) %

Year European Union NAFTA ASIA

2000 42.5 18.4 18.0

1999 45.7 18.2 26.2

1997 49.3 21.1 28.4

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 1986 35.8 30.3 20.5

Source: OECD, International Direct Investment Statistics Yearbook, 2001.

Triad countries make billions of dollars of investments in one another. In 2001 total US Foreign
Direct Investment was $641 billion in the European Union and $64 billion in Japan. In return
the European Union countries and Japan had total investments in the United States of $694
billion and $191 billion, respectively. European Union Foreign Direct Investments in Japan
was $24 billion while Japanese Foreign Direct Investments in the European Union was $88
billion. This proves that triad countries are investing large sums of money in each other’s
operations.

When considering overall foreign trade, the percentage of global Foreign Direct Investments
accounted for by the core triad countries in that period is 76.7 per cent. Even though the amount
of worldwide Foreign Direct Investments has more than tripled over the last 10 years, the triad
remained the engine of this growth.

Country/ Region 1993 FDI Stock % of Total 2003 FDI Stock % of Total
(Billion USD) (Billion USD)

United States 559,688 26.2 1501415 21.9

European Union 962,034 45.1 3434297 50.0

Japan 259,795 12.2 331596 4.8

Triad 1781517 83.5 5267308 76.7

All Others 353102 16.5 1599054 23.3

World 2134619 100.0 6866362 100.0

FDI data 1993 & 2003;

Source: UN World Investment Report 1993, UN World Investment Report 2003,

4.2 Foreign Direct Investments (FDI) made by the Triad in Developing

Countries

Triad countries have become major investors in Developing Countries from many decades. In
2002, US Foreign Direct Investments in Latin America and the Caribbean was $16.8 billion.

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Typically, receivers of Foreign Direct Investments of Triad are part of the Foreign Direct
Investments cluster, which is a group of developing countries that are usually located in the
same geographic region as the triad member and have some form of economic link to it. United
States tends to be a dominant investor in Latin America, and countries such as Mexico, Brazil,
and Argentina are part of its Foreign Direct Investments cluster. Similarly, Eastern Europe is a
favorite investment target for European Union countries and helps account for the FD made by
Germany and France in the Czech Republic and the Russian Federation. The latter is part of
the European Union Foreign Direct Investments cluster. Japan’s Foreign Direct Investments
cluster includes China, Singapore, and Thailand countries where Japanese MNEs have invested
large sums of money.

According to International Monetary Fund, Direction of Trade Statistics Yearbook, 2003 not
all developing countries, however, have been successful in attracting triad investment. One
reason is because much of this investment has been used by multinationals to build regional
networks, often starting near their home base and then working outward. For example, 69% of
all Foreign Direct Investments in Mexico comes from US firms and over 80% of all Foreign
Direct Investments in Estonia derives from European Union countries. One significant detail
in FDI’s in developing countries according to UNCTD is that more than 50% of all investment
into developing countries is going to three nations: Brazil, China, and Mexico. Most of this
investments come from triad countries that are located in that part of the world. Brazil and
Mexico are recipients of much US Foreign Direct Investments, and China and Singapore are
favorite Foreign Direct Investments targets for Japanese firms. Such investment policies help
underline proves the triad’s dominance of regional economic clusters. Late 2000’s, Triad
members have invested in new developing countries while continue to strengthen their Foreign
Direct Investments in specific regions, as in Europe, where the European Union is a major force
in economic development. At the same time, these types of investment strategies by Triad
members may restrict trade and investment opportunities for some developing countries.

This is why it is so important for non-triad countries to be linked to the triad in some way.

It was clearly seen that only gaining linkage to the triad, a country can benefit by tapping these
enormous markets as a supplier to large MNEs or by selling directly to customers in these
markets.

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4.3 Foreign Direct Investments and Economic Performance of Developing
Countries

There is a growing interest between triad and non-triad regions in changing patterns of global
FDI. As per the Annex II, in early 2000’s around 70 %of all FDI flows into developed countries,
mainly the triad. Asia, and particularly Southeast Asia, takes the major share of the remaining
30 % is drawn to developing countries. In overall, FDI is the largest source of external finance
for all developing countries and on average now amounts to about one-third of their GDP,
compared with just 10 per cent in 1980. Forms of inward FDI are varied, with some countries
or regions showing significant growth while others experience no growth and even decline.
However, Given the market-seeking and resource-seeking aims of MNE investors, it is possible
to see that the varying levels of attractiveness of different non-triad investment destinations are
the result of differences in market size and growth rates and the opportunities they present for
firms looking for sourcing and production advantages. Opportunities for accessing these kinds
of advantages can be enhanced by government liberalization policies. Many of the developing
countries continue to liberalize their economies and privatize state-owned assets, both of which
are attractive to MNEs.

Key highlight of the above FDI data is that Asia Pacific and the Middle East had received 19%
of global FDI flows, the most of any non-triad region. But FDI is highly concentrated, with 10
out of the 55 economies in the region accounting for 90% which proves the clusters of
investments made by the Triad countries. For example China, Hong-Kong and Singapore take
shares and their attractiveness has been growing steadily over the past decade. Good economic
conditions and better investment climates in Singapore, Thailand, and Vietnam in 2003–2004
boosted inward investment while some countries like Indonesia experienced declining FDI
because of its weakening economy. Koreans charting the growth and internationalization of
Korean companies Hyundai and Samsung show why and how newer MNEs have broken into
triad markets. Yet in many other cases, such as for Tesco in the International Business Strategy
in Action: From Oserian to Tesco box, firms do not see a need to engage in FDI, because they
can get access to the advantages of non-triad locations and maintain control over their supply
chains by buying and selling through global markets.

The three largest economies in Latin America i.e. Argentina, Brazil, and Mexico saw the
steepest declines in early 1990s. However, a spate of privatizations during the late 1990s also
boosted inward FDI for these and other regional economies, which makes them leading
performing developing region in the years to come. However, African countries remains as

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most of the world’s least-developed countries (LDCs). Less than 3 per cent of total global FDI
normally goes to Africa, and even this amount tends to be concentrated in resource-rich
economies like Nigeria. Still African countries heavily remains as factor driven economies.

4.4 Foreign Direct Investments made by the Developing Countries

As per the FDI outflow data, in past few decades (1980- 2000), outflows of FDI from
developing countries have grown fairly intensely. Again Southeast Asia is responsible for the
dominant share. China’s stock of outward FDI has grown from $2.5 billion in 1990 to over $25
billion in 2000. In addition, a significant percentage of the much larger outward flows from
Hong Kong originally come from mainland China.

4.5 Recent Change in the Foreign Direct Investment Trend

In the recent past, developing countries have become prominent in the field of global
investment scenario. Even during the crisis, investments in developing countries have not
decreased. During 2009, which accounts for the peak of the world economic crisis, the share
of developing countries in the global volume of foreign direct investment reached 43%.
Considering the Foreign Direct Investment trend of the world, developing countries has
become the main center of attraction. FDI inflows gained by these countries in 2013 has
increased up to $778 billion, (approximately 54% of the global FDI inflow).

According to the United Nations Conference on Trade And Development (UNCTAD), half of
the twenty countries with the largest inflow of FDI found in developing countries and countries
with economies in transition. China has record high capital inflows and ranks second among
the largest recipients of capital after the USA. This proves the fact that the increasing role of
developing countries over Triad countries in the global investment process.

Many former Communist nations in Europe and Asia are now committed to democratic politics
and free market economies creates new opportunities for international businesses. However,
there are signs of growing unrest and totalitarian tendencies in some countries. China and Latin
America are also moving toward greater free market reforms between 1983 and 2010, FDI in
China increased from less than $2 billion to $100 billion annually but, China also has produced
many new strong MNEs that could threaten Western firms.

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5. Goods Market and Money Market

The IS-LM model provides a framework for the economists to discuss the macroeconomic
policy of a country. The IS-LM model allows for the investigation of the role of monetary
policy and fiscal policy in an economy. An increase in the money supply shifts the LM
curve downward and to the right, lowering interest rates and raising equilibrium national
income. Also, an exogenous decrease in liquidity preference leads to downward shifts of the
LM curve and thus an increase in income and a corresponding decrease in interest rates.
Changes in these variables in the opposite direction shift the LM curve in the opposite direction.
On the other hand, exogenous increases in investment spending (i.e., for reasons other than
interest rates or income), shift the IS curve rightward resulting from consumer spending.
This also raises both equilibrium income and the equilibrium interest rate. Of course, changes
in these variables in the opposite direction shift the IS curve in the opposite direction.

5.1 Study with related to a Developing Country (Ghana)

The objective of this study was to explore the connection between real interest rate, GDP and
real money balances by studying the nature and existence of the IS-LM framework in Ghana.
It was conducted by Insah Baba & Ofori-Boateng Kenneth.

Annual time series data from 1980 to 2012 was used for this research. The results from the LM
analysis revealed that the interest rate elasticity with respect to real money balances was
large, negative and with respect to GDP it was positive. The GDP growth elasticity with
respect to interest rate was found to be negative whereas that of investment expenditure was
positive. On the other hand, results of the IS equation also indicated that real interest rate
exerted a stronger influence on GDP growth than that of investment expenditure. The study
thus recommends the role of monetary policy and economic growth in exchange rate
management. Also, interest rate is seen here as a stronger driver of economic growth in Ghana
compared with investment expenditure.

As a summary the study indicated that real money balances exerted a negative but significant
influence on real interest rate. The growth rate of GDP had a dominant influence on real interest
rate. On the other hand, investment expenditure exerted significant and positive influence on
GDP growth.

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5.2 Implications in Europe and USA

An econometric study was conducted by G. Peersman and F. Smets using data of Europe and
the USA from 1980 to 1998 to compare the effects of an increase in the interest rate pertaining
to the goods market using IS- LM model. It has given typical results of such changes on
macroeconomic parameters.

Effects of a change in the interest rate on a given variables were studied. The results are given
in the Annexure I. Each graph contains three lines; purple line at the center represents the best
estimate of the effect of a change in the interest rate on the variable considered in that frame.
The green and blue lines and the space between them represent a confidence interval, an interval
within which the true value lies with a probability of 90%. The left side graphs are for Europe
and the right hand graphs shows the effects of an increase in the interest rate, with respect to
USA.The main variable considered was the interest rate. It was observed that increasing the
interest rate has resulted a reduction in output. In Europe, the greatest decline in production is
reached in the second and third quarters after the increase in the interest rate, compared to five
quarters in the USA.

The results have proven one of the assumptions of the IS–LM model that is the price level does
not vary with changes in demand. The figure shows that this assumption is valid for reality in
the short term. For Example I Europe the price levels remains almost unchanged approximately
for the first five quarters. This suggests that the IS–LM model becomes less reliable in the
medium term as price level changes and become significant. Comparing the euro area in USA
prices react more rapidly in the USA, although the size of the responses are the same.

6. How World Bank try to Restore Balance

By mandate, The World Bank promotes long-term economic development and poverty
reduction by providing technical and financial support to help countries reform particular
sectors or implement specific projects—such as, building schools and health centers, providing
water and electricity, fighting disease, and protecting the environment. World Bank assistance
is generally long term and is funded both by member country contributions and through bond
issuance. Its staff is often specialists in particular issues, sectors, or techniques. The World
Bank Group consists of five organizations:

6.1 The International Bank for Reconstruction and Development:

The International Bank for Reconstruction and Development (IBRD) lends to governments of
middle-income and creditworthy low-income countries. This was established to support the

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development of the devastated European countries, upon WW II. Following the reconstruction
of Europe, the Bank's mandate expanded to advancing worldwide economic development and
eradicating poverty. The IBRD provides commercial-grade or concessional financing to
sovereign states to fund projects that seek to improve transportation and infrastructure,
education, domestic policy, environmental consciousness, energy investments, healthcare,
access to food and potable water, and access to improved sanitation. Its observed that IBRD
was initiated to support EUROPE (Triad); however, its scope is extended to support developing
countries as of today.

6.2 The International Development Association

The International Development Association (IDA) provides interest-free loans — called credits
— and grants to governments of the poorest countries. Although members contribute capital to
the IBRD, the Bank acquires funds primarily by borrowing on international capital markets by
issuing bonds. The Bank raised $29 billion USD worth of capital in 2011 from bonds issued in
26 different currencies. The IBRD has enjoyed a triple-A credit rating since 1959, which allows
it to borrow capital at favorable rates. It offers benchmark and global benchmark bonds, bonds
denominated in non-hard currencies, structured notes with custom-tailored yields and
currencies, discount notes in U.S. dollars and euro dollars. In 2011, the IBRD sought an
additional $86 billion USD (of which $5.1 billion would be paid-in capital) as part of a general
capital increase to increase its lending capacity to middle-income countries. The IBRD
expressed in February 2012 its intent to sell kangaroo bonds (bonds denominated in Australian
dollars issued by external firms) with maturities lasting until 2017 and 2022.

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6.3 The International Finance Corporation (IFC)

The International Finance Corporation (IFC) is the largest global development institution
focused exclusively on the private sector. We help developing countries achieve sustainable
growth by financing investment, mobilizing capital in international financial markets, and
providing advisory services to businesses and governments. IFC grants are shown below.

6.4 The Multilateral Investment Guarantee Agency

The Multilateral Investment Guarantee Agency (MIGA) was created in 1988 to promote
foreign direct investment into developing countries to support economic growth, reduce
poverty, and improve people’s lives. MIGA fulfills this mandate by offering political risk
insurance (guarantees) to investors and lenders.

6.5 The International Centre for Settlement of Investment Disputes

The International Centre for Settlement of Investment Disputes (ICSID) provides international
facilities for conciliation and arbitration of investment disputes.

The contribution of the triad countries to developing countries are, Commitments made in
Monterrey to an increase in aid, substantial pledges to fight HIV/AIDS and malaria, and for
conflict prevention and reconstruction; and better allocation and use of resources, including
enhanced donor harmonization—as we all agreed in the Rome meetings earlier this year.

7. Priorities to be concerned to empower third world countries through aid programs

To empower developing countries, to increase the effectiveness and absorption of aid different
measures to be established at

Country level

Regional level and

The level of the international financial institutions (IFIs).

At each level there are two aspects to empowerment: the first is advocacy to ensure developing
country views and priorities should be properly enunciated. Further to that more practical
(including analytical and technical) capabilities should be developed within developing
countries to mobilize the best quality aid for poverty reduction and economic development
given by International donor and financial agencies.

At the developing country level, the most crucial aspect is to improve the dialogue at the
national level, through genuinely country-led PRSP processes to prepare a government strategy

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for financing the national budget, in discussion with donors and civil society. The strategy
should include objectives for financing amounts (based on programs with pre-calculated cost
for the MDGs and other national poverty reduction objectives). It would also plan types of
financing (external grants; external loans; domestic debt) based on their relative costs, risks
and other advantages/disadvantages. Most important, it would also define precise and time-
bound objectives for the quality of aid based on a partnership between donors and government,
in which each side would take actions to:

 Make aid concessionary appropriate to achieve national debt sustainability

 Increase programs rather than project aid
 Reduce technical assistance and switching to capacity-building
 Reduce emergency assistance by establishing financing to combat shocks
 Channel higher proportions of assistance via the budget
 Focus donor assistance on PRSP priority sectors and projects
 Increase the predictability of aid (through 3- or 5-year agreements with each donor)
 Increase the flexibility of aid (by having greater contingency funding against shocks)
 Reduce conditionality through coordinated streamlining by all donors
 Simplify and accelerate disbursements to increase absorption and avoid shortfalls.
8. Conclusion & Recommendations

With the development of international business activities, especially among the Triad nations,
foreign direct investment and trade values have increased dramatically. United States, Japan,
and the members of the European Union, specially Germany, France, the UK, and Italy are the
key players in this regard. During the current decade, a growing number of other developing
countries has increasingly projected on the international business stage. China is establishing
itself as a major player. Other developing nations whom we will be hearing from increasingly
will include India, Mexico, the Russian Federation, Singapore, South Korea, and China. Yet
despite the increase of international activity by these countries and others in emerging
economies, MNEs from the triad will continue to account for most of the world’s foreign direct
investment and trade. Therefore, the importance of wariness on triad and its impact on world
commerce remains high.

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8.1 Strategy for the Developing Nations in competing with the Triad

Triad-based and non-triad-based firms will have similar objectives when exploring market
seeking investments. Both these parties want to increase sales in each other’s territories, and to
do so they must customize products and services to suit each other’s markets, establish (or buy)
distribution and sales networks, and raise the profiles of their brands. In many cases they may
also need to set up manufacturing, assembly, service, or support activities in each other’s
markets to avoid import duties and/or to support the needs of customers.

Starting point for attraction of triad firms who are looking to expand into developing countries
and for firms from developing countries looking to expand into triad regions can be seen in the
above model. Large markets of North America, Europe, and Japan still dominate the global
economy, but they are growing slowly relative to emerging markets both large, like India,
China, and Brazil, and small, like Poland or Malaysia.

Investment State\ Triad countries in Developing Developing countries in Triad

Investment Mode countries countries

Market Seeking Growing disposable incomes Large mature markets

and growing markets (Potential Large disposable incomes
future Markets)

Resource Seeking Cheaper and acceptable factor Specific technological expertise

based economy and managerial capabilities

Triad regions also tend to be more expensive, in terms of labor costs, infrastructure, land,
materials, and supporting industries, relative to non-triad regions. These signify push factors,
accentuating the pull of non-triad locations. Combining these differences means that there are
strong incentives for triad-based firms to improve their market or to source inputs, such as
cheap labor or manufactured components and services, from such places.

New MNEs evolving in non-triad regions, the main attraction of triad markets is the large,
mature markets in maturity. However, many firms also look into these countries to fill gaps in
their assets, resources, and capabilities, from technological know-how or specialist components
to brands. FDI into emerging economies for inputs (resource-seeking) and outputs (market-
seeking) takes a variety of forms. Many firms nowadays have cut many of its back-office
operations in those countries and established a centers in Asia. Ex: Indian IT and call-center
service.\

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9. References

1.Analysis of the Goods Market and Money Market Equilibrium in a Developing Country ,
Insah Baba, Ofori-Boateng Kenneth, School of Business, Ghana GIMPA Business School,

2. International Business, Alan M. Rugman, &Simon Collinson 4th Edition, Prentice Hall, Jan
17, 2006 - Business & Economics

3. The Monetary Transmission Mechanism in the Euro Area: G. Peersman and F. Smets, More
Evidence from Var Analysis, European Central Bank, working paper No. 91, December 2001.

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