INTERNATIONAL DIPLOMACY AND BUSINESS INDIA CENTRIC

BY PROFESSOR ANIL KAMBOJ

INSPECTOR GENERAL (RETD)
WHAT IS DIPLOMACY? Diplomacy means being respectful of your opponent’s thoughts and
opinions. It means listening. It means trying to understand the perspective of others. It means
empathizing with others to the best of your ability and working to maintain a positive relationship
while effecting change. Diplomacy means that you assert your ideas in a way that will be heard,
understood, and accepted

NEED FOR BUSINESS DIPLOMACY: Survival in today’s international business environment

does not solely depend on a multinational corporation’s (MNC)competitiveness and efficiency.
Additional factors that determine long-term organizational success are managing dynamic and
complex interactions with multilateral institutions, foreign governments and (international)
social movements.

WHAT IS ECONOMIC DIPLOMACY? Economic Diplomacy includes the promotion of trade and
investments, management of aid and other financial flows, tourism promotion and the
management of all the regulatory issues that affect a country’s external economic policy; it is
handled by the foreign ministry and the economic ministries, and involves contributions by non-
state actors.

The broader perspective of economic diplomacy rests on the management of international

relations through negotiations by government officials/diplomats and the skills required for such
management

INTERNATIONAL BUSINESS: International business comprises

all commercial transactions(private and governmental, sales, investments, logistic
and transportation) that take place between two or more regions, countries and nations beyond
their political boundaries. Usually, private companies
undertake transactions for profit; governments undertake them for profit and
for political reasons. The term "international business" refers to all those business activities
which involve cross-border transactions of goods, services, and resources between two or more
nations. Transactions of economic resources include capital, skills, people etc. for the purpose
of the international production of physical goods and services such as finance, banking,
insurance, construction etc.

ENTRY MODE IN INTERNATIONAL BUSINESS:

Choice of entry mode in international business

• Strategic variables impact the choice of entry mode for multinational corporation
expansion beyond their domestic markets. These variables are global concentration,
global synergies, and global strategic motivations of MNC.
 • Global concentration: many MNC share and overlap markets with a limited number of
other corporations in the same industry.

• Global synergies: the reuse or sharing of resources by a corporation and may include
marketing departments or other inputs that can be used in multiple markets.

• Global strategic motivations: other factors beyond entry mode that are the basic reasons
for corporate expansion into an additional market. These are strategic reasons that may
include establishing a foreign outpost for expansion, developing sourcing sites among
other strategic reasons.

GROWTH IN GLOBALIZATION OF INTERNATIONAL BUSINESS

Factors that influenced the growth in globalization of international business

There has been growth in globalization in recent decades due to (at least) the following eight
factors:

• Technology is expanding, especially in transportation and communications.

• Governments are removing international business restrictions.

• Institutions provide services to ease the conduct of international business.

• Consumers want to know about foreign goods and services.

• Competition has become more global.

• Political relationships have improved among some major economic powers.

• Countries cooperate more on transnational issues.

• Cross-national cooperation and agreements.

INDIA’S INTERNATIONAL BUSINESS

Changing international economic environment, has created significant pressures on New Delhi’s
economic corporate diplomacy to represent business interest and obtain better terms for
investment

Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of
Indian Industries (CII), helping in shaping foreign economic policy.

Globalisation has augmented the importance of economic inter-dependence among countries

Among the non-state actors, multinational corporations are powerful pressure groups at the
global level, with profound penetration into systems of international economic policy formulation

INDIAN ECONOMY - GOOD EXAMPLE

• The growth-inflation dynamics are looking better for the Indian economy than the
Indonesian economy. Gross domestic product (GDP) growth in both economies stood at
close to 5% for the quarter ended September 2014, but India appears to have more
 room to push up growth through accommodative policies because inflation levels are
now lower. Consumer inflation at last print in Indonesia stood at 8.36% while India is
now reporting consumer inflation of about 5%. This has allowed the Indian central bank
to initiate a rate cutting cycle while the Indonesian central bank has been raising rates.
Bank Indonesia (the country’s central bank) last raised rates in November 2014 to
7.75%, while the Reserve Bank of India announced a cut in rates in January this year to
7.75%. For 2015, Indonesia is targeting growth of 5.8%, while growth in India is seen
picking up to about 6.5% for the fiscal year 2015-16. In 2017 first Qtr was at 7.2%.

• This is the era of geo-economics

ECONOMIC DIPLOMACY OF INDIA

• India has managed to maintain an impressive growth rate, high foreign exchange
reserves, increasing exports and rising foreign investment

• India has established itself as a major global player in information technology,

biotechnology, pharmaceuticals, telecom and other areas

• This new paradigm shift in economic strength needs to be translated into strategic global
influence

• India is fast emerging as one of the most favoured investment destinations in the world

• World Trade Organisation and bilateral/regional trade agreements has opened the door
for new opportunities in the sphere of world trade

• Economic diplomacy has evolved from trade diplomacy

INDIAN ECONOMIC DIPLOMACY AND BUSINESS

• India geo-economic engagement in the last decade has used multilateral and sub-
regional arrangements to escape the excessive geo-political imperatives brought in by
some countries

• Geo-economics became a principal instrument to advance geopolitical objectives.

• India has been focusing on multilateral regional initiatives to connect to South East Asia

• For this connectivity is important

• Opening of India Afgan air-corridor for transportation of cargo

• Costruction of Chabar Port in Iran for connecting Central Asia through Iran and
Afghanistan

• Construction of land routes through Myanmar to rest of South East Asia

• India, Nepal, Bhutan and Bangladesh grid connectivity

• India, Nepal, Bhutan and Bangladesh grid connectivity

• Such sub-regional engagements signals India’s attempt to go ahead with the geo-
economics imperative in its regional strategy

• To harness the markets in our neighbourhood and entire East Asia Region is very
important for India

• Indo-China economic diplomacy and international trade

• Focus on improving economic engagement between India and Sri Lanka

• Business trade with US

• Russia already one of the biggest defense equipment supplier

• India has overtaken Italy, Germany and Bangladesh to emerge as the world's second
largest textile exporter

• Indo Japan emerging relations

• India offering the credit line of $100 million to Vietnam

• West Asia: Politics of ‘Black Gold’

• India as leader in South Asia

• Look East Policy of India

• Diplomacy with Central Asia

• Five Principles of Indian Foreign Diplomacy

• Conclusion