Year: 2020

The law of returns to scale describes the relationship between outputs and scale of inputs in the long-run when all the inputs are increased in the same proportion. In the words of Prof. Roger Miller, “Returns to scale refer to the relationship between changes in output and proportionate changes in all factors of production. To meet a long-run change in demand, the firm increases its scale of production by using more space, more machines and labourers in the factory’.

Assumptions

(i) All factors (inputs) are variable but enterprise is fixed.

(ii) A worker works with given tools and implements.

(iii) Technological changes are absent.

(iv) There is perfect competition.

(v) The product is measured in quantities.

Explanation

Given these assumptions, when all inputs are increased in unchanged proportions and the scale of production is expanded, the effect on output shows three stages: increasing returns to scale, constant returns to scale and diminishing returns to scale.

1. Increasing Returns to Scale

Returns to scale increase because the increase in total output is more than proportional to the increase in all inputs.

The table reveals that in the beginning with the scale of production of (1 worker + 2 acres of land), total output is 8. To increase output when the scale of production is dou­bled (2 workers + 4 acres of land), total returns are more than doubled. They become 17. Now if the scale is trebled (3 workers + о acres of land), returns become more than three-fold, i.e., 27. It shows increasing returns to scale. In the figure RS is the returns to scale curve where R to С portion indicates increasing returns.

Causes of Increasing Returns to Scale

Returns to scale increase due to the following reasons:

(i) Indivisibility of Factors

Returns to scale increase because of the indivisibility of the factors of production. Indivisibility means that machines, management, labour, finance, etc. cannot be available in very small sizes. They are available only in certain minimum sizes. When a business unit expands, the returns to scale increase because the indivisible factors are employed to their maximum capacity.

(ii) Specialization and Division of Labour

Increasing returns to scale also result from specialization and division of labour. When the scale of the firm is expanded there is wide scope of speciali­zation and division of labour. Work can be divided into small tasks and workers can be concentrated to narrower range of processes. For this, specialised equipment can be installed. Thus with specialization, efficiency increases and increasing returns to scale follow.

(iii) Internal Economies

As the firm expands, it enjoys internal economies of production. It may be able to install better machines, sell its products more easily, borrow money cheaply, procure the services of more efficient manager and workers, etc. All these economies help in increasing the returns to scale more than proportionately.

(iv) External Economies

A firm also enjoys increasing returns to scale due to external econo­mies. When the industry itself expands to meet the increased long-run demand for its product, external economies appear which are shared by all the firms in the industry.

When a large number of firms are concentrated at one place, skilled labour, credit and transport facilities are easily available. Subsidiary industries crop up to help the main industry. Trade journals, research and training centres appear which help in increasing the productive efficiency of the firms. Thus these external economies are also the cause of increasing returns to scale.

2. Constant Returns to Scale

Returns to scale become constant as the increase in total output is in exact proportion to the increase in inputs. If the scale of production in increased further, total returns will increase in such a way that the marginal returns become constant. In the table, for the 4th and 5th units of the scale of production, marginal returns are 11, i.e., returns to scale are constant. In the figure, the portion from С to D of the RS curve is horizontal which depicts constant returns to scale. It means that increments of each input are constant at all levels of output.

Causes of Constant Returns to Scale

Returns to scale are constant due to:

(i) Internal Economies and Diseconomies: But increasing returns to scale do not continue indefinitely. As the firm expands further, internal economies are counterbalanced by internal diseconomies. Returns increase in the same proportion so that there are constant returns to scale over a large range of output.

(ii) External Economies and Diseconomies: The returns to scale are constant when external diseconomies and economies are neutralised and output increases in the same proportion.

(iii) Divisible Factors: When factors of production are perfectly divisible, substitutable, and homogeneous with perfectly elastic supplies at given prices, returns to scale are constant.

3. Diminishing Returns to Scale

Returns to scale diminish because the increase in output is less than proportional to the increase in inputs. The table shows that when output is increased from the 6th, 7th and 8th units, the total returns increase at a lower rate than before so that the marginal returns start diminishing successively to 10, 9 and 8. In the figure, the portion from D to S of the RS curve shows diminishing returns.

Causes of Diminishing Returns to Scale

Constant returns to scale is only a passing phase, for ultimately returns to scale start diminishing. Indivisible factors may become inefficient and less productive. Business may become unwieldy and produce problems of supervision and coordination. Large management creates difficulties of control and rigidities. To these internal diseconomies are added external diseconomies of scale.

These arise from higher factor prices or from diminishing productivities of the factors. As the industry continues to expand, the demand for skilled labour, land, capital, etc. rises. There being perfect competition, inten­sive bidding raises wages, rent and interest. Prices of raw materials also go up. Transport and marketing difficulties emerge. All these factors tend to raise costs and the expansion of the firms leads to diminish­ing returns to scale so that doubling the scale would not lead to doubling the output.

For the management increasing, decreasing or constant returns to scale reflect changes in pro­duction efficiency that result from scaling up productive inputs. But returns to scale is strictly a production and cost concept. Management’s decision on what to produce and how much to produce must be based upon the demand for the product. Therefore, demand and other factors must also be considered in decision making.

Laws of Constant Returns

 The Law of Constant Returns is said to operate when the additional investment of labour and capital yields the same return as before.

It means the return from investment remains the same as the business is expanded or contracted.

In other-words, it can be said that “whatever the scale of production, the cost of the product per unit remains the same.”

According to Stigler – “When all the productive services are increased in a given proportion, the product is increased in the same proportion.”

Law of Constant Return remains active for some-time. From where the activeness of Law of Increasing Return ends, from there the Law of Constant Return starts and after the end of the activeness of this Law of Diminishing Return starts operation.

In other-words, it can be said that when the business moves towards the optimum, the returns increase and when it goes beyond the optimum the returns decrease. But if after having reached the optimum point, the industry is stabilized at the level of output, the returns continue to be the same; and they are said to be constant.

This law can be illustrated by the following example:

From this table it is clear that by increase in the unit of labour and capital, total production increases but the marginal production remains constant i.e., 30 is the constant figure; and this figure is Law of Constant Return.

Diagrammatic Representation:

This Law of Constant Returns can be represented in a diagram as follows:

On OX axis unit of labour and capital and on OY axis marginal production of fan has been shown. AB line is the Law of Constant Return because it shows that in-spite of increase in the unit of labour and capital marginal production of fan is the same. In other-words, here AB line is the Law of Constant Return.

Why Law of Constant Returns?

In every industry, we find the influence of man and nature. Nature controls the supply of raw-materials while man directs the manufacturing side. If there is an industry where the cost of raw-materials and the manufacturing costs are half and half, we can say that both man and nature influence equally. Such an industry would be subject to the Law of Constant Returns. For example – The woolen blanket weaving industry. Here the cost of wool is supposed to cost as much as the other manufacturing costs put in the manufacturing.

Further, if there is an integration of the extractive and manufacturing industries like sugar-making and cane-growing, steel making and iron-ore mining the Law of Constant Returns may operate. Here, the two aspects of the industry are combined, viz., the agricultural aspect which is subject to the law of diminishing returns and the manufacturing aspect which is subject to the Law of Increasing Returns.

It is possible for these two tendencies to counter­balance each other with the result that the Law of Constant Returns may operate. Thus, we find that in every industry there are two tendencies and constantly at work viz., one of diminishing returns and the other of increasing returns. Whenever this scale of production is increased the cost of raw materials and other factors may go up on account of increased demand.

This tends to raise the cost of production per unit or to bring about the operation of the Law of Diminishing Returns. But the larger the scale the greater the economies in the use of machinery, division of labour, buying and selling, research and publicity etc.

In actual life, however, either the tendency of diminishing returns is stronger or the increasing returns tendency is stronger. Thus, the operation of the Law of Constant Returns is rather rare and if at all it operates, it lasts only for a short period of time.

There are mainly two factors which give rise to the Law of Increasing Returns to scale:

1. Indivisibilities of the factors of production.
2. Specialisation of factors of production.

In economics, production theory explains the principles in which the business has to take decisions on how much of each commodity it sells and how much it produces and also how much of raw material ie., fixed capital and labor it employs and how much it will use. It defines the relationships between the prices of the commodities and productive factors on one hand and the quantities of these commodities and productive factors that are produced on the other hand.

Production is a process of combining various inputs to produce an output for consumption. It is the act of creating output in the form of a commodity or a service which contributes to the utility of individuals.

In other words, it is a process in which the inputs are converted into outputs.

Function

The Production function signifies a technical relationship between the physical inputs and physical outputs of the firm, for a given state of the technology.

Q = f (a, b, c, . . . . . . z)

Where a,b,c ….z are various inputs such as land, labor ,capital etc. Q is the level of the output for a firm.

If labor (L) and capital (K) are only the input factors, the production function reduces to 

Q = f(L, K)

Production Function describes the technological relationship between inputs and outputs. It is a tool that analysis the qualitative input – output relationship and also represents the technology of a firm or the economy as a whole.

Features of Production Function:

Following are the main features of production function:

1. Substitutability:

The factors of production or inputs are substitutes of one another which make it possible to vary the total output by changing the quantity of one or a few inputs, while the quantities of all other inputs are held constant. It is the substitutability of the factors of production that gives rise to the laws of variable proportions.

2. Complementarity:

The factors of production are also complementary to one another, that is, the two or more inputs are to be used together as nothing will be produced if the quantity of either of the inputs used in the production process is zero.

The principles of returns to scale is another manifestation of complementarity of inputs as it reveals that the quantity of all inputs are to be increased simultaneously in order to attain a higher scale of total output.

3. Specificity:

It reveals that the inputs are specific to the production of a particular product. Machines and equipment’s, specialized workers and raw materials are a few examples of the specificity of factors of production. The specificity may not be complete as factors may be used for production of other commodities too. This reveals that in the production process none of the factors can be ignored and in some cases ignorance to even slightest extent is not possible if the factors are perfectly specific.

Production involves time; hence, the way the inputs are combined is determined to a large extent by the time period under consideration. The greater the time period, the greater the freedom the producer has to vary the quantities of various inputs used in the production process.

In the production function, variation in total output by varying the quantities of all inputs is possible only in the long run whereas the variation in total output by varying the quantity of single input may be possible even in the short run.

Production analysis basically is concerned with the analysis in which the resources such as land, labor, and capital are employed to produce a firm’s final product. To produce these goods the basic inputs are classified into two divisions:

Variable Inputs

Inputs those change or are variable in the short run or long run are variable inputs.

Fixed Inputs

Inputs that remain constant in the short term are fixed inputs.

Cost Function

Cost function is defined as the relationship between the cost of the product and the output. Following is the formula for the same:

C = F [Q]

Cost function is divided into namely two types:

Short Run Cost

Short run cost is an analysis in which few factors are constant which won’t change during the period of analysis. The output can be changed i.e, increased or decreased in the short run by changing the variable factors.

Following are the basic three types of short run cost:

Long Run Cost

Long-run cost is variable and a firm adjusts all its inputs to make sure that its cost of production is as low as possible.

Long run cost = Long run variable cost

In the long run, firms don’t have the liberty to reach equilibrium between supply and demand by altering the levels of production. They can only expand or reduce the production capacity as per the profits. In the long run, a firm can choose any amount of fixed costs it wants to make short run decisions.

Law of Variable Proportions

The law of variable proportions has following three different phases:

• Returns to a Factor
• Returns to a Scale
• Isoquants

Returns to a Factor

Increasing Returns to a Factor

Increasing returns to a factor refers to the situation in which total output tends to increase at an increasing rate when more of variable factor is mixed with the fixed factor of production. In such a case, marginal product of the variable factor must be increasing. Inversely, marginal price of production must be diminishing.

Constant Returns to a Factor

Constant returns to a factor refers to the stage when increasing the application of the variable factor does not result in increasing the marginal product of the factor – rather, marginal product of the factor tends to stabilize. Accordingly, total output increases only at a constant rate.

Diminishing Returns to a Factor

Diminishing returns to a factor refers to a situation in which the total output tends to increase at a diminishing rate when more of the variable factor is combined with the fixed factor of production. In such a situation, marginal product of the variable must be diminishing. Inversely the marginal cost of production must be increasing.

Returns to a Scale

If all inputs are changed simultaneously or proportionately, then the concept of returns to scale has to be used to understand the behavior of output. The behavior of output is studied when all the factors of production are changed in the same direction and proportion. Returns to scale are classified as follows:

• Increasing returns to scale: If output increases more than proportionate to the increase in all inputs.
• Constant returns to scale: If all inputs are increased by some proportion, output will also increase by the same proportion.
• Decreasing returns to scale: If increase in output is less than proportionate to the increase in all inputs.

For example: If all factors of production are doubled and output increases by more than two times, then the situation is of increasing returns to scale. On the other hand, if output does not double even after a 100 per cent increase in input factors, we have diminishing returns to scale.

The general production function is Q = F (L, K)

An international financial institution (IFI) is a financial institution that has been established (or chartered) by more than one country, and hence are subjects of international law. Its owners or shareholders are generally national governments, although other international institutions and other organizations occasionally figure as shareholders. The most prominent IFIs are creations of multiple nations, although some bilateral financial institutions (created by two countries) exist and are technically IFIs. The best known IFIs were established after World War II to assist in the reconstruction of Europe and provide mechanisms for international cooperation in managing the global financial system.

Today, the world’s largest IFI is the European Investment Bank, with a balance sheet size of €573 billion in 2016. This compares to the two components of the World Bank, the IBRD (assets of $358 billion in 2014) and the IDA (assets of $183 billion in 2014). For comparison, the largest commercial banks each have assets of c.$2,000-3,000 billion.

In many parts of the world, international financial institutions (IFIs) play a major role in the social and economic development programs of nations with developing or transitional economies. This role includes advising on development projects, funding them and assisting in their implementation.

Characterized by AAA-credit ratings and a broad membership of borrowing and donor countries, each of these institutions operates independently. All however, share the following goals and objectives:

• To reduce global poverty and improve people’s living conditions and standards;
• To support sustainable economic, social and institutional development; and
• To promote regional cooperation and integration.

IFIs achieve these objectives through loans, credits and grants to national governments. Such funding is usually tied to specific projects that focus on economic and socially sustainable development. IFIs also provide technical and advisory assistance to their borrowers and conduct extensive research on development issues. In addition to these public procurement opportunities, in which multilateral financing is delivered to a national government for the implementation of a project or program, IFIs are increasingly lending directly to non-sovereign guaranteed (NSG) actors. These include sub-national government entities, as well as the private sector.

Canada is a partner and shareholder in the World Bank, which is the major global IFI, and in several regional development banks. This membership permits Canadian firms and individuals to compete for procurement opportunities in bank-funded projects and programs.

Since inception at Bretton, the World Bank and International Monetary Fund (IMF) have undergone several transformations in their roles of supporting the global financial architecture. There is some significant progress regarding the globalization of commercial architecture, which has a great boost to foreign operation and private investment.

Poor performance due to poorly managed developed or developing institutions led to the re-examination of the role state in curbing mismanagement and therefore enhancing the shift of these roles to other private market-based approaches. These transformations make the private international finance trusts as well as the entrepreneurship sectors to play the main role in ensuring economic development besides lending.

The twenty-first century requires procedures and measure that enhance the transformation of global scenarios. Today the International financial institutions (IFIs) are increasingly engaging countries that are economically poor into investing in resourceful developments that support economic growth.

This has been possible to achieve due to the strict measures taken over violations involving the internationally applied humanitarian laws. There are various hindrances to the role of IFIs to act as agents of promoting and ensuring adherence to international humanitarian laws.

These obstacles include countries structural and political concerns. The institutions, however, have the advantage by the fact of being in a position of publically making harsh utterances against such countries, indicating the country’s level of tolerating violations or ability to absorb them. They can place weight behind the humanitarian law thus forcing those in need of support to abide by the rules.

With this reasoning, they have the leading role in investigating a country’s commitment to impunity before loaning or funding projects. The institutions have the communal role of influencing engagement even if symbolically meant for financial considerations.

The steady growth of the private developing markets contributes hugely to fill the needed investment of flowing capital. The institutions support the growth of the savings gap in the developing nations and reduce people dependency by diversifying and sourcing funds in terms of strategically planned investments.

According to Wogan, the financial institutions use the flow of private capital to fill the financial gaps by conveying technologies, changing the market behaviors, investing in the enhancement of managerial skills and funds distribution channels. They thus have a crucial role in assessing the impact resulting from the flow of private capital on the developing economies.

The international financial bodies have to play the role of changing market positions. The traditional objectives of some of these institutions such as the World Bank and the IMF entail elevation of poverty in developing countries, enhancing measures that promote economic growth and protection of the environment.

Other institutions like the EBRD have come up with a special role of fostering transition of its operations to cover the open market economies by raising the living standards of those involved with borrowing through enlightening and expanding their rights as well as guiding in their primary choices.

In line with the World Bank reports, currently, the financial institutions are face up to fostering development through expansion of the private sector opportunities of developing economic goals. They have to ensure the poor participate in activities supporting environmentally sustainable growth.

The institutions can ensure this growth by assisting the governments’ role of creating the conditions necessary for market-orientation towards the achievements and by being participants in investing.

They ought to work with the private sectors to expand to become participating investors in the private sectors by improving the flow of working capital. Generally, the role fosters the tradition role of stabilizing the macroeconomic firms as well as ensuring provision of the required physical, legal and authoritarian infrastructure.

In collaborating with the private sectors, the financial institutions are obliged to think like them by subject to the dynamics of opportunities in the market. They thus meet the challenges of enhancing creativity and flexibility to respond to market needs efficiently.

This was evidential when the World Bank transformed to an infrastructure back in pursuit of uplifting the private sectors since they were highly influential to the economic growth and was less venerable to corruption. The support of the private establishments requires the lenders to abide by the flexibility and confidentiality involved in privatized operations. Engagement with new role comes with additional facilities such as accountability and further commercial risk analysis, avoidance and control cultures.

They have a crucial role in coming up with operational principals for well-run institutions. They aim to expand the private sectors; therefore they should stay clear of those activities that the segments are in a good position to handle and instead engage in activities that make an immense contribution to the transitional process of economic growth.

They have the role of engaging other financial institutions to assist in placing down the funding required for a chosen investment. This is a vital role in the transition process and the achievement of a broader perspective for development.

Today the financial institutions have the role of funding the building of other financial institutions in the local markets. This is a measure to strengthen their capital base through investing in projects offering broad perspectives.

There is an urgent need for well-functioning monetary branches to fulfill the role played by the financial lending institutions in fulfilling the market economies. They act as intermediaries to collect savings and invest them in the aim of commanding hard budgetary allocations into the economic recovery endeavors that enhance development.

One of the traditional roles played by the financial institution entails financing of efficient infrastructure. The constraints experienced on most of the budgetary allocations means that further commercially oriented investments are required for enhancing access to the private financial sectors. Relevant markets disciplines ought to strengthen control of costs and minimize risks as a measure of providing revenue as a discipline introduced by the financial institutions today.

A new focus on the market-oriented economies is highly supporting the flow of capital invested mainly in the private sector. The primary support by the majority of the financial institutions seems to shift goals to the development of the private sector by capitalizing on their strengths while minimizing the risks involved.

The private markets and capital flows involved are powerful forces that represent significant opportunities for growth. The financial institutions ought to provide clear principals regarding the selection and design. By supporting the private sectors, the financial institutions aim to encourage or influence them into promoting the industries that they are not able to reach.

A well-built financial and physical infrastructure creates jobs opportunities and enables broad market growths. Considering the various roles of the institutions, they can meet the high social and environmental standards of the companies by enhancing procedures to be followed by clients, which they teach during their projects support processes or advisory services to support financing projects.

Some of its major functions and activities are:

(a) Exchange Stability

The Fund is required to promote stability in the foreign exchange rates of its member countries. The Fund Agreement seeks to attain the exchange stability by requiring members to agree with the Fund suitable gold or dollar (U.S.) par values (connection with gold severed in January 1976) for their respective currencies, so as to create a system of stable exchange rates.

Each member of the Fund undertakes to establish and maintain the agreed par value for its currency, and to consult the Fund on any change in excess of 10% of the initial party. The Fund allows such alterations in exchange rates only for correcting fundamental disequili­brium in the balance of payments of the country concerned. But, now exchange values are no longer (since January 1976) determined in terms of gold, and so the IMF has ceased to have any direct impact on exchange values.

(b) Multinational Convertibility of Currencies

The Fund makes arrangement for the multinational convertibility of the currencies of the member coun­tries within the prescribed limits of the quota of each member. Since the Fund contains the currencies of all member countries, a member is entitled to purchase whichever currency it needs.

A member country can purchase foreign currencies every year up to 25% of its quota subject to the maximum limit of 200% of its quota. Thus, the Fund offers facilities to its members for additional liquidity.

(c) Assistance for Short-Term Payments Difficulties

The Fund makes its for­eign exchange resources available, under proper safeguards, to its members to meet short-term or medium-term payments difficulties.

(d) Promotion of International Trade

The Fund seeks to promote interna­tional trade by inducing member nations to avoid restrictive currency practices and barriers to trade, such as multiple exchange rates, exchange control, etc. The countries retaining exchange controls are required to justify them.

(e) Allocation of Special Drawing Rights

The Fund also supplements, as and when needed, the existing reserve assets of the participants in the Special Drawing Account. It also makes allocation from the Account to the member countries.

(f) Other Functions

Its other functions include international monetary reform, recycling of petro-dollars to the oil-importing countries, etc. Re­cently, the Fund has to introduce a series of measures like the sale of its gold reserve delinking of the par values of currency from gold, etc. for increasing the supply of international liquidity and promoting greater monetary co­operation among member countries.

Major Objectives of International Financial Institutions

The Fund has been established to achieve the following major objectives:

(a) To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income;

(b) To promote exchange stability, to maintain orderly exchange arrange­ments among members, and to avoid competitive exchange depre­ciation;

(c) To assist in the establishment of multilateral system of payments in respect of current transactions between members and in the elimina­tion of foreign exchange restrictions which hamper the growth of world trade?

(d) To shorten the duration and lessen the degree of disequilibrium in the balance of payments of members; and

(e) To promote international monetary co-operation through a perma­nent institution.

The United Nations Conference on Trade and Development (UNCTAD) was established in 1964 as a permanent intergovernmental body.

UNCTAD is the part of the United Nations Secretariat dealing with trade, investment, and development issues. The organization’s goals are to: “maximize the trade, investment and development opportunities of developing countries and assist them in their efforts to integrate into the world economy on an equitable basis”. UNCTAD was established by the United Nations General Assembly in 1964 and it reports to the UN General Assembly and United Nations Economic and Social Council.

The primary objective of UNCTAD is to formulate policies relating to all aspects of development including trade, aid, transport, finance and technology. The conference ordinarily meets once in four years; the permanent secretariat is in Geneva.

One of the principal achievements of UNCTAD (1964) has been to conceive and implement the Generalised System of Preferences (GSP). It was argued in UNCTAD that to promote exports of manufactured goods from developing countries, it would be necessary to offer special tariff concessions to such exports. Accepting this argument, the developed countries formulated the GSP scheme under which manufacturers’ exports and import of some agricultural goods from the developing countries enter duty-free or at reduced rates in the developed countries. Since imports of such items from other developed countries are subject to the normal rates of duties, imports of the same items from developing countries would enjoy a competitive advantage.

The creation of UNCTAD in 1964 was based on concerns of developing countries over the international market, multi-national corporations, and great disparity between developed nations and developing nations. The United Nations Conference on Trade and Development was established to provide a forum where the developing countries could discuss the problems relating to their economic development. The organization grew from the view that existing institutions like GATT (now replaced by the World Trade Organization, WTO), the International Monetary Fund (IMF), and World Bank were not properly organized to handle the particular problems of developing countries. Later, in the 1970s and 1980s, UNCTAD was closely associated with the idea of a New International Economic Order (NIEO).

The first UNCTAD conference took place in Geneva in 1964, the second in New Delhi in 1968, the third in Santiago in 1972, fourth in Nairobi in 1976, the fifth in Manila in 1979, the sixth in Belgrade in 1983, the seventh in Geneva in 1987, the eighth in Cartagena in 1992, the ninth at Johannesburg (South Africa) in 1996, the tenth in Bangkok (Thailand) in 2000, the eleventh in São Paulo (Brazil) in 2004, the twelth in Accra in 2008, the thirteenth in Doha (Qatar) in 2012 and the fourteenth in Nairobi (Kenya) in 2016.

Currently, UNCTAD has 195 member states and is headquartered in Geneva, Switzerland. UNCTAD has 400 staff members and a bi-annual (2010–2011) regular budget of $138 million in core expenditures and $72 million in extra-budgetary technical assistance funds. It is a member of the United Nations Development Group. There are non-governmental organizations participating in the activities of UNCTAD.

Membership in the United Nations Conference on Trade and Development (UNCTCAD)

As of May 2018, 195 states are UNCTAD members: all UN members plus UN observer states Palestine and the Holy See. UNCTAD members are divided into four lists, the division being based on United Nations Regional Groups with six members unassigned: Armenia, Kiribati, Nauru, South Sudan, Tajikistan, Tuvalu. List A consists mostly of countries in the African and Asia-Pacific Groups of the UN. List B consists of countries of the Western European and Others Group. List C consists of countries of the Group of Latin American and Caribbean States (GRULAC). List D consists of countries of the Eastern European Group.

The lists, originally defined in 19th General Assembly resolution 1995 serve to balance geographical distribution of member states’ representation on the Trade Development Board and other UNCTAD structures. The lists are similar to those of UNIDO, an UN specialized agency.

The most recent member are the Palestinians.

The full lists are as follows:

(1) List A (100 members): Afghanistan, Algeria, Angola, Bahrain, Bangladesh, Benin, Bhutan, Bosnia and Herzegovina, Botswana, Brunei Darussalam, Burkina Faso, Burundi, Cambodia, Cameroon, Cape Verde, Central African Republic, Chad, China, Comoros, Côte d’Ivoire, Republic of Congo, Democratic Republic of Congo, Djibouti, Egypt, Equatorial Guinea, Eritrea, Eswatini, Ethiopia, Fiji, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, India, Indonesia, Iran, Iraq, Israel, Jordan, Kenya, Kuwait, Laos, Lebanon, Lesotho, Liberia, Libya, Madagascar, Malawi, Malaysia, Maldives, Mali, Marshall Islands, Mauritania, Mauritius, Micronesia, Mongolia, Morocco, Mozambique, Myanmar, Namibia, Nepal, Niger, Nigeria, North Korea, Oman, Pakistan, Palestine, Palau, Papua New Guinea, Philippines, Qatar, South Korea, Rwanda, Samoa, Sao Tome and Principe, Saudi Arabia, Senegal, Seychelles, Sierra Leone, Singapore, Solomon Islands, Somalia, South Africa, Sri Lanka, Sudan, Syria, Thailand, Timor-Leste, Togo, Tonga, Tunisia, Turkmenistan, Uganda, United Arab Emirates, Tanzania, Vanuatu, Viet Nam, Yemen, Zambia, Zimbabwe.

(2) List B (31 members): Andorra, Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Greece, Holy See, Iceland, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Malta, Monaco, Netherlands, New Zealand, Norway, Portugal, San Marino, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States.

(3) List C (33 members): Antigua and Barbuda, Argentina, Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, Uruguay, Venezuela.

(4) List D (24 members): Albania, Azerbaijan, Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Montenegro, Poland, Moldova, Romania, Russia, Serbia, Slovakia, Slovenia, Macedonia, Ukraine, Uzbekistan.

Not assigned countries (6 members): Armenia, Kiribati, Nauru, South Sudan, Tajikistan, Tuvalu.

Other states that do not participate are Cook Islands, Niue, and the states with limited recognition.

The Asian Development Bank (ADB) is a regional development bank established on 19 December 1966, which is headquartered in the Ortigas Center located in the city of Mandaluyong, Metro Manila, Philippines. The company also maintains 31 field offices around the world to promote social and economic development in Asia. The bank admits the members of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP, formerly the Economic Commission for Asia and the Far East or ECAFE) and non-regional developed countries. From 31 members at its establishment, ADB now has 68 members.

The ADB was modeled closely on the World Bank, and has a similar weighted voting system where votes are distributed in proportion with members’ capital subscriptions. ADB releases an annual report that summarizes its operations, budget and other materials for review by the public. The ADB-Japan Scholarship Program (ADB-JSP) enrolls about 300 students annually in academic institutions located in 10 countries within the Region. Upon completion of their study programs, scholars are expected to contribute to the economic and social development of their home countries. ADB is an official United Nations Observer.

As of 31 December 2016, Japan holds the largest proportion of shares at 15.677%, closely followed by United States with 15.567% capital share. China holds 6.473%, India holds 6.359%, and Australia holds 5.812%.

Functions of the Asian Development Bank (ADB)

1. Economic and Social Advancement

This bank has a membership program under which there are various benefits available for the members’ countries.

These benefits include providing loan and investment at a concessional rate. One of the functions of the ADB is to provide loans and equity investments for the economic and social upgrade of developing member countries.

2. Technical Assistance

Most of the countries require a lot of services like advisory services. Moreover, they while operating at the international level, most of the countries require technical support too.

One of the functions of the Asian Development Bank is to provide technical assistance for the preparation and implementation of development projects and advisory services.

3. Investment Promotion

Firstly, the Asian Development Bank provides a lot of services to the member countries in the form of investments. At the same time, they also provide some specific sort of investment facilities for development purposes.

4. Support in Policies and Plans

Plans and policies play an important role in any country. There are various domestic agencies providing help to the authorities while framing various policies.

But there is a need for some international agencies at the same time for the same function. One of the main functions of the ADB is to provide help to the member countries in framing policies and plans at the international level.

Objectives of the Asian Development Bank (ADB)

• Firstly, its objective is to help the member countries in countering poverty. Hence, it helps them in poverty reduction and country development.
• If both the social as well as the economic aspects of a country is rising, then it leads to economic growth. One of the objectives is to help the countries to go towards economic growth.
• Thirdly, their objective is to support human development.
• Moreover, they believe in preserving and protecting the environment.
• Lastly, they work and wish to continue working towards empowering women and improving their status in society.

Organization of Asian Development Bank (ADB)

The highest policy-making body of the bank is the Board of Governors, composed of one representative from each member state. The Board of Governors, in turn, elect among themselves the twelve members of the Board of Directors and their deputies. Eight of the twelve members come from regional (Asia-Pacific) members while the others come from non-regional members.

The Board of Governors also elect the bank’s president, who is the chairperson of the Board of Directors and manages ADB. The president has a term of office lasting five years, and may be reelected. Traditionally, and because Japan is one of the largest shareholders of the bank, the president has always been Japanese.

The current president is Masatsugu Asakawa. He succeeded Takehiko Nakao on 17 January 2020, who succeeded Haruhiko Kuroda in 2013.

The headquarters of the bank is at 6 ADB Avenue, Mandaluyong, Metro Manila, Philippines, and it has 31 field offices in Asia and the Pacific and representative offices in Washington, Frankfurt, Tokyo and Sydney. The bank employs about 3,000 people, representing 60 of its 67 members.

History of Asian Development Bank (ADB)

ADB was conceived amid the postwar rehabilitation and reconstruction of the early 1960s. The vision was of a financial institution that would be Asian in character and foster economic growth and cooperation in the region then one of the poorest in the world.

A resolution passed at the first Ministerial Conference on Asian Economic Cooperation held by the United Nations Economic Commission for Asia and the Far East in 1963, set that vision on the way to becoming reality.

The Philippines capital of Manila was chosen to host the new institution, the Asian Development Bank which opened on 19 December 1966, with 31 members to serve a predominantly agricultural region. Takeshi Watanabe was the first President.

For the rest of the 1960s, ADB focused much of its assistance on food production and rural development. The next three years saw ADB’s first technical assistance, loans (including a first on concessional terms in 1969) and bond issue (in Germany).

In 1970s

Assistance expanded in the 1970s into education and health and then to infrastructure and industry. The gradual emergence of Asian economies in the late 1970s spurred demand for better infrastructure to support economic growth. ADB focused on improving roads and providing electricity.

When the world suffered its first oil price shock, ADB shifted more of its assistance to support energy projects, especially those promoting the development of domestic energy sources in member countries.

Co-financing operations began to provide additional resources for ADB projects and programs. 1970 saw ADB’s first bond issue in Asia worth $16.7 million in Japan.

A major landmark was the establishment in 1974, of the Asian Development Fund to provide concessional lending to ADB’s poorest members.

At the close of the decade, some Asian economies had improved considerably and graduated from ADB’s regular assistance.

In 1980s

It was also becoming clear that the private sector was an important ally in driving growth. ADB thus in the 1980s made its first direct equity investment. ADB also began to use its track record to mobilize additional resources for development from the private sector.

In the wake of the second oil crisis, ADB continued its support in the 1980s to infrastructure development, particularly energy projects. ADB also increased its support to social infrastructure, including gender, microfinance, environmental, education, urban planning and health issues.

In 1982, ADB opened its first field office, a Resident Mission in Bangladesh to bring operations closer to their intended beneficiaries. Later in the decade, ADB approved a policy supporting collaboration with non-government organizations to address the basic needs of disadvantaged groups in its developing member countries.

In 1990s

The start of the 1990s saw ADB begin promoting regional cooperation, forging close ties among neighboring countries through an economic cooperation program.

In 1995, ADB became the first multilateral organization to have a Board-approved governance policy to ensure that development assistance fully benefits the poor. Policies on the inspection function, involuntary resettlement and indigenous peoples designed to protect the rights of people affected by a project were also approved.

ADB’s membership, meanwhile, continued to expand, with the addition of several Central Asian countries following the end of the Cold War.

But in mid-1997, a severe financial crisis hit the region, setting back Asia’s spectacular economic gains. ADB responded with projects and programs to strengthen financial sectors and create social safety nets for the poor. ADB approved its largest single loan-a $4 billion emergency loan to the Republic of Korea and established the Asian Currency Crisis Support Facility to accelerate assistance.

A milestone came in 1999 when, recognizing that development was still bypassing so many in the region, ADB adopted poverty reduction as its overarching goal.

Into the 21^st Century

The new century brought hope and tragedy, as well as a new focus on helping its developing members achieve the Millennium Development Goals and to enhance development effectiveness.

In 2003 saw severe acute respiratory syndrome (SARS) hit the region, making it clear that fighting infectious diseases was a public good that required regional cooperation. ADB began providing support at national and regional levels to help countries more effectively respond to HIV/AIDS and the growing threat of.

ADB had to respond to other unprecedented natural disasters, committing more than $850 million for recovery in areas of India, Indonesia, Maldives and Sri Lanka hit by the Asian tsunami disaster of December 2004 and a $1 billion line of assistance to help victims of the October 2005 earthquake in Pakistan.

As 2007 drew to a close, ADB celebrated 41 years of fruitful cooperation with the governments and peoples of the Asia and Pacific region, looking back on phenomenal economic growth in the region alongside abiding development challenges.

Now in 2008, it is looking to the future with its Strategy 2020 that will determine the organization’s future direction and vision for the next dozen years.