International Trade Finance and Investment Report - Module Analysis

This report delves into the multifaceted realm of international trade finance and investment. It begins with an introduction to financial markets, elucidating their role in allocating capital both domestically and internationally. The report then explores various financial market types, including stock, bond, commodities, and derivatives markets, emphasizing their significance in facilitating trade and investment. A detailed examination of the UK's domestic economy follows, including government spending and capital allocation for international trade. The report also analyzes the generation and circulation of money within an economy. Furthermore, the report evaluates the challenges posed by industrialization and trade policies, providing a comprehensive understanding of the financial landscape and its impact on economic growth and development. The report is a comprehensive analysis for students on the Desklib platform.

International Trade
Finance and Investment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
TASK 2............................................................................................................................................7
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
International Trade, Finance and Investment refers to the various parameters which are
related with finance and can be used by the financial investors (Acquah and Ibrahim, 2020).
These parameters are important for the investors to consider before making an investment
decision. This can help in maximizing the value derived from the investments. Thus in this way
this ensures that the overall level of goals and objectives which are related with funding and
investment can be attained in a highly effective manner. Thus it is quite important from the point
of view of the organizations that a deeper understanding of the finance and the overall financial
situation within the market can be developed in a proper manner. This thereby helps a lot in the
taking of different types of decisions in the future which will help a lot in the attainment of short-
term, medium-term and long-term goals and objectives of an organization in the future. In this
report, there will be detailed focus on understanding of the financial markets. Additionally,
specific analysis on challenges a country faces due to the industrialization will be discussed as a
part of this report.
TASK 1
Financial Market- Financial Market is a market in which there is a dealing in different
types of transactions (Alfaro and Chauvin, 2016). Thus in these type of markets it is quite
important that the various modes of investment are considered. Here the dealing in the various
types of financial assets such as shares, debentures, bonds, derivatives, currencies etc. are carried
out which helps in ensuring that the needs and requirements of the organizations related with
money can be fulfilled in a highly effective manner. There are different types of financial
markets which are present within a country. Some of them are explained as follows-
 Stock Market- It is the market in which the dealing in the overall stocks and shares of
the companies can be done highly effectively (Avdjiev and et.al., 2019). Thus the
companies are able to make sure that they can register themselves in this market and can
enhance their overall level of investments effectively and efficiently. They can ensure
that they raise their funds by listing their shares publicly within this market. The use of
Initial Public Offering i.e. IPO can be made by the companies to attract funds from the
public. This can be in the form of shares like Equity Shares, Preference Shares etc. each
of them having particular face value and market value. Thus it can be said that the Stock
1

Market forms an integral part of the financial market for the purpose of making
investments.
 Bond Market- It is a market in which dealing in various types of bonds can take place
(Badarinza, Campbell and Ramadorai, 2016). Thus here the purchase and sale of the
bonds can take place properly which helps a lot in ensuring that the overall market can
function in the right manner ensuring the desired supply of funds to the companies
according to the level of demand. For the firms it is quite crucial that the bond market can
be managed in the right manner without problems and issues. This can be done by
ensuring that they get the desired funds through bonds whenever required by them.
 Commodities Market- This is the market where the dealing in the commodities like
corn, oil, gold etc. takes place (Bajo‐Rubio and Berke, 2018). The buying and selling of
these particular goods can happen within this particular market. Thus in this way it can be
said that the different types of companies can deal within this market to ensure that their
demand of the commodities can be met easily without problems and issues.
 Derivatives Market- This is a particular market where dealing in derivatives or contracts
takes place (Brewster, 2017). Therefore it is an important component of the financial
market which helps a lot in ensuring that the overall goals and objectives can be attained
without problems and issues.
The role of Central Bank is that it should regulate the various types of rates which will help a lot
in ensuring that the financial market is able to run smoothly and thus the overall management of
the finance can take place quite smoothly. This will help a lot in ensuring that the economy is
able to run in a smooth manner effectively and efficiently. This will lead towards ensuring that
the overall monetary and fiscal goals and objectives can be attained.
Capital Market is a market in which the trading of long-term equities and debts can take place in
the right manner. In this way it can help a lot in ensuring that the trading of these equities and
debts can be done properly. There is a need of Capital Market because this will help a lot in
ensuring that the companies are able to deal in the right manner with the long-term equities and
debts effectively and efficiently. The role of this market is that it should help in ensuring that the
long-term equities and debts can be managed appropriately for making the best decisions in the
future.
2

It is quite important that the interest rates are considered so that the market assessment can be
carried out in a proper manner. The impact of these interest rates has to be considered so that the
right decisions can be made effectively and efficiently. This will help in ensuring that the market
can run in a smooth manner.
The currency strength is quite important to be considered by the government because it is a
parameter for judging the success of the economy. This can therefore help a lot in taking the
right decisions effectively and efficiently.
FDI i.e. Foreign Direct Investment refers to the investment made by the firms or individuals in
the business interests of the other country.
An efficient market is the one where the flow of money takes place in the right manner and thus
the overall rotation of the funds can be carried out properly.
An inefficient market is the one where the flow of money does not takes place in the right
manner and thus the overall rotation of the funds cannot be carried out properly.
Background of financial markets-
The Financial Markets are quite effective in ensuring that a proper and appropriate use of
the funds can be made in the right manner (Brini, Amara and Jemmali, 2017). Thus in this way it
can be highly helpful in ensuring that the overall goals and objectives relating to these particular
markets can be attained without problems and issues. These markers provide appropriate sources
of funds for the businesses. This helps them a lot in ensuring that they are able to satisfy their
diverse needs and requirements which are related with funds.
In U.K. There are two important financial markets. They have been explained as follows-
 London Stock Exchange- London Stock Exchange i.e. LSE is a stock exchange in
London, United Kingdom (Caballero, Candelaria and Hale, 2018). Here the dealing in
the shares of the companies who have registered themselves in the stock market takes
place. Thus the purchase and sales of the the shares of the companies can be done here in
the right manner as LSE provides a framework for the same. The investors who want to
invest in the shares of the different types of companies can compare the rates of the
shares offered by each of them before making a decision relating to investment.
 Alternative Investment Market- Alternative Investment Market i.e. AIM is a sub-
market within London Stock Exchange i.e. LSE. It has been designed to make sure that
the smaller companies are able to deal in an effective manner with their funds in a proper
3

manner. Thus the demand and supply of these smaller companies relating to the funds
can be met in this market effectively and efficiently. Therefore this is an appropriate
platform for these companies to enable them to access public exchange with greater
flexibility as compared to the main market.
Generation and Circulation of money in the economy- The economy of any country ensures
that the generation and circulation of money in the economy can go on in the right way (Buckley
and et.al., 2018). Thus it is quite important to ensure that the following pattern can be followed
for this particular purpose-
 Increase in income within the economy- An increase in income within the economy
ensures that the overall spending power of the people can be enhanced. This ensures that
the people are given more money to spend which can lead towards an increase in the
overall level of expenditures within the economy and can enhance the economy in the
right manner.
 Increase in credit flow in the economy- An increase in the overall credit flow in the
economy can lead towards ensuring that the customers are able to spend more in the
economy leading towards an increased demand.
U.K. Domestic Economy- U.K. Is a developed country and has one of the strongest
economies in the world (Chyzh, 2016). The GDP of the country is 2.83 trillion dollars in the year
2019 and the country has a population of more than 66 million people. Thus it is the sixth-largest
economy in the world. The progress of the U.K.'s economy within the last few years has been
very good which thereby ensures that the country is able to grow steadily as compared to the
other economies in the world making regular and steady progress properly.
4

Interpretation- The above pie-chart reflects the Government Expenditure within the
U.K. Economy. Thus according to it, Social Protection has an overall expenditure of 240 billion
pounds on the part of the Government which accounts for 31.1%. Health accounts for 145 billion
pounds of the Government expenditure thereby accounting for 18.8%. Education accounts for
102 billion pounds of the Government expenditure which thereby accounts for 13.2%. Defence
has an expenditure of 46 billion pounds on the part of the Government which is 8% of the overall
expenditure. Government Debt Interest has an expenditure of 39 billion pounds which accounts
for around 5%. Public Order and Safety expenditure stands at 34 billion pounds which accounts
for 4.4%. Personal Social Services has an expenditure of 30 billion pounds and shares 3.9 % in
the overall expenditure. Housing and Environment has an expenditure of around 34 billion
pounds and shares 4.4% in the overall expenditure. The Government also incurs around 29
billion pounds of expenditure on transport which is 3.8 % of the overall level of expenditure.
Industry, agriculture and employment has an overall expenditure of 24 billion on the part of the
5
Illustration 1: (Government Spending in the United Kingdom, 2020) (Foreign Direct Investment
involving UK Companies: 2012, 2013)
Text 1: (Government Spending in the United Kingdom, 2020)

government thus sharing 3.1% in the overall expenditure. Also the other expenses of the
government stand at 49 billion pounds thus sharing 6.3% in the overall expenditure.
Thus there are following points which can be stated in the relation to the U.K. Domestic
economy-
 U.K. Is a developed country and thus it has a rapidly progressing economy which is
sixth-largest in the world. Thus it can be said that this is able to bring a significant boost
to the GDP of the country and helping the businesses in the country to prosper and
progress further and contribute towards the development of the economy.
 The Government of U.K. Is quite generous in the terms of the expenditure which it
incurs. Thus it can be said that the government is quite good in terns of ensuring that the
segregation of the expenses is done to make a proper use of the different types of funds.
Capital Allocation in U.K. Domestic Economy for international Trade-
In U.K. The Capital Allocation in International Trade is done through ensuring that the
exports and imports are carried out in a right manner. This helps in ensuring that the country is
able to receive a decent return on the investment of funds.
6

Interpretation- Europe has the maximum proportion of exports from U.K. As it stands at
50%. The Americas come next with a contribution of 28%. Asia contributes 16% to the overall
exports of U.K. Australasia and Oceania contributes 2% to the overall exports and the exports to
Africa stand at 4% of the total exports.
Also, Europe contributes at 51% to the total imports of U.K., The Americas come next
with a contribution of 26%. Asia makes a contribution of 19%. Australasia and Oceania makes a
contribution of 2% to the overall level of imports. Africa has a contribution of around 2% in the
total imports.
Use of economic forces-
 Comparative Advantage- A person can have a comparative advantage at producing
something if the production can be done at a lower cost effectively and efficiently
(Neumayer, Nunnenkamp and Roy, 2016). Thus in this way it can be said that if an
economy can produce the goods at a lower opportunity cost than the trading partners it
can create a comparative advantage.
 Aggregate Concentration- Aggregate Concentration refers to the extent at which large
firms within a macro-economy can create a dominance. Therefore it can be said that in an
economy this can lead towards more efficiency as well as effectiveness without facing
problems and issues.
Impact of Government Intervention- An impact can be created by Government Intervention on
the risk management within the economy. If the government interferes too much in the business
of the organizations in the economy then this can impact the various forces operating in the
market. Thus in this way it can be said that Government Intervention can lead towards
investment of more money within the economy by the organizations for managing their risks if
there is uncertain economic climate which has been created due to it.
Capital Allocation in Other Countries by U.K.-
7

Interpretation- According to the given pie-chart it can be stated that Europe accounts for
the maximum proportion of investments from U.K. By accounting for 61.4 % of the total
investments. USA accounts for around 22.6 % of the total FDI investments made by U.K. Rest of
the world has investments of around 15.0% from the U.K. BRICS has investments of 1.0% from
the U.K.
Further, the top countries where the U.K. Companies like to make investments are
Netherlands, Other Countries, Luxembourg, France, Ireland, Germany, Italy, Spain and Belgium.
These are the countries which are able to provide decent returns to the companies of the country
for the funds which have been invested by them and thus are the most attractive destinations for
them to make investments (Foreign Direct Investment involving UK Companies: 2012, 2013).
The impact of Brexit has been seen on the U.K. Economy because the exit of Britain
from the E.U. Has created a particular level of impact on the country. It has therefore resulted in
a slowdown in the overall economic growth rate and the business of U.K. With other countries
has also been impacted.
The U.K. Economy is a strong economy because in it the economic growth rate is quite
strong. Thus it is important that the U.K. Economy witnesses a higher-level of growth rate in the
future which will help a lot in the development of the economy in the right manner in the future.
Unemployment refers to a situation in which a person is not earning anything. The
unemployment in U.K. Is not high because it is a developed country however still significant
8

steps are required to be taken by it in the future to reduce the unemployment rate in the right
manner.
Capital Market is a market where the trading in long-term equities and debts can be
carried out which helps in ensuring that the trading of different types of long-term equities and
debts can be carried out in a right manner.
Monetary Policy is a policy which can be used by a nation's central bank to ensure that
the control of money supply and the achievement of sustainable growth can be carried out in a
proper manner.
Fiscal Policy refers to the use of government spending and tax policies so that the
economic situation which is prevailing in the country can be managed in an appropriate manner.
Opportunities refer to the chances which are available in an economy to use and ensure
that the overall growth rate can be enhanced properly.
FDI refers to Foreign Direct Investment. It is the investment which the Individuals and
Business Organizations make in the assets in the foreign countries which can help them in
enhancing the overall return in the right manner.
Summary- Therefore, it can be summarised that Financial Markets are the most
important markets for the companies because they create a balance between the demand and
supply of the various types of funds in the market and are able to ensure that the different types
of funding requirements of the companies can be met highly effectively and efficiently without
facing problems and issues. U.K. Domestic Economy has a lot of investment from the
Government of the country which is made into the different sectors as per the needs and
requirements. Capital Allocation in U.K. Domestic Economy relating to Exports and Imports has
details of the various Export and Import activities carried out in the economy. Further, the U.K.
Companies invest a lot of amount in the other countries according to the investment
attractiveness.
TASK 2
Industrialisation- Industrialisation refers to a period in which the different types of
changes which are related with the industrial growth and development are carried out which can
help in ensuring that the overall economic growth of a country can be ensured.
Trade policies- Trade policies refer to the regulations and agreements which are related
with trade which are implemented to control the various sorts of trade activities in a highly
9

effective manner. These type of policies are required to make sure that the various types of trade
activities in a country are controlled effectively and efficiently which helps a lot in boosting the
overall economic growth rate.
Uganda is a land-locked country in East Africa. Its capital is Kampala. It is a developing
country according to the classification which has been provided by the UN. Thus In this country
a lot of challenges are faced due to industrialisation and trade policies. The reason is that due to
it being a developing country it faces issues relating to it because an impact can be created on the
overall level of industrial growth rate and the trade policies which are framed by the country.
Background of Uganda- Uganda is a land-locked country which is situated in East
Africa. It is a country which faces a lot of economic challenges in the market. The reason for this
is slow economic growth, industrial challenges and various other economic challenges which are
faced. Thus in this way it can be said that in this country there are a lot of economic difficulties.
The economic freedom score of Uganda is 59.5 which places it at 102nd number in the
2020 Index. There has been a decrease in the score of country due to the reasons like bad fiscal
health and lack of government integrity (Schill, 2017). Thus overall it can be said that the
country is placed very low in the terms of economic freedom.
Net FDI of Uganda- In 2019, net inflows of FDI in Uganda were 1,266 million US
Dollars. In the period of 1970-2019 the inflows of FDI in the country increased steadily. Thus in
this way it can be said that the FDI inflows of the country are at quite a healthy position which
places it quite higher in the terms of foreign trade and investments.
GDP growth rate- The GDP growth rate of Uganda has been quite low from the past
few years. Its GDP is -4.3 %. This is a very bad indicator for a developing country like it and it
suggests that there is an urgent need to look upon the situation and ensure that the country is able
to enhance its overall economic growth in the right manner without facing problems and issues.
This will be quite helpful for it to be able to ensure that it can easily enhance the overall GDP
growth rate to become a Developed country in the future and becoming a strong economic force
to be considered.
Economic Policy of Uganda- In Uganda, the inflation is expected to remain below 5%
which can strengthen the domestic economy of the country (Voon, 2018). The country has an
economic system in which there are different private players which tend to operate in the market
10