IBDE

By Didzis Klavins, a Ph.D. student in Political Science at the University of Latvia

EXCHANGE: The Magazine for International Business and Diplomacy     No. 3 March 2011  

 IN THE CURRENT economic situation, when the global financial crisis is not yet over and the world will need several more years to recover, more and more discussions are taking place on the increasingly close relationship between diplomacy and international business. In order to better understand why diplomats should be familiar with international business, it should first of all be understood that the character of modern diplomacy is still in a continuous process of change.

Despite the fact that in every country the processes associated with diplomacy manifest differently, one may observe several major trends. In the 21st century diplomacy is no longer characterised by the traditional gatekeeper model, associated with a state-centric environment, a foreign ministry as the exclusive institution for foreign policy implementation and provision of communication through traditional channels of information exchange. Nowadays, diplomacy is characterised by networking that includes all levels of cooperation, within which business-related issues play an increasingly important role. When looking at the work of many foreign services today, one can see a trend that they are increasingly starting to function as coordinators of foreign policy implementation. Business is playing a rapidly expanding role in the daily life of diplomats.

Although the diplomatic mission, which is a participation in the country's foreign policy formulation and implementation, remains unchanged, diplomatic functions have become more diverse. In addition to the usual features (for example, compiling and evaluating available information, communication, negotiations and dispute resolutions, participation in multilateral institutions, economic development), a diplomat must also be a kind of entrepreneur, manager and coordinator. In short, there is clear orientation and adaptation to diplomacy which could be described as “the model of coordinated synergy”. One could highlight the following components of this model:

• The delegation of functions of share representation to other actors;

• An increasing role of foreign ministry in conducting the foreign policy activities;

• Movement to redefinition of the balance between generalists and specialists;

• Active cooperation between businesspeople and diplomats;

• The growing role of specialists in fields such as business, power industry and IT;

• The global information environment is defining the work of the foreign office;

• The ways of communication have been diversified;

• Development of innovative information technologies;

• Fast exchange of information minimizes the importance of previously planned policy;

• The focus on immediate solutions, growing importance of multilateral cooperation formats.

As it is known, diplomats have profound knowledge of foreign languages, cultures, local customs and changing politics. In addition, business-oriented knowledge would open channels for better and more efficient dialogue between businesspeople from both at home and abroad. Thus, diplomats could offer support to business people from their home country in pursuit of commercial success abroad, and assist direct foreign investment into their home country. Moreover, their knowledge of international trade, investment and business norms would be useful to settle diplomatic disputes affecting international business. Both the active cooperation of entrepreneurs and the support given to various business projects will allow diplomats to see more clearly the results of their work.

In the first issue of “Exchange”, Geza Feketekuty clearly demonstrated the importance of skilled international business diplomacy by running international business effectively. Indeed, business leaders, regardless of their size of business, are able to communicate effectively with government representatives and involved parties. At the same time be aware that the government, for its part, should provide easily accessible and transparent framework for entrepreneurs. Communication is a two way process by which, as a result of their successful co-operation, the involved parties are able improve their performance. The ministry of foreign affairs and the embassy are examples of this - in recent years they have begun to change their operating methods and frameworks. Although the diplomats are still complying with the Vienna Convention on Diplomatic Relations of 1961, the core functions have acquired new features. Cooperation with business representatives is one of the diplomat's routine functions whose importance is growing rapidly.

The terms of diplomatic and business relations cannot ignore the global financial crisis. Although the global economy has begun to slowly recover from the unprecedented deep recession of the last decade, stabilization is not smooth and recovery is expected to be relatively slow. Financial conditions have improved more rapidly than initially expected, mainly due to the active measures taken against the recession by the governments of the states affected. This clearly shows that the influence of states in solving global economic issues must not be dismissed - but, conversely, should be supported by those national activities that are focused on supporting entrepreneurs. In this context, strengthening business diplomacy must be one of the country’s long-term priorities. Indeed, the global financial crisis has only strengthened the conviction about the necessity and vitality of business diplomacy.

In 2009, Latvia’s economy, for example, experienced one of the worst recessions among the EU countries. Before the global financial crisis, Latvia had one of the highest GDP growth rates in Europe. Currently, the Latvian economy is experiencing a slow recovery. At a time when the revival of international trade makes it possible to increase exports, business and diplomatic mutual cooperation becomes more important. Business executives and government officials must work together to find common ground. As in other countries, the Latvian government officials and entrepreneurs are looking for common solutions to raise competitiveness and promote export. Work is ongoing to provide new forms of cooperation that are affordable for entrepreneurs. As support to business in export promotion remains a top priority for Latvian foreign service, the Foreign Ministry has introduced several initiatives such as a round of discussions "Foreign Service for Latvia's exports. Entrepreneurs meet Latvian Ambassadors", which aims at providing opportunities for business people to build direct contacts with Latvian ambassadors abroad as well as raising awareness of the capability by Latvia's foreign service to stimulate exports. In this context, most important are those diplomats who not only assist businesspeople, but who also proactively organize various projects and workshops promoting exports.

Diplomacy and business, as well as international actors or international agendas, are subject to continuous change. Developing, adapting and transforming are the words that best characterize the process of change in the 21st century. International business, in a globalised and interconnected world, has become more important than ever. Diplomats need to understand how the business world operates. Considering the aforementioned discussion in this article, highlighting relations between diplomacy and business, we can argue that the role of diplomacy and diplomats will be even more important in the future than it has been during the last twenty years. As Paul Sharp has recently written on the role of diplomacy and diplomats, ‘the demand for both is currently on the rise’.