Role of Foreign Investment a Theme for TNC Commission

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Role of foreign investment a theme for TNC Commission

Other major concerns related to strengthening the capacity of developing countries to deal with major world businesses, activities of transnational banks in relation to foreign debt of developing countries, and TNC activities which adversely affect environmental preservation efforts.

The 45-member body asked the Economic and Social Council to report on ways to increase transnational operations in developing countries in order to contribute to their economic, social and technological development.

The Council was also asked to stress the crucial need for aid to least developed countries from TNCs. A study on home-country legislation on investment by TNCs in the least developed countries (LDCs) was asked, as was one on the impact of levels of official development assistance, balance-of-payment support, technical assistance and other forms of assistance to the LDCs on flows of foreign direct investment to those countries.

Investment triples

The Centre reported that worldwide flows of direct foreign investment had tripled during the period 1983 through 1987, reversing a trend of declining investment in the early part of the decade. However, flows to developing countries declined from 27 per cent of total foreign investments during 1981 to 1983, to 21 per cent during 1984 to 1987. Inflows to Latin America declined in absolute amounts, despite debt conversions, while inflows to Africa and Asia exhibited some growth, although concentrated mainly in handful of countries in each case.

Developed countries as a whole, and especially five large developed economies--France, Federal Republic of Germany, Japan, United Kingdom and United States--had increased their share of both foreign direct investment inflows and outflows.

The United States had once again become the world's largest home country, in terms of foreign direct investment outflows. Improvements in economic growth and the profitability of TNCs, strategies of TNCs emphasizing developed countries production locations and continuing debt problems of developing countries explained the growth and pattern of foreign direct investment flows.

Another report (E/C.10/1989/6) indicated that thus far, TNCs had played an insignificant role in the economies of LDCs, because of structural impediments--such as the small size of the domestic market, inadequate development of physical infrastructure and human resources, and locational disadvantate--and constraints arising from policies. …

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