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WORLD INVESTMENT REPORT 1997
Transnational corporations,
market structure and competition policy
Improving economic
efficiency by making markets more competitive -- and thereby
serving development -- is subject to the same need to make choices.
Given the particular
characteristics of developing countries -- low income levels, skewed
distribution of wealth,
lack of infrastructure, low levels of education, asymmetries in
information, to mention a few -
- the incidence of conflicts between market outcomes and competing
objectives is often more
frequent in these countries.
For example, where foreign exchange is temporarily in limited supply,
certain import
restrictions might be needed -- thus limiting contestability -- to
ensure that critical imports are
not disrupted, e.g.,
that foreign exchange reserves are used for machine parts instead of
luxury goods. Or, where a
country is characterized by dispersed rural communities, the market
will often not provide
these with certain basic services (such as roads, telecommunications
services and railways); in
these cases, governments might need to ensure that certain services
reach segments of the
national market which otherwise could not support such services. They
could do so, for instance,
by providing the services through state-owned enterprises or, where
private operators are
involved, by providing these with market power so that services in
less-economically viable
markets can be cross-subsidized from profits earned in larger segments
of the market.48 A
policy alternative to consider in such a case would be more direct
government involvement in
the form of subsidized provision of the services in question. The
decision in this case -- whether
to allow concentration combined with cross subsidization or to provide
subsidies -- would
involve a careful consideration of the quite different trade-offs
associated with these two options
(possibly less efficiency in the market, on the one hand, versus a
direct budgetary expense on
the other).
Contents
Preface
Overview----French
----------------PART
ONE
TRENDS
I. GLOBAL
TRENDS
-A. Overall trends
--1. Trends
----(a) Characteristics of
foreign-direct-investment booms
----(b) Cross-border
inter-firm agreements and cross-border
--------strategic
research-and-development partnerships
--2. International production
--3. Recent changes in
regulatory frameworks
--4. Trends in technology
flows
-B. Estimating actual
investment in foreign affiliates
--1. Estimating "real" FDI
--2. The financing of
investment in foreign affiliates
-C. The largest transnational
corporations
--1. Highlights of the world's
top 100 and the top 50
-----developing-country
transnational corporations
--2. Future trends
Notes
II. REGIONAL TRENDS
-A. Developed countries
--1. United States
--2. Western Europe
--3. Japan
--4. Australia
-B. Developing countries
--1. Least developed countries
----(a) Trends
----(b) Prospects
--2. Africa
----(a) Trends
----(b) Prospects
----(c) South African
transnational corporations and the economic
--------development of
southern Africa
-------i. Growth pole
-------ii. Building the nest?
-------iii. Conclusions
--3. Latin America and the
Caribbean
----(a) Trends
----(b) A regulatory shift
--4. South, East and
South-East Asia
----(a) Trends
----(b) Does foreign direct
investment create balance-of-payments
--------problems?
-------i. Singapore
-------ii. Malaysia
-------iii. Thailand
-------iv. China
--5. West Asia
-C. Central and Eastern Europe
--1. Trends
--2. Foreign direct investment
and competition
--3. Conclusion
Notes
III. FOREIGN PORTFOLIO EQUITY INVESTMENT
-A. Linkages between foreign
direct and portfolio investment
-B. Trends
--1. General trends
--2. Trends in outflows to
emerging markets from the
-----principal source countries
-C. Investment mechanisms
--1. Venture capital funds
--2. International equity
investment funds
--3. American depositary
receipts and global depositary receipts
--4. Convertible bonds and
bonds with equity warrants
-D. Some issues raised by FPEI
Notes
----------------PART TWO
FOREIGN DIRECT INVESTMENT, MARKET
STRUCTURE AND COMPETITION POLICY
Introduction
IV. FOREIGN
DIRECT INVESTMENT, MARKET
STRUCTURE AND COMPETITION
Introduction
-A. Foreign direct investment,
market structure and
----competition in host
economies
--1. Inward investment and the
contestability of markets
--2. Transnational
corporations and host country market concentration
----(a) The positive
correlation between transnational corporation
--------activity and
industry/market concentration
----(b) The impact of foreign
direct investment on host-country
--------market concentration
---------i. At-entry effects
on concentration
---------ii. Post-entry
effects on market concentration
--3. Firm behaviour and
competition effects
----(a) Competitive behaviour,
the efficiency of firms, and
--------impact on performance
----(b) Anticompetitive
business practices
-------i. Collusion
-------ii. Monopolizing
mergers and acquisitions
-------iii. Exclusionary
vertical practices
-------iv. Predatory behaviour
--4. Inducing foreign direct
investment by granting market power
-B. Foreign direct investment,
market structure and competition in
----a globalizing world economy
--1. The emergence of regional
and global markets
----(a) Foreign direct
investment, efficiency and the structure
-----of regional/global
markets
----(b) Competition effects
----(c) Integrated
international production, market structure
--------and competition: the
hard-disk drive industry
-------i. Industry
characteristics and market-entry conditions
-------ii. Integrated
international production in hard-disk drives
-------iii. Market structure
and competition in the industry
-------iv. Globalization and
volatility of market positions:
-----------the dynamics of
competition in hard-disk drives
--2. International production,
supply response and competition
--3. Conclusions
Notes
V. POLICY
IMPLICATIONS
Introduction
-A. Investment liberalization
--1. Liberalization of entry
and operations
--2. Limiting market-power
inducements
----(a) Assessing costs and
benefits
----(b) Minimizing
anticompetitive effects
-B. The interface of foreign
direct investment and competition law
--1. The growing emphasis on
competition law
--2. Main elements of
competition law
--3. Competition law and
foreign direct investment
----(a) At-entry inward merger
review
-------i. General trends
-------ii. Typical scenarios
involving mergers and acquisitions
----(b) Outward merger review
----(c) Worldwide dominant
positions
----(d) Post-entry competition
issues
-------i. Ancillary agreements
restraining competition
-------ii. Secondary effects
-------iii. Cross-border
technology alliances
-C. Broader policy
implications
--1. The importance of
competition policy
--2. International cooperation
----(a) The need for
international cooperation
----(b) Obstacles
-------i. Impediments to
information access
-------ii. Limited enforcement
cooperation
-------iii. Differences in
competition laws
----(c) Existing cooperation
arrangements
--3. Looking ahead
-D. Competition policy and
market outcomes
--1. Naturally concentrated
markets
--2. Competing objectives
----(a) Promoting development
----(b) Other objectives
Notes
References
Annexes:
-Annex A.
Additional text tables
-Annex B.
Statistical annex
-Annex C.
Major instruments of foreign portfolio equity investment
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