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RROJAS DATABANK Vol. 1, No.6 /1995
     ( This set of articles on transnational corporations is
       background reading for Dr. Robinson Rojas' teaching
       on development )


 1.- Investment Potential in Africa  
 2.- Foreign Direct Investment to Developing Countries  
     Hits new Records  
 3.- Asia Dominates Recent Surge of FDI to developing countries,  
     UNCTAD study shows  
 4.- Foreign Direct Investment on the rise in Latin America   
 5.- Potential Investment Opportunities in Africa not Fully Exploited  
 6.- Release of a New Issue of the Journal Transnational Corporations  


TAD/INF/2559  28 June 1995
                  1.- INVESTMENT POTENTIAL IN AFRICA  
     Since the 1980s, African countries have become keenly interested in
receiving foreign direct investment (FDI) and undertook policy reforms
including, inter alia, revisions of regulatory frameworks, typically
within structural adjustment programmes to improve their FDI climate. 
Despite these efforts, transnational corporations (TNCs) have not
increased significantly their investment in Africa as a whole, as they
have done in other developing regions.  As a result, Africa has become
marginalized in worldwide FDI stocks and flows.  It has acquired an
unfavourable image as a continent not offering any meaningful investment
prospects, notwithstanding the fact that FDI potential does exist in a
number of African countries and that FDI in Africa is more profitable
than in Latin America and in developed countries.  TNCs should therefore
consider African countries as investment locations. At the same time,
more can be done by African Governments to further improve investment  
conditions in order to realize investment potential, but answers as to
how to proceed should be sought in each country individually.  Further
assistance from the outside world is also required to improve the
investment climate, most importantly in terms of debt relief.  These  
are the principal findings of the first book-length study on Foreign
Direct Investment in Africa (120 pages), just issued by UNCTAD/1.  
Africa liberalized FDI policies...  
     Most African countries have enacted new, or revised substantially,
investment codes. Although the approach taken differs in individual
countries, most investment codes address the full spectrum of issues
relevant to potential investors: ownership and entry restrictions  
have generally been reduced, foreign exchange controls on
investment-related capital flows have been relaxed, approval procedures
for technology-transfer agreements have become more flexible, and in
many cases fiscal and other incentives are provided.  Moreover, an  
increasing number of countries are party to multilateral treaties
protecting the rights of foreign investors, including intellectual
property right conventions.  A total of 228 bilateral investment  
treaties have been concluded by African countries, most of them with
developed countries.  
...but lags behind in FDI flows   
     Despite those efforts, Africa as a whole has not benefited from the
accelerated flows of FDI to developing countries in the early 1990s. 
While FDI inflows to all developing countries more than doubled between
1986-1990 and 1991-1994, those to Africa hardly increased at all,
remaining at an annual level of around $3 billion.  As a result,
Africa's share in the developing countries' total declined from over
eleven to six per cent, leaving Africa marginalized in an increasingly
globalized world economy (see also TAD/INF/2517).  
     One of the reasons why investment flows to Africa have been weak is
that the region has the largest concentration of least developed
countries (32 out of a total of 48).  Most of these countries suffer
from a cumulation of factors that discourage investment inflows,  
ranging from high levels of external indebtedness through small domestic
markets to poorly developed physical infrastructure and a generally
unskilled labour force, not to mention in certain cases political or
social instability.  
Inflows are concentrated in oil-exporting countries...  
     Oil-exporting countries of Africa accounted for two-thirds of FDI
inflows at the beginning of the 1990s.  Within the group of
oil-exporting countries, FDI inflows are concentrated in Egypt and
Nigeria which together absorbed, from 1981 to 1994, over 50 per   
cent of the total cumulated flows to Africa, or three-quarters of those
to the oil-exporting countries.  
...but some smaller countries also do well  
     The concentration of FDI in oil-exporting countries should not
disguise the fact that some of the smaller non-oil exporting countries
have attracted significant amounts of FDI. These countries include Cote
d'Ivoire, Morocco, Namibia, Swaziland, and Zambia in absolute terms. 
Countries such as Botswana, Equatorial Guinea, Gabon, Gambia, Seychelles
and Sierra Leone have attracted FDI in quantities which are large
relative to the size of their economies or their populations.  
Triad and primary sector dominate the stock of FDI  
     The total stock of FDI in Africa has grown in recent years,
although not at a pace comparable to that in other regions.  Four
countries -- United Kingdom, United States, Japan and France -- hold
approximately three quarters of the total FDI stock in Africa, estimated
at some $22 billion in the early 1990s, or 1.6 per cent of the world
total.  The primary sector predominates in the stock of FDI of France,
Germany, the Netherlands and the United States. The stock of the United
Kingdom is distributed evenly among all three sectors.  
FDI in Africa is small but profitable  
     Given the unfortunate image of Africa as an investment location and
perceptions as to the risk of investment there, expectations would point
to rather poor profitability of FDI, or, at least, wide fluctuations.  
     The study shows, however, that such perceptions are wrong and that
FDI in Africa is indeed highly profitable.  In most years during the
1980-1993 period, the rate of return in Africa was considerably higher
than that in Latin America and than the average for all developing
countries.  It was also higher than the average for the developed
countries as a whole.  
     Africa generated more income for United States investors than, for
example, the United States did for French and German TNCs.  While United
States FDI in Africa generated $8.6 billion in income during the period
1982-1992, German TNC income from US investment was only $0.4 billion,
while French TNCs experienced a loss of over $2 billion.  
     Most of the profits from FDI in Africa originate in the primary
sector. Rates of return are highest in petroleum, although profitability
in both the manufacturing and the services sectors is quite
considerable, when compared to the profitability of FDI in these sectors
in Latin America and Asia.  
Investment opportunities do exist in Africa  
     In spite of the small FDI flows to Africa, it should not be
considered as a continent with poor investment opportunities.  Grouping
together 54 countries in the continent conceals a complex diversity of
economic performance and factors determining FDI flows, which in many  
cases are similar to those in other developing countries that do receive
sizeable FDI inflows. Disparities exist in terms of market size and
growth, natural resource endowments, entrepreneurial and institutional
capabilities, social and economic infrastructure, political  
stability and economic policies.  This heterogeneity inevitably leads to
differences not only in FDI performance but also in FDI potential.  
     A rough preliminary assessment limited to basic economic
determinants and excluding political factors identifies a number of
African countries with considerable FDI potential, including Algeria,
Botswana, Cameroon, Congo, Egypt, Gabon, Libyan Arab Jamahiriya,
Mauritius and Sudan.  Some potential may exist in another 10 or so
countries.  Thus TNCs should not regard Africa as an inhospitable place
for FDI and should seize opportunities available in individual
Positive impact of FDI  
     Although FDI in Africa is small overall, in a number of countries
it may have a considerable impact, amplified by the relatively high
share of FDI in domestic investment.  The activities and the impact of
TNCs in most African countries are concentrated in one or a few
industries.  Their quantitative role in these industries is obviously
much greater than their average in the economy as a whole.  Where FDI is
concentrated in the development and export of natural resources, it has
played an important role in sharing high exploration and development
costs, in bringing know-how and technology and in sustaining and
expanding exports.  Moreover, the report finds that the impact of FDI on
output and employment, on domestic investment, on the balance of
payments, and on technology transfer and human resource development,
while limited, is generally positive.     
Required policy actions vary by country  
     The study contains a comprehensive picture of policy measures
undertaken by African countries to attract FDI, and provides a broad
analysis of actions that could further improve the investment climate. 
Policy options considered include:  reforming authorization procedures,
eliminating burdensome regulation and operational restrictions,
increasing the transparency of legal requirements, expanding
privatization-related FDI, improving investment-incentive schemes,
further easing of transfer of funds restrictions, creating the  
facilities and skill-base for competitiveness, increasing promotion and
fighting negative perceptions.  
1/     This United Nations publication (Sales No.E.95.II.A) may be
obtained at the price of US$ 25 from United Nations Publications, Room
DC2-953, United Nations Plaza, New York 10017, USA -
 tel: 1 212 963 8302; fax: 1 212 963 3062; telex: UNCTNC: 661062; or
United Nations Sales Section, Palais des Nations, 1211 Geneva 10,
Switzerland, tel: 41 22 917 2615;  
fax: 41 22 917 0027; telex: 412962.  
                               ** *** **  
For more information please contact Karl Sauvant, Chief, Research and
Policy Analysis Branch, Division on  
Transnational Corporations and Investment, UNCTAD;  
on telephone 41 22 907 57 07 or fax 41 22 907 01 94;   
or Carine Richard-Van Maele, UNCTAD Press Officer;  
on telephone 41 22 907 58 16/28 or fax 41 22 907 00 43.  
=========================RRojas Research Unit/1995======

TAD/INF/2509 7 March 1995  
     Foreign direct investment (FDI) reached $193 billion in 1993,
increasing by 6% in 1994, to an estimated $204 billion, UNCTAD released. 
     The recovery of the economies of the developed countries and the
continuing strong growth of several major recipients among developing
countries were the principal factors sustaining the strong growth of
outflows.  New data show that the global FDI stock (the accumulated
productive assets at book value associated with transnational
corporations) attributable to 207 000 foreign affiliates of 38 000
parent firms operating worldwide totalled $2.1 trillion at the end of
     The great majority of FDI is spearheaded by TNCs based and
operating in developed countries, but the share of the flows of FDI to
developing countries is rapidly increasing. Flows into developing
economies were at a record $71 billion in 1993 and reached an  
estimated $80 billion in 1994, boosting their share of total inflows to
40%.  Developing countries are becoming more attractive host countries
largely in response to their good growth performance combined with
on-going liberalization of their investment regimes, including
privatization programmes.  Some 80% of the inflows went to the top 10
developing  countries, in particular China.  While, overall, a
considerable share of flows of funds to developing countries has been in
the form of portfolio equity investment, these have proven to be far
more volatile than FDI.  
Highlights of regional trends  
     After experiencing a large decline in 1992, FDI inflows to the
United States recovered  to reach some $21 billion in 1993. Outflows
increased by 41% in 1993 for a new historic high of $58 billion.  

     FDI in Western Europe decreased by 10% in 1993 to $73 billion,
which represents a share of 40% of worldwide FDI inflows. FDI into the
European Union fell by 15% in 1993, but other Western European countries
experienced a near-doubling of FDI inflows.  Total FDI outflows from
Western Europe also declined by 10% to $100 billion in 1993, with only
the United Kingdom and non-European Union countries registering an
increase of over 32%.  
     After a record level of nearly $3 billion in 1992, FDI in Japan
fell to $100 million in 1993 and outflows fell by another 20% for the
third consecutive year, to $14 billion. There are, however, signs of
recovery in Japanese FDI in 1994.  
     FDI in Asia and the Pacific increased by 51% in 1993, reaching some
$48 billion in that year and an estimated $53 billion in 1994.  The
region accounted for 68% of total inflows to developing countries in
1993. With nearly $28 billion, China emerged as the largest recipient
(15%) of FDI worldwide in 1993, a position it lost to the United States 
in 1994 (an estimated $30 billion in inflows for China versus $41
billion in inflows for the United States, based on data for the first
three quarters of 1994 for the latter).  
     FDI in Latin America and the Caribbean increased by 16% in 1993,
reaching some $19 billion in that year and an estimated $22 billion in
1994.  The region accounted for 27% of total inflows to developing
countries in 1993.  
     At about $3 billion, FDI in Africa remained stagnant in 1993,
despite the on-going liberalization of investment regimes by a number of
Inter-developing country FDI is growing fast  
     Inter-developing country FDI, and increasingly investments from
developing to developed countries, is increasing and is likely to
continue to grow fairly rapidly in the future. Investment outflows from
developing countries increased by 21% in 1993 to $12 billion.  They  
are however highly concentrated with the Asian Tigers (Hong Kong,
Republic of Korea, Singapore and Taiwan Province of China) and China,
accounting for 74% of FDI outflows. While firms from East and South-East
Asia are currently the leading outward investors, the growth of
intra-regional investment in Latin America and the Caribbean,
strengthened by regional trading schemes, is likely to bolster the
importance of that region as an outward investor.  
     UNCTAD noted that TNCs have a wide range of options for accessing
international markets -- including FDI, trade, licensing agreements,
subcontracting and alliances -- and they can choose those modalities
that fit their overall strategies and core competencies best. The
relative importance of these various modalities has changed over time. 
In 1992, the sales of foreign affiliates worldwide amounted to $5.8
trillion compared to $4.7 trillion of world export of goods and
non-factor services the same year; this makes FDI the most important  
vehicle to bring goods and services to foreign markets. In the case of
the United States, for example, about three-quarters of international
transactions are associated with TNCs and the only one-quarter takes
place at arm's length.  UNCTAD notes further that access to markets  
is only one feature of these modalities.  An equal important -- if not
more important -- feature of some of them is that they also provide
access to the various factors of production (defined broadly to include
such tangible and intangible assets as capital, labour, technology,
skills and entrepreneurship).  Both, access to markets and access to
assets are combined by firms in a transnational production system. 
"Access to market and factors of production" rather than "market access"
alone captures more adequately the essential characteristics of the  
international process -- a fact that ought to be taken into account in
multilateral negotiations.  
     The UNCTAD report on global FDI trends (TD/B/ITNC/2) has been
prepared for the forthcoming session (24-28 April) of the UNCTAD
Commission on International Investment and Transnational Corporations. 
It will be supplemented by more detailed analyses of regional FDI trends
to be issued shortly.
                                  ** *** **  
This press release may be found on the internet at the following
For more information, please contact Karl P. Sauvant, Chief, Research
Policy Analysis Branch, Division on Transnational Corporations and
Investment, UNCTAD, 
on telephone 41 22 907 5707 or fax 41 22 907 00 44; or Carine
Richard-Van Maele, UNCTAD Press Officer, 
on telephone 41 22 907 5816/28, or fax 41 22 907 00 43.  
============RRojas Research Unit/1995=======================

TAD/INF/2511 10 March 1995  
     Asia is the most important focus of FDI by transnational
corporations in the developing world, with about half of the
developing-country FDI stock (some $275 billion) being located there. 
FDI stock in that region more than doubled between 1988 and 1993, an
increase unrivalled by any other developing-country region.  FDI flow
figures show that the region is consolidating its lead:  FDI flows to
Asia reached $48 billion in 1993 and an estimated $53 billion in 1994,
a considerable increase from $31 billion in 1992. The economies that did
best in 1993 were China, Indonesia and the Philippines, while Hong Kong
and the Republic of Korea showed minor declines.  These are some of the
main findings contained in the report "Foreign direct investment in
developing countries" (TD/B/ITNC/3).  
China largest recipient of FDI flows in 1993  
     With nearly $28 billion in 1993 and an estimated $30 billion in
1994, China has been particularly successful in attracting FDI. 
However, the rapid growth of FDI in China is not taking place at the
expense of investments in other countries of the region.  Much FDI in
countries of the region caters to the domestic markets since their sheer
size and income growth are generating a consumption boom with a large
potential for market-oriented FDI and FDI in services.   
Do European Union TNCs neglect Asia?  
     The report looks at the importance attached to FDI in the region by
TNCs from the Triad (European Union, Japan and the United States) and
other major sources of these investments and finds that, when compared
with firms from other Triad members, European Union firms paid less
attention to Asia despite the region's rapidly growing economic
importance.  Telling facts are:  
-    The importance of the Triad as a source of FDI to Asia has been
declining, reflecting the growing role of intra-regional
(developing-country) TNCs in the region.  The Triad accounted for 52% of
the total inward FDI stock of selected major Asian economies in 1993,
compared with 64% in 1985.     
-    The FDI stock in Asia of European Union TNCs, judging from data for
the most important home countries of the Union (accounting for some 90%
of the Union's FDI outflows in the early 1990s), was $26 billion -- 4%
of its total outward FDI stock in 1992.  This compares with 31 billion
(12%) for Japan and 39 billion (7%) for the United States (in 1993). 
FDI outflows to Asia from European Union members in the early 1990s were
also lower in absolute value: $2 billion as compared with some $4
billion for the United States and $3 billion for Japan. In terms of
shares, FDI outflows to Asia accounted for 3% of all outflows from the
European Union compared with 11% for the United States and 12% for
     Germany's outward stock in Asia was some $4 billion in 1992, half
the size of its FDI stock in Spain.   Asia represented only 2.3% of
Germany's total outward stock.  Asia's share in Germany's total outflows
between the mid-1980s and early 1990s remained stagnant at 1.5%.  
     The United Kingdom's outward stock in Asia, at $14 billion in 1992,
was about the same as the size of its stock in Australia.  Asia
accounted for 6.5% of United Kingdom's total outward stock, a decrease
from 8.3% in 1981.  Asia's share in United Kingdom's total outflows was
6.5% in the early 1990s, still low although above the 2.9% share in the
     The Netherlands's outward stock in Asia was $5 billion in 1992,
representing 3.7% of its total outward stock. Asia accounted for 3.5% of
the Netherlands's worldwide outflows in the early 1990s, a small
increase from 2.6% in the mid-1980s.  
     France's outward stock in Asia was some $3 billion in the early
1990s, about the same as its stock in Ireland.  Asia accounted for 1.8%
of France's total outward stock.  Asia's share to total outflows from
France declined from 1.9% in the mid-1980s to 0.6% in the early 1990s. 

     While European Union investments in the region have stagnated,
investment opportunities are being increasingly seized by TNCs from the
region itself, led by those from the newly industrializing economies. 
In fact, regional developing country-based TNCs have become serious
competitors of firms from all Triad members in the world's most dynamic
market.  Intraregional FDI in nine Asian economies (China, Hong Kong,
Indonesia, Malaysia, Philippines, Republic of Korea, Singapore, Taiwan
Province of China and Thailand) accounted for 45% of the total FDI
inward stock in 1993, an increase from 30% in 1980.  
     Interestingly, a somewhat similar trend is observed for exports to
Asia which suggests that the low relative importance attached to FDI is
not offset by an expanding importance of exports as a mode of delivery
of goods and services to the region's markets.  
     This partly reflects the fact that developing countries in general
had become less important destinations for FDI from European Union-based
TNCs.  In the 1980s, European TNCs had been preoccupied with investing
in Europe in response to opportunities of the regional integration
process and, in some cases, with investments in the large United States
market.  In addition, until recently, European Union TNCs had been
paying more attention to other developing regions:  for example, in
1992, Asia accounted for 25% of Germany's outward stock in developing
countries as compared with 55% for Latin America.  And Asia accounted
for 35% of United Kingdom's outward FDI stock to developing countries in
1992, compared with 53% for Latin America.  
     There are indications, however, that TNCs from the European Union
are changing course.  For example, outward flows from the European Union
to Asia rose both in value and as a share of the Union's total outflows
in the early 1990s.  Data on inward FDI for selected economies in the
region confirm this trend.  This was encouraged by the European
Commission, as well as national Governments by providing information on
FDI opportunities and investment conditions, facilitating business
cooperation through European Business Information Centres and support to
TNCs, including financial support to small and medium- sized firms. 
Still, the amounts involved are small:  FDI outflows to Asia were $2.2
billion in the early 1990s, or 2.6% of the Union's total outflows.   
     This report has been prepared by the UNCTAD secretariat for the
forthcoming session (24-28 April) of the UNCTAD Commission on
International Investment and Transnational Corporations. It will be
supplemented by more detailed analyses of FDI trends in other regions to
be issued shortly.  
                                  ** *** **  
         This press release can also be found on the Internet at the  
         following address: GOPHER://GOPHER.UNICC.ORG/11/UNCTAD/  
For more information, please contact Karl P. Sauvant, Chief, Research
and Policy Analysis Branch, Division on Transnational Corporations and
Investment, UNCTAD, 
on telephone 41 22 907 5707 or fax 41 22 907 01 94; 
or Carine Richard-Van Maele, UNCTAD Press Officer, 
on telephone 41 22 907 5816/28, or fax 41 22 907 00 43.  
===============RRojas Research Unit/1995========================

TAD/INF/2514 14 March 1995  
     According to an UNCTAD report on "Foreign direct investment in
developing countries" (TD/B/ITNC/3), the FDI stock in Latin America and
the Caribbean had reached $168 billion by 1993, which made this region
the second most important for transnational corporations (TNCs) in the
developing world, after Asia and the Pacific (see TAD/INF/2511). 
Inflows exceeded $19 billion in 1993, and were an estimated $22 billion
in 1994.  Within the overall trend, experiences have varied across
countries. Argentina ($6.3 billion) and Mexico ($4.9 billion) were the
principal recipients of FDI inflows in 1993.  Preliminary estimates
suggest that Mexico's inflows surpassed $8 billion in 1994.  In
contrast, other countries, notably Brazil and Venezuela, continued to
experience stagnation with respect to FDI inflows.    
     Privatizations have played a major role in shaping the inward FDI
patterns in some parts of Latin America.  While Mexico and Chile have
moved beyond the stage during which debt conversions and privatizations
contribute significantly to FDI flows -- in the sense that these
countries have reached a stage in which FDI flows are shaped more by
market forces than by policy-driven opportunities -- in Argentina and
Peru, privatization programmes accounted for the lion's share of recent
FDI inflows.  While Brazil has not yet implemented a consistent
privatization programme, it seems likely that privatizations will be
undertaken on a larger scale beginning this year and that this will lead
to significant opportunities for increases in inward FDI.  Furthermore,
many privatizations involving foreign investments have been in
infrastructure (especially telecommunications) and, as such, have given
rise to significant post-privatization follow-up investment flows.  
Mexico: Prospects for FDI  
     The financial crisis in Mexico at the end of 1994 raised the
question of whether FDI flows to Mexico would be affected.  To the
extent that the financial crisis has an impact on the country's economic 
growth  and  stability, FDI  flows,  especially those directed to the
weakened domestic market, might suffer.  Still, the precipitous decline
in portfolio equity investment is not likely to be paralleled by a
similar drop in FDI, principally because the latter is driven more by
longer-term structural and strategic considerations.  This holds
especially true in the case of Mexico and the United States, considering
the degree of integration attained by these two countries at the level
of production. The ongoing restructuring of TNC operations in response
to the North American Free Trade Agreement (NAFTA) further deepens this
integration.  At the same time, the devaluation of the Mexican peso
creates new opportunities for export- oriented investment.  
     Non-NAFTA-based TNCs may seize this opportunity to invest in Mexico
to gain better access to the NAFTA market; in some cases, investment
considerations may also be motivated by the need to meet the NAFTA rules
of origin in industries such as automobiles and consumer electronics. 
Provided that macroeconomic stability can be restored, Mexico could
remain an attractive FDI location. But, inflows in 1995-1996 are not
likely to near the record level attained in 1994.  
Extending NAFTA:  FDI integration in the Americas  
     Well before NAFTA negotiations even started, foreign affiliates in
Mexico had begun a fundamental restructuring process which was
accompanied by substantially increased FDI flows from the United States. 
This increase involved not only existing affiliates but also new
entrants;  in fact, half of the foreign firms that operated in Mexico by
1994 had arrived since 1989.  At the same time, Mexican FDI in the
United States had increased, reaching fairly significant levels by 1993
($1 billion).  The result has been a close integration of Mexico with
the United States at the level of production. This integration has been
led by the automobile, electrical machinery and electronic equipment
industries.  It has been characterized by the reorganization of
corporate networks through which foreign affiliates in Mexico have
become fully integrated into a regional production structure.  As a
result, a substantial share of trade between Mexico and the United
States is undertaken on an intra-firm basis.  This investment-led
integration provided a major impetus for the NAFTA negotiations which,
in turn, reinforced the regional production integration already
     Potential for investment-led integration also appears to exist in
other parts of Latin America. Chile, for example, has experienced
substantial increases in inward investment during the 1980s and 1990s,
mainly from the United States and Canada, and estimates for 1994 are for
$2.4 billion in inflows.  However, unlike the case of Mexico, FDI to
Chile has been concentrated in natural resource industries rather than
in manufacturing.  Only 8% of United States FDI was in manufacturing in
1993, compared with 70% in the case of Mexico.  Furthermore, outward FDI
flows from Chile to the United States and Canada have been negligible. 
Nevertheless, integration at the production level augurs well for
Chile's becoming a member of NAFTA.    
     In addition, other agreements, such as the Mercosur common market
(including Brazil, Argentina, Uruguay, and Paraguay) are giving rise to
increases in intra-regional trade and investment flows also, and seem to
be motivating TNCs to reorganize their operations  to  increase 
efficiency  through  the  establishment  of regional production
networks.   However, relatively high barriers to trade and investment
continue to impede the establishment of regional production networks on
a  scale similar to what has occurred among the NAFTA signatories, or
even between the United States, Canada, and Chile.  
     UNCTAD concludes that the integration of the Western Hemisphere
requires not only integration at the policy and institutional levels,
but also (and perhaps even more importantly) integration at the levels
of markets and production.  Integration at the level of production is
fostered by a combination of FDI liberalization (which allows TNCs to
locate production facilities according to efficiency criteria) and trade
liberalization (which allows TNCs to move intermediate and finished
products freely throughout their production networks).  
     Increased production integration, in turn, eventually needs to be
complemented by institutional and policy arrangements.  In the case of
NAFTA, production integration played the lead role.  Extending NAFTA
beyond its current membership may require more of a policy lead than in
the case of Mexico.  Sub-regional integration arrangements, such as
MERCOSUR, can be, among other initiatives, a step in this direction.  If
that is the intention, UNCTAD states, such arrangements should not only
aim at eliminating internal barriers to economic transactions but also
seeky to reduce external barriers, for increased production integration. 

     The report has been prepared by the UNCTAD secretariat for the
forthcoming session (24-28 April) of the UNCTAD Commission on
International Investment and Transnational Corporations.  It will be
supplemented by more detailed analyses of FDI trends in other regions to
be issued shortly.  

                                 ** *** **  
         This press release can also be found on the Internet at the  
         following address: GOPHER://GOPHER.UNICC.ORG/11/UNCTAD/  
For more information, please contact Karl P. Sauvant, Chief, Research
and Policy Analysis Branch, Division on Transnational Corporations and
Investment, UNCTAD, 
on telephone 41 22 907 5707 or fax 41 22 907 01 94; 
or Carine Richard-Van Maele, UNCTAD Press Officer, 
on telephone 41 22 907 5816/28, or fax 41 22 907 00 43.  
==================RRojas Research Unit/1995============

TAD/INF/2517  16 March 1995  

     Africa has not shared in the sharp increase in FDI inflows to
developing countries during the early 1990s, according to an UNCTAD
report (TD/B/ITNC/3).  FDI flows to Africa have remained largely
unchanged in absolute terms and decreased as a proportion of the
developing countries' total FDI from 10 % in 1987-1991 to about 5 % in
1992-1994.  With an estimated FDI stock of $48 billion in 1993, Africa
is the developing region that has received least attention from
transnational corporations (TNCs).    
  While FDI flows to the region as a whole fared poorly, flows to a
number of African countries were significantly higher. When FDI inflows
are adjusted to take into account the size of the domestic market,
several countries have fared considerably better than the average for
Africa, and even better than the average for developing countries. 
Notable examples are Equatorial Guinea, Swaziland, Seychelles and
Angola, which received $196, $65, $54 and $49 FDI inflows per $1,000 of
GDP, respectively (the average FDI per $1,000 GDP for developing
countries is $21).  Other African countries (Nigeria, Morocco, Egypt)
are important in terms of absolute size of inflows, and their combined
share of Africa's total is 64 %. (All these countries except for Morocco
are oil exporting countries.)  The uneven distribution of FDI inflows in
Africa reflects differences in the major factors affecting the
attractiveness of countries for foreign investors, and especially the
availability of mineral resources.   
Investment opportunities and high profitability  
  Indeed, the 54 African countries reveal a complex diversity of
economic performance and factors determining FDI flows.  Disparities
exist in terms of market size and growth, natural resource endowments,
entrepreneurial and institutional capabilities, social and economic
infrastructure, political stability and economic policies.  This
heterogeneity inevitably leads to differences in FDI performance and
potential.  An analysis based on an assessment of  the  actual  amounts 
of  FDI  flowing  to  African  countries  in  light of their rankings in
terms of the main economic determinants affecting FDI inflows, suggests
that there is unexploited investment potential in Egypt, Botswana,
Cameroon, Congo, Gabon, Morocco, Sudan and Tunisia. The analysis
suggests that TNCs should not treat Africa as a whole as an inhospitable
location for FDI and ignore opportunities there.   

  In addition, existing FDI in Africa is more profitable than in other
developing regions, and in some cases also higher than in developed
countries.  An interregional comparison of profitability of United
States foreign affiliates demonstrates that investment in Africa is
highly profitable.  In 1992, net income as a share of owner's equity in
Africa was 24%, more than double that of United States affiliates in
Latin America and the Caribbean (11%), and higher than that in Western
Asia (16%). Moreover, it is much higher than that in most developed
country regions (11% for all developed countries).  Most of the profits
of these affiliates have been generated in the primary sector.  
  While many efforts have been made by African countries during the past
decade to increase their attractiveness to foreign investors, more
should be done to realize the investment opportunities that exist in
Africa.  As the region comprises a great variety of political and
economic country situations (in addition to differentiated investment
opportunities), no single prescription for action would be appropriate. 
Answers need to be sought in each country.  Some governments would need
to make efforts to restore or maintain economic and political stability;
others need to pursue further liberalization policies regarding FDI;
others, mainly those with high unexploited potential, need to focus on
promotional efforts. A policy action which proved attractive to foreign
investors in other developing regions is privatization.  To benefit from
privatization-related FDI, existing programs should be improved and new
programs launched.  
  UNCTAD concludes that the message from a close analysis of FDI
opportunities in Africa is clear: "one needs to stop thinking about
Africa as a continent without investment opportunities.  Contrary to the
common perception, FDI in Africa can be profitable, and at a level about
the average of that of foreign affiliates in other developing regions. 
Firms wishing to benefit from the opportunities existing should,
therefore, consider African countries as investment locations.  At the
same time, Governments in the region have to make every effort to
maintain or restore economic and political stability, as a general
precondition for increased FDI".  
  The report has been prepared by the UNCTAD secretariat for the
forthcoming session (24-28 April) of the UNCTAD Commission on
International Investment and Transnational Corporations.  
                                  ** *** **  

         This press release can also be found on the Internet at the  
         following address: GOPHER:\\GOPHER.UNICC.ORG\11\UNCTAD\  

For more information, please contact Karl P. Sauvant, Chief, Research
and Policy Analysis Branch, Division on Transnational Corporations and
Investment, UNCTAD, 
on telephone 41 22 907 5707 or fax 41 22 907 01 94; 
or Carine Richard-Van Maele, UNCTAD Press Officer, 
on telephone 41 22 907 5816/28, or fax 41 22 907 00 43.  
==================RRojas Research Unit/1995===================

TAD/INF/2536 1 May 1995  
     Transnational Corporations, a refereed journal, published three
times a year by UNCTAD, provides insights on the economic, legal, social
and cultural impacts of transnational corporations (TNCs) in an
increasingly global economy and the policy implications that arise
therefrom.  Volume III, Number 3, just released, features the following 
 * The regional clustering of foreign direct investment and trade  
  by Peter A. Petri, Professor, Graduate School of International       
  Finance, Brandeis University, Waltham, Massachusetts, United States; 
  tel: 1 617-736-2250; fax: 617-736-2263   
  Are intense trade partners also intense partners in foreign direct
investment (FDI)?  This article shows that FDI clusters, like
international trade clusters, are regionally based.  But investment is
less strongly clustered than trade:  intense regional ties (e.g. within
North America or Europe) tend to be spearheaded by trade, and more
distant relationships by investment.  This finding is consistent with
several theoretical explanations; but on the whole it suggests that FDI
is an especially important channel for bridging regional blocs.  
 * Japan's external asymmetries and assembly industries: lean production 
   as a source of competitive advantage  
  by Terutomo Ozawa, Professor of Economics, Colorado State University, 
  Fort Collins, Colorado, United States, 
  tel: 1 303 491-6324; fax: 491-2925  
  Japan's huge external asymmetries in both trade and FDI especially
with the developed countries, pose a nettlesome political issue.  By
adopting a "techno-structural evolutionary" paradigm of Japan's trade
and outward FDI, this article presents a framework of analysis within
which the persistence of Japan's trade surplus and lopsided outflow of
FDI can be explained in terms of Japan's manufacturing strength based on
"lean" production (a manufacturing system originating in the Japanese
automobile industry) against the backdrop of "reserved competition".  It
is argued that Japan's external asymmetries reflect a particular  
stage of its structural upgrading in which lean production is embedded. 
 * Are transnational corporations an impediment to trade adjustment?  
  by Subramanian Rangan, Assistant Professor of Strategy and Management, 
  INSEAD, Fontainebleau, France; 
  tel: 33-617-495-0538; fax: 617-496-0063  
There has been a long debate over whether intra-firm trade by TNCs is as
responsive to exchange-rate changes as arm's-length trade is.  The issue
is largely empirical because, in theory, the answer can go either way. 
The few studies that have considered this question suggest that
intra-firm trade is relatively inelastic.  The author states that
unfortunately, these studies leave serious doubts because they are based
upon insufficient data and do not explore industry-mix issues.  His
article aims at shedding more light on these matters.  Using the period
1985-1989, it examines the relative vigor and speed with which United
States exports -- intra-firm and arm's-length -- responded to the dollar
s sharp drop.  Contrary to commonly held views, intra-firm trade
responded to the dollar's drop as vigorously as arm's- length trade and
even more rapidly.  Accordingly, the article concludes that TNCs are not
an impediment to trade adjustment.  
  The Journal features a research note on:  The economist's role in    
  research on TNCs: or why the dogs have barked so softly  
  by Raymond Vernon, Clarence Dillon Professor of International Affairs 
  Emeritus, Harvard University, Center on Business and Government, John 
  F. Kennedy School of Government, Cambridge, Massachusetts, United    
  States; tel: 1-617-495-1446; fax: 617-496-0063  
The author remarks that economics, a discipline that might have been
expected to make a powerful contribution to the analysis of TNCs, has
had so far very little to say.  He encourages in this note all
economists to pay more attention to the study of TNCs and to enlarge the
scope of their research.  
  It also includes a review article on the:  World Investment Report   
  1994: Transnational Corporations, Employment and the Workplace  
  by Peter J. Buckley, Professor, University of Bradford, Bradford,    
  United Kingdom; tel: 44-1274-384-4393; fax: 44-1274-546-866  
  A subscription to Transnational Corporations for one year is US$ 35  
  (single issues are US$ 15).  Requests for  subscriptions should be   
  addressed to: 
  United Nations Publications, United Nations, Sales Section, 
  Room DC2-853,  
  New York, NY 10017, United States - 
  Tel: 1 212 963 3552 ; Fax: 1 212 963 3062 ; 
  or Palais des Nations, 1211  
  Geneva 10, Switzerland - 
  Tel: 41 22 917 1234 ; Fax: 41 22 917 0123; 
  or to distributors of United Nations publications throughout the     
                                  ** *** **                            

        This press release can also be found on the Internet at the  
          following address: gopher://  
For more information concerning the press release, please contact
Fiorina Mugione, Research and Policy Analysis, Division on Transnational
Corporations and Investment, UNCTAD, 
telephone: 41 22 907 2943; fax: 41 22 907 0194; 
or Ms. Carine Richard-Van Maele, Press Officer of UNCTAD in Geneva,
telephone: 41 22 907 5725/5828, fax: 41 22 907 00 43.  
==============RRojas Research Unit/1995==========