Transnational Corps play pervasive role in exports

By A Staff Reporter

KATHMANDU, Sept 17: Transnational corporations (Tics) are playing a pervasive role in the exports of developing countries, the World Investment Report 2002 released by the United Nations Conference on Trade and Development (UNCTAD) today said.

Export growth in a number of countries is directly or indirectly linked to the expansion of Tics' international production systems. But although more and more countries are targeting export-orienting foreign direct investment (FDI), high shares of exports are not enough, the report has pointed out. "Exports must also be upgraded and involve local value added if this investment is to yield longer-term development gains."

FDI in South Asia was US$4 billion in 2001, a 32 per cent hike over the previous year. Of this, $3.4 billion went to India (up 47 per cent). Inflows into other economies in the sub-region stagnated or declined, apparently due to perceived instability in the investment environment, particularly after September 11, the report said. Nepal's inward investment was $ 19 million and Bangladesh's $78 (down from $280 million the previous year).Belgium/Luxembourg, Hong Kong, China and Angola are the best-performing host economies for FDI, while the US, Sweden and Singapore have the highest potential, according to the World Investment Report 2002.

Nepal has been ranked 133rd out of 140 countries in the FDI performance index.

These findings are based on UNCTAD's new FDI benchmarking tools, which measure performance by standardizing a country's inflows to the size of its economy, and measure potential by using a set of economic and policy factors important to investors. Taken together, the two indices show how countries are performing relative to the potential. Thus, the US ranks in the lower half of the performance index, because it receives relatively little FDI given its GDP. But as a strong economy, it heads the potential index for the same reason, a UNCTAD press release said.

"The decline of FDI flows by more than half in 2001 is the largest in 30 years," says Rubens Ricupero, Secretary-General of UNCTAD. "This makes it all the more important for countries to measure how they are doing today in terms of attracting FDI and what their potential is for the future," adds Karl P. Sauvant, lead author of the report.

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