Commission discusses role of transnational corporations in world development.

Discussions on the role of transnational corporations (TNCs) in the current international economic situation and on the modern phenomenon of transborder data flows highlighted the work of the Commission on Transnational Corporations at its tenth regular session, held from 17 to 27 April in New York.

After reviewing the activities of TNCs in South Africa and Namibia and the responsibilities of home countries towards TNCs operating there, the Commission recommended a resolution for adoption by the Economic and Social Council calling upon the home countries to prevent further new investments and reinvestments and bring about an immediate withdrawal of existing investments in southern Africa by TNCs.

During the debate on the proposed code of conduct on TNCs -- a Commission priority since 1977 -- its multilateral character was emphasized and it was said that other instruments, bilateral or regional, could not serve as a substitute for it. The body urged that every effort be made at its second reconvened special session for 1984 (held from 11 to 29 June in New York) to complete the code (see accompanying story).

The Commission reaffirmed the importance of work by the Centre on TNCs on transborder data flows and noted its intention to focus in the coming year on research related to the rise in trade in data services.

During its two-week session, the Commission also considered international standards of accounting and reporting, other international arrangements relating to TNCs than the code of conduct, policy analysis and research, a comprehensive information system on TNCs, technical co-operation projects, and work related to the definition of TNCs.

The 48-member Commission postponed action on a draft resolution that would have had the United Nations Centre on Transnational Corporations prepare a study on the activities, both qualitative and quantitative, of State-owned enterprises from both market and centrally-planned economies conducting transnational operations. The postponement, under a procedural motion of the German Democratic Republic, was approved by a roll-call vote of 30 in favour to 11 against, with no abstentions. The proposal for a study on State-owned TNCs had been submitted by Canada, the Federal Republic of Germany, Italy, Japan and Sweden.

The Commission selected 16 expert advisers--eight from developing countries, seven from developed market-economy countries and one from the socialist countries of Eastern Europe. Five experts are businessmen, five are from trade unions, and six have academic or other backgrounds. Advisers are elected for two-year terms and are eligible for re-election for one additional two-year term only.

Other texts recommended for action by the Economic and Social Council dealt with preparatory work for public hearings on TNC activity in southern Africa and a draft provisional agenda for the Commission's 1985 session.

Newly-elected Chairman Philippe Levy (Switzerland) said the internationalization of economies was characterized by growing parts of gross national product earned abroad, an increase in the number of TNCs -- some "new-comers" being small and medium-sized corporations and others coming from new home countries -- and a continuing unequal overall distribution of host countries of TNCs.

Outgoing Chairman Hassan Gadel Hak (Egypt) said TNCs could provide a link between developed and developing countries and could help to build an infastructure in developing countries, in addition to training personnel. However, TNCs were not investing enough in developing countries to assure these much-needed objectives. TNCs claimed the atmosphere in developing countries was not conducive to investment. The international community must intensify attempts to deal with that situation and must support developing countries' needs.

Sidney Dell, Executive Director of the Centre on Transnational Corporations, said many host countries were in the process of adopting specific regimes for dealing with TNCs, due in part to greater confidence in the management of their relations with these corporations. Also many TNCs have to respond to the need to orient their activities in host countries to comply with national regulations and to take into account their development policies. Finally, acute balance-of-payments pressures had prompted many countries to look to TNCs as a potential additional source of funds at a time when the flow of resources, both from public instutions and commercial banks, was lagging. Most host countries were, however, concerned about the impact on balance of payments, the potential for flight of capital, and transfer pricing.

Commission members for 1984 are: Algeria, Bahamas, Bangladesh, Brazil, Canada, Central African Republic, China, Colombia, Congo, Costa Rica, Cuba, Cyprus, Czechoslovakia, Egypt, France, German Democratic Republic, Federal Republic of Germany, Ghana, Guinea, India, Indonesia, Iran, Italy, Jamaica, Japan, Kenya, mexico, Morocco, Netherlands, Nigeria, Norway, Pakistan, Peru, Philippines, Republic of Korea, Swaziland, Switzerland, Thailand, Togo, Trinidad and Tobago, Turkey, Uganda, Ukrainian SSR, USSR, United Kingdom, United States, Venezuela and Yugoslavia.

In addition to the Chairman, other officers elected were: Vice-Chairmen -- Vladimir Philippov (Ukrainian SSR); Ahmed Rhazaoui (Morocco); and Ransford Smith (Jamaica) and Rapporteur -- Irtiza Husain (Pakistan).

International Economic Situation

The Commission reviewed reports relating to transnational corporations in world development and the role of TNCs in implementing the International Development Strategy for the Third United Nations Development Decade.

TNCs in World Development

The report on TNCs in world development (E/C.10/1984/2) deals with the changing nature of the world economy, with emphasis on its increasing interdependence, both among countries and between the public and private sectors.

Foreign direct investment flows into developing countries, the report concludes, are adversely affected by the present crisis and the structural changes taking place in both the developed and the developing world. For this reason, many host developing countries are liberalizing their policies towards foreign direct investment in an effort to substitute equity for debt financing.

At the same time, many of these countries are imposing certain performance requirements on foreign firms -- requirements that frequently relate to the trading activities of such firms, for example, by requiring them to export a specific percentage of their production, by linking permission to import quantitatively to the firm's capacity to export, or by obliging the firm to purchase a given percentage of inputs from the domestic economy. These factors, among others, are likely to change the overall role played by the TNCs in the foreign sector of host and home countries and give the foreign investment-finance-trade link a new dimension during the 1980s.

The recovery of developing countries' growth has been impaired by two major factors, the report states. One is the increase in protectionist measures taken by developed market economy countries to limit unemployment. World trade in 1983 was, according to the report, virtually the same as in 1979, and its projected real growth for 1984 is still below the average annual rate for 1974-1979. A second factor is the sharp post-1982 reduction in voluntary commercial bank lending to developing countries. Major adjustments are needed to compensate for this decline, the report states.

The increasing indebtedness of the developing countries in the post-1973 period, the report goes on, is directly related to their worsening trade-balance position. The...