Multinationals investing heavily in Asia, but not in Africa

September 06, 1994|By David Rohde | David Rohde,The Christian Science Monitor

BOSTON -- Adam Smith's invisible hand is caressing Asia, ignoring the former Soviet Union, and slapping Africa.

Economic principles put forth by the 18th-century British advocate of capitalism are being accepted wholeheartedly for the first time in decades by most of the world's developing countries: These nations are tearing down barriers to foreign investment.

Multinational corporations, now free to invest where they please instead of where they can, invested a record $80 billion in developing countries in 1993, according to the United Nations World Investment Report 1994.

Fierce competition for multinational investment has ensued, and 15 developing countries -- concentrated in Asia and Latin America -- are receiving the vast majority of multinational investment, according to the report. The former Soviet Union, Eastern Europe, Africa, and the world's "least developed" countries, meanwhile, are finding few takers.

"The big loser in all of this obviously is Africa," says Debora Spar, a Harvard Business School professor who studies foreign investment.

In 1993, Asia received $45.6 billion in global multinational investment, Latin America $17.5 billion, the former Soviet Union and Eastern Europe $5 billion, and Africa $3 billion, the report says. China led all developing countries with about $26 billion in multinational investment. Other top developing-country recipients were Singapore, Thailand, Malaysia, Mexico, and Argentina.

The report also finds that, after lagging behind British and Japanese companies for most of the late 1980s, U.S. multinationals led the world in foreign investment for the third year in a row. U.S. multinationals invested a record $50 billion overseas in 1993, followed by French, Japanese, German, and British firms.

The report, prepared by the UN Conference on Trade and Development, finds that:

* Total world foreign investment by multinationals, fueled by new global and regional trade agreements, grew to $195 billion in 1993, the first rise since 1990.

* Of foreign multinational investment, 40 percent -- a proportion not seen in decades -- went to developing countries in 1993.

* The number of multinational employees in developing countries rose slightly, while multinational employment in home countries stagnated last year.

* The U.S. remains the largest recipient of foreign multinational investment, with foreign companies investing $32 billion in the U.S. in 1993.


* One-third of world economic output is controlled by multinational corporations.

* Multinationals directly or indirectly employ 150 million people or 20 percent of the world's nonagricultural workforce.

* The top 100 multinationals hold $3.4 trillion in global assets.

* One-third of world trade is conducted among multinationals.

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