India should attract more transnational firms: Unctad

Wednesday, 18 September 2002, 07:00 Hrs
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NEW DELHI: India, which is among the world's favored investment destinations, should try to attract more transnational companies (TNC) that help boost exports, says an annual report of Unctad.

"Transnational companies are playing a pervasive role in the export of developing countries," states the "World Investment Report 2002" that was released here Tuesday.

TNCs account for substantial shares of exports in "winner countries" --nations that have been attracting large amounts of foreign investment, the report states.

China, Costa Rica, Hungary, Ireland, Mexico and South Korea are among the top winner countries that have benefited by the presence of large TNCs.

Focussing on how TNCs help countries boost export performance, the report says they account for four percent of exports in Japan and as much as 80 percent in Hungary.

In India's case, the potential of TNCs is still to be fully realized. In the software and related services, which are among India's fastest growing export items averaging a 40 percent annual growth since 1988, the share of TNCs is just 19 percent.

"Foreign direct investment per se has no meaning unless it is for the specific objectives of attracting high-technology and employment generation," said Nagesh Kumar, deputy director-general of Research and Information System for Non-aligned and Other Developing Countries, while presenting the report.

"India needs to attract some major companies having captive market access for export-oriented foreign direct investment (FDI)."

Kumar cited the case of China, which has been attracting foreign companies with the requirement that they undertake exports. These companies now account for 50 percent of China's exports.

"India does not insist on such an obligation now," he said.

"TNCs can help developing countries realize their potential," said Veena Jha, coordinator of Unctad India. "FDI policies should be part of the overall economic development policies."

In a few odd cases like Ford, India has seen employment generation and export growth in automobile components. Such cases can be replicated.

"Currently most of the companies heading for India are targeting the domestic market which has been showing five percent annual growth besides providing a sheltered market," said Kumar.

Bucking the global trend, India witnessed a 47 percent increase in FDI inflow, accounting for $3.4 billion of the $4 billion investment inflow to South Asia in 2001.

Ranking among favored destinations along with countries like Malaysia and Singapore, the Unctad report states: "This country (India), by far the largest recipient in the region, has been taking steps to liberalize its FDI regime further."
Overall the global FDI flows in 2001 witnessed a 51 percent drop, the largest in 30 years, to $735 billion, with the developed nations seeing a 59 percent drop and developing countries recording a 14 percent dip. Only central and east European countries saw a two percent rise in FDI inflows.

Source: IANS
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