Stephen VasciannieA FEW weeks ago, the Department of Management Studies, and the Mona School of Business, at the University of the West Indies hosted an excellent conference on Ethics and Public Policy. The issues raised were as wide-ranging as one would expect, and we should look forward to the publication of the proceedings of the conference in the near future.
In the course of the conference deliberations, one point which arose concerned the role of foreign investors in Caribbean economic development. Specifically, following presentations on relationships between ethics and business (broadly speaking), a student suggested that multinational corporations operating in developing countries are so problematic that we may as well try to work without them. As this view has more than its fair share of supporters in the wider society, it merits further attention.
It is easy to be critical of multinational corporations. In a broad sense, many of multinational corporations seem to represent the wealthy outsider within an impoverished community. They come in various forms and sizes, ranging, for instance, from large mining and petroleum entities to fairly small food franchises. In most instances, though, when viewed from a distance, they seem to belong to a different society, they come to make profit at our expense, and they do not know much about us. Hence, they become a target for our suspicion.
EXPERIENCE
Multinationals are also sometimes open to suspicion based on experience. About a week ago, Colin Powell indicated that the US State Department was not proud about its role in establishing the Pinochet Government in Chile in the early 1970s, with clear implication being that the anti-Allende coup had been influenced by American authorities. But, at the time of that coup, it was widely said that at least one telecommunications multinational was an active agent of the anti-Allende forces, and this helped to fuel the notion that multinationals, left unguarded, will pursue political objectives in a manner inconsistent with national sovereignty.
It is also suggested that multinationals need to be the subject of careful scrutiny because, particularly with respect to natural resource projects, they can be expected to disregard the environmental concerns of developing countries. There is no need to dwell on this point in the land of the Red Mud lake, and the Privy Council victory concerning Clarendon residents.
But the matter goes further: the suggestion is that precisely because multinationals represent capital mobility, and because they are not from within, they may be inclined to pay little attention to our natural environment. It's not their home, it's ours, is a theme that echoes not only among the Ogoni people of Nigeria.
At the same time, though, it is important not to give the dog a bad name simply in order to hang it. Today, most developing countries recognise that although multinational corporations do lead to particular difficulties for national economies, they are also an important component in generating growth. So, for instance, the Caribbean Trade and Investment Report 2000 sets out the advantages of foreign investment as follows:
"(P)otential benefits include a relatively stable means of financing current account deficits and of transferring technology, managerial skills and other assets belonging to the firm..., gains in skilled employment in higher valued industries, ... the possibility of export diversification and other effects which influence the competitiveness of the host economy."
BENEFITS
Yet, even in the face of a clear listing of the putative benefits from investment by multinational corporations, some analysts still offer resistance. Their line of argument is usually derived from the idea that multinational corporations are exploitative; so, they posit, that even if developing countries may gain from foreign investment, these benefits are less than the benefits that would accrue to the national economy without foreign investment.
This viewpoint is not convincing. Developing countries, such as ours, suffer from capital shortage; and, for well-known reasons of history, we have a large reservoir of unskilled labour and limited means of bringing labour skills up to world class standards. In this environment, it is unrealistic to assume that local enterprise alone can raise living standards and worker productivity. Rather, the challenge for us is to attract foreign investment and to acquire techniques and technology from foreign investors.
This, however, is not to say that we should give away the shop to every foreign investor who happens down our way. On the contrary, as most developing countries now realise, there needs to be a balance between the costs and benefits associated with foreign investment. Thus, the point cannot be that we must accept environmental degradation in return for nothing; it is that where environmental damage is an inevitable consequence of the productive process, some benefit must accrue to the host economy in return for environmental harm.
Similarly, if foreign companies are attracted by local incentives (in the form of tax holidays, duty exemptions and so on), they should expect to be called upon to make a tangible contribution to the local economy through employment, capital growth and training. In this way, we may talk about a genuine partnership between multinationals and developing countries. And, with the passage of time, our suspicions may be allayed.
Stephen Vasciannie is Professor of International Law at the University of the West Indies, Mona.
