PRESS BRIEFING ON UNCTAD/INTERNATIONAL CHAMBER OF COMMERCE SURVEY ON MULTINATIONALS IN ASIA
Press Briefing
PRESS BRIEFING ON UNCTAD/INTERNATIONAL CHAMBER OF COMMERCE SURVEY ON MULTINATIONALS IN ASIA
19980318
A majority of multinational corporations polled in a recent survey retained confidence in Asia as a destination for foreign direct investment despite the financial crisis there, George Kell, Economist in the Office of the Secretary-General, told a Headquarters press briefing this morning. "The overall assessment that can be drawn from the survey is a very clear vote of confidence in the economic fundamentals of the region", he added.
Out of the 500 corporations polled in the survey, Mr. Kell said, 40 per cent replied, of which 88 per cent expected either to maintain or to increase foreign direct investment in the region; 12 per cent intended to scale down their investment plans but 26 per cent planned to increase. The survey, conducted in mid-February amidst the Asian crisis, had elicited similar "upbeat figures" on the assessment of the long-term prospects and the changes in investor confidence. "Clearly, multinational corporations continue to be keenly interested in the region, which many view as one of the great markets of the twenty-first century."
The survey, whose results were released simultaneously in New York and Geneva this morning, was carried out jointly by the United Nations Conference on Trade and Development (UNCTAD) and the International Chamber of Commerce (ICC). Bill Stibravy of the ICC also attended the briefing. The survey was a concrete example of how cooperation could take shape, Mr. Kell said, adding that Secretary-General Kofi Annan had met with the ICC in New York four weeks ago, when a new initiative of cooperation had been agreed upon and a Joint Statement of Common Interest adopted.
Highlighting aspects of the survey, Mr. Kell said foreign direct investment must be distinguished from portfolio equity investment and bank lending on the other hand. "The latter two external financial flows are subject to high volatility, they have decreased a lot and they are actually the hallmark of the current economic crisis. Foreign direct investment, on the contrary, which is motivated by more long-term interests, has remained at a very high level, actually at the 1996 level, which in itself was a record level regarding foreign direct investment." The foreign direct investment had a stabilizing effect, complementing domestic investment and playing an increasingly important role in generating export revenues.
He said that currency devaluations had made Asian countries more attractive locations for production, further strengthening the system of international production. Lower asset prices had helped to ensure that foreign direct investment remained at high levels.
Mr. Stibravy said that the results of the joint survey were both encouraging and significant, representing an important vote of confidence in
UNCTAD Briefing - 2 - 18 March 1998
the economic fundamentals of East and South-east Asia and in the long-term prospects of the region "and this by major companies whose management must watch the bottom line and be prepared to answer to their stockholders". That major companies were prepared to maintain or make such long-term commitments to the economies of the host countries constituted an important element of stability in an otherwise unsettled situation.
A correspondent asked whether, in view of the negative impact of the crisis on local and regional multinationals and local companies in terms of maintaining control of their businesses and industry, the region's economy would have a European or American face in five to 10 years. Would that create problems "down the road?".
Mr. Kell said that the subject had not been the focus of the survey. "But still we have some good figures which show that mergers and acquisitions, which is the measurement for showing how far economic turnover is taking place in terms of ownership, have indeed increased in two of the affected countries, the Republic of Korea and Thailand." However, what should be considered was international comparison -- foreign direct investment penetration relative to overall investment. The penetration rate was relatively low in most countries, and one could not really talk about a major sell out that could "change the landscape" in a very fundamental way.
Another correspondent asked whether any distinctions had been made between the various affected countries in view of claims that the current situation represented above all a crisis in "Asian-style crony capitalism" and that different countries had responded in different ways, including the adoption of "Western-style" transparency in the case of the Republic of Korea and "a nationalistic and perhaps even a chauvinistic" response of resisting the International Monetary Fund's will by Indonesia and Malaysia.
Mr. Kell responded that the survey had not differentiated between countries, but had clearly shown that the corporations' "vote of confidence" was based on a solid understanding that the fundamentals of the Asian economies were still in place. Investments were motivated by economic factors, as well as political factors; most of the economic factors had never been disputed. "They have been in perfect shape and will continue to be in perfect shape."
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