Commission on TNCs discusses coproate activities in southern Africa, code of conduct at April sessions.

Commission on TNCs discusses corporate activities in southern Africa, Code of Conduct at April sessions

Detailed discussions of the activities of transnational corporations (TNCs) in southern Africa and continued efforts to reach agreement on a code of conduct on TNCs were the major focus of sessions of the Commission on Transnational Corporations held in April.

The body, at its twelfth regular session (9-18 April, New York), recommended action by the Economic and Social Council on three draft resolutions--dealing with collaboration with South Africa in the nuclear, military and economic fields; activities of the United Nations Centre on TNCs; and ongoing and future research. In reviewing TNC activities in South Africa and Namibia, it also examined responsibilities of home countries with respect to TNCs operating in southern Africa in violation of United Nations decisions.

Recommendations emanating from the public hearings on TNCs conducted by the Panel of Eminent Persons (New York, September 1985) were also considered extensively. Those include calls for a ban on nuclear co-operation with South Africa; disinvestment by all corporations in the military, police and security sectors; no new investments by TNCs in South Africa; strengthening of the arms embargo and imposition of a mandatory oil embargo; and complete desegregation of all work-related facilities.

The Commission on 14 April briefly reconvened its special session, which had met the last time in January to determine how to continue its work. The Commission recommended that the General Assembly authorize another special session "at an appropriate time' to continue work on the code, which is expected to provide the only comprehensive multilateral framework for TNCs.

Negotiations on the Code began in 1977. One of the main remaining points of divergence in the code negotiations is the relevance of international law or obligations to the application of the code.

The text, put forward by the Group of 77, also called on the Council to condemn South Africa's "brutal perpetuation of the inhuman system of apartheid' and its "illegal occupation of Namibia'. Continued activities of TNCs in South Africa and Namibia and their collaboration with the racist regime of Pretoria "perpetuates the system of apartheid and the illegal occupation of Namibia', the text stated. All States, United Nations organizations and bodies, non-governmental organizations and TNCs, banks and financial institutions would be urged to implement the recommendations of the Panel of Eminent Persons.

The Secretariat was to be asked to continue its "useful work' on the activities of TNCs in South Africa and Namibia through collection and dissemination of information, and to provide more detailed information on the profile of TNCs operating in South Africa and Namibia.

The draft on the activities of the Centre on TNCs, approved without a vote, contained preambular paragraphs, which, among other things, referred to the "growing interdependence of issues and the role of enterprises engaged in transnational operations, regardless of form or nature of ownership and country of origin, with due regard to their relative weight and influence in the world economy'; and the "relevance of the activities of such enterprises and the importance of minimizing their negative effects while maximizing their positive ones'.

By the text, the Economic and Social Council would be asked to request the Secretary-General, without prejudice to negotiations on the code of conduct on TNCs, to study ways and means in which the Centre on TNCs can take into account those preambular provisions, while preparing research, analysis and information and pursuing other activities.

Canada, the Federal Republic of Germany, Italy and Japan had submitted a draft by which the Centre was to include in its work "all enterprises engaged in transnational operations, irrespective of form or nature of ownership and country of origin and regardless of whether such enterprises are referred to in any country as transnational corporations'. The text was later withdrawn.

The Commission also decided, at Mexico's suggestion, to include the subject of transnational banks on its 1987 agenda. It referred to the resumed session of the fortieth General Assembly the question as to whether it should operate on a biennial rather than annual cycle of meetings.

The text on ongoing and future research conducted by the Centre, submitted by the Group of 77, was adopted by a roll-call vote of 31 to 9 (Canada, France, Federal Republic of Germany, Italy, Japan, Netherlands, Switzerland, United Kingdom, United States), with 1 absention (Norway).

By it, the Economic and Social Council would ask the Centre to update the report entitled Transnational Banks: Operations, Strategies and Their Effects in Developing Countries.

That report, it specified, should analyse economic elements behind the determination of interest rates by transnational banks; the role of transnational banks in the reverse transfer of resources from developing to developed countries; forms and procedures of negotiation of transnational banks vis-a-vis developing countries in relation to external debt; and interaction between the transnational banks and the International Monetary Fund (IMF) and other agencies in the negotiation of the external debt of developing countries.

International economic relations

The Commission considered reports on recent developments with regard to TNCs and international economic relations (E/C.10/1986/2) and on data on foreign direct investment, including capital inflows and outflows (E/C.10/ 1986/3).

The paper on recent developments deals with foreign direct investment and other capital flows, behaviour of transnational banks relative to the debt crisis, and issues regarding transnational service corporations. Among other things, it states that during the first half of the 1980s, foreign direct investment flows to developing countries declined by nearly one third in absolute terms. Worldwide, there has been a marked tendency for foreign investment to concentrate in the developed market economies, particularly the United States.

A similar pattern is found in commercial bank lending, which has deepened the debt crisis of a large number of developing countries. With the drying up of voluntary lending by transnational banks and direct investment by TNCs, heavily indebted countries are finding it increasingly difficult to recover their development momentum and break the vicious circle in which they were caught.

Ways should be found, the report declares, to correct imbalances which characterize the relative share of private bank lending to total development financing needed by most countries. The heavy reliance on private loans can lead to acute shortages in times of difficulty as recent experience shows. To redress the imbalance, there is a need to increase the level of bilateral and multilateral official financing to developing countries. For the hardest hit lower-income countries, these measures must be complemented by a substantial increase in concessional flows, as these countries are bypassed by both private banks and TNCs. The paper also suggests that the growth prospects of developing countries will be enhanced if private capital flows include a greater share of direct investment than has been the case over the past 15 to 20 years, which witnessed a more rapid increase in bank lending.

The debt situation, it concludes, is unlikely to be resolved through normal market mechanisms, and the adoption of a code of conduct on TNCs would be an important contribution towards financing larger flows of foreign direct investment to those countries desiring it.

In debate, differences of opinion were expressed as to the diagnosis of the current difficulties and the proposed cure. Western States tended to praise the positive role of TNCs in the development process and offer a more optimistic assessment of the current trends in view of the falling interest rates and oil prices. They preferred to deal with the debt crisis in case-by-case negotiations and considered the establishment of the Multilateral Investment Guarantee Agency (MIGA) within the World Bank and the Baker initiative as positive steps which were likely to alleviate the situation of many indebted countries.

Socialist countries stated that TNCs were generally responsible for playing havoc with the economies of host countries by controlling their key industries and exploiting their natural resources. The negative effect of TNC activities in developing countries was a major obstacle to their development, to establishing a new international economic order, and to international economic security, they averred. Those activities must be curbed through effective regulation by host Governments and by the international community through such instruments as the United Nations Code of Conduct on TNCs, these nations said.

Negotiating capacity

In considering the item on strengthening the negotiating capacity of developing countries in their dealings with TNCs, the Commission had before it reports on the activities of the Centre on TNCs and of the joint units with the regional commissions (E/C.10/ 1986/4), including information on developments in the Centre's technical co-operation programme, and on experience gained by the Centre in technical co-operation (E/C.10/1986/11).

In the latter report, a particular reference is made to the natural resources sector and joint ventures in the manufacturing sector. The report describes the major changes in the technical assistance requirements of developing countries that are associated with the increasingly complex nature of agreements in these sectors.

The complexity is linked, among other things, to the variety of legal and fiscal options, changing trading conditions in the international market, repidly increasing technological progress, the changing finance and investment climate, and subtle shifts in government policies. As a result, the Centre's technical assistance programmes have had to be oriented towards providing not only higher levels of general technical expertise but also complementing these with specific information on these changing conditions.

In the natural resources sector, the report states "there are signs that Governments in their capacity as host to foreign investors believe that a new generation of agreements can emerge which will meet the requirements of foreign investors without encroaching on sovereignty or selling too cheaply the right to exploit non-renewable resources'.

Transborder data flows

Transborder data flows (TDFs) are movements across national boundaries of machine-readable data for processing, storage or retrieval, including data transmitted electronically through transnational computer-communications systems.

A report on the subject (E/C.10/ 1986/16) reviews principal developments relating to such flows in a number of international institutions and a summary of a case study on Austria. A country study for the Federal Republic of Germany is to be issued later.

The Centre reported in has undertaken a survey on data services in Latin America and the Caribbean to be financed by the Latin American Economic System and the Government of Mexico. The study reviews the status of the data-services industry in the region and the policies pursued in this regard, focusing on the role of TNCs and discussing policy options available to countries that are interested in data services.

Information system

The gathering and dissemination of information on all aspects of the activities of TNCs has been one of the three broad areas of ongoing work of the Centre on TNCs. A report on management of information (E/C.10/1986/ 13) describes the internal workings of the information system, dealing with what must be done internally in order to produce data bases, inputs to studies and responses to requests that are external manifestations of the information system on TNCs. The report also presents problems related to obtaining accurate, adequate, comparable and timely data for each of the components of the system.

Standards

Work on international harmonization of accounting and reporting was begun in the Commission in 1976. The Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting, established in 1982, was mandated by the Economic and Social Council to report on further steps to be taken in pursuit of the long-term objective of the international harmonization of accounting and reporting.

The Working Group reports (E/C.10/ 1986/14) that at its fourth session in March 1986, it considered issues affecting accounting and reporting in five selected areas: investments; related party transactions; technology transfers; property, plant and equipment; and auditor's association with non-financial information disclosure. The Group agreed that there should be information disclosure concerning those areas.

The Group also recommends that agreed items should be presented to the Commission for appropriate action in a single, comprehensive, systematically structured document.

Environment

The Commission endorsed the Centre's intention to continue to work with all organizations and interested parties to contribute towards increased and more effective international co-operation on the environmental management of industrial process safety and hazards. The Centre was continuing to assist in preparing the consolidated list of products whose consumption and/or sale had been banned, withdrawn, severely restricted or not approved by Governments.

The Commission reviewed a technical paper entitled Environmental Aspects of the Activities of Transnational Corporations: A Survey (ST/CTC/55), prepared jointly by the Centre and the United Nations Environment Programme (UNEP) and published in 1985, and a paper on selected international programme activities relating to industrial safety and hazards.

Another report (E/C.10/1986/15) examines the impact of TNCs on the environment of host countries, particularly host developing countries, corporate environmental management policies, and forms of international environmental co-operation regarding industrial process safety and hazards.

Photo: Commission on TNCs meeting in April. Resolutions adopted: By a vote of 32 in favour to 3 against (Switzerland, United Kingdom, United States), with 6 abstentions (Canada, France, Federal Republic of Germany, Italy, Japan, Netherlands), the Commission asked the Economic and Social Council to strongly condemn transnational corporations (TNCs) which continued to collaborate with South Africa in the nuclear, military and economic fields, in violation of Security Council and General Assembly resolutions.

Photo: Student at Telecommunications Institute, Algeria.