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Effects of foreign direct investment in developing countries

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Intereconomics

Abstract

The effects of direct investments and multinational corporations remain a highly contentious issue. The author traces here the reasons for the large number of diverging statements and comments on this issue and considers what political conclusions should be drawn from this wide variety of views.

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References

  1. For a brief review of the international discussion cf. A. Tharakan, in ECSM (ed.): The International Division of Labour and Multinational Companies, Westmead 1979; also P. J. Burkley: Alternative Theories of the Multinational Enterprises, University of Reading, Discussion Papers in International Investment and Business Studies, No. 23, April 1975.

  2. Cf. S. Amin: Underdevelopment and Dependence in Black Africa—Their Historical Origins and Contemporary Forms, in: Social and Economic Studies, Vol. 11, No. 1.

  3. Cf. O. Sunkel: National Development and External Dependence in Latin America, in: Journal of Development Studies, Vol. 6, No. 1, London 1969/70, p. 23 ff; S. Amin, Underdevelopment and Dependence in Black Africa..., ibid., Their Historical Origins and Contemporary Forms, in: Social and Economic Studies, Vol. 11, No. 1. p. 177 ff; for a comprehensive review cf. A. Schmidt (ed.): Strategien gegen Unterentwicklung—zwischen Weltmarkt und Eigenständigkeit (Strategies against underdevelopment—between world market and independence), Frankfurt/New York 1976.

  4. Cf., e. g., A. Woll: Allgemeine Volkswirtschaftslehre (General economics), 6th ed., Munich 1978, p. 302–326; G. Bombach: Wirtschaftswachstum (Economic growth), in: HdSW, Vol. 12, Göttingen 1965, p. 763–801; K. Rose: Grundlagen der Wachstumstheorie (Basic aspects of the growth theory), 3rd ed., Göttingen 1977; R. H. Solow: Wachstumstheorie (Growth theory), Göttingen 1971, and the specialized literature mentioned in these books.

  5. Cf., e. g., the work of S. Enke: Economics for Development, Englewood Cliffs 1963; W. W. Rostow: The Take-off into Self-Sustained Growth, in: The Economic Journal, Vol. 66, 1965; The Stages of Economic Growth, Oxford 1960; H. Leibenstein: Economic Backwardness and Economic Growth, New York 1963; P. N. Rosenstein-Rodan: Notes on the Theory of “Big Push”, in: H. S. Ellis, H. C. Wallich (ed.): Economic Development in Latin America, London 1961; and A. O. Hirschmann: The Strategy of Economic Development, New Haven 1958.

  6. Cf. the studies of Kieler Institut für Weltwirtschaft, esp. H. Giersch (ed.): The International Division of Labour, Tübingen 1978. The World Bank strategies for the development of Third World countries point clearly in this direction, especially during the fifties and sixties.

  7. A comprehensive review of the results and the assumptions made can be found in R. G. Hawkins: Job Displacement and the Multinational Firm: A Methodological Review, Center for Multinational Studies, no indication of place of publication, 1972.

  8. Cf. G. C. Hufbauer, F. M. Adler: Overseas Manufacturing Investment and the Balance of Payments, Tax Policy Research Study No. 1, U. S. Treasury Department, Washington, D. C., 1968; H.-E. Scharrer (ed.): Förderung privater Direktinvestitionen. Eine Untersuchung der Maßnahmen bedeutender Industrieländer (Promotion of private direct investments. An investigation into the measures of important industrial countries), Hamburg 1972, p. 52 ff.

  9. Cf. H. C. Bos, M. Sanders, C. Secchi: Private Foreign Investment in Developing Countries, Dordrecht-Bosten 1974.

  10. This includes licence and management fees. Cf. K. Matthies: Transnationale Unternehmen in Mexiko (Transnational enterprises in Mexico), Hamburg 1977.

  11. Cf. G. Koopmann: Multinationale Unternehmen in Kolumbien (Multinational enterprises in Colombia), Hamburg 1978.

  12. Cf. T. Bode, T. E. Müller-Debus: Die Auswirkungen von Direktinvestitionen auf das wirtschaftliche Wachstum, die Beschäftigung und die Zahlungsbilanz von Malaysia (The effects of direct investments on economic growth, employment and balance of payments of Malaisa) (diss.), Regensburg 1975.

  13. G. Koopmann: Multinationale Unternehmen in Kolumbien, ibid., (Multinational enterprises in Colombia), Hamburg 1978. p. 79 ff.

  14. Cf. K. Matthies: Transnationale Unternehmen in Mexiko, ibid., (Transnational enterprises in Mexico), Hamburg 1977. p. 60 ff.

  15. Cf. T. Bode, T. E. Müller-Debus: Die Auswirkungen..., ibid., von Direktinvestitionen auf das wirtschaftliche Wachstum, die Beschäftigung und die Zahlungsbilanz von Malaysia (The effects of direct investments on economic growth, employment and balance of payments of Malaisa) (diss.), Regensburg 1975, p. 160 ff.

  16. Cf. H. K. May: The Contribution of US-Private Investment to Latin America’s Growth, Report for the Council for Latin America, New York, no indication of date of publication; cf. also H. C. Bos, M. Sanders, C. Secchi, ibid., p. 32f.

  17. UN: Department of Economic and Social Affairs: Multinational Corporations in World Development, New York 1973, ST/ECA/1960.

  18. Cf. H. C. Bos, M. Sanders, C. Secchi: Private Foreign Investment in Developing Countries, ibid., p. 53 ff.

  19. A distinction has to be made in this respect in particular between the Little-Mirrless method, usually applied by the World Bank, and the UNIDO’s approach. Cf. G. B. Baldwin: A layman’s Guide to Little-Mirrless, in: Finance and Development, 9th year, March 1972, p. 16 ff.

  20. Such investigations are made by UNCTAD for several countries. Cf. UNCTAD, Trade and Development Board, Balance of Payments and Income Effects of Private Foreign Investment in Manufacturing, (a) Case Studies of India and Iran, TD/B/C, 3 (V) Misc, 1, Dec. 1971, (b) Case Studies of Colombia and Malaysia, TB/B/C, 3 (VI) Misc, 1, July 1973.

  21. Among these are the mentioned studies by Koopmann, Matthies and Bode, Müller-Debus.

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Authors and Affiliations

  1. HWWA-Institut für Wirtschaftsforschung-Hamburg, Hamburg

    Dietrich Kebschull

  2. Jakarta

    Dietrich Kebschull

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  1. Dietrich Kebschull
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This essay is based on the enquiry into “Effects of Private Investments in Developing Countries” in which Karl Fasbender, Peter Geisler, Karl Wolfgang Menck, Dieter Orlowski and Ruth E. Schwarz took part together with the author.

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Kebschull, D. Effects of foreign direct investment in developing countries. Intereconomics 15, 235–240 (1980). https://doi.org/10.1007/BF02924579

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