on measures to promote and support private investment in developing countries

The European Parliament,

-having regard to the motion for a resolution by Mr Vohrer, Mr Saby, Mr Tindemans and Mr Ukeiwé on measures to promote and support private investment in developing countries (B3-1305/90),

-having regard to the report of the Committee on Development and Cooperation (A3-0204/91/corr.),

A.concerned that efforts during the last Development Decade to assist the developing countries financially and economically have not been sufficient to bring about a fundamental improvement in their economic and social situation,

B.whereas economic decline, increasing indebtedness and the fall in investment rates in many developing countries are the result both of external factors and of shortcomings in their economic and financial policies,

C.whereas many developing countries have considerable natural and human resources which they have been unable to develop on their own because of inadequate government funding and private investment, as well as excessive exports of capital by private individuals (capital flight),

D.convinced that democratic reforms and transparency of decision-making and of government expenditure are an essential precondition for the emergence of new initiatives,

E.whereas additional private investment accompanied by intensified public aid is imperative for Third World development; whereas, however, private investment is being hampered by adverse legal, democratic, political, social, administrative and cultural conditions as well as by unequal access to private property and incomes,

F.whereas many developing countries lack their own capital resources and risk capital; whereas it is increasingly difficult to provide capital or raise loans for small and medium-sized enterprises, while at the same time the outflow of development aid monies is in many cases faltering and seriously under-funded,

G.whereas a development policy that completely or virtually ignores the role of private enterprise and foreign direct investment will ultimately fail to produce industrialization and growth,

H.whereas, in the current world economic system, every country is vying with the next for investor goodwill in the global marketplace, and the competition between contending locations will be decided by an investment-oriented taxation system and a climate conducive to investment,

1.Emphasizes in particular that, in order to foster a climate for investment, it is necessary not only to improve those factors that are vital for long-term development - such as government institutions, the financial and legal systems, economic reforms, infrastructure and monitoring machinery to prevent waste and corruption - but also to foster human resources at all levels and give people increased responsibility, stressing that investment to promote skills is as economically worthwhile as capital investment;

2.Takes the view that, in order to improve the economic situation of the developing countries, additional efforts - both by those countries themselves and by the industrialized nations - are needed in the following areas: support for efforts by international bodies to improve the world economic environment; a fairer price structure for the developing countries' primary products; a solution to the debt problem and an increase in publicly funded aid (particularly to the Least Developed Countries); respect for the developing countries' legitimate interests in the Uruguay Round of the GATT trade negotiations; the further dismantling of Western trade barriers to products from developing countries; the creation of a sound political and economic framework; investment in projects that will provide a return in both microeconomic and macroeconomic terms; the drafting of structural adjustment programmes for economic recovery in countries of both the North and the South, geared to the particular circumstances of the co

untries concerned and the need for social security support, and designed to ensure that the poorest sections of the population are not further disadvantaged socially;

3.Attaches great importance to the development of local entrepreneurial activity, especially in rural areas, and to wealth creation; considers that the involvement of farmers in the development process, the development of small-scale lending banks and easier access to the credit system in rural areas are vital factors in development;

4.Reaffirms that it is essential to economic development for all resources to be harnessed, with particular account being taken of women; calls, therefore, for women to play a larger part in economic decision-taking, to receive a greater share of earnings, and to be given support in their various roles in the economy and in society, with the object of affording them better access to credit, cooperatives, technology and educational facilities;

5.Stresses the importance of private investment in the environmental sphere, in particular with regard to environmentally friendly production methods, reafforestation and hydroelectric power;

6.Considers that the Community must help the developing countries as necessary to introduce an environmental impact reporting procedure as an integral part of the decision-making process applied to major investment operations; points out in that connection that the process of renewing a country's stock of capital goods (by attracting new investment) can provide ideal opportunities for introducing new, environmentally acceptable technologies;

7.Is concerned at the increase in capital flight from many developing countries in view of the resultant drying-up of capital, damage to investment, the growing impoverishment of large sections of the population, and the industrialized nations' consequent reluctance to step up public aid for development; calls, therefore, on the developing countries to improve overall conditions and to put in place a policy that inspires confidence, bearing in mind the fact that private direct investment is governed by market forces;

8.Stresses the significance to the development process of direct investment geared to sectoral and regional circumstances by virtue of the associated transfer of capital, management and business know-how, and points to the provision of basic and further training in this connection, as well as the spin-offs stemming from close links with the domestic supply industry (additional tax revenue);

9.Deems it essential, in order to prevent private foreign investment from having harmful effects, that direct investment should not entail the transfer of inappropriate technologies or hamper independent economic development in the true interests of the country concerned; urges that consideration be shown for countries' traditional socio-cultural structures and that excessive foreign influence over a country's economy be avoided, especially monopolistic or quasi-monopolistic economic structures;

10.Urges that, where industrial plant is economically inefficient, maintenance and modernization should be given priority over the development of new enterprises;

11.Considers it particularly worthwhile in terms of development policy for private investment to go to the poorest Third World countries (LDCs) and calls for an increase in official development aid to make these countries more attractive to foreign investors by setting up the necessary infrastructure, and for the establishment of a private investment guarantee fund;

12.Calls on the Member States accordingly to increase their public development aid as rapidly as possible to the 0.7% of GNP already agreed to, with the prospect of its eventually being raised to 1%; expects in that connection closer linkage with respect for basic civil and human rights, and evidence from the recipient countries that funding is being used efficiently to build up infrastructure and the social structure, and to improve conditions for economic activity locally and private investment in general;

13.Calls on the Community and its Member States to establish a comprehensive and varied range of development instruments that must be continuously reviewed, revised and adapted to changing circumstances; considers that the Community and its Member States should provide most aid in high-risk areas, i.e. in investment by small and medium-sized enterprises and in the poorest Third World countries; proposes in this connection that the Commission, in concert with trade associations and chambers of commerce in the Member States, should seek appropriate solutions;

14.Considers it important that the development banks operating in Africa, Asia and Latin America should increasingly provide appropriate assistance to private-sector firms, in particular those that are likely to be viable in the medium and long term;

15.Welcomes the action taken by the Community so far to support foreign direct investment in Third World countries (Lomé IV, EC-International Investment Partners programme to promote joint ventures) and calls for the EC-IIP programme to be extended, provided that it encourages investment in small and medium-sized enterprises and in projects primarily benefiting people in rural areas;

16.Calls on the Commission to consider setting up a Community protection scheme providing multilateral safeguards for investment schemes from Member States in developing countries, incorporating all the key features of existing bilateral capital protection agreements;

17.Stresses, in conclusion, that a favourable climate for investment in the developing countries can only be achieved if strategies focusing on the individual can be developed, if economic and financial transactions are made more transparent, and if government authority is exercised more effectively and, above all, more justly;

18.Instructs its President to forward this resolution and the report of its committee to the Council and Commission.