talents.^ For governments to obtain these involves slow, inflexible procedures, whereas with private investment their availability is almost automatic, From one day to the next, skilled engineers and industrial experts can be had for the asking. They do not havo to be recruited5 they accompany private investment. They stay as long as they aro needed and they disappear easily from the scene whon thoir successors have been trained or the need for their services has com^ to an end.
,
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And how I como to an extremely important aspect• In the modern world we know that a substantial share of all profits*, will go to the tax collector. What more effective form of tax collection is there than taxation of the profits of private enterprise? In a developing country, an efficiently administered enterprise can produce enough additional profits "beyond what would be produced by a State-administered enterprise that there will be not only revenue for payment of a just share to the private investor, but also greater revenue for transfer to the State*
The more efficient the organization of men and materials, the larger the amount that the State can take as its duo s?hare without having to allocate any of its energies or any of its scarce pool of managerial talent to the operation of industrial enterprises - or even to the col lecting of taxes.
Finally, a last point. Disturbing political events around the world and confused thinking concerning the role of private foreign investment, have caused fear of nationalization and are deterring new private investments abroad, We are ready to prove to the emerging States that private foreign capital can serve their interest better than
nationalized enterprise. To do this is a challenge that appeals to us who believe in our system.
We can show that dividends and the return of capital, where the source of the capital is the privato investor, are roughly the same as the interest and amortization that must "be paid to governmental agencies for public capital. Although the servicing of public capital goes on regardless of the efficiency of the enterprise, dividends on equity capital are paid only when the enterprise is successful. Losses and
failures are absorbed by the private capitalist? in State enterprises, losses and failures remain the burden of the State. We can shuw that a relatively small increase in the number of persons employed beyond the limits dictated ~by efficiency, a relatively small increase in the
proportion of revenues devoted to unbusinesslike purposes, can dry up
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that margin of profit from which the State has "been able to take its tax revenue. And if this margin of profit is drastically reduced or disappears, where will the modern State get revenues for its "budget?
We want to make it oloar that if new governments attempt to avoid their responsibilites by confiscating capital, whether by throttling or
seizing it, and be it governmental or private in origin, without accepting
tho solemn duty of servioing that capital, then their credit standing will disappear among both public and private lenders.Finally, however much we may want to spread the benefits of private investment, no oi\o must expect private investors to put their money abroad for purposes which are not economic. Our benevolent intentions and our international g'cb.-.U.'.. must not be allowed to oioud our financial judgement as to profit potentials.
Nevertheless, once any project is undertaken in developing countries, it is of fundamental importance that all its operations and its entire role in the community be devoted to making that projeot the best possible ambassador of the originating nation and of the froe enterprise system.
This is not mere sentimentality. We believe it will always be true that broad vision and awareness of human dignity, and tact and courage in dealing with racial and national sensibilities will be the hallmarks of successful enterprise.
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Statement No. 11
STATEMENT BY ME. W.H, B&ATTY, PRESIDENT, AFRICAN AFFAIRS SOCIETY AND VICE-PRESIDENT, CHASE MANHATTAN BANK,
UNITED STATES OF AMERICA
Good morning, Mr* Chairman, Mr. Executive Secretary, ladies and gentlemen
-I am glad to address myself to paragraphs 26, 27 and 28 on page 7 of paper No. 4 "bo which I refer you now.
Congressman Edge of New Jersey introduced legislation in my country in the-early- '20*8 which was amended subsequently to permit commercial banks who are members of the Federal Reserve System to establish two kinds of wholly, owned subsidiaries for the purpose of making equity investments in enterprise abroad - one type in non-banking enterprise and the other in banking enterprise,
Most of the important international banking institutions in the United States, consisting of some institutions on the Eastern seaboard
centered around New York, the Middle West centered around Chicago and the Far West centered around San Francisco have availed themselves of this permissive legislation and the related regulations of the various regulatory authorities by doing the following: