rate of economic development.
48. The second exposition was based on the premise that profits .were a time-tried test of superior efficiency, which enabled private enter prise to sort out in advance the potentially most successful lines of industrial endeavour, and thereby make the most economic use of scarce capital resources. It was suggested that the profit discipline ensured flexibility of direction, and enabled losses and failures arising out of bad or wrong decisions to be absorbed without casting a burden on the exchequer. The view was also put forward that private investment was inherently superior to bureaucratic arrangements. In any case, profits of private enterprise were subject to taxation, and thus provided a
source of funds to the State.49. In the course of an examination of the various sources of capital, African and non-African, a number of points were made. African develop ment banks and corporations could play a more active role in project formulation. The current activities of the UNDP in this field were noted, particularly its offer of support for the establishment of a
pre-investment unit in the African Development Bank. UNDP, it was noted,
would be prepared to extend support to national development batiks as
well as sub-regional institutions in this field.. 14/392
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50. The representative of the African Development Bank gave an account of the preparatory work which the Bank was now undertaking- He under lined the fact that the activities of the Bank were complementary to those of other financing agencies, and that the Bank expected to work closely with member Governments, national development banks and other international agencies. The World Bank, and especially its affiliate International Finance Corporation, were assisting African oountries and other developing nations in the industrialization process. The repre sentative of the World Bank also informed the meeting that it was hoped that the IFC with the recent substantial enlargement of its loanable fund would be able to play a greater role in financing industrial development in Africa.
51• Caution was expressed on the suggestion advanced in the secretariat
document ("Industrial Finance and Management for Africa" - IND/lF/KP/l)
that marketing boards might finance some sectors of industry. The fear was that the lowering of farmers' incomes implicit in such use of
marketing boards would have the effect of depriving the economy of the general stimulus of higher rural incomes.
52, A suggestion made in the secretariat document about the need for re-ohannelling into the national economies the insurance premia collected by foreign insurance companies, instead of sending these abroad, met with mixed response. The setting up of re-insurance corporations in Africa would enable more funds to be retained locally, but it was pointed out that the insurance companies oould continue to have recourse to the international insurance market.
53. The secretariat document had also made a reference to the effioient collection of personal taxes as one method of augmenting funds, but had ignored the need to mobilize personal savings.
54- The current stage of African development, it was observed, did not seem to call for full-fledged stock exchanges, and consideration ought to be given to setting up less elaborate institutions which could bring the prospective investor and the holder of investible funds together.
e/gu. 14/392
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55. The discussion on sources of foreign capital enumerated certain omissions in the list of sources catalogued in the secretariat document, and emphasized the desirability of attention feeing given to certain long-established institutions with considerable investment in Africa/
"in particular the Caisse Centrale pour la Cooperation Economique, the Commonwealth Development Corporation, the Commonwealth Development
Finance Company Ltd., the three major British Banks active in Africa
and the European Development Fund.," It was pointed out that one non-African source of funds, namely the so-called Cooley Funds arising out of P.L. 48O transactions by the United States, was of minor importance in^ Africa in terms of amounts available, and also restricted to very few countries. The working of the Edge Act Corporations, associated with some American banks, was described at length. It was indicated . that the non-banking type of Edge Act Corporations often financed joint ventures involving multinational participation and were not necessarily committed to financing only ventures originating with citizens of the United States. Attention was also drawn to the acti vities of several United States based international investment
corporations and their willingness to work in co-operation with United Nations agencies, among others? to study and identify viable projects, inclusive of projects in the field of agriculture and animal husbandry, on a national as well as multinational basis.
56. The working of various aspects of aid from the Federal Republic of Germany and financing programmes from that country was also described in detail. It was pointed out that banks in the Federal Republic had participated in making finance available to a number of national develop ment banks in Africa. A detailed description was also offered of the operation of the German Development Company, and stress was laid on the fact that the Company was not governed by any pre-judgements as to preferred countries or industries in which to invest. It was also explained that the Company sought "know-how" partners in the Federal Republic of Germany as well as other developed countries.
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57* It was observed that the document submitted by the secretariat was deficient inasmuch as it only catalogued foreign sources of capital, and failed to pose and answer the question: what was the likelihood that foreign private capital, in fact, would be attracted to Africa?
In elaboration of the same view, it was indicated that the secretariat document ooncerned itself almost wholly with joint ventures and thus neglected to look -at ventures which, for one reason or another, oould not be Joint ventures.
58. It was also pointed out that the secretariat paper ignored the important question of fiscal incentives, and reference was made to
studies which showed that often ill-designed fiscal incentives deprived government of needed revenue, while failing in their purpose ofstimulating desirable industrial investment.