Distr.
LIMITED
UNITED NATIONS st/eca/uhctc/6
11 January 1982
ECONOMIC AND SOCIAL COUNCIL <v- • , ™»
_ Originals FRENCH
ECONOMIC COMMISSION FOR AFRICA
ECA/UNCTC Joint Unit on
Transnational Corporations
THE IMPACT OF THE ACTIVITIES OF TRANSNATIONAL CORPORATIONS ON THE BALANCE OF PAYMENTS OF THE IVORY COAST*
A TECHNICAL PAPER
* This paper was prepared by ECA consultant. The views expressed therein
are not necessarily those of the United Nations Economic Commission for Africa.
ST/ECA/UIJGTC/6
CONTENTS
INTRODUCTION
A. Concept of "transnational corporations" 2. - A
3. Statistical data „ , . . ,
•"•*" 4-5
C. The importance of multinationals in the economic
activity of the Ivory Coast . . . e c -?
•••••••••••••• 7-15
A, Balance of trade . .
••••♦••••~
S-9B, Balance of services - . ^
• • • • 9-12
C, Unrequited transfer balance D, Current account . .
• 12
E, Capital balance
F, Over-all balance of non-monetary transactions ... l5 "
III. CONCLUSION . B
16
sT/ECA/wicrc/e
I. INTRODUCTION1. Transnational corporations are becoming increasingly important in world
economic development.. Their size, their structure and their economic powergive them decisive'influence over the development .of national:economies, particularly those pf developing countries. Numerous studies have attempted to assess the impact of the .activities of transtiationals, either within a particular country or at theglobal level, froni different perspectives:
ecrinoraic development, gross domestic product, value added, trade, capital
movements, etc a
?• 'International organizations, concerned about the growing independence of these corporations and their interference in political issues by virtue of their economic power, have for some time attempted to organize their control and « intensify the monitoring of their activities by means of international co operation and common standards. Emphasis is thus placed on the actual contribution of these corporations to the development of the host country.
3- This study is intended to present an analysis of the impact of the
activities of transnational corporations in one West African'country belonging to the West. African Monetary Union,1/ the Ivory Coast. Prom I960 to 1980, it experienced remarkable economic growth, with its gross domestic product rising from U2.6 to 2,231.2 billion CFA francs. The country's economy'is dominated by the agricultural sector, whose performance is largely determined by
production trends and world, prices.
4. Principal exports are coffee, cocoa."'and wood, which account for 70 per cent of export earnings on the average. Despite significant investment, the country s industrialization has been slow, with the secondary sector
contributing only 22.7 per cent of the gross domestic product in I98O, as
opposed to U per cent in i960.5- The country's economy is further characterized by its openness and its liberal exchange control regulations. The investment code grants fiscal advantages - exemption from import duty, reduction of export taxes, exemption from tax on industrial and commercial profits, exemption from licensing, etc. - for a period of from five to 25 years to business classified as priority
enterprises. These advantages are granted by an ad hoc commission to enter prises that "assist in the implementation of economic and social development plans and in the development of the country", provided that they make a minimum amount of investment and provide jobs for Ivory Coast nationals. The investment code also guarantees registered enterprises the freedom to transfer profits from investments outside the country. This last provision is also applicable to un registered enterprises providing they can produce documents attesting"that their operation exists and'that.they have respected all national legislation regarding
fiscal obligations and investments. . .
1/ The West African Monetary Ifeiion (UIOA) has six member couftt
Benin, the Ivory Coast,.the. Niger, Senegal, Togo and the Upper Volta,
ST/ECA/UNCTC/6 Page 2
6 In general, in the Ivory Coast commercial settlements, current trans actions and capital movements abroad 2/ must conform to the provisions of the exchange control regulations. These provisions do not apply to the countries of the West African Monetary Union, to Prance or to the other franc zone countries by virtue of the freedom of transfer within this zone.
Other provisions of the exchange control regulations define the nature of operations in non-resident accounts 2/ or simply govern import or export operations or regulations and the transfer of income, as mentioned above.
7. The development of transnational* activities in the Ivory Coast has been facilitated by its liberal commercial and financial legislation. For purpose of this study, problems were encountered in defining transnational
corporations and in statistical data.A» Concept of "transnational corporation"
8* The concept of a transnational corporation or firm is subject to numerous definitions, all different, but all based on the scope of
activities of these corporations, their economic and financial power and the decision-making process. Some writers define the transnational firm or corporation as being a corporation with no nationality whatsoever, whose
activities transcend national borders. Its hallmarks are:(1) Sufficient economic power to be able to oppose Governments;
(2) Production and marketing on an international scale;
(3) The inclusion within the corporation of directors and stockholders
of different nationalities.
2/ Foreign countries or countries outside the West African Monetary
Union or the franc zone (countries having issuing agencies connected to the French treasury).
V Non-resident status is acquired, according to exchange control
regulations, by any natural person whose habitual residence is a foreign
country fan<i by any natural person of Ivory Coast nationality who has spent
more than two years out of the country and has resided abroad, with the
exception of diplomatic personnel 'assigned to foreign posts. Foreignbranches and affiliates of Ivory Coast firms have non-resident status.
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3
9. Thus the supranational and transnational aspects' of these firms- are
emphasized. /They "set their development strategy ori a world ^cal-e, thereby
escaping State control.- This category of transnational- corporations comprises several do*en.piant firms, primarily of the United States of America, European countries and, more recently, certain oil-producing Arab States. Other writers identify transnational corporations by therr expansionist role in terms of national economic power at the world level Accordingly, transnational is defined as a "large national enterprise that owns or controls several production affiliates in several countries." 4/ : This approach draws on two basic notions:- . . ■:.■■-.■.-
(1) This type of firm is a national firm that has attained a significant
degree of development and makes itself felt at-the local lever-through "
effective control of one sector of the economy; ■ ■ -
(2) The sphere of activity discribed above is production, while the
dynamics of the expansion multinational corporations reside in the fact that they cover the; three phases of .economic activity:.:, production, marketing and linancmg. In this manner, the Corporation, may assume the form of a production
company, a marketing company and a finance company.
This definition also specifies that a transnational corporation must control the activities, of several affiliates in a number of countries sot by
some writers at si:-:. ■ . ■ ....■ /
10. A third school...of thought vie*ra the transnational corporation as
a product of the market economy. Maximisation of profit leads the enterprise to expand beyond its primitive-framework in order to increase the- capital it
taken vST^^T18' '^ *"' Aerely "the °**"*»tifc»l form
taken by capital,that can no longer increase in value without becoming involved m an .international production process.-v^/ . "
11. Several other definitions have heen put forward to give a more precise ■■
notion of the transnational, based on these three schools of thought. The T f d^rture seems to be in all cases a world strategy on the part rf share holders to maximize their profits, which gives the firm a plurinaiiohal
transnational or multinational character. i'.uu^ionai,
12. Uhat approach to choose is difficult in developing countries because of the establishment of many corporations controlled hy the former colonial power whose operations, frequently :e*tend to.other former colonies, ^y virtue of their number and economic power, as compared with relatively recent
4/ Charles-Albert Michalet, Capitalisme mondial (Paris, P.U.F.) 5/ Vladimir Andraff, Profits et structures d,, r^Tri^-H.^
^(-almann-Levy; ■ ... ■ ^ ^ r---
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Page 4
national enterprises, they,dominate the country's activities and determine the • direction of its foreign relations by means of the privileged links they maintain with the former colonial power. Moreovery the number of transnationals in the strict sense of the term is relatively limited in these countries, and their actions would give only a poor idea of the role of foreign corporations in the balance—of—payments situation of the host country,,
13. For all of these reasons, and because most of these corporations are located in several West African countries, it has been decided to classify as multinational firms all enterprises located in the Ivory Coast that are '■' ' beneficiaries of direct investment, specifically:
(1) All subsidiaries of foreign enterprises as they have been defined by the International Monetary Fund, that is, enterprises set up in the Ivory Coast, whether incorporated or not, in which all capital and endowments are foreign- owned j
(2) All affiliates of foreign corporations as defined by the International
Monetary Fund, that is, corporations with foreign investment and under the control of a foreign group,
14. Because of the, peculiar nature of their activities which are governed by standard regulations within the Nest African Monetary Union, banks have been excluded from the scope of this study. Moreover, the impact of their
activities on the balance of payments is primarily limited-to financing the balance by outside loans or transfers to the parent companies or companies belonging to the group. Because of its effects on-monetary and credit policies, foreign indebtedness is being monitored within UMOA by the Banque Gentrale des Etats de l'Afrique de l'Ouest, UMOA bankinp regulations also prohibit banks from holding abroad liquid assets in excess of current
treasury needs,, Under these conditions, multinational bank operations only rarely influence developments in the balance of payments and can therefore be overlooked.
B. Statistical data
15. The main statistics available are drawn from surveys conducted in resident enterprises for the purpose of determining the balance of payments
and from documents from the financial data bank*6/ For each fiscal year
these surveys reveal capital movements, goods and services operations, transfers of funds out of- the country and the year's net trade performance.
6/ A specialised service of the Direction de la Comptabilite Publique
(Public Accounting Office) and the Iresor du.Ministers des Finances et de
l'Economie de la C6te"drlvoire (Treasury of the Ministry of Finance and the
Economy of the Ivory Coast), responsible notably for the collections, control
and processing of all information concerning the activities of enterprises established in the Ivory Coast,,ST/ECA/UNCTC./C Page 5
16. The time series drawn from these two sources of information do not cover the same period. The enterprise surveys carried date back'to 1968 when the first balance-of-payments documents were established. . The resulting
statistical data are not reliable enough for a true study of these * corporations' activities. Since the amount of time required for surveys to obtain information of sufficient quality and quantity would be well exceed the amount of time for this study, the period under study will be limited to six years, from 1973 to 1978. At the same time, some of the tables in the annex provide data only up to 1977, as the data for the last year 6f the • ■
period in question were not yet complete.17. : The financial data bank time series was established from 1974 to I979 and describes the development of financial control of firms Vy nationality invested, capital tends and the value added of all companies. "
°" The importance of multinationals in the economic activity of the
Ivory Coast ~" ' " ' '■ ■ ■
18. The total capital of enterprises operating in the Ivory Coast increased considerably during the period 1974-1979, rising from.CFAF 118.8 billion to
■■CFAF. 394-4 "billion, or an average annual growth rate of 27.5 per cent. : ; However, there was a net decrease in the growth rate during 1977 and 1978 as compared with 1975 and 1976 (21.2 per cent and 13.7 per cent respectively)
with a slight recovery in 1979- '
19. Trends in the average share of the bapital of corporations operating in the country held by the Ivory Coast followed in an even more marked fashion the upward movement of the total capital. This share rose to CFAF 230 3 billion in 1979, against CFAF 42.5 billion :five. years earlier. The 42.2 per cent average growth rate for "the period, however conceals
fluctuations with a high of 85.7 per cent in 1976 and a low of 12.5 per cent in 1978. Respite these observations, the policy of promoting national
enterprises and efforts by the Ivory Coasts to guarantee greater participation in corporate capital have definitely been successful. The ihdigenization of capital.:gained.impetus during the period 1974-1979.- The Ivory =Coas,t held oyer 50 per, cent ,of. corporate stock in 1.979, while'in 1973 it ;had held only
36 per cent. '■ '■ ■'■'■' - .■:■■■•■.■;■■.■...•,- ,K... .'!■_.■:■■.
20. Nevertheless, foreign interests in the Ivory Coast cannot be discounted;
the participation of countries belonging to European Economic Community has been.greatest, ,at least during the period in question. This participation has..doubled in absolute value, rising from CFAF 53-5 billion on:1974 to • CFAP 110.7,;billion in .197?. France is ahead of, its Common Market partners, with a relative.share .that has risen at an .annual average rate'of 87 per cent.
The importance of foreign participation in the corporations capital of
established in the Ivory Coast shows the remarkable contribution of foreign
investment to the formation of the country's gross domestic product.
ET/ECA/WiCTC/6 Page 6
21. An analysis of the value added generated ** °£P^~j^rate of
in capitax p
the average invests coefficient rose to 0«50«
22 Curing the period under study, the value added generated by transnational*
in the Ivory Coast rose to CFAF 385 billion in 1979, as against CPtJ? 67.7
oillion in 1974. Thus it can be observed that despite a reversal g^^
the distribution of equity capital of corporations established .in this counrry,
role froci'29 per cent in 1974 to 53 per cent in
23. Tn the absence of data on trends in the value added of affiliates and,
raS of these'corporationl in the Ivory Coast. Nevertheless the xnfor.a
Available for the last two years of the period under study iixHcatos a net
sufficiently profitable management.
24. At the raicro-econondc lev^l, the net performance of
afflicting developing countries.
25 In.' addition, the significant level of the average investment ratio :
encour^el co^aAy direcfors to operate in the Ivory CoaSt without concerning themseKes with the country's level of technological «te*e^"*5J^B
way transnational transfer skills developed in the more highly
economies of Europe and America.
ST/SC/v'UNCTC/6
72o. This movement is also reinforced by the policy of identifying
a manufactured product with a given production technique us©-1 by the
corporation, '"his policy provides the country with the road to success in an import substitution policy, as goods delivered to the local market ' " ..
become competitive with imports.
II. T3E IfPAGT OF TRANSNATIONAL COHPOR/^TorF,' OP'SWIONS ON t*tt?
BALANCE OF PAYMENTS
27. For ten years the balance of payments of the Ivory Coast as prepared by the Sahque Gentrale des ^tats de l*Afrioue de 1'Ouest (see table 4) generally reflected the'open nature of the econony, as evidenced by a close dependence, on external factors of production both human" and financial, 3ar.ical.ly, constant trade surpluses have made it possible to compensate for net payments for services and remittances of the large expatriate labour force in the Ivory Coast. The deficit in current account has generally.been more than offset by long-term net capital inflow, except in 197°, when the inflow of capital was exceptionally low, and in 1975 ( when the terms "of trade worsened at the same time that the Ivory Coast was experiencing the effects of the
first oil crisis.
28. A worsening of the terms of trade in 1973 reduced, export earnings
considerably with the 1979 balance-of-payments deficit reaching a record low of CFAF 130 billion. T?hen such trends occurred in the external transactions of the,. Ivory Coast it would have been instructive to be able to identify exactly the policies of transnational corporations. 'However, the data at hand do not permit this. The :sample "involved in the enterprise survey ''"""
covers-35 subsidiaries arid 135 afriiiattw ox i'oreign corporations out of 1,500 entities controlled from abroad. Under these conditions, the following analyses should be interpreted with caution.
?9. From 1973 to 1975 the total balance of external transactions of
affiliates and subsidiaries as given in the balance of payments rbowed trend- comparable to those described above. The great imbalance record for 197^>
arose -essentially from'net payments for direct investment earnings that were relatively greater than the country's over-all external tra-snactions. The year 1974 was sharked for affiliates and subsidiaries by favourable .increases
in the trade sector,; in line with trends at'-the. global level. Pfet non- raonetary caoital inflow reached a high in 1975* which mitigate^ the effects of the deterioration in the value of exports, , In I976 and 1<777 private transfers, which compose of remittances of funds abroad resulting from savings on salaries of expatriate personnel employed by the affiliates and
?S£ldl!rte<V increaser? by''three and four times respectively in relation to
1975. thus nelping to rectify over-all -'elicits. /?he deficits were
worsened: by a decrease in long-term capital'inflows in 1976, resulting in : ■ net outflows a year later, These trends were also visible at the level of tie over-all balance of payments, where private assets recorded the same
downward movement.
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A. Balance of trade (Tables 4-C) . .
30. Statistical data for an analytic of the principal products exported or imported by subsidiaries an'1 affiliates are not available. Only the general trends of the sample are known.
(1) FoQ.b. exports
31. From 1973 to 1977 > exports of transnational corporations followed over all export trends. In general they increased, except in 1975» when they decreased by CFAF 24.'7 billion, a reduction of ??O6 per cent ,oyer the.l9*?4 level. The other years covered in thic study experienced an average
increase of 34 per cent, apart from the jump of 50 per cent recorded in 1974 • These rates are quite untrue with over—all export trends, except in 197^* . when there was a ?1 per cent increase over 1975• ^he relative share,of ... . . subsidiaries and affiliates in the value of total exports, in the vicinity. ...
of 36 per cent in 1973 and V~f?L\t fell to ^Z per cent in 1975 and approximately 26 per cent in 1977 • Thus, foreign sales of subsidiaries an^ affiliates
constituted a significant part of the total export earnings of the Ivory Coast, at almost y^i per cent. Considering the weakness of the sample retainer1, this rate is quite likely to have been unr-erctimated.
(2) F.o.b. imports •
32» The f.o.b. impqrts of subsidiaries and affiliates increased steadily from 1973 to 1977* whilst not following exactly the trends in the country's r over—all imports. . They rose from CFAF 60.5 billion in 1973 to
CFAF 99«7 billion in 1977* ^Horins this period the share of transnational in the country's total imports con.otanti'y dimini^he^,, falling progressively from 3^»7 per* cent in 1973 to ^.^ per cent in 197$, T-rith the eicception of
a slight increase in 1975*
(3.) ,. Trade balance . . .
33» Commercial transactions of, affiliates and subsidiaries showed a positive balance ^from 1973 to 1977* The lowest surplus of exports over imports wac recorded di^ring the years. 1973 and 1'975, at CFAF n,3 bullion and ' - , CFAF 10.6 billion respectively, as againct CFAF .38.3 billion in.1974..
Beginning with 197^ tra^e balance improved,, showing a,surplus in 1977 of CFAF 53»3 billion, or more than twice the surplus recorded for the, . previous year, CFAF 20,3 billion.
34- On the average, affiliates and subsidiaries contributed ?!?*? per cent of the over—all surplus for this .period. However, this contribution was uneven; noticeable fluctuations, were recorded in some years, with a low ,
of 14.8 per cent in 1^76 and a high of 4-A.4 per cent in 1974*
ST/SCA/UNCIC/6
0
35* Affiliates and subsidiaries of foreign corporations have made appreciable contribution to the significant ta';e—off of foreign trade in the Ivory Coast.
In addition, the. presence.,of these companies has brought with it certain advantages. In. connexion with the increase in the volume/of imports and ' exports., the country has benefited from the development of its external communications system,; specifically in. the area of transport, with the
establishment of national shipping co;;ipanies, the upgrading of shipping portr.
and the improvement of civil,.aviation cervices. The telecommunications , system has- also ;pro£ited from the establishment of affiliates anr1 sub sidiaries of foreign corporations in the Ivory Coast, ^le country has profited from these companies1 need to be in direct an'*1 permanent contact
(by telephone, telex, etc) with the group directors or the parent company
in the course .of their day—to-day operations,
35. The development of tourism and related activities has. followed that of the country's communications network. Revenue from tourisri has grown
remarkably; the number, of incoming tourists.in 1973 was calculated at
179r°°0» as against 13.7,QOQ in. .1977, or an increase of. 30 per cent., pearly.
300,000 incoming tourists are forecast for 19-31*7/.
37.. It has not been possible to measure the effectr; of the development of
tourism on handicrafts in the, Ivory Coast. Nevertheless thece effects
definitely be seen from the supply and quality of the objects d'art avail able on the local market. Another advantage related tp the importance of commercial transactions of affiliates and subsidiaries^in the establishment,over the past gO years of numerous national marketing companies upstream or dowietream of the, production processes of these enterprises, . . .
3. Balance of services (Tables:/[-,, 5 and 9) ....;.•'■ : (l). Freight and - transport of_goods , .'.-..
30. Charges for freight and transport of goods, which are lin'ted to the
increase in the volume of. fmpor.tp.i Ii^ve risen from year to year. At the same, time, awi,ng to slow down in the, gro.T-rth rate of importG and the,. ; positive performance pf the three Tvpry Coas.t shipping companies, the risein the afiiount of payments made to foreign, transport, firms slowed consider ably 1114979., This.,trend affected subGidiaries' and. affiliates, whose
international shipping costs rose from CFAF 5.6 billipn in 197? to
CFAF 16.9 in 1977.
7/ i;inistere de I1 Sfconomie, des Finances et du °lan, La Cote
d'lvolre en Chiffres. 1979-1930 edition.
ST/ECA/UNCTC/e Page 10
(2) Direct investment earnings
39. 3y definition, the near totality of foreign transfer under this heading accounts for the profits of subsidiaries and the dividends ahc* undistributed profits of affiliates. From 1973 to 1977i subsidiaries1 profits were low but steady, expept in 1977 when they reached CFAF 3.2 billion, an increase of 32.3 per.cent over 1975. This relatively low level was the result of the small number of subsidiaries in the sample under study which were not necessarily the most representative. luring this period profit transfers represented nearly 12 per cent of all transfers falling into the category of
direct investment earnings.
40. Respite fluctuations, payment of dividends abroad was marked by an upward increase. In 1973, the total earnings transferred by subsidiaries and affiliates were, CFAF 5-6 billion in 1977. This figure represented 42 per cent of the total of transfers involving direct investment.
Interest paid outside the country more than triple'1 from CFAF 1 billion in 1973 to CFAF 3.7 billion in 1977. Undistributed profits showed consider able fluctuations corresponding to the financial needs of subsidiary
companies. Undistributed profits reached their lowest level in 1974
(CFAF 4.3 billion, as against CFAF 10.9 billion in 1975) and the average value for other years rose to roughly CFAF 8 billion.
(3.) Management compensation '..".'.
41. Payments^ abroact for expenses incurred by transnationals dropped from ■ CFAF 4.3 billion in 1973 to CFAF ?,1 billion in 1974 and then increased steadily to reach a high of CF/J? l?,o billion in 1977. These particularly significant amounts were due to stronger links between the affiliates and the foreign parent companies. They could also be interpreted ae over- invoicing for services rendered, tliuo leading to the transfer of profits outside the host country.
4?.. This strengthening of links betueen enterprises and the group, which is characterized by visits from foreign technicians and trainers who are specialists in enterprises in the Ivory Coast, lias definite.advantages for the hostcountry, Lodal personnel of the affiliate or subsidiary benefit
?rom the opportunity 'for pn-the-job training or an upgrading of already .
acquired technical skills. . ' , \
(4) Commissions
43• Transfers from commissions have been small, representing only 1 to 6 per cent of the services balance.
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5- ftisurance and re-insurance premiums and benefits
44. 3h the absence of statistics on insurance and re-insurance operations carried out by subsidiaries and affiliates, the external transactions balance of insurance companies in the Ivory Coast will be viewed as the-outcome of transnational1 activities. Transfers of funds for payment of insurance premiums and benefits were relatively low compared uith the level of the other components of the services column. The highest asount was CFAF \5
It uV11 19V wMch rePresented ^-ly 2-1 par cent of all net payments under
the heading of services,,
6. Miscellaneous
45. Under this heading are unspecified operations of companies covering
|djhoc foreign, inverentions, be they, of the group or the parent company, in . the production process of the resident companies. Also included under (his heading are services rendered by foreign corporations in the form of technical assistance to firms in the Ivory Coast, ^rora 19?6 to x<m transfers'unrter the
?!i^i;aSe?"?1heading'inoPe than <3oubled» increasing from CFAF-5.6 billion to
* A bllllon indicating that foreign technical control of subsidiaries
and affiliates was strengthened.
45. In addition there are those advantages deriving frora imports of protetion technology, KiltipUer effects are felt both upstream and downstrear/of the
production .processes of -multinational-^irms:
a) . Itownstream, where "the technology of the multinational firm's oroduct
es an occasion for new investment based on the use of this product';" §/
(b) Upstream, where investment is "made to provide these affiliates and
laries with capital assets (production technology) or intermediate goods
in"theaiTOry Coalt!11101067 ~ ^^ effe°tS proElote ^ustrial development
47. Foreign exchange outflows in payment for transport and freight costs, direct investment earnings and other services kept the value'of the deficit
lS-7/ I IT f ^rYices at a relatively high level. With the exception of
foreign transactions of subsidiaries and;affiliates.
/ Organization for Economic Co-operation and. DeveloDirient (O.E.C.D.)
1-L-, Z^ tran"f^-:%eChh0l0fiifcTUe ^ les *i>™* multinational, vol. I,
9/ Ibid.
ST/3CA/UIICTC/6 12
43. The 1974 surplus was -the'combined result of the improvement in the trade and services balances. From 1973 to 1977, subsidiaries an--1 affiliates trans ferred out of the country between 37.3 and 5O«3 per cent of the total value of companies domiciled in the Ivory Coast.
C. Unrequited transfer balance (Tables 4, 5 and 10)
49« The data presented in this section were estimated from total salaries distributed by all foreign enterprises. Savings on salaries of expatriate personnel of transnational have thus been estimated at 73 ^>2** cent an"1 50 per cent of the total salaries pai' to European and Africans not nationals of the Ivory Coast respectively. After a oeriod of stability
(1973 to 1975), transfers of savings on salaries doubled in 1976, rising.to
CF/J? 21.-3 billion. In 1977, they increased by nearly another CFAF 9 billion.The share of transfers of savings on salaries in the current account of
multinationals reached. 52.1 per cent in 1977, as against 42-1 per cent in
1976 and only 23.6 per cent in 1975. These transfers contributed signifi cantly to the negative external transactions balance of affiliates and subsidiaries,0. Current account (Tables 4, 5 and 11)
50. I&jor foreign exchange payments for current transactions of affiliates
and subsidiaries were recorded in all years from 1973 to 1977 except 1974*
">eficits rose to almost. CFAF 50 billion during the last three years of this period,
^- Capital balance (Tables 4, 5 and V>.)
51. The deficit on current account of the Ivory Coast has forced the country to turn to foreign capital to finance it either partially or totally, Tfith a view to maintaining the level of its foreign exchange reserves. In addition, the country's development needs have led the State, the prime investor in developing countries, to mobilize external assistance to finance its investments in the face of insufficient domestic resources, ^lese two factors explain why the capital balance shows an ever increasing surplus throughout the period, except for 1979, 1974 and 1979 •
52. The participation of the private sector in deficit financing appears to have been marginal in the Ivory Coast even if it did not result, as in 1972 and 1977, in a net capital outflow. Compared to the net global inflows represented, only 15 per cento "he maximum attained was 45 per cent in 1970, during which,year no distinction could be made between paraoublic and private capital. In later years this rate, when it. was positive, oscillate between 10 and 34 per cent.
ST/ECA/DNCTO/6
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53- From 1973 to 1977, the net contribution of capital by transnationals surpassed that of the private sector as a uhole: CFAF 41.7 billion, as against CFAF 32.2 billion. Thus the actions of these firms would seem to determine the state of the balance of private capital in the Ivory Cdast except in 1977, when only 17 per cent of the deficit in this balance could be
attributed to them.
1. Direct foreign investment
54. Direct foreign investment showed a great deal of fluctuation from year to
year, but presented a net surplus in every year except 1972, From 1970 to 1977, the net .'cumulative' volume of direct foreign investment rose to
CFAF 54.5 billion, covering 17 per cent of the total deficit on current account, which reached CFAF 313-3 billion during the same period. From 1973 to 1977 transnationals constituted, practically the only source1 of direct foreign
investment, fcforeover, in 1977, despite 1:heir contribution of CFAF 4.6 billion, the net surplus of all private investment did not exceed CFAF 0.7 billion as a result of disinvestments made by other non-resident enonomic agents.
During this period net investments made by subsidiaries and affiliates accounted for 103 per cent of the private sector cumulative total.
55. Net investments of the transnationals represented from 75 to 115 per cent of their net contribution of capital for this period, except for 1977, when
no reporting took place. Consequently, the investment policy of.subsidiariesand affiliates in the Ivory Coast contributed largely to financing the balance
of payments and the economy,,
5o, At the same time gross investments' by transnationals tended to decrease during this period. Except for a sudden sharp increase in 3.975 which brought their total to CFAF 19.9 billion, gross investments reached no more than CFAF 8.4 billion in 1977, as against CFAF 12.5 billion iri 1973, This trend must be taken together with the discrepancy between local and foreign interest
rates which encouraged subsidiaries arid affiliates to remit to their owncountries an increasing share of their profits so.as to benefit from more remunerative rates on "their bank deposits abroad* In contrast, gross outflow from disinvestment by transnationals continued to increase annually, rising from CFAF 1.3.billion at the beginning of the period to CFAF 3.8'billion at the end of the period, after a. temporary drop tp CpAF 1,5 bullion in 1976.
This development is in line -4th the behaviour of foreign corporations, which, because of political risks, are primarily concerned with remitting to the-home country as soon as possible the fruits of the capital they have invested in developing countries. It is also explained by participation in
the foreign companies in the country,
2. Private external borrowing
57. Ttie period from 1970 to 1977 can be divided into three distinct phase as far as the net foreign indebtedness of the private'sector is concerned:
(a) A net reimburseoent phase covering the years 1970 and 1971;
ST/ECA/UNCfC/6 Page 14
(b) A net capital inflow phase going frorr. 1972 to 1975, with highest net withdrawal (CFAF 7.6 billion) occuring in 197?;
(c) A new net reimbursement phase beginning in 1976, marked by net with drawals totalling CFAF 10.2 billion in 1977.
*0. This trend is more or less in line with the terms of international bank loans, the principal source of financing for this borrowing, which usually mature within three to five years. During the period from 1973 to 1977,
total external loans produced net reimbursements of CFAF 5.5 billion, thereoy vating the deficit in the current balance. At the share of transnational these operations showed a negative balance of CFAF 4.1 billion, or 75 per cent of the total outflow from the private sector during this period. Hiring 1974 and 1976, which correspond to net withdrawals, the reserve ratio of current transactions of subsidiaries and affiliates to their net borrowings was set at 10, 1 and 4 per cent respectively. This situation stresses the negligible contribution of such capital to financing the balance of payments, despite the such corporations' access to international bank credit. Ihis policy might lead to a reduction in the number of potential sources of local, bank financing available to economic enterprises and agents and the exertion of significant influence on the volume of foreign exchange reserves of the
host country.
3; Suppliers' credit
pc Over-all trends in suppliers' credit showed a continuous surplus balance marked by sharp rises in 1974, 1976 and, to a lesser degree, in1977, with the
level remaining moderate in other years. During the period 1970-1377 the cumulative surplus represented 106 per cent of the total net private
contributions of capital and covered 13 per cent of the cumulative deficit m
the current balance.
60. Between'1973 and 1977 this surplus rose to CFAF 40,2 billion and financed 16 per cent of current transactions, with the lowest rate, 5 per cent, recorded in 1973 and 1975 and-the highest, 84 per cent, in 1974. Affiliates and
subsidiaries of~foreign corporations accounted for only CFAF 12.4 billion, of 31 per cent, of this total. In addition, their transactions were offset in 1975 by net payments.to foreign suppliers. ^iese trends in transnational
suppliers1 credit hid a significant increase in gross withdrawals during- the'period whidh were offset by a concomitant increase, in reimbursements.
4. Client credit
61. From 1970 to 1974, external credit extended to clients increased regularly.
The greatest fluctuation in absolute value (an increase of CFAF 11*3 billion;
occurred in 1974. One year later such credits increased by only CFAF 5.0
billion before increasing again in 1976 to reach CFAF 16 billion in 1977.
ST/ECA/UNCTC/6
nage 15The relatively high level of client credit as compared to the level of suppliers' credit in a developing country which calls on external resource^
can be explainer by the volume of exports and bv the npiv' *■*■?•
^ 7qo K^i' ubGid'iar'ieE and affiliates accounting for
OFA^ 13.9 billion, or 29 per cent, of that figure. ~he ran/»eV
orjdxts agree, to by these enterprises tareJed every year^xc^^L
This tendency follow the trends i. client credita except for'the fact that
tne total increase in 1976 WaS less than in 1974, while the level attaint
by transnational in 1976 exceeded their 1974 level.
^- affiiiates of f^i5n corporations in the Tvory
^. ^ clients abnornial deadlines for p in this area would not seem to prejudice country's
to ^ f e inCrea°e in ^al °^« durin
to 1977 corresponded.to their participation (30 per cent) i
ShtehTe PSrif' K Can ^ C°nCMed ^ ^ol that is m harmony with the country's global nolicy balance nf »^^W^::ij33j^ fables 4, 5 and 13)
f^^.ti^^^!?^ H-n ^ transactions
withdrawn fro- th.^!- , ^' blllion? with the samo amount being
wirnarawn tro,. the foreign exchange reserves of the Ivory Coa-t r~ fnJ
perioJ ox GF^ H9.S billion, as against a surplus of CFAF 1S«.7 bi
for otner economic enterprises and agents. oi
ST/ECA/UNCTC/6 Tage 16 .- .
III. CONCLUSION
56. In spite of statistical gaps and reservations about the reliability of the statistics used, the following useful and valuable lessons can be drawn from this study:
(a) The concept of transnational in saall or medium-sized developing countries should be expanded to include all foreign companies;
(b) Transnational help to maintain the economic openness of developing countries and are thus responsible to a large extent for the current structure of their foreign trade;
(c) The way in which transnationals develop trade uiight lead to a parallel development of the country's communications sector;
(d) Transnationals hardly seem to contribute to the process of the transfer of technology. However, their productive resources constitute technical innovations in terms of the generally low level1of development of the host country. This technological "advance" could make the Ivory Coast one of the subregion's focal points;
&7» In addition, along with this non-transfer of technology, transnationals could contribute indirectly to the training of national manpower bearing in mind that they are forced to call upon technicians and managers from the parent group to manage their day—to—day operations;'
(e) Transfers of savings on salaries and leave expenses of Expatriate personnel generally have an adverse effect on the balance of payments;
(f) Transnationals to; a great extent disturb the services balance by their transfers of investr-jent earnings and their repayment of headquarters
expenses; : " ■■
(g) Transnationals make a significant amount of direct investment;
In contrast, the banking assistance they receive in the form of development credits substantially run down the host country's foreign exchange reserves;
68, At the level of adjustment of the balance of payments in the Ivory Coast alone, the activities of transnationals result in increased pressures on the current balance, in low net inflow, and even net outflow of private capital;
In this regard, their foreign transactions bring about a loss of foreign exchange reserves rather than bringing foreign currency into the country.
Because of the grsat amount of confidential information contained in this ctur'.y, its distribution should be limited to a minimum of persons requiring this information, with the readers1 attention being drawn to the need to respect professional secrecy*
product of the Ivory Coast at current prices (Billions of CFA francs)
0 c..9)
.0-!>■
.0 <?1971 117.6 (57.2) 101.4 -(68-.-0f- 175.8 394.8
1972 125.1 (62.2) 111.5 188.6 425.2
1973 159.2
(63.7)
121.5■ (37.0)
229.2 5©9.91974 193.2
(32.3) 156.7 .-.{118.5)
313.0•667.9
1975 240.4
(107.8)
179.2k326.8 ■74^.4
1976 284.C
(126.7)
220.6 '•501.f■■-• 1007.011977 380.2
(142.5)
294.0(185.4)
742.2*:^.~
1973a/
427.3 (179.6)
?82.a(229,4)
779,3-.•1979V 474.3
ar9.°)
440.5(2*9.1)
^.4 17*1.71930b/
(199.2) 50^.7 (307.7)
929.2 1999.°47.3 55.4 . 7X.1. 88a_ 106.? 12.^9 151.2 3 44oa ^72*5 5^5.3 .739.0 .334.5 ^ 113.9 1539.3. 1740.6 1971.^- 2 2?1.?.
Coast,I96O-I965and1970-1978.country of origin of the capital of » g 1
OtherAllforeignAll^„ 4. PV*nce EEC United States COUntries countries countries
aryCoasteram-*;___________^————————————,.5 35.3 46.5 3S.2 53.5 45.0 4.8; 4.0 1B.0 15.2 75.3 54.2
16.2:.4 40.° 57.° 3^.3 ^f/.. 4U* """' '" ,S 51.3 C9.3 30.7 7B.4 34.B 5.0 ^ . ** .^ ^ ^ .8 2S.4 38.4 _32.3 5.4 ^ 30.1 11.0 123.9 45.4 ,.3 ■53.9 ' 83.2 .26.7 .*,* 31.3 16.0 5.1 29.3 9.4 U2.7 4^.1 3-0 0.3 58.2 95O 24.1 T1D.7 2B.r 19.3 5.0/ '33^
, ST/ECA/UNCTC/61
'..-...I' Page'19;
Table 3; Average capital-output ratio (all enterprises) •■•'•'.
1974 1975 197£ 1977 197S 1979.' Capital of enterprises q A 1C.< o ooc * o~jr> c on n on; *
in billion of CFA francs ll8*° 15°#2 225^ 273*5 311.0 394.4
Value added „ '
in billions of CFA francs 233«8 269*8 326.0 495.0 6l8.7 726.1 (Total salaries) (90.8) (94.8) (ll7.l) (171.7) (220.7) (248.1)
Average capital-output _ _, n ^ n ^ - !- :
ratio °-51 °*57 O.69 0.55 0.50 O»54
aAT.AWCE OF SBaVICEg(B)
Freightandtransport Directinvestment earnings:ftS :fe* _ 8.4 - n«5
- 69,2 - 73£ -WW -M
17.3-3.1 +0.4 .1.6 -10;9
-13.0 -10.5 -4.6 -0.9 -2.0
17.3 - 17.0 - ao*9| "* 21'6 " ^^ - 9.0- - 10.9 - 19.5 - 6.3 - 5.1 - 3.0 - 3.4
_1.0-1.3- 4.2; - . 4.5 - ■1.4 - o-6 " _ 24:7 - 26:9 - 38.9; -5^3-^^
Insuranceandreinsurance ore'iiiuiaandbenefits?Other services ) LAI-ICE OF T3ANS_Fggg (c) ~ pj j?rj _ -2COT - 25.^ - J^.J- •■" i^' r\( kc~?) (L Private transfers - 14• " ^ v (_ ^ c) (. 27.5)(- 33*5) |l- J!_cin" "f^ ' (including savings/wages) (- ^-^^ ^|^V+ 8o3 + 10.8 + 9.8 :+ 7«C + 4./
Publictransfers+CPRRSNT SALAI-jGg (D = CAPITAL 3ALANCE (s)
""Officialanc;"sei;u-official capital Privatecapital+ (including: DirectinvestmentsK+Loans S"
Suppliers'creditsClient credits) 29.1 + 49.1 + 15.0 + 16.0 4-0) (- 4.7) (+ 11.3K+ 2.2) (+ /.6) 1+ (+ 1.1) (+ 1-9) (+ l'l\ ( (- 0.4) (- 2.1) (- 5.6) (-
3.5) (+ 0.4) (- t-31 + 16.5) (+■ 8.3) - 9.1) c- i^( « AND OIiaSSIOMS(F) - 0^ 3ALAHCE (G = DfBt-F) + ?-5 " kl
1.6-
-122,2 ^—^^X +^cate^ credit; «. ^ol -goatee a-*Lt, . eU& (...) --
Provisionalfigures,b/Estimatesdat,hot
ST/ECA/UNCTC'6
^#-tr^^ the Ivorv Coast
in billions of CFA franco]— * ^~~ Y Loast
>-BALANCE~0F" TRADE (a)
Sports -
BALANCE OF SERVICES (3) Freight and transport a/
Management
Commissions
Insurance and reinsurance
premiums and benefitsBALANCE OF PRIVATE TRMSFERS~7cT -
Transfers of savings on Wages^
CURRENT BALANCE (d = A+B+C)
BALANCE OF PRIVATE CAPITAL (e) ' —'— —i- " --•*
Direct investment
Loans .
Suppliers1 credit
Client credit7,9 + 4.6
BALANCE OF EXTERNAL TRANSACTIONS
OF MULTINATIONALS (D + E) - 2°
syrabol + indicate
^nfis on t,fages of
°f ^"^ ™rkers not Ivory Cba^t nationals re
H wages distributed in
ST/ECA/WJCTC/6 Page 22
Table 6s Composition of exports (f»o.b«) of the Ivory Coast, 1970-1979 (in billions of CFA francs)
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 Cocoa beans 26.7 21.7 22,6 27.8 62.3 47.6 71.4 93,8 160.9 116.2 Coffee 43.2 42,2 36.9 43.8 63,8- 51.7 132,8 198C6 131,1 166.5
Vfood
Sub-total
Petroleum
Other
Total (B) (A)
produc ts
29.3 99.2
1.1
29.9 130.2
31,0
94.9
0.7
31.0
126.6
37.9
97.4
2.9
39.2
139.5
66.1
137.7
4.4
48.6
190.9
66.
192.
10.
3
4
0
291.8
45,5
154 >
H-
85.
254.
8
4
4
6
78.3
282.5
15*2
94-8
392,5
86O9
384.3
20,0
124c 9
529.2
71.3
363.3 19.4
14L7
524.4
85.2
367.9
24,0
142.9
534.8
D . . A ■
Katl° B 76.2 75.0 70.0 72.1 66.0 60,8 72.0 72.6 69-3 .68.
in percentage
Source; Official foreign trade statistics
of imports of the Ivory CWH-
(in billions of CFA francs)
ST/ECA/UNCTC/6
Page 23
Item
Petroleui.i products
■ ™ ■' " ■ —
Food products
1975 1976 1977
49c 0
~- rmm
36,1 29.7 33d 15.5 17.6
Chemical and
plastic products
Textiles
51.5 61.1
" *' " ' ■ i-
3.9 3.6 4.7 9.5 9.4 12.4 15.9 23.0 22
9.2 3.2 9,6 11.7
0
Iron and steel products
33.5 46.6 35.7
Machinery andequipment
17.7 19.G 19.9 26.5
35.5 ^3Other
Growth rate in percentage
48.5 49,5 50-7 6^ o
1 I !■■—
107.7 110.8 1H.3
2.9 3*2 37.8 45.8 3.
93. s I328 1??
9 29.1 37.9 21.6 1.
3ources Qfficlal foreign ^^ statistics
tableau GRAPH i TRADE BALANCE
TABLE8GRAPHIQUE : SOLDE BALANCE COMMERCIALE
Allenterprises EnsembleSocie'te's TNC«TRANSNATIONALCORPORATIONS (1)F.II.N*FIRMESMULTINATIOHALESTABLEAU TABLE
ST/ECA/UNCTC/6 Page 25
GRAPH : SERVICES BALANCE
GRAPHIQUE: SOLDE BALANCE DES SERVICES
1970 1971 1972 1973 1974 1978 1979
-170,4
-212,1
-232
All enterprises Ensemble Socie'te's
TNC = TRANSNATIONAL CORPORATIONS (I) FMN= FIRMES MULTINATIONALES
TABLEAU
TABLE 10 Graphique
Graph
Solde balance des transferts Transfers balance
ST/ECA/UNCTC/6 PAGE 26
1971 1972 1973
—I—
1974 1975 1976 1977 1978
-5,5 -
-73,7
-94,2
F.M.N.ll)
Ensembl*
Sociatls ■ All •nterpris**
TNC = Transnational corporations F.M.N » Firm«s MultinationaUt
TABLE At1 TABLE
Graphique ; Balance courante
Graph : Current account balance ST/CCA/UHCTC/6 PACE 17
+ 3,2
•979
ST/ECA/UNCTC/6 PAGE 28
TABLEAU TABLE
graphique: solde balance des capitaux graph! current account balance
93,9
44,9
Ensemble Societes All Enterprises
T. N.C.= Transnational Corporations
ta
.M.N. = MultinationalsTABLEAU TABLE 13
graphique: so'lde global graph: over-all balance
ST/ECA/UNCTC/6 PAGE 29
Ensemble Societe's All Enterprlces
T.N.C.= Transnational Corporations (a)F.M.N.= Firmes Multlnationales
