FINANCE: Record year for foreign investment in Third World forecast

• by IPS Correspondents (washington)
• Wednesday, November 23, 1994
• Inter Press Service

WASHINGTON, Nov 23 (IPS) - Foreign direct investment in developing countries could reach a record 75 billion dollars in 1994, according to a new report released this week by the World Bank.

That would break the previous high of 65 billion dollars in 1993, according to the report, the latest in the quarterly series, 'Financial Flows and the Developing Countries'. It is also 40 percent higher than FDI flows in 1992.

The flood of investment, however, is unevenly distributed, according to the latest report. In 1993, China received 26 billion dollars -- or almost 40 percent of the total.

Eastern Europe, on the other hand, received only five billion dollars and Africa only 1.8 billion dollars.

Many developing countries, according to the report, are relying increasingly on FDI to finance infrastructure projects.

The Bank is currently predicting that all developing countries will spend about 200 billion dollars a year on telecommunications, utilities and transportation projects that should attract substantial amounts of FDI.

The report noted several countries have eased conditions under which foreign investment and technology may be used in domestic telecommunications projects.

In mid-September, India announced guidelines under which foreign private firms will be permitted to enter the local telecommunications sector. Foreign companies may now be able to hold up to a 49-percent share in such companies, and operating licenses will be awarded for 15 years.

In addition, China's recently decided to allow a second telephone network to operate alongside the state monopoly. That network may provide oportunities for foreign investment.

And in Brazil, Telebras, the state telecommunications company, is leasing networks and facilities from private companies under a recently announced partnership programme.

Pakistan, according to the report, is also selling part of the government's stake in the national telecommunications company through a domestic and international offering.

The Philippines is also making progress on its own privatisation programme, according to the report.

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