Implications for developing countries Sample Clauses

Implications for developing countries. The implications of these proposals for each developing country can be stated as follows: a) The strategy of reducing foreign share and increasing local share of equity would be threatened. Social engineering through equity requirements would be impossible, thus denying countries with serious ethnic or other inequities a key instrument for structural reform. b) Joint ventures would disappear; foreign firms would prefer to take the form of wholly-owned subsidiaries, without any equity restrictions. This affects the policy of encouraging or requiring joint ventures, to share the benefits of ownership and profit with locals, to facilitate technology transfer, and to limit foreign profit outflow. A worsening of the balance of payments (BOP) item 'investment income payments' can be expected. c) The policy of requiring companies or financial institutions to incorporate themselves locally may become invalid- More seriously; the treaty will impose extreme financial liberalisation, with foreign banks and other financial institutions given the right to operate as nationals. d) The EC proposal is that the treaty covers all sectors, except defence (even here, it warns that national security or preservation of public order should not shield protectionism). Foreign firms and foreign individuals must be allowed to enter all areas and be treated like locals, in sectors including land, real estate, services including health, law, travel and transport, media and communications, finance, agriculture, mining, construction, and manufacturing. Unrestrained foreign entry could overwhelm a national economy. Developing countries have to some extent tried to resist pressures for liberalization in services, especially in the financial sector. The investment treaty will be used as a new instrument to overcome what is seen as 'resistance'. e) Policies favouring local businesses would have to be cancelled. Many local enterprises, their market-share cut, would be deprived of preferential management and development planning. Equity ownership, foreign-exchange inflows and remittances, and the direction of investment decisions, volume, and flows would increasingly lie outside the purview of government. f) Government would be deprived of the right to regulate the terms of foreign ownership of houses, real estate, and land (urban and rural). g) With government deprived of discretionary powers to set terms of entry and regulatory powers, the possibility of technology transfer (already at an u...